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Posts Tagged ‘economy

“Two obsessions are the hallmarks of Nature’s artistic style: Symmetry- a love of harmony, balance, and proportion [and] Economy- satisfaction in producing an abundance of effects from very limited means”*…

Life is built of symmetrical structures. But why? Sachin Rawat explores…

Life comes in a variety of shapes and sizes, but all organisms generally have at least one feature in common: symmetry.

Notice how your left half mirrors the right or the radial arrangement of the petals of a flower or a starfish’s arms. Such symmetry persists even at the microscopic level, too, in the near-spherical shape of many microbes or in the identical sub-units of different proteins.

The abundance of symmetry in biological forms begs the question of whether symmetric designs provide an advantage. Any engineer would tell you that they do. Symmetry is crucial to designing modular, robust parts that can be combined together to create more complex structures. Think of Lego blocks and how they can be assembled easily to create just about anything.

However, unlike an engineer, evolution doesn’t have the gift of foresight. Some biologists suggest that symmetry must provide an immediate selective advantage. But any adaptive advantage that symmetry may provide isn’t by itself sufficient to explain its pervasiveness in biology across scales both great and small.

Now, based on insights from algorithmic information theory, a study published in Proceedings of the Natural Academy of Sciences suggests that there could be a non-adaptive explanation…

Symmetrical objects are less complex than non-symmetrical ones. Perhaps evolution acts as an algorithm with a bias toward simplicity: “Simple is beautiful: Why evolution repeatedly selects symmetrical structures,” from @sachinxr in @bigthink.

Frank Wilczek (@FrankWilczek)

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As we celebrate symmetry, we might recall (speaking of symmetry) that it was on this date in 1963 that the Equal Pay Act of 1963 was signed into law by president John F. Kennedy. Aimed at abolishing wage disparity based on sex, it provided that “[n]o employer having employees subject to any provisions of this section [section 206 of title 29 of the United States Code] shall discriminate, within any establishment in which such employees are employed, between employees on the basis of sex by paying wages to employees in such establishment at a rate less than the rate at which he pays wages to employees of the opposite sex in such establishment for equal work on jobs[,] the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions, except where such payment is made pursuant to (i) a seniority system; (ii) a merit system; (iii) a system which measures earnings by quantity or quality of production; or (iv) a differential based on any other factor other than sex […].

Those exceptions (and lax enforcement) have meant that, 60 years later, women in the U.S. are still paid less than men in comparable positions in nearly all occupations, earning on average 83 cents for every dollar earned by a man in a similar role.

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“It’s a recession when your neighbor loses his job; it’s a depression when you lose your own”*…

The “R word,” unpacked…

It’s being whispered and murmured about. The president is facing questions about it. Business leaders and investors are already bracing for it. The specter of recession is once again rearing its monstrous head.

It’s feasible that the economy could chug along without any bumps or crashes. But boom-and-bust cycles remain a seemingly inescapable feature of capitalist economies. Some countries have done well avoiding busts. Starting in 1991, Australia had a run of almost 29 years without a recession, the longest stretch of economic growth of any nation in modern history. That ended in 2020, when the pandemic led to a big contraction — and Australia (briefly) succumbed to the beast.

While Australia had zero recessions between 1991 and 2020, the United States had two, a mild one in 2001, amid the dotcom crash and the 9/11 terrorist attacks; and a catastrophic one known as the Great Recession, between 2007 and 2009. Since 1854, the first year for which we have official economic data, the United States has experienced 35 recessions.

The National Bureau of Economic Research’s Business Cycle Dating Committee is the official body that keeps track of recessions in the U.S. The committee has traditionally defined recessions as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”…

Recessions– what they are, what they aren’t, and how they happen: “Fear The Vibe Shift: Are We Entering A Recession?,” from Greg Rosalsky (@elliswonk) at Planet Money (@planetmoney).

And for a dive into the vibe in question, see Derek Thompson‘s (@DKThomp) examination of why many Americans believe that they’re personally doing well, even as they feel that the country and the economy are going to hell: “Everything Is Terrible, but I’m Fine.”

See also: “There are 2 very different kinds of recessions—and the U.S. is likely headed for something totally different than 2008” in @FortuneMagazine (source of the image above), and “A recession in America by 2024 looks likely– It should be mild—but fear its consequences” in @TheEconomist.

* Harry S. Truman

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As we batten the hatches, we might send carefully-considered birthday greetings to Robert Aumann; he was born on this date in 1930. An economist and mathematician, he is best known for his contributions to game theory, especially for his work on repeated games (situations in which players encounter the same situation over and over again). He developed the concept of correlated equilibrium in game theory, which is a type of equilibrium in non-cooperative games (like most of those in our economy), a more flexible version than the classical Nash equilibrium.

For these and related contributions to game theory, he shared the 2005 Nobel Prize in Economics.

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“A good bookshop is like a genteel black hole that knows how to read”*…

Some good news…

Riding strong gains in the second half of the year, bookstore sales increased 28% in 2021 over 2020, according to preliminary estimates from the U.S. Census Bureau. Sales were $9.03 billion, compared to sales of $6.50 billion in pandemic-ravaged 2020.

The rebound was not quite enough to bring 2021 bookstore sales back to 2019 levels, falling 1% below 2019 sales of $9.13 billion… [but] was higher than the 19.3% increase for the entire retail sector…

Book shops are back: “Bookstore Sales Rose 28% in 2021,” from @PublishersWkly

* Terry Pratchett

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As we browse, we might spare a thought for an author whose works are eminently worth picking up on one’s next bookstore run: social reformer, orator, writer, and statesman Frederick Douglass (Frederick Augustus Washington Bailey); he died on this date in 1895. Born into slavery, he escaped to become a national leader of the abolitionist movement in Massachusetts and New York, famous for his oratory and incisive antislavery writings.

He was described by abolitionists in his time as a living counterexample to slaveholders’ arguments that slaves lacked the intellectual capacity to function as independent American citizens; indeed, some Northerners at the time found it hard to believe that such a great thinker had once been a slave.

Douglass believed in dialogue and in making alliances across racial and ideological divides, and in the liberal values of the U.S. Constitution. When radical abolitionists, under the motto “No Union with Slaveholders,” criticized Douglass’s willingness to engage in dialogue with slave owners, he replied: “I would unite with anybody to do right and with nobody to do wrong.”

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“Unless we change direction, we are likely to end up where we are headed”*…

The economy is in a very confusing place. Happily, the good folks at Full Stack Economics weigh in with data in the form of illuminating charts….

It’s a turbulent time for the US economy. The economy largely shut down in March 2020 only to come roaring back a year later with the highest inflation in almost 40 years. No one is sure what’s going to happen next.

At Full Stack Economics, we believe that charts are an essential way to understand the complexities of the modern economy. So in recent weeks, I’ve been looking far and wide for the most surprising and illuminating charts about the US economy. I’ve compiled 18 of my favorites here. I hope you enjoy it…

Speaking for myself, I did enjoy (and appreciate) it. I’m still confused, but I’m confused at a much higher level.

Take a look for yourself: “18 charts that explain the American economy,” from @fullstackecon (@AlanMCole and @binarybits)

* Chinese proverb (often mis-attributed to Lao Tzu)

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As we ponder the portents, we might recall that it was on this date in 1937, on NBC Radio, that The Guiding Light premiered. A soap opera created by Irna Phillips, who helped develop the template for the day-time serial drama targeted to women, it ran for a decade before shifting to CBS Radio, where it ran until 1956. But in 1952, CBS transplanted the series to television, where it ran as a daily (weekday afternoon) staple until 2009.

Irna went on to create other soaps (e.g., Another World) and in the process to introduce and mentor the giants of the form (including  William J. BellJames Lipton, and the great Agnes Nixon). With 72 years of radio and television runs, Guiding Light is the longest running soap opera, ahead of General Hospital, and is the fifth-longest running program in all of broadcast history– behind only the country music radio program Grand Ole Opry (first broadcast in 1925), the BBC religious program The Daily Service (1928), the CBS religious program Music and the Spoken Word (1929), and the Norwegian children’s radio program Lørdagsbarnetimen (1924–2010).

Show creator Irna Phillips (far right) talks with show cast members

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“Symmetry is not the way of the world in all times and places”*…

What a difference a couple of decades make…

Asymmetries are back. Rising market power, the sudden ubiquity of global digital networks, hierarchical hub-and-spoke structures in international trade and finance and the enduring dominance of the US dollar, despite the transition to floating exchange rates, all point to their resurgence. The remarkable decay of economic multilateralism in the very fields – trade and development finance – where global rules and institutions were first tried and reigned supreme for decades, is paving the way to a redefinition of international relations on a bilateral or regional basis, with powerful countries setting their own rules of the game. This transformation is compounded by the strengthening of geopolitical rivalry between the US, China and a handful of second-tier powers.

Donald Trump’s attempt to leverage US centrality in the global economy to extract rents from economic partners was short-lived. But US policy has certainly changed permanently. For all its friendly intentions, the Biden administration leaves no doubt about its overriding priorities: a foreign policy for the (domestic) middle class – to quote the title of a recent report (Ahmed et al, 2020) – and the preservation of the US edge over China. China, for its part, has set itself the goal of becoming by 2049 a “fully developed, rich and power-ful” nation and does not show any intention to play by multi-lateral rules that were conceived by others. In this context, the rapid escalation of great power competition between Washington and Beijing is driving both rivals towards the building of competing systems of bilateral or regional arrangements.

What is emerging is not only an asymmetric hub-and-spoke landscape. It is a world in which hubs are controlled by major geopolitical powers – in other words, a multipolar, fragmented world. Nothing indicates that these asymmetries will fade away any time soon. On the contrary, economic, systemic and geopolitical factors all suggest they may prove persistent. We will have to learn to live with them.

There are several consequences. First, this new context calls for an analytical reassessment. Recent research has put the spotlight on a series of economic, financial or monetary asymmetries and has begun to uncover their determinants and effects. Analytical and empirical tools are available that make it possible to gather systematic evidence and to document the impact of asymmetries on the distribution of the gains from economic interdependence. We are on our way to learning more about the welfare and the policy implications of participating in an increasingly asymmetric global system.

Second, the relationship between economics and geopolitics must now be looked at in a more systematic way. For many years – even before the demise of the Soviet Union – international economic relations were considered in isolation, at least by economists. They were looked at as if they were (mostly) immune from geopolitical tensions. This stance is no longer tenable, at a time when great-power rivalry is reasserting itself as a key determinant of policy decisions. Whatever their wishes, economists have no choice but to respond to this new reality. They should document the potential for coercion by powers in control of crucial nodes or infrastructures and the risks involved in participating in the global economy from a vulnerable position.

Third, supporters of multilateralism need to wake up to the new context. They have too often championed a world made up of peaceful and balanced relations that bears limited resemblance to reality. Because power and asymmetry can only be forgotten at one’s own risk, neglecting them inevitably fuels mistrust of principles, rules and institutions that are perceived as biased. Multilateralism remains essential, but institutions are not immune to the risk of capture.

Asymmetry, however, does not imply a change of paradigm. Even if it affects the distribution of gains from trade, it does not abolish them. And in a world in which global public goods (and bads) have moved to the forefront of the policy agenda, there is no alternative to cooperation and institutionalised collective action. The prevention of climate-related disasters, maintenance of public health and preservation of biodiversity will remain vital tasks whatever the state of inter-national relations. What asymmetries call for is an adaptation of policy template. The multilateral project should not be ditched, but it must be rooted in reality.

Understanding the emerging new global economy: from the conclusion of Jean Pisani-Ferry‘s (@pisaniferry) paper, “Global Assymetries Strike Back,” eminently worth reading in full. [Via @adam_tooze]

*  Charles Kindelberger, economic historian and architect of the Marshall Plan

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As we find our place, we might send tight birthday greetings to Paul Adolph Volcker Jr.; he was born on this date in 1927. An economist, he was appointed Federal Reserve Chair by President Carter in 1979, and reappointed by President Reagan. He took that office in a time of “stagflation” in the U.S.; his tight money policies, combined with Reagan’s expansive fiscal policy(large tax cuts and a major increase in military spending), tamed inflation, but led to much larger federal deficits (and thus, higher federal interest costs) and increased economic imbalances across the economy. In the end, Reagan let Volcker go; as Joseph Stiglitz observed, “Paul Volcker… known for keeping inflation under control, was fired because the Reagan administration didn’t believe he was an adequate de-regulator.”

Volcker returned to government service in 2009 as the chairman of President Obama’s Economic Recovery Advisory Board. In 2010, Obama proposed bank regulations which he dubbed “The Volcker Rule,” which would prevent commercial banks from owning and investing in hedge funds and private equity, and limit the trading they do for their own accounts (a reprise of a key element in the then-defunct Glass-Steagell Act). It was enacted; but in 2020, FDIC officials said the agency would loosen the restrictions of the Volcker Rule, allowing banks to more easily make large investments into venture capital and similar funds.

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