I'm Binah, and I approved this posting

It's a shame, but I have reached the point of no longer having the time to blog as I once did -- life has too many other demands at this point. So I'm quitting the blogging life, perhaps for good, perhaps just for a time.

I don't need to expand much on the depressing political developments probably coming our way -- a large step backwards to about 30 or 40 years ago -- in the form of Barack Obama, his movement, and the flunky journalist class that surrounds and protects him. Falsely sold as an agent of change, Obama in reality is the politics of Boomer nostalgia made flesh and dwelling among us, as well as a false messiah of the panicked establishment now filling his campaign coffers. It's older voters and older Boomers who are his core supporters. He's not the future, but very much the past, nicely scripted and teleprompted.

There will be no more seemingly limitless easy credit from our Asian lenders after the current financial crisis ends. Once discredited, nostalgia-filled "progressive" politics is likely to turn into nasty or even violent reaction. Constitutional and democratic government will be under exceptional stress, with suppression of dissent and free speech very likely. With its voter fraud schemes and bullying of local radio and television stations, the Obama campaign is a foretaste.

Somewhere between cult and hoax, an Obama presidency will probably be one term only. But don't get your hopes up too fast. An enfeebled GOP will take at least a decade to rebuilt an effective opposition, and we don't have a decade to respond to the crisis brought on by a vast credit bubble and a decade and a half of overborrowing. The coming breakdown of the welfare state will only add more woe. The problems created by too much debt cannot be solved by more borrowing. Politicians' new false promises can't undo the damage done by past false promises.

Political opposition is likely to take more bizarre forms. Backward steps in tax and other policies will undoubtedly make the US an even more hostile place than it already is for businesses that produce goods and services -- as opposed to financial institutions and politicians that encourage Americans to pile on more debt to buy from elsewhere. The dollar's long period as the world's main reserve currency enabled much of this excess. Expect the dollar to lose much or all of this status. The terms of borrowing from foreigners will become much tougher.

If we had a free press in America -- ah, but we don't. (See here and here, curiously, both by Democrats.) What we have instead is a class of would-be courtiers and lackeys, all primping themselves to serve as Obamamerica's unpaid Ministry of Popular Enlightenment. The conventional media is a junk-food banquet in which most of the dishes are poisoned. The best thing you can do is the simplest: turn it off. Conservatives, libertarians, and independents need to abandon the media-driven populist posturing that has displaced their older political wisdom in the last 15 years. The conservative movement so successful in the 1970s, 80s, and 90s was a movement of personal experience, thought, conversation, and books, not a movement of televised talking heads, Washington cocktail parties, and pandering.

This is Binah, signing off, till who knows when. To quote a journalist from a different era, when America actually had reporters, good night and good luck. Let's hope the night doesn't last longer than it needs to.



POSTSCRIPT: How could I forget "blogal warming"? :) Good news to report: more and more scientists are publicly rejecting the idea, as the negative evidence keeps piling up. Don't ignore your personal experience: the last two years really have been colder. The polar regions, especially the Antarctic, are cooling. The connection to the Sun's weakening magnetism can no longer be disputed, even if it is not yet understood.

It's refreshing to see scientists responding to evidence and ignoring mistaken computer models. If only Wall Street had taken this to heart earlier ....

House: Wonderful life to Boomer nightmare

Ross Duthat has an interesting piece in today's Washington Post about the origins of America's romantic obsession with home-owning. He picks an interesting culprit, one George Bailey -- yes, that one -- and traces the consequences in our tax code, public subsidies, zoning laws, transportation systems, and much else. Real estate is undoubtedly our true religion.

But I don't agree with his conclusions. He seems to think oil will remain at $140 a barrel, while the new deflation means oil will actually continue to drop in its dollar price -- it's already virtually half its peak price now. And there's no evidence that mass transit or other "new urbanism" is affordable or even desired by most Americans. (See here for California's breathtaking rail boondoggle, for which the state wants federal help and which it should absolutely not get.) And until the 1990s, the federal agencies for helping people buy houses (the VHA and FHA) did act in a conservative way. They were regular government agencies, founded by people who lived through the Depression and largely insulated from direct Congressional pressure, that also did not lobby Congress in turn -- very different from the quasi-private but government-backed patronage-graft extravaganzas of Fannie and Freddie.

What will result instead is probably a more sensible version of the automotive-suburban dream: more hybrid and other efficient cars (we had more efficient cars in the 80s!), smaller houses, and more compact development. Nor is so-called "sprawl" unique to America: it's increasingly common in other countries too, like France (see here). The "new urbanism" is largely a reactionary, elite fantasy.

The debt-based consumption excess of the last 15 years is really a generational tale, of Boomers and their kids gone wild. They treat what their parents and grandparents viewed correctly as a dream requiring hard work and good choices as a mindless and easy entitlement.

A big smoking hole in the ground: Moral hazards in many shapes and colors

PRE-POSTSCRIPT: Christopher Caldwell has an excellent article in the London Financial Times setting straight the political reality of this crisis: "pragmatism" not only doesn't work, it's precisely what got us into the crisis to start with. "Ideologues" are supposed to be bad, mean people who block "pragmatism"; in fact, they block politically gratifying but false solutions that just cause more problems down the road. It's too bad there weren't more -- many more -- "ideologues" standing in the way of government-sponsored subprime mortgages. There should also have been more "ideologues" (meaning, people who actually know something) more insistent on deflecting the rescue push in a more helpful direction.

The incoherent response of the US and other governments is also a case of "pragmatism": myopic reaction, shaped by panic, and not calming down and thinking it through. The economic knowledge to thread governments and markets through this mess is available in abundance. But politicians, journalists, and others in the chattering classes often don't want to hear it.
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After a busy week, a few brief items to post.

Anyone paying attention to the financial crisis is aware of the role of subprime mortgages and their sponsorship by Fannie Mae and Freddie Mac. They form the weakest part of the mortgage market, so it's no surprise that the crisis hit there first, then spread.

But why the rest of the housing market? It's because of the powerful collective delusion shared by banks, credit markets, the public at large, and the regulators themselves that housing prices would "have to" keep going up forever at eight or 10 per cent a year. This misperception is a textbook case of "bubble" psychology. In an undistorted market, lenders, home buyers, and everyone else, would have perceived risk more realistically and acted accordingly. Subprime mortgages would still have happened, but at a lower volume and higher interest rates.

This misperception played a crucial role in the subprime mortgage fiasco. If I lend you $500,000 for a house, and you're not a good credit risk, but housing prices rise 10% next year, it's fine. If you default and I foreclose on your house, I can sell it for $550,000. I've made money in this supposedly dire scenario. If I expect housing prices to behave that way into the indefinite future, I'm going to be a complacent creditor, willing to lend to just about anybody.

But if housing prices start dropping and appear ready to keep dropping for at least several years, the picture changes drastically. If you're a good credit risk, I'll lend to you, perhaps at somewhat tougher terms (more down payment, higher interest rate), but let you, the borrower, assume the risk of your house falling in value. (You always have the alternative of not buying at all and renting instead.) If you're a bad credit risk and in danger of default, there's no way to avoid losses somewhere: you will lose if and when you sell your house, or I will lose when you default and I'm left with a $500,000 mortgage attached to a $400,000 (say) house.

It is here that we see how Fannie and Freddie set up lenders for unwittingly assuming big risks. Fan and Fred didn't redistribute income or wealth; they redistributed risk, from home buyers, then to the banks lending the money, and finally to the bondholders who bought the mortgages in the form of Fan-Fred bonds. The F-F business model was to buy the mortgages from the bank as bonds and at a discount, then resell them at full value to bondholders. The bondholders did this because behind F-F was the implicit government guarantee of bailout in case of default.*

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Whence the fuel for the bubble in the housing market generally, that part not subprime?

We've already heard from many about moral hazard, the term economists use for some third party (usually government, although it doesn't have to be) guaranteeing an outcome for a certain class of people, regardless of their own mistakes or outsized risks they take. Fannie and Freddie were complex schemes of moral hazard.

But, all over the advanced world, central banks have also long been in the habit of creating moral hazards from policies of cheap credit, holding interest rates artificially low. The money supply grows too fast, but it's in the form of credit, not cash. The result is not "inflation" as we usually understand it (rising consumer and producer prices), but asset bubbles (stocks, houses) and misinvestment. Overly-easy lending practices make everyone too casual about what they invest in and lull them into a false sense of complacency. It wastes scarce savings (capital). Above all, it creates the illusion that certain favored assets du jour will just keep going up in price. In other words, cheap credit enables and promotes bubbles.

Is this possibility relevant to the recent economic history? You bet: it describes the Fed's behavior in 1995-99, as it enabled a massive stock bubble. As the Fed's commitment to price stability wavered in the late 90s and during the 2001 recession, it describes even better the 2002-07 housing bubble, which was accompanied by other classic inflationary signs, such as a falling dollar and rising prices for imported natural resource like oil.**

People wonder if the huge injections of credit by the Fed and other central banks over the last few years will lead to inflation down the line. The response is, they already have done so. These injections kept housing and natural resource bubbles going for several years. But it's not possible for central banks to keep manipulating economies and financial markets indefinitely this way. Eventually everyone gets wise and readjusts their behavior and thinking. That's what's been happening for the last year or so, and we're now heading into deflation, at least for a while.
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* Where did Fannie and Freddie's profits go? F and F both sold stock to shareholders, and they got some of the net proceeds. The rest went into that Congressional patronage pot already mentioned, the Affordable Housing Trust Fund.

** Slightly older but relevant to the present crisis are the 1980s bubble and 1990s post-bubble stagnation of Japan. Again, the central bank played a pivotal role in spreading lots of cheap credit around and driving up real estate and other asset prices to fantastic levels.

The last credit show

PHOTO OF THE YEAR: I love this picture, taken at the Capitol Friday, just after the bailout passed.

Pelosi hasn't the slightest clue what just transpired. Hoyer's distracted smile suggests he knows something bad is going down, but he can't put his finger on it. Only Emanuel's glum look indicates someone who gets it.

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I don't know about all those bloggers who post every few hours, but I've virtually run out of things to say about the financial crisis.

I'm not happy with some of the conservative talk radio types denouncing businesses for running on short-term credit as a form of money. Modern business activity couldn't proceed at the level it does, accomplish what it accomplishes, and employ the people it employees, on a cash-only basis. Long ago (in the 19th century, actually), capitalism outgrew the cash-only system, just as it eventually outgrew the gold standard. Businesses, consumers, and governments make extensive use of short-term credit because spending and income don't always match at every instant in time. Short-term credit is a way to shift money flows so that it does all balance out. The Federal Reserve counts cash and cash equivalents as basic forms of money (M1). But short-term credit functions as money as well and gets added to form M2. It walks and quacks like a duck. Thus, it's a duck.

Sometimes it strikes me that certain conservatives, unfettered, would abolish fractional reserve banking and credit-as-money, thinking that they're just some slick phony-baloney. I wonder if they think a modern economy could function that way.

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OTOH it has been impressive to see economists, especially younger ones, publicly denouncing the bailout. Part of the opposition is prompted by the bailout's being embarnacled with "sweeteners"; i.e., bribes to get the Congress-critters to pass it. But the opposition also has an intrinsic economic basis: the government shouldn't be pledging taxpayer money to buy up assets with declining prices, when we don't yet have a good sense of what their real prices are.

Most economists -- excluding economists opposed outright to any rescue -- have pushed "recapitalization": essentially, some way of tiding over lenders, equivalent to my pet proposed series of ad hoc, strings-attached, short-term loans.* But it's vital to decouple steadying the credit markets and falling asset prices, precisely so that the asset shakeout can proceed without threatening the financial system. To reiterate: the credit crunch has to be dealt with first.

The larger tidying up, with its lessons about moral hazard and its punishment of the innocent and rewarding of the guilty, will take a few years. The government shouldn't be in the business of buying up and reselling distressed assets, except as part of larger post-bankruptcy settlements. Once an economic actor is bankrupt, it's out of the game, so to speak, and the risk of open-ended commitments and market distortions is much lower.

POSTSCRIPT: Some of the biggest doomer-gloomers (like our friend Fabius Maximus) have been pushing the "end of the American era" as a result of this crisis. But the dollar's rise belies such talk. Related crises are happening in Europe and Asia, and they are in some ways worse than ours.

That's also why investment banking, as practiced on Wall Street until recently, won't be decamping to London or Hong Kong. It really is dead.
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* I was probably too harsh on Krugman for pushing "recapitalization." It's the right idea, but banks and other lenders will eventually have to do something about the mismatch between falling housing prices and yesteryear's mortgages. The credit crunch can't wait for that resolution.

What is to be done?

UPDATE: The post below was composed on Friday and Saturday, so the news is a little outdated.

The distinction I made is parallel to the distinction Virginia Postrel makes in her recent post between the "illiquid" (the immediate credit crunch, the unwillingness of lenders to lend) and the "insolvent" (the narrower and longer-term problem of serious restructuring or bankruptcy, caused by mortgage loans not performing or in default). She also makes the wonderful suggestion that any net profit Treasury makes on federal intervention should be rebated directly to taxpayers.
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The Paulson-Bernanke proposal for a financial sector bailout still seems to be floundering in Washington. The House Republicans, at last report, are still split on the idea, and without a united front from them, the Democrats are not willing to jump in alone.

For a moment, set aside the economics of the proposal and focus on the politics. The Congressional Republicans suffered in the 2006 elections from the perception that they had completely lost it on restraining federal spending. They had also spent six years in partisan lockstep with Bush on spending, expanding government, and the Iraq war. Enough conservative and independent voters got pissed off by the Republican abandonment of anything resembling conservative policies that many just stayed home or, in some cases, voted Democratic. The Republicans lost control of Congress.

That painful lesson floats in the background now as the House Republicans struggle with the question of whether to support the plan. Some support it because they think it's a good idea, and others oppose because they think it's bad. What hangs in the balance is how much Bush can call on simple partisan and personal loyalty. He lacks the automatic Republican support he enjoyed in his first term, and thus we see a political cliffhanger.

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Now turn back to the economics of the plan. Paulson and Bernanke got themselves in some trouble because they failed to explain the situation and their proposal completely enough.

Some of the problem is everyone's ignorance about when and where the housing market will bottom. That event will be crucial in determining the final, diminished values of the assets that back the financial paper (bonds and other credit instruments) that many now suddenly mistrust. Those values in turn will determine the ultimate losses that lending institutions, depositors, and bondholders will face. Many will just have a bad day; a subset will suffer large losses; a subset of that subset will go bankrupt. No one knows the full scope yet. Yesterday's Washington Mutual failure threw some more paint on the canvas and filled in another part of the still-incomplete picture.

Paulson and Bernanke are also wrestling with a crisis that has two very distinct parts, subcrises with different origins, time horizons, and consequences. Their plan addresses both at once, which was probably a mistake, and thus evokes a lot of skepticism.

There's a large advantage to separating these two parts. Part two will take a few years to fully work out and make sure that the government is not overpaying for distressed assets. No one can make those judgments now -- it's too early. At the same time, part one can address the credit crisis right away, but through short-term loans, not buying up assets.

Part one, the credit market crisis, is immediate and needs to be confronted quickly. Failure here would cause severe economic problems, as short-term credit acts as quasi-money for businesses, government, and individuals. If banks and other lenders suddenly decide all at once to stop lending, we will have something like the Great Depression on our hands. The Fed is already acting as it should to prevent this, keeping low the interest rates it controls (federal discount and interbank overnight). It also injects cash by buying up Treasury and government agency bonds and exchanges longer-term bonds for shorter-term. All act to keep the money supply flowing, or "liquid," as economists say.*

But it might prove necessary to do more with the credit crisis than the Fed, under its normal rules, can do. The New York Federal Reserve's AIG loan is the model to follow. It's a relatively short loan (twenty-four months) and, during its term, gives the Treasury some say in how AIG is run. The Treasury, by charging AIG interest, is also forcing AIG to pay for the privilege of rescue.** Such an approach is about preventing a short-term credit crisis, nothing else. It should be ad hoc and address serious dangers quickly as they arise with time-limited rescues. It's not about the collapse of underlying asset values (houses, mainly).

Dealing with that collapse is part two of the crisis, where we have to think in terms of a few years or even a decade, not weeks or months. The model should be the Resolution Trust Corporation that dealt with the savings and loan bust of the early 90s. Here's where the RTC-like agency collects distressed assets in a kind of giant fire sale.† It then resells them, not immediately, but over a period of time, to get better prices and not glut the market for those assets all at once. The RTC worked well in the end, costing taxpayers only about $100 billion.†† The initial cost seemed much higher, because the RTC was in buying mode at first. But in resale mode later on, it recouped most of its gross costs. It worked because it spread out the impact of the S&L bust over a number of years, preventing the cost from being felt all at once.
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* Bernanke has a strong interest in the Great Depression, when banks failed in large numbers, as the Fed kept pursuing the exactly wrong policy. In effect, it hoarded gold (the dollar was backed by gold in those days) and starved its member banks.

The Federal Reserve is actually not part of the government. It's a publicly chartered, non-commercial private entity that regulates the money supply, which includes not just cash, but various forms of credit and foreign exchange. It's a "bank of banks," which federally chartered banks are required to join and contribute to. Other banks can join too, if they want.

Recently, proposals have been floated to allow non-bank entities (insurance companies like AIG, for example) to join. They would get the help the Fed can provide in a crisis, but they would also have to pony up some of their assets in exchange and accept a higher level of regulation.

** From the government and taxpayer point of view, a loan is better than a guarantee. It makes AIG's assets collateral in case of default. The conditions are more spelled out than a guarantee usually is, and the term is limited in time. Someday, people will thank Paulson and Bernanke for this.

† By themselves, assets are not "distressed." They become so when a loan or some other financial obligation is attached to them that assumes a value well above what they can actually be sold for. Selling the asset raises some cash, but not enough to fully cover the attached obligations.

†† I know, I know - "only" :)

They were a nice middle class couple, just buying a house

They keep saying it, and it's true: an era is ending on Wall Street. In fact, "Wall Street" as defined for the last 30 years, centered on independent investment banks seeking large returns by taking large risks, will be only a memory in a few months. Wall Street's two remaining large investment houses (Morgan Stanley and Goldman Sachs) are seeking to become much more like commercial banks. They will still do investing, but it won't be their sole business any longer. Diversified commercial banking is apparently the future of finance. Investment banking as an independent activity is about to disappear, at least as an institutional phenomenon.

The origins of this almost-gone era lie in the Great Inflation of the 70s and the reaction of investors desperately seeking higher returns to compensate. One asset bubble after another followed: commodities, such as gold; loans to developing countries, leading to an early 80s bust; the savings & loans (S&L) bubble and crack-up in the late 80s; the stock bubble of the mid- to late 90s; and lastly and most grandly, the 30-year-long housing boom that culminated in a bubble (2002-2007) and bust (2007-?). The housing boom lasted as long as it did because of the demographic bulge of the Baby Boomers, who entered their prime house-buying years in the mid-70s and exited just a few years ago.

The whole investment landscape is rapidly changing. Expect thinking and practice to become much more traditional, "square," and 9-to-5-ish. The era of the frantic, 14-hour investment banking workday is surely finished.

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The new government intervention in financial markets is evolving in strange and not necessarily good directions. The danger is that the Treasury Department and Fed have developed a premature, pre-emptive, and open-ended intervention -- the risk and cost to taxpayers are vague and potentially large.

Unlike previous government bailouts, there's no clear criterion of which actors really are in distress and which are just having a bad day. The supposed model of the current intervention, the Resolution Trust Corporation (RTC) of the late 80s, resold assets from savings and loan institutions that were already bankrupt and, in the end, didn't cost taxpayers that much. The present crisis hasn't progressed far enough to make such judgments. Treasury's seizure of Fannie Mae (FNMA) and Freddie Mac (FHLMC) drew its authority from the nature of their charters: their assets were essentially collateral pledged to the government anyway.

Ensuring liquidity and promoting greater transparency in the murky interconnections of bonds and the institutions that own and trade them are good things for Treasury and the Fed to be doing now. But much of more of a shake out is needed. The epicenter of the crisis is the subprime mortgage collapse. But in line with its major role in creating this particular crisis, the federal government is on the road to sorting out the resulting mess.

The larger question has no answer yet: where is the bottom of the housing market? Prices have been falling for about a year and a half. But there is still a large glut of houses in many parts of the country. The national average market time for selling houses is around 10 months; in some areas, it's much longer. Economists estimate that the housing market was about 20-30% overvalued in late 2006. Prices have fallen roughly 15 to 20% since then. The bottom might be near, or it might be another year or more away.

The lending markets are scared of this situation because, while not non-performing, many house mortgages are now collateralized by assets (houses) worth significantly less than the face value of the mortgages. Even a modest default rate on such mortgages puts many lending institutions at risk.

It's hard to see why the Treasury or Fed should be entering with a bailout in such an unripened situation. They have no knowledge, superior to the knowledge of private actors, of when and where the housing market will bottom. While the Fed did enhance the housing boom into a bubble with cheap credit over the last decade, the federal government has no particular legal obligation here. Better to catalyze private buyouts and rescues while waiting until the most serious systemic dangers have been isolated.

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The current problems are concentrated in the bond and money markets, not the stock market. Why the media and others are obsessed with stocks is therefore a mystery. That crisis is having impact elsewhere -- insurance, the money market, and short-term credit -- but it's far from the end of the world.

Other undying myths keep popping up in the media and the blogosphere, and I suppose I should do my part to debunk them. I'm not sure how much good it'll do, but I'll try.

A popular one is that the financial sector's problems were made possible by the "repeal" of the 1933 Glass-Steagall Act, which separated investment and commercial banking. The latter continues to be more regulated and conservative in its practices and carries some level of government insurance for individual depositors; the former does not. The 1999 Gramm-Leach-Bliley Act didn't abolish this distinction, although it did make it possible for commercial banks to get indirectly involved in investment markets.

The present crisis has nothing to do with the commercial-investment distinction. As many of my more sensible journalist and blogger confrères and consoeurs have pointed out, the trouble is in the housing and debt markets. Banks, brokerages, and investors heavily in the mortgage market are the ones in trouble. Like the stock market, diversified commercial banks are not in trouble; in fact, what's striking is how well they're weathering the crisis. They're doing well, in part, because they're diversified and not especially exposed to the mortgage mess. Allowing commercial banks to diversify has built a large additional quantum of safety into the system, not made it more fragile.

Another pseudohistorical absurdity making the rounds is that the "securitization" of mortgages in recent decades is to blame; that is, the packaging, sale, and resale of mortgage debt as bonds. Actually, this has been going on since the 1970s and poses no problems as long as accurate credit information is available. Mortgage bond buyers scrutinize such numbers carefully. There is a certain amount of unnerving ignorance in the bond and money markets right now about who's financially sound and who isn't. But that is driven by the two factors already mentioned: the subprime sector of the mortgage market not having accurate credit information, with the distortion of governments guarantees for non-creditworthy borrowers; and the more general problem of no one knowing exactly where the housing market bottom is. Whether the mortgage creditor is a bank or a bond owner is irrelevant.

Ditto for the attacks on "short-selling." Short-selling can't drive down the price of a sound security, at least not for long. Short-selling only works on securities that are weak to begin with. The public service that short-sellers do is to expose weak securities; that way, people will not waste their money buying more of them.

Finally, certain commentators and the media generally have tried to deflect criticism away from the political figures, mainly Democrats, who played such a large role in setting up the Fannie Mae-Freddie Mac failure. The larger housing market woes are indeed shaped by many decades of government policy promoting the overbuilding and overbuying of houses, stretching back to the 1940s.

But the narrower crisis of subprime mortgages -- the epicenter -- is of more recent origin, specifically in the Clinton years, when a strong push was made to make owning a house a government-backed entitlement. Fannie Mae and Freddie Mac's profits were partly funneled back into a patronage pot called the Affordable Housing Trust Fund. And, yes, politicians, mostly Democrats, were up to their ears in it, doling out this fund to friends and supporters.* Certain others, like Joe Biden and Barney Frank, played a pivotal role in setting up the disaster. Biden helped to push the states into getting rid of lending standards. Frank is a one-man wrecking crew, being the main Congressional protector of Fannie Mae and Freddie Mac's special status and pushing to virtually eliminate regulatory oversight of both corporations. In 2005, the New York Stock Exchange and the Securities and Exchange Commission were bullied into continuing to list Fannie Mae as active, even though it had stopped reporting on its financial condition, and its bonds could no longer be accurately rated as to their quality. That year, the first signs of trouble were already apparent (rising defaults and foreclosures). From then until now, an important part of the mortgage debt market has been flying blind, in a cloud of ignorance about its true situation.

The main fault of the Republicans? Not putting up strong and consistent opposition to these schemes. Occasional fits of opposition, an episode of hard questions from the Bush Treasury in 2004 -- that was about it. Rubin and Summers, both Treasury Secretaries under Clinton, did raise questions about Fannie Mae and Freddie Mac in the late 90s. But such questions were not part of the Democrats' political agenda and were ignored.

POSTSCRIPT: Another half-baked theory has been floated by New York Times economics columnist Paul Krugman, that the financial sector's problems are due to not having enough capital. In fact, the problem is the (too-low) ratio of good assets to total assets. More capital might help and is generally a good idea. But shedding bad assets is a more certain way to reduce the financial sector's immediate agony. Hence, the attempts to create a public RTC-style clean-up/rescue company, to collect and resell bad assets. The problem with the proposed bailout is that no one yet knows the full identity and scope of these bad assets and which institutions are in the deepest trouble. In fact, until the housing market hits bottom, we can't know -- at least, not fully.

Krugman's overrated lucubrations are a sad spectacle of outstanding technical economics talent wasted on dumb politics. Krugman's political obsessions, over and over again, get him into trouble with his economic reasoning. If you want a serious journalistic treatment of economic and financial matters, read the Washington Post's Robert Samuelson instead.
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* Obama's friend, Tony Rezko, is merely the best known of these characters.

There is also the long list of former Congressmen and Senators, former staffers, and relatives who became FNMA and FHLMC employees and part of the army of lobbyists working on Congress to maintain their special status.

Media's end

Is there any way to keep up with the jaw-dropping mix of bias, arrogance, adulterated junk food, and obtuse stupidity that the American news media has on display for us this election year? Bloggers, talk-show hosts, and others who are about to replace the American news industry struggle to come up with the words that will, in effect, form its epitaph.

The recent flap over Sarah Palin's ABC interview with Charles Gibson has even sympathetic media observers agog. Just pick a random blog in the blogroll to the right and look. Start with Mary Madigan comparing the raw and doctored interviews, and finish up with this classic Simpsons clip (requires WMP 11 or IE7). Like the indispensable Onion, only parody can now do justice to the schlock, "advocacy," and strutting, vicious pretense -- both cutthroat and petty -- that make up so much of our so-called "news."

The core problem here is that Palin, limited as her political experience is, is smart, as well as direct and plain-spoken. Her mere existence highlights the phoniness of liberal and "progressive" politics. Her limited but real accomplishments in Alaska underscore, every time those intolerable boobs on MSNBC open their mouths, the empty hype and puffery of the Obama campaign.

So media-land is in a tizzy. I don't take polls that seriously, but one poll and survey after another in the last decade has indicated that a large swath of the voting public knows what they're seeing and reading and are willing to say so. Some of these polls indicate that even a majority of self-described liberals now admit that the media is biased junk. And there's no mystery as to the nature of that bias.

In all likelihood, this election cycle will be the last in which the conventional news media has a dominant role in "reporting" and shaping the outcome. The media's credibility and prestige have been eroding for 25 or more years. But few foresaw the stunning speed of collapse we're now watching.

Basic research and why it's important

Recently, Physics Today, flagship publication of the American Physical Society (but not a refereed journal), published an interesting article on "soft," liquid or liquid-like states of matter (requires subscription). I was struck by how much progress has been made in the last 30 years on the subject and by how much that progress was due to the interaction of applied and basic, or pure, research. Such achievements show better than any abstract argument why science can't function without both.

Basic research is not necessarily theoretical -- it can include experiment -- but it is conducted with no immediate application in mind. It's obvious enough that pure research needs both experimental and applied research. (Ignore this, and you get string theory.) I don't think any successful pure research was ever not a result, direct or indirect, of some attempt to solve an applied problem.*

But applied research needs pure research as well. The reason is that applied research, carried far enough, encounters or poses problems that applied research alone cannot answer. Re-posed as pure research, these problems and their eventual solutions in turn often have unexpected and broad ramifications. There's Fourier analysis, for example; 200 years ago, it was mainly a mathematician's curiosity. But by the late 19th century, it was already very practical. Today, most of the technological gadgets we encounter day to day owe something to Fourier's discovery.

Weather and climate constitute a case where understanding beyond a certain point fails because of large, unanswered basic questions about the definition, nature, and prediction of "climate" over long times. The pressure on scientists to resolve questions that currently lack answers is what has produced the groundless para-science of "global warming." Without the real thing, empty mummery and BS fill the void. A "consensus" is manufactured. Pressure to conform to this consensus overrides scientific standards and critical thinking. Demands for policy-ready conclusions are a major culprit.

POSTSCRIPT: With hurricane season upon us, making climate predictions more useful is becoming topical. But typical weather predictions of a few days or the two-week type are all that's needed to get people out of the way of incoming storms.** There's no point in creating an industry of bogus "long-term forecasting." At the present stage of the science, such an industry can be no better than reading tea leaves, beyond obvious seasonal and other astronomical patterns.

The value of basic research arises from the apparent paradox that, to be useful in the long run, it has to be "useless" in the short.
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* That's true even of subatomic physics, which has its origins in 19th century theories of electromagnetism and early 20th century attempts to combine electromagnetism and quantum mechanics.

** Even better is finding ways of discouraging people from living in likely storm paths in the first place -- or at least, not encouraging them.

Wealthier countries have early warning systems in case of severe weather. A helpful step would be to make these early warnings more available in poorer countries. But such steps have nothing to do with improving weather forecasting or climate science. They're about making already-known information better disseminated and, in that sense, "more useful."

Thank god for evolution

As a proponent of the "new" atheism, Richard Dawkins is, like Christopher Hitchens and others, sometimes annoying. But when it comes to explaining the nuts and bolts of evolution, few do it better.

Next year is the 200th anniversary of the birth of Charles Darwin and the 150th anniversary of the publication of On the Origin of Species: By Means of Natural Selection. To mark those dates, the BBC has started an evolution series on Channel 4 with Dawkins, also available from Dawkins' Web site.

For another look at the exciting and controversial world of biblical archeology, television viewers will be able to take in the two-hour Nova special on PBS this coming November (trailer here). From the previews, it seems the content should be taken with a grain of salt: it's unlikely the Bible was written by hundreds of authors, and archeological remains and linguistics tell us that the ancient Israelites were definitely not Canaanites. But this is journalism, after all -- it's not supposed to be accurate, just ... umm ... "provocative" :)

(Hat tip to Adam.)

Is modern art that bad?

Are the Philistines on the march over at the Guardian? Joe Queenan just published there a splenetic outburst against modern art. He doesn't seem to like much after about 1900. Terry Teachout does his own examination of Queenan's hostility at the Wall Street Journal. Complaints about modern art -- I don't mean just negative reactions to anything new, but sustained, visceral dislike for the modern -- are as old as modern art itself.

There is a problem with artistic modernism, especially music. But the problem is more recent than Queenan thinks and dates from the 1950s, not the 1900s. It is true that the "break" that defines modernism happened some time in the decade or so before 1914, and much of modern art's problem with the general public dates from those years. But the literature and visual art of that period have long since been been assimilated by both critics and the general public, and the same is true of most of its music. The later art of the 20th century has just been a working out of that moment: the breakdown of inherited realist, classical, and romantic esthetics.

Since 1945, the fates of the arts have diverged. Literature has proven the most conservative, largely abandoning the modernistic experiments of, say, Proust, Joyce, and Nabakov. There is widespread admiration for their achievements, but few serious imitators. Literature's close relation to time-bound narrative, reinforced by the ubiquity of movies and television, made that fate difficult to avoid. The visual arts suffered a different fate: widespread appreciation of and big money for signature breakthrough works. Still, there were fewer and fewer serious imitators and practitioners in the last century's concluding decades.

Something entirely different happened to music. While undergoing wrenching changes from the end of the nineteenth century -- the rise of commercialized popular music, the influence of non-Western musical cultures, the exhaustion of the classical-romantic paradigm -- Western "art" music was still vigorous down to the Second World War. The distinction between "popular" and "high" music had not yet become a chasm. Contrary to Queenan and other critics,* the twentieth-century repertory is second only to the nineteenth century's in being studied, played, and listened to.**

The true failure of modern art happened after 1945. The sheer destructiveness of the Second World War had multiple, devastating impacts on European centers of art, reinforcing the existing disruptions of war, revolution, and exile. Classical music, especially the core Romantic and Austro-German traditions, has taken its time recovering from the way it was misused by the collectivist movements and totalitarian states of the first half of the twentieth century. The straddling of popular and classical musical cultures, by the 1950s, seemed fatally compromised by either accusations of "selling out" or knuckling under to the agit-prop demands of "socialist realism." On the other hand, the unprecedented explosion of techniques and resources for popular music, starting in the late 50s, pulled audiences elsewhere. Then television miniaturized everyone's mind.

And something else went wrong in the decades after 1945: the academicization of once-radical artistic tendencies, especially Expressionism, a movement that started in Germanic countries as a reaction to the popular cheapening of Romanticism. Expressionism was a brief but potent episode of "hyper-romanticism," in the sense of validating the artist's expression of (usually negative) inner feelings, regardless of external form or audience comprehension. It's impossible to systematize such a tendency. The originating works of this movement have still not lost, and probably will never lose, their power to shock. Yet, starting in the 1920s with Schoenberg's twelve-tone technique, attempts have been made to reduce it to formula. Formulas enabled lesser talents to create lifeless imitations of something that can't be mimicked. Appreciation and artistic creation became mired in a familiar Germanic-academic tendency to load esthetic values down with a lot of heavy theorizing.† After 1945, the spread of higher education put this questionable and half-digested theorizing on everyone's dinner table, as it were.††

Esthetics begins and ends with the senses, not Theory.‡ The origins of modern Western art lie in the happy symbiosis of the inward feeling of the northern peoples (Germans, Celts, Slavs, and others) with classical notions of proportion, form, and timing preserved by the Italians and French. Modernism began to sprout in the late nineteenth century when that symbiosis broke down, and the Germanic and the non-Germanic went their separate ways.
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* Like Henry Pleasants, whose Agony of Modern Music (1955) is entertaining, right in many details, and wrong in the big picture.

** I use "nineteenth century" loosely, running from late classical (late Haydn, mature Mozart and Beethoven) through late romantic, bordering on modern (Mahler and Strauss). The "high" modern period ran from the 1890s until the 1950s, from Debussy through, say, Bartók and Bernstein.

† A complaint made earlier and more effectively by Tom Wolfe in his Painted Word and From Bauhaus to Our House. The Germans themselves have a nifty term, Augenmusik -- "music for the eyes" and not for the ears.

†† Perceptive readers will sense the tortured ghost of Allan Bloom and his prolix, controversial Closing of the American Mind haunting this posting. The trouble with Bloom's book is that he took twice as many words as needed to make his (largely valid) point.

‡ "... this blathering jargon, which so warms the hearts of philosophy professors ..." (Schoenberg himself).

Candidacy or cult?

American politics seems to be, far more than in any time in living memory, falling into an era both silly and dangerous. The most recent sign was the Democratic primaries, a largely empty contest of identity politics where the most qualified candidates were eliminated early on. The ultimate result was Barack Obama's success in getting the Democratic presidential nomination, backed heavily by the wealthy, white, and ultraliberal wing of the party. But it's also hard to remember an election when the news media were so thought-free and ready to divert attention from political substance, while relentlessly promoting a candidate as the center of a celebrity cult. Obama is probably the most underqualified presidential candidate since the 1920s and maybe ever. His candidacy is a testimony to the continuing, if declining, influence of the media. More than anything, Obama is their candidate. One of the few good side effects is that what's left of the media's credibility is being hosed away before our eyes.

Obama's candidacy is also a fantasy of ultraliberal wealthy donors who like the fact that he's a blank slate. They're competing with each other to be the first to scribble it. They want to shape him the same way Bush was "turned" by the neocons after 9/11 -- another sign of a cult, hangers-on competing to manipulate the image of the figurehead. For his supporters, Obama is an exciting Rorschach inkblot. But he's not baggage-free. The notion that Obama is "post-partisan" or all about "change" is the phoniest thing about his candidacy. His political career in Chicago and voting record demonstrate this. Even more striking is Obama's combination of ignorance and arrogance.* While Obama went in six months from "not black enough" to "the black candidate," his politics has always been white-bicoastal-ultraliberal. The cult tendencies are most obvious and disturbing whenever the media's largely successful attempt to protect Obama from questions or criticism breaks down. The campaign reacts with anger: how outrageous, how racist. Isn't this a preview of an Obama administration, both authoritarian and empty, with a lackey press in tow?

There's only one reason to vote for Obama, and that's if you want a seriously underqualified candidate with all the baggage of the Democratic left: semi-isolationist parochialism, free-trade phobia, high taxes, high inflation, greedy interest group paralysis. All the other reasons being kicked around are bad ones. What we're electing in November 2008 is the president for the next four years, not the last four, or the four before that. (As for the Iraq war, it's essentially over.) The attraction of some conservatives and libertarians to Obama especially needs a cold shower of this sort. While a majority of Democratic votes and elected delegates did not go to him, there is also the attraction of the anti-Hillary voter to Obama: how else to explain otherwise rational women falling for him?

My experience with foreigners on this issue continues to be different from what I expected. For the most part, they can't understand why American voters would be attracted to someone so inexperienced, even more than Bush in 2000 or Carter in 1976. Obama's politics are a pre-1980 throwback, with the Democrats' post-60s isolationist-protectionist tendencies added. This isn't just idle talk. People keep tearing their hair out about the price of oil. Most of its recent increase is actually due to the decline of the dollar. That decline, in the last six months, is strongly influenced by a perception outside the US that Americans have entered another period of self-righteous navel-gazing and political weakness. It's true, although the causes are not widely understood outside the US. Without consciously thinking it, the words tumbled out of my mouth while explaining this to a foreign friend: certain voters are attracted to Obama because he's an underqualified blank slate.

Since the 1980s, the left wing of the Democratic party has wanted to tear down the two pillars (economic and security) of post-1945 American leadership under the guise of "progressive" politics. The Democrats were the party that built this system, but they've repudiated it. Keep that in mind when you hear the continuing chatter about American "unilateralism" and "restoring American's reputation." Obama's provinciality on these issues, to the extent he knows anything about them, is astounding. (Mostly, he sounds like the last adviser to brief him.) This is not your father's Democratic party, or even Bill Clinton's. Something has gone terribly wrong.

Hillary is the ambitious 18-year-old Tracy Flick, now forced to attend "Kumbaya" exercises with the 12-year-old set. But Hillary and her husband are no longer the issue: it's the voters who voted for her. The not-surprising upshot is a sight familiar over the last forty years, a large group of voters who would like to vote for a Democrat, but not for the party's candidate. A majority of Democratic primary voters failed to determine the nomination, and the non-Obama Democrats are growing firmer in their rejection. The party has a major problem on its hands. What's more amazing is the repudiation by the party's wealthy elite of what the Democrats once stood for as the main creators of the post-1945 international order. Instead, Democratic politicians and activists have ever more completely rejected free trade and foreign entanglements, being now beholden to narrow interest groups and devoted to non-stop pandering to the party's nutty fringe. It's no wonder the dollar is falling, foreigners are worried, and American voters are disoriented.
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* Like his insistence that Americans learn French before they go to Europe. Really -- Americans should be learning European. Not everyone in Europe speaks French :)

Does cultural property make sense?

The postwar concept of "cultural property" is increasingly intruding on museums and their ability to offer a cornucopia of the world's material culture. It sounds like a good, liberal idea: returning things to their countries of origin. The classic case is apparently the Elgin Marbles, parts of the Parthenon and other classical Greek ruins removed by Lord Elgin (the British ambassador to the Ottoman empire) in the early 19th century and placed in the British Museum. But even though Elgin was criticized at the time, it's hard to see how he did anything but good.

Like many such ideas, it's actually more politically correct than liberal. It's based on a weird inversion of liberal values -- the value of diffusing knowledge, especially to the general public that goes to and supports museums -- mixed with bogus history. Ben McIntyre of the London Times has a look over here and finds the whole movement questionable at best.

The Elgin Marbles themselves, once their full history is understood, are a perfect example. When Elgin removed the marbles from the Parthenon, there was no modern Greek state to claim them. In fact, at the time, few Greeks knew or cared about the leftovers of classical antiquity. Athens was controlled by the Ottoman Turks, and the Parthenon was a military fort. The Greeks were fighting a war of independence, heavily supported by the British, and eventually won in 1833. Elgin spent about £75,000 (about a couple million dollars today), part of it to pay the Ottoman government, the only government there at the time. And it's clear that the friezes would have been even more damaged than they are already were at the time, if they had been left on the Parthenon, exposed as it was to rifle and artillery fire. The Parthenon had already been badly damaged in previous wars.

There are many other examples of the same mix of selective and garbled history and chauvinism, like Kennewick Man. Discovered in 1990 in the Pacific Northwest, this skeleton, wrongly claimed by certain American Indian tribes as a ancestor, is of unknown origin. Fortunately, it's still open to scientific study. Only through the willful PC ignorance of history and acceptance of cultural chauvinism by whoever's anointed and designated as "oppressed," while rejecting the cultural chauvinism of "white Europeans" or whoever's the latest designated "oppressor," can bad ideas like this get a foothold. But wait! Aren't the Greeks white Europeans?

Anyway, as McIntyre argues correctly, the material culture of the past deserves to be shared more, not to be monopolized.* This is another example of our "post-liberal" culture: Enlightenment ideas (here, a shared past "owned" by no one) opposed by superficially "progressive," but in reality, parochial and narrow, agendas.
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* Meaning that the British Museum, say, should be sharing more and not itself act as a monopolist. In some cases, works could be moved permanently elsewhere, if there is a museum that can care for the objects in the same way. What's bogus are the legal and historical arguments often given and used in court cases.

The Royal Game of Ur, plus: Mice on drugs

Board games seem simple and obvious enough that you might think people have been playing them for a long time. And you'd be right. The oldest known is the Royal Game of Ur, one of the capitals of Sumer, in ancient Mesopotamia, starting from about 2600 BCE. The paraphernalia of the game were discovered decades before the rules were reconstructed. But they have been, and you can even play it online. (Warning: this site requires the Shockwave plug-in.) The British Museum sells a real-space version of the game as well (click on picture).

The weird thing is that the last known living variant of this game was played until recently by the Cochin Jews, of Cochin, India. They mostly live in Israel now. Evidently, they brought it with them when they moved from Mesopotamia (the Babylonian exile) to India. Some came with Alexander the Great (around 330 BCE); others later with the Muslims around the year 1000, or with the British, in the 19th century.

Meantime, in Israel, another ancient phenomenon, frankincense, has been investigated, not only as a spice and incense, but as a drug. Inhale enough of it, or drink the resin, and you get very calm and a little confused, but happy-confused. Now mice at the Hebrew University are testing and apparently liking it.

Frankincense might even be used some day as an antidepressant. It was once used as an incense in many ancient and not-so-ancient temples, evidently for good reason.

The polar bear disaster

A sidelight on the strange world of climate hysteria and what Official Science has done to us ....

The "endangered polar bear" fiasco is an example of the madness of manufactured ignorance. The new Bush administration position, putting forth polar bears as endangered but attempting to not invoke the full regulatory apparatus of the Endangered Species Act, is an incoherent piece of cynical political maneuvering. The decision should be rescinded immediately.

For one thing, the decision puts us in immediate conflict with Canada and other Arctic-bordering countries. Polar bear numbers are healthy, and there are more than a few decades ago. ("Endangered" means populations so small they risk not being able to reproduce themselves.) Instead, the new policy is based on speculative judgments about the Arctic ice shrinking, in spite of the facts: the polar bear population is growing, most of the Arctic ice is not shrinking, the Antarctic is cooling and icing up, and polar bears range mainly along shorelines. There's no scientific basis for considering them endangered.

Here's another case of the authoritarian mummery of Official Science putting science and scientists into conflict with policy. What do they say? What they know (polar bears aren't in danger)? Or, what they're supposed to say? Climate hysteria has loaded a wide range of scientific subjects, journals, scientists, and professional societies with this dilemma. Go with the politics, be a "player" - or stick to the science? As scientists, what do we traffic in: authority, or knowledge?

The Bushies seem to think this will mollify some people, but without giving the environmentalist wackos a powerful new legal lever to start demolishing industrial civilization in the US. Here again, we see a breakdown of governmental sovereignty, how government's power, especially under a weak president, becomes fragmented, taken over by narrow interest groups, and abused at the expense of society as a whole. The situation is frightening, opening up a limitless dictatorship over everyday life by environmentalist and legal fanatics.

Climate policy after Kyoto

The first thing to understand about the policy implications of abandoning the Official Science of climate is that we are, indeed, living after the Kyoto era. Many don't understand this yet.

In quick succession, the seeds of the "climate change" hysteria sown in the late 80s sprouted into the 1992 Rio "Earth" summit, followed by the Intergovernmental Panel on Climate Change (IPCC) of the UN, which started issuing regular reports in 1997. A pact committing signatory nations to significant reductions in CO2 emissions (back to 1990 levels) was negotiated in Kyoto, Japan, in 1996. Many countries ratified it. The US gave preliminary presidential approval. But a 95-0 advisory vote in the Senate rejected the treaty, and the Clinton administration didn't even bother to formally submit the treaty for Senate ratification.

The scientific case fails. The years since have seen two basic developments. One is that the case for current and recent warming, never more than ambiguous, underwent the rise and fall of the "hockey stick." For ten years, people were sent running around in circles by a manifestly wrong scientific claim. In the end, in 2007, the IPCC implicitly abandoned the "hockey stick" for the pre-1980s climate and implicitly acknowledged the long-term, four-to-five century warming trend (far too long to have anything to do with human activity), sticking to much more modest claim of post-1980 human-caused warming. Even this claim has fallen in the last decade, however, as mixed trends of the 1990s have been followed by a clear, decade-long cooling trend. The observational case for "global warming" fell apart. There was never any serious theoretical case.*

The Kyoto Accord fails. The other development is that, after a decade-plus of the Kyoto emission limits, the countries that ratified the Kyoto Accord have failed to come anywhere close to their quotas. They never will. The cost is politically unacceptable. In the last two years, the revolt against Kyoto has spread far and wide in the signatory countries, now that they're faced with "put up or shut up." The required reductions in CO2 emissions would inescapably shut down a noticeable chunk of industrial civilization. The people who devised and signed the Accord were, at least to an extent, aware of this. Always pious frauds, the Kyoto agreement and its regulatory system are dead.

Some economic comparisons. I'm fortunate in that Freeman Dyson, the last of those mid-century physics greats, has done most of the policy work for me in his recent and refreshingly honest article in the New York Review of Books. Couched as a review of two recent policy books on climate, Dyson lays out the issue with a scientific simplicity and clarity rare today. He summarizes the conclusions of economist William Nordhaus in considering the one- to two-century results of following various policies, given the IPCC's already exaggerated predictions.

Nordhaus estimates economic benefits and costs, both from climate change and policies designed to combat it and uses constant 2005 US dollars as his unit, with time discounting at 4% yearly. He estimates the absolute cost of "do nothing about CO2 emissions" at $23 trillion over a century, or about $230 billion annually. His figure of merit for comparing policies is a "net benefit," the total benefit relative to the "do nothing about CO2 emissions" baseline. (For comparison, the US annual economic output is about $15 trillion and constitutes about a quarter of the world's production.)

In rank order of "net benefit," the results are:

• Low-cost with technological breakthrough(s) (Nordhaus), +17
• Realistic and economically optimal policy (Nordhaus), +3
• Kyoto Protocol with (without) the US (Kyoto Accord), +1 (+0)
• Stern (Nicholas Stern^a), -15
• Gore (Al Gore), -21

^aStern is a British science advisor and was part of Tony Blair's government.

We must take the exact numbers with a grain of salt, since the inherent unknowns in such estimates are large. (Nordhaus assumes economic growth and inflation at the overall rate of the last century.) But the rank ordering, and the strikingly close results of the second and third policies, and the fact they are close to zero (that is, close to "do nothing about CO2 emissions") are very telling. $230 billion a year is about 1/65th (1.5%) of the annual US output, or 1/260th (0.38%) of global output. It's smaller than current interest rates, which can be taken as an overall social "discounting" rate incorporating risk and uncertainty.

From such results, "climate change" looks like, not non-existent, but still quite marginal. And the policies pushed by Gore and Stern, far more restrictive than Kyoto, are clearly lunatic and should not be considered further.

Dyson's article is also one of the few, outside of narrow technical forums, I've seen that discusses the effect of plants. That alone makes it invaluable, and I strongly recommend that you read the whole thing, as they say. To Dyson's lucid discussion should be added some additional points. The time scale for noticeable climate impact from CO2 emissions is one to two centuries. When we consider the smallness of the effect, scaling the costs of "do nothing about CO2 emissions" and the benefits of "doing something about CO2 emissions" down to account for the IPCC's exaggerations (at least a factor of two, probably three, in temperature change), the case for any but minimal countermeasures vanishes. Indeed, once you step outside the media- and environmentalist-saturated Western world, you run into much stronger skepticism about both the science and policy of "climate change." The reasons are no more than those presented here and in previous postings.**

Some important quibbles. I have only two significant points of disagreement with Dyson. The first concerns his characterization of "climate change consensus" as representing the large majority view of "climate change" among climate and allied scientists. This is simply false. The IPCC's scientific annexes alone, with their broad and large differences with the summary reports, demonstrate this. Consider as well organized protests by climate and other geoscientists against the Official Science of "global warming," such as the Heidelberg Appeal and Leipzig Declarations. The media generally capture the same group of self-appointed "true believers" over and over.

My other point of disagreement is Dyson's overly sanguine view of environmentalism, which he correctly acknowledges as the great secular religion of our time and the latter-day replacement for socialism, the last big secular religion. Disconnecting the "climate change" propaganda machine, starting at the governmental level and in the schools, is an essential step. The "climate change" hysteria has needlessly frightened both adults and children, warped and darkened their view of science, technology, and industrial civilization, and corrupted how science is taught and understood. The rampant runaway bad metaphors alone represent a new level of manufactured ignorance, something our society is getting better and better at.†

Slightly more than nothing. Dyson's article is a sanity tonic in a subject that, 15+ years ago, left scientific standards and protocols behind for the status of religious belief. The smorgasbord of policy alternatives he summarizes from Nordhaus, together with the other considerations presented here, leads to some natural policy conclusions. The phenomenon should be viewed on the time scale of a couple centuries, with at least a guess of cloud enhancement, plant metabolism, and ocean absorption taken into account. The IPCC's reports don't currently do this in a serious way, because the reliable science to do it isn't there.

Based on what we know now and what we don't know, there's no justification for any active countermeasures against CO2 emissions, beyond a mild form of geoengineering, which I've previously and cheerfully denounced as crazy. Here's my one exception: the most important geoengineering scheme, the one with the least risks, is more and better plants. Dyson reaches the same conclusion. The coming century will be one of biotechnology, just as much as the last was one of electronics and information. Superplants with enhanced CO2 metabolism are not at all impossible. Genetically engineered, or simply cultivated by the selective breeding that humans have been doing for millennia, such plants, spread wide enough, put the atmosphere's CO2 level under human influence no less than CO2 emissions form burning fuels do.

If a more aggressive policy toward slowing human emissions of CO2 and CH4 should ever prove necessary, the right approach is to tax them.†† Of course, politicians hate taxes for environmental purposes, because they hate putting the cost of their pet policies up front and visible to all. Complex and obscure regulatory systems are far more attractive to environmentalists, because they hide the real costs of the regulation. In any case, CO2 is not a poison or a pollutant in the classic sense. (Is π=3? Is the Earth flat? Why are courts involved in deciding such issues?) It's a naturally occurring gas respired and metabolized by plants and absorbed by oceans. If anything, it should be treated like water. No one thinks of water as a pollutant, even though people occasionally drown in floods, and clear-air water vapor is the main infrared-active gas at the heart of "global warming." At about 30 billion metric tons (Gt) of CO2 emitted per year and using Nordhaus' estimates, the external costs run to roughly $23,000 billion/100 years/(30 Gt/yr) = (US 2005) $7.80/metric ton.‡ The US is a relatively efficient burner of fossil fuels, by comparison with China, now the world's biggest CO2 emitter, or Russia and India. Their technologies are simply not as efficient or clean as ours: here's the world's real contemporary pollution crisis.

Finally, and always, keep in mind the crucial point made so effectively by Bjørn Lomborg: wealthy and technologically advanced societies have more means and choices at their disposal. There's no problem that we face, have faced, or will ever face made harder by better technology. (Whether we make good use of it is another matter.) Whatever the future holds for humanity and Earth's climate, there's no case for shutting down civilization or significantly impairing it. On the contrary, the better science and technology we have, the better we understand both the climate and the limits of our knowledge, the better decisions we'll make and the better off we and our descendants will be in facing whatever's headed our way.
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* Anyone who thinks otherwise has been fooled by fuzzy, runaway bad metaphors about "greenhouses" and a climate modeling science still in its early infancy.

** I've never met a Russian scientist who takes the "global warming" hysteria seriously or views the climate problem as anything more than marginal. And the Chinese aren't about to impoverish the next two generations of Chinese for marginal and uncertain benefits.

† It's not the natural ignorance we're all born with. We're an advanced society and have the means to "do" ignorance far better now :)

†† "Cap-and-trade" should be abandoned as soon as possible. It's easily corrupted and subject to confusing manipulation by all parties involved. Also see this by Megan McArdle. Work like that of Nordhaus provides a first answer to the question of "costing" the CO2. But there's no "natural and optimal" level of CO2; all we can do is compare scenarios and ask, "What do we want?" (BTW, it's carbon dioxide gas, not "carbon.")

‡ One gigaton (Gt) of CO2 would fill about 89 million Goodyear blimps. The CO2 emission control schemes of Gore and Stern imply costs of $300-1000/metric ton CO2, which shows in a different way how far out of line with reality their proposals are.

A metric ton of CO2 emitted in the US produces about $1850 of economic value. Compare with the Nordhaus estimate of external cost ($8) and, again, the marginality of the problem is evident. And remember, these Nordhaus numbers assume the IPPC's already exaggerated claims.

Abandoning Official Science

Junk science has several warning signs: It advocates a cause, pays little attention to the investigative process, ignores contrary evidence and advertises a high moral purpose.

- Ron W. Pritchett, "Recognizing Junk Science," The Professional Geologist (December 1997)

For its two-decade history, the "global warming" craze has been an outstanding case - perhaps the supreme one in our time - of something I've called Official Science. It's not quite the same as what some people call "junk science," although it includes a fair amount of that. But it has something else: an authoritarian mummery that looks like science, but isn't. I've called this "para-science." In the case of climate, the key elements - the IPCC and its false "consensus" - are political in nature, not scientific. Blame it on Rio: they were enshrined in the policy world by the 1992 Rio "Earth" summit, a party to which scientists, for the most part, were pointedly not invited. The summit was a jamboree of environmentalist politics and activism, not ecology, climate, or any other science.

The kernels of Official Science are the pet theory and the politically, ideologically, or theologically predetermined conclusion. Science, among other things, is mostly bottom-up and inside-out knowledge. In areas where many open questions remain, it's stimulated by surprise discoveries and unexpected insights. Basic research is especially important here because it tries to frame questions and find answers with potential for wide-ranging impact, both in theory and application. Official Science is the opposite: top-down and outside-in. Non-scientists (politicians, political intellectuals, journalists, activists), often in alliance with ex-scientists either cynical, ambitious, delusional, or all three, apply the pressure from the outside. Blow-ups, dilemmas, and intellectual corruption begin where the two cultures - science and "para-science" - collide.

Cultures in collision. This is origin of the unusual social phenomena associated with the "global warming" craze. They include the misrepresentation of an actually non-existent "consensus" about "climate change," which consensus is then repeatedly invoked to isolate and demonize "deniers," skeptics, and fence-sitters (who, all told, actually make the up the majority of climate and geoscientists). Environmentalists attempt to smear scientists with often false or misleading "reports" detailing alleged "secrets" about funding sources.* Quasi-official institutions (bureaucratic leaders of government and academia, scientific journal editors) create an echo chamber where otherwise normal skepticism and criticism are silenced. Publications once noted for their high standards (like Scientific American) degenerate into politically correct propaganda outlets, with scientific reasoning playing less and less a role in their arguments. In its place are invocations of authority, something having no place in science. In fact, in no other area of science are such non-scientific procedures so routinely made use of. The mere existence of an "official panel" on climate (the IPCC) is far from scientifically kosher.

Follow the (public) money. Scientists in climate and allied areas have protested, repeatedly, against the fake "consensus." The protests are ignored by the IPCC and the non-science media. But the situation is more subtle and disturbing than a simple black-white opposition. Incentives both positive and negative have been applied to reshape the sociology of the field (and don't doubt that this reshaping is a conscious political effort.) Public funding has moved from open-ended basic research, in which questions are paramount, to a situation where the larger answer is assumed and research proposals have to be tailored to "get with the program." Professional societies (American Geophysical Union, American Physical Society, American Statistical Association, etc.) leave the provinces and move to Washington, where their staffs shift gears and become political players in a politically- and journalistically-shaped arena, leaving scientific questions far behind. These societies - or at least their headquarters staff - then join the "consensus," often over the protest of their scientific members.**

The IPCC itself offers a particularly insidious temptation for scientists, the IPCC reports' scientific annexes, which are produced by a large body of "working groups" (a couple thousand scientists) routinely confused in the media and by politicians with the the much smaller IPCC staff (a couple hundred). To compare the working groups' annexes and the IPCC's summary report is to compare two apparently different planets. The couple thousand scientists in the working groups become, in effect, wittingly or not, ventriloquists' dummies.

The folks back home. So why the scientific annexes to the IPCC reports? Essentially, to impress the rubes. Nothing else can explain why the scientific reports keep getting included, yet contradict what the Summary report says. The gap has not closed in 16 years of these reports. The rubes are politicians, journalists, even other scientists, and you and me. It makes the reports look authoritative, while allowing the IPCC and "global warming" fanatics to ignore scientific criticism and demonize and isolate individual critics as "skeptics" or "deniers" (as if skepticism is out of place in science, instead of being its daily bread). Meantime, outside of their respective scientific disciplines, few actually read the scientific reports. (I've read parts of the 2002 and 2007 reports.) Under the baleful influence of Official Science, scientists amongst themselves and individually express one view, but assembled "officially," express a very different view. That's a sure sign of arm-twisting and Official Science overriding of scientific criticism. It's no road to knowledge: science makes more progress through criticism, by demolishing bad ideas and disproving wrong hypotheses, than through converging on correct ideas. Not that these processes are separate: converging on the right conclusion requires a lot of clearing away first.

Official Science equals bad science. Under the usual circumstances of scientific practice, the extravagant claims of the IPCC - being able to predict future weather; denying or selectively "cherry picking" the behavior of the current, recent, and paleoclimate - would be laughed out of the room, so to speak. Specific instances of sloppily done or simply mistaken scientific embarrassments, the "hockey stick" above all, would have been ripped apart through the usual process of criticism, counterproposals, and so on. Without an externally enforced preconceived and dogmatic conclusion, progress would result, as it usually does when scientists work on something in their usual mixture of cooperation and competition.

But with the "boundary conditions" changed, so to speak, and an externally imposed, preconceived conclusion forced on the issue, something very different happens. Badly done science, embarrassing fallacies, and outright fraud start to win, no matter how horrifying, because they fit the dogma. Really good science, superb insights with clear implications (for example, the ice core results), are disallowed, rejected for publication, ridiculed, or otherwise ignored and languish in a narrow specialty in a way that doesn't threaten the dogma. When editors of leadings journals (like the editors of Nature and Science in the 1990s) undergo conversion and baptism in the Cause of "global warming," excellent work contradicting the official line doesn't get published, at least not their journals.† Mistakes that would be marked wrong on a test or homework assignment, or corrected by a graduate research advisor, instead get perpetuated in prestigious venues.

Official Science must go. There's a lot of positive progress that awaits climate and allied sciences, once they're freed from this monkey on their backs. But before anything positive happens, the big negative has to be cleared away first. There's no "reforming" Official Science, or "making it responsive." The spirit animating it and the spirit animating science are in direct conflict and can't be reconciled. The right thing to do with Official Science is to abandon it.

In the case of climate, the IPCC should simply be scrapped. It keeps committing the same crime over and over, providing the fanatics of "global warming" in the political, environmentalist, and journalistic worlds more clubs (or hockey sticks) to beat up their designated targets simply for practicing science in public. The IPCC carries on under the auspices of the UN, but is rooted in a multinational convention that grew out of the 1992 Rio summit. It's true that this convention, the IPCC, and the Kyoto Treaty that resulted are not in America's interests. But they're really not in anyone's interests. The US should withdraw from any official involvement in or funding of the IPCC and strongly encourage other countries to do the same. What private individuals and institutions do on their own time and nickel is their business. It's become everyone else's business just because ways have been found to force it on everyone else.

That's a first big step in the right direction for the science and scientists and frees them to look at positive possibilities. Such a step also has a whole set of separate implications for policy.

SPOT THE FALLACIES! I ran across this item recently in Physics Today, flagship publication of the American Physical Society. It's a not a refereed technical journal, but a magazine at a high level for physicists and scientists in related areas, as well as students and interested outsiders, with the main articles and much else written by scientists. PT has high standards, so the item came as a shock, if not a complete surprise. It commits at least four climate fallacies in two paragraphs. See if you can spot them.†† (Disclaimer: I don't meant to criticize anything about the research article discussed in this news item. I haven't read it.)
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* Sorry: even if these reports were correct, "funding sources" is not a scientific argument.

** The American Statistical Association, in the past a reputable professional scientific organization, recently announced its endorsement of the already debunked "hockey stick," creating some shock in the scientific world. Important members of the ASA were involved in the earlier debunking and were not consulted in this change of "official" view. Apparently, the ASA is working hard to "get with the program," a political, not a scientific, imperative. The problem is not that the "official" view needs to be changed; the problem is rather that there is an "official" answer to the question at all. This is the essence of what's wrong with Official Science.

Disaster results from such trends: good people leave the field or shut up; good students don't enter, and so on. This has now gone on for almost a generation, and climate and allied scientists are waking up to the cold truth of how much damage this crusade has done to their science, their research, and their teaching. (How do you teach this stuff to students with a straight face, when there are so many things so obviously wrong with it?) These are the sort of dilemmas faced more and more over the last 15+ years by natural scientists in geosciences, climate, and neighboring subjects.

† Then these same editors have claimed - with a straight face! - that their journals don't have many papers that conflict with the fake "consensus."

†† The fallacies I spotted are:

• Solar radiation is not reflected from the Earth's surface, but absorbed and re-radiated. That's why the Earth's surface warms up. Reflected, radiation can't warm anything.
  
• Extra warming does not occur because IR-active (misnamed "greenhouse") gases absorb the IR radiating from the surface. These molecules are good at IR absorption; they're also good at IR emission. They're a more efficient IR "bucket brigade." The "extra warming" is not a retention of heat, but actually a steepening in the slope, or lapse rate, of the radiation temperature.
• A greenhouse doesn't work like this.
• The Earth's climate isn't a greenhouse anyway.

Official Science does rot your mind.