Quotes of the day

Film people, actors, are puppets. We are silly. We are silly folk.--Christiane Kubrick

I am not remotely an expert in complexity theory, but for the past week I have been largely glued to my screen reading these comments, understanding some of them, and learning a lot of mathematics as I struggle to understand the others. It’s been exhilarating. Why is this momentous? In some ways, there’s nothing new about any of this. It’s not terribly uncommon for a serious looking paper to address a major outstanding problem, and it’s de rigeur for experts to comb through those papers, searching simultaneously for new paradigms, irreparable flaws, and salvageable insights. We call it peer review. But what’s new is that this played out in public, and that it took a week instead of the usual months or years, and that the dozens of conversations taking place all over the world were melded into one giant conversation where every idea was available for everyone to hear—and for everyone to shoot down. Many very smart people said very smart things that turned out to be wrong, and in the world before the Internet, they might have gone on believing those things for weeks or months. The Net made it very difficult to believe wrong things for more than an hour.--Steve Landsburg

The map is not the territory. The map — the set of axioms — is either consistent or it’s not. If it’s inconsistent, there’s no corresponding territory. If it’s consistent, there are many corresponding territories and the map can’t tell you which one you’re in.--Steve Landsburg

Unlike industrial policy, government provision of infrastructure and education does not override consumer choice in order to promote favored industries. Unlike industrial policy, the provision of public goods does not protect firms or industries from competition. Unlike industrial policy, the provision of public goods is not part of a government plan to achieve specific, foreseeable, and targeted patterns of investment and employment. The fact that government supplies a blank canvas does not imply that it is an artist capable of painting a pretty picture.--Don Boudreaux

[Eckhard] Höffner has researched that early heyday of printed material in Germany and reached a surprising conclusion -- unlike neighboring England and France, Germany experienced an unparalleled explosion of knowledge in the 19th century. German authors during this period wrote ceaselessly. Around 14,000 new publications appeared in a single year in 1843. Measured against population numbers at the time, this reaches nearly today's level. And although novels were published as well, the majority of the works were academic papers. The situation in England was very different. "For the period of the Enlightenment and bourgeois emancipation, we see deplorable progress in Great Britain," Höffner states. Indeed, only 1,000 new works appeared annually in England at that time -- 10 times fewer than in Germany -- and this was not without consequences. Höffner believes it was the chronically weak book market that caused England, the colonial power, to fritter away its head start within the span of a century, while the underdeveloped agrarian state of Germany caught up rapidly, becoming an equally developed industrial nation by 1900. Even more startling is the factor Höffner believes caused this development -- in his view, it was none other than copyright law, which was established early in Great Britain, in 1710, that crippled the world of knowledge in the United Kingdom. Germany, on the other hand, didn't bother with the concept of copyright for a long time. Prussia, then by far Germany's biggest state, introduced a copyright law in 1837, but Germany's continued division into small states meant that it was hardly possible to enforce the law throughout the empire.--Frank Thadeusz

The aberration in Japan’s recession was not the behavior of growth, which is best seen as a series of recoveries aborted by policy errors – a sawtooth, not a flat line. Rather, the surprise was the persistent steadiness of limited deflation, even after recovery took place. This strikes me as a more fundamental challenge to our basic macroeconomic understanding than is commonly recognized, and we need more research on it. The UK and US economies are at low risk of turning Japanese in the sense of having recurrent recessions through macroeconomic policy mistakes - but deflation itself cannot be ruled out. The UK worryingly combines a couple of financial parallels to Japan with far less room for fiscal action to compensate for them than Japan had. More active investors and greater openness in the UK than in Japan may be able to. One major problem which Japan did not face during its Great Recession was poor prospects for external demand and the need to reallocate productive resources across export sectors. The UK, US, and many Euro Area economies do now face this challenge simultaneously, which may limit the pace of, and our share in, the global recovery.--Adam Posen

In stressed times after a bubble (eg, the 'after' line above), the private sector tries to run a big surplus as it pays down debt. This causes recessions, which can be mitigated if not eliminated via countercyclical budget deficits by the public sector. This argument would be tenable if it were 1936 and people never tried it, but it has been tried over and over and if a government could spend itself to prosperity and stability, a couple such countries would demonstrate this. Instead, we have the examples of the contrary, where fiscal restraint and modest automatic stabilizers were consistent with the wealthier countries post WW-II. But what I love is the way Krugman totally ignores the heterogeneity of investment and employment, and simply thinks that people and companies are saving 'too much', and so anti-savings by the government would offset this, leading to full-employment bliss. That kind of thinking is profoundly misleading.--Eric Falkenstein

To get the housing finance system out of intensive care, short-term policies need to be implemented that promote deleveraging. Perhaps some of the excess supply of foreclosed properties should be sold to buyers who agree to put 40% down and use the properties as rentals. Josh Rosner, managing director of the research firm Graham Fisher, has suggested that homeowners who voluntarily pay down a portion of the principal on their underwater mortgage receive a tax credit also applied to their mortgage principal. In return, they would forgo future tax deductions of their mortgage interest payments. While the road to housing hell may have been paved by the government, the road back will be built by the private sector.--Edward Pinto

Chinese Exclusion stayed in effect de facto until 1965, when the racist provisions of US immigration law were removed, liberalizing immigration by all non-European groups. Only 5 years later in 1970, Chinatown had already expanded greatly. Italians and Jews had already left for middle-class and upper-class neighborhoods elsewhere. ... Today Chinatown is one of Manhattan’s most thriving neighborhoods. Other East Asian immigrants also congregate there. The ladder out of poverty continues for today’s immigrants, following the Italians and Eastern Europeans, who in turn had followed the Germans and Irish.--William Easterly

Maybe if you don't talk to me, I can help you lose your job.--Spencer Rich, Washington Post reporter