Stringing Along
Hot on the heels of my recent post about string theory, I find that Sean Carroll has teamed up with some other physics types to start a new group blog, Cosmic Variance, and Sean has posted an article asking why people are mean to string theorists:
I am often surprised at the level of disdain and resentment with which string theory is viewed by non-string-theorists. I’m thinking not so much of people on the street, but of physicists, other scientists, and even other academics. As a physicist who is not personally identified as a string theorist, I get to hear all sorts of disparaging remarks about the field from experimental particle physicists, condensed matter physicists, astrophysicists, chemists, philosophers, and so on. I sometimes wonder whether most string theorists understand all the suspicion directed against them.
It shouldn’t be like this. String theory, with all of its difficulties, is by far the most promising route to one of the most long-lasting and ambitious goals of natural science: a complete understanding of the microscopic laws of nature. In particular, it is by far the most promising way to reconcile gravity and quantum mechanics, the most important unsolved problem in fundamental physics. At the moment, it’s a notably incomplete and frustrating theory, but not without genuinely astonishing successes to its credit.
The reasons have as much to do with sociology as physics. It's probably worth taking a little time (while the vacuum system pumps down) to lay out some of the reasons, as I see them.
I think one of the biggest problems string theorists face, on the more science-y end of things, is that the problems string theory addresses are awfully arcane and sort of abstract. Sean talks mostly about string theory as a path to a working theory of quantum gravity, which is a big deal for him, because he does cosmology, and has to worry about the intimate details of gravity as part of his everyday research. For those of us who only worry about gravity when balanced precariously atop a ladder, it's not such an immediate concern.
The other common argument for the importance of string theory is to cite the supposed ugliness of the Standard Model, and point out that you need to specify some large number of parameters in order for the theory to work. This may seem like a major crisis to people who are used to setting h-bar and c equal to one, but for those of us who work in SI units, it's not obvious why this is a big deal. The theory underlying my work requires dozens of input parameters, and I get along just fine. Yeah, it would be more satisfying if there were only one or two fundamental numbers that explained everything else. It would also be more satisfying if pi were exactly 3, but despite the best efforts of the Indiana state legislature, we're stuck with an irrational number.
(As an aside, it's a little hard to reconcile this argument against the Standard Model with Sean's counter-argument to Peter Woit's complaints about inifinite numbers of states:
Nobody complains that there are a huge number of possible quantum field theories, and we actually have to go out and measure the properties of actual particles rather than calculating them using pure thought. If string theory turns out to be the same way, that’s life.
(To be fair, though, Sean isn't using the "The Standard Model is ugly!" path to string theory, so it's not a direct conflict with anything he has said.)
The "astonishing successes" that Sean cites are also pretty abstract. Yes, you can get gravity to pop out of string theory in a very natural way, but it's still pretty abstract-- it's not like it predicts the exact correct value of the strength of gravity, or any other force for that matter. You can fiddle around with things, and make the theory reproduce the observations, more or less, but there are lots of theories you can construct that will reproduce the observed particle masses and interactions, with enough tinkering. String theory is just one among many theories with that property, only it brings with it an amazingly baroque apparatus of extra dimensions, parallel universes, and other weird and unobservable effects.
The baroque nature of string theory, in and of itself, is not a show-stopper. After all, quantum mechanics, relativity, and quantum field theory all make some pretty astounding predictions of their own-- matter waves, curved space, virtual particles. The difference is, all those theories very quickly made predictions that could be tested, and shown to be correct.
String theory, on the other hand, has been noodling around for twenty-odd years without producing a clear signature of any of this stuff. There are people out there working very hard to try to see some effect of extra dimensions, or whatever, but to the best of my knowledge, string theory has yet to make a unique prediction that has been verified. The theory can easily adapt to new observations-- neutrino masses, or whatever-- but it can just as easily be made to work with the old information.
Depending on what you take as the starting point, quantum mechanics probably took at least thirty years to gain general acceptance, and that was with clear experimental confirmation of the theory's predictions. Given the utter lack of experimental tests for string theory, it should come as no surprise that it's still looked at as something of a curiosity.
The biggest reasons for the poor opinion many scientists have of string theory are, as I said, rooted more in sociology. I know that my personal opinion of string theory is colored very strongly by a number of factors that have nothing to do with the quality of the science.
The short description of the problem is that string theorists very often present themselves and their work in a way that suggests a certain disdain for the rest of physics. There's a little of this in every discipline, but string theorists give a very strong impression of dividing the world of science into "String Theory" and "Stamp Collecting."
This manifests itself in a lot of little ways, starting with the asinine public statements made by many people who are associated with the field (see my previous post on the subject, linked above). When people pooh-pooh the need for experimental tests, as an experimental scientist I find that slightly offensive.
And string theorist in general seem to conduct their business in ways that flout the conventions of the rest of physics. It's not just the "proof by mathematical elegance" thing, but also things like the disdain for normal peer review and publishing inf avor of doing everything via the preprint server. Whether or not that's the wave of the future for physics in general, it's bound to rub some people (myself included) the wrong way.
(Of course, this is hardly confined exclusively to string theorists, though it seems to be more common among high-energy physics in general. When I was a post-doc, there were a couple of large groups that we never saw except at departmental seminars in their subfield, or at the departmental Christmas part. It was as if they regarded all other areas of physics as beneath their notice.
(And then there was the plenary talk by Steven Weinberg at the APS Centennial meeting. Weinberg was the first of three (I think) speakers, but as soon as he finished, about a third of the audience just got up and left. If you're not willing to show the minimal amount of courtesy required to listen to a talk in another field, well, that doesn't really do much for my impression of your field of research.)
Posted at 12:26 PM | link | follow-ups | 23 comments
Book Stuff
While things have been sort of slow over here, there's been a fair amount of recent booklog activity, including a lengthy response to Kate's "Fantasy Conversion Kit" list (a non-standard use of the phrase "conversion kit," I know), plus three new books (new since the last time I pimped the booklog here, anyway).
The Harry Potter book is not among the new books, by the way, though I did finish it last night. The most concise review I can give is that it failed to really hold my attention for a lot of the time that I was reading it-- I had little trouble setting it aside to go to sleep, and I opted for channel-surfing over reading on at least one occasion. I think that my dislike of Book 5 was strong enough that I'm less inclined to forgive the little annoyances that are scattered throughout, though, to be fair, there's some real improvement on the idiot plotting front.
For the longer review, well, it's down the queue a ways, but there's not much I would say that isn't already said in Timothy Burke's spoiler-riffic review and associated comments (particularly those of Russell Arben Fox).
Posted at 8:48 AM | link | follow-ups | no comments
What Have You Done For Our Stock Price This Quarter?
Hewlett-Packard laid off almost fifteen thousand people today. Michael Hiltzik, guest-blogging at Calpundit Monthly, is all over the CEO pay side of the story, but I'd like to focus on a slightly different part of it.
One of the more annoying (to me, at least) features of policital debates in recent years is the preponderance of "market-based" schemes for reforming anything that looks like it might be in need of reform. You name a social problem, and you can find somebody out there with an idea for a way to use market competition to magically make everything better. I find this endlessly aggravating, leading to a large number of tedious rants in this space.
Today's HP story is another example of the sort of thing that bothers me about most market-based ideas. Following the layoff announcements, HP's stock price dropped, but not for the reason you might think:
HP shares, which have risen recently in anticipation of the job cuts, closed down 1.6 percent on Tuesday.[...]
Some investors said they had been expecting more. "I was expecting to hear a lot more changes in how they structure the business," said Shawn Campbell, principal of Campbell Asset Management. "If this is it, I'm a little underwhelmed."
This is a pretty common feature of these sorts of stories-- buried somewhere in the middle of a story announcing huge layoffs will be a line mentioning that the stock price went up as a result. Or, as in this case, that the price went down because they didn't cut enough jobs.
Now, on an extremely cold and narrowly rational level, this makes some sense. The point at which cuts are made is probably pretty close to the bottom, and if that's the case, that's where you should buy the stock. If they're going to rebound from there, the price should go up.
On a more, well, human level, though, this always strikes me as rewarding exactly the wrong behavior. I mean, the company may have made a marginal improvement in its immediate profitablility, but at the cost of fifteen thousand jobs, with the whole cascade of bad economic consequences that go along with that (given that people without jobs tend to spend less money than those with jobs). Looking at a somewhat bigger picture, it seems like large layoffs ought to be a reason for the stock price to drop.
There are lots of examples of this sort of thing, and they all bug me. The market rewards companies who move large numbers of jobs to lower-priced locations, or who restructure pension plans to pay retirees less. But you never hear (or, at least, I never hear) of companies being rewarded for doing things that are more socially responsible in the big picture. I'd love to hear about stock prices going up following the announcement of more generous employee benefits, or executive benefits being cut to pay for keeping employees on through tough times.
Of course, I'm only saying this because I'm a squishy liberal type. And I have no idea how you could implement a more responsible system. It wouldn't be easy, and might be effectively impossible.
But whenever I see these stories about companies being rewarded for cutting good people loose... Well, it doesn't do much to inspire confidence in the market as a magical tool for making everything better.
Posted at 7:31 PM | link | follow-ups | [ hide comments ]
Of course, I’m only saying this because I’m a squishy liberal type. And I have no idea how you could implement a more responsible system. It wouldn’t be easy, and might be effectively impossible.
Look to Japan and the European Union for models that still preserve civil liberties. I don’t think either of those are really admirable models considering the crippling deflation and stagnation (in Japan) and the crippling unemployment and stagnation (in Europe.)
It ain’t pretty. It may even be a terrible system, except that it works better than all the other ones we’ve tried.
There’s some good opportunities in there for computer science research, too….
John Novak, 2005-07-19, 9:13pm [link]
Some investors said they had been expecting more. “I was expecting to hear a lot more changes in how they structure the business,” said Shawn Campbell, principal of Campbell Asset Management. “If this is it, I’m a little underwhelmed.”
I understand this man quite differently than you, Chad. In my opinion, he expected changes of more complex kind, not just layoffs. He’s actually thinking along your lines—that just laying off people does not do much good to the company. I think (I’m not expert) that there have been tons of stuff written on the topic.
Stock market does not think long-term. It’s not meant to do it. Also, companies are meant to maximize their profits, not do the job of the state. It’s the state’s responsibility to fight unemployment. Sometimes a company just has to lay off people, to save the whole company from going bankrupt. It’s the ugly face of the same market which creates jobs. Actually, you won’t have one without the other—nobody’s going to hire people if he can’t fire them in the future.
Look to Japan and the European Union for models that still preserve civil liberties. I don’t think either of those are really admirable models considering the crippling deflation and stagnation (in Japan) and the crippling unemployment and stagnation (in Europe.)
Europe is a huge continent, with lots of different economical systems implemented in different countries. Putting the all in one sack is very misleading. Maybe you meant: France and Germany?
The project I manage is part of a larger effort to save the company money. I’m concerned with recycling more material to save costs and avoid environmental taxes (and look virtuous in the annual CR report). But because we’re short of staff exclusively assigned to the project, I have to seek assistance from colleagues in operations who can spare the time from constant firefighting.
Meanwhile, my colleague two desks down has a project of his own: he’s looking for staff with spare time so he can cut the headcount!
The trouble with eliminating ‘fat’ is, how do your survive the famine?
Del C, 2005-07-20, 9:26am [link]
“Europe, with its crippling unemployment and stagnation” is a catchphrase I hear a lot from Internet commenters in America. It’s not something I see much of here in Europe.
Del C, 2005-07-20, 9:30am [link]
Complex changes can’t be implemented in an organization the size of HP on a dime. If the stock market wants significant organizational changes, investors (who make up the stock market) need to be willing to wait longer than a quarter to achieve results. The only thing that achieves the kinds of results short-term investors currently demand is massive expense-cutting, and that usually means people.
Investment demand is also driven by analysts like the Campbell guy that Chad quotes. If analysts like Campbell said, “it’ll take a year to see how these changes pan out”, people might be willing to wait. But if he said that, he’d be out of a job because he’d be perceived as less of an expert, even if what he says now proves to be wrong in a year.
Perhaps this is what you mean by the stock market not being meant to do that. The stock market isn’t meant to do anything other than put investors with money and companies who want it together. The rest is just side effects, which are, in this case, detrimental to both employees and to companies who have to answer for quarterly numbers, which may and do impede the development of a long-term commercial strategy.
Ginger Stampley, 2005-07-20, 9:32am [link]
Rwerp:
Stock market does not think long-term. It’s not meant to do it.
I am not at all convinced that’s true. If you broaden “stock market” into “financial markets” then I’m convinced it’s untrue, since the broader financial markets also include commodities pricing and futures, not to mention treasury bills and bonds, which are the very definition of long term thinking. Tell an oil finance guy that he’s not thinking long term.
No, seriously, go ‘head, I wanna see the reaction.
It’s also important to keep in mind that the markets are something between an ongoing, dynamic, continually adjusting economic experiment on the one hand, and a bio-social imperative in the vein of ant colony path optimization or amoebic foraging strategy optimization on the other.
It’s not pretty. It’s not a cookbook, step-by-step approach to magical happiness. But it is a broad strategy with a broad track record of impressive success.
Sometimes a company just has to lay off people, to save the whole company from going bankrupt. It’s the ugly face of the same market which creates jobs. Actually, you won’t have one without the other—nobody’s going to hire people if he can’t fire them in the future.
This is perfectly accurate. There is no better way to say what you just said. Again, I point to the European Union (or, specifically, France and Germany) for the defining illustration, where unemployment rates are in the 10 to 12% range because once hired, it’s nearly impossible to be fired.
The crushing problem in France and Germany, though, is that the structural and social problems run so deep that they not only can’t be fixed in a year… they can’t be fixed in ten years. One can tell a group or a sector or even a generation to tighten their belts for a year, or even a few years, and have a reasonable expectation that if your plan makes sense, people will follow you.
It’s a little different when you’re telling a generation to tighten their belts for a decade or three. That’s not belt-tightening, that’s the screwing over of an entire generation.
I don’t want to go down that road. That road scares the crap out of me.
Europe is a huge continent, with lots of different economical systems implemented in different countries. Putting the all in one sack is very misleading. Maybe you meant: France and Germany?
France and Germany ae the exemplars of the model I’m talking about when I mention the European Union, yes. I don’t think it’s deceptive to mention them that way, since even a casual reading of the (now doomed) EU Constitution, or a European business-oriented magazine, will reveal that France and Germany have been trying to export that model in force for the last few deacdes. Oversimplification, perhaps, but not all that misleading.
It’ll be interesting to see what happens if Sarkozy and Merkel are at the helms of their nations by 2007 and 2006, respectively (I think.)
Del:
“Europe, with its crippling unemployment and stagnation” is a catchphrase I hear a lot from Internet commenters in America. It’s not something I see much of here in Europe.
I go largely by statistics, and again I’m speaking much more of France and Germany than England.
Annoyingly, it’s difficult to find a site which will just lay out the historic GDP growth rates by country, but Germany’s unemployment is at 12%, and has been over 10% for three years. France’s is over 10% presently. Both have had rather anemic GDP growth over the last five years or so—I know Germany has in fact had at least one actual contraction in that time, at the same time France effectively flatlined. And the GDP growth estimates for both countries for 2005 keep getting revised farther and farther down.
The numbers in France and Germany are not pretty.
Novak, 2005-07-20, 11:48am [link]
The stock market is “is a broad strategy with a broad track record of impressive success.”
What? Are you saying that the stock market is the US economic system? I think that is an entirely backwards way of looking at it. The stock market today is an artificial parasite of the economic system, not our way of doing business but a result of our way of doing business.
I also disagree with the concept that business must concern itself only with making a profit. While that is a totally amoral position, it is best disputed on purely pragmatic grounds. Making a profit is the ultimate reward, but concentrating on that alone eventually leads to failure of the business. It’s what happens when MBAs make cars. They do not sell well when competing against cars made by people who are interested in making cars rather than short-term profits.
Mark Paris, 2005-07-20, 2:16pm [link]
Mark:
Not the stock market, but the broader market approach… of which the stock market is a critical component.
I’m not sure why you claim it is artificial, or a parasite.
Novak, 2005-07-20, 2:37pm [link]
Look to Japan and the European Union for models that still preserve civil liberties. I don’t think either of those are really admirable models considering the crippling deflation and stagnation (in Japan) and the crippling unemployment and stagnation (in Europe.)
It ain’t pretty. It may even be a terrible system, except that it works better than all the other ones we’ve tried.
Says the guy who’s never lived in Europe or Japan.
You’re only repeating what Chad said: the U.S. system rewards companies, at the expense of workers’ quality of life. It’s not so simple as the U.S. system being “better” or the European system being “better,” it’s a question of “better for whom”?
I can’t say anything about Japan, since I’ve never even visited there (someday…), but there are many ways in which QOL in Europe is better than in the U.S. For example, you cite higher unemployment levels. However, unemployment in Europe is not necessarily the crippling blow that it is in the U.S. Like, you can still get decent health care if you happen to be unemployed and sick.
Pam, 2005-07-20, 3:11pm [link]
The way America has defined a corporation’s existance and purpose, they’re definitely not there to make life better. The day of companies trying to be social agents improving life for their rank and file is long over, because that disctracts them from their mission. And as much as it may or may not bemoaned, their mission is to make money for the people who own the company (i.e., shareholders). So Pam, whether we like it or not, the answer to “better for whom” is “shareholders”.
Mark, I agree with you that as a practical matter businesses are likely to find themselves more profitable long-term if they care for their employees, but caring for their employees is not why corporations exist. And you’re just wrong about stock markets being parasitical; what they are is an efficient way of marrying capital to labor for the purposes of making money. Without stock markets, kiss your industrial revolution goodbye unless you’re willing as a nation to have a “Great Leap Forward”.
agm, 2005-07-20, 4:14pm [link]
Pam:
You’re only repeating what Chad said: the U.S. system rewards companies, at the expense of workers’ quality of life. It’s not so simple as the U.S. system being “better” or the European system being “better,” it’s a question of “better for whom”?
Obviously. And it depends on what you want out of an economy. My comments are predicated on my personal desire for economic growth at large, and economic opportunity at small. Preferably, economic opportunity for myself. (Ultimately, all economics may not be short term, but it’s all local and it’s all personal….)
I don’t want to regress back to the bad old days of totally unregulated hard core capitalism, like the 1880’s—that would be horrible for everyone except the uppermost tier.
I also don’t want to make it sound like there is no possible room for improvement—that would just be silly. I cannot easily picture a better way that I am confident would work, but then, duh… I’m just one guy, not the whole distributed economy. I do know that advancing technology tends to open up better economic forms, though. I don’t think a modern market economy could have been run 500 years ago (just for instance), because the communications systems were so slow that they couldn’t possibly cope, and the mathematics for modern quantitative finance hadn’t been developed.
It seems likely, even, that the economic forms we have 100 years from today would be impossible to sustain now, for the same types of reasons.
But I don’t think we have all that bad a system.
I can’t say anything about Japan, since I’ve never even visited there (someday…), but there are many ways in which QOL in Europe is better than in the U.S. For example, you cite higher unemployment levels. However, unemployment in Europe is not necessarily the crippling blow that it is in the U.S. Like, you can still get decent health care if you happen to be unemployed and sick.
Again, it depends on what you want out of an economy. If what you want is a job, an opportunity, and the chance to buy your own house, then sustained 12% unemployment is pretty harsh. (I remember talking with Swedish friends, and boggling over the idea of centralized waiting lists for apartments—I’m not making up the example out of thin air.) If what you want are opportunities for wealth creation, then chronic continental growth rates hovering between 0 and 2% are also pretty harsh.
If what you want is economic security at a lower level of economic performance, then these things may not be that bad. It’s not an irrational choice, but it’s not one I’d make.
The more serious very open question is how long France, Germany, et al, can maintain the triple play of:
1) Low growth
2) Strong central srvices, and
3) Bad demographic trends/low assimilation rates.
And just like I don’t want to paint the American system as panglossian perfection, I don’t want to predict the death of the European economy by 2050 (film at 11:00!) they way some idiots do. But I don’t think the picture is entirely rosy, nor do I think the fixes, when they come (and they inevitably will) will be easy, short, or painless.
Novak, 2005-07-20, 4:54pm [link]
Stock market does not think long-term. It’s not meant to do it.
In theory, a stock price is the sum of all public knowledge out to an infinite time horizon, so in that sense, yes, the market thinks long term. In practice, the way stock prices react to expected and prepared for events makes me doubt the theory a little bit, but I’ll leave that to folks with more economics knowledge under their belts than I.
One way in which the stock market is heavily short term is the way executive compensation seems to be tied too much to the stock price. There’s definitely a financial incentive for CEO’s to put short-term gains over long-term health (see Lucent, Agilent, and any other labs with new, fluffy names) and that’s something I think that can be alleviated with legislation. Adjusting the tax code and revisiting the expensing of stock options are the ideas I hear floated around the most, and I’d be interesting in reading more detailed arguments on them.
(Oh, and Ezra Klein had a good comment a couple of days ago on analyst wankery in these types of news articles. Mainly their complaints about Costco’s treatment of workers.)
Craig, 2005-07-20, 5:13pm [link]
One way in which the stock market is heavily short term is the way executive compensation seems to be tied too much to the stock price.
Oh, yes!
Some of the nastiest layoffs I’ve ever been through have been (I’m convinced) tied pretty closely to the CEO’s compensation plan. I do not understand why this tight feedback loop with mismatched time scales is considered a good thing.
Novak, 2005-07-20, 5:19pm [link]
The day of companies trying to be social agents improving life for their rank and file is long over, because that disctracts them from their mission. And as much as it may or may not bemoaned, their mission is to make money for the people who own the company (i.e., shareholders). So Pam, whether we like it or not, the answer to “better for whom” is “shareholders”.
I think you should like it. Everybody who has a pension fund of some sort, is a shareholder.
I think there’s a divergence of discussion going on here, too.
One question is who the companies and the narrowly defined stock markets are good for, who they’re supposed to be good for, etc. And my opinion is that the companies and stock markets are supposed to be good for the owners, but must also make themselves good enough for the workers in order to fulfill their missions.
A nifty theory.
The other question is who the broader market economy is supposed to be good for. And there, my opinion is that the broader market economy is supposed to be good for everyone, or for as many people as possible… owing to the emergent phenomenon of agile wealth creation and some suitable regulations that prevent 1880’s style excesses.
Another nifty theory.
(And we all know how they can both break down.)
...Aaaaaand bringing that all back around to one of Chad’s points, that’s why you can’t just wave the “market solutions!” wand at a problem like some sort of shamanic invocation. You’re more likely to end up back the figurative 1880’s again, unless you’ve paid some real damn close attention to the incentive structures, the feedback loops, the dodges people will pull, etc… preferably backed up with some real-world, small-scale test programs. One needs a system where private greed still creates an overall public positive effect.
Obviously, this is not trivial.
Novak, 2005-07-20, 6:18pm [link]
rwerp
I guess you missed that part of the article where HP also announced it was reducing its pensions?
It’s a double whammy.
I feel a little bad about kicking this thread off and then not really contributing, but it’s been a stupidly busy day at work, and other people have said more or less what I would’ve said, anyway.
On the question of comparing the economic systems of different nations, I don’t think there are really any obvious judgements to be made. For one thing, it’s not clear to me that the problems afflicting Japan and parts of Europe are really problems intrinsic to the way they have organized their societies, rather than an unfortunate result of certain contingent cultural and historical factors (for example, German re-unification a little over a decade ago…). Likewise, it’s not clear that the successes of the American model are really an indication of its innate superiority, rather than a happy coincidence. And then there’s the fact that none of this happens in a vacuum, and in fact, I’ve heard some arguments that some of our successes come at the expense of place like Japan and Europe (though I couldn’t begin to reporoduce them). It’s an awful mess, and I’m deeply skeptical of anyone who claims to have it all figured out.
That’s the problem with economics, after all. It’s sort of like astronomy, in some ways—the experiments take forever to run, the results are hard to sort out, and they’re a bitch to repeat. The astronomers actually have it a little easier, owing to the effectively infinite size of the Universe, while the economists are stuck with a finite set of countries.
Finally, I’m a little dubious about a lot of the measures used to measure economic growth. The distribution of wealth is at least as important as the rate of wealth creation, if not more so. When you can have a situation in which GDP grows rapidly but real wages are stagnant or declining, well, I’m not convinced that that’s a good thing.
I find myself in sort of an awkward position with respect to a lot of this stuff. Personally, I’ve done pretty well under the American economic system, as has my family. At the same time, though, I’m acutely aware that we’ve been very lucky in this, and a lot of people aren’t particularly well served by the system.
Would my personal situation be worse in Japan or Europe? Maybe. Would I trade that for an improvement in the lot of some large set of other people? Maybe.
Chad Orzel, 2005-07-20, 8:25pm [link]
I dunno, I have the same skepticism in reverse—I don’t think economic results over decades can be attributed to sheer luck. And frankly, if they can, then this entire discussion is meaningless. I mean, how far does that mindset extend? Was the Soviet Union economic disaster just bad luck? Or was it the result of decades of profoundly bad choices?
I’m also familiar with the idea that we’ve somehow taken advantage of Europe and Japan to produce our success. Without endorsing them, I will note that there are equal and opposite counterarguments. For instance, that Europe and Japan have been able to avail themselves of artificially low defense spending, or that the entire Asian business model of artificially cheap cash loans stimulating exports overall is itself a very predatory macroeconomic model.
On the one hand, I think that sort of fingerpointing is just fascinating… but on the other hand, it’s really not productive.
And on the way home, tonight, a reason accurred to me for why I prefer the American system. It’s atually simple, now that I articulated it to myself: Basically, I don’t trust anyone to look after my interests but me. I don’t trust my government to do it, and I don’t trust my employers to do it. It’s not like I believe I’m ever going to see a social security check, for instance (to point out a looming failure of the American system.)
So I naturally gravitate toward the system that allows me the greatest flexibility, even if the risks are increased.
John Novak, 2005-07-21, 1:06am [link]
John, I think a problem with your posts is that you’re jumping all over Europe to pick out problems, for example
“If what you want is a job, an opportunity, and the chance to buy your own house, then sustained 12% unemployment is pretty harsh. (I remember talking with Swedish friends, and boggling over the idea of centralized waiting lists for apartments”
gives the impression that Sweden has waiting lists because of high unemployment, when actually the Swedish rate is about 6%. And
“The more serious very open question is how long France, Germany, et al, can maintain the triple play of:
1) Low growth
2) Strong central srvices, and
3) Bad demographic trends/low assimilation rates.”
the first two are true of France, but France is also going through a population boom at the moment, and the assimilation problems are not as bad as US commenters would have you believe.
And if we want to talk about the successes of the US economy, we also have to remember that it depends on massive public and private debt. Flexibility is great, as long as you start from a decent position, and don’t get hit with bad luck early in the game…
Ray, 2005-07-21, 5:14am [link]
I dunno, I have the same skepticism in reverse—I don’t think economic results over decades can be attributed to sheer luck.
See, I think that decades are a relatively short term in terms of politics and economics. After all, the current political situation in the US is shaped to an alarming degree by Civil War and its immediate aftermath…
I think it would be foolish to claim that the current world economic situation doesn’t still owe a great deal to WWII, and I think that much more recent events, such as German re-unification, affect the current situation in pretty dramatic ways. “Luck” is probably a bad word for those factors, but they’re definitely contingent factors affecting different countries differently.
And on the way home, tonight, a reason accurred to me for why I prefer the American system. It’s atually simple, now that I articulated it to myself: Basically, I don’t trust anyone to look after my interests but me. I don’t trust my government to do it, and I don’t trust my employers to do it. It’s not like I believe I’m ever going to see a social security check, for instance (to point out a looming failure of the American system.)
So I naturally gravitate toward the system that allows me the greatest flexibility, even if the risks are increased.
I think that’s a good organizing principle, to the degree that you can expect other people to do the same. Or, to narrow it a little bit, to the degree that you can expect other people not to mismanage their own affairs in a manner that will end up adversely affecting you.
Disturbing though it is to say this, I suspect you may have more faith in humanity than I do (at least in a limited, economic sense).
Chad Orzel, 2005-07-21, 10:07am [link]
Ray:
Re Sweden: You’re probably right in that I shouldn’t have even brought it up, but the anecdote lept to mind as I was typing, so….
At any rate, the purpose of the anecdote was to express bafflement at the centality of housing arrangements in Sweden, not to ding their economy. I had to google for it, but Sweden’s growth rates are pretty good, although that makes the notion of long waiting lists for housing even more puzzling to me.
Re Debt loading: As I recall, France’s debt load is about 63%, the United States’ is about 65%, and Germany’s is about 68%, normalized to the size of the economy. I’m sure those fluctuate from year to year, but I’m not seeing a huge difference here. Although at 160% of economy, Japan’s is, uh, not so good.
Re Demographics: I was unaware of the recent French baby boom. We’ll see how that goes, I guess. But the article I dug up took pains to couch it with phrases like “compared to Europe” and predicated their hypothetical overtaking of Germany’s population on Germany’s continued population decline.
I have in the past seen the age cohort graphs for France, and they don’t look great to me. They don’t look great for the United States, either, but the sense I get among developed economies is that they range from “dubious” (the United States) to “alarming” (several European states, plus Japan.)
On the one hand, those are predictions, so there’s always a wait-and-see attitude. On the other, the French baby boom will take a full 20 years to ripple into the work force, assuming it’s sustained and sustainable. It does sound like overal good news, though, if they also loosen up their markets. A big population that still has 10% unemployment is not a net gain. A big population with looser markets, though, can at least hope to sustain the coming grey bulge.
Chad:
I think the word you’re looking for is “geopolitical” but I suspect that term gives you hives, with its connotations of demography equating to destiny.
I also think that decades is a pretty appropriate time span. Less than a decade, and you’re as likely to be seeing noise effects, or superficial results. More than, I dunno, fifty years? And you’re seeing the effects of dramatically different technologies coming into play. And I still have to believe that choices matter.
And my faith in humanity is… well, let’s say it’s odd. I have great faith in humanity continuing to be human, and acting according to the worst angels of our nature. But that’s part of the appeal of the market system for me—with appropriate regulations, it has proven to be a very effective way to produce pretty good results in the large out of pretty amoral goal in the small.
And at my real philosophical core, I have to have some faith in humanity in order to believe that freedom works. I’m not in the 18-25 age bracket, anymore. I can no longer logically sustain the simultaneous notions that freedom is good/freedom works, and that people are irredeemably and dangerously stupid and unfit to manage their lives… even though it’s a source of constant amazement to me that good results can come from unsavory goals.
Unless I’m having a really bad day at work, in which case all bets are of….
(Good discussion, BTW.)
Novak, 2005-07-21, 12:14pm [link]
Speaking of unemployment rates, it all depends on your perspective. Comparing to USA’s 5-6%, French 10% is bad. Comparing to my country’s 18%, it’s sweet.
Different countries have different living arrangements. Ireland, for example, has a high rate of home ownership, but in many countries its more normal to rent. The supply of housing can also be affected by zoning regulations, and a waiting list may be for a particular type of housing, rather than housing in general. So I don’t find it so strange that Sweden can have a good economy and housing lists.
On debt, I wasn’t just talking about public, government debt, but also levels of persoanl debt, which I understand are much higher in English-speaking countries.
“On debt, I wasn’t just talking about public, government debt, but also levels of persoanl debt, which I understand are much higher in English-speaking countries.”
I think you want to be careful throwing around the term “English-speaking countries.” What exactly do you mean by it?
Aaron, 2005-07-22, 2:11pm [link]
Yeah, you’re right. I meant the US and UK (and Ireland) (compared to France, Germany, Benelux, Scandinavia), but that wasn’t at all clear.
Novak: I think the word you’re looking for is “geopolitical” but I suspect that term gives you hives, with its connotations of demography equating to destiny.
Well, something was certainly giving me hives recently (I’m taking enormous antihistamine pills now, which has helped a lot). I tend to think it was the shifting defenses of Karl Rove, though, as I have no particular opinion of the word “geopolitical.”
I also think that decades is a pretty appropriate time span. Less than a decade, and you’re as likely to be seeing noise effects, or superficial results. More than, I dunno, fifty years? And you’re seeing the effects of dramatically different technologies coming into play. And I still have to believe that choices matter.
Choices matter, but choices are easily constrained by external factors. The Cold War and the dominant position of the US during the Cold War greatly restricted the options available to most of the other participants. The devastation inflicted by WWII changed the set of possible choices for Europe (and the USSR and its satellites) in ways that have little to do with the intrinsic merits of their economic systems.
And the choices you make from an initial, limited set, further constrain your future choices.
I have great faith in humanity continuing to be human, and acting according to the worst angels of our nature. But that’s part of the appeal of the market system for me—with appropriate regulations, it has proven to be a very effective way to produce pretty good results in the large out of pretty amoral goal in the small.
I would mostly agree with your first sentence, and parts of the second. I think the key difference between our views is probably in the area of separability—that is, the degree to which we believe that the bad decisions of others are their problem alone. That leads to a difference in what we would consider an “appropriate” level of regulation.
Though it’s not just a question of regulation. One of the things that worries me most about the current arrangement of American capitalism is that the horizon used for investment decisions is much too short, and has only gotten shorter in recent years. That’s not the result of any government action, nor is it something that could easily be fixed with regulations—it’s a question of culture and attitude. Unfortunately, I’m not sure what would be a good tool to fix it.
Chad Orzel, 2005-07-23, 10:09am [link]
Choices matter, but choices are easily constrained by external factors. The Cold War and the dominant position of the US during the Cold War greatly restricted the options available to most of the other participants. The devastation inflicted by WWII changed the set of possible choices for Europe (and the USSR and its satellites) in ways that have little to do with the intrinsic merits of their economic systems.
That may be true—in some cases it is true—but I don’t think it’s true to the extent you’re implying, at least not in that case. I don’t think there was anything special about the outcome of World War II that, say, prevented England, France, West Germany, Spain or Italy from adopting the economic policies of their choice… except the desires of their people and leaders.
(Note that the Soviet satellites are obviously not in the same category. But even there, that’s not what I’m thinking of as luck. Yeah, it’s bad luck to have your economy managed directly by Joe Stalin, but it’s still Joe Stalin making bad decisions for you.)
Now, it can get dicey to change horses in mid race. Much of what I’v read implies that it would be, in fact, pretty damn painful for France or Germany to rework themselves into a more American, or even a more British system, even assuming they wanted to. (And that becomes a chicken and egg problem—they don’t want to, by what I’ve read, because it would be long term pain.)
I think the key difference between our views is probably in the area of separability—that is, the degree to which we believe that the bad decisions of others are their problem alone. That leads to a difference in what we would consider an “appropriate” level of regulation.
Certainly. And when someone starts talking about regulation in terms of either curtailing peoples’ bad choices or mitigating the results…. well, that starts to give me hives, on a bunch of different levels. At the very least, it sort of presupposes the ability of the state to accurately set down regulations for their desired goals, doesn’t it? But that’s a key reason I don’t trust the state to do this—I don’t believe that ability exists, outside some pretty broad strategies and frameworks. And if the state makes a mistake in that regard, then the state is in the posision of mandating (or encouraging) the same mistake across the entire economy.
It doesn’t do a good job of factoring different goals into the equation, either.
Another key difference is the degree to which we think luck is a determining factor. For the record, I don’t think you got where you are today by luck. (And as far as I know, you’ve got a job doing pretty much exactly what you’ve always wanted to do, which I both respect and admire. I’m close to that status, but not quite there.) I don’t think I got where I am by luck, either, except in the sense of not getting run over by a bus while I was in college.
It would be insane for me to completely discount luck on the national level (see also, tsunami of 2004) or the personal level (someone get the number of that bus!) But I don’t think it’s a defining factor.
And the third main difference is probably just means. Not motive. To go back and address Pam’s comments about health care, through a digression: I don’t think it would be all that tough to provide every citizen a decent day’s meal, every day, or at least the raw materials for it. If we must have agricultural subsidies, let’s get something out of them, yes? Food’s just not that expensive, and nobody should be so worried about making a bad choice that they won’t be able to eat tomorrow.
I dream of a year when 98% of medical care is just as societally cheap as food is today. But medical care isn’t quite the same—it’s potentially extremely expensive for some people, and ridiculously cheap for others… though still a lot more than basic food requirements. I’d like to get to a point where we could write off 98% of all medical care like we could do with food. But that requires a staggeringly wealthy society, not to mention a lot better health technology than we’ve got, which is why I do tend to focus on things like economic growth rates. That’s the thing I want to achieve. And the happy accident is that greater flexibility seems to lead to the higher growth rates that would make that sort of thing a possibility.
Though it’s not just a question of regulation. One of the things that worries me most about the current arrangement of American capitalism is that the horizon used for investment decisions is much too short, and has only gotten shorter in recent years. That’s not the result of any government action, nor is it something that could easily be fixed with regulations—it’s a question of culture and attitude. Unfortunately, I’m not sure what would be a good tool to fix it.
Changing the capital gains tax structure would be one way. But I’m going to play pedant: other than a gut feel, what reasons do you have for claiming that the investment horizon is too short? Or, put another way, how would you determine, in principle, the optimal investment horizon to compare the present horizon against?
I dunno about you, but I invest for my retirement.
...And don’t even talk to me about Karl Rove.
John Novak, 2005-07-23, 8:13pm [link]
COMMENTS ARE CLOSED.
Please visit Uncertain Principles' new location at ScienceBlogs to comment.
My husband was laid off today for pretty much the same reason from a company that NASDAQ is buying most of if the regulators approve it. There’s apparently some worry that the regulators won’t or that the stock price will fall in a way that scuttles the deal, so the CTO and a bunch of other managers (including my husband) were let go.
From the human POV, yes, it sucks.
Ginger Stampley, 2005-07-19, 8:44pm [link]