Paul Krugman | Guns, Ships and Chips: On Economic Inflexibility – The New York Times

By Paul Krugman

Opinion Columnist

“What do shipping containers and artillery shells have in common? This isn’t a trick question. The answer is that both have been in very short supply at some point over the past three years. And these shortages tell us something disturbing about modern economies: They aren’t nearly as flexible as many people, myself included, had thought.

About those artillery shells: Like many people, I’ve been closely following the war in Ukraine. Everyone knows the broad outlines of the story so far: Vladimir Putin’s Russia invaded in February of last year, expecting a quick victory over Ukraine’s much weaker army, but the Ukrainians, astonishingly, defeated the would-be blitzkrieg and the war has turned instead into a brutal slugging match.

No matter how valorous, Ukrainians on their own would have no chance in such a match. But they have received crucial aid from Western nations that see Ukraine — as do I — as a crucial front in the defense of democracy.”

“. . . .   That is, in contrast to the story told by Samuelson’s curve, it may be very hard to produce more guns in the short run even if you’re willing to give up a lot of butter.

The revelation that economies aren’t as flexible as we thought has many implications for policy. Supply-chain constraints weren’t the sole reason inflation took off in 2021, but they were clearly an important part of the story, with implications for future monetary policy. And in general, economic inflexibility suggests that we should be taking more precautions against the possibility of future disruptions, especially for strategic goods, but possibly more widely.

But all of that demands a much longer discussion. The main point for now is that it turns out that the Rolling Stones may have had it backward: Modern economies generally do a very good job of getting people what they want, but sometimes you just can’t get what you need.”

Spencer Bokat-Lindell | Do We Need to Shrink the Economy to Stop Climate Change? – The New York Times

By Spencer Bokat-Lindell

Mr. Bokat-Lindell is a staff editor.

This article is part of the Debatable newsletter. You can sign up here to receive it on Tuesdays and Thursdays.

“If there is a dominant paradigm for how politicians and economists today think about solving climate change, it is called green growth. According to green growth orthodoxy — whose adherents populate European governments, the Organization for Economic Co-operation and Development, the World Bank and the White House — the global economy can both continue growing and defuse the threat of a warming planet through rapid, market-led environmental action and technological innovation.

But in recent years, a rival paradigm has been gaining ground: degrowth. In the view of degrowthers, humanity simply does not have the capacity to phase out fossil fuels and meet the ever-growing demand of rich economies. At this late hour, consumption itself has to be curtailed.

Degrowth is still a relatively marginal tendency in climate politics, but it’s been attracting converts. In 2019, more than 11,000 scientists signed an open letter calling for a “shift from G.D.P. growth” toward “sustaining ecosystems and improving human well-being.” And in May, a paper published in the journal Nature argued that degrowth “should be as widely and thoroughly considered and debated as are comparably risky technology-driven pathways.” “

As Heat Pumps Go Mainstream, a Big Question: Can They Handle Real Cold? – The New York Times

“Over the past decade, heat pumps have been steadily making their way into more American homes. There was a major milestone last year when they surpassed gas furnaces in annual sales by a wide margin.

But the blistering cold weather descending on the Midwest this week has many homeowners wondering: Do heat pumps still work in freezing temperatures?

Experts and electrification advocates say that they do — and that even in cold weather, they can still be more efficient, and better for the climate, than furnaces and boilers that run on fossil fuels.

An electric heat pump is an all-in-one heating and cooling unit, essentially an air-conditioner that runs in two directions. In the summer, it functions like a traditional A.C. unit, pumping heat out of the home and pulling cooler air back in. In the winter, it draws heat into the home. That might seem surprising, but it’s true. Even when it’s bitterly cold outside, there is still heat available. As it gets colder, heat pumps have to work harder, using more energy, to extract that heat.”

David Lindsay Jr.

NYT Comment:

I love my 8 ductless split heat pumps by LG. I have a 450 sq ft house in Connecticut, and these splits completely heat and cool the house all year round. We also have a heat pump hot water heater, an electric car, and hybrid prius prime that has a 25 mile electric battery, that covers most of my local driving. All of this is powered by 54 solar panels on the east, west and south roofs, so we don’t have to worry about buying dirty energy which is a plus. I am pleased to report, that after three solar installations, the home is now a private power generation station with an annual output capacity of 14.83 kW. Yes, we still have our gas furnace as a backup, and we run it monthly to make sure it is working, but we haven’t actually needed it since the third group of solar panels were installed. When the temperature approached zero, the splits worked fine. We made one mistake with the installation of the the two condensers which we put on the outside wall of the family room, on brackets, attached to the house. We have dance band and singing parties and rehearsals in the family room, which are hampered by the loud low rumblings of the condensers against the wall. I should have spent a little more, to have these two condensers mounted on cement footings on the ground a few feet from the house, to maintain the sanctity or functionality of our music making room.

David is a dance caller and musician, song leader and folk singer, who blogs about the enviroment at InconvenientNews.net.

Mihir A. Desai | The Crypto Collapse and the End of Magical Thinking – The New York Times

By Mihir A. Desai

Mr. Desai is a professor at Harvard Business School and Harvard Law School.

“At a guest lecture at a military academy when the price of a single Bitcoin neared $60,000, I was asked, as finance professors often are, what I thought about cryptocurrencies. Rather than respond with my usual skepticism, I polled the students. More than half of attendees had traded cryptocurrencies, often financed by loans.

I was stunned. How could this population of young people come to spend time and energy in this way? And these students were hardly alone. The appetite for crypto has been most pronounced among Gen Z and millennials. Those groups became investors in the past 15 years at previously unseen rates and with exceedingly optimistic expectations.

I have come to view cryptocurrencies not simply as exotic assets but as a manifestation of a magical thinking that had come to infect part of the generation who grew up in the aftermath of the Great Recession — and American capitalism, more broadly.

For these purposes, magical thinking is the assumption that favored conditions will continue on forever without regard for history. It is the minimizing of constraints and trade-offs in favor of techno-utopianism and the exclusive emphasis on positive outcomes and novelty. It is the conflation of virtue with commerce.

Where did this ideology come from? An exceptional period of low interest rates and excess liquidity provided the fertile soil for fantastical dreams to flourish. Pervasive consumer-facing technology allowed individuals to believe that the latest platform company or arrogant tech entrepreneur could change everything. Anger after the 2008 global financial crisis created a receptivity to radical economic solutions, and disappointment with traditional politics displaced social ambitions onto the world of commerce. The hothouse of Covid’s peaks turbocharged all these impulses as we sat bored in front of screens, fueled by seemingly free money.

With Bitcoin now trading at around $17,000, and amid declining stock valuations and tech sector layoffs, these ideas have begun to crack. The unwinding of magical thinking will dominate this decade in painful but ultimately restorative ways — and that unwinding will be most painful to the generation conditioned to believe these fantasies.”

Why Are Energy Prices So High? Some Experts Blame Deregulation. – The New York Times

By Ivan Penn

Jan. 4, 2023, 5:00 a.m. ET

6 MIN READ

“When California, New York, Texas and other states began deregulating their electricity markets in the 1990s, officials promised that those changes would foster competition and make energy more affordable.

But it hasn’t worked out that way.

Average retail electricity costs in the 35 states that have partly or entirely broken apart the generation, transmission and retail distribution of energy into separate businesses have risen faster than rates in the 15 states that have not deregulated, including Florida and Oregon. That difference has persisted for much of the last two decades or so, including in the last year, when energy prices increased worldwide after Russia invaded Ukraine.

On average, residents living in a deregulated market pay $40 more per month for electricity than those in the states that let individual utilities control most or all parts of the grid. Deregulated areas have had higher prices as far back as 1998.”

Peter Coy | In Retirement, You May Not Need to Spend So Much – The New York Times

By Peter Coy

Opinion Writer

“If the recent rout in the stock market has you drastically cutting back your retirement spending plans, it probably means that you were counting too much on ever-rising asset prices. But a new research paper suggests that spending less at advanced ages is not necessarily a sign of failure to plan. Even people who plan perfectly do it.

Let’s back up for a minute. The notion that your spending should be consistent over your lifetime is known as consumption smoothing, an economic concept developed by Milton Friedman, Franco Modigliani, Robert Hall and others. The core idea is simple: No amount of luxurious living at age 60 compensates for living in penury at 25 or 85. So you should borrow when you’re young, save and pay off debts during your peak earning years and then spend down your savings in old age. If you do it right, you will enjoy an even standard of living throughout your adult life.”

David Lindsay Jr.

Hamden, CT | NYT comment:

Great essay. I wish it had included, that if you reduce your consumption, you will probably reduce your carbon foot print, with just a little effort.

David Lindsay wrote “The Tay Son Rebellion,” and blogs at InconvenientNews.net.

Paul Krugman | Europe’s Gonna Party Like It’s 1979 – The New York Times

By Paul Krugman

Opinion Columnist

“You probably have to be a senior citizen to remember the gasoline shortages of 1979. I am, and I do. I also remember how demoralizing they were. Then as now, outside a few big cities, America was a highly car-dependent nation, and waiting in long lines, not knowing whether you would be able to fill up, was deeply disconcerting.”

Pace of Climate Change Sends Economists Back to Drawing Board – The New York Times

By Lydia DePillis

• Aug. 25, 2022

“Economists have been examining the impact of climate change for almost as long as it’s been known to science.

In the 1970s, the Yale economist William Nordhaus began constructing a model meant to gauge the effect of warming on economic growth. The work, first published in 1992, gave rise to a field of scholarship assessing the cost to society of each ton of emitted carbon offset by the benefits of cheap power — and thus how much it was worth paying to avert it.

Dr. Nordhaus became a leading voice for a nationwide carbon tax that would discourage the use of fossil fuels and propel a transition toward more sustainable forms of energy. It remained the preferred choice of economists and business interests for decades. And in 2018, Dr. Nordhaus was honored with the Nobel Memorial Prize in Economic Sciences.

But as President Biden signed the Inflation Reduction Act with its $392 billion in climate-related subsidies, one thing became very clear: The nation’s biggest initiative to address climate change is built on a different foundation from the one Dr. Nordhaus proposed.

Rather than imposing a tax, the legislation offers tax credits, loans and grants — technology-specific carrots that have historically been seen as less efficient than the stick of penalizing carbon emissions more broadly.

The outcome reflects a larger trend in public policy, one that is prompting economists to ponder why the profession was so focused on a solution that ultimately went nowhere in Congress — and how economists could be more useful as the damage from extreme weather mounts.

A central shift in thinking, many say, is that climate change has moved faster than foreseen, and in less predictable ways, raising the urgency of government intervention. In addition, technologies like solar panels and batteries are cheap and abundant enough to enable a fuller shift away from fossil fuels, rather than slightly decreasing their use.

Robert Kopp, a climate scientist at Rutgers University, worked on developing carbon pricing methods at the Department of Energy. He thinks the relentless focus on prices, with little attention paid to direct investments, lasted too long.”

I didn’t like this piece because it was too limited. There are new sustainable economists saying growth no longer works. Here are two of many good comments:

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Erik Frederiksen

Asheville, NC3h ago

It is frightening to see how much faster severe climate impacts are occurring at just 1.2°C above preindustrial times. Not many people seem to be aware of how bad things are going to get over the next few decades. We are deep into a planetary emergency and leaders are not responding commensurately.

2 Replies149 Recommended

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David Anderson

North Carolina2h ago

The end of Homo sapiens ? ? The Biosphere is defined as the relatively thin layer of the earth’s surface that can support life. It extends down to the deepest layers of soils and ocean trenches and up to the highest levels of the earth’s atmosphere. Change in the Biosphere generally operates on “slow;” that is in multiples of many hundreds or thousands or even millions of years. But change can also operate on “fast.”The Permian Triassic extinction 252 million years ago and the Cretaceous extinction 66 million years ago are two examples of relatively rapid change. The Cretaceous came from a meteorite and resulted in low temperatures. The Permian Triassic came from a Methane (CH4) Hydrate Feedback Loop and resulted in high temperatures. Both were accompanied by Biosphere change so extreme as to extinguish a very large percentage of planetary life. When such change occurs those species that inhabit precisely bounded biological niches are the first to be affected. They die out. Then others follow. We are now in our Modern Age seeing the first signs of Biosphere change due to our industrial civilization adding excessive amounts of (CO2) into the planet’s Biosphere.  As with all other life on the planet, while in the membrane we Homo sapiens are biologically dependent on an evolutionarily constructed and precisely bounded niche.

3 Replies50 Recommended

Herman Daly: This Pioneering Economist Says Our Obsession With Growth Must End – The New York Times

“Growth is the be-all and end-all of mainstream economic and political thinking. Without a continually rising G.D.P., we’re told, we risk social instability, declining standards of living and pretty much any hope of progress. But what about the counterintuitive possibility that our current pursuit of growth, rabid as it is and causing such great ecological harm, might be incurring more costs than gains? That possibility — that prioritizing growth is ultimately a losing game — is one that the lauded economist Herman Daly has been exploring for more than 50 years. In so doing, he has developed arguments in favor of a steady-state economy, one that forgoes the insatiable and environmentally destructive hunger for growth, recognizes the physical limitations of our planet and instead seeks a sustainable economic and ecological equilibrium. “Growth is an idol of our present system,” says Daly, emeritus professor at the University of Maryland School of Public Policy, a former senior economist for the World Bank and, along with the likes of Greta Thunberg and Edward Snowden, a recipient of the prestigious Right Livelihood Award (often called the “alternative Nobel”). “Every politician is in favor of growth,” Daly, who is 84, continues, “and no one speaks against growth or in favor of steady state or leveling off. But I think it’s an elementary question to ask: Does growth ever become uneconomic?”

David Lindsay Jr.

Hamden, CT | NYTimes Comment:

Great interview of Herman Daly by David Marchese. I would like to nominate Herman Daly for the two Nobel prizes, the Nobel prize in economics, and the peace prize. When I attended the University of Washington Foster School of Business for an MBA in 1990, I was disturbed that all the economists I studied under assumed that growth was the only way to improve life on the planet. The world has to wake up, and admit that unrestricted population growth and consumerism and all the pollution created by these trends, is completely unsustainable for life as we have known it. We desperately need more ecological and steady-state economists. Which brings me back to my two Nobel prize nominations.

David blogs at InconvenientNews.net

Thomas Piketty’s Radical Plan to Redistribute Wealth – The New York Times

By Nicholas Lemann

• April 19, 2022

A BRIEF HISTORY OF EQUALITY
By Thomas Piketty

“Thomas Piketty begins his latest book by genially mentioning the entreaties he gets to write something short — previous books have been around 1,000 pages long — and ends it by expressing the hope that he has given “citizens,” rather than economists, new weapons in the battle against inequality, which is his master subject. This shouldn’t be taken for a sign that “A Brief History of Equality” is consciously simplified. It isn’t centered on a new economic finding, like that in “Capital in the Twentieth Century,” where Piketty reported that the return to capital exceeds the rate of economic growth. But neither is it written in a tone of patient explanation. It’s useful as an opportunity for readers to see Piketty bring his larger argument about the origins of inequality and his program for fighting it into high relief.

Much of the current discussion of inequality focuses on the period since 1980, when the benefits of growth began to go much more narrowly to the rich than they had before. Although Piketty hardly disputes this, he announces here that he has come to tell an optimistic story, of the world’s astounding progress toward equality. He does this by creating a much wider temporal frame, from 1780 to 2020, and by focusing on politics and measures of well-being as well as economics. Life expectancy has gone from 26 to 72 and, with the rise of compulsory state-provided education, the literacy rate from about 10 percent to 85 percent. Slavery and colonialism, once endemic, have been substantially abolished. Perhaps half of the population of the developed world is at least middle class, though before the 20th century there was no middle class to speak of. The right to vote, formerly restricted even in democracies to male property owners, is well on its way to becoming universal.

What caused this progress? Piketty has a straightforward answer: the advent of progressive taxes on income and wealth, and of the comprehensive welfare state. The taxes reduced inequality and paid for the welfare state, which has provided education, health care, old-age pensions and protection against severe deprivation. Our culture’s familiar assertions about how growth, innovation and entrepreneurship are connected with general prosperity stand completely outside Piketty’s account. Instead, he says, property owners have always used their excessive influence over government to create systems of “military and colonial domination” and environmental despoliation that made them even more wealthy than they were already. The idea that growth can solve the world’s economic woes is “totally insane.” Only a substantial weakening of property rights — a process that in the past included the abolition of slavery, but has many more steps to take — can do that.”