Obama is the only Democrat running for President.

I just watched the results of the South Carolina Democratic primary, Obama's victory speech and the non-concession speeches of Clinton and Edwards.  Suddenly the essential meaning of the whole campaign emerged--they are running for three different jobs.  Obama is running to be head of state, Clinton is running to be head of government, and Edwards is running for a job that doesn't exist (unless he's running for Vice President or his old Senate seat). 

In corporate terms, Obama talks like a chief executive officer, and Clinton talks like a chief operating officer with the job of making sure the organization efficiently implements the boss's vision.  Obama is about vision, inspiration, and working together, while Clinton is about tactics, overcoming obstacles, and enforcing discipline.  Obama inspires like Jack Kennedy and Ronald Reagan, and Clinton sounds like a cautious and competent George H. W. Bush.  There are only ten days left, and television advertising is a poor way to communicate these differences, but if Super Tuesday voters see it this way, Hillary is toast. 

Update on Monday, February 11, 2008 at 10:42AM by Skeptic

I was challenged on this post at a dinner party last evening and now revise and extend my remarks.  That's the point of challenge, isn't it? 

I would now strike the last sentence in this post--about Hillary potentially being toast.  I was making an assumption on some vaguely remembered punditry, Chinese philosopher, or The Prince, that the populace has more affection for a head of state than for a head of government.  In truth, I have no evidence of that, and I may have been completely out of bounds. 

What I think is still valid is that Clinton and Obama emphasize different aspects of the Presidential job description.  And, as a dinner partner pointed out, McCain is emphasizing another aspect--Commander in Chief.  So, as I see it, Obama is running for head of state, Clinton is running for head of government, and McCain is running for CIC.  Which of these will be elected in November to replace the person who has dumbed the job down to "The Decider"? 

An episode from the Martin Luther King celebrations supports my distinction between Obama as inspirational leader (head of state or CEO) and Clinton as the get-things-done project manager (head of government or COO).  Clinton praised MLK for his elevating civil rights issues and building a movement, but said it took a President to get things done.  Was it smart to get people thinking that Obama was like MLK and she was like Lyndon Johnson? 

One more point. 

In the post I suggested Obama sounds more inclusive and inspirational.  This morning I remembered that I have heard or read punditry to the effect that Clinton talks about "I" and "me" in her stump speeches, while Obama talks about "you."  I wondered if that's true and, if so, how it affects the sound of the message.  So I downloaded and compared Clinton's Remarks at the New Hampshire Democratic Party 100 Club Dinner on 1/4/08 (about 2200 words) with Obama's victory speech after the South Carolina primary on 1/26/08 (about 1600 words). 

Obama used "you" or "your" only 3 times, and arguably on two of those occasions he was referring to himself (enduring the Clinton attack on him for saying something positive about Ronald Reagan).  What he did do is to make massive use of "we," "us," and "our"--74 occurrences, 4.6% of the total words, compared with only 1.1% of the words "I" or "me."   In contrast, 3.5% of the words Clinton spoke were "we," "us," and "our," while almost as many, 2.9%, were "I," "me," or "my," and 1.3% were "you" or "your."  When the latter two are combined, she talked more about herself and about "you" as a group not including her noticeably more than she used words that included herself and her audience in the same group.  Does that make a difference to an audience?  I report, you decide. 

In the two stump speeches I analyzed, Obama used vision-setting and motivational language to inspire collective action, using language that recalls Martin Luther King and Cesar Chavez.  (Obama regularly uses the slogan of the United Farm Workers in the Chavez era, "Yes we can!")  And recall that he started his legal career as a community organizer.  Clinton does some of that as well, but mostly she tells her audience what she is going to do for them instead of enlisting them to work with her together in a movement.  In that regard, she sounds like John Edwards did in his unsuccessful campaign, even describing herself as a "champion" of her constituents. 

So, do more voters want a President to inspire and lead them or a President to do things for them? 

Business people abandoning the Republican ship?

Many business people are abandoning the GOP because most businesses, especially small and medium sized firms, historically have done better when the Democrats were in power, according to John Dean.  He explains that many business people do not like Mr. Bush's War, deficit spending, focus on abortion and gay marriage, exclusion of immigrant labor, spiraling health care costs, and environmental deterioration.  To this I would add that many business people hate incompetence and passivity; see for example this excerpt from Lee Iacocca's new book.  Dean notes that the Wall Street Journal, in GOP Is Losing Grip On Core Business Vote, has described this as an "elephant stampede."

This does not necessarily mean Happy Days Are Here Again for the Democratic Party.  More likely the opportunity presented by the Republican unraveling means intensified struggle for control of the Party's agenda, soul, and direction of growth.  Democrats are conflicted about which of those fragments to court and what expanding its coalition might do to the Democratic agenda. 

Although he updates the specifics to 2008, Dean's observation that Democrats can appeal to a significant part of the Republican coalition by having economic policies that work better is not new.  A core idea of the 1980s Democratic Leadership Council was to enlarge the Democratic Party tent in that direction.  President Clinton pushed through NAFTA, which had been negotiated by a Republican administration, embraced welfare reform, and declared that "the era of big government is over."  Rounding up the stampeding elephants continues to be a goal of the Clinton wing or "business Democrat" wing of the Party.  This may partly explain why House Democrats agreed this week on an economic stimulus package heavy with business subsidies that will enhance after-tax bottom lines but not stimulate domestic investment or consumption.   

Other Democrats feel that the Party cannot deliver on the needs of its labor and economically disadvantaged constituents if it has to compromise much with a business constituency.  This would be "the Democratic wing of the Democratic Party," as Howard Dean described it in 2004.  John Edwards makes the point more starkly when he refuses lobbyist and PAC money and says he will not negotiate America's new national health care plan with insurers and drug companies but will, instead, fight to overcome them on behalf of working people. 

The "Democratic wing" would prefer to enlarge the Party tent in different directions.  For example, they see that many religious conservatives share the Party's social and economic justice agenda and cannot abide the laissez faire capitalist ideologs who control the GOP's economic agenda.  (Recall Mike Huckabee's recent criticism of the Club for Growth by name.)  It seems the aging Moral Majority part of the GOP coalition does not speak for younger evangelicals, who have, instead, been receptive to the Democratic economic and environmental messages.  Naturally, the pro-choice, gay-rights, and secularist groups in the Party are concerned that expansion in this direction will sacrifice their dearest issues to a broader social and economic justice agenda. 

At least the Democrats have choices about which parts of the Republican Humpty Dumpty to try add to the Democratic Party omelet.  The Republican challenge is to try to make up their losses by creating new fault lines among independents and Democrats.  So far, they're trying fear of terrorism and nuclear-armed rogue nations, xenophobia, and some other wedges of dubious effectiveness.  It's the Democrats' game to lose this year. 

Update on Sunday, May 18, 2008 at 06:52AM by Skeptic

Winning special elections in Republican districts is causing problems for House Democrats. 

Joseph Stiglitz on why we are at the brink of stagflation

Joseph Stiglitz, Nobel Laureate in Economics and author of the book Making Globalization Work, recently posted a column Stagflation Cometh.  He concludes by hoping central bankers around the world will understand that much of their inflationary pressures are being "imported" and not raise interest rates, as would be appropriate if the inflationary pressure arises from excess domestic demand.  But the most interesting part of his piece is his assessment of why we are where we are.  Here are two key paragraphs: 

"Until now, three critical factors helped the world weather soaring oil prices.  First, China, with its enormous productivity increases--based on resting on [sic] high levels of investment, including investments in education and technology--exported its deflation.  Second, the United States took advantage of this by lowering interest rates to unprecedented levels, inducing a housing bubble, with mortgages available to anyone not on a life-support system.  Finally, workers all over the world took it on the chin, accepting lower real wages and a smaller share of GDP. 

"That game is up.  China is now facing inflationary pressures.  What's more, if the US convinces China to lets its currency appreciate, the cost of living in the US and elsewhere will rise.  And, with the rise of biofuels, the food and energy markets have become integrated.  Combined with increasing demand from those with higher incomes and lower supplies due to weather-related problems associated with climate change, this means high food prices--a lethal threat to developing countries." 

Do union members put values above selfish economic interests?

At a rally yesterday hosted by Service Employees International Union (SEIU), John Edwards drew much louder and longer applause for his promise to restore the protections of the Constitution than he did for any of the economic and populist red meat he threw out.  I need help understanding why.

Edwards spoke to about 1,000 mostly union members at the SEIU headquarters in Los Angeles.  I saw T-shirts and signs for SEIU, the carpenters union, and the United Steel Workers.  The ethnic makeup was overwhelmingly Hispanic and Anglo with just a few African-Americans. 

Edwards gave his whole stump speech to a friendly but restrained crowd.  They applauded his positions on universal health care, ending combat presence in Iraq within a year, and criticizing Governor Schwartzenegger for proposing 10% cuts in K-12 education, health care, and aid to the poor.  They cheered his call for an increase in the minimum wage to $9.50 and his support for easier unionization.  As far as I could tell, Edwards pressed all the other union hot buttons too and got expressions of approval.  Along the way he also got applause for decrying the greed of the haves, and the cruelty of health insurance executives. 

But then toward the end of his speech, this odd thing happened.  He promised to have the federal government to start complying with the Constitution again.  Specifically, he said that Guantanamo and all secret prisons around the world should be closed, that "extraordinary renditions" should end, that our government should never torture people--no exceptions--and that the federal government should stop spying on Americans. By a large margin, this part of his speech got the loudest and longest applause of anything he said.  Why?

Did the crowd hold human rights and civil liberties more dearly than the economic issues that I presume are at the core of their union affiliations? 

As I recall, nothing else Edwards said could be as easily interpreted as a direct personal attack on President Bush.  Did the crowd sound off to register its strong disapproval of Bush? 

Something else?  I'm stumped.

Now you can choose to get updates by email.

I have had reports that the RSS (Really Simple Syndication) feed method of getting update notices was not convenient or maybe not workable in some browsers.  So I have modified the "Subscribe" section in the sidebar to allow guests to sign up to receive an email every time I add a new post.  I have also completely revised the "FAQs about Blogging" section to explain both processes. 

Bill Buckley calling for government to impair contract obligations.

Bill Buckley, yes that Bill Buckley, says mortgage lending should have been regulated by the federal government, and now the federal government should impose a moratorium on foreclosures to ameliorate the subprime mortgage crisis. Further, he seems to say that in general regulation is necessary to make markets work.  I can't even imagine what would cause a free market movement conservative and founder of National Review to say such things.  Thanks to Paul Krugman's blog for bringing this to my attention. 

Update on Thursday, February 28, 2008 at 08:08PM by Skeptic

Bill Buckley died yesterday.  Maybe he had intimations of mortality and was trying to undo some of his lifetime of misdeeds.  Still he was a likeable, smart, and articulate misguided rascal. I'd gladly turn over Rush Limbaugh, Bill O'Reilly, Glenn Beck, and Ann Coulter to the devil to get Buckley back for a few more years. 

Can good economic policies be based on what our leaders learned in university 50 years ago?

When I started talking and writing about economic issues two years ago, I often got a response like, "I learned in economics in college (or business school) that . . . , and that's inconsistent with you just said (or wrote)."  Well, I know what they learned because I learned it too, and the reason I brought it up is that I think there are problems with the old doctrine.  Usually, I get open-minded consideration of discrepancies between current reality and what we were taught, but I'm depressed by a video of Pete Peterson saying this: 

"I was taught at the University of Chicago and Northwestern that it was terribly important for countries to have savings and to invest a lot in the future and that that had a lot to do with how well they're doing." 

Peterson is Senior Chairman of The Blackstone Group, former Chairman of the Federal Reserve Bank of New York, former Secretary of Commerce, retired Chairman of the Council on Foreign Relations, and number 165 on the Forbes 400 list of the world's wealthiest people.  He graduated from Northwestern in 1947 and the University of Chicago in 1951, and he starts and ends his analysis that the US economy is in trouble by saying our national savings rate isn't as high as he learned 60 years ago it should be!  Good grief! 

Does he not remember that the economic doctrine being taught then was largely developed when America's economy was still predominantly agricultural and that when he was learning this doctrine the US was in a post-war boom while the rest of the industrialized world was being rescued by Marshall Plan aid?  Did he not notice that in those days national savings tended to be invested at home and "Eurodollars" were an oddity, whereas today the most significant feature of globalization is that investment capital easily flows across borders in enormous quantities?  Certainly on a worldwide basis there is plenty of capital seeking investment opportunities today--that's why interest rates have been so low (making the arbitrage opportunities for The Blackstone Group and other private equity and hedge funds so great).  What is the importance of a national savings rate in a global economy, Mr. Peterson?  Does what you learned 60 years ago give any useful guidance about that? 

I share Peterson's concern that it is China, Japan, and petroleum exporters that are doing the saving and that Americans are selling them our assets in order to keep spending on current consumption, sort of like burning the furniture to keep the house warm.  But, I seriously doubt that scolding Americans (as Peterson does in the linked video) for their moral laxity in spending now instead of deferring their gratification will be effective or that we could avoid a recession if middle class Americans start spending less and saving more.  And I am beyond appalled that Mr. Peterson and so many others who make our important economic decisions have no better models of current reality upon which to base their decisions than theoretical models they learned 60 years ago.  The officers of the Titanic and the Exxon Valdez had more situational awareness. 

Update on Friday, January 25, 2008 at 04:33PM by Skeptic

The problem is well stated by John Maynard Keynes, which I found in this secondary source: 

"Ideas . . . when they are right and when they are wrong, are more powerful than is commonly understood . . . .  Practical men, who believe themselves . . . exempt from any intellectual influences, are usually the slaves of some defunct economist . . . .  The power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas." 

To that I would add that, as new ideas gradually encroach, old ones only gradually recede. 

Update on Sunday, January 27, 2008 at 09:10AM by Skeptic

Nick Anderson makes the "inadequate savings" point well in this Houston Chronicle cartoon. 

Those who argue that globalization is inevitable sound a little panicky.

Alan Blinder's NYT op ed today urges the next President to use the bully pulpit to "explain why globalization is both (a) inevitable and (b) more an opportunity than a threat."  The inevitability argument is out there a lot.  It's in the NYT editorials.  It's in Tom Friedman's The Earth is Flat.  We will hear it a great deal in the Presidential election campaign.  This begs the question, if it's inevitable, why talk about it? 

I suggest the answer is that, even assuming globalization in some form is inevitable, many of those who make this argument are acutely aware that the specific ways in which globalization proceeds are very much subject to negotiation and power politics.  Having so far successfully controlled the implementation and realized the "opportunity," they very much don't want to lose or share control of that process with those who have realized the "threat." 

Iraq in a Nutshell as of December 2007

For a comprehensive, balanced 7-page assessment of the military and political situation in Iraq by retired General Barry McCaffrey after his visit in December 2007, click here. He concludes that the force level that the US could feasibly maintain in Iraq over the decade to stamp out an insurgency is half or less of what would be needed to "probably succeed." 

McCaffrey's assesses (top of page 10) that "an active counter-insurgency campaign in Iraq could probably succeed in the coming decade with twenty-five US Brigade Combat Teams."  In January 2007, we had 15 combat brigades in Iraq.  Then the "surge" announced by Bush added 5 more combat brigades by mid-year.  In September, General Petraeus re-affirmed the plan to reduce the level back to 15 combat brigades by July 2008.  New York Times, September 11, 2007.  This reduction has been widely reported as being absolutely necessary because the military is too small to sustain higher troop levels beyond then.  McCaffrey says, "We can probably sustain a force in Iraq indefinitely (given adequate funding) of some 10+ brigades.  However, the US Army is starting to unravel." 

If we know we have only about half the resources necessary to give us a probability of military success, what should be our strategy? 

Update on Tuesday, January 8, 2008 at 11:21AM by Skeptic

An NPR report today is based on interviews of McCaffrey and others and highlights where there are--and are not--differences of opinion about the success of the "surge."  Transcript.  Everybody agrees the violence is down dramatically, but the question is whether it was 30,000 more troops in Baghdad and/or something else that made the difference. 

One opinion is that the elevated troop presence is keeping the bad guys underground or has driven them into the northern provinces to regroup.  If that's the primary factor, one has to be concerned about what will happen when the "de-surge" starts in March 2008.  McCaffrey is quoted saying this is the least important factor underlying the improved conditions. 

Another opinion is that violence has been reduced because, under the leadership of Gen. Petreaus, the US military is making deals with the Sunni insurgents, especially in Anbar (where US troop levels were not surged).  The US is paying local militiamen $10 per day to keep the peace (and not attack Americans).  There is concern that the Sunnis are using the money and US-supplied arms to be better prepared for a likely civil war with the Shia. 

A third opinion is that the ethnic separation of Sunnis and Shia has been substantially completed so that death squads are no longer embedded in the neighborhoods of their ethnic victims.  Of course, all three opinions may be correct to some degree. 

Ron Paul and Hillary Clinton Stick Out Like Sore Thumbs.

The print edition of today's New York Times has a very interesting chart summarizing each of the 13 Presidential candidates' positions on 8 top issues. National at 14-15. When comparing their positions on Iraq, it struck me that if Hillary Clinton and Ron Paul were to switch parties there would be almost complete consensus within, and apposition between, the two parties concerning Iraq.

As summarized by the Times, Clinton's position is-- 

Start phased withdrawal within 60 days of taking office, with the goal to have most troops out by the end of 2013. Leave a residual force in Iraq to fight terrorist groups, deter Iranian aggression, protect the Kurds and possibly support the Iraqi military.

She seems more committed to Mr. Bush's War than Mr. Bush is. Bush has announced a troop drawdown starting in March 2008, but Clinton is talking about March 2009, and she won't complete the redeployment until after her presumed re-election in 2012. Clinton's position seems indistinguishable from all the GOP candidates except Ron Paul. No wonder she won't back away from her vote to authorize the invasion.

In sharp contrast, it appears all the other Democrats and Ron Paul have a near consensus about what should be done: The bulk of our troops should be out of Iraq sometime between "immediately" (Paul) and the end of 2009 (Richardson), and some residual forces for training, security, and other non-combat missions should be left in Iraq or stationed in neighboring countries.

Unfortunately, the chart is not available on the NYT website because, I assume, it's just too big for a computer screen. Other issues charted are health care, taxes, detainees, interrogation, immigration, energy, and climate.

Paul Krugman Says I “Have a Point and Deserve Some Respect!”

The New York Times editorial board has consistently advocated for "free trade agreements," even those they haven't read. Yesterday, in a full page New York Times ad, the Consumer Electronics Association asserted that opposing the Columbia Free Trade Agreement is indistinguishable from a desire to re-introduce Smoot-Hawley protectionism. In today's column, New York Times columnist and long-time trade booster, Paul Krugman, called a time out and sent both to their rooms.

Krugman made his chops as a young economist "advancing" theory about international trade, including publishing several influential papers and writing a successful textbook. He endorses a theory that trade between countries that have very different "factor endowments" can have "large effects on income distribution, and leave large groups worse off," as he explains in one of his blog posts, "Bit of background on today's column." Cutting through the jargon, this means that if a high-wage nation like the USA trades extensively with a low-wage nation like China, some large groups in the USA will have lower incomes.

In 1995 Krugman published a paper in which after looking at available data he concluded that any such effects on the US economy were only "modest." Not any more. In today's column, Krugman says, "The trouble is that these effects may no longer be as modest as they were, because imports of manufactured goods from the third world have grown dramatically—from just 2.5 percent of G.D.P. in 1990 to 6 percent in 2006." "[W]hen it comes to manufactured goods, it's at least arguable that the . . . highly educated workers who clearly benefit from growing trade with third-world economies are a minority, greatly outnumbered by those who probably lose."

I applaud Krugman for changing his views when he gets new facts. He makes clear he still believes in the benefits of "keeping world markets relatively open" (notice he doesn't say "free trade"), especially for the billions of people who don't live in America. Then he gave this good advice to his editorial board, "I am arguing for an end to the finger-wagging, the accusation either of not understanding economics or of kowtowing to special interests that tends to be the editorial response to politicians who express skepticism about the benefits of free-trade agreements." Krugman concludes his column by saying, "[T]hose who are worried about trade have a point, and deserve some respect." Hey, that includes me!

Update on Monday, December 31, 2007 at 02:14PM by Skeptic

I submitted the following comment about this on Paul Krugman's blog:

If there were a prize for the economist most interested in testing his theories against real-world data, you would not have much competition. Still I don't see recognition of certain trade facts--of the 500 pound gorilla variety--that no theory addresses satisfactorily.

Most economists argue that balanced trade is good for a trading nation. Some argue that sometimes an export surplus is even better for a trading nation. But I have never heard it argued that a trading nation benefits from running a chronic trade deficit. So why has the fact of America's chronic large deficit not caused us to conclude that our trade policy is fouled up?

I guess New Trade Theory and Old Trade Theory and Every-Other Trade Theory predict that all trade deficits will eventually turn into balanced trade through market adjustments in currency exchange rates. But when "eventually" is so many years that the deficit becomes a substantial fraction of GDP and national wealth, how can we ignore the facts and patiently wait for equilibrium? While we wait, families are crushed, foreign affairs policy options are limited, and society is transformed--not necessarily in a good way. Furthermore, the theories predict only that the net outflow of wealth will eventually stop--not that it will reverse and restore the status quo ante.

Isn't it true that all theories about trade are too rudimentary to be useful because they do not account for the facts that real trade deals are characterized by cupidity, stupidity, and political distortion and that real currency markets are manipulated by governments and others who can?

I checked back today to see if it had been published.  It hasn't, but maybe he read it.  Krugman has a new post on his blog in which he acknowledges that trade theories all assume balanced trade, and he even provides a link to one his early papers in which he explicitly says that in the penultimate paragraph. 

Krugman's blog is worth following because he gives background on things that didn't fit in one of his columns, and on other things as well.  Recently, he has been posting several times a day.  I subscribe to his RSS feed and recommend it to my readers. 

Update on Tuesday, January 1, 2008 at 09:29AM by Skeptic

And here's a link to Krugman's lecture at the London School of Economics in June 2007.  He says the same thing he did in his column--that extensive trade with a low-wage nation is likely to have big income distribution effects in a high-wage nation--but then he said it more wonkishly and at greater length. 

Update on Thursday, January 3, 2008 at 11:58AM by Skeptic

Krugman got so many comments to his Bit of Background post that it took him several days to clear and post them.  If you go to his blog to read these 23 comments (includes mine), don't miss these three:  Discussing how China is managing trade while the USA just lets it happen to us, posted by Jim at 2:18pm on 12/28; an economic theory (not a social or political theory) why wealth concentration is bad, by sash at 2:26pm on 12/28; explaining why product design and manufacturing improvement/technology jobs tend to go where the manufacturing is, by Economic Pessimist at 7:29pm on 12/28.

Do Some of Adam Smith's Most Ardent Disciples Know What He Says about Them?

Ben Stein has effectively exposed The Tattered Standard of Duty on Wall Street. When Gordon Gekko famously proclaimed in the 1987 film Wall Street, "Greed is good," many of us understood it as critical social commentary, but others apparently took that speech as words to live by. Moreover, they are wont to slander Adam Smith by claiming he justifies their greed and disregard for fiduciary duty. I rise to defend Adam Smith.

Adam Smith's point was that self interest in the economic sphere has socially beneficial collateral effects. He did not say there was a need to take the existing level of greed and "kick it up a notch." To the contrary, Smith thought the level of greed among capitalists was so high they could not be trusted. These are the last two sentences of Book I of Wealth of Nations:

"The proposal of any new law or regulation of commerce which comes from this order [profit takers], ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it."

I nominate this for the bit of Adam Smith's advice that is least attended today by politicians and free market fundamentalists.

Update on Tuesday, November 18, 2008 at 06:26AM by Skeptic

Gavin Kennedy has the same view, supported with quotations from Moral Sentiments.  Thanks to Mark Thoma for the link.

Update on Saturday, December 19, 2009 at 07:15AM by Skeptic

Gavin Kennedy refutes at length Niall Ferguson in A Twisted Tale of Falsehoold About Adam Smith. For example, Kennedy rebuts Ferguson's assertion that Smith favored laissez faire policies (even though he never used the phrase in any of his writings): 

Smith always emphasised that the main enemy of competition was monopoly and the main legal protection of monopoly was particular (but not all!) government-sponsored state regulation, and illegal collusions among corporations. He commented that legislators and those who influenced them, giddy with the false arguments of mercantile political economy, used regulations to stymie competition, whether from other merchants (and would-be merchants) and their employees through collective action, plus, of course, legalised protectionism, tariffs and prohibitions.

Please accept your choice of greetings of the season from Skeptic.

To All My Liberal Friends:  Please accept with no obligation, explicit or implied, my best wishes for an environmentally conscious, socially responsible, low-stress, non addictive, and gender-neutral celebration of this period near the winter solstice, practiced within the most enjoyable traditions of the religious persuasion of your choice, or secular practices of your choice, or with respect for the religious/secular persuasion and/or traditions of others, or your choice not to practice any religious or secular traditions at all. I also wish you a fiscally successful, personally fulfilling, and medically benign recognition of the onset of the calendar year 2008, but not without due respect for the different calendars recognized by other cultures whose contributions to society have helped make America great (not to imply that America is necessarily greater than any other country nor the only America in the Western Hemisphere). Also, this wish is made without regard to the race, creed, color, age, physical ability, sexual preference, or financial circumstances of the wishee.
 
To All My Other Friends: Merry Christmas and a Happy New Year

An ounce of business experience is worth a pound of economic theory.

Ben Stein explored in his NYTimes column, "The Great Inflation Mystery, Still Unsolved," why we have not had inflation in the last seven years or so when factors widely thought to be economically important are very similar to the 1970s when we had terrible inflation of the stagflation subtype. He discussed the theories of several prominent economists and Fed chairs, plus Ronald Reagan and Bob Dylan, and found that "we do not know what causes inflation" because "economics is an extremely inexact science." I sent him the following email, which he pronounced "fantastically interesting" in a reply:

Dear Mr. Stein:

It wasn't Burns, Reagan, Volcker, Friedman, Fisher, Greenspan, Bernanke, or Dylan. It was Sam Walton who made the difference between the 1970s and the 1990s.

In the 1970s I was an officer of an energy company and participated in a mass psychology of raising prices and wages to keep up with inflation. Nixon imposed wage and price controls in 1971 and Ford had WIN buttons, but in reality there was no effective resistance to raising prices. It got so bad that capital equipment vendors quoted prices indexed to steel prices or CPI. Our big project survived a 21% prime rate, but it did not survive the uncertainty as to total cost.

In the 1990s I was an officer of a manufacturing company whose largest and fastest-growing customer was Wal-Mart, which was also the major competitive threat to every other large retailer. This time, the psychology was exactly the opposite. The whole W-M organization was a towering, seamless, impenetrable, screaming wall against raising prices. We might be able to take a little cost and quality out of the product if we were not too obvious about it, but we absolutely, positively could not raise prices. This made us tougher on our vendors and tougher on ourselves to control costs, and we looked offshore. What Wal-Mart taught us and our competitors kept prices low for all retailers.

Indeed, economics is an extremely inexact science.

Ben Stein describes himself as a lawyer, writer, actor, and economist. He was a speech writer for Nixon during the time of the wage and price controls, but I did not know that when I wrote to him. Also, he is the son of Herb Stein, an economist who was chair of Nixon's Counsel of Economic Advisors when the controls were imposed. See Herb's reflections on Nixon's 1971 wage and price controls 25 years later. Ben is one of my favorite columnists about economic and business matters. I recommend reading his whole piece.

News Flash: Skeptic has a sense of humor. But it's kinda twisted.

"Monkey Do" in the Shouts & Murmurs feature of the current New Yorker is so funny I just had to create a new topic, Made Me Laugh, so I could post this link. 

Update on Sunday, October 24, 2010 at 09:40PM by Skeptic

I can't remember the cartoon I thought was funny, but apparently the link has rotted away. Sorry.

The President should be limited to 2 Jack Bauer actions per half.

The best argument against strictly enforcing existing prohibitions against torture is that our government may someday hold a person involved in an imminent terrorist attack intended to kill thousands and that it would be moral to torture out of him the information necessary to avert the attack. National Football League instant replay rules show us how to deal with this unlikely but serious situation without opening the door to using torture in other situations.

The President should be authorized to torture each half term up to two persons whom he believes (a) are involved in an imminent terrorist attack likely to kill at least 10 Americans and (b) possess information essential to averting the attack. The President should be required to notify relevant Congressional committees within 24 hours of each authorization and provide full secret briefings on the results every 48 hours.

Holding hearings on such a bill could be very revealing. Those who favor more than 2 torture authorizations every 2 years would reveal they do not want to limit torture to ticking time bomb situations and should be pressed for justification. Those who think a threat of 10 or more deaths in a terrorist attack is too high a bar can offer and defend lower thresholds. Those who want to allow torture of persons who may have information but are not thought to be involved in an impending terrorist attack can make their case for torturing innocents. The definition of torture will be at issue. Administration unwillingness to provide secret reports to Congressional Committees in exchange for getting authority to stop a ticking time bomb would suggest the Administration cares more about unfettered Executive power and avoidance of accountability than averting terrorist attacks.

Hydrogen fuel cell vehicle technology is on a road that doesn't go to market.

Those who envision a world full of automobiles powered by fuel cells running on hydrogen seem not to have noticed that this can't happen unless the hoped-for technology can out-perform competing technologies, especially battery-powered cars.  Both systems start with electricity and both end with electricity driving on-board electric motors.  But the fuel cell vehicle--left column in the following comparison--is inherently less efficient and, for that reason alone, likely to be more costly:

The first three steps in the hydrogen route embody well-established technology, but the last step, fuel cell technology to convert hydrogen to electricity aboard a vehicle, needs much refinement. In comparison, battery technology also needs refinement, but no preliminary conversion or handling steps increase the cost or reduce the energy efficiency of this route.

In order to make the two routes as comparable as possible, one could postulate that hydrolysis, compression, and hydrogen storage are done in small scale units at each local vehicle filling station, which would eliminate the need for a new, separate hydrogen distribution system. Centralized facilities would make sense to the extent that increased efficiencies would support the costs of a hydrogen distribution system.

In order to believe fuel cell vehicles will win the competition with battery vehicles one needs to believe either that fuel cell technology (now at an infant stage) will catch up to and pass battery technology (now at a juvenile stage) and be enough more efficient that it can bear the costs and inefficiencies of the up-stream facilities and still be cost competitive, or that fuel cells will be given legal advantages to overcome their economic disadvantages.

The observation that the first entrant can sometimes dominate a market even with inferior technology and higher costs could work to favor battery vehicles but is not likely to work in favor of fuel cell vehicles if they should be first. The electricity distribution system for battery vehicles already exists and could be exploited by later entrants with battery-powered vehicles even if a parallel hydrogen generation/distribution were already in place. In contrast, it is hard to see who would invest in a separate hydrogen distribution system when there is no assurance that fuel cells will be competitive with batteries.

Another reason to expect that batteries will win the race is that there are many, many uses for batteries and many industries and companies are working on making batteries smaller, lighter, longer-lived, more efficient, safer, and faster to charge. (See, e.g., a report of ExxonMobile work on litium ion batteries and other postings on the blog linked here.)  In contrast, solving the comparable problems of fuel cells is not of much interest to companies that are not vehicle manufacturers.

Hydrogen can also be produced by "reforming" light hydrocarbons (routinely done in petroleum refineries) or by reacting powdered coal with steam (used to make "town gas" in the 19^th Century). If we have light hydrocarbons, why would we not just run them in a standard internal combustion engine in a hybrid auto, instead of reforming to hydrogen to feed a fuel cell? Either way, we have CO₂ to dispose of and, I strongly suspect, more wasted energy. The town gas reaction is throw-back technology with the biggest possible CO₂ burden. So, assuming a generic source of electricity instead of one of these sources of hydrogen seems like the best case scenario for the fuel cell vehicle.

I say hydrogen fuel cell vehicle development is a dead end.  What do you think?  Did I get my facts or analysis wrong?  Are there technological reasons to believe the hydrogen route can displace the battery route?  Are auto companies doing research on hydrogen vehicles only to reduce the political pressure to commercialize hybrids and plug-in cars sooner?  Why are environmental groups like NRDC promoting hydrogen vehicles?

Update on Saturday, December 8, 2007 at 08:02AM by Skeptic

For a good article focusing on the politics of this issue, and the first discussion of the competitive difficulties faced by the hydrogen car I have seen in any news journal see "2 'green' technologies race for driver's seat" in today's Los Angeles Times.  The Bush Administration is backing fuel cell development with $1.2 billion of our dollars.  Do we need any more evidence that the fuel cell auto is doomed? 

For a really good survey of the technological issues surrounding the hydrogen powered car, there is an excellent little book by a PhD who oversaw Department of Energy research spending in this area in the 1990s.  Joseph J. Romm, The Hype About Hydrogen (2004, Island Press).  This book has been taken seriously by some serious people, including John Doehr, who wrote a blurb for the book jacket. 

Update on Saturday, May 24, 2008 at 11:50AM by Skeptic

Recent developments are reported here in Joe Romm's blog, with links to his earlier posts and current press. 

Update on Wednesday, June 18, 2008 at 03:27PM by Skeptic

Joe Romm lays out here in detail the reasons why hydrogen fuel cell vehicles are a dumb idea and won't happen.  The arguments are the same as in my post but made at greater length, and he quantifies the relative efficiency with which the hydrogen car and the battery car get power from the grid to the wheels:  The battery car is 3 to 4 times as efficient. 

Update on Friday, September 12, 2008 at 07:39AM by Skeptic

Joe Romm notes here that The Economist has recently pronounced that hydrogen cars are the cars of the future and always will be, and reprises and updates the arguments why hydrogen cars are very unlikely to be commercialized. 

Update on Tuesday, January 13, 2009 at 08:15AM by Skeptic

Cheap and efficient batteries are so important to hybrid cars, and especially plug-in vehicles, that battery manufacturers could push traditional auto makers out of the driver's seat.  Chinese cell phone battery maker BYD has announced it will start selling an all-electric car later this year.  GM says dominating battery technology is critical, but Ford is relying on a vendor.  Ken Bensinger has the story here.

Update on Friday, May 8, 2009 at 09:43AM by Skeptic

The Department of Energy has announced it will cut off its funding for further development of hydrogen powered vehicles because such vehicles will not be practical within the next 10 to 20 years.

Update on Wednesday, July 22, 2009 at 12:58PM by Skeptic

Joe Romm tees off on the hydrogen fuel cell vehicle again here as Congress tries to restore funding that Secretary Chu tried to eliminate 2 months ago.

Update on Wednesday, February 29, 2012 at 05:49PM by Skeptic

Joe Romm hammered in some more coffin nails here. 

Economic Science is to Science as Fantasy Football is to Football

This week three gents won the Nobel Memorial Prize for "Economic Science."  The idea that the study of political economy is a science is misleading to the general public and, apparently, to a great many economists.  To call the field a "science" is to imply that it employs the "scientific method," developing hypotheses about cause and effect or other relationships in the physical world and attempting to disprove or confirm them empirically.  To the contrary, economists, especially macro-economists, are not able to test anything because the real world has a vast number of uncontrollable variables (including populations who refuse to cooperate). 

Wise economists recognize this and properly regard their ideas as merely insights or arguments in the legitimate (but unscientific) field of "political economy."  Economic "scientists," on the other hand, seem to deal with the real world by ignoring it when it does not agree with their beliefs.  The latter often develop mathematical models and run them through computers as though their field can be explained as simply and elegantly as Isaac Newton explained the laws of motion.  Unfortunately for them, the real world of macro-economics has a complexity more like that of the life sciences.  A principal focus of this blog is likely to be exposing the unreality of their views, which can do great damage when promoted by influential people. 

On the bright side, the recent Nobel prize was for work on "mechanism design theory."  That this sub-field exists is a challenge to free market fundamentalists who purport to believe that free markets yield the best solutions to all problems.  The fundamental tenet of this sub-field is that all markets have rules and that the particular rules chosen can have great influence on transaction outcomes.  For a brief and useful summary, see John S. Irons. 

Update on Saturday, October 20, 2007 at 10:15AM by Skeptic

"Carping from time to time over the unworthiness or politics of a particular Nobel peace or literature laureate is expected.  But when it comes to economics, it's the award itself that sometimes comes in for sneers; even a couple of its winners have suggested it be abolished."  Today's New York Times.  The story quotes James K. Galbraith, "They're not engaged in the problems of the actual world."  1974 winners Gunnar Myrdal and Freidrich von Hayek were the two laureates who suggested there should be no prize for economics.  Myrdal "rejected the idea that the field of economics could claim a Nobel on the basis of its scientific rigor."  But they're still doing it, so I'll continue "carping."