Tuesday, May 14, 2013

Tuesday Links

  • The above is the Yen/$ exchange rate since 1970.  The uptick on the far right is the initial effects of Abenomics (essentially making somewhat credible threats to increase inflation by increasing the money supply).  Some more interesting charts here from Edward Hugh, along with a rather sceptical take.  I'm inclined to think it's a bit too soon to draw any firm conclusions.
  • Someone may be studying how to perform destructive cyber-attacks on energy infrastructure.
  • The children of the upper class and upper middle class are increasingly stressed out by the process of being prepared for today's hyper-competitive globalized society.
  • Related: student debt and the crushing of the American dream.
  • There are severe financial consequences to firmly predicting global doom and being wrong.
  • Kevin Drum has a very good piece about the economic consequences of approach to singularity. His views and mine are rather similar in the short to medium term (and he even uses one of my graphs).  In the long term, I'm rather less optimistic about the "robotic paradise of leisure and contemplation" than he is.  That assumes that a highly intelligent economic system with no need at all for humans will continue to prioritize their welfare for many generations.  Building the system to guarantee that strikes me as very hard to do.
  • This Bertrand Russell essay on the value of idleness was written in 1932, but still seems trenchant today (I'm personally struggling with how to think about these issues in the context of the approaching singularity).  H/T Ran Prieur.


petemason said...

Many thanks for the Bertrand Russell link.

It ought to be taught in schools, but it won't be for the reasons the author himself spells out.

The Rational Pessimist said...


As regards Abenomics, the yen is really a side show. The BOJ could have targeted the exchange rate directly with a currency intervention if this was at the core of their theoretical understanding of the problem.

The absolutely critical thing to understand is that Abe and Kuroda believe that they are tackling a demand-side liquidity trap, not a supply side problem. Hugh captures this point well.

Kuroda's policies are built around the belief that there exists a large output gap that can be closed by creating the perception of negative interest rates into the future. This is pure Krugman 1998 and Eggertsson/Woodford 2004 (the bedrock of Ben Bernanke's unconventional monetary policy).

Like Hugh, I believe that this analysis is incorrect. The problem is a combination of structural supply-side constraints on growth (demographics, slowing technology-led productivity, energy costs) and structural demand-side constraints (impact of technology on median wages).

To target the wrong supply- and demand-side problem via pumping up asset prices and depreciating the yen is a recipe for trouble. I've blogged about this in depth here:


Mike Aucott said...

Regarding the advance of AI; as I've noted before, there seems no reason that the evolution of robots will not be marked by the same sorts of struggles for dominance and share of the energy and materials pie that has marked all of evolution. The idea that the advance of AI to the point where robots are automatous will result in some grand, cooperative, all-encompassing system seems highly unlikely. Instead, specific robots and AI systems seem likely to behave like different species. It could be robot vs. robot for millenia until cooperative, interdependent relationships evolve for, more or less, mutual benefit. Humans will continue to be players in this ecosystem, perhaps in ways we cannot imagine.