Links 9/4/09 « naked capitalism

Friday, September 4, 2009

Links 9/4/09

Arctic ‘warmest in 2,000 years’ BBC

Notes from the Space Elevator Conference h+ (hat tip reader David C)

Photographer to the Tsar: Sergei Mikhailovich Prokudin-Gorskii Library of Congress (hat tip reader John D). 100 year old color photos, and impressive quality

How Did Economists Get It So Wrong? Paul Krugman, New York Times (hat tip reader Andrew)

A Failure of Research: Posner on Law Professors and the Financial Crisis Adam Levitin, Credit Slips

The looming political war over Afghanistan Glenn Greenwald, Salon

SEC, CFTC urged to align rules to police markets Reuters

Inquiry Stokes Unease Over Trading Firms That Shape Markets New York Times

Lehman downfall triggered by mix-up between London and Washington Guardian (hat tip reader Keiran)

Real Change: Turning up the heat on non-bank lenders Elizabeth Warren, New Deal 2.0

Antidote du jour:

image010-2

24 Comments:

a says:

September 4, 2009 at 3:13 am

Second time posting this. There was a great Bloomie article yesterday, “AIG Won’t ‘Feed Goldman Sachs’s Bonus Pool Anymore.’”

skippy says:

September 4, 2009 at 5:14 am

RE: the Krugman article, are Economists stuck in Einsteins last days, looking for the Creator or Eloquent solution too which one man could in his own mind encompass it all.

Skippy….good luck with that.

Retirement Savior says:

September 4, 2009 at 7:58 am

Re: the global warming article, you aren’t hearing much about global warming this year in the Southeast US, as it has been rainier and cooler than normal on the whole this year. Seems like people have serious recency bias that affects their activism levels on climate issues.

DownSouth says:

September 4, 2009 at 8:24 am

Paul Krugman is one of Swift’s Laputians, who have an Academy where “projectors,” stuck on one idea, work for years in vain. They toil to extract sunbeams from cucumbers and seal them in bottles; they want to replace silkworms with spiders and endeavor to make clothes by trigonometry. That Krugman is only slightly less deluded than some of those whom he critiques is of little consolation.

The fact that Krugman so limits the discussion should throw red flags up all over the place. To listen to Krugman, one would believe the whole field of economic endeavor falls somewhere between the moderate Keynes and the right-wing neoclassical extemists. Completely absent from the debate is any mention of the dissident Marx, heaven forbid someone really radical like Thorstein Veblen:

“Official economics, in a word, was apologist and unperceptive. It turned its eye away from the excesses and exuberance that were the very essence of the American scene and painted instead a sterotype in formal lines and lusterless color… It suffered from what Malthus had once called ‘the insensible bias of situation and interest’. ”

“The fantastic game of monetary cutthroat was described as the process of ‘Thrift and accumulation”; the outright fraud as ‘enterprise’; the gilded extravagances of the age as colorless ‘consumption’.”
–Robert Heilbroner, “The Worldly Philosophers”

Krugman buys hook, line and sinker into the assumptions that underpin modern Western thought, and he never questions those assumptions. But what if those assumptions aren’t true?

What if unending growth is not possible?

What if America’s stellar rise to becoming the land of milk and honey had more to do with the advent of oil exploitation than our hallowed democratic form of government or capitalistic economy?

What is America to do now that it has encountered a belief system in the Middle East that is every bit as fundamentalist, fanciful and intractable as classical economics and its begets?

Hugh says:

September 4, 2009 at 3:26 pm

Great comment. Krugman falsely frames the debate in a fairly binary way in terms of the theory. And he doesn’t seem to have thought through the data and what they imply for what is likely to happen next. Instead we get a thoroughly bizarre, “hope it all works out, knock on wood.” I mean isn’t it rather his profession to come up with something a little more fact-based than this?

His job is to interpret the data and tell it like it is. Instead he seems to be spinning.

And finally, his choice of who got it right seems very selective. He misses many economists and bloggers who not only got it right about the housing bubble but the sterile leveraging of the paper economy in general. The main benefit I derive from such pieces is more what it says about the author and his limits than those he writes about.

Stephen V. says:

September 4, 2009 at 8:32 am

Mr. Krugman needs to dig a little deeper.
It’s called *capture* folks.
http://mpra.ub.uni-muenchen.de/15691/

Not only were economists mesmerized by their pretty models but dissidents were drummed out of the profession. I attended UCSD in the 1980′s. There was a notice prominently displayed in the Econ Department: if you want an internship, you are on your own fool! We shan’t sully our pretty little hands with real-world business stuff.

Moz says:

September 4, 2009 at 8:42 am

You might enjoy this. I’m not sure what a fennec fox is doing in Sweden – except maybe chillin’.

You know you all need to …

http://www.dn.se/webbtv/nyheter/raven-rommel-rymde-1.944989

DownSouth says:

September 4, 2009 at 9:35 am

If Glenn Greenwald believes that Obama has “certainly deviated from what the GOP would do in the realm of domestic policy,” he needs to spend a little more time reading Naked Capitalsim.

But other than that criticism, his column offers some great insights. My favorite is this:

“But as became clear with Iraq, the ‘mere’ fact that a large majority of Americans oppose a war has little effect — none, actually — on whether the war will continue. Like so much of what happens in Washington, the National Security State and machinery of Endless War doesn’t need citizen support. It continues and strengthens itself without it. That’s because the most powerful factions in Washington — the permanent military and intelligence class, both public and private — would not permit an end to, or even a serious reduction of, America’s militarized character. It’s what they feed on. It’s the source of their wealth and power.”

In reading Hannah Arendt’s “On Revolution” last night, it suddenly dawned on me the form of government we now have in the United States:

“Since the end of antiquity, it had been common in political theory to distinguish between government according to law and tyranny, whereby tyranny was understood to be the form of government in which the ruler ruled out of his own will and in pursuit of his own interests, thus offending the private welfare and the lawful, civil rights of the governed.”

Peripheral Visionary says:

September 4, 2009 at 10:51 am

Krugman has a good start in asking the question of what went wrong in economics, but fails to follow the question to any meaningful answers. Instead, it is the usual Krugmanisms: the heretics of the Chicage School have departed from the true Keynesian ways, and need to be returned to the orthodoxy.

No mention is made of Marx, and very little mention is made of behavioral economists, nor of other significant theorists like Minsky. Instead, he puts himself in the impossible position of decrying the consensus that was based, at least in part, on the very Keynesian theories that he so vociferously supports. He clearly understands that the profession mistakenly placed too much faith in certain conventional theories, but cannot face the possibility that the theories he himself favors might be included in that list.

Keynes was brilliant and is well worth studying, there is no question of that. But if the problem was that economists put too much faith in certain schools of thought, surely Keynes is also on that list; if this crisis has exposed the flaws of conventional thinking, that would have to include Keynesian thought. In many ways the leadership followed the Keynesian formula of pumping massive amounts of money into the economy, and it has not succeeded as advertised.

Krugman is right in that the economics profession needs more introspection and more reconsideration of its theories. But that most certainly includes the theories that Dr. Krugman favors as much as anything else.

mangy cat says:

September 5, 2009 at 9:32 pm

beware of your analogies!
almost as dangerous as mixed metaphor
based at st.louis, hyman minsky, the ultimate “salt” was in the deepest part of the freshwater pool

Dave says:

September 4, 2009 at 11:13 am

Re: Inquiry Stokes Unease Over Trading Firms That Shape Markets

You can just feel the middle class suffering at the hands of the greedy people in this article. I cannot believe that we tolerate this… An extra dollar from millions of people at the pump so these guys can have speed boats. Outrageous.

Tortoise says:

September 4, 2009 at 11:38 am

The important news today is regarding the employment situation. The most interesting statistic (which the news media characteristically ignores) is the Employment-Population Ratio which is now down to where it first was in 1979. Calculated risk has a graph:

http://www.calculatedriskblog.com/2009/09/employment-population-ratio-part-time.html

If this ratio continues dropping the way it has during the last two months, it will soon reach levels reminiscent of the sixties. “Leave it to Beaver” times …

eric anderson says:

September 4, 2009 at 12:27 pm

Reversing 2,000 years of Arctic cooling, whether it is caused by GHGs or not, is to my mind a good thing. The alternative is continuing to slide toward the next ice age, which is actually overdue compared to the cycles of brief warming between glaciations over the past 400,000 years. I live in Iowa. I don’t want our farms covered in hundreds of feet of ice. During most of the past half million years, they were.

The reason economists failed in their predictions is similar to the reason climate scientists failed to predict the global cooling since 1997. A world economy is too complex and chaotic for theories and models. The climate is too complex for current models to handle. There are still too many unknown inputs and feedbacks. Anyone who closely examines the IPCC reports will note that they admit scientific understanding of several major climate “forcing” factors is poor. It’s in the report. Yet, they bluster on about the certainty of future warming just like Bernanke blusters on about averting disaster and the looming recovery.

They’re all hubristic baboons.

eric anderson says:

September 4, 2009 at 12:37 pm

One additional point. If the Arctic is colder, why is there more ice? The sea ice area is greater this year than in 2007 and 2008.

Don’t believe me. Look for yourself. The Nansen Environmental & Remote Sensing Center in Bergen Norway has the charts online. tinyurl.com/6ywaqk

Arctic ice is increasing again in concert with global cooling.

burnside says:

September 4, 2009 at 2:46 pm

Denmark’s Centre for Ocean and Ice notes no such anomaly. So we have two opposing reports. See if you can find evidence of significant change in their dataset – NOAA does not release theirs for review, which I find potentially disturbing.

http://ocean.dmi.dk/arctic/meant80n.uk.php

rootless cosmopolitan says:

September 4, 2009 at 5:42 pm

burnside,

what are you talking about? The paper to which the BBC news report refers has been published in Science [1], i.e., the publication was per reviewed. The data sets used for the study are available to the public.[2] Please inform yourself instead of spreading rumours and misinformation.

[1] http://www.ncdc.noaa.gov/paleo/pubs/kaufman2009/
http://www.sciencemag.org/cgi/content/abstract/325/5945/1236
[2] ftp://ftp.ncdc.noaa.gov/pub/data/paleo/reconstructions/arctic/kaufman2009arctic.txt

rc
- rootless cosmopolitan says:
  
  September 4, 2009 at 7:52 pm
  
  I wanted to say “peer reviewed”.
  - burnside says:
    
    September 5, 2009 at 3:59 am
    
    rc,
    
    The data you link is the processed, gridded format from CRU Hadley, and not raw data. There are a number of institutions and individuals with access to the methodology and the full dataset, though that access is subject to a number of restrictions and will not be broadly available for some time. I have no problem with this, but to present peer review as complete – and not ongoing – cannot be what you intend to say.
    
    Science, as is proper, presents the Kaufman et al paper and support. But I think NOAA is a bit ahead of the curve and, perhaps unwittingly, has precipitated a flurry of journalistic treatments which place more weight on Kaufman’s findings than they will reasonably bear at present. While the media mostly do accept the idea that publication in a respected journal renders such work and its conclusions a matter of fact, the reality is that it’s been judged solid work and worthy of getting out into the scientific community for comment and a broader perspective.
    
    We will see how robust the report proves to be, but I think it is a mistake to accept the proposed 1995 arctic reversal as fait accompli. Which was my point in linking the Danish graph.
    
    I personally have no dog in this fight, but think you might acquit me of either ignorance or of willful distortion.

rootless cosmopolitan says:

September 4, 2009 at 5:05 pm

@erik anderson:

“Arctic ice is increasing again in concert with global cooling.”

Is this a fact? Or is this wishful thinking?

http://ocean.dmi.dk/arctic/icecover_30y.uk.php

Again, there is a longer-term trend and short-term variability. Like it is with the global mean temperature.

rc

robJ says:

September 4, 2009 at 9:37 pm

RC,
Thanks for publishing the ice extent graph, which should make it clear where the overall trend is heading. A small increase over the last year does not mean “ice extent” is increasing, as if the huge downtrend over the last 20 years can be wiped out by a small upflux. The Northwest Passage was open (briefly) last summer. I suppose this fact does not raise any eyebrows among Mr. Limbaugh and his flock of parrots, since they have no eyebrows to raise. Furthermore, although the data is sparse (and I therefore hesitate to raise the point), studies suggest that thickness of Arctic ice is more rapidly decreasing than ice extent. This decrease in albedo, of course, is an important positive feedback to accelerate Arctic warming.
But nevermind. Rush is not hesitate to proclaim a one year slight increase off the bottom as as “proof” warming has reversed. What has he to say about the previous precipitous 20 year decline? It’s like calling your portfolio healed after the recent 45% increase, even though you’re still down 25% and haven’t made anything in 10 years (if all your money is in an s&P index, anyway). But, hey, you’re OK–you’re up 45% from the bottom, don’t you know?
And sea ice extent is up 2% from last year’s bottom, so, hey, no warming here.

rootless cosmopolitan says:

September 4, 2009 at 5:11 pm

@eric anderson:

“The reason economists failed in their predictions is similar to the reason climate scientists failed to predict the global cooling since 1997.”

What global cooling since 1997? In what world is this supposed to have happened? In the cherry-pick-the-data world where people don’t (want to) know the difference between natural short-term climate variability and longer-term climate change trends?

http://data.giss.nasa.gov/gistemp/2008/
http://www.cru.uea.ac.uk/cru/info/warming/

rc

rootless cosmopolitan says:

September 4, 2009 at 7:49 pm

^peer reviewed
eric anderson says:

September 5, 2009 at 10:27 am

Hey, if you want to look at long-term trends, then look at CO2 versus temperature over the past 500 million years. No correlation.

However, satellite-measured atmospheric temperature does seem to be in decline since approx. ten years ago. See University of Huntsville Alabama Climate Data. Over 25 years, we see Arctic Warming, Antarctic Cooling, and in between a slight warming. Still, the trend has been down in recent years, wiping out most of the “alarming” warming since the late 1970s.

climate.uah.edu/25yearbig.jpg

Anybody can look this up. I would say this is not cherry-picked. It’s a global temperature record over 25 years.

Juan says:

September 4, 2009 at 6:14 pm

Krugman – standard operating procedure within neoclassical econ – one school blames another for ‘getting it wrong’, never bothering to consider that neoclassical economics as a whole was built upon, depends on, a number of become axiomatic false assumptions required to shift from more production centered labor value theories to consumption ‘based’ theories.

This had to do with expansion [and growing militancy] of the 19th century working class. Those theories which if even to a mild degree assigned surplus creation to that class could no longer suffice as an element of dominant ideology but had to be replaced.
Different angle, and an earlier moment, labor theories of value played a part in the convergence of interest between a then revolutionary class of capitalists and the class of wage laborers, in their necessary opposition to the ancien regimes. Capitalist and worker necessarily united in their opposition to rent-seeking essentially pre-capitalist legal-political-religious institutions.

But with conquest of the state and the deeper/more expansive development of capital, the intensified exploitations, such happy partnering could not persist. Antagonisms grew. The boss required a new ideology and the neoclassical economists provided it. Unconsciously or not, They still do.

Why should they ever be expected to ‘get it right’ when the real job is to convince that it was, is, will be right no matter how wrong.

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