Just to put something new up

November 19, 2014 at 9:28 pm (Icepick) ()

Anyone that cares to can look at my latest post on the current labor situation in the USA over at my own site. It’s actually worse than I supposed. Not as link filled as usual, as originally it was just a string of comments.

Otherwise, how’s everyone doing? I hope you and yours and your cows are all enduring the arctic blast, Karen, and hope this finds all of the rest of you well, too.

Not much happening here, though I may finally get something tested soon. (Woo AND hoo.) We’ll see.

And a friend and his wife had a surprise adoption of a new baby over the weekend! I’ll write up more about that later, when I confirm I can share the story more widely, but I’m quite thrilled for them.

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Not so fast with the optimism, buddy!

April 4, 2014 at 4:35 pm (Icepick) (, )

CAVEAT: I try to avoid political posts here at Ambiance. But today, as yesterday, there is some economic news worthy of note.

The new jobs report was released today. I have heard a few people make some optimistic noises about the fact that private sector jobs have matched the 2008 peak in terms of numbers. (See here, for example, though they do have the decency to caveat the hell out of the article.)

What I’m not hearing, and don’t expect to hear from the Administration, is a comment about full-time jobs. As of March 1 2014, the US economy had 3,872,000 FEWER full-time jobs than it did at its peak in November 2007. And that’s after almost five years of recovery.

http://research.stlouisfed.org/fred2/graph/fredgraph.png?g=vV4

And given that the working age population has grown considerably in the intervening years, the employment situation is actually even worse than it appears.

So don’t let the bastards tell you how goddamned good we’ve got it, and what a wonderful job they’ve done. Because it just ain’t so.

(Sorry, I’ve been trying to get the graph to embed, but wordpress isn’t accepting the FRED site’s code. I’ll see what I can do to fix it later.)

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Killing America

December 7, 2010 at 9:06 pm (By Miles Lascaux) (, , )

It’s probably a bad idea for someone like me, with a weak grounding in economics, to think about economics. But you can’t help thinking about economics nowadays. And I probably should have been thinking about it all along.

Thinking about it is hard work for me, in part because so many people I instinctively dislike and mistrust have weighed in on it so loudly, with opinions that seem to me based on flawed premises. But that doesn’t mean their conclusions are to be dismissed.

Look, here’s what I see. I’m 50. When I was a teenager, banks were local. In Philadelphia, you had PSFS and you had Girard. Both storied old names with deep local roots. You could open a savings account there and get 4% or 5% interest on $100. It taught you how to invest and grow your money. Both are gone now. The banks you see now on the city’s streets, I don’t even know where they have headquarters.

And nobody except rich dudes and eccentrics played the stock market. It was understood to be a form of legalized gambling in which the small and uninitiated investor was almost certainly going to be cheated, unless he worked his tail off at it. When you bought stock, you got a big engraved piece of paper with the name of the company on it.

When you had a good job, you had a pension fund. Your employers, who probably were local, had it invested in a local bank, which lent it out at interest to people it knew and trusted, to buy homes, build stores, etc.

There were many problems and pitfalls in all this. But it seemed to work well enough for modest growth and reasonably good employment.

Then, in 1978, along came the 401(k). I don’t think anyone intended it to have the effect it had. But it eventually made everyone an investor in the global financial markets. Nobody except government workers seems to have a pension fund now. In short, all of us gradually came to feel our interests were identical to those of the Wall Street sharks, because our pension funds were parked in the same places as their play money.

Worse, new financial products were devised which sliced and diced and repackaged investments like sausage meat. So you didn’t know if your money was in this company or that company, but you felt you were playing the game. And you were, but now it was a shell game. By the mid-1980s, guys in the barbershops were reading the stocks pages and bragging about their investments. As though the shark tank had become a Disney ride, as though they still weren’t guppies.

Short term, big profit. If someone bought up the local silverware making company and shipped the work off to China and Mexico, that put 150 people in your town out of work, but it also meant that company could make a lot more profit, and as we all were, technically, invested in corporate profits, it seemed like a good thing in the end overall. A little sad, maybe, if you knew one of the unlucky few. But we had learned to think of ourselves like little tycoons.

The Wall Street mentality. I don’t know any bankers, or any investment house executives. But I know the kind of rapacious swine they brought in to take over newspapers in the 1980s and ’90s, when they passed from family hands to corporate investments. They are people you don’t ever want to be beholden to for anything.

This guy can tell you what really killed journalism in America. The newspaper is a product that, unlike a lightbulb, can’t be outsourced to China or India to make (though, gods help them, they have tried). Doesn’t matter. It was subject to the same evisceration as any other American industry:

In fact, when newspaper chains began cutting personnel and content, their industry was one of the most profitable yet discovered by Wall Street money. We know now – because bankruptcy has opened the books – that the Baltimore Sun was eliminating its afternoon edition and trimming nearly 100 editors and reporters in an era when the paper was achieving 37 percent profits. In the years before the Internet deluge, the men and women who might have made The Sun a more essential vehicle for news and commentary – something so strong that it might have charged for its product online – they were being ushered out the door so that Wall Street could command short-term profits in the extreme.

Such short-sighted arrogance rivals that of Detroit in the 1970s, when automakers – confident that American consumers were mere captives – offered up Chevy Vegas, and Pacers and Gremlins without the slightest worry that mediocrity would be challenged by better-made cars from Germany or Japan.

In short, my industry butchered itself and we did so at the behest of Wall Street and the same unfettered, free-market logic that has proved so disastrous for so many American industries. And the original sin of American newspapering lies, indeed, in going to Wall Street in the first place.

When locally-based, family-owned newspapers like The Sun were consolidated into publicly-owned newspaper chains, an essential dynamic, an essential trust between journalism and the communities served by that journalism was betrayed.

So didn’t it all start with the gentle, subtle, paradigm shift that made the average American worker (when there still was such a thing) feel like his interests were aligned with those of the worst sort of corporate bosses? That has occasionally happened before in our history (in the 1830s and 1850s, for instance), but it is not a stable position, because it is so palpably false. But now it’s become the fiction that sank the ship we rode this far.

I don’t think anyone did all of this deliberately, even though it was accomplished in a lifetime. I don’t think any one political party is to blame for all of it. But I do think some people steered it and nudged it for their own benefit. And they still have not been called to account for it.

And I would like to see them all shipped off to a barren rock of an island in shark-infested waters, with no trees and no shade and no fresh water, and left there. I’d even go get a pilot’s license and fly them there myself.

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Chutes and Ladders [UPDATED AGAIN]

May 12, 2009 at 10:03 pm (By Amba) (, , , , )

Okay, since economics is what we find ourselves talking about, I’ll bite:  here’s an aspect of economics, contentious and critical to economic policymaking, that strikes me as important and fascinating.

It’s the study of how impulses, incentives, and consequences shape human behavior.  I think it’s called behavioral economics:

Economic Man makes logical, rational, self-interested decisions that weigh costs against benefits and maximize value and profit to himself. Economic Man is an intelligent, analytic, selfish creature who has perfect self-regulation in pursuit of his future goals and is unswayed by bodily states and feelings. And Economic Man is a marvelously convenient pawn for building academic theories. But Economic Man has one fatal flaw: he does not exist.

When we turn to actual human beings, we find, instead of robot-like logic, all manner of irrational, self-sabotaging, and even altruistic behavior. […]

Nonetheless, neoclassical economics sidelined such psychological insights. As recently as 15 years ago, the sub-discipline called behavioral economics—the study of how real people actually make choices, which draws on insights from both psychology and economics—was a marginal, exotic endeavor. Today, behavioral economics is a young, robust, burgeoning sector in mainstream economics, and can claim a Nobel Prize, a critical mass of empirical research, and a history of upending the neoclassical theories that dominated the discipline for so long.

This new field doesn’t just pick the brains of psychologists (to whom, one senses, it could give a whole new useful life), but those of neurologists, and, implicitly, of sociobiologists, who view these hard-wired behavioral mechanisms as winners of the competition to survive:

“Economists specialize in taking really complex things and boiling them down to simple principles,” says David Laibson. “So, rather than treat the brain as billions of neurons, or trillions of neurotransmitters, we want to ask, what is the right level of analysis? It turns out that the brain has two key subsystems. One, the limbic and paralimbic system, rules the intuitive and affective parts of our psyches. It’s shared by all mammals and seems to do a lot of emotional cognition—how we feel emotionally, how we respond to other humans, or to being treated unfairly. This system seems to function unconsciously; we don’t have access to it and maybe can’t even control it. It’s experiential and rapid in function.

“Contrast that with the analytic system, centered in the frontal and parietal cortexes,” Laibson continues. “It controls a lot of the thought processes we learn to do: calculated, conscious, future-oriented thinking. It’s not based on past experience; you could have the rules of a brand-new game explained and the analytic system would be able to figure out how to play.”

Brain researchers have shown that an interaction of the limbic and analytic systems governs human decision-making. The limbic system seems to radically discount the future. While the analytic system’s role remains constant from the present moment onward, the limbic system assumes overriding importance in the present moment, but rapidly recedes as rewards move into the future and the emotional brain reduces its activation. This explains impulsiveness: the slice of pizza that’s available right now trumps the dietary plan that the analytic brain has formulated. Seizing available rewards now might be a response pattern with evolutionary advantages, as future benefits are always uncertain.

There it is right there:  the seat of no-tomorrowism!

Strangely, even more interesting to me than the study of human motivation (which is only going to end up proving what the wise have always known, verifying millennia of maxims and canny clichés) is the engineering angle:  the study of how to motivate humans.  It interests me, I think, because it’s what so much of the disagreement between right and left comes down to.  What optimizes motivation?  Struggle or security?

America, relatively speaking, lacks a social safety net.  There’s a feeling — I’ve felt it — that you have to succeed to survive.  It’s very starkly Darwinian:  there isn’t much middle ground.  Is it this anxiety that spurs us on to great heights as a nation?  Or does it actually sap creativity, condemning all but the entrepreneurially fierce and fit to waste their lives and gifts struggling to get by?  Does assuring people’s basic survival, at the root of Maslow’s hierarchy of needs, free them to climb that tree and be curious and creative?  Or does it take the edge off and make them lazy and dependent?  I don’t know the answer, but suspect it’s not totally either/or.  On the one hand, our nervous systems are tuned to peril and triumph.  On the other hand, beyond a certain degree of stress we lapse into “learned helplessness,” the depressed state of experimental animals that have learned there’s nothing they can do to predict, avoid, or prevent random electric shocks.  The Maslovian view posits way too much Rousseauian optimism about human nature.  The social-Darwinian view selects for manic extraversion, creating a bit of a one-note culture.  Introverts must medicate to keep up.

A related question is:  what is definitely in society’s collective interest to provide, overriding concerns about the effects on individual self-reliance and moral fiber?  The common defense, clearly.  The internal version of defense — law and policing, the maintenance of public order.  Sanitation, a no-brainer.  I think a strong case can be made for education:  not that the public sector should monopolize education, but that it should make it available to all as the default.  Very much in the collective interest — anyone care to count the ways?  Scientific competitiveness (from Sputnik to the new spur of globalization) is only one.

Far more controversial:  various forms of the basic income guarantee, and health care.  To many liberals it seems self-evident that providing single-payer health care is in the collective interest.  Conservatives say that market incentives make American health care, for all its problems, much more innovative and effective.  You saw the arguments that Natasha Richardson would not have died in the U.S.

Incentives and consequences are the most fascinating part of the picture, on every level.  The elusive preventive aspect of health care, for instance.  This is one of the areas where the limbic system presents a major stumbling block.  When the supermarket is packed with snacks and advertising issues perpetual siren songs for supersized this and that, how do you help the analytical forebrain override the impulse with remote concerns about longevity, economy, and even vanity, a limbic reward that requires an analytical abstinence?  The limbic brain doesn’t get the time lag between eating a pint of Ben & Jerry’s and gaining a pound.

And then, when there are penalties for good behavior, and rewards for bad behavior, what do you think you’re going to get?

Front page story of today’s NYT discusses the small, well managed, profitable, risk averse banks.

Indeed, as Chris Whalen has so frequently noted, the vast majority of banks in the United States are Triple A by his standards. Its just that these 6,500 banks hold a minority of the total deposits in the nation, with biggest dozen or so banks sitting on 65% or so.

Talk about burying the lead: The Times also noted — in the very last paragraphs — how the big incompetent banks and their very pricey bailouts are screwing these small healthy banks:

“At DeMotte [State Bank, an 11-branch operation in the northwest part of Indiana, Bank President] Mr. Goetz is bracing for a steep increase in a crucial overhead cost: the bill from the Federal Deposit Insurance Corporation, which is basically an insurance fund underwritten by banks.

Last year, DeMotte paid $42,000 into the fund. This year, because of failures in other parts of the country and particularly among national banks, that sum will rise to $500,000 or more.

“Isn’t that the American way?” he says, folding his arms. “Whoever is left standing, whoever was prudent, is always the one who has to pick up the pieces.”

Thus, yet another reason why these bailouts are so absurd: They punish the risk averse and reward the irresponsible . . .

Why do we have different standards for large institutions and little guys?  I’ve long been fascinated by what I think of as “selective Darwinism” — applying the stringency of survival of the fittest to some categories while bailing out others.  (I guess you could argue that getting too big to fail is a form of fitness, a special case of the general point that mega-success is the surest path to survival.) Our thinking, both right and left, seems extremely muddled in this regard.  Incentives and consequences — chutes and ladders — are what it’s all about.  Both the sages and the neurologists will tell you that.

I wish I could do a better job of thinking this through, but I’ve already stolen too much time from work.  Please jump in.

UPDATE: And speaking of incentives, what do you think of paying kids to learn, promoted by Newt Gingrich?

[T]he Learning Makes a Difference Foundation […] focuses on innovative learning programs, such as Learn, Earn and Achieve, which offers students financial rewards for studying math and science.

[…P]reviously uninterested students not only improve their math and science scores but discover the thrill of learning for learning’s sake.

The pilot program is called Learn, Earn & Achieve.  It may not be idealistic — it turns my vestigial hippie stomach, sure — but it’s realistic, isn’t it?  Remuneration is one of the reasons why we do what we do.  Getting up, getting dressed, and “going to school” in the morning already trains you for getting up, getting dressed, and “going to work” in the morning.  School is a kid’s job.  It has the same structure.  For better or worse, it’s training for adult life in our society.  Why not teach them that good work brings good pay?  Instead of an allowance?  (And instead of the basic income guarantee?)  Of course, then parents would have to help them decide how much of it they should save for college tomorrow and how much they can blow on gear today.  That could be good training too.  What do you think?

I guess the part of it I might question is that last:  discover the thrill of learning for learning’s sake.”  Would kids who got paid for learning ever see any point in doing it voluntarily for free?  But then, school as it is today doesn’t exactly consistently convey the thrill of learning for learning’s sake.  Raise your hand if you enjoyed the Great Novels you had to read?  The thrill of learning for learning’s sake depends most on the quality of the teacher.

UPDATE II: @newtgingrich “Learning IS the most important civil right in the 21st century and it should apply to every american of all ages to compete with china”

And, as stated above, in society’s collective interest to provide, for many reasons, scientific competitiveness being only one.  Think of the advantages of having an informed, critically thinking populace — or more to the point, a populace with the skills to inform itself.  Or, even more to the point, think of the disadvantages of not having such a populace.

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