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AP Exaggerates Social Security Problems

AP Exaggerates Social Security Problems

Dean Baker at Beat-the-Press has pointed out (sorry, not able to link to it) that Associated Press put out a tweet that presents an essentially hysterical story about future prospects for Social Security following the recent release of the Trustees.  This report says that as of 2026 Medicare and as of 2034 Social Security will face a “shortfall.”  However, the AP tweeted that what they face is “insolvency.”  Needless to  say, “insolvency” is much more serious than “shortfall” and simply feeds the overblown hysteria that so many think about these programs, feeding political pressures to mess with them.

The new report provides the latest update on what would happen if the forecast happens and nothing is done.  Given that the projection is that Social Security benefits are set to increase by about 20% by 2034, if somehow nothing were done and benefits were set to be reduced so that they could be paid by expected tax revenues, the benefit would be cut back by about that amount to about what they are now in real terms.  In short, this is not the hysterical crisis AP suggested or that so many think is out there. We have seen this nonsense before.

Of course, Dean accurately points out that by law the benefits must be paid. This may also be a time to remind everybody that the US is really in much better shape demographically in terms of life expectancies, retirement ages, and expected population growth rates than most other high income nations, with such cases as Japan and Germany in much worse shape than the US.  However, all these nations are making their public old age pension payments.  In the case of Germany the payments are higher than in the US, but the payments are being made, and its economy is humming along very well.  There simply is not basis for any of this hysteria in the US regarding the future of Social Security.

Barkley Rosser

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Rejoinder To Rauch’s Response To Me On The Happiness Curve Overhyped

Rejoinder To Rauch’s Response To Me On The Happiness Curve Overhyped

On May 15 I posted here on “Overhyping the Happiness Curve,” a critique of the recent book by Jonathan Rauch, The Happiness Curve: Why Life Gets Better After 50. After it was linked to on Marginal Revolution, author Jonathan Rauch wrote a Response to my post on May 25, which was also linked to on MR. I did not immediately reply as I was in Santa Cruz and did not have my copy of the book. I shall now comment on his reply.  He makes three main points.

The first is that he says I made a false dichotomy between unadjusted and adjusted studies of the age-happiness relation, and that I failed to recognize his discussion on pp. 69-75 of how factors besides age affect happiness.  Certainly he recognizes that other factors impact happiness, even as his focus is on the particular effect of age, which requires focusing on adjusted relations taking account of the impact of those other factors. He cites Blanchflower and Oswald (the apparent originators of the U-curve idea and among its strongest advocates) to the effect that going from age 20 to 45 reduces happiness by as much as a third of what becoming unemployed does, which is a lot.  Some other studies along such lines are cited.  Then a formulation from psychology is brought in that says that happiness is a function of one’s “set range” (basically one’s general happiness propensity), of circumstances not under one’s control, and of things under one’s control.  While he cites Martin Seligman, this argument has been widespread in psychology, with a common finding being that 50% is the set range, 10% is circumstances, and 40% is under one’s control, although Rauch does not mention this finding.  As it is, he proposes time as a separate variable, although offhand it would seem to fit in the category of those things we cannot control, “circumstances.”  (I have some serious questions about what is under our control and what is not, but let us leave that aside.)

This is all well and good, more or less, but it does not deal with the point I made that a quite a few of these other things that can impact happiness tend to be pushing one towards being happier in middle age than not, which can easily lead to a finding that age makes one unhappy in middle age when one pulls out the estimated effects of these other variables.  Again, we are talking about employment, income, marital status, health, and broader social relations, among others.  Rauch simply never notes this, although it is implicit in his contrasting a global finding that shows unadjusted happiness tending to gradually rise from 20 to 64 with a global finding adjusting for non-age factors that shows the U-curve bottoming at 50.  So, yes, he talks about how other factors are important, but he never addresses their own relationship with age, which is what makes this so difficult to parse out.

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When Big Sur Met Silicon Valley: Remembering The Santa Cruz Nonlinear Dynamical Systems Collective

When Big Sur Met Silicon Valley: Remembering The Santa Cruz Nonlinear Dynamical Systems Collective

I spent Memorial Day weekend with extended family members in Santa Cruz, near where many of them live, but with none of them right there  It was most pleasant, but explaining the nature of the place and the University of California branch there led me to think more deeply about the place.  I am not aware of anybody else saying this before, but it struck me that Santa Cruz is a place where some decades ago Big Sur met Silicon Valley.

The place remains a very pleasant Northern California beach town, where tourists like to go and long have.  It was fully crowded this past weekend, difficult to get to the Wharf and Boardwalk downtown and Natural Bridges State Park.  All of this has little to do with these other matters.  But sharp local  observers note that there is an “old” and a “new” Santa Cruz.  The old is symbolized by older wooden houses, some with funky sculptures in the yard and funny mailboxes. This all has a touch of Big Sur somewhat further south along the coast.  One can run into Air Bnb landlords who are cameramen for the Dalai Lama and talk about how well they knew Timothy Leary and own 41 acres in Big Sur and so on.  Yes, really.

The new Santa Cruz is symbolized by newer more expensive places, some with funky mailboxes, but they are not falling over.  Many of these people earn often substantial their money over the Coast mountain range in Silicon Valley a half an hour away.  Big Sur may have been there first, but Silicon Valley is fully there now, and the place is gentrifying fast,.

As it was, from the time that Silicon Valley first got itself going in the 1960s and 1970s, there was a parallel development in Santa Cruz that both fed off of that and in its own way fed into it, if not as much as Stanford University did.  This was the founding in 1966 and subsequent early history of UC-Santa Cruz, sitting on top of a hill northwest of the center of town.  From the beginning it combined an ideal of innovative and progressive education with a highly mathematical, scientific, and technical focus with much emphasis on computers, perfect for its proximity to the developing Silicon Valley.  The former fed off the nearby Big Sur with such places as the Esalen Institute, which was always about serious intellectual and philosophical matters (and still is) as well as the more famous artistic and beat/hippie carryings on there.  On the technical side a curious aid for UCSC upfront was the propitious proximity of the Mount Lick Observatory on Mount Hamilton, then second only to Mount Palomar in size, which helped attract top astronomers, who helped bring in the physicists and the mathematicians and computer scientists.

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Iran Responds to Plan B

Iran Responds to Plan B

Juan Cole reports that Iran’s supreme leader, Ayatollah Khameini has responded to Trump’s withdrawal from the JCPOA and Pompeo’s Plan B 12 demands with 6 demands for Europe: 1) condemn the US withdrawal, 2) stop pressing Iran on missile development, 3) criticize any further US boycotts, 4) undo damage to Iran economy of boycotts especially to buy any oil not able to be exported because of them, 5) support financing of Iran economy, and 6) respond rapidly to these demands.  According to Cole they are not optimistic the European nations will be able to withstand the US sanctions, with the impending withdrawal of France’s Total a harbinger.  Macron may be key.

If demands not met, Iran will return to enriching uranium to 19.75%, enough for medical use and to fuel a nuclear submarine (Iran has none), but not to make a weapon.  Oh such fun.

Barkley Rosser

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Plan B on Iran

Plan B on Iran

Earlier today (Monday) ne US Secretary of State, Mike Pompeo, presented this administration’s “Plan B” at the Heritage Foundation on how to deal with Iran following the US’s withdrawal from the nuclear deal, the  JCPOA.  Pompeo presented 12 demands and threatened to impose “the strongest economic sanctions in history.”  The Trump administration may wish to do the latter, but the  refusal of all the other parties to the JCPOA to go along with this effort will certainly guarantee that even if the sanctions are strong, they will not match what preceded the negotiation of the JCPOA.  As it is, Jeffrey Sachs (as reported by Juan Cole) has argued that if Trump tries to sanction European companies dealing with Iran through non-dollar currencies, the  EU should take the US to the WTO as well as the UN Security Council and General  Assembly. After all, this extraterritorial action would violate international trade agreements, and given that the JCPOA is an officially recognized agreement by the UN Security Council, the US is in fact in violation of international law with its withdrawal, not that those supporting this recognize this.

As it is, the 12 demands are chock full of hypocrisy and nonsense, some of it unacceptable even to a government that would be secular and pro-US.  I shall not go through all of them, but will note just three that will not be accepted by Iran, to the extent the are even possible to be carried out. One is for Iran to “cease threatening its neighbors.”  Well, the problem with this is that it is largely in the minds of such neighbors as Saudi Arabia and UAE that Iran is “threatening” them.  KSA has the third highest level of military spending in the world, but somehow Iran is “threatening” it. KSA has called for the military overthrow of the Iranian government.  I am unaware of the Iranian government doing the same regarding KSA.  Of course many of the demands involve Iraq and Syria, but last time I checked the governments of those nations have invited what Iranian military units are in their nations, with them in Syria battling against rebels backed by KSA and UAE attempting to overthrow that government.  Really, this is just ridiculous, although  Bahrain might  have a complaint about Iran providing some military aid to majority Shia elements in that nation opposed to its dominant Sunni  government, but Bahrain has had a problem with this for a long time.

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ZTE and the Iran Nuclear Deal

ZTE and the Iran Nuclear Deal

The whiplash that many observers have felt on learning of President Trump’s about-face on China’s ZTE telecom company from condemning it as violating US national security and violating sanctions rules by selling to North Korea and Iran has been pretty easily explained by our soon thereafter learning that China has provided a mere half a billion dollars to a project in Indonesia where Trump interests are deeply involved.  This is probably the most blatant violation of the Emoluments Clause of the US constitution yet, but do not hold your breath that anything formal will come of it, despite widespread outrage.  Rather his backers will accept that this is necessary for obtaining Chinese support in dealing with Kim Jong-In in the possible forthcoming summit.  This is supposed to trump all other considerations.

Of course the supposed forthcoming summit and related events, such as the  recent release of hostages held by North Korea, have been trumping Trump’s withdrawal from the JCPOA nuclear deal with Iran, which has been praised by his supporters as an action that “fulfills a campaign promise” and thus just simply wonderful.  However, a little noticed aspect of this in the US is triggering considerable reverberations abroad. It is the hypocrisy that while Trump seems to be blithely forgiving ZTE for breaking already in-place sanctions against Iran, he and members of his administration such as John Bolton have been unyielding to the Europeans that all of their companies must cease any economic dealings with Iran ASAP now that Trump has scuttled US participation in the deal, even though it is widely accepted in Europe that Iran is in full compliance with the deal.  The spectacle of the freshly arrived US ambassador issuing an immediate “order” to German companies to immediately comply with US demands on this has raised especial hackles.

Pretty clearly the Europeans need to identify some budding Trump Organization project somewhere on the planet that they can dump a pile of money into so that their companies can get exemptions like ZTE has from having their markets in the US cut off if they continue to operate in Iran.

Barkley Rosser

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Blowing Up The Iran Nuclear Deal

Blowing Up The Iran Nuclear Deal

This is probably Donald Trump’s biggest mistakes, his refusal to certify Iran’s compliance with the JCPOA nuclear deal with Iran and his fullout abrogation of it by announcing the reimposition of full economic sanctions against Iran, although we had not fully undone those sanctions anyway.  An immediate victim in the US of this action will be Boeing workers who were to benefit from a $3 billion contract Boeing had with Iran, now cancelled by order of the US government.  Needless to say, Trump has simply lied repeatedly about this matter, claiming the Iranians are not in compliance, when the IAEA and all other parties to the agreement say they are.  Trump has strutted some reports stolen by Israeli intelligence, but those show almost nothing we already did not know, most particularly that Iran did have a covert nuclear weapons program prior to 2003 that it shut down.

I have posted on this topic regularly over a long period of time, going back all the way to the predecessor of this blog (Econospeak), MaxSpeak.  I shall not reiterate all that I have said over those years, although I think my track record has been pretty good.  I have long heavily relied on Juan Cole’s Informed Comment for information on what is going on in Iran, and his track record on that has been excellent.

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On Negotiations In Korea

On Negotiations In Korea

Let me say that if Donald Trump is able to finalize a serious agreement in Korea that brings an official end to the war there as well as establishing some kind of peaceful settlement in general that leads to some sort of mutually acceptable arrangement between the two Koreas that maintains a peaceful situation for some reasonably lengthy time into the future, pretty much irrespective of the exact details, I shall applaud.  I shall not even hold my nose if somehow he gets the Nobel Peace Prize for it, as advocated by ROK president Moon Jae-in, although it is the latter who is the far more deserving recipient.  But maybe such an award would have several recipients for it, if it happens.  A few observations in any case.

I suspect that the importance of Trump’s loud sabre-rattling has been exaggerated, certainly in the US media, but I shall not say it has played no part.  But certainly important has been the substantial heightening of economic sanctions that came in over the past year as DPRK president Kim Jong-un carried out a series of major nuclear weapons and missile tests, culminating with a claim of testing an H-bomb and obtaining a sufficient nuclear weapons stache for deterrent purposes.  Most important in this was China finally enforcing much stricter economic sanctions on the DPRK, either out of trying to please Trump, or out of increasing annoyance with Kim, or more likely a combination of both.  As it is, Kim visited Beijing (by train) just before announcing his willingness to visit the ROK, and in fact China has been easing the economic sanctions since then.  Without doubt this played a huge role, if not all that widely acknowledged, and even as all along pretty much everybody said that DPRK would not act until China put the economic squeeze on, and it finally did.

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Duncan Foley On Socialist Alternatives to Capitalism

Duncan Foley On Socialist Alternatives to Capitalism

Yes, it is May Day, time to think about workers and socialism, while Vladimir Putin gets himself inaugurated for another term as President of Russia, with military vehicles parading In Red Square like they used to for the glory of the workers, but today for the glory of President Putin.

So, a couple of weeks ago there was a conference at the New School honoring Duncan Foley, who seems to be gradually retiring, half time to quarter time, I am not sure.  It is my understanding that this conference had a lot of emphasis on Duncan’s work on Marxist economic theory, with it organized by Roberto Veneziani and Mark Setterfield.  I did not attend, but heard rumors about it.  As it is, this is the second conference there honoring Duncan.  I attended and presented in the first, which resulted in a festschrift volume in 2013, Social Fairness and Economics: Economic essays in the spirit of Duncan Foley, Routledge, an excellent volume.

The first thing that should be noted is that while Duncan is indubitably one of the leading living theorists of Marxist economics, he does not consider himself to be a “Marxist,” but rather a student of Marx, if a deeply sympathetic one.  This is a sensitive matter as he was turned down for tenure at Stanford largely because he was accused of being a “Marxist economist” when he started publishing papers and books on Marxist economics.  He has always sais that his true ideology is his religion, Quakerism, the Friends, with him agreeing with their pacifism, which is not an idea inherent in Marxism, indeed, with many Marxists supporting violent revolution.  Nevertheless, there is probably no living economist who is clearly more important as a deep analyst of Mars’s economics, with some of his closest rivals in attendance at this latest conference, such as Anwar Shaikh.

How he got into Marxist economics followed on from his earlier work on general equilibrium theory, which was what got him hired at Stanford in the first place (and he still writes on GET). Indeed, he had been hired at MIT from Yale to teach general equilibrium theory to grad students a la Arrow-Debreu-McKenzie, as this was not Paul Samuelson’s cup of tea.  The motive for moving to Marx was the problem posed by fitting money into general equilibrium theory, which is generally done in a purely barter form.  This is also a cover for the problem of how to link micro to macro.  He was especially intrigued by Marx’s writings on money in the Grundrisse and in Vol. III of Capital, which became the basis for his later interpretations and studies of this.

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Whither Social Capital?

Whither Social Capital?

This past Friday there was yet another retirement conference, this time honoring “Mr. Social Capital,” Robert S. Putnam, who is retiring from Harvard’s Kennedy School at age 77.  I was not invited, but I know some people who attended, including my sister and brother-in-law, the latter speaking at the dinner as family, the brother of  Bob’s wife, Rosemary.  As it is, I have known Bob Putnam since before he became Robert S. “Mr. Social Capital” Putnam.  That came especially with the publication in the 1990s of his massive hit book, Bowling Alone, in which he presented massive amounts of  data and arguments about the idea of social capital.  This helped trigger an outright fad among academics and policymakers, including at the World Bank, about the importance of increasing social capital in many nations so as to supposedly improve their economic and social situations.  It also led Putnam to become one of the most frequently cited living social scientists (176,000 plus times and counting, according to Google Scholar).

According to him the idea has been floating around in and out of public discourse since it first appeared in a report on education in West Virginia a good century ago.  However, it began to pick up serious academic steam starting in the late 1980s when sociologist James Coleman began studying it and writing about it.  Putnam’s own background was mostly as an expert on Italian politics, but he picked up on the idea from Coleman in the early 1990s in a famous book he wrote on Italian democracy. For him it became a crucial factor in explaining the much  better economic and social (and political) performance of northern Italy compared to southern Italy, albeit with a deep historical background.  Whereas substantial portions of northern Italy had been independent city states with long histories of civic engagement in local ruling groups, most of southern Italy spent several centuries ruled by outside and autocratic Spain, which laid the foundation for the rise of the mafia as a countervailing power, which would come to dominate the society of the Mezzogiorno with its secrecy and lying and corruption.  For Putnam one finds lots of people engaged in civic group activities in  the North, but not in the South, and I even heard him once give a talk in which he claimed that one could explain 90% of the difference in economic growth rates among Italian regions by just looking at the percentage of their populations that belonged to civic choral groups in the 1870s.  That correlation is probably correct, even if it has almost nothing to do with causation.

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