A Downward Spiral? Economics Made Too Simple by STUART KAUFFMAN

A Downward Spiral? Economics Made Too Simple by STUART KAUFFMAN



Categories: Science and Policy

09:23 am

July 25, 2011


When asked, the great mathematician John von Neumann intuited that money was

somehow related to physical energy.

The intuition has rested there. I believe von Neumann was on the right track and it

probably bears on our current economic mess.

In physics, energy is defined as "the capacity to cause change." The root of this in

physics lies in Newton's three laws of motion.

The first law, we recall, states that a body in motion continues in straight-line motion

at a constant velocity. Newton rests this on the concept of inertia, from Galileo.

Technically, "velocity" includes speed and direction of motion.

The second law of motion is central to us: Any change in straight line motion at a

constant velocity requires an outside force which changes, or "accelerates" that

motion. The famous equation is F = MA. Force equals mass times acceleration,

where acceleration is the rate of change, positive or negative of the speed of motion,

or the direction of motion.

The third law will not concern us: For every action there is an equal and opposite

reaction.

13.7: Cosmos And Culture

Sandra Mu/Getty Images

Cash money

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It is from the second law which defines force as that which "changes" motion, that we

get with some manipulations, an expression for energy E = 1/2MV squared.

Fine. Some time ago a group of friends including myself and Mike Brown, former

CFO of Microsoft and Chairman of NASDAQ were wondering how von Neumann

could be right. We realized we needed an "Economic First Law of Motion." But none

exists in the text books. So we invented one: It starts with "Trade or die."

Indeed, Mike had spearheaded an effort to build our proud agent-based "Partecon"

model with agents and a set of goods. Agents had to trade within a given period or

die.

Is this "trade or die" rule sensible? Yes. (It is the economic analogue of "inertia" in

fact.)

It is 50,000 years ago. I have caught a rabbit today, you have caught nothing today.

"I'll give you half my rabbit today if you'll give me an equal weight of what you catch

in the next while," I offer you. You accept. Note that credit has just been created, for

you owe me a share of whatever you catch in the next while, say a month.

Then, 50,000 years ago, with food scarce and problematic, we trade or die. If there

are several goods and hunting and gathering, we hunt, gather (i.e. produce food) and

trade or die. Sometimes we trade for what we like more but do not have, traded for

what we have too much of, which is the economist's advantages of trade and

Edgeworth box.

So we have a first law of economic motion: Trade or Die, within some bounded

period is the roughly conserved average economic inertia. Then that first law states:

In the absence of outside forces, the total rate of trade in the clan will be, on average,

constant — like Newton's first law. Note clan GDP is constant.

Now let salt emerge as a favored good we all want and use as money to facilitate

trade among many parties with diverse goods and preferences.

Now let paper money emerge. The Chinese were the first to invent it, and the

emperor, it seems, entranced, printed vast amounts and induced fantastic, ruinous

inflation.

Which brings us to the "money supply." In a simplest, steady state economic theory,

if the money supply suddenly doubles, more money in our hands chases the same

number of goods, so prices double. If this price doubling were to happen in an

instant, the average rate of trade remains constant. The Economic First Law would

hold.

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But the steady state economic theory is wrong. Price changes lag a change in money

supply. Suppose instead a slow, steady increase in the money supply. What will

really happen in this case is that prices will indeed rise, but with a lag, say of eight

months or so.

Then, given a slowly increasing money supply and a lag in price rises, we really do

have more money per good at their current prices, even as money supply continues

to slowly increase.

So what happens? We really do purchase more goods and produce more goods to

match. In short, the total average rate of trades increases, and increases steadily if

the money supply continues to increase and prices continue to lag.

We have our second economic law of motion: An increasing money supply and

lagging prices increases (positively accelerates) the average rate of trade. The

economy grows, clan GDP grows and there is slow inflation. The increasing money

supply and lagging price increases is the analogue of F = MA, an economic force

acting to accelerate the First economic law of motion of constant rate of trade. The

appropriate integral of this force will be the analogue of economic energy added to

the economy.

But conversely, and critically, if money supply gradually decreases and price drops

lag, we really have less money per good and so purchase less and produce less. Trade

slows, or decelerates. In short, the "velocity of money" slows, GDP drops and

economic energy is drained from the economy.

Then what has driven so much growth in the First World since WWII? In some part,

there has been a global fluctuating increase in debt, from credit card debt, to

mortgage debt, to sovereign debt. This has slowly increased the money supply with

lagging price increases, and so driven an increase of trade, i.e. GDP growth.

I suspect, with most of us, that the debt rubber band is very stretched. We have only

to look at Greece, Ireland, Spain, Portugal, Italy and our own mushrooming debt.

At some point, say now, you do not repay my half-rabbit in a month but in five years.

I'm no longer willing to extend credit to you.

We may be there now. A credit bubble may be about to start a long contraction with

price drops lagging, sapping economic energy from our First World economy in a

long downward spiral.

This world is not this simple. I'm sure von Neumann would smile, even if he liked

this version of money as economic energy. But I doubt he would think the above is

entirely wrong.

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The GOP’s fuzzy math By Matt Miller

The GOP’s fuzzy math By Matt Miller, Wednesday, July 20, 8:40 AM

It’s one thing for a political party to lose its moral bearings – after all, community values evolve, and large swaths of people and their elected representatives can end up on the wrong side of history on such questions as slavery, suffrage, and civil rights. But when a party loses its mathematical bearings – well, that’s a little shocking.



Yet that’s what’s happened to the Republican Party. The debt ceiling endgame has exposed the denial gripping the GOP in the face of the inevitable loss of “lower taxes” as the core of the party’s identity. You can feel the Republicans’ pain; tax cuts have been the party’s defining issue since Ronald Reagan rode them to power in 1980. But in an aging America, the numbers no longer work, and Republicans have failed to develop a new conservative vision to replace their fading mantra.



The “cap, cut and balance” plan passed by the House Tuesday night captures Republican denial perfectly. The plan would cap federal spending at 19.9 percent of GDP by 2018, with the goal of lowering it to18 percent over time. Similar caps have been endorsed by most of the GOP’s presidential candidates.



You’d never know from listening to Republicans that these goals are mathematically and politically unattainable.



But they are. Why? If there’s one fact you need to emblazon in your mind to make sense of the current debate, it is that Ronald Reagan ran the federal government at 22 percent of GDP back when our population was much younger. (Under President Obama, the extraordinary measures enacted to fight the recession – plus a collapse in the denominator, GDP -- have boosted spending to around 24 percent, while revenue has dropped to 15 percent from its 18-19 percent longtime average).



It is simply not plausible to argue that as we double the number of seniors on Social Security and Medicare, Uncle Sam will be able to operate at spending levels 10 to 20 percent below those over which America’s modern conservative icon presided. (Though, as my colleague Dana Milbank notes, Reagan agreed to raise taxes 11 times.) Today there’s no question: Taxes must rise.



Republican “thinking” about these facts is telling. According to the Wall Street Journal, House leaders picked 19.9 percent as their cap “because it is in line with the average spending level over the last thirty years.”



Well, sorry, GOP: The average spending levels of the last 30 years are irrelevant because we weren’t retiring 76 million baby boomers over the last 30 years. And decades ago per capita health costs for seniors were far smaller than they are today.



Let me pause so there’s no caricaturing of these views as belonging to some “tax and spend liberal.” I’ve advocated more “conservative” changes to Social Security than Paul Ryan did in his budget or his prior “roadmap.” I’ve urged progressives to realize that if we don’t slow Medicare’s outsized growth, there will be no money left for poor children, infrastructure, or R&D. And I’ve said we need to learn from countries like Singapore that get outstanding results in health care while spending a fraction of what we spend. So count me as a longtime entitlement reformer who has the arrows from my friends on the left to prove it.



Here’s the point: Even if we enacted the platonic ideal of sane entitlement reform, and trimmed defense (as we need to), Republican budget math still doesn’t come close to adding up. Instead, as my colleagues at the Center for American Progress have shown, shrinking spending to sub-Reagan levels while retiring the boomers would involve dramatic cuts in everything else Americans think of as government – from national parks to NASA to the FBI to cancer research to student loans.



So why does the GOP pretend otherwise? Because acknowledging mathematical reality is too politically painful. Because uttering this simple phrase – “to accommodate the retirement of the baby boomers, taxes will need to rise” – is forbidden by official Republican doctrine.



Because official Republican doctrine has banned honest math.



Aversion to honest math explains why the Ryan budget embraced by the GOP doesn’t balance the budget — even after Medicare changes that may prove fatal to the party -- until the 2030s and racks up at least $14 trillion in debt between now and then.



That’s because the Ryan budget cuts taxes. Balanced budget math in an aging America doesn’t work without higher taxes.



This doesn’t mean we shouldn’t cut taxes in the near-term to goose the economy. But when it comes to a long-term fiscal fix, the GOP’s math anxiety has produced months of debt ceiling charades instead of framing the debate we really need, which is this: Once the economy has more fully recovered, how do we lift taxes to fund the boomers’ retirement in ways least harmful to economic growth?



My own view is that this means slashing payroll taxes and corporate income taxes, while more than offsetting those tax cuts with higher taxes on consumption and dirty energy. But we can’t even get to this conversation until Republicans relinquish the fantasy that we can keep cutting overall taxes as America ages.



At bottom, this fantasy masks fear. Republicans’ refusal to let go of the old time religion shows how little work the party has done to craft an agenda equal to America’s current challenges. The party has abandoned problem-solving for brand preservation. If tax cuts aren’t our defining issue, Republican pols ask themselves, what distinguishes us from Democrats? Why should voters choose us?



Maybe the Gang of Six can end the GOP’s war on math, but I’m skeptical. For now, if it’s a choice between defying math and staring into this policy and political abyss, Republicans choose defiance.

July 11, 2011

Koolhaas, Delirious in Beijing By NICOLAI OUROUSSOFF

BEIJING — Aside from the new World Trade Center, it’s hard to think of a more contentious architectural project in the last few years than the CCTV building, the headquarters of China Central Television here.
After Rem Koolhaas, the project’s architect — along with his former Beijing partner, Ole Scheeren — unveiled the design in 2003 he was pilloried by Western journalists for glorifying a propaganda organ of the Chinese government. Several years later a fire at the site nearly burned down a neighboring building, also designed by Mr. Koolhaas, landing the director of the project and 19 others in prison for negligence and significantly delaying construction.
And then there’s something about the building’s appearance that seems to unsettle people. Just when things got back on track after the fire, a Chinese critic published an article saying that the building’s contorted form, which frames an enormous void at its center, was modeled on a pornographic image of a naked woman on her hands and knees. The piece ignited a storm of negative press, forcing Mr. Koolhaas to issue a denial.
Yet for all that, the CCTV headquarters may be the greatest work of architecture built in this century. Mr. Koolhaas, of the Office for Metropolitan Architecture, has always been interested in making buildings that expose the conflicting energies at work in society, and the CCTV building is the ultimate expression of that aim, beginning with the slippery symbolism of its exterior. At moments monumental and combative, at others strangely elusive, almost retiring, it is one of the most beguiling and powerful works I’ve seen in a lifetime of looking at architecture.
What grabs the imagination as much as anything is the vision the building offers of this particular period in history. Mr. Koolhaas has created an eloquent architectural statement about China’s headlong race into the future and, more generally, life in the developed world at the beginning of the 21st century. It captures our era much as the great works of the early Modernists did theirs.
Mr. Koolhaas has been one of architecture’s most influential thinkers since the late 1970s, when his book “Delirious New York” offered a celebration of the “culture of congestion” in Manhattan at a time when many middle-class New Yorkers were still fleeing to the suburbs.
Over the next few decades he established himself as both an architect of extraordinary talent and the profession’s reigning enfant terrible. His 1997 competition entry for an expansion of the Museum of Modern Art, which would have sunk the museum’s beloved sculpture garden into the ground and stowed curators in a tower labeled MoMA Inc., enraged many people at that institution but could well have reinvigorated an institution struggling to reimagine its identity. The 2004 Seattle Central Library, an uneven stack of slabs shrink-wrapped in a glass-and-steel web, was at once an evocative memorial to the conventional library and a monument to the new Information Age.
Mr. Koolhaas was offered the CCTV commission in late 2002, around the time he was invited to participate in redevelopment plans for ground zero in Lower Manhattan, and he immediately decided he could not take on both. “It was a matter of focus,” he said. By then the redevelopment plans at ground zero had become so politically and emotionally heated that Mr. Koolhaas was skeptical that anything of real architectural value could be produced there.
CCTV had its own problems; for one, its construction was widely seen as part of a huge public relations campaign in the run-up to the 2008 Olympic Games here. But Mr. Koolhaas was fascinated by Beijing’s mix of ancient hutongs, Stalinist-era workers’ housing and 1960s megastructures. And unlike New York, an aging city that was becoming increasingly nostalgic, Beijing was in the midst of a major modernization push.
“I was aware of negative developments there, of course,” Mr. Koolhaas said. “But on the whole there was also an incredible sense of change at that moment. There was a real desire to improve things, especially in Beijing.”
No building has since done more to burnish the reputation of Beijing as a city of the future than Koolhaas’s. His CCTV building, nearing completion, has been a highly visible part of the cityscape in this nation’s capital since late in the last decade, rising across an elevated freeway from the generic towers of Beijing’s new business district. Its two 50-story legs, which house offices and production studios, are joined at the top by a 13-story bridge whose angled form juts out precariously over a plaza.
The more time you spend with it, the harder it is to pin the building down. The legs, which taper as they rise to slightly different heights, distort your normal sense of perspective, and Mr. Koolhaas represses all the most obvious signs of human scale, like the repetitive windows and floor slabs of a conventional tower. From a distance it’s virtually impossible to get a grip on the building’s size — an apt metaphor for the way giant media companies like CCTV have collapsed the scale of our world.
Approaching from the direction of the freeway, with the massive bridge looming directly ahead, the building can look dark and menacing. From another angle the legs seem almost fragile. And from yet another the bridge’s tilted roof gives the building a strangely two-dimensional quality.
These distortions are reinforced by the structural system, an irregular network of steel cross-bracing that looks as if it were etched into the building’s skin. Because the cross-bracing becomes denser where the stresses are most severe — for example, where the bridge connects to the towers — at certain points the structure seems to be straining against all odds to stay up.
The forms are a reworking of classical perspective; the irregular structure is an attack on Modernist ideas about structural purity. Both are an effort to break down what Mr. Koolhaas, like a number of other architects of his generation, sees as the oppressiveness of the Cartesian order that has shaped architecture for centuries. The design is also striving to make room for the impurities and imperfections that make us human.
Mr. Koolhaas, of course, also had to deal with the mundane issues of how the building works. It is raised on a concrete plinth, contributing to a sense that it is a monolithic world, disconnected from the life of the city. But that impression changes once you walk inside.
The main lobby, in a low structure at the base of one of the towers, is classic Koolhaas: a montage of colliding forms. Light pours in through big rhomboid-shaped skylights. Walls tilt on two sides, creating a slight sense of compression that nudges you forward. A walkway in front of you cuts across the room toward the elevator banks. Stepping onto it, you look down several stories into a vertiginous underworld of escalators, beams and bridges.
The view is startling, not least because it undermines the impression of CCTV as a walled compound. Every morning a subway station will disgorge thousands of workers who will climb the escalators up to the lobby, passing through a security barrier and a row of 50-foot-tall yellow travertine pillars, to the elevators beyond.
A separate entry to one side of the lobby leads down a wide staircase to an exhibition space for tourists and other visitors. Above the stair, a glass-enclosed V.I.P. lounge overlooks the lobby. Another staircase leads up to a garden on the plaza for employees. People in these spaces will be in constant eye contact with one another, although they will rarely mix.
The limited interaction of disparate social groups becomes far more limited higher in the building. The doors that separate executives from their underlings are as firmly shut as they would be in any Western corporation. The director’s office, a sequence of spacious rooms clad in more yellow travertine, comes equipped with a plush apartment. Executives lunching in the V.I.P. dining room — a spectacular space braced by heavy steel columns — can stare up through a big skylight at other V.I.P.’s landing on a helipad.
And public access to the building will be limited to what Mr. Koolhaas calls “the loop”: a sequence of exhibition spaces, restaurants and viewing areas that climb up one tower, cross the bridge and descend the other.
At one point you end up at a public observation deck, a cavernous room crisscrossed with beams and columns at the angle of the bridge. Three big round windows are cut into the deck’s floor, with views down to the employees’ garden. Seen from here, the garden turns out to be a blown-up version of Piranesi’s 18th-century map of an imaginary Rome from his engraving series “Il Campo Marzio dell’Antica Roma.” The map represents an urban ideal, one in which the greatness of cities is seen to arise from a clash of architectural visions built up over centuries, and where each of these visions is given equal weight.
In its allusion to a vital city built from the ruins of a once mighty empire, the garden is an obvious allegory for China. Mr. Koolhaas seems to be reminding us that all empires fade; it is the cultural triumphs — including the great buildings — that will remain the most enduring testament to who we were and what we hoped to become.

This article has been revised to reflect the following correction:
Correction: July 15, 2011

An architecture review and two picture captions on Wednesday about the CCTV building in Beijing, the headquarters of China Central Television, omitted one of the architects. Besides Rem Koolhaas, Ole Scheeren also designed the building.

The Hot List: A Single Pleasure Ere Summer Fades By THE NEW YORK TIMES Julia Yellow

July 14, 2011, 7:11 pm

The Hot List: A Single Pleasure Ere Summer Fades By THE NEW YORK TIMES Julia Yellow

Just one thing, you tell yourself, as the summer slips by like so many summers before it. If you manage to do nothing else for your own pleasure in this season of unclaimed hours, you will read that book, see that movie, watch that show, gaze at that painting, listen to that guitarist. Even people who do these things for a living – the New York Times arts critics – can’t always organize their cultural calendars to include what they most want to do. We asked them to share the single item in, or closely related to, their critical discipline at the very top of their summer bucket list. Here are their selections.
Art‘Night Vision’ – Past Meets Present After Dark, by Holland Cotter
ArtAt the Met, a Canvas Ahead of Its Time, by Roberta Smith
BooksDon DeLillo’s Prescient ‘Underworld’, by Michiko Kakutani
BooksPauline Kael’s ‘Hooked’ a Worthy Beach Read, by Dwight Garner
DanceAlways Moving, Always Frozen, by Alastair Macaulay
Movies‘The Tree of Life’ – Authority From God to Dad, by Stephen Holden
MoviesA Few Hours of ‘Zazie Dans le Métro’, by A.O. Scott
MoviesA House Tour for Cinephiles, by Manohla Dargis
Music Ivan Fischer’s Double Duty in ‘Don Giovanni’, by Anthony Tommasini
MusicVisiting the Original Birdland, by Ben Ratliff
MusicTom Zé, a Brazilian Force of One, by Jon Pareles
MusicRiding in Cars With Music, by Jon Caramanica
MusicFestival of Contemporary Music at Tanglewood, by Allan Kozinn
Television ‘The Killing,’ Perfect for Dark Skies, by Ginia Bellafante
Television‘Prime Suspect’: Returning to the Source, by Alessandra Stanley
TheaterTheatrical Beauty in ‘Alexander McQueen – Savage Beauty’, by Charles Isherwood
Theater‘Bluebird’ – Taxi Fare for the Uncommon Man, by Ben Brantley
What did you make special time to do, or what are you looking forward to? Share your summer must-do activity here.

3 Grown-Up Books For The Hogwarts Grad by ANNIE ROPEIK

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July 13, 2011

The Harry Potter franchise has its last hurrah on Friday, and fans like me are facing a forcible graduation from the protection of a fictional universe we've always known. I was 7 when Harry began, but I'm 21 now, and it's time to broaden my horizons beyond Hogwarts.

But what to pick up first? To me, the perfect post-Potter book isn't an imitator, but rather something entirely different (darker, perhaps, or less padded with childhood optimism) that's laced with threads of familiar territory. Through striking and unexpected lenses, these three books give new life to my favorite foundations of Harry's literary magic.

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The Magicians

By Lev Grossman, Paperback, 416 pages, Viking Adult, list price: $16.

Cry derivative all you want — Lev Grossman's novel, hailed as Harry Potter for adults, is all that and more. Combine Narnia, Potter and your sullen, booze-fueled college existentialist phase, and you'll have the world of Quentin Coldwater, a high school senior from Brooklyn who finds himself enrolled at Brakebills College, where he studies to be a magician. It's everything you'd want from a freewheeling postgrad wizardry experience, and the magic itself is wonderfully scientific — messy, sprawling, while technical in a way that Potter forgoes. But it's in the self-reflective thread of Quentin's journey, which culminates in a true-to-genre magical quest undercut by a vein of harsh realism, that The Magicians shines. The endgame is a heartrending, cathartic examination of the nature of magic and our relationship to the stories we wanted to live in as kids — required reading for anyone trying to recover from a lifelong love affair with a fictional world.

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Ender's Game

By Orson Scott Card, Paperback, 352 pages, Top Science Fiction, List Price $6.99.

The first installment in Orson Scott Card's classic science-fiction series offers a gripping study of how to make a soldier, told through the eyes of child prodigy Andrew "Ender" Wiggin. Set at a futuristic school where kids learn the art of war through battle simulators, Ender's Game shows the vicious toll that thankless expectation exerts on young people, while Ender's own journey has an uneasy sort of "chosen one" edge to it. Card expertly twists your emotions as you watch the boy genius molded — not entirely with his own permission — into the perfect leader, with his capacity for love and hurt compartmentalized behind ruthless cunning. Ender's voice is a mesmerizing mix of childlike wonder and calculating cynicism, and it's stunningly easy to get lost in his war games. This exemplary piece of sci-fi is a chilling and heartbreaking take on what happens when children inherit war.

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The Secret History

By Donna Tartt, Paperback, 576 pages, Vintage, list price: $16.

Donna Tartt's acclaimed novel centers on a group of classics majors at a small college in New England whose aspirations toward antiquity careen terrifyingly out of control. But folded into the thrilling story, which is tinged with a crisp, dizzied academic appeal, are dark ruminations on the gifts and curses of the ancients. These ubiquitous archetypes, models and moral codes make up every story we know to some degree — whether it's a reluctant hero's quest, a battle between good and evil or simply a journey through a life. In The Secret History, Tartt offers a fascinating perspective on the influence of the classics on our lives, with a stunningly written moral narrative that warps and coils in on itself to reveal truths about good and evil that most would be afraid to discover.

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These books aren't the fantastical J.K. Rowling adventures of my childhood, and they're certainly far less cheerful than a certain epilogue. But they embody what I'll always love about Harry Potter— meditations on magic, morality and growing up, shot through with the understanding that while real life isn't always just like storybooks, there's learning in that, too.

THE PRODUCER'S PERSPECTIVE SUMMER READING LIST from Ken Davenport (the producer blogger on GReader)

THE PRODUCER'S PERSPECTIVE SUMMER READING LIST  from Ken Davenport (the producer blogger on GReader)




1. Letters from An Actor by William Redfield



William Redfield's recollections of appearing in the 1964 production of Hamlet starring Richard Burton and directed by Sir John Gielgud.



2. Underfoot in Show Business by Helene Hanff



"Each year, hundreds of stagestruck kids arrive in New York determined to crash the theatre, firmly convinced they're destined to be famous Broadway stars or playwrights. One in a thousand turns out to be Noel Coward. This book is about life among the other 999. By one of them." -Helene Hanff



3. The Whorehouse Papers by Larry L. King



An account by a journeyman dramatist of the production--from phone call to first night--of his first play The Best Little Whorehouse in Texas and the attendant wranglings, clashes, and confusions.



4. The Seesaw Log by William Gibson



A day-by-day candid account of the creativity, conflict, and compromise involved in the making of a smash-hit Broadway show (Seesaw), by the playwright himself.



5. We Bombed in New London by Brian Gari



A day-by-day candid account of the creativity, conflict, and compromise involved in the making of a legendary flop Broadway show (Late Nite Comic) written by the composer-lyricist.



6. Everything Was Possible: The Birth of The Musical Follies by Ted Chapin



Ted Chapin is now Chairman of the American Theatre Wing. But when he was 22 years old, he was just a lowly Production Assistant, running around after Hal Prince, Stephen Sondheim, and Michael Bennett as they created one of the most legendary musicals of all time. This was his journal.



7. A Year With The Producers: One Actor's Exhausting (But Worth It) Journey From Cats to Mel Brooks' Mega-Hit by Jeffry Denman



Jeffry Denman's journey with The Producers from audition to opening night.



8. The Show Business Nobody Knows by Earl Wilson



Earl Wilson chronicled Broadway's Golden Age in The New York Post from 1942 to 1983. This book tells some of his sordid tales.



9. Showstopper by Abigail Pogrebin



A recent release, this mini-book is now-author Abigail Pogrebin's story of getting cast in Merrily We Roll Along at the age of 16.



10. Making It Big: The Diary of a Broadway Musical by Barbara Isenberg



Barbara Isenberg was a fly on the wall during the out-of-town tryout and Broadway birth of the musical Big. From a review by Library Journal: "This book is not for the weak-hearted or those with illusions about Broadway as the home of art; making this musical was more like making war."

July 12, 2011

Grill Dome’s Demonstration Chicken adapted from Tarsem Kohli

Time: about 1 hour

1 1/2 teaspoons salt
1 teaspoon pepper
1 teaspoon chili powder
1/2 teaspoon cayenne
1 teaspoon ground ginger
1 teaspoon garlic powder
1/ 2 teaspoon sugar
2 teaspoons mango powder or finely grated orange zest
10 chicken drumsticks, skinned
3 teaspoons Worcestershire sauce
3 teaspoons red wine vinegar
1/4 cup heavy cream.

1. In a bowl, stir together the salt, pepper, chili powder, cayenne, ginger, garlic powder, sugar and mango powder or orange zest. Add the drumsticks and rub the spice mix evenly into the chicken.
2. Add the Worcestershire sauce, vinegar and cream and toss to coat. Set aside for 30 minutes.
3. Heat hardwood lump charcoal in a grill with a lid until the temperature gauge holds at 350 or the coals are evenly gray. Place the drumsticks on the grill, and close the lid. Cook, turning the wings every 6 or 7 minutes, until done, 15 to 30 minutes.
Yield: 5 servings.      

Meeting in the Middle for a Velvety Cheesecake By MELISSA CLARK

July 8, 2011

Meeting in the Middle for a Velvety Cheesecake By MELISSA CLARK

AMONG cheesecake lovers, there’s a sharp divide. Some like their cheesecake New York deli style: rich cream-cheese-filled wedges, the best of which have not been shellacked with neon red bits that may or may not be berries.
On the other end of the spectrum are those who prefer an airy cheesecake made with ricotta or fromage blanc or farmer cheese. These cakes, refined and milky, are never slathered with food-coloring-enhanced canned pie filling. They are delicate things.
I spent most of my life on the hulking-deli-slice side of the line. The subtle nuances of the lighter cakes just didn’t satisfy my cheesecake yens.
But one day I met a cake that landed smack in the middle of the two styles. Made with cream cheese, it was velvety and voluptuous. But it also contained crème fraîche and goat cheese, making it fluffy as well as complex, and not terribly sweet.
The key is getting the right flavor balance by choosing a soft fresh goat cheese with a mild but distinct taste. Too strong and you end up in a barnyard; too wimpy and you might as well skip it.
Beating the goat cheese and cream cheese together until they are completely smooth gives the cake its sublime texture. Using room temperature ingredients helps as well.
Since I first sampled this cake, I’ve used it as a showcase for whatever fruit is in season: stewed rhubarb in spring, berries and stone fruit in summer, figs in autumn, cranberries in winter. It’s even good naked and alone, though a pinch of pepper in the batter and a drizzle of good, intense honey (buckwheat, lavender, chestnut), maybe accompanied by toasted nuts, adds sophisticated notes that work all year long.
Feeling nostalgic for those florid glazes of yore, I recently chose a topping of sour cherries, simmered with sugar until they were practically candied. Piled on the stark white cake, the lipstick-red fruit looked scarily like the worst of the hulking deli cakes. But it tasted good enough to please cheesecake lovers in any camp.        

Crème Fraîche Cheesecake With Sour Cherries

Time: 11/2 hours, plus cooling

FOR THE CHEESECAKE:
1 1/2 cups cream cheese
1/2 cup fresh goat cheese
1/2 cup sugar
1 1/2 cups crème fraîche
1 teaspoon vanilla extract
1/4 teaspoon black pepper
4 large eggs

FOR THE CHERRIES:
2/3 cup sugar
2 pints sour cherries, pitted
2 teaspoons balsamic vinegar.

1. To make the cheesecake, heat the oven to 325 degrees. Wrap the bottom of a 9-inch springform pan with foil and place on a baking sheet.
2. Using an electric mixer, beat the cream cheese and goat cheese until very smooth. Add the sugar and continue beating until no lumps remain. Beat in the crème fraîche, vanilla and pepper. Beat in the eggs one at a time, scraping down the sides of the bowl between additions, and beat until combined.
3. Pour the mixture into the pan and bake for 10 minutes, then reduce the temperature to 250 degrees and bake until the cake is just set (it will still wobble a little in the middle), 45 to 60 minutes. Transfer the pan to a wire rack to cool completely.
4. While the cheesecake is cooling, make the cherry topping. Pour the sugar and
2/3 cup water in a heavy-bottomed saucepan over medium heat. Cook until the sugar has dissolved and the syrup has thickened, 5 to 8 minutes. Add the cherries and balsamic vinegar and cook, stirring occasionally, until the cherries soften and release their juices, 2 to 3 minutes. Use a slotted spoon to transfer the cherries to a bowl. Continue cooking the liquid in the pan until the sauce reduces by half, about 10 minutes. Take the pan off the heat and stir the cherries and any juice from the bowl back in.
5. Run a knife around the edge of the pan to loosen the cake from the pan before unmolding and serving with the cherry topping.
Yield: One 9-inch cheesecake.        

Five myths about the debt ceiling By Bruce Bartlett

Five myths about the debt ceiling  By Bruce Bartlett
 Published: July 7

In recent months, the federal debt ceiling — last increased in February 2010 and now standing at $14.3 trillion — has become a matter of national debate and political hysteria. The ceiling must be raised by Aug. 2, Treasury says, or the government will run out of cash. Congressional Republicans counter that they won’t raise the debt limit unless Democrats agree to large budget cuts with no tax increases. President Obama insists that closing tax loopholes must be part of the package. Whom and what to believe in the great debt-limit debate? Here are some misconceptions that get to the heart of the battle.





1. The debt limit is an effective way to control spending and deficits.



Not at all. In 2003, Brian Roseboro, assistant secretary of the Treasury for financial markets, explained it best: “The plain truth is that the debt limit does not affect the deficits or surpluses. The critical revenue and spending decisions are made during the congressional budget process.”



The debt ceiling is a cap on the amount of securities the Treasury can issue, something it does to raise money to pay for government expenses. These expenses, and the deficit they’ve wrought, are a result of past actions by Congress to create entitlement programs, make appropriations and cut taxes. In that sense, raising the debt limit is about paying for past expenses, not controlling future ones. For Congress to refuse to let Treasury raise the cash to pay the bills that Congress itself has run up simply makes no sense.



Some supporters of the debt limit respond that there is virtue in forcing Congress to debate the national debt from time to time. This may have been true in the past, but the Budget Act of 1974 created a process that requires Congress to vote on aggregate levels of spending, revenue and deficits every year, thus making the debt limit redundant.





2. Opposition to raising the debt limit is a partisan issue.



Republicans are doing the squawking now because there is a Democrat in the White House. But back when there was a Republican president, Democrats did the squawking. On March 16, 2006, one Democratic senator in particular denounced George W. Bush’s request to raise the debt limit. “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure,” the senator thundered. “Increasing America’s debt weakens us domestically and internationally. . . . Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren.”



That senator was Barack Obama, and he, along with most Democrats, voted against a higher limit that day. It passed only because almost every Republican voted for it, including many who are now among the strongest opponents of a debt-limit increase.





3. Financial markets won’t care much if interest payments are just a few days late — a “technical default.”



Some Republicans believe that bondholders know they will get their money eventually and will understand that a brief default — just a few days — might be necessary to reduce future deficits. “If a bondholder misses a payment for a day or two or three or four,” Rep. Paul Ryan (R-Wis.) told CNBC in May, “what is more important [is] that you’re putting the government in a materially better position to be able to pay their bonds later on.”



This is nothing but wishful thinking. The bond-rating agencies have repeatedly warned that any failure to pay interest or principal on a Treasury security exactly when due could cause the U.S. credit rating to be downgraded, which would push interest rates upas investors demand higher rates to compensate for the increased risk.



J.P. Morgan recently surveyed its clients and asked how much rates would rise if there was a delay in payments, even a very brief one. Domestic investors thought they would go up by 0.37 percentage points, but foreign buyers — who own close to half the debt — predicted an increase of more than half a percentage point. Any increase in this range would raise Treasury’s borrowing costs by tens of billions of dollars per year.



Some may think that a rise in rates would be temporary. But there was a case back in 1979 when a combination of a failure to increase the debt limit in time and a breakdown of Treasury’s machines for printing checks caused a two-week default. A 1989 academic study found that it raised interest rates by six-tenths of a percentage point for years afterward.





4. It’s worth risking default on the debt to prevent a tax increase, given the weak economy.



While Republicans’ concerns about higher taxes are not unreasonable, most economists believe that any fiscal contraction at this time would be dangerous. They note that a large cut in spending back in 1937 brought on a sharp recession, which undermined the recovery the country was making after the Great Depression.



Republicans respond that tax increases are especially harmful to growth. However, they made the same argument in 1982, when Ronald Reagan requested the largest peacetime tax increase in American history, and again in 1993, when Bill Clinton also asked for a large tax boost for deficit reduction. In both cases, conservative economists’ predictions of economic disaster were completely wrong, and strong economic growth followed.





5. Obama must accept GOP budget demands because he needs Republican support to raise the debt limit.



Republicans believe they have the president over a barrel. But their hand may be weaker than they think. A number of legal scholars point to Section 4of the 14th Amendment, which says, “The validity of the public debt of the United States . . . shall not be questioned.”



Some scholars, including Michael Abramowicz of George Washington University Law Schooland Garrett Epps of the University of Baltimore Law School, think this passage may make the debt limit unconstitutional because by definition, the limit calls into question the validity of the public debt. Thus Treasury may be able to just ignore the debt limit.



Other scholars, such as Michael McConnell of Stanford Law School, say the 14th Amendment will force Obama to prioritize debt payments and unilaterally slash spending to pay bondholders. But this would involve the violation of laws requiring government spending.



Either way, a failure to raise the debt limit would force the president to break the law. The only question is which one.





Bruce Bartlett, a former adviser to President Ronald Reagan and a Treasury official in the George W. Bush administration, is the author of “The New American Economy: The Failure of Reaganomics and a New Way Forward.” He will be online at 11 a.m. on Monday, July 11, to chat. Submit your questions and comments now.



Want to challenge everything you know? Visit our “Five myths” archive , including “Five myths about interest rates,” “Five myths about the Bush tax cuts,” “Five myths about defense spending,” and “Five myths about the deficit.”

July 7, 2011, 12:01 am

How Health Insurance Affects Health

By DAVID LEONHARDT

In the nearly year and a half since Congress passed the health care overhaul, one of the main purposes of the bill — to provide health insurance to people who lack it — has often been lost in the debate. Instead, supporters and opponents of the bill have argued over whether the bill is constitutional, and they’ve argued over whether the bill will cut medical costs more or less than the Congressional Budget Office projects.
Those are obviously important issues. But so is the fact that, unlike any other rich country in the world, the United States has tens of millions of people who do not have health insurance and therefore go without some forms of medical care.
A new study being released today, by some of the country’s top health economists, aims to estimate the effects of not having health insurance — and the effects are large.
The researchers used a lottery that the state of Oregon conducted in 2008 to determine who would become eligible to apply for a limited number of Medicaid slots. The researchers compared the health outcomes of those who won the lottery (many of whom then received insurance) and those who did not (who were more likely to remain uninsured).
The researchers have followed the subjects for only a year so far, so the paper has some clear limitations. But it nonetheless suggests that having health insurance substantially improves health. Expanding insurance does not save society money — as some advocates of preventive medicine have claimed — but it does appear to make people mentally and physically healthier.

The authors point out that the insurance in question — Medicaid — is the same one that many uninsured people will receive as part of the health care law. For that reason, among others, the paper suggests that the law is likely to improve the health and well-being of many of the uninsured.
Katherine Baicker — one of the authors and a Harvard economist who served in President George W. Bush’s administration — wrote the following to me, via e-mail:

There has been a great deal of uncertainty about how much of a difference Medicaid makes to enrollees. Some argued that Medicaid isn’t ‘good’ insurance coverage and that a Medicaid card doesn’t get enrollees much access to care. Others argued that the uninsured already have access to care through the emergency room, clinics, or charity care.
Our study shows that gaining access to Medicaid matters on a number of different dimensions, including increased access to and use of health care.

The authors also point out that the benefits of health insurance aren’t only medical. They’re financial too, as is the case with other forms of insurance. Here’s another author, Amy Finkelstein (an M.I.T. economist who has written for The Wall Street Journal opinion pages and whom I’ve written about), also via e-mail:

Health insurance isn’t just about access to health care – it’s also about protection from financial ruin. This point isn’t often discussed in the debate about health insurance expansions, but the reduction in financial strain that we found was substantial. This is important for enrollees, but it is also important for the providers who see fewer of their bills go unpaid.

Besides Ms. Baicker and Ms. Finkelstein, the paper’s authors include Jonathan Gruber (an M.I.T. economist, who has advised the Obama administration) and Joseph Newhouse (a Harvard economist who designed and ran the famous RAND Health Insurance Experiment in the 1970s and ’80s). The other authors are Sarah Taubman, Bill Wright, Mira Bernstein, Heidi Allen and members of the Oregon Health Study Group.
Excerpts from the study, which my colleague Gina Kolata writes about today, follow:

About one year after enrollment, we find that those selected by the lottery have substantial and statistically significantly higher health care utilization, lower out-of-pocket medical expenditures and medical debt, and better self-reported health than the control group that was not given the opportunity to apply for Medicaid.
The increase in hospital admissions appears to be disproportionately concentrated in the approximately 35 percent of admissions that do not originate in the emergency room, suggesting that these admissions may be more price sensitive.
[W]e find that insurance is associated with improvements across the board in our measures of self-reported physical and mental health, averaging two-tenths of a standard deviation improvement. These results appear to reflect improvements in mental health and also at least partly a general sense of improved well being; they may also reflect improvements in objective, physical health, but this is more difficult to determine with the data we now have available.
[I]nsurance is also associated with an increase in compliance with recommended preventive care. We look at four different measures of preventive care: blood cholesterol checks, blood tests for diabetes, mammograms, and pap tests. …[T]he results indicate … a 20 percent increase in the probability of ever having one’s blood cholesterol checked, a 15 percent increase in the probability of ever having one’s blood tested for high blood sugar or diabetes, a 60 percent increase in the probability of having a mammogram within the last year (for women 40 and over), and a 45 percent change in the probability of having a pap test within the last year (for women).
[Our] calculation suggests that insurance is associated with a $778 (standard error = $371) increase in annual spending, or about a 25 percent increase relative to the implied control mean annual spending.

July 7, 2011

First Study of Its Kind Shows Benefits of Providing Medical Insurance to Poor By GINA KOLATA

When poor people are given medical insurance, they not only find regular doctors and see doctors more often but they also feel better, are less depressed and are better able to maintain financial stability, according to a new, large-scale study that provides the first rigorously controlled assessment of the impact of Medicaid.
While the findings may seem obvious, health economists and policy makers have long questioned whether it would make any difference to provide health insurance to poor people.
It has become part of the debate on Medicaid, at a time when states are cutting back on this insurance program for the poor. In fact, the only reason the study could be done was that Oregon was running out of money and had to choose some people to get insurance and exclude others, providing groups for comparison.
Some said that of course it would help to insure the uninsured. Others said maybe not. There was already a safety net: emergency rooms, charity care, free clinics and the option to go to a doctor and simply not pay the bill. And in any case, the argument goes, if Medicaid coverage is expanded, people will still have trouble seeing a doctor because so few accept that insurance.
Until now, the arguments were pretty much irresolvable. Researchers compared people who happened to have insurance with those who did not have it. But those who do not have insurance tend to be different in many ways from people who have it. They tend to be less educated and to have worse health habits and lower incomes, said Dr. Alan M. Garber, an internist and health economist at Stanford. No matter how carefully researchers try to correct for the differences “they cannot be completely successful,” Dr. Garber said. “There is always some doubt.”
The new study, published Thursday by the National Bureau of Economic Research, avoided that problem. Its design is like that used to test new drugs. People were randomly selected to have Medicaid or not, and researchers then asked if the insurance made any difference.
Health economists and other researchers said the study was historic and would be cited for years to come, shaping health care debates.
“It’s obviously a really important paper,” said James Smith, an economist at the RAND Corporation. “It is going to be a classic.”
Richard M. Suzman, director of the behavioral and social research program at the National Institute on Aging, a major source of financing for the research, said it was “one of the most important studies that our division has funded since I’ve been at the N.I.A.,” a period of more than a quarter-century.
In its first year of data collection, the study found a long list of differences between the insured and uninsured, adding up to an extra 25 percent in medical expenditures for the insured.
Those with Medicaid were 35 percent more likely to go to a clinic or see a doctor, 15 percent more likely to use prescription drugs and 30 percent more likely to be admitted to a hospital. Researchers were unable to detect a change in emergency room use.
Women with insurance were 60 percent more likely to have mammograms, and those with insurance were 20 percent more likely to have their cholesterol checked. They were 70 percent more likely to have a particular clinic or office for medical care and 55 percent more likely to have a doctor whom they usually saw.
The insured also felt better: the likelihood that they said their health was good or excellent increased by 25 percent, and they were 40 percent less likely to say that their health had worsened in the past year than those without insurance.
The study is now in its next phase, an assessment of the health effects of having insurance. The researchers interviewed 12,000 people — 6,000 who received Medicaid and 6,000 who did not — and measured things like blood pressure, cholesterol and weight.
The study became possible because of an unusual situation in Oregon. In 2008, the state wanted to expand its Medicaid program to include more uninsured people but could afford to add only 10,000 to its rolls. Yet nearly 90,000 applied. Oregon decided to select the 10,000 by lottery.
Economists were electrified. Here was their chance to compare those who got insurance with those who were randomly assigned to go without it. No one had ever done anything like that before, in part because it would be considered unethical to devise a study that would explicitly deny some people coverage while giving it to others.
But this situation was perfect for assessing the impact of Medicaid, said Katherine Baicker, professor of health economics at the Harvard School of Public Health. Dr. Baicker and Amy Finkelstein, professor of economics at M.I.T., are the principal investigators for the study.
“Amy and I stumbled across the lottery in Oregon and thought, ‘This is an unbelievable opportunity to actually find out once and for all what expanding public health insurance does,’ ” Dr. Baicker said.
They had just a short window of time. Within two years, Oregon found the money to offer Medicaid to the nearly 80,000 who had been turned down in the lottery.
As an economist, Dr. Finkelstein was interested, among other things, in whether Medicaid did what all insurance — homeowner’s, auto, health — is supposed to do: shield people from financial catastrophe. Almost no one had even tried to investigate that question, she said.
“It is shocking that it is not even in the discourse,” Dr. Finkelstein said.
The study found that those with insurance were 25 percent less likely to have an unpaid bill sent to a collection agency and were 40 percent less likely to borrow money or fail to pay other bills because they had to pay medical bills.
Dr. Finkelstein said she had thought that the people were so poor to begin with that they just did not spend very much out of pocket on medical care when they did not have insurance. “Yet look at the results,” she said.
Dr. Baicker interviewed people for Part 2 of the study and was impressed by what she heard.
“Being uninsured is incredibly stressful from a financial perspective, a psychological perspective, a physical perspective,” she said. “It is a huge relief to people not to have to worry about it day in and day out.”

July 7, 2011

What Obama Wants By PAUL KRUGMAN

On Thursday, President Obama met with Republicans to discuss a debt deal. We don’t know exactly what was proposed, but news reports before the meeting suggested that Mr. Obama is offering huge spending cuts, possibly including cuts to Social Security and an end to Medicare’s status as a program available in full to all Americans, regardless of income.
Obviously, the details matter a lot, but progressives, and Democrats in general, are understandably very worried. Should they be? In a word, yes.
Now, this might just be theater: Mr. Obama may be pulling an anti-Corleone, making Republicans an offer they can’t accept. The reports say that the Obama plan also involves significant new revenues, a notion that remains anathema to the Republican base. So the goal may be to paint the G.O.P. into a corner, making Republicans look like intransigent extremists — which they are.
But let’s be frank. It’s getting harder and harder to trust Mr. Obama’s motives in the budget fight, given the way his economic rhetoric has veered to the right. In fact, if all you did was listen to his speeches, you might conclude that he basically shares the G.O.P.’s diagnosis of what ails our economy and what should be done to fix it. And maybe that’s not a false impression; maybe it’s the simple truth.
One striking example of this rightward shift came in last weekend’s presidential address, in which Mr. Obama had this to say about the economics of the budget: “Government has to start living within its means, just like families do. We have to cut the spending we can’t afford so we can put the economy on sounder footing, and give our businesses the confidence they need to grow and create jobs.”
That’s three of the right’s favorite economic fallacies in just two sentences. No, the government shouldn’t budget the way families do; on the contrary, trying to balance the budget in times of economic distress is a recipe for deepening the slump. Spending cuts right now wouldn’t “put the economy on sounder footing.” They would reduce growth and raise unemployment. And last but not least, businesses aren’t holding back because they lack confidence in government policies; they’re holding back because they don’t have enough customers — a problem that would be made worse, not better, by short-term spending cuts.
In his brief remarks after Thursday’s meeting, by the way, Mr. Obama seemed to reiterate the Herbert Hooveresque view that deficit reduction is what we need to “grow the economy.”
People have asked me why the president’s economic advisers aren’t telling him not to believe in the confidence fairy — that is, not to believe the assertion, popular on the right but overwhelmingly refuted by the evidence, that slashing spending in the face of a depressed economy will magically create jobs. My answer is, what economic advisers? Almost all the high-profile economists who joined the Obama administration early on have either left or are leaving.
Nor have they been replaced. As The Wall Street Journal recently noted, there are a “stunning” number of vacancies in important economic posts. So who’s defining the administration’s economic views?
Some of what we’re hearing is presumably coming from the political team, whose members seem to believe that a move toward Republican positions, reminiscent of former President Bill Clinton’s “triangulation” in the 1990s, is the key to Mr. Obama’s re-election. And Mr. Clinton did, indeed, rebound from a big defeat in the 1994 midterms to win big two years later. But some of us think that the rebound had less to do with his rhetorical move to the center than with the five million jobs the economy added over those two years — an achievement not likely to be repeated this time, especially not in the face of harsh spending cuts.
Anyway, I don’t believe that it’s all political calculation. Watching Mr. Obama and listening to his recent statements, it’s hard not to get the impression that he is now turning for advice to people who really believe that the deficit, not unemployment, is the top issue facing America right now, and who also believe that the great bulk of deficit reduction should come from spending cuts. It’s worth noting that even Republicans weren’t suggesting cuts to Social Security; this is something Mr. Obama and those he listens to apparently want for its own sake.
Which raises the big question: If a debt deal does emerge, and it overwhelmingly reflects conservative priorities and ideology, should Democrats in Congress vote for it?
Mr. Obama’s people will no doubt argue that their fellow party members should trust him, that whatever deal emerges was the best he could get. But it’s hard to see why a president who has gone out of his way to echo Republican rhetoric and endorse false conservative views deserves that kind of trust.

July 7, 2011

The Unexamined Society By DAVID BROOKS

Over the past 50 years, we’ve seen a number of gigantic policies produce disappointing results — policies to reduce poverty, homelessness, dropout rates, single-parenting and drug addiction. Many of these policies failed because they were based on an overly simplistic view of human nature. They assumed that people responded in straightforward ways to incentives. Often, they assumed that money could cure behavior problems.
Fortunately, today we are in the middle of a golden age of behavioral research. Thousands of researchers are studying the way actual behavior differs from the way we assume people behave. They are coming up with more accurate theories of who we are, and scores of real-world applications. Here’s one simple example:
When you renew your driver’s license, you have a chance to enroll in an organ donation program. In countries like Germany and the U.S., you have to check a box if you want to opt in. Roughly 14 percent of people do. But behavioral scientists have discovered that how you set the defaults is really important. So in other countries, like Poland or France, you have to check a box if you want to opt out. In these countries, more than 90 percent of people participate.
This is a gigantic behavior difference cued by one tiny and costless change in procedure.
Yet in the middle of this golden age of behavioral research, there is a bill working through Congress that would eliminate the National Science Foundation’s Directorate for Social, Behavioral and Economic Sciences. This is exactly how budgets should not be balanced — by cutting cheap things that produce enormous future benefits.
Let’s say you want to reduce poverty. We have two traditional understandings of poverty. The first presumes people are rational. They are pursuing their goals effectively and don’t need much help in changing their behavior. The second presumes that the poor are afflicted by cultural or psychological dysfunctions that sometimes lead them to behave in shortsighted ways. Neither of these theories has produced much in the way of effective policies.
Eldar Shafir of Princeton and Sendhil Mullainathan of Harvard have recently, with federal help, been exploring a third theory, that scarcity produces its own cognitive traits.
A quick question: What is the starting taxi fare in your city? If you are like most upper-middle-class people, you don’t know. If you are like many struggling people, you do know. Poorer people have to think hard about a million things that affluent people don’t. They have to make complicated trade-offs when buying a carton of milk: If I buy milk, I can’t afford orange juice. They have to decide which utility not to pay.
These questions impose enormous cognitive demands. The brain has limited capacities. If you increase demands on one sort of question, it performs less well on other sorts of questions.
Shafir and Mullainathan gave batteries of tests to Indian sugar farmers. After they sell their harvest, they live in relative prosperity. During this season, the farmers do well on the I.Q. and other tests. But before the harvest, they live amid scarcity and have to think hard about a thousand daily decisions. During these seasons, these same farmers do much worse on the tests. They appear to have lower I.Q.’s. They have more trouble controlling their attention. They are more shortsighted. Scarcity creates its own psychology.
Princeton students don’t usually face extreme financial scarcity, but they do face time scarcity. In one game, they had to answer questions in a series of timed rounds, but they could borrow time from future rounds. When they were scrambling amid time scarcity, they were quick to borrow time, and they were nearly oblivious to the usurious interest rates the game organizers were charging. These brilliant Princeton kids were rushing to the equivalent of payday lenders, to their own long-term detriment.
Shafir and Mullainathan have a book coming out next year, exploring how scarcity — whether of time, money or calories (while dieting) — affects your psychology. They are also studying how poor people’s self-perceptions shape behavior. Many people don’t sign up for the welfare benefits because they are intimidated by the forms. Shafir and Mullainathan asked some people at a Trenton soup kitchen to relive a moment when they felt competent and others to recount a neutral experience. Nearly half of the self-affirming group picked up an available benefits package afterward. Only 16 percent of the neutral group did.
People are complicated. We each have multiple selves, which emerge or don’t depending on context. If we’re going to address problems, we need to understand the contexts and how these tendencies emerge or don’t emerge. We need to design policies around that knowledge. Cutting off financing for this sort of research now is like cutting off navigation financing just as Christopher Columbus hit the shoreline of the New World.

July 4, 2011

The Mother of All No-Brainers By DAVID BROOKS

The Republicans have changed American politics since they took control of the House of Representatives. They have put spending restraint and debt reduction at the top of the national agenda. They have sparked a discussion on entitlement reform. They have turned a bill to raise the debt limit into an opportunity to put the U.S. on a stable fiscal course.
Republican leaders have also proved to be effective negotiators. They have been tough and inflexible and forced the Democrats to come to them. The Democrats have agreed to tie budget cuts to the debt ceiling bill. They have agreed not to raise tax rates. They have agreed to a roughly 3-to-1 rate of spending cuts to revenue increases, an astonishing concession.
Moreover, many important Democrats are open to a truly large budget deal. President Obama has a strong incentive to reach a deal so he can campaign in 2012 as a moderate. The Senate majority leader, Harry Reid, has talked about supporting a debt reduction measure of $3 trillion or even $4 trillion if the Republicans meet him part way. There are Democrats in the White House and elsewhere who would be willing to accept Medicare cuts if the Republicans would be willing to increase revenues.
If the Republican Party were a normal party, it would take advantage of this amazing moment. It is being offered the deal of the century: trillions of dollars in spending cuts in exchange for a few hundred billion dollars of revenue increases.
A normal Republican Party would seize the opportunity to put a long-term limit on the growth of government. It would seize the opportunity to put the country on a sound fiscal footing. It would seize the opportunity to do these things without putting any real crimp in economic growth.
The party is not being asked to raise marginal tax rates in a way that might pervert incentives. On the contrary, Republicans are merely being asked to close loopholes and eliminate tax expenditures that are themselves distortionary.
This, as I say, is the mother of all no-brainers.
But we can have no confidence that the Republicans will seize this opportunity. That’s because the Republican Party may no longer be a normal party. Over the past few years, it has been infected by a faction that is more of a psychological protest than a practical, governing alternative.
The members of this movement do not accept the logic of compromise, no matter how sweet the terms. If you ask them to raise taxes by an inch in order to cut government by a foot, they will say no. If you ask them to raise taxes by an inch to cut government by a yard, they will still say no.
The members of this movement do not accept the legitimacy of scholars and intellectual authorities. A thousand impartial experts may tell them that a default on the debt would have calamitous effects, far worse than raising tax revenues a bit. But the members of this movement refuse to believe it.
The members of this movement have no sense of moral decency. A nation makes a sacred pledge to pay the money back when it borrows money. But the members of this movement talk blandly of default and are willing to stain their nation’s honor.
The members of this movement have no economic theory worthy of the name. Economists have identified many factors that contribute to economic growth, ranging from the productivity of the work force to the share of private savings that is available for private investment. Tax levels matter, but they are far from the only or even the most important factor.
But to members of this movement, tax levels are everything. Members of this tendency have taken a small piece of economic policy and turned it into a sacred fixation. They are willing to cut education and research to preserve tax expenditures. Manufacturing employment is cratering even as output rises, but members of this movement somehow believe such problems can be addressed so long as they continue to worship their idol.
Over the past week, Democrats have stopped making concessions. They are coming to the conclusion that if the Republicans are fanatics then they better be fanatics, too.
The struggles of the next few weeks are about what sort of party the G.O.P. is — a normal conservative party or an odd protest movement that has separated itself from normal governance, the normal rules of evidence and the ancient habits of our nation.
If the debt ceiling talks fail, independent voters will see that Democrats were willing to compromise but Republicans were not. If responsible Republicans don’t take control, independents will conclude that Republican fanaticism caused this default. They will conclude that Republicans are not fit to govern.
And they will be right.
This article has been revised to reflect the following correction:
Correction: July 5, 2011

July 5, 2011

Big Business Leaves Deficit to Politicians By DAVID LEONHARDT

WASHINGTON
If you want to understand why cutting the deficit is so hard, you can’t do much better than to look at the Business Roundtable.
The roundtable is one of the more moderate big-business lobbying groups. Its president is John Engler, the former Michigan governor, and its incoming chairman is James McNerney, the chief executive of Boeing. When roundtable officials talk about the deficit, they use sober, common-sense language that can make them sound more reasonable than either political party.
But the roundtable is actually part of the problem.
Rhetoric aside, it consistently lobbies for a higher deficit. The roundtable defends corporate tax loopholes and even argues for new ones. It pushes for a lower corporate tax rate. It favors the permanent extension of the Bush tax cuts. It opposes a reduction in the tax subsidy for health insurance, a reduction that was part of the 2009 health reform bill. Oh, and the roundtable also favors new spending on roads, bridges and other infrastructure.
It’s easy to look at the squabbling politicians in Washington and decide that they are the cause of the country’s huge looming budget deficit. Certainly, they deserve some blame. The larger problem, though, is what you might call roundtable syndrome.
In short, there isn’t much of a constituency for deficit reduction. Sure, plenty of people and special-interest groups say that they are deeply worried about the deficit. But they are not lobbying for specific spending cuts or tax increases. They aren’t marshaling their resources to defend politicians who take tough stands, like President Obama’s 2009 Medicare cuts or Rand Paul’s proposed military cuts.
Instead, many of the officially nonpartisan groups in Washington are even less fiscally responsible than the partisans. Public sector labor unions have fought changes to pensions and work rules that could lead to less expensive, more effective government. Private sector unions — along with the roundtable — have defended the huge tax subsidy for health insurance, which drives up health costs.
Labor groups have at least been willing to push for some tax increases. Today’s business groups struggle to come up with any specific deficit plan. Last year, the Business Council — a group of top corporate executives headed by Jamie Dimon of JPMorgan Chase — and the roundtable released a 49-page plan that simultaneously warned that projected deficits would “retard future growth” and called for policies that would add hundreds of billions of dollars a year to the deficit. That’s the essence of roundtable syndrome.
When I ask roundtable officials and other lobbyists about this contradiction, they show an impressive ability to avoid specifics and stick to their talking points. Mr. Engler, by e-mail, said, “A simpler, flatter tax system can be enacted in a fiscally responsible manner that better serves American workers and supports economic growth.”
Taken by itself, this statement is entirely accurate. The corporate tax code is a mess. A better code, say both conservative and liberal economists, would be flatter — that is, have a lower rate and fewer loopholes. Companies would then waste less time complying with the code and could still help reduce the deficit.
But the roundtable is not pushing for the simpler, flatter, fiscally responsible code that Mr. Engler mentions. It’s pushing for tax cuts for its members: a lower rate, the continuation of existing loopholes and the creation of new ones, like a permanent credit for research and a tax holiday for overseas profits. Mr. Engler and his colleagues, in other words, are lobbying for a more complex, less fiscally responsible tax code.
Given how much we’re going to talk about the deficit, I’d suggest requiring any self-proclaimed fiscal conservative to give specifics. You’re against the deficit? Great. How do you want to cut it?
The fact is, naming specific ways to reduce the deficit is no more technically challenging than naming new spending programs or tax cuts. To take the current debt ceiling negotiations as a benchmark, White House officials and Congressional leaders are looking for about $200 billion a year in deficit reduction. They could get it any number of ways.
Two different bipartisan groups — the Bowles-Simpson deficit commission and the Sustainable Defense Task Force — have called for roughly $100 billion a year in cuts to the military budget. Getting rid of farm subsidies would save about $15 billion. So would cutting the federal work force by 10 percent.
Allowing the expiration of the Bush tax cuts on income above $250,000 a year would raise about $60 billion a year. The expiration of all the other Bush tax cuts would bring in another $200 billion or so. Various changes to Medicare and Social Security — raising the retirement age, reducing benefits for the affluent, cutting back on some forms of health care — could cut spending even more. In the long term, with projected deficits well above $1 trillion a year, such changes will surely be necessary.
By the standard of specificity, a few of the most prominent politicians in the deficit debate end up looking more serious than many outside groups. Representative Paul Ryan, the Wisconsin Republican who heads the House Budget Committee, has called for the effective elimination of Medicare for everyone under 55 years old. Mr. Obama favors some Medicare cuts, the closing of several modest tax loopholes and tax increases on the affluent.
There are many potential objections to the Obama plan and to the Ryan plan. And neither would eliminate the deficit. But both plans would at least reduce it, which is more than you can say about corporate America’s deficit plan.
The deficit is one of those national challenges that will require tough choices and courageous leadership. Many of those choices and much of that leadership will have to come from politicians. But I’m guessing we won’t solve the deficit until the politicians get some help — and simply calling yourself a fiscal conservative doesn’t count as help.