David Brooks on Different Economic Points of View

David Brooks of the New York Times is one of my very  favorite thinkers – he’s a calm and intellectual conservative who manages to maintain a great deal of respect for the reality of the sweeping political changes before us, but Brooks is wisely very cautious about the many pitfalls that come with the overwhelming power Americans have granted to the President Obama and the Democratic Party.

In my view Brooks, unlike “conservative” blowhards and political/media buffoons like Rush Limbaugh, Sarah Palin, and Sean Hannity,  articulates the kind of vision the founders of our American experiment would have appreciated very much.     They understood how important it was to debate, discuss, consider and reconsider and then use democracy within a constitutional framework as the key tool to resolve disputes.

On Charlie Rose Brooks made a several of observations I thought were really, really interesting.    The first is that Obama  – so sharp and confident as President and chief  manager – is at risk for overextending himself based on that level of self-confidence.   Brooks seemed to suggest (and I’d certainly agree) that this overconfidence is reflected in the governmental and budget optimism that is used to support what I’d call our massively irresponsible spending plans for the post-recession economy.    Almost every economist and politician now agrees that a large deficit is appropriate for a few years in an effort to stimulate the global economy, but there are huge differences of opinion about what to do after that stimulus … stimulates.

To me the answer is probably that we should return as soon as possible to the free marketeering mechanisms that got us to the incredible levels of prosperity we now enjoy, and should seek to reduce government … dramatically.    However this “small government” view has become so unpopular now that I’m going to avoid the stress and just sit back and watch as the huge government view now so prevalent is tested on the grandest scale in all of human history.     I still think we are pushing debts forward at massively unsustainable levels, but luckily we should have a good sense of how unsustainable within a few years as the projected benefits of massive spending fail to materialize.

Another point Brooks made was that Obama’s vision is that of a technocratic and effective government, bringing resources and people to bear on the host of regulatory, security, military, and economic problems Obama inherited from the past.    Brooks agrees that unbridled Capitalism needs to be kept in check but worries about the government as the mechanism for that balance.       Brooks prefers the ideas of UK Moderate Conservative party leader David Cameron who he suggested is trying to embed the necessary checks on capitalism’s potential for excess in non-governmental institutions such as competing sectors of the market, family, and community.

This “small governments, empowered communities” idea  is very provocative and I’d guess very much in line with what the founders would have liked to see, though I think it will take some time to catch on as we’ve spawned a generation of voters who will simply assume that massive government is the status quo.

Capitalism did what  it does so well and said  “damn the torpedos full speed ahead”.     From 1945 until 2008 the global economy dodged most of those torpedos and many – especially in the USA and Europe but also much of the developing world – enjoyed levels of prosperity unparalleled in all of human history.      In 2008 the global economy suffered direct hits from a *lot* of the torpedos we’d been dodging so well.      Governments failed to see them coming and I doubt they’ll succeed in restoring prosperity without torpedos (I’d argue that’s not even possible – the risks *created* much of all those rewards), but we’ll know soon enough.

In the meantime when you tuck your children into bed be sure to tell them “thank you”.   “Thank you for taking on our families share of the USA debt of $473,000 … while you slept” . Source for 473,000 is USA Today.

David Brooks on Charlie Rose:

Dear WordPress – Now that you own Intense Debate, please get Intense Debate Comments going at WordPress hosted blogs.

Problem:  Cannot install Intense Debate at WordPress hosted blogs

The internet is a funny place, usually interesting, always provocative, and often frustrating.     In typical internet fashion after learning about how nice it would be to have the  “Intense Debate” comment system here to manage my comments more effectively and allow comment folks to get more out of the blog I spend a half hour learning that it can’t be installed here because I’m hosted at WordPress.

This is a bit odd since (in the typical topsy turvy ironic online world) WordPress actually *owns* IntenseDebate.   They bought it last fall so I can hope they’ll provide support for it soon.    I’m always reluctant to nag the excellent folks at WordPress because they don’t make much if any money from the blogging portions of their massive online programs (they do pretty well with Akismet anti-spamming software and they have one of the world’s largest and in my opinion extremely valuable online footprints).

However I do want to note this for others and hopefully save them the agony of trying to figure out how to install IntenseDebate at a WordPress hosted blog, which as far as I can tell is currently impossible because it’s only available via plugin and plugins are not allowed at WordPress hosted blogs aka WP hosted blog.

Note that you can easily install the IntenseDebate plugin via instructions at IntenseDebate if you have a WordPress.org setup, which is using WordPress Content management software at other sites.    e.g.  Our technology news blog Technology Report is such an external WordPress setup via Godaddy hosting,  so I may try to set this up over there, but unfortunately Joe Duck  is where all the comment action tends to be so this is where we need IntenseDebate!

C’mon Matt Mullenweg, can’t we have an intense debate widget for this  or something?

A simple solution for looming credit card problems? End the usury.

President Obama’s promising to work on the next looming financial crisis – credit card debt.    As Americans face the finanacial hardships from crisis ONE it appears we may have crisis TWO coming right up, which is unsustainable levels of consumer debt for people who are already starting to lose jobs.      I don’t envy the president’s team in this era where they need to work to support the banking structure, get them profitable, and get them loaning money while at the same time reign in the excesses, poor regulation, profiteering, and illegal banking activity that got us here in the first place.

However quality solutions are often simple ones, and I think we could go a long way towards recovery and solvency by taking a lesson from the council of Nicea which sought to regulate interest rates in more reasonable ways than we do now  (although I think we’d need to remove the religious discrimination parts of those rules).    Usury in history. In simple terms let’s just end the outrageous top interest rates charged by the banks on their credit cards, which often top 25%.       I’d have to say these usurous rates have never had much of an impact on me because I generally pay off my balances before I get charged any interest.   Also, I used to take advantage of introductory rate schemes (where you pay a few percent until an unclear time limit after which you pay a huge percent).     If you monitor the dates and rates closely these are often a very favorable short term loan.    However if you make the mistake of doing this without resources to pay them back at the expiration of the introductory rate you’ll be hammered to pieces with rates often as high as 20% or more.

Note that the introductory rate offers seem to be worse than they used to be and more misleading due to extra fees and also note that a single month at 24% can wipe out the savings you’d enjoy from a full year at 2%.     As a general rule I’d say it’s best to avoid the “special offer” interest deals and in my opinion the Government should be requiring the banks to disclose the real APR on these offers rather than the fake number which does not reflect the fees.     If, for example, you pay a 3% fee to borrow 10,000 at “APR 3%” for  a year your actual interest rate on this is 6%, often more than a home equity line which is also more likely to be tax deductible.

A big part of the solution is to cap interest rates at levels that are less likely to financially ruin people. This in turn will lead to more responsible lending by banks who can no longer count on bait and switch and fake APR games to beef up penalties and fees (which are about 25% of all bank revenues!).      Free markets suggest we should not over-regulate, but I think even Adam Smith would have said that the free hand starts to break down when people’s bad luck or ignorance traps them into paying 30% interest.     I think much of the current banking game is based on assumptions of a lot of defaulting, and this becomes self – fulfilling as the rates skyrocket for those not paying.   You wind up with a more predatory style system where you are trying to build fees and interest rather than load responsibly.

Of course we are not alone in the universe, but not for the reasons suggested by most UFO enthusiasts.

I can’t tell you how much I wish the UFO stories were all true.   In fact I’d be thrilled if even *one* of them was a credible story.   But they aren’t.  It’s very, very unlikely that even a single one of the thousands of reported stories about aliens visiting earth are true, for the reasons I discuss below.

Every so often Astronaut Ed Mitchell is quoted – here at CNN – talking about the Government cover ups of Roswell and other alien incidents he is convinced prove the existence of extraterrestrials and their visits to earth.    With all due respect to Mr. Mitchell’s accomplished career this is an area where he’s by no means an expert and clearly has just been convinced by the same silly stories that have convinced thousands of other people “We are not alone”, mostly because they want to believe rather than because there is any compelling evidence.    In fact there is no compelling evidence of alien visits to earth, and the idea the Government is covering up those visits is just dumb.

Don’t get me wrong – it is in my view it is nearly *certain* that there are at least *millions* of other planets with intelligent life on them.   I’ve blogged about why I think there’s a very high likelihood that there are probably many billions of civilizations in the universe.     In short it’s because we – as little replicating macromolecular structures – are unlikely to be all that special and because the universe is so darn huge with hundreds of billions of *galaxies*, each with hundreds of billions of stars and probably billions of planets.

But unfortunately for us earth lies in the low traffic zone of our milky way galaxy.    We are so far from the center, and so far from even the closest star, that visits from aliens – especially organic ones like the dude pictured in the silly Roswell hoax – are very, very unlikely.    Even with advanced technologies it would likely take many organic being lifetimes to travel to earth.  Tommo corrects me on this – time dilation would allow organic beings to travel extensively if the ship could approach speed of light.

Why would they choose this part of the Galaxy when the center is teaming with  star systems and probably millions of times more life per sector?

Don’t flatter yourself – the idea that we have attained some special status of great interest to more advanced beings that have the technologies to travel throughout the galaxy is a weak idea.   Possible, sure, but weak.

We are NOT alone in the universe, but we won’t be visited anytime soon.


Roswell Joe

Afghanistan & Pakistan Tribal Conflicts

Leave it to the BBC to come up with an excellent  summary of the situation along the Pakistan / Afghanistan border where the USA is about to invest a lot more blood and treasure in the fight with the Taleban and Al Queda and supporters in those regions.

Given the huge global  importance of this region it is amazing to me how little we tend to know about this area, though this BBC summary helps explain why things are anything but simple there.

Our Symbiotic Economy

In biology there are several kinds of relationships between animals where one or both benefit from the interactions. This obviously happens in economic relationships as well.

Something I have wondered about for some time is the size of what we might call the “commensalist” economy. Commensalism is the relationship between organisms where one supports the other without benefit to the host. Unlike a parasite, the commensalist character does no harm to the host, but also doesn’t bring anything to the table.

In defining the symbiotics in human economics we find many economic interactions where the benefits are so disproportionate or negative they would not be commensalist.  Some would be called parasitic such as scams like the Bernie Madoff ponzi scheme.

Many (probably most) economic relationships are mutually beneficial such as me buying a pizza and a Coke at the local restaurant. Here, they get my money and I get the pizza and Coke – the end products of hundreds of generally mutually beneficial economic relationships between farmers, bottlers, distributors, truckers, packagers, banks, research chemists working in the food industry, and more.

Yet I’m starting to think that the economy where one party gets a lot more than the other may be much larger than generally thought. This is very relevant as we begin to spend trillions on infrastructure and other Government projects. Will this money go for mutually beneficial projects or get sucked up into commensalist nonsense or low ROI things?

Some examples of the commensalist economy? Parents sell their house to their kids for less than a market rate, stock broker churns the account for commissions, CNBC reporters entertain but do not inform their viewers, “get rich quick” schemes in general (news flash – these do not work. Stop looking for the one that does and do some real work!), good salespeople upsell unneeded and overpriced services. In fact this last one is probably the key to my question – how much of our economy is built on “upsold” products and services and the commissions.

My hunch is that this type of economic relationship is simply huge – perhaps even 20% or more of the “truly productive” and mutually beneficial parts of our massive global economy when you factor in the massive commissions on sales which often simply reflect competition between large firms for massive private or government projects of dubious value to society.    Pork barrel military contracts, for example, offer some of the lowest ROI of any human activity in history yet they represent a significant percentage of USA GDP.

… more after some research ….