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The previous session like this: “It’s question hour!“, 26 October 2008
27 thoughts on “It’s question hour again! Ask any question about Geopolitics (the answers are free)”
This question arose at the end of a Lecture about Kant this week: “If you stand on the North Pole, ie. the very dot marked ‘North Pole’, which way is west?”
Fabius Maximus replies: Questions about geopolitics, please. Not geography.
okathleen: Undefined. West is defined as perpendicular to the longitude line. Since at the exact north pole, there is no longitude line (they all meet), there’s no normal defined. Walk just away from the north pole, and then circle clockwise around the north pole is “walking west”.
Here are three questions submitted by email, and my answers
(1) Is conventional state-to-state warfare out of the question now?
Violence, even conflict, will continue as it always has. Most frequently under two circumstances.
(a) Where a small state does something stupid to provoke a large one insides its zone of influence. As Georgia did to Russia, under the delusion that the US would back it. There is a long history of this, and it will continue into the distant future.
(b) Where a big state decides to interfere in a small state’s affairs, either inside the large state’s zone — or where the small state has no reliable large-state ally.
Neither of these are “war” are we think of it, because conquest is usually either not possible or too expensive. Esp as it is illegitimate under current international law. That makes the whole “big war” thing largely dumb, as we discovered in Iraq and are learning again in Afghanistan. The rewards cannot posibly justify the cost. Even the hawks don’t bother attempting to justify the cost, largely b/ they delusionally think we are rich beyond such mundane considerations — and don’t care about the casualties (on either side).
No other state can afford such mistakes, so they seldom do. Israel is in this, as in so many ways, an exception.
(c) When will conventional state to state war disappear?
Until everybody has nukes. Which will happen eventually. Eventually building a nuke will be possible a high school science project. Sometime between that point and now everybody will have them, which will change the shape of the world.
2. How much attention should be given to the possibility of a conventional war?
We don’t want to be defenseless, the equivalent of leaving our front door unlocked. But spending almost as much on nat secty as everyone else combined (allies and potential enemies) is insane. Literally stupid beyond imagining.
3. Do you have any further information regarding insurgents use of bunkers, tunnels and trenches?
(a) Using these things is just good sense, as they are standard tools. The concept of “force multiplier” is nutty jargon. All tools are force multipliers. The shovel has been a force multiplier longer than the horse, I suspect.
(b) The modern literature has relatively little on their use, how and under what circumstances insurgents use them.
For more information on these things: see the FM Reference Page about Military and Strategic Theory. Esp this post: A solution to 4GW — the introduction
Building a gun-type nuclear truck bomb is a high school science project. Getting the Highly Enriched Euranium is the only barrier. Do you believe proliferation is not a problem, or is your remark about all countries having the bomb meant casually?
Agree entirely with your view of American defense budget. Eisenhower warned us. What is unconventional about current warfare — because it is not massed infantry and movement created in the 18th century and died with nuclear weapons. Not coming back what we have now is the new conventional warfare. Do you agree?
Or do you think this is some indicator of the nation-state dying? If the nation state is dying, what was decolonization about?
Fabius Maximus replies: Taking these in sequence.
(1) I suspect that building an atomic bomb is more difficult than “a high school science project.” Today. But technological progress makes building atomic weapons easier for every generation. Eventually “everybody” will have them. It’s just something we must learn to live with; doing so might be one of our species greatest challenges. We might lose a few cities along the way, just as cities have been sacked and burned throughout history.
(2) I agree, non-trinitarian conflict — of which 4GW is a subset — is “conventional warfare.” For more on this see “A solution to 4GW – the introduction.”
(3) The logic runs only one way. The rise of non-trinitarian conflict (and hence 4GW) does not mean the “state” as our paramount political entity is in decline. But the decline of the state powerfully drives the rise of non-trinitarian conflict in all its forms (including 4GW).
The Chinese were recently grousing about how the USA has damaged the world financial system. When will they do their part (since it takes two to make a loan), and not invest in the USA?
FM replies: Let’s take this in small steps.
Prime Minister Wen Jiabao’s keynote speech at Davos — Source. Excerpt
This description fits us exactly. Unfortunately, he’s right. The weaknesses of our internal economy are, of course, our own fault. As the world’s hegemon, the dominant voice in the major economic institutions (e.g., IMF, WB, BIS), we bear the largest share of blame for the instability of the global financial mechanisms.
But, as you note, China was an enthusiastic participant in the bizarre and inherently unsustainable economic “system” called Bretton Woods II. Unwinding this system will not be easy.
* America sits on a pile of debts, probably not possible to pay.
* China’s economy is built not just on exports, but on growing their exports.
As America slides into recession, we will buy less from China (depressing China’s GDP). They will have fewer dollars with which to buy US bonds. But they probably continue to rollover their existing holdings, otherwise the RMB would rise vs. the US dollar — depressing their exports even more.
How can we — China and the US — untie this knot? For more on this see “Effective treatment for this crisis will come with ‘The Master Settlement of 2009’″.
#5 – “The point is, ladies and gentleman, that greed, for lack of a better word, is good. Greed is right, greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms; greed for life, for money, for love, knowledge has marked the upward surge of mankind. And greed, you mark my words, will not only save Teldar Paper, but that other malfunctioning corporation called the USA. Thank you very much.”
Apparently an entire generation believed in the Gecko evolution. By exercising his words to a maximum, derivatives backing derivatives backing derivatives, we have in effect built the house of cards such when that first derivative goes bad, so goes the house of cards upon which it is built.
The question of placing blame is only important if we wish to punish those that perpetrated such greed. Since 90% of the people responsible are still in their positions, it’s clear that we do not. They “blue screened” the world, and every 1st, 2nd, and 3rd world economy is now paying.
Should we conduct a bailout? Perhaps. In the end, there are many who are suffering who in no way participated. The only resonsible action of government is to try, as much as it can, to protect those who are truly innocent.
The question of regulation is not one of external influences, but of internal. A lack of moral fiber is the true missing piece. When we discarded God, and God’s rules towards our fellow man, we find ourselves here today.
1. Regarding the on-going evolution of human conflict, what role is forcast for new technologies such as nanotechnology, or perhaps genetic engineering?
As a biochemist, I know a bit about the latter; technological leaps are being made in genetic engineering almost daily. These are of concern, due to their potential misuse as WMDs. The equipment needed to grow pathogenic micro-organisms is fairly cheap, easy to hide, and readily obtained; the knowledge required is open-source and accessible to anyone with a basic science education. The difficulty so far has been weaponizing these agents, which is technically more complex, and not as easy as it sounds. However, should someone clone and then modify a variant of the virus that caused the deadly influenza pandemic of 1918 which killed millions — well, you get the idea.
Genetic engineering is making nightmare scenarios like this more likely. Why use guns, tanks or planes to kill the enemy when you can engineer a bug to destroy his society w/o firing a shot. Granted, there is the risk of blow-back, being killed by your own bioweapon – but that might be incidental to some parties as long as they kill enough of us, or cause enough damage to our society. Many historians reckon that the flu pandemic came closer than any other single event to causing the breakdown of civilization here and abroad. If you are skeptical, read “The Great Influenza” by John Barry; it is frightening even nearly a century later.
Ok, anyone want to take a shot at nanotech? Thoghts and comments?
FM replies: As I said in comment #4 about nukes, super-wapons are just something we must learn to live with. Doing so might be one of our species greatest challenges. We might lose a few cities (or nations) along the way, just as cities (nations) have been destroyed throughout history.
As for timing, these will probably come more slowly than enthusiasts expect — but eventually have effects far greater than skeptics imagine.
But for our time, low-tech conflict and war seems the focus — where the action lies. Non-Trinitarian conflict (and the subset of 4GW).
2. What work is being done on the resiliant communities concept these days? That is, moving away from vast, interlinked networks that can disabled with a single, well-placed attack, toward smaller, semi-autonomous organzations, communities, etc. that are nodular enough to withstand attack, natural disasters, and other calamities w/o entirely collapsing? Sorry for the stilted language, I am not a systems engineer… hope you get the idea.
This approach loses some of the benefits of economies of scale, but gains resiliency, and also has the effect of pushing control of services such as utilities closer to the local level, where they are better managed, more easily supervised, and so on. Far as I am concerned, smaller can indeed be better.
3. Last but not least, in the military reform department, why not skrink the size of our standing military (army in this example) radically, but vastly increase the standing reserve. Thinking of something along the lines of what the Swiss do; all males within a wide age range (I would use something like 17 – 65) are trained as reservists subject to mobilization for true homeland defense, missions abroad only with a supermajority of Congressional approval, and so on. Bill Lind has done some work on this, anyone else? The citizen-soldier concept has worked for our nation in the past, and can work again. The national defense is too important to be left to the professionals! Yes, of course there is a critical role for professionals, but relying entirely on a fully-professionalized military has drawbacks, as many of you well know.
The benefits to the nation could be very great. A paradox about defense is that when people are forced into training to defend themselves instead of relying on someone else to do it, they become more disciplined about the use of force generally, and less inclined to vote its use irresponsibly. I have seen this over and over in martial arts training; engaging in the many years of disciplined study required to master a martial art makes one less likely to use violence, not more, and then only as a last resort.
P.S. “A paradox about defense is that when people are forced into training to defend themselves…” – poor choice of words, one would not be compelled to serve but would be asked to volunteer. In any case, whether this scheme is compulsory or not is not my point.
Fabius Maximus replies: There have been many proposals to shrink our military forces, perhaps the best being Chet Richard’s monograph “If We Can Keep It” (FM review here).
We have not reduced the military and will not do so because we have an Imperial military, designed to project forces around the world — and defeat almost any foe. And 3rd-tier foe, or the expeditionary forces of any 1st or 2nd tier foe.
As for citizen-soldiers, here are several posts exploring that concept:
* America needs a Foreign Legion, 18 April 2008
* “America’s Greatest Weapon”, 25 May 2008
* Militia – the ultimate defense against 4GW, 31 May 2008
* Lawrence Korb of CAP and CDI advocates a militia, 4 June 2008
* Thoughts on fixing America’s national security apparatus, 11 August 2008
Thank you Nicholas Weaver in attempting to clarify which way is West. Personally, I think knowing your East from your West, and your Left from your Right couldn’t be more GEOPOLITICAL?
It’s time politicians worldwide turned to a little reflexive thinking. Philosophy is the ointment to rub on at times like this.
Do you believe that, given the election of Barack Obama, and the economic crisis, there is a danger of radical right wing groups initiating 4GW within certain areas of the USA, either during his presidentcy, or within the forseeable future?
Fabius Maximus replies: This is an important subject. First, let’s unpack it.
(a) What is the likelihood of social unrest, should the economic crisis be long and deep? There was little during the Great Depression, but America may have changed since then?
(b) Given (a), is it likely to be a non-trinitarian conflict — armed conflicts in which one or more of the participants are non-state groups? For example, serious use of force by organized crime (not just more cases of 49-year-old women robbing banks to pay the rent. This would be serious, but not “war” in any meaningful sense.
For example, criminals can use force to establish a “social space” in which they can routinely operate, such as networks for prostitution, drug trafficking, smuggling, or money laundering. If their victory is officially sanctioned by the State, these become semi-autonomous societies. Europe might be seeing the early stages of this, as institutions develop to support and enforce Sharia for/on their Muslim citizens.
(c) When non-T conflicts become struggles for control of large geographic areas (not just an inner-city neighborhood) AND involve substantial use of force, they become 4th generation wars. What is the liklihood of this?
My guess is that (a) is probably (but not certain); (b) is likely; and (c) is improbable. I consider right-wing groups an unlikely source of serious disorder (more than isolated terrorism). There are other groups far better equipped to do so. In non-T conflict, “equipped” does not mean hardware (the American fetish), but in the sense Mao would use: having a strong social base supporting it and alienated from the larger society.
Have always considered Masters level education important in knowing your craft. With MS in Aero as a basis, if we designed airplanes the way our MBAs are working business/economy, they’d mostly all be in a river, ditch,on a mountain somewhere.
Question is how does a masters level education process create people with such opposite concepts for the economy? The question/answer would fall into non-scientific subject matter and or trivia, if those folks weren’t so adamant about how right they are in what to do. Can’t compromise on design here.
Second question: Shouldn’t lawyers be upset that there are still more lawyer jokes than MBA jokes?
Fabius Maxims replies: You do not give examples, so we can only guess at what you mean.
How often do you ask “what is the consequence of this for America’s economy” before making a decision? The MBA’s directing large financial organizations acted just like we do, maximizing their personal welfare. They operated in a system which not just allowed by encouraged massive risk-taking — and were rewarded for their actions.
Rewarded not just in money, but social status. “Socially-responsible” investors (the enlightened ones) hated mining companies but loved financial companies (see here). They were stars in both elite society and the media.
Not just rewarded in money, fame, and status — but officially approved. Government regulators not only knew of the rising leverage and use of derivatives (subject of dozens of hearings and studies), but explicitly acted to facilitiate it (as in the 2004 decision by the SEC to allow brokerage firms greater leverage).
Now we learn that these things did not work, and we wonder why these guys with MBA’s did not consider “what is the consequence of this for America’s economy”. Perhaps that is the wrong question. Perhaps we should ask about how we select and reward our corporate and government leaders. About oversight. And, most of all, why we went on the multi-decade “borrow and spend” binge that is the true cause of the crisis.
Remember, we were warned — often — but decided not to listen.
P.S. Ed is in a different position than most of us, and might ask “what’s best for America” before acting.
Question is how does a masters level education process create people with such opposite concepts for the economy?
A: The distinction is that we understand how air and gravity work. An MBA is not at all equivalent to a MS in Aero because, as events have clearly shown for quite some time, the economy is of an order of complexity and scale and unprectability far beyond that of anything in physics. To make economics more science than dismal would require that we fully understand human psychology, for example, at which point we run up against Goedel’s paradox. Imagine, if you will, and I am fairly sure this is happening, cosmic hero-to-zero Alan Greenspan poring over his copy of the Fountainhead, wondering on a daily basis if the book or his interpretation of it were wrong. It is also far from without precedent that sophisticated and even dominant cultures can be completely right about one area of endeavor and completely wrong or ignorant about another. The Romans built wonderful roads and plumbing, but alas, there was the lead poisoning issue. The Babylonians wrote the first codified laws, and contemporaneously had formal academies that taught divination by entrails using academically certified ceramic models of animal innards. We are not genetically very different, if at all, from either of these peoples.
With the global economic crisis being compared to the great depression and Bernie Madoff becoming the poster child, I’m wondering about something, was part of the anti-semitism in Germany that Hitler fed off of a result of Jewish prominence in European finance at the time?
I apologize if my question is impolite.
Fabius Maximus replies: Not at all an impolite question. See the Wikipedia entry about Shylock in “The Merchant of Venice”:
While banking made some Jews prosperous, it is human nature to dislike ones creditors — esp when dependent on them. While not a cause of oppression (which predates this), this exacerbated it.
The following sounds familiar. At one time I think in the 16th century, the Jews were banned from Venice as they had ended up with all the gold…. Yet without their usuary Europe would have faltered. From The Jewish Encyclopedia entry on Venice:
(1) What is the likelihood of the chaos in Mexico spreading to the US resulting in a 4GW conflict?
(2) If it is a distinct possibility what can be realistically done to reduce the threat and what do you think the US is likely to do?
(3) What would you say the chances are for the US government to pull out of this recession/depression with it’s legitimacy intact?
(4) Would it be a good idea for people to start forming resilient communities as what John Robb has been proposing?
Fabius Maximus replies: Taking these in sequence.
(1) Mexcio: now experiencing non-trinitarian confict.
* The odds of 4GW in Mexico during the next decade are high, but by no means certain.
* The odds of intense non-T conflict spreading to the US from Mexico (same time horizon): high.
* The odds of 4GW spreading from Mexico to the US (same horizon): low.
For more on this see “New reports about Mexico, the failing state on our border“, links to previous posts appear at the end.
(2) Very little can be done to prevent these scenarios. Intervention in Mexico would be delusional, almost certainly counter-productive. For us, non-T conflict and 4GW are defensive games. For more see:
* How America can survive and even prosper in the 21st Century – part I
* How America can survive and even prosper in the 21st Century – part II
(3) Quite high over the next few decades. The big test will be when the boomers retire. This economic downturn has not only wrecked many of the personal and instiutional savings pools of America, but also will accellerate the boomers’ date of retirement. Those fired in their late 50’s are mostly de facto retired. Some form of adjustment (aka “default”) on the government’s promises seems highly likely — and might prove difficult to manage.
(4) The question is “why”? If the answer is “to manage disasters, both natural and otherwise”, I’d say yes. If “to provide against the disintegration of socieity” — “Mad Max” scenarios — I’d say no.
#7 Pete – Recommended reading- John Robb’s Brave New War; Bill Joy’s Why The Future Doesn’t Need Us; John Gray’s Straw Dogs…; Sir Martin Rees’ Our Final Hour; Barry Kellman’s strong (2008) Bioviolence.
Who can recommend additions?
Fabius Maximus replies: You might find of interest the book review listed on the FM Reference page “Books about geopolitics“.
Posed this question to Peter Bergen – he of the bin Laden interview – at a break in a conference in 2006. If we had not gone into Iraq, where would we have gone? Assumption (right or wrong)that the other side would have pushed and pushed until we committed someplace – maybe back to Somalia, maybe Pakistan, maybe Palistine???? It’s cheating to answer “Home, after finishing things up in Afghanistan.”
Fabius Maximus replies: Why is it “cheating”? Is this some game? Like a Pentagon war-game in which some moves are required and some not allowed — where our fleets are re-floated if sunk?
All the intel reports I’ve seen, gov’t and academic, say that going into Iraq had either a positive or neutral effect on al Qaeda. The initial hit to them was being thrown out of Afghanistan. All subsequent damage resulted from normal intel, security, and police work. The most effective efforts against al Q post-Afghanistan were done by locals, supported by our intel and motivated (in part) by our money. Esp interrupting their communication and finance networks.
For more about al Qaeda:
* “Lessons Learned from the American Expedition to Iraq“, 29 December 2005
* “Forecasts – Why wait? Read tomorrow’s news … today! (part I)“, 11 July 2006
* “Was 9/11 the most effective single military operation in the history of the world?“, 11 June 2008
* “The enigma of Al Qaeda. Even in death, these unanswered questions remain important“, 15 September 2008
#18 led me to two related questions.
If the US had not invaded Iraq but had effectively committed a comparable level of resources to Afganistan, including economic development & corruption-prevention, how might American security & global influence be different today?
Second, what if America invested those ‘Iraq’ resources effectively, split between Afganistan and promoting an enduring Palestinian/Israeli peace initiative?
Fabius Maximus replies: Let’s break that up a bit finer.
(1) If the US had not invaded Iraq, but instead took burned the money — the hundreds of billions spent on Iraq — would America be better off? Almost certainly. We might have been able to buy Iraq from Saddham for less than the funds actually spent.
(2) If the US had done something rational with the money, would we be better off? Yes.
(3) What would have happened if we spent that money on Afghanistan? They’d love us. They’d still want us to leave, but if we did so they’d esteem our memory for a hundred generations as “those crazy but fun infidels.”
(4) What about spending even more billions on the Egypt, Israel, Palestine area? A total waste of money IMO, with one exception. (a) Paying Israel to exit the settlements and build a tight defense along the new border. (b) Massive American aid to rebuild Palestine, perhaps with contributions from other Arab states.
Assuming we would have focused on Afghanistan and truely put finished to al Qaeda is the easy (and therefore noted as “cheating”) path of thought, and indeed it is plausable. BUT… it is also possible, not having gotten us up to it there, AQ (main team, wanna be’s, etc) could have exploited other areas hoping to suck us in. This is not a question on our decisions, rather it is about the 4GW adversary and his use of the OODA Loop. No matter how bad we mess things up, it is even worse if we don’t reflect on a thinking, capable, flexible enemy. By in large he chooses the battlespace and it will be in an asynchronous manner and always in the worst possible environment – “amongst the people.”
And thanks for note on previous question. Most gracious of you.
Fabius Maximus replies: Do we have a “thinking, capable, flexible enemy?” I doubt al Qaeda qualifies, at least Bin Laden’s al Qaeda. The success of the “al Qaeda” franchining operation might prove different.
This is the key point of 4GW: it assume smart non-State adversaries. Fortunately, they appear to be rare. Our national defense apparatus needs foes to justify its awesome expenditures, and has a history of exaggeration that would shame Baron Münchhausen.
Too much time devoted to secondary issues of Al Qaeda and too little to the primary problem of why terrorism escalates, what are the reasons we seem not to comprehend in the forces behind it, what are our fallacies of comprehension, and why do we persistently apply wrong means to eliminate the problem. The amount of intellectual effort spent on Al Qaeda borders on nonsensical: we will eliminate it (sooner or later) and 6 months later a Brotherhood of Left-Torqued Helix pomatia emerges on the Island of Bongo Bingo, then goes on a rampage across the world. Will understanding Mr. Bin Laden’s psyche help us much in the new confrontation or will clear a perception of what is it all about, and why are we the continuing target of the selfsame, offer a better means of addressing the issue? Our tendency is the amazingly persistent attachment to the last verb in a fairly long sentence. The result is understanding the verb in a wrong, imagined, and self-contrived meaning rather than the real one, and in complete isolation from the objective and proper context, while losing the meaning of the entire sentence at best or not even realizing there was one in the first place at worst. Not the best means of having an intelligent conversation, it it?
My guess is that (a) is probably (but not certain); (b) is likely; and (c) is improbable. I consider right-wing groups an unlikely source of serious disorder (more than isolated terrorism).
Interesting, thanks. I should probably read some Mao Zedong.
In August of 1349, the Jewish communities of Mainz and Cologne were exterminated. In February of that same year, Christians murdered two thousand Jews in Strasbourg. Then the Dreyfus Affair and later the Jewish Holocaust. Now we see Israel waging genocide upon the Palistinians using the above history as rationalization.
Lloyd deMause, the driving force behind psychohistory, the science of historical motivations, combining the insights of psychotherapy with the research methodology of the social sciences to understand the emotional origin of the social and political behavior of groups and nations, past and present, suggests these cycles of violence begetting violence will only be mitigated by better treatment of mothers and children.
My geopolitical question:
How do we implement this insight instead of creating ever more clever ways to traumatize the next generation?
1. This may be a little late to ask this, but what do you think is likely to happen in China when it comes to this recession/depression?
2. What will the result of whatever happens in China be for the rest of us?
3. Would you say that the risk of China stretching it’s military muscles at least locally is more likely than not?
Fabius Maximus replies: This is IMO one of the most important questions!
The consensus is that China will have 5 – 8% GDP growth this year, which will stabilize the global economy. A small minority believe it might hit zero — or even contract late in the year. For more see section #2 in A situation report about the global economy, as the flames break thru the firewalls.
As for #3, I guess the odds to be near zero.
FM: do you think the Made in America clause in the fiscal stimulus package will be inserted?
Fabius Maximus replies: Great question, which I have no special ability to predict. My guess is yes. If so, we are playing a dangerous game — which could easily and quickly spin out of control.
#12 With MS in Aero as a basis, if we designed airplanes the way our MBAs are working business/economy, they’d mostly all be in a river, ditch,on a mountain somewhere.
Actually the financial ‘rocket scientists’ DID, exactly, design their risk models in the same ways that Aero experts designed new jets. You *do* know that Test Pilots have quite a high fatality rate — because when a jet is designed for maximum performance, within ‘reasonable safe parameters’, something small going wrong is often enough to cause a crash.
But with Jets, the ‘laws’ of physics can assumed to be constant and remain so.
With economics, human behavior, the ‘laws’ are actually only ‘usual guidelines’, such ‘laws’ merely codify a type of human behavior in a certain political-economic environment. In fact, whenever the economic ‘laws’ are understood enough to consistently allow financial above average returns thru some type of action (borrowing hugely to buy houses; selling mortgage backed securities as a way to get fees from investors; combining crappy MBS packages into a mega-package that includes a AAA rated tranche; buying tulips) — the human actions to make easy money by following the ‘laws’ result in a change in the environment such that the ‘laws’ break. House prices drop; tulip prices drop; internet company prices drop; junk bonds drop; oil futures drop; Madoff’s Ponzi scheme values drop (ponzi schemes are a bit different).
The general uselessness for investment purposes of most ‘economic laws’ is shown in the famous book: A Random Walk down Wall Street. It’s never possible for everybody to get ‘above average’ economic returns.
Fabius Maximus replies: I don’t have time to reply adequately, but this is wrong. The models were not in fact well-constructed, and there was considerable debate about this (for example) inside the rating agencies (providing much fodder for the coming litigation). They were constructed to generate revenue for the firms, at which they were successful. Everyone involved made money; nobody is giving it back. This is called principal-agent conflict.
The analogy with testing aircraft is not correct, as these models were “in production” use (not just testing). A better analogy would be if the airlines experienced widespread crashes of 2 year old aircraft, with massive fatalities.
The last line is absurd. Only a small fraction of economic theory concerns markets, and little or none of that is disproved by Malkiel’s 1973 book. I suspect Tom is confusing economic theory with its subset of finance theory (such as the Capital Asset Pricing Model, for which William Sharpe won the Nobel Prize in 1990).
Question: a) what percentage of the $800+ bil. stimulus package will be spent in the first quarter of 2009?
b) do you believe it will be a higher or lower percent than if there had been a pure Tax Holiday (no sending cash to the IRS)?
c) do you have an update on your preferred stimulus bill, if any?
d) should the gov’t bail out the auto makers?
Fabius Maximus replies: (1) I have not seen any estimates so granular. Since the bill has not yet been passed, I suspect the number will be small (or tiny).
(2) Don’t know, don’t care. Too hypothetical.
(4) Only as part of a triage-like massive restructuring, including labor contracts. The costs would probably be similar to the cost to government of bankruptcy (when the workers walk across the Street and collect government aid).
Update: how quickly are tax cuts spent? Much more slowly than many non-experts believe. See these two articles for more information.
“Budget Surplus? Tax Cut! Budget Deficit? Tax Cut! High Energy Prices? Tax Cut! Deep Recession? More Tax Cuts!“, Menzie Chinn, Econbrowser, 2 February 2009 — This applies to all forms of tax cuts. Excerpt (esp note the graphs):
“‘Stimulus’ Tax Cuts Not Set Up For Speedy Economic Impact“, Investors Business Daily, 2 February 2009 — Discusses the current proposal. Excerpt: