Krugman on Lebanon

A great column by Krugman.

Shock and Awe

For Americans who care deeply about Israel, one of the truly nightmarish things about the war in Lebanon has been watching Israel repeat the same mistakes the United States made in Iraq. It’s as if Prime Minister Ehud Olmert has been possessed by the deranged spirit of Donald Rumsfeld.

Yes, I know that there are big differences in the origins of the two wars. There’s no question of this war having been sold on false pretenses; unlike America in Iraq, Israel is clearly acting in self-defense.

But both Clausewitz and Sherman were right: war is both a continuation of policy by other means, and all hell. It’s a terrible mistake to start a major military operation, regardless of the moral justification, unless you have very good reason to believe that the action will improve matters.

The most compelling argument against an invasion of Iraq wasn’t the suspicion many of us had, which turned out to be correct, that the administration’s case for war was fraudulent. It was the fact that the real reason government officials and many pundits wanted a war ¢â¬â their belief that if the United States used its military might to “hit someone” in the Arab world, never mind exactly who, it would shock and awe Islamic radicals into giving up terrorism ¢â¬â was, all too obviously, a childish fantasy.

And the results of going to war on the basis of that fantasy were predictably disastrous: the fiasco in Iraq has ended up demonstrating the limits of U.S. power, strengthening radical Islam ¢â¬â especially radical Shiites allied with Iran, a group that includes Hezbollah ¢â¬â and losing America the moral high ground.

What I never expected was that Israel ¢â¬â a nation that has unfortunately had plenty of experience with both war and insurgency ¢â¬â would be susceptible to similar fantasies. Yet that’s what seems to have happened.

There is a case for a full-scale Israeli ground offensive against Hezbollah. It may yet come to that, if Israel can’t find any other way to protect itself. There is also a case for restraint ¢â¬â limited counterstrikes combined with diplomacy, an effort to get other players to rein Hezbollah in, with the option of that full-scale offensive always in the background.

But the actual course Israel has chosen ¢â¬â a bombing campaign that clearly isn’t crippling Hezbollah, but is destroying Lebanon’s infrastructure and killing lots of civilians ¢â¬â achieves the worst of both worlds. Presumably there were people in the Israeli government who assured the political leadership that a rain of smart bombs would smash and/or intimidate Hezbollah into submission. Those people should be fired.

Israel’s decision to rely on shock and awe rather than either diplomacy or boots on the ground, like the U.S. decision to order the U.N. inspectors out and invade Iraq without sufficient troops or a plan to stabilize the country, is having the opposite of its intended effect. Hezbollah has acquired heroic status, while Israel has both damaged its reputation as a regional superpower and made itself a villain in the eyes of the world.

Complaining that this is unfair does no good, just as repeating “but Saddam was evil” does nothing to improve the situation in Iraq. What Israel needs now is a way out of the quagmire. And since Israel doesn’t appear ready to reoccupy southern Lebanon, that means doing what it should have done from the beginning: try restraint and diplomacy. And Israel will negotiate from a far weaker position than seemed possible just three weeks ago.

And what about the role of the United States, which should be trying to contain the crisis? Our response has been both hapless and malign.

For the moment, U.S. policy seems to be to stall and divert efforts to negotiate a cease-fire as long as possible, so as to give Israel a chance to dig its hole even deeper. Also, we aren’t talking to Syria, which might hold the key to resolving the crisis, because President Bush doesn’t believe in talking to bad people, and anyway that’s the kind of thing Bill Clinton did. Did I mention that these people are childish?

Again, Israel has the right to protect itself. If all-out war with Hezbollah becomes impossible to avoid, so be it. But bombing Lebanon isn’t making Israel more secure.

As this column was going to press, Israel ¢â¬â responding to the horror at Qana, where missiles killed dozens of civilians, many of them children ¢â¬â announced a 48-hour suspension of aerial bombardment. But why resume that bombardment when the 48 hours are up? The hard truth is that Israel needs, for its own sake, to stop a bombing campaign that is making its enemies stronger, not weaker.

Could open source be a better way for big pharma?

Big Pharma is in a bind. A big bind.

As James Surowiecki explains in this excellent piece there are some really big problems looming for pharmaceutical companies. And like the saying about banks, when the problems are big enough, they’re our problems, not just the companies’.

You see they can be sued for the damage their drugs do. That seems reasonable, and some of the court cases against tobacco companies, and asbestos manufacturers and drug companies behaving similarly years ago – eg Distillers manufacturers of Thalidomide – couldn’t have happened to a nicer bunch of people.

As the theory goes some nice juicy payouts will improve the incentives these companies face.

But things are different now. For a long time it’s been clear that standards of legal liability do not tally particularly well with science. If you’re a company making something that harms someone, lawyers and the juries they direct can easily find you liable for harm done, even if you’ve taken reasonable steps to avoid that harm, and even if a bit of foresight would demonstrate that a finding of liability could jeopardise the commercial existence of a very worthwhile product that brings help to millions of people. Continue reading

Net neutrality (amongst other things I ought to know about)

I went hunting for pieces by one of the worlds really good economic journalists, James Surowiecki of the New Yorker (author of the truly teriffic best seller The Wisdom of Crowds). This nice piece on net neutrality reminded me that I have seen the issue discussed around the place but haven’t really read a lot about it. If readers have any tips for me – please let me have them. I guess my instincts tell me that I’d be conservative about this and keen to preserve the ‘common carrier’ properties of the net until it was fairly clear that there were net benefits (sorry about the pun) from allowing non-neutrality.

I’ve reproduced James S’s piece below the fold. Continue reading

The economic possibilities of our grand grand nephews: Edmund Pevensee shock revelations!

skandarkeynes.jpg

I vaguely remember wondering if Skandar Keynes – who played Edmund Pevensee (the bad child who gets saved by the others) – was related when I saw the credits. Running into his name again in an unlikely context here, I asked Google if he was related to JM Keynes, which he is – about as directly as one can be to someone who didn’t have any kids. As Keynes lamented, the baron is barren.

Wikipedia reveals that Skandar is the great-great nephew of the great great man. And great great great grandson of Charles Darwin. Keynes’ brother Geoffrey married Charles Darwin’s granddaughter Margaret Darwin.

Now Darwin had a famous grandfather – Erasmus – who published very interesting and well regarded speculations on biology and evolution before him. Likewise Maynard’s Dad John Neville was no slouch publishing a quite important treatise on economic methodology. Meanwhile Steve Sailor drags in the Wedgwoods and Ralph Vaughan Williams.

Ralph Vaughan Williams’s maternal grandmother, Caroline Sarah Darwin, was Charles Darwin’s older sister, and his maternal grandfather, Josiah Wedgwood III, was the older brother of Darwin’s wife Emma. [Charles Darwin married his first cousin.]

And on it goes. I guess.

Does high employment require high social inequality? Fred Argy

The following opinion piece first appeared in New Matilda. Comments welcome.

Many economists are fond of saying that a country can have relatively high employment or relatively low inequality – but not both. The argument runs like this. Good employment outcomes can only be achieved through free, competitive markets, with low levels of social regulation, a high degree of wage flexibility, curbs on trade unions and tough welfare to work policies. Such policies are bound to widen earnings inequalities – but any attempt to counter this effect through tax/transfer redistribution measures would simply nullify the economic and employment benefits of the market liberalisation measures. Higher inequality is therefore a pre-condition for higher employment.

Economic theory alone cannot prove or disprove this kind of argument. Subject to the usual qualifications, economists start with a strong presumption in favour of free and competitive market economies – but once a high level of market freedom is attained, as is now the case in all Western societies, the profession is far from unanimous about the incremental effects of further market liberalisation on economic performance.

So we need to turn to the empirical literature for guidance. Many economists like to compare “Anglo” countries (the US, UK, NZ and Australia) with those in continental and southern European countries (which I will call “Continentals”). This comparison does lend support to the ‘trade-off’ theory: Anglo countries have generally performed better on employment criteria than the Continentals but worse on income inequality.

The Nordic experience

However the trade-off hypothesis is undermined by the experience of the Scandinavians (Denmark, Norway, Sweden, Iceland and Finland) and countries like Ireland, Netherlands and Austria. These Northern Europeans, which I will call “Nordics’ for short, have generally been able to deliver low levels of inequality as well as strong employment outcomes. Continue reading

The Non-econometrician’s lament

One for Nicholas!  

As soon as I could safely toddle
My parents handed me a Model;
My brisk and energetic pater
Provided the accelerator.
My mother, with her kindly gumption,
The function guiding my consumption;
And every week I had from her
A lovely new parameter,
With lots of little leads and lags
In pretty parabolic bags.With optimistic expectations
I started on my explorations,
And swore to move without a swerve
Along my sinusoidal curve.
 

Alas! I knew how it would end:
I’ve mixed the cycle with the trend,
And fear that, growing daily skinnier,
I have at length become non-linear.
I wander glumly round the house
As though I were exogenous,
And hardly capable of feeling
The difference ‘tween floor and ceiling.
I scarcely now, a pallid ghost,
Can tell ex ante from ex post:
My thoughts are sadly inelastic,
My acts invariably stochastic.  

– Sir Dennis H. Robertson