Summers: “better than even” chance of recession in next 3 years

Larry Summers is concerned about the stability of the international economic, financial, and political systems.

While high equity prices and low volatility may seem surprising, they likely reflect the limited extent to which stock-market outcomes and geopolitical events are correlated. For example, Japan’s attack on Pearl Harbor, the assassination of President John F. Kennedy, and the 9/11 terrorist attacks had no sustained impact on the economy. The largest stock-market movements, such as the 1987 crash, have typically occurred on days when there was no major external news…

Financial markets are widely cited, including by US President Donald Trump, as providing comfort in the current moment. But a relapse into financial crisis would likely have catastrophic political consequences, sweeping into power even more toxic populist nationalists. In such a scenario, the center will not hold…

But recessions are never predicted successfully, even six months in advance. The current expansion in the US has gone on for a long time, and the risk of policy mistakes there is very real, owing to highly problematic economic leadership in the Trump administration. I would put the annual probability of recession in the coming years at 20-25%. So the odds are better than even that the US economy will fall into recession in the next three years.

He goes on to say that recession is not even what he is most worried about, but a downward spiral where people lose faith in their governments and elect people who will actually act to destroy the effectiveness of governments. In this environment, autocrats can seize control by rallying the population against internal and external enemies, whether real but exaggerated, or completely fictional.

BIODIVERSITY AND ECOSYSTEM SERVICES IN URBAN GREEN INFRASTRUCTURE PLANNING

I like this article from Italy a lot because it represents a practical approach to focusing on ecosystem services in urban areas.

BIODIVERSITY AND ECOSYSTEM SERVICES IN URBAN GREEN INFRASTRUCTURE PLANNING: A CASE STUDY FROM THE METROPOLITAN AREA OF ROME (ITALY)

Target 2 of the European Biodiversity Strategy promotes the maintenance and enhancement of ecosystem services < (ES) as well as the restoration of at least 15% of degraded ecosystems by creating green infrastructure (GI). The purpose of the this research is to present a GI proposal that combines the delivery of regulating services with the restoration and ecological reconnection of urban forests and trees in a densely urbanised context.

The project area covers about 3 000 ha in the urban sector of the metropolitan area of Rome and the GI components consist of 533 ha of areal green spaces and of more than 500 km of road verges. Planned interventions include forest restoration and tree plantations, with a varying service supply according to type and condition of the different components. Potential natural vegetation (PNV) models and dispersal potential of representative forest species, together with structural and functional vegetation models for the enhancement of air pollutants removal, guided the selection of the species to be promoted and of the planting pattern. Environmental benefits of the proposal include more than 30 ha of restored urban forests, about 15 000 planted individuals of native oaks, a sevenfold improvement in ecological connectivity and halved isolation between green spaces. On the other hand, the expected socio-economic benefits include almost 300 000 potential beneficiaries of the improved air quality and avoided costs for damages to human health that range between 40 700 and 130 200 EUR per year.

Notwithstanding their preliminary character, these estimates allowed the proposal to highlight the relationship between GI and public health. Moreover, they showed the economic and social effectiveness of nature-based solutions in comparison with further development of grey infrastructure. These results promote the definition of a national GI strategy in Italy.

December 2017 in Review

Most frightening stories:

  • The U.S. has lost ground relative to its peers on road deaths, and is now well below average. I noted that something similar has happened with respect to health care costs, life expectancy, infant mortality, education, drug addiction and infrastructure. Maybe a realistic goal would be to make America average again.
  • A lot of people would probably agree that the United States government is becoming increasingly dysfunctional, but I don’t think many would question the long-term stability of our form of government itself. Maybe we should start to do that. The Consumer Financial Protection Bureau has been doing a decent job of protecting consumers and reducing the risk of another financial crisis. The person in charge of it now was put there specifically to ruin it. Something similar may be about to happen at the Census Bureau. A U.S. Constitutional Convention is actually a possibility, and might threaten the stability of the nation.
  • Daniel Ellsberg says we are very, very lucky to have avoided nuclear war so far. There are some tepid ideas for trimming the U.S. nuclear arsenal, and yet it is being upgraded and expanded as we speak. The North Korea situation is not getting better. Trump may be playing to religious fundamentalists who actually are looking forward to the Apocalypse.

Most hopeful stories:

  • Exercise may be even better for your brain than it is for your body, and exercising your body may be even better for your brain than exercising your brain itself.
  • Macroeconomic modeling is improving. So, just to pick a random example, it might be possible to predict the effects on a change in tax policy on the economy. Now all we need is politicians who are responsive to logic and evidence, and we could accomplish something. At least a few economists think the imperfect tax plan the U.S. Congress just passed might actually stimulate business capital investment enough to move the dial on productivity. The deliberate defunding of health care included in the bill is going to hurt people, but maybe not all that dramatically.
  • Moody’s introduced a new methodology for assessing climate risk in municipal bonds.

Most interesting stories, that were not particularly frightening or hopeful, or perhaps were a mixture of both:

  • There are life forms surviving in space right now, most likely of Earth origin. I wondered if maybe we should purposely contaminate other planets with them.
  • Microsoft is trying to one-up Google Scholar, which is good for researchers. More computing firepower is being focused on making sense of all the scientific papers out there.
  • Futuristic technologies keep coming along. Something vaguely like the “liquid metal” from Terminator 2 is being used for experimental aircraft parts. Vital signs might be monitored soon using a simple RFID device. A tiny electric shock of just the right size to just the right part of your brain might cure you of bad habits. And Magic Leap may finally release…something or other…in 2018.

The Best of the Best of 2017

Here’s a little feature I call the Best of the Best of. Basically I’ll link and comment on a few “2017 in review” articles I happen to come across. I’ll let all this rattle around in my brain and do a “best of” my own blog in January.

  • Worst cyberattacks of 2017 (Axios): Cyberattacks are bad, of course. This is an article about the most successfully bad ones, including hospitals, pacemakers, and Equifax. The article suggests, without providing any evidence at least in this short article, that some of these might be government hackers in North Korea, Russia, or China gathering information and probing U.S. vulnerabilities prior to a larger attack in the future.
  • The year in architecture (curbed.com). Not that I particularly care about architectural style, but the architectural press covers some planning and sustainability topics that I find interesting, A few highlights for me include Hurricane Harvey coverage, what Google Citylabs is up to in Toronto, Blade Runner 2049, a new energy-efficient Cornell campus on Roosevelt Island in New York City, timber-framed skyscrapers, and a Philadelphia rowhouse because Philadelphia rowhouses are where all the cool kids live and you don’t know what you’re missing until you buy one.
  • And for completeness, the year in landscape architecture (Huffington Post). A highlight for me was the reopening of the big fountain garden at Longwood Gardens outside Philadelphia. I have fond memories of visiting that garden as a kid and got a chance to see it again with my own children shortly after it reopened this year. The rest of the article is a bunch of park designs and book reviews including some touching on urban ecology.
  • Planetizen urban planning blog’s most popular posts of 2017: a few that caught my eye are a Microsoft smart city development in Arizona, Seattle discontinuing its bikeshare program, “bikelash” from angry drivers, skepticism about self-driving cars, and the never-ending debates about density, gentrification, and New Urbanism. They also have Top 10 lists of planning-related books, websites, and apps. One new website that caught my attention is called “Treepedia”.
  • 2017 MacArthur Fellows: I hadn’t heard of any individuals, but it can be interesting to see the professions and trending specialties. I count 10 artists/writers, 7 social scientists/activists (sorry to lump you guys together), 4 computer/physical scientists/mathematicians, 1 journalist, and 2 landscape architects/planners
  • Stuff that happened in the Middle East in 2017 (Lawfare): Saudi Arabia initiated some social and economic reforms, but also an internal crackdown on political rivals, aggressive diplomatic attacks on some of its neighbors and a vicious, ongoing military attack on Yemen which the U.S. is participating in. The war in Syria is apparently winding down with its government hanging on. ISIS was decisively defeated by the Iraqi and U.S. armies and no longer controls territory politically, but has “gone underground” to plot and inspire terrorist attacks around the world. The U.S. is trying to back out of the Iran nuclear deal. Kurdistan tried to declare independence and the rest of the world basically ignored it. The U.S. has also torpedoed the Israeli-Palestinian peace process and gotten itself condemned by the great bulk of the United Nations. But good news: the U.S. still leads a “coalition of the willing” including “Israel, Guatemala, Honduras, the Marshall Islands, Micronesia, Nauru, Palau and Togo”, at least until several of those blink out of existence from sea level rise (a slight irony there?).
  • The year in hate crimes (ProPublica): Somewhat unsurprisingly, Islamophobic and anti-Semitic incidents were both up in the U.S.
  • Best political long-form articles of 2017 (Longreads.com): This is a seriously deep dive into resurgent white nationalism in Europe and the U.S. If you take the plunge be sure to come back up for air.
  • Best science and technology long-form articles of 2017 (Longreads.com): The most interesting one here is on artificial intelligence augmenting human intelligence.
  • Jealousy List 2017 (Bloomberg): This is a list of articles Bloomberg writers liked in other publications. There is way too much to read here. A few interesting ones are the decline of public research universities, James Burnham’s “managerial elite”, what is going on at Snopes.com, even more white nationalism, the risk of nuclear war, Elizabeth Warren, chemical industry foxes guarding the toxic hen house at the EPA, the complete dysfunction and failure that is the U.S. health care system, the Bin Laden raid, and octopuses.
  • The Most-Read Business Stories of 2017 (Wired): A lot of these have to do with the effect of automation on jobs. Also, Amazon’s “nomadic retiree army”, guaranteed basic income, and China’s social scoring plan.
  • Best of Wired Science (Wired): Wired Science is awesome. I could spend 2018 just reading these articles from 2017. The most popular commercial species of banana is so inbred it is in serious trouble. (But, one thing I learned when I lived, worked, and traveled in Asia for awhile is that there is a whole universe of delicious bananas out there most of us have never tried. Some have seeds, don’t ship well or don’t keep well, and therefore are not commercially ideal, but are actually quite delicious.) Meat allergies might be caused by a tick. Life-extension pills, fake meat, and robot friends might all become real things.
  • 2017’s Biggest Conspiracy Theories (Snopes.com): Maybe these really were big, but I hadn’t heard of most of them. A few things I didn’t know is that this year’s killer hurricanes either were real and created by the government, or else they were fictitious and created by the government. The survivors of the Las Vegas shooting are being hunted down and murdered. Bitcoin is a creation of an evil artificial intelligence. And Obama is running a shadow government. Now, I don’t automatically discount all conspiracy theories. I figure that for every 100 conspiracy theories, one or two are probably true, so it’s good to keep an open mind, review the facts, and then reject about 99% of them.
  • Wired most-read opinion pieces (Wired): A few interesting ones are about “permanent” drought in California, the idea that a state government could just pull the plug on a private corporation like Equifax, playing the odds in sports, and criminal sentencing using algorithms.
  • Top economics commentary from Project Syndicate: Some top economists wrote about everything from why the U.S. economy, stock market, and/or dollar could be headed for a fall, to the collapses of Puerto Rico and Venezuela, to recognizing the need to compensate globalization’s losers.

Big-C and Little-C Consciousness

This article in KurzweilAI explains the competing “Big C” and “Little C” theories of consciousness.

Another viewpoint on consciousness comes from quantum theory, which is the deepest theory of physics. According to the orthodox Copenhagen Interpretation, consciousness and the physical world are complementary aspects of the same reality. When a person observes, or experiments on, some aspect of the physical world, that person’s conscious interaction causes discernible change. Since it takes consciousness as a given and no attempt is made to derive it from physics, the Copenhagen Interpretation may be called the “big-C” view of consciousness, where it is a thing that exists by itself – although it requires brains to become real. This view was popular with the pioneers of quantum theory such as Niels Bohr, Werner Heisenberg and Erwin Schrödinger.

The interaction between consciousness and matter leads to paradoxes that remain unresolved after 80 years of debate. A well-known example of this is the paradox of Schrödinger’s cat, in which a cat is placed in a situation that results in it being equally likely to survive or die – and the act of observation itself is what makes the outcome certain.

The opposing view is that consciousness emerges from biology, just as biology itself emerges from chemistry which, in turn, emerges from physics. We call this less expansive concept of consciousness “little-C.” It agrees with the neuroscientists’ view that the processes of the mind are identical to states and processes of the brain. It also agrees with a more recent interpretation of quantum theory motivated by an attempt to rid it of paradoxes, the Many Worlds Interpretation, in which observers are a part of the mathematics of physics.

what’s new with Magic Leap?

Actually, nobody knows what is new with Magic Leap. But there is supposed to be something new in 2018.

 at long last, Magic Leap has unveiled a prototype and will make its headset available with developer tools in 2018. The goggles, dubbed the Magic Leap One, come with a controller and battery pack the size of my palm, and have a steampunk vibe. They’re sleek, with bug-eyed lenses, and a Rolling Stone preview suggests they’ll be expensive. Truthfully, there’s not much more information available. Developers haven’t tried them, so it’s impossible to compare them directly to other available prototypes. But what’s distinctive about these glasses is that they exist at all—that Magic Leap has finally come forth with evidence that its technology, which until now has only been seen by those of us who have signed lengthy and complicated nondisclosure agreements, will have form.

Samantha Bee takes on the Apocalypse

I’m not a big Samantha Bee fan. I find her un-funny and would rather get my news elsewhere in a more serious form. It also makes me uncomfortable that she is essentially making fun of people’s religious beliefs here, even though yes they are kind of ridiculous on their face to those of us who don’t share them. You need to try to understand where people are coming from before you have any chance if changing their minds or at least staying well out of their way. On that note though, it is interesting watching this clip just to see some Christian fundamentalists talk about their beliefs in their own words. That, and the one laugh-out-loud-funny moment that kind of makes the point nicely that Trump is not part of any moral majority, religious or otherwise.

the tax plan and the mandate

I assumed that the end of the “individual mandate” would seriously undermine funding for Obamacare, and in fact that is exactly what Trump is claiming. But Politifact says we all have that wrong. In fact, those penalties cover only about 3% of the cost of the Affordable Care Act. The main point of the penalty was always a psychological incentive for people to go to the exchanges and find out if they qualified for free or subsidized insurance. People wanted to avoid that penalty even if avoiding it meant they pay more for insurance than they would have paid for the penalty. Not only that, but people who qualify for Medicaid, which is free, have been more likely to find out they qualify for Medicaid because they go to the exchanges after wrongly thinking they are subject to the penalty. So it was somewhat of a psychological trick all along rather than a serious funding mechanism. This doesn’t mean that removing it will have only a 3% affect on premiums for the subsidized private plans – the effect may work in reverse, with more people never going to the exchanges and some not realizing they qualify for free Medicaid benefits. The CBO guesstimate is a 10% increase in premiums as a result of this effect. It’s still going to hurt the working class who need health insurance the most and it’s still immoral. The really immoral part is that as U.S. health care costs continue to spiral out of control in both the public and private sectors, our immoral dishonest politicians are going to point to Obamacare as the cause, and our uninformed citizens are going to believe them.

U.S. life expectancy down again

The U.S. Centers for Disease Control has released statistics on life expectancy and causes of death for 2016. Some interesting findings:

  • Overall average life expectancy fell by 0.1 year, from 78.7 to 78.6 years.
  • The average masks the finding that for women, life expectancy held steady at 81.1 years while for men, it decreased by 0.2 years from 76.3 to 76.1 years.
  • Deaths from disease were down in almost every category. The increases come from “unintentional injury” and suicide. Unintentional injury sounds like car accidents and falling off a ladder, and it does include those things. But dig a little bit and it includes “poisoning”, and poisoning in turn includes drug overdose.

The Guardian explains that life expectancy has fallen two years in a row and how unusual that is:

Drug overdoses killed 63,600 Americans in 2016, an increase of 21% over the previous year, researchers at the National Center for Health Statistics found.

Americans can now expect to live 78.6 years, a decrease of 0.1 years. The US last experienced two years’ decline in a row in 1963, during the height of the tobacco epidemic and amid a wave of flu.

“We do occasionally see a one-year dip, even that doesn’t happen that often, but two years in a row is quite striking,” said Robert Anderson, chief of the mortality statistics branch with the National Center for Health Statistics. “And the key driver of that is the increase in drug overdose mortality.”

The article goes on to explain that the last time we saw three years of decline was during the Spanish flu epidemic 100 years ago.

Comparing any two years could easily be a statistical blip, as any climate science denier could tell you. But it seems clear that over time the U.S. is losing ground to its peers in the developed world. The solution our elected politicians have identified, of course, is to take away health care and mental health coverage from the working class.

Michael Boskin and the golden rule

A few serious economists, like Michael Boskin at Stanford, are defending the Republican tax plan. Basically, the argument is that the economic growth benefits of stimulating corporate investment in “equipment” outweighs the outright bribery of wealthy campaign donors.

Summers’s own research results dramatically drive home that point. Using data from a variety of countries and time periods, some as short as five years, he and Brad DeLong of the University of California, Berkeley, (who also opposes the current tax bill) have made the strongest case I know that equipment investment can have a large impact on GDP growth. Moreover, the effect they estimate is much larger than in the conventional models used in most studies, including those relied on by government revenue scorers.

“The analysis suggests a strong and causal relationship between equipment investment and economic growth,” according to Summers and DeLong. They concluded that, “an increase of three or four percentage points in the share of GDP devoted to equipment investment is associated with an increase in GDP per worker of one percent per year.” So, to achieve the 0.3% increase in annual GDP growth that is now being debated, equipment investment would need to rise by 1% of GDP per year, sizeable to be sure, but well within the range of historical experience.

Summers and DeLong also calculate that the social returns from equipment investment are far larger than private returns. Thus, they concluded that “a strong case seems to exist for making sure economic policy does not penalize, and in fact, rewards, investors in equipment”; and that “measures that reduce the tax burden on new equipment investment are likely to be especially potent in maximizing the equipment investment engendered per dollar of government revenue forgone.” Finally, they noted that, “policies with an anti-equipment bias include tax rules that subsidize assets that can easily be levered … [and] pieces of equipment are frequently more difficult to use as collateral for debt than are investments in structures.”

This fits with the “golden rule level of capital” you learn about in economics 101, where “capital” is the “plants and equipment” mentioned above. If as a society you are investing too little in capital (and you have to invest just to hold it steady as it wears out, let alone increase it) your rate of growth is lower than it could be. Deficit spending to increase capital is a sort of free lunch in this case, because growth will offset the expenditures. It is not too hard to imagine this sort of logic extending to investments in research and development, education, and public infrastructure. (By the way, if you really care about economic growth, WHERE IS OUR TRILLION DOLLAR INFRASTRUCTURE BILL YOU LYING SONS OF BITCHES!)

Maybe reducing the corporate tax rate in the U.S. really is a good, efficient policy that will boost growth. My questions are first, how do we know the corporate tax cut will be invested in capital rather than just pocketed? Second, are the lost tax revenues hurting investments in education and infrastructure which could be equally or more beneficial? Third, how can the Republicans torpedo the health care system that was finally starting to help the working class and small business owners, and still sleep at night? It’s hypocritical and immoral. And finally, how can we just accept the rot of institutionalized corruption where politicians are elected by dollars rather than votes, when other advanced countries (a club we may not belong too much longer) don’t do that?