Wine, Physics, and Song

Since I’m thinking of writing a scholarly book or two, I wonder whether print-on-demand publishing houses, combined with outlets like Amazon, allow academics to effectively compete directly with the more usual academic publishers like Springer, Cambridge UP, Oxford UP, etc…?  I’ve recently noticed that in ordering new books from all three of these publishers, I’ve frequently been sent what look like print-on-demand editions.  Here’s a bit on Springer’s POD activities.   To take one recent purchase, Faraut and Koranyi’s Analysis on Symmetric Cones, Oxford, is now print-on-demand, and they’re still charging $200 for it.  It’s adequate, but much less attractive than the original edition which has the trademark Oxford deep-blue cloth-covered boards, with nicely finished paper (perhaps excessively sized, even) and extremely crisp type.  The print-on-demand edition is on paper that’s not as nice, an almost inkjet-printed appearance where the edges of the characters are just not crisp enough for my taste, and the boards are thick, covered with something glossy, and more prone to warp outward so the book doesn’t quite close firmly.  Springer and Cambridge POD books are similar.  It’s a little more like you LaTeX’d something, printed it out two-pages-to-a-sheet, cut the sheets in half and glued them into a binding.  (Except maybe your average laser printer would produce sharper results—I’d need to do a direct comparison.)  This is quite serviceable for the right price, for usable math books, but $200 (I was able to find it for less, but still an outrageously high price) seems ridiculous.  But if academics were able to publish their works this way, sell for $40-65, deduct the cost of printing (about which I’m quite curious), do a little yearly accounting and extra business at tax time, and pocket the rest, it might be a much better deal than publishing through a major house.  I suspect that for a good academic work, reputation developed through citations and online access (one could make the book available chapter-by-chaper for free, if desired) might work almost as well as the publicity provided by an academic or corporate publisher.  The major issue might be library purchases, I’m guessing.  Anybody out there have any experience or ideas with this?

More info:  Amazon’s POD printing and distribution unit, Createspace (Springer’s US partner) has an expanded distribution plan claimed to wholesale books to libraries and bookstores.  Cambridge has partnered with LightningSource.

Here’s a video of the Espresso Book Machine, for producing paperback books at or near the point of sale, in action:

Here’s Amazon’s “Pro Plan” at their CreateSpace. The combination of the terminology “royalties” for the money you get, and “self-publishing”, seems, technically, contradictory.   Royalties are paid by a publisher for the right to publish and sell your book; if you were actually self-publishing, you would be hiring Amazon/Createspace to print your book, and do some of its distribution and sales, but what you keep would be profit, not royalties.  So I’m curious which it actually is, in their case.  Anyway, you seem to get about 43% of the list price on sales through Amazon, 23% on their Expanded Distribution Channel (to libraries, bookstores, and “certified resellers” at, presumably, wholesale prices, although maybe not since Amazon labels the entire difference between your share and list price “Our Share”), and 63% through something called an eStore (which is presumably an outlet at your own website, linked to Amazon; more investigation warranted).   Those are on a $16 book; on a $45, 320 page book with black and white interior, it looks like 30% through the EDC, 50% through Amazon, and 70% through your eStore.  I’m guessing this is for a paperback.

So, quite a bit better than the standard academic press royalty which I believe is something like 7% or so, but still, through the expanded distribution channel, not that hefty.

Kokopelli, described as a biodiversity-promoting nonprofit association and seedbank that sells seeds of traditional varieties, loses a suit against a big seed company because their varieties aren’t—and perhaps can’t be, due to the genetic inhomogeneity associated with traditional varieties and that is part of their contribution to biodiversity—on the EU’s official catalogue of seeds that can be sold.  In French at Kokopelli’s site here, summarized (read down past the Iraq stuff) in English here.  One can see how this might be in part a case of well-intended regulation gone awry…regulation perhaps even intended in part to keep new technologically developed seed varieties from running amok or genetically influencing other varieties…but one can also imagine that the regulations that big agribusiness is exploiting were likely influenced by them toward such results.  Hopefully over the next few decades this kind of outrage, and similar ones like the “patenting” of existing varieties by agribusiness, will be curbed, but I have my doubts.  Even more hopefully, some resolution will be found by modifying the existing EU regulations, but there too I have my doubts.

Oh yeah, I learned of this at Wine Terroirs.

A must-read article by Kevin Drum at Mother Jones on the power of the finance lobby.  He cites figures from (but doesn’t link) this page at the politics-’n-money tracking website opensecrets.org on how the finance lobby, at $475 million in political spending, dwarfs even the healthcare sector, the next relatively specific sector at $167 million.  There are four categories inbetween, however, comprising one and a quarter million dollars, so clearly a lot of the action is there, in “Other, Ideology/Single-issue, Misc Business, and Lawyers and Lobbyists”.  Finance, in this way of slicing things, is actually finance, real estate, and insurance, so it includes other activities than strictly financial ones although the role of real estate and insurance in the financial sector, and the recent meltdown, is well known.  Still, this is a big wad.

The article has lots of details about how they’ve used that power, and what they got for their money.  Kinda makes you want to revisit more sympathetically the kind of attitude represented by the headlines of the minute left-sectarian fringe newspapers that used to be (and must still be—some things will never change) hawked at demonstrations, and by the title of this post.  Or by this quote (also via Kevin Drum) from a rabble-rousing Thirties radical:

We had to struggle with the old enemies of peace — business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.

Drum is quite a good writer, sprinkling his piece with to-the-point metaphors (Long Term Capital Management was “a relative minnow”, and “leverage is a harsh mistress“), and I’m going to add him to my RSS feed if I ever get one set up.  FDR (the rabble-rousing radical quoted above) wasn’t too bad with the quotable one-liners either—the remainder of the quote includes the line “We know now that Government by organized money is just as dangerous as Government by organized mob”.  Okay, he had good speechwriters.

“The real size of the bailout“, also at MoJo, is interesting but really needs a lot more analysis and explanation.  They peg it at $14 trillion, calling it “the price of the bailout” at one point, but I’m not convinced that everything in the graph is money down the tubes for the government, rather than pay-ins to funds for subsidized loans and asset purchases some of which will turn out to be repaid, or worth something.

Update:  There’s now some more explanation here.

Woo hoo!  US private-sector employment has had a positive second derivative for eight months now.  (And a negative first derivative.)

Niall Ferguson is on about deficits. The Newsweek piece is full of fearmongering and frank imperialism—his biggest worry is that “economic weakness is endangering our global power”.  Well, I guess US global power, despite plenty of abuses, is more benign than most other varieties I could imagine becoming more prominent as it ebbed (except perhaps EU global power)…and could conceivably become more benign if Obama’s election ushered in an extended era of sensible, moderately liberal, multilateral policies with the world’s wellbeing among their major goals.  But the deficit fearmongering borders on the ludicrous, and while he brings in some reasonable points, the quantitative evidence is often missing and the economic reasoning slipshod or missing too.  What is perhaps most seriously lacking is a reasonable degree of balance between long-term deficit concerns and the need for deficits in the short term.

Let’s take the seriously misleading stuff first.  The US economic stimulus is described as “muted” because:

what makes a stimulus actually work is the change in borrowing by the whole public sector. Since the federal government was already running deficits, and since the states are actually raising taxes and cutting spending, the actual size of the stimulus is closer to 4 percent of GDP spread over the years 2007 to 2010—a lot less than that headline 11.2 percent deficit.

This verges on incomprehensible.  First, what is he doing with “spread over the years 2007 to 2010″?  The stimulus bill was passed in early 2009; spreading it over 2007 and 2008, years in which it was not being spent, to get an apparent lower percentage of GDP, is hogwash.  On the other hand, if we take .787 trillion as the size of the stimulus package, and spread it over 2009 and 2010, estimating 2009 GDP at 14.2 trillion and 2010 GDP at 14.697 trillion (a 3.5% growth rate, based on not much but faster than the current pace of recovery; it makes little difference to this calculation), you get a stimulus of about 2.7% of GDP.  That’s actually quite a bit less than the 4% Ferguson uses.  But that’s a big boost to aggregate demand. Not as big as it should be given the magnitude of the economic shock we’ve been hit with, but far from negligible.

I have no idea why Ferguson feels the need to start with the size of the deficit as a candidate for the size of the stimulus, and then cut it down because “we were already running deficits” and because “state and local governments are cutting taxes and raising spending”.  What matters is the change in the amount of government spending, relative to no stimulus policy.  Ferguson would appear to be overestimating the stimulus, perhaps because he’s focusing on the idea that “the deficit is the stimulus” and then “correcting” it—but a recession usually increases deficits automatically by decreasing tax receipts, without (usually) a corresponding cut in spending.  (Many states, though, now do cut spending in response to recession, often because of balanced budget laws.)  So perhaps by doing this he is including some of that recession-induced deficit in his estimate of “the stimulus”…and then reducing his overestimate by spreading it over the two prior years, as well.

The main thing that is misleading, though, is that then he estimates “the cost of this muted stimulus” by using the full deficit.  A recession is going to have a fiscal cost even without stimulus—chalking up the full 11.2% of GDP deficit as the cost of a stimulus, whether 2.7% or 4%, is either dishonest or a mistake that is really hard to excuse in an article for a national publication like Newsweek.  The fact that he uses 4% as the stimulus figure perhaps results from some mixed-up attempt to be a little less than dumb about this while still using the full deficit as the cost—perhaps this can be thought of as a way of including “automatic stabilizers” in federal spending as “stimulus”…but then arbitrarily damping it down by dividing by the extra years.  Anyway, the bottom line is that the variable spending under control of the federal government was increased by 2.7% of GDP, and roughly speaking that 2.7% is the additional cost in current dollars of the additional fiscal stimulus.  Actually, the cost is slightly less, for reasons I’ll explain shortly.  11.2% reflects the “fiscal” cost of the recession including, but not limited to, the additional stimulus spending.  A serious macroeconomic estimate of the fiscal cost of stimulus actually needs to take into account that, if you believe the economic models used to justify the stimulus itself, the stimulus increases GDP and so increases tax revenues, and so partially pays for itself.  I haven’t done this calculation—lots of people were doing it this spring, and with reasonable figures for multipliers and tax rates—say 20% for taxes and a somewhat generous 1.4 for the spending multiplier—you’d get around a 28% reduction in the total fiscal cost of the stimulus, to around 2% of GDP.  And let’s not forget that this fiscal cost is incurred in order to obtain an increase in GDP—with this multiplier, of 3.78% of GDP.  Let’s also not forget that this fiscal cost is not a loss of GDP—it is just an increase in government debt.  The GDP gain should be around a full 3.78%—perhaps less, if the stimulus is spread out longer, or the multiplier a bit lower (which it might be because some determinants of spending, like the propensity of businesses to invest, and perhaps of households to consume, may be lower than usual in the current climate of fear), but not less by the fiscal cost.

So, the 11.2% of GDP estimated federal deficit for 2009 (I should check that this is the change in net, rather than gross, public debt) is just not the cost of the “muted” stimulus, in any sense.  The “muting” of the stimulus by state budget cuts, etc., is of course argument for more short-term stimulus—for example, aid to states so they don’t have to make those budget cuts.

“We are, it seems, having the fiscal policy of a war, without the war.”  Well, hurrah for that, I say.  Better to avert a potential depression, and mitigate a serious recession, with war-footing fiscal policy than to get out of a depression the way we did in the 1940s—with the fiscal policy of an actual world war.  Of course we have the Afghan war, and had the Iraq war.  Ferguson pooh-poohs these as contributors to the fiscal situation—and here’s the second highly misleading bit of his article.

these are trivial conflicts compared with the world wars, and their contribution to the gathering fiscal storm has in fact been quite modest (little more than 1.8 percent of GDP, even if you accept the estimated cumulative cost of $3.2 trillion published by Columbia economist Joseph Stiglitz in February 2008).

Since, despite the “even if” which suggests he doubts these estimates, no other estimates are offered, let’s with Ferguson accept Stiglitz’ ones, which seem in line with what I recall hearing.  Where the heck does he come up with “little more than 1.8 percent of GDP”?  Recall that (based on three quarters of official government estimates) I estimated 209 GDP at $14.2 trillion; the total cost of the war comes to 22.5% of this year’s GDP!  (Just to clarify: this is not the yearly rate of war spending as a percentage of GDP; but Ferguson is comparing national debt to GDP, so we are looking at war debt on the same footing he’s using for total debt.) More to the point, the Nov. 25th, 2009 net federal public debt was $7.612 trillion; the estimated cost of the wars thus comes to 42%—nearly half—of the current public debt!!!  If you take at face value the CBO deficit estimates for 2019 that Ferguson cites (I have not evaluated them myself), those 3.2 trillion are still 22.4% of the projected 2019 debt of $14.3 trillion—hardly negligible (and they’d look like a higher percentage, if debt service on them were included).  I’m guessing the 1.8 percent Ferguson refers to must mean the debt service on the Stiglitz estimate of the cost of the war.  But then, since the entire rest of the public debt is less than one and a half times this war cost estimate, why doesn’t Ferguson tell us that the cost of servicing it is currently modest, too?

Now, I haven’t looked carefully, recently, into the contribution of the tax cuts of the Bush years to the deficits.  Early in the administration, they probably helped stimulate the economy out of the post-9/11 recession; but on balance they’ve added plenty to the deficit and the national debt.  By the “radical fiscal reform” we need to forestall the “fatal arithmetic of imperial decline”, does Ferguson mean things like the repeal of these tax cuts, and maybe even some modest tax hikes?  And could the current low rates private investors afford the US treasury even on long term borrowing, suggest that just maybe, these investors are pretty confident that the US will, eventually, through some combination of health care reform, tax cut repeal, tax increases, and other measures possibly including non-draconian social security adjustments, bring things into reasonable shape in the medium term, averting Ferguson’s calamitous projections?  Perhaps these low rates are a vote of confidence in a Democratic administration, as Democratic administrations have added to the national debt at a substantially lower rate than Republican ones in the past few decades. Numbers along these lines, and more on Ferguson’s article, to come.

But I can’t end without mentioning Ferguson’s comparisons to he fiscal situation of Habsburg Spain in the 16th-17th century, or prerevolutionary France—well, this sounds fun, and there may even be lessons from this far back in history.  Like, maybe it’s better to ditch the empire than trash your economy to support it?  I’m not ready to argue historical points with a historian, but it does seem like these comparisons just might be stretching it a bit, as far as the political economy of the situation and the economic and financial policy tools and knowledge available.  I do think the Habsburg Spain analogy might have fit better under Bush and Cheney.

Since I’ve posted a bit on economics, I thought I should link to a post that deals with real-world, on-the-ground economics, in all its human complexity, in the context of wine, at one of my favorite wine blogs…

OK, another must-link, to Paul Krugman’s extended New York Times version of something he’s blogged on before: the divide between “freshwater” and “saltwater” economists, and how the profession largely failed to anticipate the present economic crisis, and to some extent—especially in the “freshwater” camp—lacks the intellectual tools to deal with it.

Anybody who is interested in understanding the current economic situation, and in getting some background for their attempt to understand it, should read Krugman’s article.  (And even more importantly, read Keynes’ “General Theory”.

As a graduate student in economics round about 1985-87, for a semester at Yale and then for two and a half years at Berkeley (I moved to the Bay Area for love), I got (or rather continued, since I’d taken a bit of econ as an undergrad, and done quite a bit of reading on my own) a squarely “saltwater” (this refers to the coastal US—say, Berkeley, Harvard, MIT, Yale—as opposed to the heartland—say, Minnesota and Chicago, and I’m not sure how far the generalization holds beyond these schools…) economics education, taking first-semester macro, for example, from Jim Tobin.  Yet even then, and there, we were subjected to readings from the “rational expectations” and “real business cycles” school of macro:  Barro, Sargent, Lucas.  I must admit I found this stuff as obviously out of touch with reality then, as Krugman is now telling us it is.  Often  fitted out with impressively technical talk of autocorrelations and regressions, it made claims such as:  systematic use of monetary policy to smooth out business cycles can’t have any effect, because rational economic agents will anticipate it; business cycles are due to such “real” factors as shifts—due to underlying changes in “technological possibilities”, not due to failure of aggregate demand—in the relative rewards to leisure versus labor, resulting in more people choosing leisure (the “Great Depresssion as Great Vacation” theory, as Krugman skewers it).   The apparently supportive econometric analyses apparently worked—I don’t actually recall the econometric critiques of the time, having been more concerned at the time to acquire tools that would help me understand how the economy actually did function, than to score intellectual points against the wrong-headed—by mistaking correlation for causation, and leaving out of the analysis variables of critical importance.  Sometime somebody should—heck, somebody probably has, and I’d love to be pointed towards the analysis—take their macroeconometric work apart.  (Here’s a contribution in that direction from one L. H. Summers—pretty devastating, I’d say.)

Krugman’s article adduces two, or perhaps three reasons—the “beauty” of rational-agent equilibrium theories, the lure of “sabbaticals at the Hoover Institution and job opportunities on Wall Street” why “freshwater” macro gained as much influence as it did.  Of these, he thinks the “beauty” aspect was the more important.  I think a lengthy exploration of the culture and politics of the economics profession would reveal a lot about how the intertwining of politics, business, and academic culture enabled the rise of the freshwater school.  I’d love to see such a work, by an economically literate social scientist (perhaps even an economist).  Because to my mind, the fact that the bundle of misguided ideas Krugman is referring to as “freshwater economics” gained as much influence as it did, is a serious counterexample to the idea that economics, as practiced in the academy and the more academically-linked think-tanks and policymaking institutions, is a science that makes a serious effort to test its theories against reality, and judges the work of its practitioners accordingly.

Having said that, I’ll admit to being very irritated by people who claim that economic theory and academic economics in general have been shown up as useless by the present crisis.  For me, Keynesian theory was always at the heart of macroeconomics, certainly the macro that was taught me when I was in grad school (and that I sought out to teach myself even before then) and its value as a tool to help understand and deal with reality is only accentuated by this slump—as is the value of intelligent, reasoned, reality-based economic analysis more generally.

Anyway, I’d like to think that “freshwater” versus “saltwater” may be a bit of a calumny on the heartland.  Maybe instead of the fresh versus the salt we should (reversing the order) call them, whether or not it fits with Levi-Strauss, the Raw and the Cooked, according to whether they are willing to accept the raw facts of economic slumps, unemployed resources, burst asset bubbles, or can’t believe these are what they appear to be and (unintentionally in most cases, perhaps) are moved to cook the data via sophisticated regressions to fit their “markets can’t fail” theories. For them, or those seduced by them, maybe the words of Jonathan Richman and the Modern Lovers (if you want to listen, the track was switched with “Modern World [alternate take]” ) are apropos, put into the mouth of a hypothetical bubble-acknowledging, behavioral-economics-friendly, neo-parti-Keynesian, reality-based “raw” economist:

Now I’ve watched you walk around here.
I’ve watched you meet these
boyfriends, I know, and you tell me how they’re deep.
Look but, if these guys, if they’re really so great,
tell me, why can’t they at least take this place
and take it straight? Why always stoned,
like hippie Johnny is?
I’m straight and I want to take his place.

Joseph Stiglitz on the bank bailout, from Bloomberg:

“All the ingredients they have so far are weak, and there are several missing ingredients,” Stiglitz said in an interview yesterday. The people who designed the plans are “either in the pocket of the banks or they’re incompetent.”

Stiglitz is only one of the world’s best economists;  when he talks, you really *should* listen.

President Obama, on why the new financial bailout/rescue plan doesn’t temporarily “nationalize” the banks (as Sweden successfully did in its 1990s financial crisis):

“Obviously, Sweden has a different set of cultures in terms of how the government relates to markets and America’s different. And we want to retain a strong sense of that private capital fulfilling the core — core investment needs of this country.

And so, what we’ve tried to do is to apply some of the tough love that’s going to be necessary, but do it in a way that’s also recognizing we’ve got big private capital markets and ultimately that’s going to be the key to getting credit flowing again.”

Well, we voted for change, didn’t we, so let’s start changing the culture that says we can’t even temporarily nationalize the largest banks with the worst balance-sheet issues, in an emergency that threatens the world economy and is in part attributable to these banks’ irresponsibility.  Say, as many, including lefties like the former IMF chief economist Ken Rogoff, and lefty financial-history prof Niall Ferguson seem to believe, a belief perhaps even reflected in the stock market’s fall on Geithner’s press conference, we need to temporarily nationalize the banks.  Call it restructuring, make the call that the zombie banks are effectively bankrupt and an expedited, not court-supervised, receivership is needed, call it tough love, pander to our “culture” of responsibility.  Nationalization is a stupid word to use—it suggests an intention for long-term transfer of banking to the government, and few are seriously suggesting that.  We can do bank restructuring and still “retain a strong sense of that private capital fulfilling the core investment needs of this country.” Maybe it can be done, in a stealthier way, through Geithner’s plan—but it’s apparently not clear to most what Geithner’s “plan” will turn out to be, in practice.

To prevent a filibuster, the administration has to coddle the Senate’s Great Men (and Women) Of The Center.  Specter insisting the plan cost less than either the $820 billion house bill or the $838 billion senate version—knocking $40-58 billion, 5% or more, off of a stimulus that may already be too small.  And with the final total looking like it will be $790 billion, pretty much succeeding.   A few Republican moderates (and a Democrat or two) holding the economy hostage so that — what?  Their power be recognized?  It’s been a while since I saw Specter in action in a hearing, but I recall, perhaps erroneously, a really bad gut-check about the guy as he browbeat some poor sap, or maybe some perfectly reasonable guy he happened not to agree with.  True, he’s been a voice of reason on some issues, but I was not impressed.   Maybe the Republican moderates feel they have something to take back to their party in order not to be drummed out of it for supporting the plan at all.  Specter also insisting on keeping $10 billion for NIH untouched, while an increase for the NSF was scaled  back by the Senate plan—what’s with that, does NIH have a facility in Pennsylvania, or is Specter just a health nut?

Probably Obama’s playing it cool at this point is the right game plan… getting the thing passed without having to break a filibuster is probably much better for his long-run efficacy.   But I worry that it is not large enough—that by not signing on, but effectively watering it down through the implcit threat of a filibuster, the Republicans are setting up—not consciously for the most part, except that there probably are those who believe an extended recession is better than any increase in government spending—to try to benefit from an unnecessary extension of the recession.  At some point—perhaps on the second batch of stimulus that will likely turn out to be necess, crying “stimulus was ineffective”.  I’m not sure Obama will get a chance to put in another round of stimulus, though he occasionally talks of it.  And, he may be able to get in another round under the guise of longer-term public investment, which he has called for, with stimulus as a side-benefit.  But I imagine there will be a filibuster showdown at some point.  Hopefully the chits will be called in and the moderates will help him break it, maybe with another ceremonial multi-billion-dollar bone or two as compensation.   But it is frustrating that the “senate moderates” are as boneheaded as they are about this.  One can only hope they are doing it because they feel the need to shelter themselves from the ire of their party.

From the AP:

“Earlier Tuesday, the Senate sailed to approval of its $838 billion economic stimulus bill, but with only three moderate Republicans signing on and then demanding the bill’s cost go down when the final version emerges from negotiations.

Negotiators initially were working with a target of about $800 billion for the final bill, lawmakers said. But GOP moderate Arlen Specter, R-Pa., said Tuesday night on MSNBC’s “Hardball” that he was insisting on a figure at around $780 billion.”

Credit for the pound of flesh metaphor to Paul Krugman, back on Feb. 6th.