August 2010 – Page 3 – artdiamondblog.com

Documenting Dangers of Growing Public Debt (and of Replacing History with Math)

“Kenneth Rogoff and Carmen Reinhart at Ms. Reinhart’s Washington home. They started their book around 2003, years before the economy began to crumble.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 1) Like a pair of financial sleuths, Ms. Reinhart and her collaborator from Harvard, Kenneth S. Rogoff, have spent years investigating wreckage scattered across documents from nearly a millennium of economic crises and collapses. They have wandered the basements of rare-book libraries, riffled through monks’ yellowed journals and begged central banks worldwide for centuries-old debt records. And they have manually entered their findings, digit by digit, into one of the biggest spreadsheets you’ve ever seen.

Their handiwork is contained in their recent best seller, “This Time Is Different,” a quantitative reconstruction of hundreds of historical episodes in which perfectly smart people made perfectly disastrous decisions. It is a panoramic opus, both geographically and temporally, covering crises from 66 countries over the last 800 years.
The book, and Ms. Reinhart’s and Mr. Rogoff’s own professional journeys as economists, zero in on some of the broader shortcomings of their trade — thrown into harsh relief by economists’ widespread failure to anticipate or address the financial crisis that began in 2007.
“The mainstream of academic research in macroeconomics puts theoretical coherence and elegance first, and investigating the data second,” says Mr. Rogoff. For that reason, he says, much of the profession’s celebrated work “was not terribly useful in either predicting the financial crisis, or in assessing how it would it play out once it happened.”
“People almost pride themselves on not paying attention to current events,” he says.
. . .
(p. 6) Although their book is studiously nonideological, and is more focused on patterns than on policy recommendations, it has become fodder for the highly charged debate over the recent growth in government debt.
To bolster their calls for tightened government spending, budget hawks have cited the book’s warnings about the perils of escalating public and private debt. Left-leaning analysts have been quick to take issue with that argument, saying that fiscal austerity perpetuates joblessness, and have been attacking economists associated with it.
. . .
The economics profession generally began turning away from empirical work in the early 1970s. Around that time, economists fell in love with theoretical constructs, a shift that has no single explanation. Some analysts say it may reflect economists’ desire to be seen as scientists who describe and discover universal laws of nature.
“Economists have physics envy,” says Richard Sylla, a financial historian at the Stern School of Business at New York University. He argues that Paul Samuelson, the Nobel laureate whom many credit with endowing economists with a mathematical tool kit, “showed that a lot of physical theories and concepts had economic analogs.”
Since that time, he says, “economists like to think that there is some physical, stable state of the world if they get the model right.” But, he adds, “there is really no such thing as a stable state for the economy.”
Others suggest that incentives for young economists to publish in journals and gain tenure predispose them to pursue technical wizardry over deep empirical research and to choose narrow slices of topics. Historians, on the other hand, are more likely to focus on more comprehensive subjects — that is, the material for books — that reflect a deeply experienced, broadly informed sense of judgment.
“They say historians peak in their 50s, once they’ve accumulated enough knowledge and wisdom to know what to look for,” says Mr. Rogoff. “By contrast, economists seem to peak much earlier. It’s hard to find an important paper written by an economist after 40.”

For the full story, see:
CATHERINE RAMPELL. “They Did Their Homework (800 Years of It).” The New York Times, SundayBusiness Section (Sun., July 4, 2010): 1 & 6.
(Note: the online version of the article is dated July 2, 2010.)
(Note: ellipses added.)

The reference for the book is:
Reinhart, Carmen M., and Kenneth Rogoff. This Time Is Different: Eight Centuries of Financial Folly. Princeton, NJ: Princeton University Press, 2009.

Source of book image: http://www.paschaldonohoe.ie/wp-content/uploads/2010/02/This-time-is-different.jpg

We’re from the Government, and We Are Here to Help

In February, I heard a wonderful presentation by Emily Chamlee-Wright on the recovery process from Hurricane Katrina. One of my favorite parts of her presentation was an account of how the federal bureaucracy hindered those whose entrepreneurship was needed for recovery. The account is included in her book The Cultural and Political Economy of Recovery, that documents her research on Katrina:

(p. 142) . . . , the bureaucratic structure governing disaster relief can stifle, or at the very least frustrate local leadership driving community redevelopment. Doris Voitier’s efforts to re-open the public school system in St. Bernard Parish illustrate this point. Voitier had initially assumed that FEMA’s newly created task force on education would lend the support and expertise she needed. But she quickly learned that FEMA’s role was not so much to lend support as it was to regulate the decisions coming out of her office.

VOITIER: [W]e had our kickoff meeting in September. We didn’t even know what a kickoff meeting was nor did we know we were in one until after it was over . . . . In their little book, which I read later, they tell them, “meet in the person’s home territory,” basically. Now . . . we were operating out of Baton Rouge, and so were all of the people who attended this meeting. We all got rental cars and drove down [to St. Bernard Parish] and met on the third floor of the building over by Chalmette Refining at 2 o’clock in the afternoon in 100 degree heat with no air conditioning or anything. [M]y assistant superintendent and I walk into this meeting and there were 27 people in this meeting are sitting around this table . . . and we were going through the introductions. And the first two people said, “We’re so and so. We are the FEMA historical restoration team” I said, okay, tell me what you do. “Well, we make sure any buildings that are 40 years old or more, they’re designated a historical building, we make sure all of the rules and regulations are followed for that or if there are any historical documents, paintings, or whatever, that they’re preserved properly, and that you do (p. 143) everything you’re supposed to do . . . .” Now here we are just trying to, you know, trying to recover, not worrying too much about that sort of stuff, but . . . thank you very much. So the next two introduced themselves and I said, “Well who are you?” “We are the FEMA environmental protection team.” I said, “Tell me what you do.” Well, same thing. “We make sure all of the environmental laws are followed, that if there are any endangered species that they’re protected,” you know, yadda, yadda, yadda. Okay. The next two, “We are the FEMA 404 mitigation team.” I’m looking at them and I’m thinking, what in the heck is 404 mitigation? Because the next two were the FEMA 406 . . . . So I’m looking at them, I’m thinking, I don’t know what 404 was and I certainly don’t know what 406 is . . . . And you know. . . [I’m thinking] can’t somebody help me get a school started and clean my schools . . . ?

Source:
Chamlee-Wright, Emily. The Cultural and Political Economy of Recovery: Social Learning in a Post-Disaster Environment, Routledge Advances in Heterodox Economics. London: Routledge, 2010.
(Note: first ellipsis added; other ellipses in original.)

Scientific Opinion Shifts to Galambos Who Was Fired for His Theory

“Robert Galambos, . . . , studied the inaudible sounds that allow bats to fly in the dark.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 20) Dr. Robert Galambos, a neuroscientist whose work included helping to prove how bats navigate in total darkness and deciphering the codes by which nerves transmit sounds to the brain, died June 18 at his home in the La Jolla section of San Diego. He was 96.
. . .
In 1960, while on an airplane, Dr. Galambos wrote that he had an inspiring thought: that the tiny cells that make up 40 percent of the brain, called glia, are as crucial to mental functioning as neurons.
“I know how the brain works!” he exclaimed to his companion.
But his superiors at Walter Reed found the theory so radical that he was soon job-hunting. The view at the time was that glia existed mainly to support neurons, considered the structural and functional unit of the nervous system. But Dr. Galambos clung to his belief, despite the failure of three experiments he performed in the 1960s.
Since then, scientific opinion has been shifting in his direction. In 2008, Ben A. Barres of the Stanford University School of Medicine wrote glowingly in the journal Neuron about the powerful role glia are now seen to play. He concluded, “Quite possibly the most important roles of glia have yet to be imagined.”

For the full obituary, see:
DOUGLAS MARTIN. “Robert Galambos, 96, Dies; Studied Nerves and Sound.” The New York Times, First Section (Sun., July 18, 2010): 20.
(Note: the online version of the article is dated July 15, 2010 and has the title “Robert Galambos, Neuroscientist Who Showed How Bats Navigate, Dies at 96.”)
(Note: ellipses added.)

“Vast Majority of People” Will Reject a New Idea at the Start

(p. 288) . . . , my advice has to do with what you do when you find yours elf sitting there with ideas in your head and a desire to build them. But you’re young. You have no money. All you have is the stuff in your brain. And you think it’s good stuff, those ideas you have in your brain. Those ideas are what drive you, they’re all you think about.

(p. 289) But there’s a big difference between just thinking about inventing something and doing it. So how do you do it? How do you actually set about changing the world?

. . .

Well, first you need to believe in yourself. Don’t waver. There will be people–and I’m talking about the vast majority of people, practically everybody you’ll ever meet–who just think in black-and-white terms. Most people see things the way the media sees them or the way their friends see them, and they think if they’re right, everyone else is wrong. So a new idea–a revolutionary new product or product feature–won’t be understandable to most people because they see things so black and white. Maybe they don’t get it because they can’t imagine it, or maybe they don’t get it because someone else has already told them what’s useful or good, and what they heard doesn’t include your idea.
Don’t let these people bring you down. Remember that they’re just taking the point of view that matches whatever the popular cultural view of the moment is. They only know what they’re exposed to. It’s a type of prejudice, actually, a type of prejudice that is absolutely against the spirit of invention.

Source:
Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.
(Note: Italics and centered ellipsis in original; initial ellipsis added.)

Banks Try to Suppress Competition Through Federal Finance Regulations

“Banco Wal-Mart plans to open more than 160 branches in Mexico this year.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B2) Banco Wal-Mart plans to open more than 160 branches in Mexico this year, nearly doubling its presence south of the border. Wal-Mart Canada Bank also opened this month. It is offering a credit card and may make loans, including mortgages.

As Wal-Mart has done with retail in America, a Wal-Mart bank could be a disciplining force in keeping down costs for customers. It could also act as an engine of credit creation for a significantly underbanked subset of the American populace.
The Federal Deposit Insurance Corporation estimates that 60 million Americans, most of them low-income, are underserved by local community banks and wind up using usurious check cashers, payday lenders and pawnbrokers for financial services.
. . .
As part of the financial reform legislation, bankers have supported a three-year freeze on new applications for industrial loan corporations, the charter Wal-Mart would need.
That runs contrary to the supposed spirit of reform that seeks to empower and protect consumers. Greater competition, coupled with sounder regulatory supervision, would help accomplish that. And Wal-Mart could be its catalyst.

For the full commentary, see:
ROLFE WINKLER, ROB COX and MARTIN HUTCHINSON. “Reuters Breakingviews; The Halls of Finance Fear Wal-Mart.” The New York Times (Thurs., June 24, 2010): B2.
(Note: the online version of the article has the date June 23, 2010.)
(Note: ellipsis added.)

Smithsonian and NIH Are Contributing to Wikipedia, But Will Professors?

(p. B2) Professor Jemielniak in the passage quoted below, asks why professors would ever contribute to Wikipedia since they already can get published in academic journals, and also have a captive audience at their lectures.
Based on that reasoning, Professors likewise would have little motive to blog—yet many do. Why? Perhaps because there is something satisfying in reaching a wide audience of readers who are not required to read, but who choose to read.
(Readers of academic articles are often few, and students at academic lectures are often captives whose bodies are present, but whose minds are somewhere else.)

(p. B2) In the United States, the Wikimedia Foundation has sponsored an academy to teach experts at the National Institutes of Health how to contribute to the site and monitor what appears there. And Mr. Wyatt said that other institutions including the Smithsonian had inquired about getting their own Wikipedian in residence to facilitate their staff members’ contributions to the site.

One talk here by a Polish professor, Dariusz Jemielniak, took a jab at the idea of experts as contributors. He said he had noticed that students often remained contributors to Wikipedia but that professors left quickly. His explanation was that Wikipedia was really just a game for people to gain status. A teenager offering the definitive account of the Thirty Years’ War gets a huge audience and respect from his peers. But, Mr. Jemielniak asked, why would a professor stoop to edit Wikipedia?
“Professors already get published and can lecture and force people to listen to their ideas,” he said.

For the full story, see:

NOAM COHEN. “Link by Link; How Can Wikipedia Grow? Maybe in Bengali.” The New York Times (Mon., July 12, 2010): B2.
(Note: the online version of the article is dates July 11, 2010.)

Driving Blind: Exploring the Unexplorable

“The National Federation of the Blind operates a science camp to inspire young blind students, such as the girl above [Addison Hugen]. The organization is working with Virginia Tech on a vehicle equipped with sensors for blind drivers.” Source of photo: online version of the article quoted and cited below. Source of caption: print version of the article quoted and cited below. [Bracketed name from online version of caption.]

(p. 3A) WASHINGTON (AP) – Could a blind person drive a car? Researchers are trying to make that far-fetched notion a reality.

The National Federation of the Blind and Virginia Tech plan to demonstrate a prototype vehicle next year equipped with technology that helps a blind person drive a car independently.
The technology, called “nonvisual interfaces,” uses sensors to let a blind driver maneuver a car based on information transmitted to him about his surroundings: whether another car or object is nearby, in front of him or in a neighboring lane.
Advocates for the blind consider it a “moon shot,” a goal similar to President John F. Kennedy’s pledge to land a man on the moon. For many blind people, driving a car long has been considered impossible. But researchers hope the project could revolutionize mobility and challenge long-held assumptions about limitations.
“We’re exploring areas that have previously been regarded as unexplorable,” said Dr. Marc Maurer, president of the National Federation of the Blind.

For the full story, see:
KEN THOMAS . “Blind Drivers Goal of High-Tech Car Project.” Omaha World-Herald (Saturday, July 3, 2010): 3A.
(Note: the online version of the article has the title: “Driving while blind? Maybe, with new high-tech car.”)

Inventor Wozniak Tries Entrepreneurship

(p. 247) In a way, that happened to me. The US Festival was exactly the opposite of the Apple experience for me. It didn’t come easily. It involved having plans to get certain groups, and having those groups cancel. It involved having plans for sites, and having those sites cancel. It involved having plans for equipment, and having the equipment not come through. It was a costly battle to do all the right things, but we did them anyway.

I’d written a check. I had confidence in my people. I’d already taken a stand, and when you take a stand, you don’t back away from it. Sometimes this has been a big problem in my life–especially marriage-wise–but if I’m in, I’m in. I don’t back out. And by the time I could see this was a disaster, I had this guy, Pete Ellis, and all the people he’d hired, counting on me. I couldn’t just (p. 248) all of a sudden pull the rug out. And we’d already planned the date: the first US Festival would be the Labor Day weekend of 1982, right after my first year back at school.
. . .
(p. 255) I loved that first US Festival concert, and I knew I’d made so many people happy doing it. We thought from press reports that enough people–nearly half a million–had shown up. So we thought that would make us money. But we lost money, nearly $12 million, because it turned out we didn’t sell as many tickets as there were people.

Source:
Wozniak, Steve, and Gina Smith. iWoz: Computer Geek to Cult Icon: How I Invented the Personal Computer, Co-Founded Apple, and Had Fun Doing It. New York: W. W. Norton & Co., 2006.

Expert Says Australian Cow Burps Add to Global Warming

“Athol Klieve, an expert on cattle stomachs, with steers used for research on reducing methane emissions from belching cattle.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A14) GATTON, Australia — To hear Athol Klieve tell it, a key to reducing Australia’s enormous carbon emissions is to make a cow more like this country’s iconic animal — the kangaroo.
. . .
Australia contributes more greenhouse gases per capita than just about any other country, with its coal-fired power plants leading the way. But more than 10 percent of those gases come from what bureaucrats call livestock emissions — animals’ burping.
At any given point, after munching and regurgitating grass, tens of millions of Australian cattle, as well as sheep, are belching methane gases nonstop into the air. With methane considered 21 times more potent than carbon dioxide in warming the atmosphere, the burping has given ammunition to environmentalists, vegetarians and other critics of beef while initially putting the large meat industry on the defensive.
. . .
Ruminants release methane because of the peculiar way they digest their food. Inside a cow’s foregut, which can contain more than 200 pounds of grass at any given time, fermentation of the food leads to the release of hydrogen, a byproduct that would slow down the fermentation. Microbes known as methanogens help the ruminants get rid of the excess hydrogen by producing methane gases that the animals release into the atmosphere.
In other animals known as hindgut fermenters, including humans — in which food is fermented after going through their stomachs — methane is sometimes released through flatulence, a fact that, Mr. Klieve said, has led to misunderstanding about his work
“We’ve had to put up with that all the time,” Mr. Klieve said. “It comes from the front end! In the cow, it comes from the front end. But if you’re a hindgut fermenter, it goes the other way.”
. . .
Like cattle, kangaroos are also foregut fermenters. But instead of relying on methanogens to get rid of the unwanted hydrogen, kangaroos use different microbes that reduce hydrogen by producing not methane, but harmless acetic acids, the basis of vinegar.
. . .
“It’s going to be very difficult to meet the current production needs, particularly for the current global population, with kangaroo,” Ms. Henry said. “You need something like 10 kangaroos to produce the same amount of meat as one steer. You can’t herd them or fence them in.”
Undaunted, a few kangaroo meat entrepreneurs are pressing ahead, seeing methane emissions as a business opportunity.

For the full story, see:
NORIMITSU ONISHI. “Gatton Journal; Trying to Stop Cattle Burps From Heating Up Planet.” The New York Times (Weds., July 14, 2010): A14.
(Note: the online version of the article is dated July 13, 2010.)
(Note: ellipses added.)

Source of map: online version of the NYT article quoted and cited above.

Obama Mentor Saul Alinsky on Chicago Reform Candidates

(p. A15) When Barack Obama came to prominence as a presidential candidate, his Chicago background–in particular, his efforts as a “community organizer”–reignited an interest in Saul Alinsky (1909-72), the hard-charging activist whose 1971 book, “Rules for Radicals,” was said to have had a formative influence on Mr. Obama’s thinking.
. . .
Hardscrabble though his youth had been, Alinsky managed to get into the University of Chicago, where his major was archaeology. When the Depression dried up money for digs, he wangled a fellowship to study criminology and began hanging out with gangsters as part of his study, including Al Capone’s “enforcer,” Frank Nitti.
Mr. von Hoffman tells us that one of Alinsky’s favorite stories involved a meeting between Nitti and Anton Cermak just after Cermak had been elected Chicago’s mayor in 1931. The meeting’s purpose was to negotiate the money that Capone would pay the city to keep its speakeasies stocked with beer and liquor: “As Saul told the story,” Mr. von Hoffman writes, “Cermak explained to Nitti, ‘You know I was elected as a reform candidate.’ To which Nitti replied, ‘What the hell does that mean, Tony?’ and waited for an answer. ‘It means,’ the mayor said after a suitable pause, ‘that the price is double.’ ”
The anecdote nicely illustrates the cynicism that informed Alinsky’s ideas about the way the world works.

For the full review, see:
CHRISTOPHER WILLCOX. “A Chicago-Style Peace Disturber; ‘Community organizer’ Saul Alinsky lumped politicians in with gangsters..” The Wall Street Journal (Thurs., July 15, 2010): A15.
(Note: ellipsis added.)

The book under review is:
von Hoffman, Nicholas. Radical: A Portrait of Saul Alinsky. New York: Nation Books, 2010.