America’s Decline

In this Newsweek article, Fareed Zakaria explores the status of America as the world’s premier innovator. He takes to task the idea that somehow our culture is the predominant reason that we’ve held the status we’ve held. I’ve always felt that it was more likely that the state of the world at large, our geographical separation from Europe (especially during WWII), and our once dominant educational system had larger impacts than simply our culture and I think that Zakaria agrees here.

The first key idea here for me is that the US government used to spend significantly more money on basic research and development (as a percentage of GDP). In fact, Zakaria states that “the government’s share of overall R&D spending remains near its all-time low.”

The second key idea is about education in the US. Zakaria uses the example of California which “builds prisons, but not college campuses” anymore. Anyone who knows me well has probably heard me talk about how important I think education is and I would definitely stand for education reform and increased financing.

The overall growth in innovation from countries like China and India are on the grand scale wonderful things that we should not try and inhibit. Instead we should should try and compete in progress.

Politics/Economics: Why We Can’t Cut Spending

This Forbes article did a pretty good job of explaining in simple terms and numbers why we can’t balance the budget just by cutting spending. The gist is that there really isn’t that much money in services which can be cut (to balance the budget we’d have to cut nearly ALL of it) because services are really a very small portion of the federal budget.  Along with the minuscule impacts of cutting services on the budget, there’s little political will for doing so.

Another interesting point that puts simply what I didn’t hear in the news during the debate over stimulus v. tax cuts is spelled out:

Revenues would be even lower if Republicans had gotten their wish and the stimulus consisted entirely of tax cuts. How tax cuts would help people with no wages because they have no jobs or businesses with no profits to tax was never explained.

Global Warming: CBO Director on Economic Effects of Legislation

The director of the CBO, Doug Elmendorf, wrote an interesting blog post summarizing the findings from the analysis of some proposed policy changes concerning the limiting of green house gases. I found them very interesting.

It seems inevitable that some at least short term damage will have to be done to the economy to get the emissions under control, but considering that the companies powering the economy are largely responsible for the high emissions, of course their behavior must change.

Economics: Krugman on the Failure

This article by Paul Krugman has really invigorated my fancy for economics. I’ve been in the process of reading what are two of the most foundational books in economics: Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations, published in 1776 and referred in short as The Wealth of Nations which essentially gave birth to the field of economics and John Maynard Keynes’ The General Theory of Employment, Intersest and Money which has particular relevance to the most recent economic recession and the logic behind the use of federal stimulus in an attempt to curtail the impact of the recession. After reading Krugman’s article I fully intend to finish ready those books where I left off as its inspired a lust for more understanding.

The article’s main point is that economists have for the last 30 odd years have been stuck in a concept of ‘efficient markets’. That is, that the market perfectly prices the value of an asset. This idea is based on the assumption that investors are always and only making rational decisions, and that the market can in fact control itself perfectly. While there are different factions of fundamental academic theory both seem to make use of this assumption to some degree. Some even going so far to believe that either recessions and depressions don’t exist or they are in fact part of the free market expression, claiming that unemployment rises can be attributed to the people’s desire not to work. The current recession seems to stand in the face of this ‘efficient market’ theory and so Krugman suggests and predicts that ‘flawed market’ economics must be given more credence from here on out.

I don’t pretend to understand all of it or even a relevant fraction of it, but reading about this academic controversy and how new evidence has confounded both mainstream theories makes me think of other mainstream scientific theories, which is what the economic theories should be, and have apparently failed to be, where new evidence has forced change and new thinking. The future of economics should be quite interesting and if I wanna be a part of it, I’m gonna have to start the education now.