Category Archives: Project-Syndicate.org

How the Market Is Betraying Advanced Economies

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April 16,2016

How the Market Is Betraying Advanced Economies

Diane Coyle
coyle6_Michel StoupakNurPhoto via Getty Images_yellow vests

As lifestyles in the world’s developing economies improve drastically, many in the advanced economies are seeing their well being deteriorate – a trend that automation will only exacerbate. Without fundamental change in the framework of public policymaking, it is difficult to imagine a prosperous future in these societies.

 

CAMBRIDGE – Despite ever-improving conditions for millions of people around the world – documented by entities like the University of Oxford’s Our World in Data and highlighted by scholars like Steven Pinker – popular discontent is on the rise in many places. The reason is simple: whereas the first trend is being driven by low- and middle-income countries, the second is concentrated in high-income countries.

Apr 9, 2019 Joseph E. Stiglitz thinks it’s his attacks on the truth-seeking institutions that underpin economic prosperity.

Throughout the developed world, conditions for many workers are deteriorating, with no recovery in sight. Income inequality is near historic highs, wealth inequality is even higher, and economic insecurity is widespread.As the United Kingdom tears itself apart politically and constitutionally over Brexit, many of its citizens struggle with low-quality jobs, inadequate housing, and poverty so severe that they rely on food banks. France’s Yellow Vest protests have been hijacked by violent extremists, but they reflect real grievances about the growing challenge of maintaining living standards. In the United States, the Economic Report of the President touts the supposed elimination of poverty, but life expectancy does not decline in a prosperous country.In short, the post-World War II social contract in many of today’s developed economies is breaking down. And even more uncertainty and insecurity are on the way, as new technologies such as artificial intelligence and robotics take root.Though the pace and scope of the next wave of automation is impossible to predict with precision, the impact will be profound. Like other digital technologies, AI and robotics will boost the value of some skills while reducing the value of others. And, by , extensive algorithmic decision-making risks amplifying existing inequalities further.It is impossible to uninvent technology. But we should not fall into the trap of technological determinism. The forces that drive structural economic change are always refracted through policy decisions, which can help ensure that technological innovations contribute to a more prosperous future.

Given the depth of the transformation ahead, however, it is not just the policies themselves that must change, but the very framework on which they are based. This means abandoning the idea – which has shaped public policy for more than a generation – that the “market” must be the organizing principle for collective decision-making.

The market, in this sense, is an abstraction – one that has little to do with actual markets, which are social institutions as varied and multitudinous as Leo Tolstoy’s unhappy families. It embodies the assumption that, overall, we secure the best economic outcomes if producers compete to respond to the desires of individual consumers (in line with their purchasing power). And its performance is measured according to the number of contemporaneous exchanges taking place.This is to be the best metric. For one thing, it does not account for the depreciation of assets, from houses in California destroyed by wildfires to insect species at risk of extinction. It also fails to account for the fact that a growing proportion of exchanges in the digital economy involve “public goods,” consumption of which is non-rivalrous (the good can be shared by any number of people without being depleted).But there is an even more fundamental problem with assessing an economy’s welfare according to the satisfaction of individual choices. As the late William Baumol pointed out, if you assume that economic agents are independent, you will conclude that independent choices maximize their well being. This is circular reasoning.In fact, economic agents are not as independent as the conventional wisdom would have us believe. People’s consumption preferences are not discovered through introspection and then upheld permanently; they are shaped socially and change over time. In the age of social media “influencers,” this may be truer than ever, with turbocharged network effects amplifying the impact of one individual’s choices on others.Likewise, in production, there is far-reaching potential for economies of scope and scale – potential that grows even larger in high-tech domains. This means that one firm’s production decisions affect production by others in the same market.The conceptual underpinnings of policymaking need to be updated to reflect this economic reality. For starters, governments need to recognize that their decisions shape the structure of production, and develop strategies to support particular strengths in production (through innovation policies or procurement frameworks) or to address weaknesses (in areas such as skills). Economists like Dani Rodrik and have led the way in proposing ways to think about modern industrial strategy.Governments must also improve the opportunities available to those left behind in today’s fast-changing economy. This means ensuring that all citizens have access to quality public education, public transportation and broadband infrastructure, adequate health care, and decent housing. Such basic services are more important than income subsidies, because they are public goods, which the market – where decisions are made by aggregating individual demand – will not provide.The organization of millions of interdependent individuals in a technologically complex society will always be difficult to manage. With productivity flat-lining and public anger growing, it is clear that existing policies are not up to the challenge. Without a new approach, it is difficult to imagine a prosperous future for Western societies.

 

  • WmC Mantis  

    Is Diane Coyle trying to tell us that economic policymakers should be doing more to ensure a continually rising mean household quality of life? If so, she could have done it in fewer words.

 

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Trump’s Most Worrisome Legacy

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April 13, 2019

stiglitz257_Win McNameeGetty Images_trump nielsen

Trump’s Most Worrisome Legacy

The US president’s attacks on America’s truth-seeking institutions jeopardize its continued prosperity and very ability to function as a democracy. As corporate giants capture the institutions that are supposed to protect ordinary citizens, a dystopia once imagined only by science fiction writers is emerging before our eyes.

NEW YORK – Kirstjen Nielsen’s forced resignation as US Secretary of Homeland Security is no reason to celebrate. Yes, she presided over the forced separation of families at the US border, notoriously housing young children in wire cages. But Nielsen’s departure is not likely to bring any improvement, as President Donald Trump wants to replace her with someone who will carry out his anti-immigrant policies even more ruthlessly.

Trump’s immigration policies are appalling in almost every aspect. And yet they may not be the worst feature of his administration. Indeed, identifying its foulest aspects has become a popular American parlor game. Yes, he has called immigrants criminals, rapists, and animals. But what about his deep misogyny or his boundless vulgarity and cruelty? Or his winking support of white supremacists? Or his withdrawal from the Paris climate accord, the Iran nuclear deal, and the Intermediate-Range Nuclear Forces Treaty? And, of course, there is his war on the environment, on health care, and on the rules-based international system.

This morbid game never ends, of course, because new contenders for the title emerge almost daily. Trump is a disrupting personality, and after he’s gone, we may well reflect on how such a deranged and morally challenged person could have been elected president of the world’s most powerful country in the first place.

But what concerns me most is Trump’s disruption of the institutions that are necessary for the functioning of society. Trump’s “MAGA” (Make America Great Again) agenda is, of course, not about restoring the moral leadership of the United States. It embodies and celebrates unbridled selfishness and self-absorption. MAGA is about economics. But that forces us to ask: what is the basis of America’s wealth?

Adam Smith tried to provide an answer in his classic 1776 book The Wealth of Nations. For centuries, Smith noted, standards of living had been stagnant; then, toward the end of the eighteenth century, incomes start to soar. WhySmith himself was a leading light of the great intellectual movement known as the Scottish Enlightenment. The questioning of established authority that followed the earlier Reformation in Europe forced society to ask: How do we know the truth? How can we learn about the world around us? And how can and should we organize our society?From the search for answers to these questions arose a new epistemology, based on the empiricism and skepticism of science, which came to prevail over the forces of religion, tradition, and superstition. Over time, universities and other research institutions were established to help us judge truth and discover the nature of our world. Much of what we take for granted today – from electricity, transistors, and computers to lasers, modern medicine, and smartphones – is the result of this new disposition, undergirded by basic scientific research (most of it financed by government).

The absence of royal or ecclesiastical authority to dictate how society should be organized to ensure that things worked out well, or as well as they could, meant that society had to figure it out for itself. But devising the institutions that would ensure society’s wellbeing was a more complicated matter than discovering the truths of nature. In general, one couldn’t conduct controlled experiments.

A close study of past experience could, however, be informative. One had to rely on reasoning and discourse – recognizing that no individual had a monopoly on our understandings of social organization. Out of this process emerged an appreciation that governance institutions based on the rule of law, due process, and checks and balances, and supported by foundational values like individual liberty and justice for all, are more likely to produce good and fair decisions. These institutions may not be perfect, but they have been designed so that it is more likely that flaws will be uncovered and eventually corrected.

That process of experimentation, learning, and adaptation, however, requires a commitment to ascertaining the truth. Americans owe much of their economic success to a rich set of truth-telling, truth-discovering, and truth-verifying institutions. Central among them are freedom of expression and independent media. Like all people, journalists are fallible; but, as part of a robust system of checks and balances on those in positions of power, they have traditionally provided an essential public good.Since Smith’s day, it has been shown that a nation’s wealth depends on the creativity and productivity of its people, which can be advanced only by embracing the spirit of scientific discovery and technological innovation. And it depends on steady improvements in social, political, and economic organization, discovered through reasoned public discourse.

The attack by Trump and his administration on every one of the pillars of American society – and his especially aggressive vilification of the country’s truth-seeking institutions – jeopardizes its continued prosperity and very ability to function as a democracy. Nor do there appear to be checks on corporate giants’ efforts to capture the institutions – the courts, legislatures, regulatory agencies, and major media outlets – that are supposed to prevent them from exploiting workers and consumers. A dystopia previously imagined only by science fiction writers is emerging before our eyes. It should give us chills to think of who “wins” in this world, and who or what we might become, just in the struggle to survive.

 

Joseph E. Stiglitz, a Nobel laureate in economics, is University Professor at Columbia University and Chief Economist at the Roosevelt Institute. His latest book, People, Power, and Profits: Progressive Capitalism for an Age of Discontent, will be published in April.

Picking Up the Pieces After Hanoi

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March 19, 2019

Picking Up the Pieces After Hanoi

by Richard N. Haass

The collapse of last month’s summit between US President Donald Trump and North Korean leader Kim Jong-un was perhaps the inevitable result of a process in which the two leaders dominated, optimistic about their personal relationship and confident in their abilities. The question is what to do now.

 

NEW YORK – When last month’s summit between US President Donald Trump and North Korean leader Kim Jong-un ended without a deal, the result was not surprising. One or both countries came to Hanoi with a misunderstanding of what was possible.

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The United States maintained that North Korea wanted nearly all international sanctions lifted upfront and was not prepared to give up enough of its nuclear facilities to warrant doing so. North Korean officials explained that they were prepared to dismantle the country’s main facility, the Yongbyon Nuclear Scientific Research Center, “permanently and completely,” but only in exchange for a considerable reduction in existing sanctions.

The anticlimax in Hanoi was perhaps the inevitable result of a process in which the two leaders dominated, optimistic about their personal relationship and confident in their abilities. Senior officials and other staff members, who normally devote weeks and months to preparing for such summits, had but a limited role.

The question is what to do now. One option is to try to negotiate a compromise: either more dismantling of nuclear infrastructure in exchange for more sanctions relief, or less dismantling in exchange for less relief.

Although one of these approaches may prove possible, either outcome would be less than ideal. Simply agreeing to give up individual nuclear facilities is not the same as denuclearization. Indeed, it does not necessarily even get us closer to denuclearization, because facilities could be built or expanded as others are being dismantled. Precisely this currently seems to be occurring. Meanwhile, lifting sanctions removes the pressure on North Korea to take meaningful steps toward denuclearization.

So what are the alternatives? Using even limited military force risks escalation, a costly war from which no one would benefit, and a crisis in relations between the US and South Korea. And, given North Korea’s demonstrated resilience, existing or even additional sanctions alone are highly unlikely to be enough to coerce its leaders into abandoning their nuclear program.

Moreover, no matter how much pressure is brought to bear on North Korea, China and Russia will likely do whatever is necessary to ensure its survival, given their strategic interest in avoiding a reunified Korean Peninsula aligned with the US. Hopes that North Korea will collapse under its own weight are thus unrealistic.

Trump seems to harbor the equally unrealistic notion that North Korea will voluntarily give up its nuclear weapons in order to become the next Asian economic tiger. But while Kim wants sanctions relief, fundamental economic reform would threaten his tight grip on power, and giving up his nuclear weapons and missiles would make North Korea and himself vulnerable. He has taken note of what happened to Ukraine, which voluntarily relinquished its Soviet-era nuclear weapons in the early 1990s, as well as to Iraq’s Saddam Hussein and Libya’s Muammar al-Qaddafi.

The status quo, however, is no solution. The current testing moratorium could end; indeed, North Korea is threatening to resume tests and there is evidence it is reconstituting its principal missile-testing site. This may be a bid to encourage the US to show more flexibility, or the North may actually be preparing to restart testing – a step that would likely lead the US to resume large-scale military exercises with South Korea and push for new sanctions. Talks would likely be suspended; we would be back to where we were two years ago but with an overlay of recrimination and mistrust.

Even absent such developments, drift is not desirable. North Korea could use the passage of time to increase the number of nuclear weapons in its arsenal and make some improvements to its warheads and delivery systems without overt testing. There is a big difference between a North Korea armed with a handful of inefficient warheads and inaccurate missiles and one with dozens of advanced weapons that could be mounted on accurate long-range missile systems capable of reaching the US.

At this point, any realistic policy must begin with accepting the reality that complete and fully verifiable denuclearization is not a realistic prospect any time soon. It need not and should not be abandoned as a long-term goal, but it cannot dominate near-term policy. An all-or-nothing policy toward North Korea will result in nothing.

So it makes sense to explore a phased approach. In an initial phase, North Korea would agree to freeze not just the testing of its systems, but also the production of nuclear material, nuclear weapons, and long-range missiles. This would require the North Korean authorities to provide a detailed accounting (a so-called declaration) of the relevant facilities and agree to verification by international inspectors.

In exchange, North Korea would receive the sort of substantial sanctions relief it sought in Hanoi. There could also be an end to the state of war that has existed for the past seven decades, and liaison offices could be opened in Washington, DC, and Pyongyang. But full sanctions relief and diplomatic normalization would come only with full denuclearization.

This might well be too much for North Korea, arguably the world’s most closed society. If so, the bulk of the sanctions need to remain in place; they would be lifted only in proportion to any dismantling – and only so long as the world could be confident that North Korea was not developing new capabilities to replace those it was abandoning. The US could specify which sites, in addition to Yongbyon, need to be dismantled.

Even this less ambitious approach would likely prove extraordinarily difficult. But, given the high stakes and unattractive alternatives in dealing with North Korea, any viable route to a settlement that ensures long-term stability is worth pursuing.

ttps://www.project-syndicate.org/commentary/dealing-with-north-korea-after-hanoi-summit-failure-by-richard-n–haass-2019-03

Richard N. Haass, President of the Council on Foreign Relations, previously served as Director of Policy Planning for the US State Department (2001-2003), and was President George W. Bush’s special envoy to Northern Ireland and Coordinator for the Future of Afghanistan. He is the author of A World in Disarray: American Foreign Policy and the Crisis of the Old Order.

Lessons from BREXIT

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March 10, 2019

Lessons from BREXIT

By Emmanuel Macron
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European citizens need to learn from the Brexit impasse and apply those lessons ahead of and after the European Parliament election in May. That means embracing reforms that advance the three goals that lie at the heart of the European project.

 

PARIS – Never, since World War II, has Europe been as essential. Yet never has Europe been in so much danger. Brexit stands as the symbol of that. It symbolises the crisis of Europe, which has failed to respond to its peoples’ needs for protection from the major shocks of the modern world. It also symbolises the European trap. That trap is not one of being part of the European Union. The trap is in the lie and the irresponsibility that can destroy it.

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Who told the British people the truth about their post-Brexit future? Who spoke to them about losing access to the European market? Who mentioned the risks to peace in Ireland of restoring the former border? Nationalist retrenchment offers nothing; it is rejection without an alternative. And this trap threatens the whole of Europe: the anger mongers, backed by fake news, promise anything and everything.

We have to stand firm, proud and lucid, in the face of this manipulation and say first of all what today’s united Europe is. It is a historic success: the reconciliation of a devastated continent in an unprecedented project of peace, prosperity and freedom. We should never forget that. And this project continues to protect us today. What country can act on its own in the face of aggressive strategies by the major powers? Who can claim to be sovereign, on their own, in the face of the digital giants?

How would we resist the crises of financial capitalism without the euro, which is a force for the entire European Union? Europe is also those thousands of projects daily that have changed the face of our regions: the school refurbished, the road built, and the long-awaited arrival of high-speed Internet access. This struggle is a daily commitment, because Europe, like peace, can never be taken for granted. I tirelessly pursue it in the name of France to take Europe forward and defend its model. We have shown that what we were told was unattainable, the creation of a European defence capability and the protection of social rights, was in fact possible.

Yet we need to do more and sooner, because there is the other trap: the trap of the status quo and resignation. Faced with the major crises in the world, citizens so often ask us, “Where is Europe? What is Europe doing?” It has become a soulless market in their eyes.

Yet Europe is not just a market. It is a project. A market is useful, but it should not detract from the need for borders that protect and values that unite. The nationalists are misguided when they claim to defend our identity by withdrawing from Europe, because it is the European civilisation that unites, frees and protects us. But those who would change nothing are also misguided, because they deny the fears felt by our peoples, the doubts that undermine our democracies. We are at a pivotal moment for our continent, a moment when together we need to politically and culturally reinvent the shape of our civilisation in a changing world. It is the moment for European renewal. Hence, resisting the temptation of isolation and divisions, I propose we build this renewal together around three ambitions: freedom, protection and progress.

Defend Our Freedom

The European model is based on the freedom of man and the diversity of opinions and creation. Our first freedom is democratic freedom: the freedom to choose our leaders as foreign powers seek to influence our vote at each election. I propose creating a European Agency for the Protection of Democracies, which will provide each member state with European experts to protect their election processes against cyber-attacks and manipulation. In this same spirit of independence, we should also ban the funding of European political parties by foreign powers. We should have European rules banish all incitements to hate and violence from the Internet, since respect for the individual is the bedrock of our civilisation of dignity.

Protect Our Continent

Founded on internal reconciliation, the EU has forgotten to look at the realities of the world. Yet no community can create a sense of belonging if it does not have bounds that it protects. The boundary is freedom in security. We therefore need to rethink the Schengen area: all those who want to be part of it should comply with obligations of responsibility (stringent border controls) and solidarity (one asylum policy with the same acceptance and refusal rules). We will need a common border force and a European asylum office, strict control obligations and European solidarity to which each country will contribute under the authority of a European Council for Internal Security. On the issue of migration, I believe in a Europe that protects both its values and its borders.

The same standards should apply to defence. Substantial progress has been made in the last two years, but we need to set a clear course: a treaty on defence and security should define our fundamental obligations in association with NATO and our European allies: increased defence spending, a truly operational mutual defence clause, and the European Security Council with the United Kingdom on board to prepare our collective decisions.

Our borders also need to guarantee fair competition. What power in the world would accept continued trade with those who respect none of their rules? We cannot suffer in silence. We need to reform our competition policy and reshape our trade policy with penalties or a ban in Europe on businesses that compromise our strategic interests and fundamental values such as environmental standards, data protection and fair payment of taxes; and the adoption of European preference in strategic industries and our public procurement, as our American and Chinese competitors do.

Recover the Spirit of Progress

Europe is not a second-rank power. Europe in its entirety is a vanguard: it has always defined the standards of progress. In this, it needs to drive forward a project of convergence rather than competition: Europe, where social security was created, needs to introduce a social shield for all workers, east to west and north to south, guaranteeing the same pay in the same workplace, and a minimum European wage appropriate to each country and discussed collectively every year.

Getting back on track with progress also concerns spearheading the ecological cause. Will we be able to look our children in the eye if we do not also clear our climate debt? The EU needs to set its target – zero carbon by 2050 and pesticides halved by 2025 – and adapt its policies accordingly with such measures as a European Climate Bank to finance the ecological transition, a European food safety force to improve our food controls and, to counter the lobby threat, independent scientific assessment of substances hazardous to the environment and health. This imperative needs to guide all our action: from the European Central Bank to the European Commission, from the European budget to the Investment Plan for Europe.  All our institutions need to have the climate as their mandate.

Progress and freedom are about being able to live from your work: Europe needs to look ahead to create jobs. This is why it needs not only to regulate the global digital giants by putting in place European supervision of the major platforms (prompt penalties for unfair competition, transparent algorithms, etc.), but also to finance innovation by giving the new European Innovation Council a budget on a par with the United States in order to spearhead new technological breakthroughs such as artificial intelligence.

A world-oriented Europe needs to look towards Africa

A world-oriented Europe needs to look towards Africa, with which we should enter into a covenant for the future, taking the same road and ambitiously and non-defensively supporting African development with such measures as investment, academic partnerships and education for girls.

Freedom, protection and progress. We need to build European renewal on these pillars. We cannot let nationalists without solutions exploit the people’s anger. We cannot sleepwalk through a diminished Europe. We cannot become ensconced in business as usual and wishful thinking. European humanism demands action. And everywhere, the people are standing up to be part of that change.

So, by the end of the year, let’s set up, with the representatives of the European institutions and the member states, a Conference for Europe in order to propose all the changes our political project needs, with an open mind, even to amending the treaties. This conference will need to engage with citizens’ panels and hear academics, business and labour representatives, and religious and spiritual leaders. It will define a roadmap for the EU that translates these key priorities into concrete actions. There will be disagreement, but is it better to have a static Europe or a Europe that advances, sometimes at different paces, and that is open to all?

In this Europe, the peoples will really take back control of their future. In this Europe, the United Kingdom, I am sure, will find its true place.

The Brexit impasse is a lesson for us all. We need to escape this trap and make the upcoming European Parliament elections and our project meaningful. It is for Europe’s citizens to decide whether Europe and the values of progress that it embodies are to be more than just a passing episode in history. This is the choice I propose: to chart together the road to European renewal.

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Emmanuel Macron is President of France.

Why Economics Must Get Broader Before It Gets Better

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March 9, 2019

Why Economics Must Get Broader Before It Gets Better

By Mohamed A. El-Erian

Even as the public’s skepticism toward their profession has grown, economists have continued to ignore increasingly obvious flaws in their analytical frameworks. A discipline long dominated by “high priests” must now adopt a more open mindset, or risk becoming irrelevant.

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L-R: Stigltz- Hayek- Sowell-Keynes- Sen-Schwartz-Sachs- Friedman

NEW YORK – The economics profession took a beating after most of its leading practitioners failed to predict the 2008 global financial crisis, and it has been struggling to recover ever since. Not only were the years following the crash marked by unusually low, unequal growth; now we are witnessing a growing list of economic and financial phenomena that economists cannot readily explain.

Like Queen Elizabeth II, who famously asked in November 2008 why nobody had seen the crisis coming, many citizens have grown increasingly skeptical of economists’ ability to explain and predict economic developments, let alone offer sound guidance to policymakers. Some surveys rank economists among the least trusted professionals (after politicians, of course, whose trust economists have also lost).

A solid economic training is no longer regarded as a must-have for candidates for top positions in finance ministries and central banks. This marginalization has further weakened economists’ ability to inform and influence decision-making on issues that relate directly to their expertise (or what they would call their comparative and absolute advantage).

The profession owes its deteriorating reputation largely to excessive reliance on its own self-imposed orthodoxies. With more openness to interdisciplinary approaches and the broader use of existing analytical tools, particularly those offered by behavioral science and game theory, mainstream economics could start to overcome its shortcomings.Three recent developments underscore the urgency of this challenge. In the 12 months between the World Economic Forum’s 2018 and 2019 in Davos, those in attendance went from celebrating a synchronized global growth pickup to worrying about a synchronized . Notwithstanding the , neither the extent nor the speed of the change in consensus seems warranted by economic and financial developments, which suggests that economists may have misdiagnosed the initial conditions.

A second area of concern is monetary policy. Professional economists still have not spoken up clearly enough about the challenges facing the US Federal Reserve’s communication strategy, despite the fact that even slight misfires, such as occurred in the fourth quarter of last year, can trigger severe bouts of financial instability that threaten growth. Instead, they have simply continued to embrace the contemporary view that greater Fed transparency is always a good thing.

We have come a long way since the era of former Fed Chair Alan Greenspan’s “Fedspeak” (or, as he put it, “mumbling with great incoherence”). But that raises a new problem: illusionary precision. The Fed now follows every policy meeting with a release of statements, minutes, transcripts, blue-dot plots, and a press conference, signaling to markets a level of sophistication that is scarcely realistic in a world of fluidity and heightened uncertainty.

Rather than simply going along with the view that more is better, economists should be urging the Fed to adopt an approach more like that of the Bank of England, which emphasizes scenario analyses and fan charts. Economists could also be doing more to inform – and perhaps even influence – the Fed’s ongoing review of its policy frameworks and communications strategy. After all, the economics literature on asymmetrical information suggests that greater input from economists outside of the Fed is both appropriate and necessary for ensuring an optimal policy outcome.

A third area of concern is the Sino-American trade conflict, which is more controversial, owing to its political nature. So far, the vast majority of economists have trotted out the conventional argument that tariffs (real or threatened) are always bad for everyone. In doing so, they have ignored work from their own profession showing how the promised benefits of trade, while substantial, can be undermined by market and institutional imperfections. Those who wanted to make a productive contribution to the debate should have taken a more nuanced approach, applying to distinguish between the “what” and the “how” of trade warfare.

These are just three recent examples of how economists have dropped the ball. In addition, economists are struggling to explain recent productivity developments, the implications of rising inequality, the impact of persistently negative interest rates in the euro-zone, the longer-term effects of other unconventional monetary policy measures (amplified by the European Central Bank’s latest policy pivot), and the sudden slowdown in European growth. They also failed to foresee the Brexit saga and the political explosion of anger and alienation across the West in general.

None of this is a huge surprise, given the profession’s embrace of simplistic theoretical assumptions and excessive reliance on mathematical techniques that prize elegance over real-world applicability. Mainstream economics has placed far too much analytical emphasis on the equilibrium condition, while largely ignoring the importance of transitions and tipping points, not to mention multiple-equilibria scenarios. And the profession has routinely failed to account adequately for financial links, behavioral-science insights, and rapidly evolving secular and structural forces such as technological innovation, climate change, and the rise of China.

All of this should tell economists that there is plenty of room for improvement, and that they need to expand the scope of their analysis to take into account human interactions, distributional effects, financial-economic feedback mechanisms, and technological change. But this cannot just be about devising new analytical models within the field; economists also must incorporate insights from other disciplines that the profession has overlooked.

A discipline long dominated by “high priests” must now adopt a more open mindset. That means acknowledging and addressing unconscious biases, not least by making a concerted effort to improve inclusion and diversity within the field. It also means focusing more on inter-disciplinary approaches and distributional effects, and less on the purity of mathematical models, average conditions, and just the belly of distributions. Such structural changes will require more and better intellectual and institutional “safe zones,” so that analytical disruptions can be managed and channeled in productive directions.

Without significant adjustments, mainstream economics will remain two steps behind changing realities on the ground, and economists will be risking a further loss of credibility and influence. In an era of concern about climate change, political upheavals, and technological disruption, the shortcomings of mainstream economics must be addressed posthaste.

 

  • Rick Puglisi  

 

  • Michael Public  
  • Mike Robinson  

 

Will Trump Win a Second Term?

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March 8, 2019

Will Trump Win a Second Term?

Elizabeth Drew
ttps://www.project-syndicate.org/commentary/how-trump-wins-second-term-in-2020-by-elizabeth-drew-2019-03

 

 

Logic would suggest that US President Donald Trump can’t make it through a reelection fight: his base is too small, and he’s done next to nothing to expand it. But Trump’s success at solidifying his base could be his salvation in 2020.

 

WASHINGTON, DC – It seems that every time I write about Donald Trump’s presidency, I pronounce it to be in more trouble than ever. This time is no different: he and his presidency are indeed in more trouble than ever. And yet that may not prevent him from winning again in 2020.

The Burn and the Smart Elizabeth

I used to think Trump might not even finish his first term, much less get a second. Now I’m agnostic. For one thing, the US Justice Department’s questionable view that a sitting president can’t be indicted is an inducement to fight to stay in office. Logic would suggest that Trump can’t make it through a reelection fight: his base, an estimated 35-38% of voters, is too small, and he’s done next to nothing to expand it. And while he has governed for the base, he’s failed to fulfill many of his promises. But logic isn’t a trademark of the Trump Presidency.

Much of Trump’s base is quite satisfied that he’s named two very conservative justices to the Supreme Court, that he’s rolled back regulations on various industries, and that businesses and the wealthy got their tax cut. But business tycoons and the wealthy don’t attend his rallies and cheer his every utterance. Those who do tend to be middle- and lower-middle class voters, to whom he has delivered little other than the satisfaction of yelling at mentions of Democrats and chanting – still – “Lock her up!” even though their target, Trump’s 2016 opponent Hillary Clinton, has said that she won’t run again in 2020.

Trump is America’s first cult President. His followers delight in his insouciance toward the norms of political behavior, his dismissal of “political correctness,” and his skill at taking down opponents (like mocking the ultra-liberal Democratic presidential candidate Elizabeth Warren, who has claimed native-American heritage, with the sobriquet “Pocahontas”). He skates on the edge of incitement and governs on the edge of danger. His disparaging of the press – a fanatic Trump supporter roughed up a BBC cameraman at a recent rally – satisfies his followers’ suspicion of “elites,” while helping him create a fact-free environment in which his thousands of lies define an alternate reality. His invention of a “national emergency” on the US-Mexico border channels his base’s bigotry (plus his own) and supposedly justifies an unprecedented presidential power grab (bipartisan majorities in Congress don’t agree).

Trump’s success at solidifying his base could be his salvation in 2020 if the Democratic nomination process doesn’t produce a strong enough opponent or ends in hostility. And, though Trump appears to have committed several impeachable offenses – accepting “emoluments,” or gifts or income from foreign sources, and obstructing justice, among others – the Democrats are reluctant to be seen as seeking his removal from office, owing to the fierce opposition of Trump’s base. (Fanatic Trump supporters have threatened literal civil war if their hero is impeached or convicted.) Leading Democrats say that they won’t begin impeachment – or a vote in the House to indict a president on specific grounds – without bipartisan support.

This could be a circular trap: it took some time for any Republicans to accept the possibility that Richard Nixon should be forced to leave office, and Trump’s base is both larger and more institutionalized (through Fox News, among other pillars). By launching a broad investigation of Trump’s private and public actions – the House Judiciary Committee (which has jurisdiction over impeachment) this week sent out 81 demands for more information – congressional Democrats are actually trying to prepare for impeachment. If this doesn’t succeed, the theory goes, they will at least have damaged Trump’s reelection prospects. It would also be useful in case Special Counsel Robert Mueller’s anticipated report does not offer anything helpful. (No one outside that investigation has a clue as to what Mueller has found.)

With an overcrowded field of democrat presidential hopefuls, he may be in The White House beyond 2020.Will he be impeached? That’s the Question to ask.

Some of the figures now called before the committee were suggested by Trump’s former consigliere, Michael Cohen, who, in his own recent open testimony before the House Committee on Oversight and Reform, called his former boss a racist, a con man, and a cheat. (Apparently he had also been helpful to the Democrats in closed testimony before the Intelligence Committee.)

Although the oversight committee’s Republican members portrayed Cohen as untrustworthy because he’d been convicted of lying to Congress and will soon go to jail, they noticeably didn’t defend Trump. (Cohen had essentially lied to defend Trump, with his encouragement.) He also offered some evidence and anecdotes that could prove highly problematic for Trump – for example, by suggesting that Trump knew in advance about the first WikiLeaks dump of Democratic Party emails and about the infamous meeting in Trump Tower between top Trump aides and Russian operatives. In the end, a poll showed the public believes Cohen over Trump by 50% to 35%.

There has already been conflict between the Democratic-controlled House of Representatives and the White House over the former’s demand for information on why intelligence officials denied Trump’s son-in-law, Jared Kushner, the high security clearance he needed to carry out some diplomatic tasks – and why they were overruled by the president, a highly unusual (though legal) act. Kushner is suspected of using his public position to advance his private interests, namely raising funds for his family’s real-estate business. More recently, it was revealed that the president ordered that his daughter Ivanka also be given clearance, though this is not required for her job, whatever it is. These are among the wages of Trump running the White House as a family business and of his indifference toward governance norms.

So was the failure of Trump’s meeting in Hanoi with the North Korean dictator Kim Jong-un. The collapse of the talks on denuclearizing the Korean Peninsula was the result of Trump and his aides not preparing adequately – such agreements are often pre-cooked, or at least there are no great surprises – and of Trump’s assumption that his powerful personality and what he sees as a close relationship with the brutal Kim would carry the day.

The failure of the Hanoi summit was to some extent offset by relief that Trump hadn’t given too much away – though he had been on the path to doing so. True to form, Trump and his aides blamed the outcome on the Democrats for holding the Cohen hearing on the same day. And, true to form, they were lying: the hearing date had been set first.

Elizabeth Drew is a Washington-based journalist and the author, most recently, of Washington Journal: Reporting Watergate and Richard Nixon’s Downfall.