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Earth to Ben Bernanke

By PAUL KRUGMAN

The New York Times

When the financial crisis struck in 2008, many economists took comfort in at least one aspect of the situation: the best possible person, Ben Bernanke, was in place as chairman of the Federal Reserve.

Bernanke was and is a fine economist. More than that, before joining the Fed, he wrote extensively, in academic studies of both the Great Depression and modern Japan, about the exact problems he would confront at the end of 2008. He argued forcefully for an aggressive response, castigating the Bank of Japan, the Fed’s counterpart, for its passivity. Presumably, the Fed under his leadership would be different.

Instead, while the Fed went to great lengths to rescue the financial system, it has done far less to rescue workers. The U.S. economy remains deeply depressed, with long-term unemployment in particular still disastrously high, a point Bernanke himself has recently emphasized. Yet the Fed isn’t taking strong action to rectify the situation.

The Bernanke Conundrum — the divergence between what Professor Bernanke advocated and what Chairman Bernanke has actually done — can be reconciled in a few possible ways. Maybe Professor Bernanke was wrong, and there’s nothing more a policy maker in this situation can do. Maybe politics are the impediment, and Chairman Bernanke has been forced to hide his inner professor. Or maybe the onetime academic has been assimilated by the Fed Borg and turned into a conventional central banker. Whichever account you prefer, however, the fact is that the Fed isn’t doing the job many economists expected it to do, and a result is mass suffering for American workers.

What the Fed Can Do

The Federal Reserve has a dual mandate: price stability and maximum employment. It normally tries to meet these goals by moving short-term interest rates, which it can do by adding to or subtracting from bank reserves. If the economy is weak and inflation is low, the Fed cuts rates; this makes borrowing attractive, stimulates private spending and, if all goes well, leads to economic recovery. If the economy is strong and inflation is a threat, the Fed raises rates; this discourages borrowing and spending, and the economy cools off.

Right now, the Fed believes that it’s facing a weak economy and subdued inflation, a situation in which it would ordinarily cut interest rates. The problem is that rates can’t be cut further. When the recession began in 2007, the Fed started slashing short-term interest rates until November 2008, when they bottomed out near zero, where they remain to this day. And that was as far as the Fed could go, because (some narrow technical exceptions aside) interest rates can’t go lower. Investors won’t buy bonds if they can get a better return simply by putting a bunch of $100 bills in a safe. In other words, the Fed hit what’s known in economic jargon as the zero lower bound (or, alternatively, became stuck in a liquidity trap). The tool the Fed usually fights recessions with had reached the limits of its usefulness.

That doesn’t mean the Fed was out of options. Not according to the work of a number of economists, anyway, among them a prominent Princeton professor by the name of Ben Bernanke. As noted above, Bernanke was among the economists who took notice, back in the 1990s, of the troubles afflicting Japan — a huge real estate bubble that left behind a legacy of high private-sector debt when it burst and a central bank up against the zero lower bound.

The woes confronting the United States today aren’t identical to those faced by Japan. For one thing, Japanese inflation wasn’t just low; by the end of the 1990s, Japan was actually suffering chronic deflation. For another, Japan’s slump was never as terrible as ours; unemployment, in particular, never became the scourge it has become here. Still, Japan provided an example of how an advanced modern economy could seemingly be caught in an economic trap.

In a hard-hitting 2000 paper titled “Japanese Monetary Policy: A Case of Self-Induced Paralysis?” Bernanke declared that “far from being powerless, the Bank of Japan could achieve a great deal if it were willing to abandon its excessive caution and its defensive response to criticism.” He proceeded to lay out a number of actions the Bank of Japan could take. And he called on Japanese policy makers to act like F.D.R. and do whatever it took: “Japan is not in a Great Depression by any means, but its economy has operated below potential for nearly a decade. Nor is it by any means clear that recovery is imminent. Policy options exist that could greatly reduce these losses. Why isn’t more happening? To this outsider, at least, Japanese monetary policy seems paralyzed, with a paralysis that is largely self-induced. Most striking is the apparent unwillingness of the monetary authorities to experiment, to try anything that isn’t absolutely guaranteed to work. Perhaps it’s time for some Rooseveltian resolve in Japan.”

Bernanke had some specific proposals that could serve as advice for the Fed today. One set of options would have it take a larger role in financial markets. Short-term interest rates may be zero, unable to go lower, but longer-term rates aren’t. So the Fed, which typically buys only short-term U.S. government debt, could expand its portfolio, buying long-term government debt, bonds backed by home mortgages and so on, in an effort to drive down the interest rates on these assets. This is the strategy that has come to be known, unhelpfully, as quantitative easing.

Another set of options involves trying to change expectations about future Fed policy. Right now, investors believe that the economy will eventually recover enough for the Fed to start raising rates again. Such expectations about future Fed plans, in turn, can have an important impact on the economy right now. In particular, beliefs about how long the Fed will wait before raising rates can have a major impact on expectations of future inflation. At the moment, investors assume that the Fed will raise rates enough to keep inflation from rising much above 2 percent. If the Fed were to raise its target for inflation — and if investors believed in the new target — expected inflation over the medium term, say the next 10 years, would be higher. Many economists, ranging from the chief economist of the International Monetary Fund to one of Mitt Romney’s top economic advisers, have argued, as I have, that higher expected inflation would aid an economy up against the zero lower bound, because it would help persuade investors and businesses alike that sitting on cash is a bad idea. Bernanke endorsed the idea in his “Paralysis” paper, suggesting that the Bank of Japan declare “a target in the 3-to-4-percent range for inflation, to be maintained for a number of years.”

So which of these steps has the Fed taken lately? Well, it has bought more than $2 trillion worth of long-term government debt and bonds of government-backed housing agencies. That sounds like a lot, but it’s much less than most analysts think necessary to jump-start economic recovery. The Fed has also tried to influence market expectations about future policy, but only for the fairly near term, declaring that it doesn’t expect to raise short-term rates until late 2014. What’s more, Bernanke has ruled out more ambitious policies. In 2010, for example, he dismissed the notion of a higher inflation target for the United States, arguing that it would undermine confidence and the Fed’s “hard-won inflation credibility.”

In short, Chairman Bernanke’s Fed has been much more passive than Professor Bernanke’s writings would have led us to expect.

Can the Fed Do No More?

Some economists and Fed officials believe that the Fed has already done all it can or should — that, in particular, high unemployment is structural, that it can’t be brought down simply by getting people to increase spending. They also warn that any further efforts by the Fed to boost the economy would simply drive up inflation instead. This is, however, a minority view both among economists and at the Fed.

Most stories about structural unemployment stress a perceived mismatch between the work force and employment opportunities: workers, so the story goes, either have the wrong skills or are in the wrong place. But as Bernanke pointed out in a recent speech, employment looks bad across the board: “The fact that labor demand appears weak in most industries and locations is suggestive of a general shortfall of aggregate demand rather than a worsening mismatch of skills and jobs.” As a result, he declared, the data “do not support the view that structural factors are a major cause of the increase in unemployment during the most recent recession.”

What about inflation? So-called headline inflation, a k a the Consumer Price Index, has fluctuated wildly — deflation during the worst of the recession, annualized inflation hitting a peak of almost 4 percent last September. These big swings are, however, driven mainly by fluctuations in the prices of raw materials, which Fed officials consider poor indicators of underlying inflationary pressures. They prefer, instead, to focus on measures like core inflation, which excludes volatile energy and food prices and which has remained fairly quiescent.

The Fed is right in this. Last year, many conservatives seized on rising headline inflation — driven mainly by increasing gasoline prices — as evidence of a looming inflation tsunami. Representative Paul Ryan, the Wisconsin Republican, for example, pointed to rising prices of raw materials and said ominously, “There is nothing more insidious that a country can do to its citizens than debase its currency.” Fed officials, however, steadfastly predicted that the inflation surge would soon ebb, and it did.

So the Fed doesn’t think there are good reasons for high unemployment and isn’t worried about inflation. Indeed, the minutes from the January meeting of the Federal Open Market Committee, which sets monetary policy, revealed that a majority of members expected an eventual fall in unemployment to below 6 percent, with inflation remaining low.

Think about what this means in terms of the dual mandate. The Fed is supposed to pump up the economy when it’s running too cold, with unemployment high and inflation low. That’s where we are right now, in the Fed’s own estimation. Yet the most recent minutes, from March, show Fed officials unwilling to take any further action to boost the economy.

Why won’t the Fed do more?

Political Bullying

When Fed critics interpreted a brief escalation in raw-material prices as evidence of out-of-control inflation last year, it was unusual only because for once the critics had some actual inflation to talk about. Since 2008, the Fed has faced constant attacks over its supposed inflationary actions, whether or not the actual data indicate the existence of runaway inflation. Some attacks have even bordered on menace, most famously Rick Perry’s warning that Bernanke would be treated “pretty ugly” if he visited Texas.

The effect must be somewhat intimidating. Recently N. Gregory Mankiw of Harvard University — an adviser to Mitt Romney who himself briefly advocated raising the inflation target but went quiet after receiving intense criticism — put it succinctly: “If Chairman Bernanke ever suggested increasing inflation to, say, 4 percent, he would quickly return to being Professor Bernanke.”

Maybe, then, Bernanke still wants higher inflation and other unconventional policies but knows that there’s no point in pursuing or even advocating them. But there are two problems with this supposition. First, that’s not the way the Fed is supposed to work. It’s meant to be insulated from political pressure — so why would people so calmly accept the notion that it could be pressed to avoid doing what it thinks it should do? Second, Bernanke has gone out of his way to insist that his current position reflects an economic judgment, not political compromise — that it’s all about preserving that “hard-won inflation credibility.”

I suspect that the old Bernanke would have scoffed. He would have pointed out that the Fed could still keep inflation within bounds — that 4 percent inflation (which is what we actually had during the late years of the Reagan administration) need be no more unsettling than 2 percent inflation. He would also, I suspect, have argued that the risks of losing credibility pale beside the risks of inaction. Bear in mind, whenever someone invokes the specter of a return to ’70s-style stagflation, when the economy is weak and inflation is high — a greatly overrated risk — that what we are going through now is much, much worse than anything that happened in the ’70s. It takes a certain mind-set to worry more about a hypothetical loss of confidence than about the clear and present suffering of the unemployed — the mind-set, one might say, of a conventional central banker.

The Fed as Borg

Recently Laurence Ball of Johns Hopkins University made waves among monetary economists by looking through Fed minutes to determine how and when Ben Bernanke’s views changed. According to Ball, Bernanke’s big retreat from F.D.R.-like resolve happened way back in 2003, less than a year after he arrived at the Fed. That month, a Fed staff report rejected many of the ideas Bernanke previously supported — and ever since, Bernanke has spoken only of limited responses to the problem of the zero lower bound. What’s puzzling about this apparent conversion is the fact that while Bernanke may have been a newbie at the Fed, he was a towering figure in his field. Why should he have taken his cues from a staff report?

Ball emphasizes both the pressures of groupthink and Bernanke’s shy personality. Without necessarily disagreeing, I’d point to a crucial difference between the policies Bernanke advocated in his pre-Fed days and the ones he has supported since 2003. His Fed-era policies aren’t simply less ambitious than those of his academic era; just as important, Chairman Bernanke’s policy menu, unlike Professor Bernanke’s proposals, has been set up so that the Fed can’t be blamed for failure.

Suppose, for example, that the Fed announces a higher inflation target. It might not work: markets might not consider the Fed’s proclamations credible and believe instead that no matter what the Fed says now, it will return to its traditional focus on price stability. So an attempt to raise expected inflation could lead to an embarrassing failure. When buying government bonds, on the other hand, the Fed can always claim that the policy worked, even if the economy does poorly, because it can insist that things would have been even worse without its actions. So by retreating to a narrow definition of the Fed’s role, Bernanke has also adopted a position that is much more comfortable for the Fed as an institution.

Back in 2000, Professor Bernanke warned against exactly this kind of retreat, harshly criticizing the Bank of Japan’s unwillingness to “try anything that isn’t absolutely guaranteed to work.” But within a year of his arrival at the Fed, he seemed to have been assimilated by the Fed Borg, like Capt. Jean-Luc Picard in a famous “Star Trek” episode, converted into a half-robot servant of a hive-mind.

Bernanke may have pulled back from his earlier activism years ago, but given the scale of our economic catastrophe, he might well have returned to his earlier views if the political climate hadn’t been so hostile. So I wouldn’t fully discount the importance of right-wing bullying. As for his insistence that it’s not about politics — could he really get away with saying, or even hinting, that pressure from the likes of Paul Ryan is keeping him from pursuing full employment?

My best guess is that the disappointing response of the Bernanke Fed represents the effects of both bullies and the Borg, a combination of political intimidation and the desire to make life easy for the Fed as an institution. Whatever the mix of these motives, the result is clear: faced with an economy still in desperate need of help, the Fed is unwilling to provide that help. And that, unfortunately, makes the Fed part of a broader problem.

Consider, if you will, the current state of our nation. Despite hints of economic progress, we’re still in the midst of an immense disaster, in which unemployment and underemployment are devastating millions of American lives. And none of this need be happening! There has been no plague of locusts; we have not lost our technological know-how. Americans should be richer, not poorer, than they were five years ago. Yet economic policy across the board has become almost passive, has essentially accepted this disaster instead of trying to end it.

The Fed under Bernanke is by no means the worst sinner in this failure of intellect and will, and you can argue that Ben Bernanke has done a better job than anyone else who might have held his position. Yet the fact is, he has not done remotely enough. The Fed, under its eminent chairman, was supposed to be an important part of the solution to mass unemployment. That isn’t happening.

This article has been adapted from “End This Depression Now!” by Paul Krugman, to be published by W. W. Norton & Company this month.

Krugman is a Times columnist and winner of the 2008 Nobel Prize in economics.

Politics, Odors and Soap

By NICHOLAS D. KRISTOF

New York Times Editorial

Conservatives may not like liberals, but they seem to understand them. In contrast, many liberals find conservative voters not just wrong but also bewildering.

One academic study asked 2,000 Americans to fill out questionnaires about moral questions. In some cases, they were asked to fill them out as they thought a “typical liberal” or a “typical conservative” would respond.

Moderates and conservatives were adept at guessing how liberals would answer questions. Liberals, especially those who described themselves as “very liberal,” were least able to put themselves in the minds of their adversaries and guess how conservatives would answer.

Now a fascinating new book comes along that, to a liberal like myself, helps demystify the right — and illuminates the kind of messaging that might connect with voters of all stripes. “The Righteous Mind,” by Jonathan Haidt, a University of Virginia psychology professor, argues that, for liberals, morality is largely a matter of three values: caring for the weak, fairness and liberty. Conservatives share those concerns (although they think of fairness and liberty differently) and add three others: loyalty, respect for authority and sanctity.

Those latter values bind groups together with a shared respect for symbols and institutions such as the flag or the military. They are a reminder that human moral judgments are often about far more than just helping others. Some of Haidt’s most interesting material is his examination of taboos.

His team asked research subjects pesky questions. What would they think of a brother and sister who experimented with incest, while using birth control? Or of a family that, after their pet dog was run over, ate it for dinner?

Most respondents were appalled but often had trouble articulating why; we find these examples instinctively disturbing even if no one is harmed. (One lesson of the book: If you see Haidt approaching with a clipboard, run!)

Of course, political debates aren’t built on the consumption of roadkill. But they do often revolve around this broader moral code. This year’s Republican primaries have been a kaleidoscope of loyalty, authority and sanctity issues — such as whether church-affiliated institutions can refuse to cover birth control in health insurance policies — and that’s perhaps why people like me have found the primaries so crazy.

Another way of putting it is this: Americans speak about values in six languages, from care to sanctity. Conservatives speak all six, but liberals are fluent in only three. And some (me included) mostly use just one, care for victims.

“Moral psychology can help to explain why the Democratic Party has had so much difficulty connecting with voters,” writes Haidt, a former liberal who says he became a centrist while writing the book.

In recent years, there has been growing research into the roots of political ideologies, and they seem to go deep. Adults who consider themselves liberals were said decades earlier by their nursery-school teachers to be curious, verbal novelty seekers but not very neat or obedient.

Some research suggests that conservatives are particularly attuned to threats, with a greater startle reflex when they hear loud noises. Conservatives also secrete more skin moisture when they see disgusting images, such as a person eating worms. Liberals feel disgust, too, but a bit less.

Anything that prods us to think of disgust or cleanliness also seems to have at least a temporary effect on our politics. It pushes our sanctity buttons and makes us more conservative.

A University of Toronto study found that if people were asked to wash their hands with soap and water before filling out a questionnaire, they become more moralistic about issues like drug use and pornography. Researchers found that interviewees on Stanford’s campus offered harsher, more moralistic views after “fart spray” had been released in the area.

At Cornell University, students answered questions in more conservative ways when they were simply near a hand sanitizer station.

Our ideologies shape much more than our politics. We even seek pets who reflect our moral outlook. Researchers at YourMorals.org found that liberals prefer dogs who are gentle but not subservient, while conservatives seek dogs who are loyal and obedient.

In short, moral and political judgments are complex and contradictory, shaped by a panoply of values, personalities — maybe even smells.

Little of this is a conscious or intellectual process. Indeed, Haidt cites research that a higher I.Q. doesn’t lead people to think through their moral positions in a more balanced, open way (although they are more eloquent in defending those positions).

There’s even extensive research finding that professors of moral philosophy are no more moral than other scholars.

And do you know what kind of books are disproportionately stolen from libraries? Books on ethics.

March 17, 2012, 6:15 pm

Forget the Money, Follow the Sacredness

New York Times, Campaign Stops, Election Opinions

By JONATHAN HAIDT

In the film version of “All the President’s Men,” when Robert Redford, playing the journalist Bob Woodward, is struggling to unravel the Watergate conspiracy, an anonymous source advises him to “follow the money.” It’s a good rule of thumb for understanding the behavior of politicians. But following the money leads you astray if you’re trying to understand voters.

Self-interest, political scientists have found, is a surprisingly weak predictor of people’s views on specific issues. Parents of children in public school are not more supportive of government aid to schools than other citizens. People without health insurance are not more likely to favor government-provided health insurance than are people who are fully insured.

Despite what you might have learned in Economics 101, people aren’t always selfish. In politics, they’re more often groupish. When people feel that a group they value — be it racial, religious, regional or ideological — is under attack, they rally to its defense, even at some cost to themselves. We evolved to be tribal, and politics is a competition among coalitions of tribes.

The key to understanding tribal behavior is not money, it’s sacredness. The great trick that humans developed at some point in the last few hundred thousand years is the ability to circle around a tree, rock, ancestor, flag, book or god, and then treat that thing as sacred. People who worship the same idol can trust one another, work as a team and prevail over less cohesive groups. So if you want to understand politics, and especially our divisive culture wars, you must follow the sacredness.

A good way to follow the sacredness is to listen to the stories that each tribe tells about itself and the larger nation. The Notre Dame sociologist Christian Smith once summarized the moral narrative told by the American left like this: “Once upon a time, the vast majority” of people suffered in societies that were “unjust, unhealthy, repressive and oppressive.” These societies were “reprehensible because of their deep-rooted inequality, exploitation and irrational traditionalism — all of which made life very unfair, unpleasant and short. But the noble human aspiration for autonomy, equality and prosperity struggled mightily against the forces of misery and oppression and eventually succeeded in establishing modern, liberal, democratic, capitalist, welfare societies.” Despite our progress, “there is much work to be done to dismantle the powerful vestiges of inequality, exploitation and repression.” This struggle, as Smith put it, “is the one mission truly worth dedicating one’s life to achieving.”

This is a heroic liberation narrative. For the American left, African-Americans, women and other victimized groups are the sacred objects at the center of the story. As liberals circle around these groups, they bond together and gain a sense of righteous common purpose.

Contrast that narrative with one that Ronald Reagan developed in the 1970s and ’80s for conservatism. The clinical psychologist Drew Westen summarized the Reagan narrative like this: “Once upon a time, America was a shining beacon. Then liberals came along and erected an enormous federal bureaucracy that handcuffed the invisible hand of the free market. They subverted our traditional American values and opposed God and faith at every step of the way.” For example, “instead of requiring that people work for a living, they siphoned money from hard-working Americans and gave it to Cadillac-driving drug addicts and welfare queens.” Instead of the “traditional American values of family, fidelity and personal responsibility, they preached promiscuity, premarital sex and the gay lifestyle” and instead of “projecting strength to those who would do evil around the world, they cut military budgets, disrespected our soldiers in uniform and burned our flag.” In response, “Americans decided to take their country back from those who sought to undermine it.”

This, too, is a heroic narrative, but it’s a heroism of defense. In this narrative it’s God and country that are sacred — hence the importance in conservative iconography of the Bible, the flag, the military and the founding fathers. But the subtext in this narrative is about moral order. For social conservatives, religion and the traditional family are so important in part because they foster self-control, create moral order and fend off chaos. (Think of Rick Santorum’s comment that birth control is bad because it’s “a license to do things in the sexual realm that is counter to how things are supposed to be.”) Liberals are the devil in this narrative because they want to destroy or subvert all sources of moral order.

Actually, there’s a second subtext in the Reagan narrative in which liberty is the sacred object. Circling around liberty would seem, on its face, to be more consistent with liberalism and its many liberation movements than with social conservatism. But here’s where narrative analysis really helps. Part of Reagan’s political genius was that he told a single story about America that rallied libertarians and social conservatives, who are otherwise strange bedfellows. He did this by presenting liberal activist government as the single devil that is eternally bent on destroying two different sets of sacred values — economic liberty and moral order. Only if all nonliberals unite into a coalition of tribes can this devil be defeated.

If you follow the sacredness, you can understand some of the weirdness of the last few months in politics. In January, the Obama administration announced that religiously affiliated hospitals and other institutions must offer health plans that provide free contraception to their members. It’s one thing for the government to insist that people have a right to buy a product that their employer abhors. But it’s a rather direct act of sacrilege (for many Christians) for the government to force religious institutions to pay for that product. The outraged reaction galvanized the Christian right and gave a lift to Rick Santorum’s campaign.

AROUND this time, bills were making their way through state legislatures requiring that women undergo a medically unnecessary ultrasound before they can have an abortion. It’s one thing for a state government to make abortions harder to get (as with a waiting period). But it’s a rather direct act of sacrilege (for nearly all liberals as well as libertarians) for a state to force a doctor to insert a probe into a woman’s vagina. The outraged reaction galvanized the secular left and gave a lift to President Obama.

This is why we’ve seen the sudden re-emergence of the older culture war — the one between the religious right and the secular left that raged for so many years before the financial crisis and the rise of the Tea Party. When sacred objects are threatened, we can expect a ferocious tribal response. The right perceives a “war on Christianity” and gears up for a holy war. The left perceives a “war on women” and gears up for, well, a holy war.

The timing could hardly be worse. America faces multiple threats and challenges, many of which will require each side to accept a “grand bargain” that imposes, at the very least, painful compromises on core economic values. But when your opponent is the devil, bargaining and compromise are themselves forms of sacrilege.

Jonathan Haidt is a professor of psychology at the University of Virginia and a visiting professor of business ethics at N.Y.U.’s Stern School of Business. Parts of this essay were excerpted from “The Righteous Mind: Why Good People Are Divided by Politics and Religion,” which was just released.

Why Some Countries Go Bust

By ADAM DAVIDSON

New York Times, March 13, 2012

By his own admission, Daron Acemoglu is a slightly pudgy and fairly nerdy guy with an unpronounceable last name. But when I mentioned that I was interviewing him to two econ buffs, they each gasped and said, “I love Daron Acemoglu,” as if I were talking about Keith Richards. The Turkish M.I.T. professor — who, right now, is about as hot as economists get — acquired his renown for serious advances in answering the single most important question in his profession, the same one that compelled Adam Smith to write “The Wealth of Nations”: why are some countries rich while others are poor?

Over the centuries, proposed answers have varied greatly. Smith declared that the difference between wealth and poverty resulted from the relative freedom of the markets; Thomas Malthus said poverty comes from overpopulation; and John Maynard Keynes claimed it was a byproduct of a lack of technocrats. (Of course, everyone knows that politicians love listening to wonky bureaucrats!) Jeffrey Sachs, one of the world’s most famous economists, asserts that poor soil, lack of navigable rivers and tropical diseases are, in part, to blame. Others point to culture, geography, climate, colonization and military might. The list goes on.

But through a series of legendary — and somewhat controversial — academic papers published over the past decade, Acemoglu has persuasively challenged many of the previous theories. (If poverty were primarily the result of geography, say, or an unfortunate history, how can we account for the successes of Botswana, Costa Rica or Thailand?) Now, in their new book, “Why Nations Fail,” Acemoglu and his collaborator, James Robinson, argue that the wealth of a country is most closely correlated with the degree to which the average person shares in the overall growth of its economy. It’s an idea that was first raised by Smith but was then largely ignored for centuries as economics became focused on theoretical models of ideal economies rather than the not-at-all-ideal problems of real nations.

Consider Acemoglu’s idea from the perspective of a poor farmer. In parts of modern sub-Saharan Africa, as was true in medieval Europe or the antebellum South, the people who work the fields lack any incentive to improve their yield because any surplus is taken by the wealthy elite. This mind-set changes only when farmers are given strong property rights and discover that they can profit from extra production. In 1978, China began allowing farmers to benefit from any surplus they produced. The decision, most economists agree, helped spark the country’s astounding growth.

According to Acemoglu’s thesis, when a nation’s institutions prevent the poor from profiting from their work, no amount of disease eradication, good economic advice or foreign aid seems to help. I observed this firsthand when I visited a group of Haitian mango farmers a few years ago. Each farmer had no more than one or two mango trees, even though their land lay along a river that could irrigate their fields and support hundreds of trees. So why didn’t they install irrigation pipes? Were they ignorant, indifferent? In fact, they were quite savvy and lived in a region teeming with well-intended foreign-aid programs. But these farmers also knew that nobody in their village had clear title to the land they farmed. If they suddenly grew a few hundred mango trees, it was likely that a well-connected member of the elite would show up and claim their land and its spoils. What was the point?

I encountered another side of Acemoglu’s thesis during what must have been one of history’s great natural economic experiments: post-Saddam Hussein Baghdad. On April 9, 2003, the day the city was captured, one of the world’s most tightly controlled economies suddenly became a free-for-all. Amid the chaos, many former state functionaries turned into entrepreneurs. Nearly every engineer from the ministry of housing, it seemed, had opened his own construction company. Satellite TVs, once illegal to all but a very small elite, were sold on every major street. Under Hussein, only one company (widely rumored to be monitored by the intelligence service) offered Internet access, and it was incredibly bad and expensive. After it was gone, there were so many new Internet companies that I had far more access options then than I do today in Brooklyn.

Yet the American authorities, who had not planned for this budding free market, all but destroyed it when they gave the bulk of new contracts to large companies outside the country. Often, these outsiders subcontracted to Iraqi firms with close ties to the state’s new political establishment. By the anniversary of the United States invasion, it was clear that economic success would again come from connections and corruption rather than talent and hard work. Today, Transparency International ranks Iraq as one of the most corrupt nations on earth. An Iraqi friend once told me that he had hoped we would teach the Iraqis how to be Americans. Instead, the Americans learned how to be Iraqi.

Acemoglu, Robinson and their collaborators did not come up with the idea that incentives matter, of course, nor the notion that politics play a role in economic development. Their great contribution has been a series of clever historical studies that persuasively argue that the cheesiest of slogans is actually correct: the true value of a nation is its people. If national institutions give even their poorest and least educated citizens some shot at improving their own lives — through property rights, a reliable judicial system or access to markets — those citizens will do what it takes to make themselves and their country richer. This suggests, among other things, that instead of supporting one-off programs promoting health or agricultural productivity, the international community should focus its aid efforts on deep political and economic change.

Perhaps just as interesting, “Why Nations Fail” also shows the effects of different economic and political systems over the centuries. The sections on ancient Rome and medieval Venice are particularly compelling, because they show how fairly open and prosperous societies can revert to closed and impoverished autocracies. It’s hard to read these sections without thinking about the present-day United States, where economic inequality has grown substantially over the past few decades. Is the 1 percent emerging as a wealth-stripping, poverty-inducing elite?

Well, maybe. Acemoglu and Robinson’s frequent collaborator Simon Johnson, the former chief economist at the International Monetary Fund, told me that financial firms have so thoroughly co-opted the political proc­ess that the American economy has become fundamentally unsound. “It’s bad and getting worse,” he told me. Barring some major shift in our political system, he suggested, the United States could be on its way to serious economic failure.

Charles Calomiris, an economist at Columbia University, is less worried. But it’s not because he thinks that banks haven’t co-opted our political system. “We’ve never had a good banking system,” he says. “What’s amazing about America is that we’ve been the most successful economy in the world while being crippled by political constraints on the quality of our banking system.” This has been going on since the 1700s, Calomiris says, and he doesn’t see any reason for the United States’ economy to stop growing anytime soon.

Acemoglu and Robinson are on the pessimistic side of optimism about the United States’ chances of a resurgence. Congress, they told me, is too heavily influenced by the wealthy, and the advent of super PACs has only given elites more power. Yet Acemoglu surprised me when he said he was encouraged by the rise of the Tea Party and Occupy Wall Street. While neither has an especially coherent or subtle economic agenda, both show that, however frustrated they might be, large numbers of Americans still believe they can influence the political process to improve their fortunes. Since the future of American economic health lies in its people, Acemoglu explained, as long as Americans believe they can influence the process, they will.

But, he quickly pointed out, what if Americans find their protests have no impact? What if the United States becomes a truly extractive nation, with violent repression of protest or — in some ways, worse — the grudging acquiescence of the beaten-down masses? While many Americans are frustrated by the divisive, often angry public debates over our economic future, we may only be in real trouble at the very moment that they shut up.

Adam Davidson is the co-founder of NPR’s Planet Money, a podcast, blog, and radio series heard on “Morning Edition,” “All Things Considered” and “This American Life.”

Physicians in Congress Committing Malpractice on Millions

Friday 9 March 2012

by: Dr. Brian Moench, Truthout | News Analysis

What would you think if your physician told you, “Keep smoking because quitting would kill tobacco and health care jobs.” Or, “Don’t take your high blood pressure medicine, you can’t afford it.” And, “Don’t lose weight, no one has proven obesity is bad for you.”

That’s exactly the quality of medical advice we are getting from the 18 Republican physicians currently serving in Congress. Some of the most well known are the father and son team of Rep. Ron Paul and Sen. Rand Paul, and Sen. Tom Coburn. Almost all of these physician/Congressmen have been key soldiers in the Republican war on the Environmental Protection Agency (EPA), calling it a “job killer,” pronouncing relevant health science “unproven,” claiming we “can’t afford” their regulations.

In the last ten years, over 2,000 scientific studies published in the mainstream medical literature have revealed that air pollution has much of the same physiologic and disease consequence as first- and second-hand cigarette smoke.(1, 2) Those studies show that just as there is no safe number of cigarettes a person can smoke, there is no safe level of air pollution a person can breathe. Even pollution at “background” levels still causes health consequences, including increased mortality rates.(3, 4)

Air pollution contributes to and/or exacerbates, virtually every lung disease known, in every age group, from newborns to the elderly. The connection is as solid as that between smoking and lung cancer; in fact, air pollution also causes lung cancer. But air pollution damages much more than the lungs. It causes a systemic low-grade arterial inflammation,(5) impairing and increasing the disease potential of virtually every organ system, especially the heart, lungs, brain and placenta. Heart attacks, strokes, sudden death, poor birth outcomes, higher infant mortality rates, autism, Alzheimer’s, diabetes and breast cancer are just some of the many diseases found to occur in significantly higher rates among people who breathe more air pollution. Even people who are otherwise healthy are harmed. Air pollution accelerates the aging process, increases the average person’s blood pressure and shortens life expectancy even if it causes no obvious symptoms.(6, 7, 8, 9, 10)

Particulate air pollution, the primary focus of EPA regulations, can travel from the lungs to the arteries and eventually penetrate any cell in the body. For example, the chemicals and heavy metals within particulate pollution can actually penetrate brain tissue, causing loss of intelligence and memory and learning impairment in children.(11, 12, 13, 14, 15, 16)

Pollution particles can even penetrate subcellular structures like the cell nucleus where the all-important chromosomes lie. Particulate air pollution can alter and damage chromosomes, especially serious if occurring during early embryonic development. By causing chromosomal dysfunction, air pollution can even impair the health of future generations.(17, 18, 19, 20, 21)

The nation’s premier pollution and health experts, the Clean Air Scientific Advisory Committee (CASAC) regularly review all new medical research and advise the EPA on updating the national air pollution standards. Every time the CASAC has made that review, they have called for making those standards more strict, as they are doing right now and have been since 2006.

Supporting the CASAC in calling for standards even stricter than what Republicans are bludgeoning the EPA for, is virtually every major medical and public health organization in the country, specifically, the American Medical Association, the American Thoracic Society, the American Lung Association, the American Academy of Pediatrics, the American College of Cardiology, the American Heart Association, the American Cancer Society, the American Public Health Association and the National Association of Local Boards of Health. Indeed, there is no reputable health group that disagrees with the CASAC’s recommendations.(22, 23) because they understand and accept new research, apparently unlike our physician/Congressmen.

Every study not funded by fossil fuel industries has shown economic and health benefits of controlling air pollution far exceeding the costs of implementing those controls, even if pollution levels are already low. In fact, the benefits average 30 times greater than the costs, and those benefits create jobs, not kill them.(24) That kind of rate of return on investment should be impressive, even to someone who works for Bain Capital. (By the way, someone should tell Mitt Romney, he could do a leveraged buy out of the EPA.)

Being on the front lines of patient care, in a specialty where the margins between life and death can be very thin, I’m reluctant to accuse other physicians of malpractice. However, it is obvious these lawmakers have let political fealty co-opt their medical judgment. Moreover, their malfeasance has the potential to sabotage the health of millions, not just a handful of their own patients. This is malpractice on a grand scale.

Footnotes:

1. Peters, A. “Air Quality and Cardiovascular Health: Smoke and Pollution Matter,” Circulation. 2009: 120:924-927

2. Eugenia E. Calle and Michael J. Thun C. Arden Pope, III, Richard T. Burnett, Daniel Krewski, Michael Jerrett, Yuanli Shi. Circulation. 2009; 120:941-948. “Cardiovascular Mortality and Exposure to Airbourne Fine Particulate Matter and Cigarette Smoke.”

3. Elliott CT, Copes R. “Burden of mortality due to ambient fine particulate air pollution.” (PM2.5) in interior and Northern BC. Can J Public Health. 2011 September-October;102 (5):390-3.

4. Peters, A, and Pope, CA III Editorial, Lancet. Vol 360, Oct 19, 2002.

5. American College of Cardiology.(2008, August 14) “Air Pollution Damages More Than Lungs: Heart And Blood Vessels Suffer Too.”

6. Urch B, Silverman F, Corey P, Brook J, Lukic K, Rajagopalan S, Brook R. “Acute Blood Pressure Responses in Healthy Adults During Controlled Air Pollution Exposures.” Environ Health Perspect. 2005 August; 113 (8): 1052–1055.

7. Sérgio Chiarelli P, Amador Pereira LA, Nascimento Saldiva PH, Ferreira Filho C, Bueno Garcia ML, Ferreira Braga AL, Conceição Martins L. “The association between air pollution and blood pressure in traffic controllers in Santo André, São Paulo, Brazil.” Environ Res. 2011 May 11. (Epub ahead of print.)

8. Brook RD, Shin HH, Bard RL, Burnett RT, Vette A, Croghan C, Thornburg J, Rodes C, Williams R. “Exploration of the rapid effects of personal fine particulate matter exposure on arterial hemodynamics and vascular function during the same day.” Environ Health Perspect. 2011 May;119 (5):688-94.

9. Adar SD, Klein R, Klein BE, Szpiro AA, Cotch MF, Wong TY, O’Neill MS, Shrager S, Barr RG, Siscovick DS, Daviglus ML, Sampson PD, Kaufman JD. “Air Pollution and the Microvasculature: A Cross-Sectional Assessment of In Vivo Retinal Images in the Population-Based Multi-Ethnic Study of Atherosclerosis (MESA)” PLoS Med. 2010 November 30;7 (11):e1000372.

10. Pope, CA III, Ezzate, M., Dockery, D. “Fine-Particulate Air Pollution and Life Expectancy in the United States.” NEJM. Vol. 360:376-386 January 22, 2009, Num. 4.

11. Calderon-Garciduenas, L. et al. (2002) “Air pollution and brain damage.” Toxicol. Pathol. 30, 373–389

12. Calderon-Garciduenas, L. et al. (2003) “DNA damage in nasal and brain tissues of canines exposed to air pollutants is associated with evidence of chronic brain inflammation and neurodegeneration.” Toxicol. Pathol. 31, 524–538 .

13. Mateen F, Brook R. “Air Pollution as an Emerging Global Risk Factor for Stroke,” JAMA. 2011;305 (12):1240-1241.doi:10.1001/jama.2011.352.

14. Morgan TE, Davis DA, Iwata N, Tanner JA, Snyder D, Ning Z, et al. 2011. “Glutamatergic Neurons in Rodent Models Respond to Nanoscale Particulate Urban Air Pollutants In Vivo and In Vitro.” Environ Health Perspect : doi:10.1289/ehp.1002973.

15. Gackière F, Saliba L, Baude A, Bosler O, Strube C. “Ozone inhalation activates stress-responsive regions of the central nervous system.” J Neurochem. 2011 April 6. doi: 10.1111/j.1471-4159.2011.07267.x. (Epub ahead of print.)

16. Calderón-Garcidueñas L, D’Angiulli A, Kulesza RJ, Torres-Jardón R, Osnaya N, Romero L, Keefe S, Herritt L, Brooks DM, Avila-Ramirez J, Delgado-Chávez R, Medina-Cortina H, González-González LO. “Air pollution is associated with brainstem auditory nuclei pathology and delayed brainstem auditory evoked potentials.” Int J Dev Neurosci. 2011 March 31. (Epub ahead of print.)

17. Bocskay K, Tang D, Orjuela M, et al. “Chromosomal Aberrations in Cord Blood Are Associated with Prenatal Exposure to Carcinogenic Polycyclic Aromatic Hydrocarbons.” Cancer Epidem Biomarkers and Prev. Vol. 14, 506-511, February 2005.

18. Perera F, Tang D, Tu Y, “Biomarkers in Maternal and Newborn Blood Indicate Heightened Fetal Susceptibility to Procarcinogenic DNA Damage.” Environ Health Persp Vol 112 Number 10 July 2004.

19. Pilsner JR, Hu H, Ettinger A, Sanchez BN, et al. “Influence of prenatal lead exposure on genomic methaylation of cord blood DNA.” Environ Health Persp, April 2009.

20. Baccarelli A. “Breathe deeply into your genes!: genetic variants and air pollution effects,” Am J Respir Crit Care Med. 2009 March 15;179 (6):431-2.

21. Baccarelli A, Wright RO, Bollati V, Tarantini L, Litonjua AA, Suh HH, Zanobetti A, Sparrow D, Vokonas PS, Schwartz J. “Rapid DNA methylation changes after exposure to traffic particles.” Am J Respir Crit Care Med. 2009 April 1; 179 (7):523-4.

22. Letter from the CASAC to EPA Administrator [4]Stephen L. Johnson, September 29, 2006.

23. Letter from 1,882 physicians and health care professionals to Congress [5], February 9, 2011.

24. EPA report [6] “The Benefits and Costs of the Clean Air Act: 1990 to 2020.”

Dr. Brian Moench is president of  Utah Physicians for a Healthy Environment and a member of the Union of Concerned Scientists.

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