He discusses the uncertainties inherent in whether emulations are ‘sentient’ (i.e., whether WBEs are conscious and can feel pain) and moral considerations and strategies thereof. I’m generally rather skeptical of ethics papers, but the signal-to-noise ratio here is very good.
The most striking passage for me was this quote from Thomas Metzinger:
What would you say if someone came along and said, “Hey, we want to genetically engineer mentally retarded human infants! For reasons of scientific progress we need infants with certain cognitive and emotional deficits in order to study their postnatal psychological development – we urgently need some funding for this important and innovative kind of research!” You would certainly think this was not only an absurd and appalling but also a dangerous idea. It would hopefully not pass any ethics committee in the democratic world. However, what today’s ethics committees don’t see is how the first machines satisfying a minimally sufficient set of constraints for conscious experience could be just like such mentally retarded infants. They would suffer from all kinds of functional and representational deficits too. But they would now also subjectively experience those deficits. In addition, they would have no political lobby – no representatives in any ethics committee.
Metzinger probably overstates his case– the notion that WBEs “could” feel such pain is by no means a settled matter, and it feels like Sandberg includes this as a ‘worst-case’ scenario. But perhaps we can approach this question from a Bayesian perspective… if we take
[Suffering experienced by a mind insane-in-the-way-imperfect-
My intuition: the first quantity seems very large; the second quantity is probably very low, but may not be; the third quantity is almost certainly very large. If I give the second quantity even a 5% chance (or even 1%), that’s a lot of expected suffering.
Obviously this estimate is very rough, but it poses two questions: (1) how could we improve this sort of probabilistic estimate? And (2), *if* WBEs can suffer, how can we mitigate this*? I’m not convinced this issue matters, nor am I convinced this doesn’t matter. It’s not keeping me up at night… but it is an interesting question.
*Sandberg suggests the following:
Counterparts to practices that reduce suffering such as analgesic practices should be developed for use on emulated systems. Many of the best practices discussed in Schofield and Williams (2002) can be readily implemented: brain emulation technology by definition allows parameters of the emulation that can be changed to produce the same functional effect as the drugs have in the real nervous system. In addition, pain systems can in theory be perfectly controlled in emulations (for example by inhibiting their output), producing ‘perfect painkillers’.
However, this is all based on the assumption that we understand what is involved in the experience of pain: if there are undiscovered systems of suffering, careless research can produce undetected distress.
Last week I had the opportunity (thanks Alton!) to attend the launch event for the Palo Alto Longevity Prize. In short, it’s a $1m prize for substantial progress on “hacking the code of aging”. The Washington Post has more.
$1m is not a lot of money for this. But the hope is that by explicitly saying: “We want people to hack aging, and we will give anyone who does it a prestigious prize” it may attract key scientists already working on this, and also help legitimize the background assumption that aging *is* a disease which *should* be cured.
I have a lot of sympathy with this (h/t Nick Bostrom’s The Fable of the Dragon-Tyrant). I also see how curing aging could cause deep social problems. Some remarks I made in a facebook discussion:
I’m actually a little skeptical about the social effects of indefinite lifespan. Max Planck’s notion that “science advances one funeral at a time” is witty, yes, but I think it also largely rings true.
I think we can extend this and say a primary driver of social change is that there’s a constant influx of young people, with newer ideas and more open minds– and that the older, higher-status people who have their hands on the levers of power slowly die off to make room for them.
Death, being the great equalizer, may also incentivize altruism. He who dies with the most toys still dies, after all– unless indefinite lifespan is possible, at which point why give as much to charity, since you might need it later?
This system is terribly inefficient and rather cruel in many ways. But it’s also a time-tested process that sustains society’s dynamism. I am (of course!) in favor of curing aging, but I think there are many potential hidden ‘gotchas’ involved, and I don’t think they’ll be trivial. (Note: brain plasticity-enhancing drugs or prosthetics may help with some of these problems, but I think they’ll have to work around fundamental limitations.)
Trying to solve a scientific mystery is like starting a startup: timing is everything. Try to solve a problem too soon, and your efforts are wasted. Try to solve a problem too late, and you can’t contribute anything new. But there’s a sweet spot between when a problem becomes solvable in principle and when it becomes obvious, where efforts have the most leverage. A time when the problem you’re trying to solve still looks dreadfully out of reach, but nothing except inertia and muddled thinking is actually standing in your way. I think the mystery of pain and pleasure (i.e., what’s the intrinsic factor that makes things feel good or bad?) is in this sweet spot right now.
After the fold is a partial excerpt from a paper I’m working on. If it piques your interest, please do contact me.
Every year, literary-agent-to-famous-intellectuals John Brockman emails his 150+ clients a philosophical question to publicly weigh in on. The question he asked this year is, What should we be worried about?
I can’t say this list did much for my peace-of-mind, but it was interestingly diverse. Most comments aren’t anything you couldn’t find in the New York Times, but some seemed unusually pithy, prescient, or fresh. Here’s what stood out to me this year:
Rolf Dobelli on how goods that convey high status will always be in short supply:
As mammals, we are status seekers. Non-status seeking animals don’t attract suitable mating partners and eventually exit the gene pool. Thus goods that convey high status remain extremely important, yet out of reach for most of us. Nothing technology brings about will change that. Yes, one day we might re-engineer our cognition to reduce or eliminate status competition. But until that point, most people will have to live with the frustrations of technology’s broken promise. That is, goods and services will be available to everybody at virtually no cost. But at the same time, status-conveying goods will inch even further out of reach. That’s a paradox of material progress.
Yes, luxury used to define things that made life easier: clean water, central heating, fridges, cars, TVs, smart phones. Today, luxury tends to make your life harder. Displaying and safeguarding a Rauschenberg, learning to play polo and maintaining an adequate stable of horses, or obtaining access to visit the Pope are arduous undertakings. That doesn’t matter. Their very unattainability, the fact that these things are almost impossible to multiply, is what matters.
As global wealth increases, non-reproducible goods will appreciate exponentially. Too much status-seeking wealth and talent is eyeing too few status-delivering goods.
The American political scene is in sorry shape. If you’re reading this blog– or indeed, if you have a pulse– you likely agree with this, so I won’t belabor the point.
The standard prescription is to get out and vote. While it’s important that people vote, the idea that ‘our problems would melt away if only everyone got out and voted’ is troubling, because if you vote and feel you’ve done your duty yet voting doesn’t actually do much, it’s ‘empty calories’ of a very dangerous sort.
As I get older and (I think) wiser, I find the choices voters get are hardly choices at all. We only get exposed to– let alone get to vote for– candidates that have passed through a huge gauntlet of vested interests. Candidates who won’t rock the boat too much, candidates who will “play ball”, candidates who have essentially sold out, beholden to and dependent on their party, media alliances, and funders. “Get out and vote” is hardly a viable prescription for change when we can choose to vote for Goldman Sachs or Goldman Sachs.
The Powers That Be have always been able to vet candidates to some extent, but in the past few elections it’s gotten particularly stark: before, a wildcard like Perot might’ve snuck in, but (love him or hate him) witness what happened to Ron Paul when he tried to circumvent the gatekeepers’ gauntlet.
It’s a hard, complex problem. But I see a way to short-circuit a lot of this gatekeeping. Convince more celebrities to run for office.
It sounds like a joke, but I’m entirely serious. Celebrities already have their own power base, their own media exposure. They don’t need to mortgage their ideals to get access to voters. They get a (mostly) free pass through the gatekeepers’ gauntlet, and many would stand a good chance at getting elected going head-to-head against the sorts of candidates the major parties field.
Clearly we wouldn’t want any old celebrity running for president, but there are celebrities who would genuinely be great candidates. Matt Damon, Jon Stewart, Bruce Willis, Meryl Streep, Leonardo DiCaprio– all potential candidates who would be more electable, likely more competent, freer to speak their minds, and much less likely to respect sacred cows on both the right and the left than anybody the standard party nomination process can produce. And perhaps we see the past with rose-tinted glasses, but it seems like the celebrities we’ve already elected have done pretty well by us.
I’m sure I missed a lot of celebrities who would make good candidates. Who are they?
Jaan Tallinn (of Kazaa/Skype fame) gave a ‘big picture’ talk at SS2011 on existential risks and how society may (or may not) meet our coming challenges head-on. There’s a lot of good stuff in there, but one thought in particular stood out: he talks about how social status is a powerful a carrot for doing good things, but also how the way social status is doled out fails in incentivizing people to do really great things. Right or wrong, it’s hard to think of a more structurally important topic. Here’s me paraphrasing his argument:
Many (if not most) things that are good for society happen because society grants social status to those who do them. Once the bare necessities are accounted for, this respect granted by society is the biggest carrot around– being high-status is one of the best feelings in the world, but moreover it’s convertible to so many different things, like money, preferential treatment, sex, etc.
Society benefits enormously from this. But there are at least three systemic biases in how society doles out status for achieving things good things:
1. There’s a natural bias toward the short-term. People literally get addicted to the social status cycle… just like a drug. It’s chemical. They go for short-term projects for a more steady ‘fix’.
2. Social status is scale insensitive. Minor things (like founding an animal shelter) can give almost as much social status as curing cancer, or Elon Musk’s attempt to get our species off this planet. It’s on a log-type scale, like the Richter Scale– if you do something 10x cooler, you only get twice as much status. This discourages people from aiming high and risky.
3. There’s a strong bias toward the easy to understand. Since social status depends on the perception of other people, achievements need to be able to be widely understood to ‘cash in’ on status. E.g., the Gates Foundation tries to do good things, but only within the context of stuff that everybody can understand. And so it ends up not doing REALLY GREAT things.
Of course, Tallinn is implicitly arguing that he (and his immediate audience, the Singularity community) should be granted more social status. He’s not a completely uninterested party here.
There’s also lots of interesting ground outside of Tallinn’s scope of ‘the flaws in society’s algorithm for granting status based on achievements’. E.g.,
– Different reasons society grants status (for achieving great things; for looking pretty; for successfully signaling you’re a member of the ‘in’ group, etc);
– The distinction of prototypically-masculine “respect is earned” vs prototypically-feminine “everybody deserves respect” cultures and their tradeoffs;
– Evopsych-derived theories on the psychosocial dynamics of respect and how to “game” them. And perhaps most pressingly:
– If and how we can fix some of these ‘bugs’ in how society grants respect.
Still, I think he’s got some good points.
Sports doping is an eternal arms race. You have black-market chemists making undetectable ‘designer drugs’, and you have anti-doping agencies coming up with more-and-more sophisticated tests in response. Sadly, the dopers are winning right now, and few sports are ‘pure'. Many athletes — perhaps most — at the 2012 Olympics will be doping in some form or fashion. The incentives to cheat are just too high. To quote an anonymous wit from Slashdot,
There’s an age old adage in sport that if you aren’t cheating you aren’t trying hard enough. What modern competition will become is a battle to have your particular advantage, stimulant, or beneficial genetic abnormality declared competition legal, while your competitor’s advantages are restricted.
Perhaps comprehensive gene expression tests combined with the promise of post-facto tests on samples could stop most doping. We shall see. But I can’t shake the feeling all this anti-doping testing might be sports’ Maginot Line — we’re so focused on doping that we may get caught flat-footed by types of cheating we don’t expect. Performance degradation of competitors comes to mind.
Let’s put on our mad scientist caps and talk heat rays. Consider how easy it would be to hide a low-power, directional microwave array in standard AV/broadcast equipment— basically a set of dishes that can focus energy at some distant point and heat it up a bit. Something that could be aimed at, say, a runner and heat up their internal tissue just enough to hurt their performance.
Heat build-up in muscle and nerve tissues, it turns out, is one of the biggest factors that degrade athletic performance. Something like this — essentially a directional version of a microwave oven — wouldn’t hurt anyone at low power levels, but by heating up their muscle tissues and core temperature it could sap a few percent off their peak performance/endurance. Which is easily the difference between a gold and a bronze medal, or a having a killer comeback 4th quarter vs getting rotated out for exhaustion.
The tech is actually really simple… essentially a sophomore-level physics problem. You’d need to find the right wavelength and power intensity to penetrate skin and heat tissue (but not too much), you’d need to disguise the equipment (it’d look like a handful of DirectTV dishes*), you’d need a clear line-of-sight to the athletes, you’d need to figure out a workable area-of-effect focus (say, a sphere with a 3ft radius), and you’d need some way to control it. Maybe you’d have one of your “camera guys” point-and-shoot it manually, or you could write some software to track targets automatically. Governments could use this to cheat at the Olympics; pro sports teams could use this to tire-out key opponents. It’d sure be a slimy way to win, but effective.
So, what are the chances something like this will get used in London 2012? Or that it was used in Beijing 2008? Non-zero, I’d say. And unlike doping, which leaves traces in blood and urine samples which can be analyzed years later with more sophisticated tests, this would leave no trace. Just some momentary, inexplicable fatigue.
*Since microwaves effortlessly pass through many materials, you could presumably hide these dishes *inside* boxes or other props.
Edit, 7-21-13: perhaps opentheory.net has some Israeli readers?
 Excerpts from a Spiegel interview with Angel Heredia, once a doping dealer and now a chief witness for the U.S. Justice Department:
… He had been in hiding under an assumed name in a hotel in Laredo, Texas, for two years when the FBI finally caught up with him. The agents wanted to know from Angel Heredia if he knew a coach by the name of Trevor Graham, whether he carried the nickname “Memo”, and what he knew about doping. “No”, “no”, “nothing” – those were his replies. But then the agents laid the transcripts of 160 wiretapped telephone conversations on the table, as well as the e-mails and the bank statements. That’s when Angel “Memo” Heredia knew that he had lost. He decided to cooperate, and he also knew that he would only have a chance if he didn’t lie – not a single time. “He’s telling the truth,” the investigators say about Heredia today.
SPIEGEL: Mr. Heredia, will you watch the 100 meter final in Beijing?
Heredia: Of course. But the winner will not be clean. Not even any of the contestants will be clean.
SPIEGEL: Of eight runners …
Heredia: … eight will be doped.
SPIEGEL: And how did you become the best in your world?
Heredia: With precision. You want an example? Everyone talks about epo. Epo is fashionable. But without adding iron, epo only works half as well. That’s the kind of thing you have to know. There are oxygen carriers that make epo work incredibly fast – they are actually better than epo alone. I call my drug “Epo Boost.” I inject it and it releases many tiny oxygen molecules throughout the body. In that way you increase the effect of epo by a factor of ten.
SPIEGEL: Do you have any other secrets?
Heredia: Oh yes, of course. There are tablets for the kidneys that block the metabolites of steroids, so when athletes give a urine sample, they don’t excrete the metabolites and thus test negative. Or there is an enzyme that slowly consumes proteins – epo has protein structures, and the enzyme thus ensures that the B sample of the doping test has a completely different value than the A sample. Then there are chemicals that you take a couple of hours before the race that prevent acidification in the muscles. Together with epo they are an absolute miracle. I’ve created 20 different drugs that are still undetectable for the doping testers.
SPIEGEL: Is there doping at every level of athletics?
Heredia: Yes, the only difference is the quality of the doping. Athletes with little money use simple steroids and hope they don’t get tested. The stars earn 50,000 dollars a month, not including starting bonuses and shoe sponsorship contracts. The very best invest 100,000 dollars – I’ll then build you a designer drug that can’t be detected.
SPIEGEL: Explain how this works.
Heredia: Designer drugs are composed of several different chemicals that trigger the desired reaction. At the end of the chain I change one or two molecules in such a way that the entire structure is undetectable for the doping testers.
SPIEGEL: The drug testers’ hunt of athletes …
Heredia: … is also a sport. A competition. Pure adrenaline. We have to be one or two years ahead of them. We have to know which drug is entering research where, which animals it is being used in, and where we can get it. And we have to be familiar with the testers’ methods.
SPIEGEL: Can the testers win this race?
Heredia: Theoretically yes. If all federations and sponsors and managers and athletes and trainers were all in agreement, if they were to invest all the money that the sport generates and if every athlete were to be tested twice a week – but only then. What’s happening now is laughable. It’s a token. They should save their money – or give it to me. I’ll give it to the orphans of Mexico! There will be doping for as long as there is commercial sports, performance-related shoe contracts and television contracts.
SPIEGEL: Are there still any clean disciplines?
Heredia: Track and field, swimming, cross-country skiing and cycling can no longer be saved. Golf? Not clean either. Soccer? Soccer players come to me and say they have to be able to run up and down the touchline without becoming tired, and they have to play every three days. Basketball players take fat burners – amphetamines, ephedrin. Baseball? Haha. Steroids in pre-season, amphetamines during the games. Even archers take downers so that their arm remains steady. Everyone dopes.
 Anthropologist John Hawks on doping:
John Leonard, executive director of the American Swimming Coaches Association, told of conversations he has had with coaches and scientists in China.
“We are really naive if we are to believe that the Chinese at this point are clean or that they are the only country in the world that is experimenting with genetic enhancement as we speak,” said Leonard, who was not a panelist but attended the conference and spoke during question-and-answer periods.
“There are lots of countries in the world who couldn’t care less about doing it safely, and there are lots of athletes who will take the chance that they will die in order to win medals. … Will the United States have the same viewpoint when we start losing gold medals?”
But really, there are plenty of people who would stand in line to trade 20 years of their lives to win an Olympic medal. And many who think that the current winners are simple beneficiaries of a genetic lottery. As soon as genetic modifications become routine to correct developmental problems, the kids who had them will start coming up through the sports ranks. The way it stands now, the Olympics and other sports venues are staging themselves as some of the last arbiters of “pure” humanity.
 A friend suggests,
You’re thinking too Star Trek. Easier to slip trace amounts of prohibited substances into an opposing athlete than rig heat waves.
Probably true. But might raise more investigative flags… and would definitely be less fun.
Spend any time around finance people, and you start to worry about things. Unsustainable trends, ruinous policies, global economic collapse. I think it’s always like this— it’s a career that attracts and rewards worriers. But something’s different in 2012 finance: there’s a growing whiff of sheer, unadulterated panic in peoples’ honest evaluations. Very smart, very serious people are talking frankly of scenarios with real-world consequences that years earlier would have been unthinkable. There’s even a subgenre of blogs which can only be called “economic dispair porn” – and it’s hard to say exactly why they’re more unreasonable than those preaching calm and a slow-but-steady recovery.
Everybody who’s paying attention knows things need to change– that we’re at the wrong end of multiple unsustainable trends. Are we looking at a recession slowly leading into a recovery? A long-term recession characterized by stagflation as the new normal? A worldwide economic disaster? It’s hard to say. Nobody knows. All are real possibilities, though I think the Krugmans of the world are ignoring our structural problems and the magnitude of the pain required to solve them. What’s clear is we’re in a tight place, economically speaking, with a lot of risk and few good options.
Why do bad things happen to good economies? (Of Austrians, Keynesians, and the path of least resistance)
How’d we get into this mess? A lot of people blame greedy bankers, crony capitalism, partisan politics. There’s some truth in each of these, but one of the biggest factors is how we approach economic cycles. Keynesian economics suggests the healthiest way to handle cycles is to put money aside during the ‘up’ parts of the cycle, and spend these savings during the ‘down’ parts to smooth things out. It seems intuitive. Austrian economics, on the other hand, suggests that any attempt to subvert natural economic cycles is ultimately unhealthy, and we need to just tough out the recessions— moreover, the ‘down’ part of the cycle is actually the most healthy, since economic pain is the only way to cleanse an economy of bad investment and structural problems.
Economists have spent a lot of air and ink debating the relative merits of each (note: link is to an econ rap battle). But, ironically, since 1987 we’ve done neither: we’ve injected liquidity — banker talk for “thrown money at the problem” — whenever things slow down, as the Keynesians suggest, but we haven’t been setting aside money in the good times. So for 25 years we’ve taken the path of least resistance and financed our way out of short-term recessions by taking on more long-term debt, enjoying the fruits of economic growth while kicking the can down the road. This can go on… until it can’t. The music may be stopping, the party winding down, and the hangover is starting to pound.
The domino effect (and, “at least we’re not Greece”)
The larger issue here is that most nations are in roughly the same fiscal position as the US, or worse. Greece went pseudo-bankrupt and is essentially sliding into ‘failed nation’ status; Spain is likely close behind. Ireland, Italy, Portugal, and really most of the Eurozone is in pretty sad shape, burdened with inflexible, unworkable policy and mountains of debt. Japan is stable but almost completely underwater, India is staggering, and though China seems to have different economic problems than those in the West, it may be in no better shape. Most countries export to the US, so a slowdown here means slowdowns elsewhere. The specific watchword here is “contagion”, which means since everyones’ economies are linked to everyone else’s, a default (bankruptcy) of one country or major bank could interrupt cashflow to its trading partners enough to cause a chain reaction of defaults. The more defaults there are, the more likely this is to cause even more defaults. Here’s a simple video on the topic.
Contagion is a serious concern, the cause of the government’s oft-maligned emergency TARP loans and of the EU’s special dealings with Greece. This situation is further complicated by the existence of hundreds of trillions of dollars of CDOs and CDSes (JPMorgan alone has a $70 trillion derivative exposure, a figure higher than world GDP, though nobody–JPMorgan included–knows quite what this means). These are essentially hugely leveraged bets that countries won’t default on their sovereign debt, bets that will explode in the world’s face in a fiery ball of leveraged pain and contagious uncertainty if a country like Greece does technically default on its debt.
Caveats (and their caveats…)
Not everything is certain gloom and doom, and there are some particular bright spots– American technology and startups, singularity trends, and the small-but-growing China export market could all help gloss over a lot of structural dysfunction. Reasonable people can be hopeful. But these bright spots have caveats— Thiel makes a solid case for pessimism about technological progress, there are strong bear arguments on Chinese growth and stability, and the Chinese consumer market is turning out a lot smaller than expected anyway. We’re probably going to need to fix our problems the old-fashioned way– which translated, means we should expect to experience pain sufficient to compel us to fix the structural problems that got us into this mess, before things turn good again. And given how entrenched the problems are and how long we’ve deferred said reckoning, it’s going to be significant.
All this adds up to a rather scary prediction. I hope I’m wrong, and I wish there was more I could do to help.
What rich people are worrying about (the smart ones, at least…)
This brings us back to the point about worrying: let’s assume there’s a non-trivial chance that multiple unsustainable trends are going to come due in the next few years, that a lot of wealth is going to be destroyed, that the ‘economic pie’ is going to shrink drastically. The problem people with money face, then, is to find the pieces of the pie that will shrink the least. To make sure the wealth that’s destroyed is other peoples’. It’s not pretty, but economic contractions never are.
Pessimism doesn’t make hay; what to do?
There are so many rich economic pessimists so desperate for insulation against systemic risk that reasonably-priced hedges are few and far between. Gold, the standard hedge against fiscal uncertainty, has quadrupled in price since 2000. Farmland in the Midwest jumped ~25% in the past year after strong gains the past decade. The ol’ “hide your cash in your mattress” strategy isn’t very good when governments can simply inflate away its value. In other words, if you’re worried about finding a relatively disaster-proof way to store your wealth, you’re going to have to either pay a huge premium for being late to the party, or get a little creative and off-the-beaten-path.
A key problem here is the economic worth of most everything is linked to the level of economic activity. A hotel’s value, for instance, depends on how many people can afford to stay there. Copper’s value depends on lots of people wanting to make stuff with it. A vacation beach house’s value depends on there being people with enough disposable income for luxuries. So the ideal hedge would be something with inelastic or countercyclical demand, yet something that wouldn’t lose value if the financial apocalypse failed to materialize, or if singularity trends kept apace. Even better if it was a company or property that generated income under all such scenarios. And of course, you wouldn’t want to put all your eggs in one basket. It’s possible that something like the Vice Fund could be viable, but I have to say I think there are much better investments out there. We just have to find them. Or make them.
 Furthermore, the US’s dirty little secret is that we’ve slowly, imperceptibly drifted away from a market-driven economy and toward a government-driven economy, which further distorts natural economic cycles. Government spending accounts for ~40% of GDP, and government influence in the economy, in forms ranging from egalitarian employment mandates, security administration at airports, to interest rate manipulation, is everywhere. (On the Fed’s role, my dad has noted the irony “that we are probably in the mess we’re in because a follower of Ayn Rand [Greenspan] decided that central planning was better than the markets – as long has HE was doing the planning”.) Capitalism is never pure, and in modern societies there’s always some element of central planning. But our government bureaucracy’s influence on what happens inside our borders is more pervasive and less accountable than strictly necessary, and its sheer size is burdensome… especially during downturns, when the private sector sheds its least efficient jobs but the government doesn’t. (Or would be, if we weren’t just borrowing the money to pay for it.)
– One pernicious issue is how many elements of society have outsourced the funding of their financial obligations onto continued growth. See, e.g., CalSTRS, or the pension fund for the California State Teachers’ Retirement System. At 10% growth, it fully funds all its pensions. At 7.5% growth, it’s underfunded by $64.5 billion. At 1-2% growth… things look pretty grim for retired teachers.
We can’t just not shrink, we can’t just grow a little; we need to grow a LOT just to keep our financial obligations from blowing up. It didn’t have to be this way, but it is.
– David Brooks has a reasonable op-ed on structural problems, and how the same playbook that got us into this mess won’t get us out.
– The elephant in the room in these economic debates is whether the growth of the middle class in the last 60 years is a ‘new normal’ or just a temporary aberration. As Taibbi worries,
I think people are going to realize what a blip on the radar American-style democracy in the 20th century was. A big middle class that had a huge powerbase, financial interests, bosses giving benefits… all those things. It’s just a little blip in history. For the most part, concentrated wealth will make all the decisions and everybody else is dictated to.
Edit, 2-3-13: I highly recommend this fantastic bearish writeup on Zerohedge. Entertaining and enlightening. (Warning: it is long.)
The question of whether the official government inflation numbers are right (currently 2-3%, depending on inclusion of food and energy) is really important. It would be hard to understate how important this is. But it’s considered a fringe topic, a settled issue. Here’s Krugman scoffing at the doubters.
We measure inflation with the Consumer Price Index, which is basically an aggregate, pared down cost-of-living metric. How much it costs, month by month, to buy life’s essentials for the average consumer. If this ‘basket of representative goods and services’ goes up, we call that inflation. As a cost-of-living metric it’s pretty good, and as Krugman notes, alternate approaches turn up about the same numbers.
But ‘how far does a dollar go for the average consumer?’ and ‘how much a dollar is worth compared to everything else?’ are very different questions. Here’s my take:
When we get down to it, everyone has their own inflation rate, based on what they want and need to buy. Averages here miss a lot of trends. One trend that comes to mind is the current economic polarization and concentration of wealth. Let’s keep in mind, dollars are a commodity like any other, and inflation is just supply-and-demand. It happens when too many dollars are chasing too few goods and services. In 2012, there’s a huge oversupply of dollars held by rich people and investors; stuff that these people want to buy (investments, high-end and luxury goods and services) is getting bid way up. On the other hand, in the lower tiers of society, there isn’t an oversupply of dollars. Official inflation rates are calculated based on cost of living for the majority of people— NOT, e.g., the cost of what people who hold most of the dollars want to buy. It’s an important distinction: in short, we look at inflation from the average person’s perspective, whereas we should look at it from the average dollar’s perspective.
I’m sure this alternately weighted, dollar-centric rate of inflation would be much higher than the official CPI. How could we calculate it reliably? I’m not sure. But you could make a lot of money if you figure out how.
 Walmart-style globalization, Procter & Gamble-style manufacturing efficiency gains, and Moore’s Law-type exponential improvement should all be strongly blanket deflationary factors– that is, making peoples’ dollars go further. That such deflation tends to be narrow (only a few things get cheaper, while most keep inflating) suggests to me these factors are effectively subsidizing inflation.
 Some of this inflation in investment commodities is driven by the current extreme levels of uncertainty, but some isn’t. One could presumably quantify some of this by looking at option premiums. Market analysis of dollar-denominated commodities gets really complex when there may be hidden inflation, however, and government-numbers-derived tools like TIPS are pretty worthless qua tools.
 The money supply may be said to be one of many tools the powerful use to extract wealth from the less powerful. If there is indeed a currency crisis ahead, involving inflationary and deflationary shocks, a reasonable guide for their timing would be to look at what would benefit the central bankers’ balance sheets the most.
– Is this driven by an oversupply of currency or of credit? Probably both, e.g., “Some insights from my visit to the ECB“. And due to many people being desperate to hold anything but currency (ABC).
– The US is creating a lot of currency, but this is definitely not limited to the US dollar. Every other government in the world has two incentives to print money: more competitive exports, and free money. Trends like this persist until they can’t.
– People think of inflation and deflation as opposites; I would say they’re cousins, in that they’re both products of and drivers of volatility. Both erode the leverage of the tools we use to manage our fiscal affairs, and I suspect both could happen in short succession, particularly with a whipsawing money supply– or even at the same time, in different sectors of our economy (just like different inflation rates).
– Why does this matter? Aside from skewing all economic statistics, this adds a great deal of volatility to anything connected with currency. Back in 2005 people scoffed at the possibility of a housing bust, pointing at a variety of statistics (all of which looked very solid and reasonable at the time). Now, people are scoffing at the possibility of a currency crisis, pointing mainly at the stability of the CPI. I don’t know what the future holds, but I know that’s not a good argument.
Additional References (but, caveat lector):