Austerians have had their worst week since the last time GDP numbers came out for a country that's tried austerity.
But this time is, well, different. It's not "just" that southern Europe is stuck in a depression and Britain is stuck in a no-growth trap. It's that the very intellectual foundations of austerity are unraveling. In other words, economists are finding out that austerity doesn't work in practice or in theory.
What a difference an Excel coding error makes.
Austerity has been a policy in search of a justification ever since it began in 2010. Back then, policymakers decided it was time for policy to go back to "normal" even though the economy hadn't, because deficits just felt too big. The only thing they needed was a theory telling them why what they were doing made sense. Of course, this wasn't easy when unemployment was still high, and interest rates couldn't go any lower. Alberto Alesina and Silvia Ardagna took the first stab at it, arguing that reducing deficits would increase confidence and growth in the short-run. But this had the defect of being demonstrably untrue (in addition to being based off a naïve reading of the data). Countries that tried to aggressively cut their deficits amidst their slumps didn't recover; they fell into even deeper slumps.
Enter Carmen Reinhart and Ken Rogoff. They gave austerity a new raison d'être by shifting the debate from the short-to-the-long-run. Reinhart and Rogoff acknowledged austerity would hurt today, but said it would help tomorrow -- if it keeps governments from racking up debt of 90 percent of GDP, at which point growth supposedly slows dramatically. Now, this result was never more than just a correlation -- slow growth more likely causes high debt than the reverse -- but that didn't stop policymakers from imputing totemic significance to it. That is, it became a "fact" that everybody who mattered knew was true.
Except it wasn't. Reinhart and Rogoff goofed. They accidentally excluded some data in one case, and used some wrong data in another; the former because of an Excel snafu. If you correct for these very basic errors, their correlation gets even weaker, and the growth tipping point at 90 percent of GDP disappears. In other words, there's no there there anymore.
Austerity is back to being a policy without a justification. Not only that, but, as Paul Krugman points out, Reinhart and Rogoff's spreadsheet misadventure has been a kind of the-austerians-have-no-clothes moment. It's been enough that even some rather unusual suspects have turned against cutting deficits now. For one, Stanford professor John Taylor claims L'affaire Excel is why the G20, the birthplace of the global austerity movement in 2010, was more muted on fiscal targets recently.
The discovery of errors in the Reinhart-Rogoff paper on the growth-debt nexus is already impacting policy. A participant in last Friday's G20 meetings told me that the error was a factor in the decision to omit specific deficit or debt-to-GDP targets in the G20 communique.
The UK and almost all of Europe have erred in terms of believing that austerity, fiscal austerity in the short term, is the way to produce real growth. It is not. You've got to spend money.Bond investors want growth much like equity investors, and to the extent that too much austerity leads to recession or stagnation then credit spreads widen out -- even if a country can print its own currency and write its own checks. In the long term it is important to be fiscal and austere. It is important to have a relatively average or low rate of debt to GDP. The question in terms of the long term and the short term is how quickly to do it.
Growth vigilantes are the new bond vigilantes. Gross thinks the boom, not the slump, is the time for austerity -- which sounds an awful lot like you-know-who.
The austerity fever has even broken in Europe. At least a bit. Now, eurocrats can't say that austerity has been anything other than the best of all economic policies, but they can loosen the fiscal noose. And that's what they might be doing, by giving countries more time and latitude to hit their deficit targets. Here's how European Commission president José Manuel Barroso framed the issue on Monday:
While [austerity] is fundamentally right, I think it has reached its limits in many aspects. A policy to be successful not only has to be properly designed. It has to have the minimum of political and social support.
That's not much, but it's still much better than the growth-through-austerity plan Eurogroup president Jeroen Dijsselbloem was peddling on ... Saturday.
Now, Reinhart and Rogoff's Excel imbroglio hasn't exactly set off a new Keynesian moment. Governments aren't going to suddenly take advantage of zero interest rates to start spending more to put people back to work. Stimulus is still a four-letter word. Indeed, the euro zone, Britain, and, to a lesser extent, the United States, are still focussed on reducing deficits above all else. But there's a greater recognition that trying to cut deficits isn't enough to cut debt burdens. You need growth too. In other words, people are remembering that there's a denominator in the debt-to-GDP ratio.
But austerity doesn't just have a math problem. It has an image problem too. Just a week ago, Reinhart and Rogoff's work was the one commandment of austerity: Thou shall not run up debt in excess of 90 percent of GDP. Wisdom didn't get more conventional. What did this matter? Well, as Keynes famously observed, it's better for reputation to fail conventionally than to succeed unconventionally. In other words, elites were happy to pursue obviously failed policies as long as they were the right failed policies.
But now austerity doesn't look so conventional. It looks like the punchline of a bad joke about Excel destroying the global economy. Maybe, just maybe, that will be enough to free us from some defunct economics.
When my wife was struck by mysterious, debilitating symptoms, our trip to the ER revealed the sexism inherent in emergency treatment.
Early on a Wednesday morning, I heard an anguished cry—then silence.
I rushed into the bedroom and watched my wife, Rachel, stumble from the bathroom, doubled over, hugging herself in pain.
“Something’s wrong,” she gasped.
This scared me. Rachel’s not the type to sound the alarm over every pinch or twinge. She cut her finger badly once, when we lived in Iowa City, and joked all the way to Mercy Hospital as the rag wrapped around the wound reddened with her blood. Once, hobbled by a training injury in the days before a marathon, she limped across the finish line anyway.
So when I saw Rachel collapse on our bed, her hands grasping and ungrasping like an infant’s, I called the ambulance. I gave the dispatcher our address, then helped my wife to the bathroom to vomit.
Lip service to the crucial function of the Fourth Estate is not enough to sustain it.
It’s not that Mark Zuckerberg set out to dismantle the news business when he founded Facebook 13 years ago. Yet news organizations are perhaps the biggest casualty of the world Zuckerberg built.
There’s reason to believe things are going to get worse.
A sprawling new manifesto by Zuckerberg, published to Facebook on Thursday, should set off new alarm bells for journalists, and heighten news organizations’ sense of urgency about how they—and their industry—can survive in a Facebook-dominated world.
Facebook’s existing threat to journalism is well established. It is, at its core, about the flow of the advertising dollars that news organizations once counted on. In this way, Facebook’s role is a continuation of what began in 1995, when Craigslist was founded. Its founder, Craig Newmark, didn’t actively aim to decimate newspapers, but Craigslist still eviscerated a crucial revenue stream for print when people stopped buying newspaper classifieds ads.
Radical longevity may change the way we live—and not necessarily for the better.
“So, you don’t want to die?” I asked Zoltan Istvan, then the Transhumanist candidate for president, as we sat in the lobby of the University of Baltimore one day last fall.
“No,” he said, assuredly. “Never.”
Istvan, an atheist who physically resembles the pure-hearted hero of a Soviet children’s book, explained that his life is awesome. In the future, it will grow awesomer still, and he wants to be the one to decide when it ends. Defying aging was the point of his presidential campaign, the slogan of which could have been “Make Death Optional for Once.” To (literally) drive the point home, he circled the nation in the “Immortality Bus,” a brown bus spray-painted to look like a coffin.
He knew he’d lose, of course, but he wanted his candidacy to promote the cause of transhumanism—the idea that technology will allow humans to break free of their physical and mental limitations. His platform included, in part, declaring aging a disease. He implanted a chip in his hand so he could wave himself through his front door, and he wants to get his kids chipped, too. He’d be surprised, he told me, if soon “we don’t start merging our children with machines.” He’d like to replace his limbs with bionics so he can throw perfectly in water polo. Most of all, he wants to stick around for a couple centuries to see it all happen, perhaps joining a band or becoming a professional surfer, a long white beard trailing in his wake.
The preconditions are present in the U.S. today. Here’s the playbook Donald Trump could use to set the country down a path toward illiberalism.
It’s 2021, and President Donald Trump will shortly be sworn in for his second term. The 45th president has visibly aged over the past four years. He rests heavily on his daughter Ivanka’s arm during his infrequent public appearances.
Fortunately for him, he did not need to campaign hard for reelection. His has been a popular presidency: Big tax cuts, big spending, and big deficits have worked their familiar expansive magic. Wages have grown strongly in the Trump years, especially for men without a college degree, even if rising inflation is beginning to bite into the gains. The president’s supporters credit his restrictive immigration policies and his TrumpWorks infrastructure program.
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Humans have been living and working with horses for more than 5,000 years, since the first domesticated equines had their teeth worn down by primitive bridles in northern Kazakhstan. Hands could not have built modern civilization without the help of hooves—to haul ploughs, pull carriages, march soldiers into battle, and carry messages of love and war across hundreds of otherwise-insurmountable miles.
An unlikely pairing of wily predator and one-ton prey, humans and horses have managed to successfully communicate across the species barrier because we share a language: emotion. Experienced riders and trainers can learn to read the subtle moods of individual horses according to wisdom passed down from one horseman to the next, but also from years of trial-and-error. I suffered many bruised toes and nipped fingers before I could detect a curious swivel of the ears, irritated flick of the tail, or concerned crinkle above a long-lashed eye.
On Saturday, the president slipped away from the doubters in Washington to address a Florida crowd filled with loyal supporters.
MELBOURNE, Fla.—After four miserable weeks of being locked up in presidential prison—starved of affection, suffocated by bureaucracy, tormented by the press—Donald Trump made a break for it Saturday.
Touching down just before sunset here in the heart of Trump Country, the president was greeted as he emerged from Air Force One by an adoring crowd of 9,000 super-fans, many of whom had stood in line for hours to see him speak. Trump made no effort at masking his gratitude. “I’m here because I want to be among my friends,” he told them, adding, “I also want to speak to you without the filter of the fake news.”’
The rally was widely trumpeted in the press as a return to the campaign trail, and it’s easy to see why. The event had all the trappings of Trump-style electioneering—he deployed the same slogans, recycled the same stump-speech rhetoric, and walked out on stage to the same soundtrack. What’s more, the White House made clear earlier this week that the rally was being funded not by the federal government but by his campaign, making this perhaps the earliest launch to a reelection bid in history.
Even within a university as famously offbeat as the Massachusetts Institute of Technology, Random Hall has a reputation for being a little quirky. According to campus legend, the students who first lived there in 1968 wanted to call the dorm “Random House” until the publishing house with that same name sent them a letter to object. The individual floors have names, too. One is called Destiny, a result of its cash-strapped inhabitants selling the naming rights on eBay; the winning bid was $36 from a man who wanted to name it after his daughter.
In 2005, another plan started to take shape in the corridors of Random Hall. James Harvey was nearing the completion of his mathematics degree and needed a project for his final semester. While searching for a topic, he became interested in lotteries.
Even as the militant group loses ground in Iraq, many Sunnis say they have no hope for peace. One family’s story shows why.
Falah Sabar heard a knock at the door. It was just before midnight in western Baghdad last April and Falah was already in bed, so he sent his son Wissam to answer. Standing in the doorway was a tall young man in jeans who neither shook Wissam’s hand nor offered a greeting. “We don’t want you here,” he said. “Your family should be gone by noon tomorrow.” For weeks, Wissam, who was 23, had been expecting something like this, as he’d noticed a dark mood taking hold of the neighborhood. He went to get his father, but when they returned, the stranger was gone.
Falah is tall and broad-shouldered, with salt-and-pepper hair. At 48, he was the patriarch of a brood of sons, daughters-in-law, and grandchildren. He sat down with Wissam to talk things through. They had been in Baghdad for just three months, but that was long enough for the abiding principle of refugee life to imprint itself on Falah’s psyche: Avoid trouble. When Wissam had managed to find a job at a construction firm, Falah had told him to be courteous, not to mix with strangers, and not to ask too many questions. If providence had granted them a new life in this unfamiliar city, it could snatch that life away just as easily.
A new study suggests that some people are neither "owls" nor "larks"
Erwin Schrödinger, the Nobel-prize-winning Austrian physicist, was able to make major contributions to the fields of quantum mechanics, general relativity, and color theory during his lifetime. There was only one caveat: He was not able to make those contributions ... in the morning.
“He couldn’t work in the mornings at all,” his wife, AnneMarie, said in an interview. “The [Max] Planck lectures—as you know, it was 30 or 40 years ago that Planck was in Berlin—were given in the morning from nine to ten. When he got this very, very honorable call to Berlin, he wrote first thing and said, ‘I’m very sorry, but I can’t keep the lecture hours because I can’t work in the morning.’ ... They understood, and changed it to the afternoon—two lectures, one after the other—on two days.”
The Scandinavian country is an education superpower because it values equality more than excellence.
The Scandinavian country is an education superpower because it values equality more than excellence.
Everyone agrees the United States needs to improve its education system
dramatically, but how? One of the hottest trends in education reform lately
is looking at the stunning success of the West's reigning education
Trouble is, when it comes to the lessons that Finnish schools have to offer,
most of the discussion seems to be missing the point.
The small Nordic country of Finland used to be known -- if it was known for
anything at all -- as the home of Nokia, the mobile phone giant. But lately
Finland has been attracting attention on global surveys of quality of
life -- Newsweek ranked it number one last year -- and Finland's national
education system has been receiving particular praise, because in recent
years Finnish students have been turning in some of the highest test scores
in the world.