Results for “writing”

1387 found

What’s missing is a recognition of how mysterious the secret of
economic growth remains, despite all the energy that economists have
poured into solving it.

That’s James Surowiecki, reviewing Ha-Joon Chang’s Bad Samaritans and writing on free trade; the piece is interesting throughout.  The pointer is from Ben Casnocha.

Earlier this week Tyler wrote:

I was thinking of writing a science fiction story.  In this world human
capital is incredibly valuable.  Even if you lose all your wealth you
can earn back lots very quickly, at least if you are talented and
well-educated….The level of risk-taking is very high and capitalist enterprise starts to collapse…Production resumes only when a) managers precommit to costly drug addictions, so that they again fear pecuniary losses and b) shareholders find altruistic managers and also initiate
charitable contributions to India.  They threaten to cut off those
contributions if managers perform poorly.

Some of you were perhaps wondering what on earth this means.  (Recall my post on Tyler v. Alex.)  Perhaps I can help.  Here is a recent item from the NYTimes.

BlackRock, the publicly traded asset manager, and a hedge fund firm, Highfields Capital Management, are backing a new company seeking to raise $2 billion to buy delinquent residential mortgages.

Private National Mortgage Acceptance will be run by Stanford L. Kurland, former president of Countrywide Financial Corporation, the largest American home-loan provider, the companies said Monday in a statement.

I was thinking of writing a science fiction story.  In this world human capital is incredibly valuable.  Even if you lose all your wealth you can earn back lots very quickly, at least if you are talented and well-educated.  In fact, even if you stay poor, wealthy friends or a spouse will take care of you and you can have fun watching cable TV or playing Second Life.  The only way to get above this baseline level of happiness is to succeed at "winning" and gaining relative status among your peers by superior earnings.

The level of risk-taking is very high and capitalist enterprise starts to collapse.  (Credit markets disappeared in 2081.)  Every manager plays metaphorical or perhaps even literal roulette with the money of the shareholders.  The move toward unlimited liability for corporations only postpones the dissolution of cooperation. 

Production resumes only when a) managers precommit to costly drug addictions, so that they again fear pecuniary losses, and b) shareholders find altruistic managers and also initiate charitable contributions to India.  They threaten to cut off those contributions if managers perform poorly.

Managers are addicts and blackmailable altruists.  The Indian poor flourish.  Most Americans remain unemployed.  At some point the world becomes poor enough to sustain cooperation once again.

Here is a good Sachs article, summarizing his views, namely that a carbon tax is not nearly enough to solve the problem.  He writes:

…low-emissions
technologies developed in the rich world will need to be adopted
rapidly in poorer countries. Patent protection, while promoting
innovation, could slow the diffusion of these technologies to
low-income countries unless compensatory actions are taken. As with
medicines, patent protection may be double edged: promoting innovation
but slowing diffusion to the poor.

Economists like to set corrective prices and then be done with it,
leaving the rest of household and business decisions to the magic of
the market. This hands-off approach will not work in the case of a
major overhaul of energy technology. We will need large-scale public
funding of research, development and demonstration projects;
intellectual property policies to promote rapid dissemination to poor
countries; and the promotion of public debate and acceptance of new
options. We will need to back winners, at least provisionally, to get
new systems moving.

While this makes a great deal of sense, I am already feeling the "yikes are we reallly up to that?" response.  Sachs also writes: 

Consider three potentially transformative low-emissions technologies:
carbon capture and sequestration (CCS), plug-in hybrid automobiles and
concentrated solar-thermal electricity generation. Each will require a
combination of factors to succeed: more applied scientific research,
important regulatory changes, appropriate infrastructure, public
acceptance and early high-cost investments to “ride the learning curve”
to lower costs in the long term. A failure on one or more of these
points could kill the technologies.

Again, this more than makes sense.  It is a sober breath of fresh air in a debate that too often looks for easy palliatives.  My worry, however, comes in Sachs’s fairly optimistic-sounding book.  He stresses that for no more than one percent of global gdp per year, we can avoid a doubling of carbon emissions, relative to pre-industrial levels, by 2050. 

I am much more pessimistic, partly for reasons Sachs already outlines.  I won’t recapitulate all of my previous writings on the topic (follow the links here), so let me give a kind of "splat" response: Chinese CO2 emissions are much worse than we had thought, China resists outside pressure, Chinese governance is often of very poor quality, China is currently subsidizing energy consumption, China thinks it is our problem to solve, China won’t automatically keep on becoming prosperous, the super eco-conscious Europeans in fact haven’t made much of a dent in the problem in terms of percentage change, the U.S. has done better on carbon emissions than most of the Kyoto signatories, the price of oil rose fivefold in a relatively short period of time without much helping, a gradual increase in carbon taxes (in a Hotelling model) can lead to more extraction today thus worsening the problem, and if the rich countries massively cut their carbon consumption the prices of coal and oil would plummet and the incentive for someone to buy and smoke the stuff will be all that much stronger.  Valuable stuff in the ground tends to be dug up and used.  And by the way, curing the ozone problem was easy and even a "simple" international organization such as WTO gets tied up in gridlock.

Did I mention that some of the world’s nations might even benefit from global warming, most of all Russia, and thus they might wish to sabotage various partial solutions and that Russia holds a permanent seat on the Security Council of the UN?  And that geo-engineering is massively risky and might be considered by some countries to be an act of war?

That’s not even all the arguments I can think of.  And no, they are not arguments for ignoring the problem but they are arguments against optimism.  As I read Sachs, the core message is: "We can solve this problem if we try."

I would sooner start with the list of these problems.  Yikes, and yes I know it might scare some people into simply letting things slide.  But if action is to have any chance of succeeding we need to understand the problem.  I’d like the book — and yes I know this is a popular book, but even popular books should advance the debate — to start with the tough stuff and tell us what to do.

Maybe the technical costs of Sachs’s fix are one percent of global gdp.  But when we consider the imperfections of institutions, I fear that the costs are much much higher.  At the end of Sachs’s article he writes:

By 2010 at the latest, the world should be breaking ground on
demonstration CCS coal-fired plants in China, India, Europe and the
U.S.; the wealthy nations should be helping to finance and build
concentrated solar-thermal plants in states that border the Sahara; and
highly subsidized plug-in hybrids should be rolling off the assembly
line. Only these steps will enable us to peer much farther down the
path of truly transformative change.

Under one meaning of the word "should," this may sound just right.  Under another meaning of the word "should," it’s further reason for thinking the proffered formula doesn’t have much chance of success.

People used to think that more population was bad
for growth. In this view, people are stomachs–they eat, leaving less for
everyone else. But once we realize the importance of ideas in the economy,
people become brains–they innovate, creating more for everyone else….

In the 20th century, two world wars diverted the energy of two
generations from production to destruction. When the horrors ended, the
world was left hobbled and split. Communism isolated much of the world,
reducing trade in goods and ideas–to everyone’s detriment. World
poverty meant that the U.S. and a few other countries shouldered the
burdens of advancing knowledge nearly alone.

The battles of the
20th century were not fought in vain. Trade, development and the free
flow of people and ideas are uniting all of humanity, maximizing the
incentives and the means to produce new ideas. This gives us reason to
be highly optimistic about the future.

That’s me, writing at Forbes.com.  Read more about why the economics of new growth theory gives me reasons to be optimistic here.