I read David Brooks so you don’t have to. In today’s offering, he regales us with a very boring and dubious-sounding story about how it took eight years for some committee in Israel to write ‘part’ of the curriculum for their high schools. By the time they were done, all the members of the Ministry of Education were dead had lost interest and the curriculum was never implemented. There might be a point to telling us about this absurdly slow performance except that it was completely typical.
Kahneman then asked the most experienced among them how long such work took other curriculum committees. The gentleman pointed out that roughly 40 percent of the committees never finished their work at all.
But what about those that did finish? The gentleman reported that he had never seen a committee finish in less than seven years and never in more than 10.
I’ll leave it to you to explain why Israeli committees need the better half of a decade to do anything. Even the sloth-like Max Baucus’s Finance Committee needed less than a year to write their portion of the Affordable Care Act.
Brooks pivots off these observations to argue that the U.S. government has been operating under fallacious assumptions about its own ability to fix the global economic slump. The problem isn’t divided government preventing the full implementation of the desired remedy. No, the problem is that the world is too complex for mere mortals to control.
The Democrats, besotted by the myth that the New Deal ended the Great Depression, have consistently overestimated their ability to turn the economy around. They regard the Greek crackup as a freakish, unlucky break, even though this sort of thing is a typical feature of a financial crisis.
I wonder if tsunamis and nuclear accidents are also typical features of financial crises. I wonder if Brooks is aware that the Great Depression and the Great Recession were not typical financial crises. But, I digress. It’s the lack of self-conscious irony in Brooks’s conclusion that really caught me eye.
Over the past decades, Americans have developed an absurd view of the power of government. Many voters seem to think that government has the power to protect them from the consequences of their sins. Then they get angry and cynical when it turns out that it can’t.
It may be true that the people have developed an absurd view of the power of government to protect them, but the government was quite capable of protecting the banksters from the consequences of their sins. I’d argue that that’s where Brooks should look for the origins of people’s anger and cynicism. Propping up the banks was a necessary evil. We needed to get them lending again. But that didn’t mean that a lot of people shouldn’t have gone to prison. And it didn’t mean that they should have been allowed to carry on much as they had before. There are some good reforms in the Dodd–Frank Wall Street Reform and Consumer Protection Act, but it didn’t do enough to create accountability or to alleviate people’s cynicism.
And, really what is Brooks’s point? That planning is futile?
Boo – long time reader (~4-5 years), first time commenter. Thanks for the sanity you bring daily.
I wanted to comment on a pervasive misunderstanding of the current economic crisis that spans parties and ideologies. (Though the GOP misunderstanding heaps a lot of other nonsense on top.)
That is that in large part our current economic woes are due to energy price – specifically oil. UCSD economist James Hamilton of the famed econbrowser warned last year that oil prices had exceeded a threshold that would cause a slowdown/recession. (He wasn’t the only one.) Basically when oil prices exceed about $90/bbl (WTI) we go into a slowdown or recession about 9 months later. It isn’t a coincidence that we had a similar price spike in 2007 – Hamilton has found that 10 of the last 11 recessions coincided with an oil price spike. (Of course in each there were other problems that compounded, which is why the Great Recession has been worse than others.)
Here’s the bottom line that too few folks recognize: oil is now the main bottleneck for our economy, and economic growth as we’ve known it is over. Unfortunately it’s exactly here where the standard progressive argument runs off the rails. Stimulus only works to get a self-sustaining recovery going if there are resources for the economy to self-sustain. Given that oil production has been on a global plateau for 6 years while China and India are gobbling up more and more of it, even if we got the economy revved up again it would sputter from high oil prices. Drilling won’t solve the problem either. I don’t mean to say Brooks is right, but that the standard progressive policies won’t work either.
This is the first modern recession after which real GDP didn’t recover to the pre-recession peak. That’s not a surprise – there isn’t enough cheap oil to make it happen.
Sorry for going on so long, but this is an important point that I feel has been missed for far too long. Heinberg’s new book (most chapters are available online) goes into this in depth.
What you say might be true if oil prices were responding to supply and demand changes–and especially the fact that most analysts have concluded that all of the moderate-quality (ignoring tar sands) reserves of oil have been discovered.
But like other commodities, oil is an asset that is subject to speculation, to storage and release. And one set of major players in the oil market have organized a cartel that is used for political as well as economic purposes.
There is no reason that stimulus could not get the economy going from a recession that fundamentally is about a lack of demand — even with oil at higher prices.
To argue that there is not enough cheap oil is to argue that there is a supply-side solution. Just allow drilling, relax regulations, construct tar sands refining infrastructure, and enact even more tax credits for oil companies. That would be a huge mistake and it would not cure a recession that is fueled by a lack of demand and perpetuated by the notion that private and public austerity will cure it.
Oil spikes can trigger recessions when it spooks markets into thinking that inflation is coming. The response is to bid up interest rates or have central banks bid up interest rates. The 2007 oil spike essentially did that. Interest rates went up, and all over the country adjustable rate mortgages reset, sometimes at outrageous jumps in rates — forcing homeowners into foreclosure. Because of the “innovative way” mortgages were being packaged, those foreclosures rippled through the financial system and created the risk of a $100T loss to the financial system.
I believe that there is a massive failure among financial actors to distinguish between supply-demand increases in price and financial inflation increases in price.
This is the first modern recession not to recover to its post-recession peak mainly because it is the second recession not to use established macroeconomic fiscal stimulus — because that involves government spending domestically. War and tax cuts created the deficit that allowed the Bush economy to recover — very slowly.
There are four things that can restart demand and cause expansion of production: consumer spending (unemployed people can’t spend at previous levels); business investment in real goods and services (business is trading paper because there is no demand); government spending (legislatively blocked); positive balance of trade (outsourcing means we have a negative balance of trade). The economy is dead in the water because consumers can’t, businesses can but won’t, government is being obstructed from, and exports are in the toilet because the recession is global.
The American Recovery and Reinvestment Act (it was more than a monetary stimulus) invested in creating the substitutes for dependence on oil in the future. The rapidity with which that is rolled out offsets the constraints in oil production.
In general, the idea that there are limits to growth imposed by finite resources is a good argument to make as it motivates folks to find ways of creating higher satisfaction with fewer material and energy inputs — which drives technology and innovation. The fact of the matter is that the US has not invested in innovation in the past 30 years to the degree that it did in the immediate post-World War II era. Corporate R&D has been devoted to minor tweaks that would not disrupt industries. Disruptive innovation has come from startups and from outside the US.
But investment in innovation is still investment in goods and services. Without demand, this is at a standstill as well. And that just perpetuates the captivity of the economy to high-resource and resource-wasting means of production. A more vigorous stimulus to create “green” jobs could create the innovation to make resource constraints less of a problem. It could also make oil obsolete as an energy source, saving it for use as a lubricant.
Speculation plays a small part, but the fundamentals are real. Hamilton examined exactly what you describe, and found that speculation played a minor role in the oil price spikes we’ve seen recently. The fact that oil production hasn’t gone up for 6 years despite many many efforts to increase it should be a major sign.
No, that’s the GOP argument – that there is a supply side solution. There isn’t one. I’m saying, as the Jeffrey Brown article points out (that I linked to), that peaks of oil production happen due to geological constraints, and have happened in every field, and regardless of technology, politics, subsidies, etc. And this is ignoring the energy-return on investment – the fact that tar sands, for example, take an unbelievable amount of energy to turn into synthetic crude, so there’s a minimum price to even make it worth producing tar sands (~$80/bbl, maybe more). Chris Skrebowski (a British energy expert) goes into this in detail.
It’s not about spooking the market. It’s about how much money individuals and businesses are forced to spend on oil/gasoline and increased input costs. It takes money out of their pockets so they can’t spend on other things, driving down demand in all other sectors of the economy. New Deal Democrat has written about this several times [here and here for example]. Our economy depends upon oil for almost everything, as almost everyone drives a car, we ship things by truck, diesel trains, ship, and plane, make myriad goods out of oil products, use oil in agriculture (for everything other than fertilizer), etc.
It did so at maybe 1/100th the level we need to (and had plenty of counterproductive highway construction, etc.). I don’t doubt that a properly crafted stimulus can help move us away from oil and enable economic recovery at some future date. But any broad-based economic stimulus simply juices the economy which makes us start using oil more, which in turn causes another downturn. As it’s often said: the cure for high oil prices is high oil prices.
I agree with this at a high level, though the investment needs to all be in goods and services that aren’t oil dependent. (e.g. electric rail of all kinds, bicycle lanes, carpool programs, etc.) While investment in alternative energy is worthwhile, it can’t substitute for oil directly and thus doesn’t help us deal with the near-term issue. One way or another oil is going to be obsolete as an energy source – the real question is what’s left of our economy when it is.
I don’t see where you are arguing against progressive prescriptions for the economy then.
We need rapid and massive investment by government in the infrastructure (domestic and military, I might add) that disengages the US from the oil and fossil fuels economy and does this quickly. As quickly as FDR converted the economy to electricity and highways.
Alternative energy is at the point that massive deployment can help us in the near term. Installation of solar and construction of wind farms use exactly the skills that the construction-led recession left idle. The demand for these goods will stimulate a supply chain for parts, which with proper government policy could stimulate the US economy.
And putting money in the hands of consumers would permit them to actualize the demand that they have for more energy-efficient lifestyles. There are many people who feel stuck in the suburbs and can’t financially move. There is a pent-up demand for hybrid and electric vehicles.
So long as oil is not subsidized. And by not subsidized, that includes reshaping a military that does not require overseas resources and disengages from the oil wars. And it requires that the gasoline tax be converted from absolute cents at current level to a percentage tax that accelerates the move away from gasoline power.
Demand for oil still can fall even as the economy rebounds. OPEC of course will adjust its production to feel the world addiction to oil and try to underprice alternatives. But even OPEC countries are recycling oil money into investments in alternatives. As rich as desert countries are in oil, they also are rich in solar flux and wind density.
The reason that highways were part of the stimulus is because of the amount of deferred maintenance of that system. And it was easy to have shovel ready street projects. And interstate repaving. But higher oil costs even affect that because asphalt costs track oil costs. If the transit is rolled out fast enough, the traffic damage and demand for maintenance decreases.
One of the major changes that must occur is shifting truck traffic that parallels rail service to rail freight.
And the big sticker of all is air transportation. The biofuel feedstock for air transport is still not acceptable environmentally for a variety of reasons. This is a bigger issue with military aviation.
I’m not in the abstract (I’m sure most progressives like the idea of getting off of oil), but in the concrete. I’ve never seen (and I’ve looked) any progressive congressperson – pick your favorite…Sanders, Boxer, Lee, etc. – propose anything that comes close to addressing the problem oil poses for us. Most responses come from the climate change perspective – which is important but much longer term. I have yet to see any understanding about how oil is the principal economic bottleneck today. (I’m trying to do my part by meeting with staffers of my elected officials to educate them about it.)
I’d hope that once progressives begin to understand this as the fundamental issue, the policy prescriptions will change. Economic stimulus that’s very carefully targeted to only decrease oil consumption in either the short or long term is the way to go. And regulation – a 100% dividend carbon tax like James Hansen suggests – would help immensely.
That’s the thing – alternative energy doesn’t directly help deal with our near-term oil problems because you can’t substitute the oil used in cars, trucks, planes, manufacturing, agriculture, etc. with electricity. Even the most ambitious estimates think that a few percent of cars will be electric by 2020. It does help with climate change, and may in the very long term re: oil. In general, alternative energy sources aren’t as much of a solution as is generally believed, as David Fridley shows.
Definitely, though I think Hansen’s 100% dividend carbon tax is a much better way to go than strictly taxing gasoline.
I think we’re broadly in agreement that it’s an issue. I just think that there isn’t nearly enough awareness that our current economic woes were foretold by oil prices and that the only way out of this economic mess – even if we were to fix the banks, tax rates, wars, etc. – is to decrease our use of oil fast. Hirsch, whose study for the Department of Energy is still the gold standard of peak oil reports, found in a followup study that there’s roughly a 1-to-1 correspondence between oil production and GDP. He estimates that post peak (we’re roughly on the peak plateau right now, and will start heading down in 2-4 years) we’ll see a 2-5% annual production decline. That’d be like having a new, mild recession every year. The only way to offset that is to decrease our oil consumption at a faster rate.
I read David Brooks so you don’t have to.
and, even if we don’t say it enough…
THANK YOU, BooMan.
LOL
Shorter Brooks:
Self-government is futile.
Actually, combine that with a desire for a new benevolent Caesar to rule America, and you’ve got about half of Brooks’s overall output.
In the US, that wouldn’t be a Caesar but a Bush.
Bush Herbert
Bush Walker
Bush Rick
Bush Jeb
.
.
.
all down the lines of even more incompetent and greedy rulers.
Brooks longs for America to sack the Senate and be governed by a Bush.
Your analogy to history has sent pangs of pain down my spine. If the popularity of Reagan were combined with the elite status of the Bush line… If George W. Bush had been more Augustus than Nero … Brrr. Chills. I’m not one who hews too closely to analogies between Rome and the US (The Roman Republic was almost nothing like the US politically, economically, demographically, etc.), but occasionally a historic parallel is just too creepy.
But back to the point – I don’t think that Brooks particularly cares which rich family the American Caesar comes from. If Bloomberg wanted to be the American Caesar, Brooks would be lining up to kneel in supplication. The important factors are that his American Caesar needs to be rich and “moderate” (i.e. “thinks like David Brooks”). So long as those two factors are there, Brooks is ready to kneel and maybe even help dissolve the Congress.
Lots of self-identified “conservative” intellectuals imagine themselves as Cicero.
He’s channelling his inner Burke. Brooks’ mancrush on Edmund Burke is well documented, and Brooks is only taking the Burkean line that tinkering with institutions is a bad idea. That the evolution of institutions means that they benefit from the wisdom of usage and experience.
Brooks’ problem is that wisdom and experience shows us that Social Security works, Medicare works and infrastructure projects boost employment. The most Burkean of Presidents since ’45 was Eisenhower, who met a recession with the interstate highway system.
There is much to recommend in Burke’s type of conservatism. But only – unlike Brooks – if you really understand what it means.
The irony and problem with Burke, is that he assigns value to tradition. Tradition is meaningless. It’s how something was able to work. That does not mean that it is the best method, it does not mean it is the only method and it does not mean it is equipped to take on challenges in the future.
The whole idea of deference to tradition is both limiting and baffling, and it smacks of a pseudo-progressiveness that assumes that those traditions will always slowly evolve in a positive direction.
Not defending Burke, but I’d just like to observe that “how something was able to work” isn’t meaningless. Agreed, it may not be the best method, it most likely isn’t the only method, and it may not be equipped to take on future challenges.
On the other hand, particularly with complex systems (like human society), it seems to me reasonable to presume that there is a certain wisdom in tradition. Furthermore, I think it behooves those of us who are progressives to take the time to figure out the good and useful parts of tradition—the better to use them to advance progressive ends. (E.g., the LGBT community seems to have done a good job in recent years of using the issue of marriage towards progressive ends.)
By “tradition”, generally we mean what is handed down culturally from generation to generation. Burke was defending the British class system against the new revolutionary movements that sprung from the arguments of Thomas Paine and others. Burke was defending a particular tradition, not tradition generally–despite his framing.
Traditions are not dead hands on society. The most durable traditions are those that are the most fluid and open to the influence of other traditions. For the past century the US has had a fluid tradition. And now progressivism a century later is itself a tradition as is modernism. Progressivism seeks to carry into the future the values of good and just government, inclusion, international peace, respect for science, collective bargaining by labor, and separation of church and state — among other values. The progressive tradition was dominant in American culture until the 1970s. Since then a radical movement that takes a newly inventing reading of conservatism has asserted itself falsely as traditional. And too many in the media and elsewhere have taken this at face value.
Fundamentalism was an invention of the Moody Bible Institute and others in the early 1900s. The publication of the Fundamentals of the Christian Faith was financed by a Standard Oil of California executive. Fundamentalism was a reaction to the Christian Labor movement and as a result argued that Christianity had to do with personal faith instead of social justice. An advertising man, Bruce Barton, presented in The Man Nobody Knows the argument that Jesus was the founder of modern business. This was the origin of the “muscular Christianity” movement and the modern Christian justification of riches. Barton’s book coincided with the rise of the modern KKK outside the South and with the Roaring 20s. And marked the reduction of Christian evangelism to marketing, something that tent evangelists had done for some time but still made folks uncomfortable because it led to wealthy evangelists with lavish lifestyles. Again the 1920s were the heyday of the Billy Sunday type of evangelist even if they did not fall into his vices. It was when Dr. Bob Jones made the fortune that allowed him to start a university and sowed the seeds for the entrepreneurial evangelism of the 1930s. None of these antecedents of the religious right are in any way “traditional Christianity”.
In the same way, there is nothing about the supply side economists that is “classical economics”. And one (Jude Wanniski) had not economics background. They were mostly influenced by a mid-twentieth century writer, Ayn Rand, whose personal history caused her to try to destroy the intellectual foundations of liberalism, which she and others at that time conflated with Marxism.
If Brooks thinks he is a conservative because he hearts Edmund Burke, he is blind to the roots of the current “conservative” movement.
To paraphrase from faulty memory something I read long ago in a book far away:
There are two kinds of fool who between them have caused most of the grief in the history of the world. One says this is old, and therefore good. The other says this is new, and therefore better.
It behooves us to question both assertions, always and everywhere.
Histories Mysteries last night had a series on speculation of Alien visits to our planet and the first segment dealt with Aliens interbreeding with the human population to ‘speed up our evolution’. Laughed outloud. Where’s a good Alien when you need ’em?
Nah. The only good Alien is a dead Alien. Just ask Jan Brewer or Rick Perry.
Yep, and the next complaint will be:
What a rip; the Aliens are either married or gay. Where’s the interbreeding in that?
All the GOOD aliens will be married or gay. We can still have the leftovers.
I remember reading some Zechariah Sitchin paperbacks back in the day. Purportedly non-fiction, the premise was that Ancient Astronauts came to Earth millions of years ago and “uplifted” primates found here by using their alien DNA.
Why would they do this? Because they needed slave labor. And what did they need slave labor for? To mine the planet for gold. Apparently the Ancient Astronauts were big believers in the Austrian School of economics 🙂
(Those books are a hoot if you find them cheap. Lots and lots of “research” to “prove” that the gods of Egypt and Mesopotamia were all Ancient Astronauts, the myths of Mesopotamia describe alien genetic experiments, and at some point rival groups of aliens were lobbing nukes at each other and created the Sahara desert or something. Hilarious stuff – just don’t pay cover price.)
Perhaps that is his point. Planning is something nerdy do-gooders do. Thinking about things carefully is not the domain of the Real Man, which Brooks desperately wants to be.
This column appears to be another incarnation of the GOP motto: Let America Fail.