Monday, December 29, 2008

Something to Consider when Drafting New Year's Resolutions

Andrew Osborn writes in yesterday's Wall Street Journal about Professor Igor Panarin, a Russian academic and former KGB man who we have cause to hope is not a modern-day Cassandra.

Professor Panarin is possessed of a theory that the United States ". . . will fall apart in 2010" (see map of our multi-sundered union via link to WSJ above). Why? Because, ". . . mass immigration, economic decline, and moral degradation will trigger a civil war . . ." Oh no! When does all this start? Next fall. Perhaps the professor has cable and has been exposed to Lou Dobbs and Fox News.

In truth, though, the professor has been pitching this idea since 1998. Recently he has been given the Obama treatment by Russian state media (which at least has the excuse of being state media). The popularity in Russia of the specter of American decline and the fact that the end is nigh combine to render the professor and his prediction presently conspicuous.

If 2009 passes without the rumblings of civil war, and if 2010 passes without the actual thing, then Professor Panarin will have some explaining to do. Perhaps in that event he can join together with Oral Roberts and those folks in the '70's who predicted a new ice age (some of whom, without acknowledging their past certitude, are now putting spoons to highchairs on behalf of melting ice caps) and begin charging rich folks money to predict the future movement of the stock market.

If, however, the professor is right, the United States will break up into six pieces. Alaska is a piece unto itself, and will be subsumed into Russia (this at least answers the questions about Palin's future in the Republican Party). A piece which the professor calls "Atlantic America" is to join the European Union and so make up something very much like Orwell's Oceania. Many folks in Tennessee, Kentucky, West Virginia, and South Carolina, if told that Professor Panarin has predicted that " . . . Washington, D.C. and New York [City] . . . " will join the European Union, might ask the professor when he will get around to predicting the winner of the 2008 presidential contest. They will certainly be surprised to find out their states, as constituents of "Atlantic America," are following Sodom and Gomorrah into the European vortex.

The great north of our nation will be annexed by Canada. But here, if only most conspicuously, the professor's theory seems a stranger to reality. Brave and valiant in arms are the Canadians, but a northern state could repel a Canadian invasion by dispatching a local Boy Scout troop. And too we have in those parts an apparently endless supply of shack-dwelling and prodigiously-armed hermit loons, who will not take kindly to the invasion.

In early January of 2004, I was in Spain's capital of Madrid. My trip coincided with the annual Desfile de los Reyos Magos (a parade and party featuring the three wise men, or kings; apparently the Spanish exchange Christmas gifts, rather sensibly, on the date that the three wise men are believed to have arrived at the manger). The city had come to a standstill, and the people had crowded into the streets and the tapas and the Parque del Retiro. Passing by a side street bordering the Calle de Acala, I saw a mother standing passively by while her nino heroically relieved himself into the sewer by the sidewalk. At the time, I considered the scene a vignette that Hemmingway could have turned into something special; indicia of the visceral soul of the Spanish people or some such thing. But now, inspired by Professor Panarin, I see that what I saw was a harbinger of Spanish moral collapse and that nation's impending absorption into Andorra (bitter-sweet for the Basque region).

The image is an Advanced Spaceborn Thermal Emission and Reflection Radiometer of Madrid: NASA/GSFC/METI/ERSDAC/JAROS, and U.S./Japan ASTER Science Team

Keynes Again

A once-so-cool economist, his name has been a political epithet for the last last two decades. Times are different and economists are scrambling for the next big thing. Are Keynes's ideas hot or not?

Keynes' 1936 magnum opus, The General Theory of Employment, Interest and Money changed the face of macroeconomics in the early twentieth century. He advanced a way of thinking about a nation's entire economy at once. And he questioned the foundational assumptions of classical economics that economic activity would over the long run tend toward stability, full employment, and equilibrium.

William Barber says this about Keynes in in A History of Economic Thought 229 (Penguin Books 1967):
"The classicists were too preoccupied with questions of long-period economic growth to concern themselves directly with short-period instability; in any event - apart from the post-Napoleonic war years - the matter was not of major significance in their day and age. . . . Though some neo-classical writers made reference to ‘industrial fluctuations’ and to the ‘inconstancy of employment’, they were far more interested in the forces influencing output in particular markets than in those governing the output of the economy as a whole. Moreover, they were persuaded that full employment was the long run equilibrium position toward which the economy naturally gravitated and their analysis was built on this premise.

Even before his doubts about neo-classical presuppositions had crystallized, Keynes was suspicious of this attitude – ‘in the long run,’ he observed, ‘we are all dead’. As his thought took shape in the General Theory, economic analysis was reconstructed to bring short-period aggregative problems to the centre of the stage. The microeconomic questions around which the neo-classical tradition had been organized were pushed toward the wings. At the same time. Keynes was at pains to dissociate his position from the Marxist contention that capitalism was doomed. The essentials of the system, he maintained, could be preserved if reforms were made in time. An unregulated capitalism, however, was incompatible with the maintenance of full employment and economic stability."

Skipping through considerable detail, Keynes rejected the prevalent idea that an income depression (such as the Great One) was inevitably temporary and that once wages and prices fell far enough, firms would finally resume selling all they made and workers would all find jobs. Keynes said that inadequate consumer spending could cause an ecoomy to stagnate permanently. To end a depression, he said, spending had to rise. Although people could not be counted on to spend their way out of an economic depression-- a government could. And an initial increase in government spending, for example on New Deal style public works projects, would have a "multiplier effect" on total spending; an increase in total spending would cause consumption to increase and unemployment to fall and so on.

In Keynes' macroeconomic model, a decrease in spending leads to a decrease in employment, which leads to a further decrease in spending and so on. If people try to increase their saving (relative to spending) there will inevitably follow a fall in employment and production. The multiplier that made government spending such a panacea worked the same way in reverse to create what has come to be called the paradox of thrift. By attepmpting to increase the rate of saving, a society may create economic conditions under which the amount it can actually save is reduced.

Nascent neo-Keynesians should note that not saving hasn't worked out all that well. During the 1990's, the US personal savings rate fell from 8% to 2%. By 2005, it was negative. The good (or bad) news is that personal saving is on the rise. The Fed reported a positive savings rate in the last q of 2008. Economists are predicting that the rate will reach 4.5 % by the end of 2009.

The paradox of thrift rests on the premise that saved income falls through a hole in the floor and disappears. Not so. Saved income is standing by to purchase goods in the future. It shows up as investment in new factories, machines, education and other inputs for the product of future goods. In the long run (which Keynes dismissed as uninteresting) total demand and consumption doesn't fall because of increase saving relative to current goods consumption. It just changes form. In the short run, an increase in saving relative to current goods consumption causes some disruption. The current goods industry, so to speak, needs to lay off workers and adjust to reduced demand. The future goods industry usually can't move as fast. Future goods production depends on inputs like laws and scientific discoveries yet to be made, skills yet to be acquired and development of the next big idea.

Tuesday, December 23, 2008

Katz Building Sneak Peak

For those of you at home for Christmas and unable to tour the new Katz Building, we thought we would post a few pictures. The pictures are, in order (1) the Dean, working hard to make the move happen (2) the courtroom (3) the auditorium (4 & 5) classrooms.

Thursday, December 18, 2008

A Quick Diversion

Four exams down, one to go tomorrow . . . boy, am I tired! I am not sure about others, but I always seem to have some music running through my head and highlighting emotions or themes. Day to day the music will vary, but it never fails that with one day to go in a semester, I end up with "One Day More" from Les Miserables playing encouragingly in my mind. Les Mis is, by far, my favorite musical. Themes of redemption, justice, love, freedom, survival, and loss make this historical fiction incredibly moving and beautiful. Here is the original London "dream cast" singing at the tenth anniversary concert.

Wednesday, December 3, 2008

Ecomonic Downturn Results in Commoditized Exams

A high school calculus teacher, confronted with a downward revised printing budget insufficient to cover the cost of printing his class' quizzes and exams for the school year, has resorted to selling ads in the margins of the quizzes and exams.

This is an example of out of the box thinking in the face of reduced circumstances; whether edifying or regrettable I can't say. The teacher plans for the ads to be temporary; until the government, in his view, steps up and pays for education like it is supposed to. Meantime, we have only to hope this novel example does not metastasize into theme based ads matched to test subject matter; a development likely to divide folks along ideological grounds (e.g. imagine what could show up on sex ed. exams, if there are such things as sex ed. exams).

Meantime too, maybe Dickinson can use the idea to relieve tuition a bit. Of course, only folks who haven't been to law school, and so don't know about the time pressures of a law exam and the related single mindedness of the tested, might be induced to pay for such ads.