articals on Taipei Times

Forecasting a recession may make it worse.
By Bill Emmott
Tuesday, Jan 06, 2009, Page 9
“What, pray, is all the fuss about?” asked a sage columnist on the first anniversary of the credit crunch (“Crisis, what crisis?”, The Guardian, Aug. 12, 2008). In response to claims that this was a great crisis of capitalism, he even deployed the word “phooey.” That sage columnist was of course yours truly; it is safe to say that I will not paste that article into my scrapbook under the title “Most Prescient Pieces.”
My argument was of course correct in that it looked in the rearview mirror rather than at the road ahead. The striking thing about the first year of the crunch was how little impact it had on the wider economy beyond the banks, the City of London and Wall Street.
And any impact that has yet been seen does not make the situation worse than the recession of the early 1990s, or especially the early 1980s, when unemployment was nearly double today’s level. Still, it is no longer possible to be as sanguine as I was in August. We are still far from a “worst since the 30s” situation, but there is no doubt that in the last four months all developed economies, and many developing ones, have frozen up. How bad might it get? We don’t know, because we can’t know.
It is worth dwelling for a moment on why I was proven so wrong. There are, I think, two reasons beyond idiocy or complacency.
First, I may have spent too much time thinking about Japan. It really did have the rich world’s worst financial crisis since 1929, when after 1990, its stock market plunged 75 percent and property prices fell 70 percent. But it never had a severe recession: more a slow squeeze that ended, from 1997 onwards, in deflationary stagnation. A huge public spending program prevented a slump; while using public funds to rescue banks prevented a meltdown.
The collapse of our financial pyramid scheme could be absorbed, I thought, by learning from Japan’s example and improving on it. That is exactly what British Prime Minister Gordon Brown did by recapitalizing Britain’s banks 14 months into the crisis, rather than waiting eight years, as Japan had. It is reflected in the fiscal expansion announced in British Chancellor of the Exchequer Alistair Darling’s pre-budget report in November and the huge spending program being prepared by US president-elect Barack Obama.
However, our drama now feels worse than Japan’s because it is international. Healthy global growth propped up Japan’s economy, whereas now we are all slowing or receding together. It is also worse because of the second factor that I misjudged in August: psychology.
The position I took was in effect an attempt to argue that we risked talking ourselves into recession through media scaremongering and remarks such as Darling’s warning in his Guardian interview on Aug. 29 that the UK faced the worst economic times in 60 years, with more “profound and long-lasting” effects than people were expecting. No doubt he now thinks he has been proven correct, while I still hope that he won’t be, and feel he may have contributed to the panic — even though it would be implausible to argue that he caused it.
Now fear has taken over. Companies, households and banks have decided that cash must be king, to be in debt is to risk death, and new commitments are best avoided. Individually, this is rational. Collectively, it is disastrous. Or, to avoid being a scaremonger, it brings about the thing we are afraid of: a nasty recession.
We can’t predict how deep the recession will be, or how long it will last, because it depends on psychology. Economics is not about models and mathematics; it is about behavior: our reactions to opportunities, risks and fears.
Brown and Darling are right to be trying to counter that deflationary psychology by throwing away the old fiscal rules, cutting VAT and expanding public borrowing. Like in Japan, this will help to mitigate the slump. But whether it can end the slump will depend on companies, households and banks that hold cash being convinced that it is time to start spending again.
Meanwhile, this is not yet a true “crisis of capitalism.” That would arise if confidence never seems likely to return, if unemployment has soared and if hope seems truly to be dead. We cannot rule it out. But let us, as Obama said in his book, have the audacity to hope that it won’t happen, and the sense not to announce it until and unless it does.
(Bill Emmott is a former editor of The Economist. )
Innovation should mean more jobs, not fewer.
Efficiency achieved through technological innovation lowers production costs, boosts consumption and expands industries, experts say
By Janet Rae-dupree
Tuesday, Jan 06, 2009, Page 9
Creating new jobs is a good way to get the US economy moving again. That’s not the controversial part of US president-elect Barack Obama’s economic stimulus plans. As usual, the devil is in the details. And innovation advocates fear that if the devil runs amok, a short-sighted emphasis on jobs over long-term productivity may bog down the economic recovery.
The problem, as they see it, is a centuries-old misconception that innovation is synonymous with automation, which in turn leads to the elimination of jobs.
“If you invest in a technology that makes something more efficient, the fear is that people will be put out of work,” says Kevin Efrusy, the venture capitalist whose firm Accel Partners is the lead funder of several important Silicon Valley start-ups, including Facebook.
“But it’s just the opposite. When anything becomes cheaper, we consume a lot more of it. The overall economic effect is, you create and expand entire new industries and employment goes up,” Efrusy said.
A 1995 study by the Organization for Economic Cooperation and Development showed that periods of high productivity — often achieved through automation — were correlated with periods of high job growth throughout the last half of the 20th century.
“Innovation leads to job growth directly and clearly,” says Robert Atkinson, president of the Information Technology and Innovation Foundation.
The data collected since that study was published continue to prove the point, he says, adding that even with the trend toward offshoring earlier this decade, unemployment rates in the US remained quite low until the recent economic downturn began.
While creating jobs by upgrading the nation’s physical infrastructure may help in the short term, Atkinson says, “there’s another category of stimulus you could call innovation or digital stimulus — ‘stimovation,’ as a colleague has referred to it.”
Although many economists believe that a stimulus package must be timely, targeted and temporary, Atkinson’s organization argues that a fourth adjective — transformative — may be the most important. Transformative stimulus investments, he said, lead to economic growth that wouldn’t be there otherwise.
A new report by the Information Technology and Innovation Foundation presents the case for investing US$30 billion in the nation’s digital infrastructure, including health information technology, broadband Internet access and the so-called smart grid, an effort to infuse detailed digital intelligence into the electricity distribution grid.
The stimulus money is “a wonderful opportunity” to integrate innovative technologies at a far faster pace than would otherwise be possible, he said.
“You’d have an economy and society within three to four years that would be a lot better than we have today, and you’d create a lot of jobs,” Atkinson said.
Beyond direct stimulus investments, he supports an initiative being circulated in Silicon Valley that seeks an information technology investment tax credit to foster innovation through the downturn.
Citing an op-ed essay on Nov. 30 in the New York Times by the economist Joseph Stiglitz, the Silicon Valley petition calls for a tax credit for companies that spend more than 80 percent of what they had been spending annually on information technology like computers and software.
The petition’s creator is David Thompson, the chief executive of
“I think it’s great that they want to build more highways and bridges,” Thompson said. “But if you really want to invest in long-term job viability, you need to invest in the innovation economy.”
Various organizations have previously backed such a tax credit specifically for clean technologies, biotech and broadband development. But TechNet, an advocacy group for the technology industry, is pushing for a tax credit that would underwrite innovation more broadly.
“Innovation is the lifeblood of the American economy,” says Jim Hock, a spokesman for TechNet. “We’re only as good as our next innovation. TechNet believes we shouldn’t be picking and choosing technologies to back with a tax credit. We should be technology-neutral and create an atmosphere of innovation that will let a thousand flowers bloom.”
Stiglitz, who was chairman of the Council of Economic Advisers from 1995 to 1997, said in an interview that there has been a slow divergence between traditional economics and what may be called innovation economics.
“I’ve been a bit astonished that all the discussion around the private-sector stimulus has centered on infrastructure,” he said.
“Bailouts, too, are aimed at correcting mistakes of the past, so they are backward-looking. We would be much better off spending our money forward-looking. If we spend US$700 billion on new technology and innovation, we’d have a stronger, new, real economy. Up to now, the discussion has focused on the sectors that have been mismanaged rather than the sectors that are creating our future,” he said.
Geoffrey Moore, a partner with Mohr Davidow Ventures and author of five bestselling business books, says that whatever form the government stimulus takes, it must focus on the nation’s greatest strength.
“America is probably the best culture in the world at failing,” he said. “We’re willing to navigate in a fog and keep moving forward. Our competitive advantage tends to be at the fuzzy front end of things when you’re still finding your way. Once the way has been found, we’re back at a disadvantage. So, yes, investing in innovation is critical.”
Coping with the economic crisis
By Alina Tugend
Tuesday, Jan 06, 2009, Page 9
“It will sound corny to some people, but if your life portfolio is greater than your financial portfolio, then you’re diversified.”— Robert Leahy, director of the American Institute for Cognitive Therapy
I didn’t know this — maybe you did — but Nov. 17 is officially “Coping With Uncertainty Day.” I can’t figure out if this came about through an act of Congress or was the brainchild of a greeting card company, but you can send e-cards and even coffee mugs to mark the occasion.
I really think we need more than a day. In fact, last year could be the “Coping With Uncertainty Year.” (And no doubt, the commemoration will continue into this year as well.) Like so many others over the past year, my family faced job insecurity, investment losses and were even touched by the Bernard Madoff scandal.
The year ended up with our jobs safe and our investments no worse than anyone else’s. But the feeling that life is increasingly chaotic and fragile remains. Most of us may intellectually agree with Benjamin Franklin that “nothing is certain except death and taxes.”
But we still believe — and this is particularly true of the baby boomer and younger generations — that for the most part we’re in control. And when that belief crumbles, we often do, too.
In fact, researchers have found that uncertainty can sometimes take a greater toll than bad news.
Sarah Burgard, an assistant professor of sociology at the University of Michigan, has for several years looked at how perceived job insecurity affects people’s health.
Drawing data from two separate longitudinal studies — the Americans’ Changing Lives survey and the Midlife in the US survey — Burgard and her colleagues looked at almost 3,000 employed people below age 60.
The subjects were divided between those who were worried about losing their jobs and those who were not so concerned. The survey was adjusted for gender, education and income, as well as for those who were more anxiety-prone in general and for those who had lost jobs in the past and, therefore, might be more worried about it in the future.
Based on how participants rated their own physical and mental health, the academics found that people who felt chronically insecure about their jobs reported significantly worse overall health in both studies and were more depressed in one of the studies than those who had actually lost their jobs or had even faced a serious or life-threatening illnesses.
“Chronic stress is extremely damaging to your health,” Burgard said. “I’m an academic and I’m going up for tenure. I know what uncertainty is. You’re unable to make plans, unable to take action. You’re waiting for the other shoe to drop.”
Of course, not everyone reacts the same way to uncertainty. There are gamblers who get a charge out of playing the odds and thrive off risk. And there are some who may not love, but at least can tolerate, insecurity.
And then there are those considered by researchers (and maybe some others as well) to be neurotic. That’s not a clinical definition, but refers to people more anxious or easily stressed out, said Jacob Hirsh, a graduate student at the University of Toronto who has studied how different people respond to uncertainty.
Hirsh was the lead author on a study, published in the October issue of the journal Psychological Science, which found that those considered higher on the neuroticism scale would prefer knowing something for sure — even if it’s negative — than not knowing.
In the study, 41 young men and women were given a personality survey to assess if they were more laid back or more anxiety-prone. Then they were fitted with electrode caps that measured brain activity as they completed different tasks.
Hirsh and his colleagues looked at neural activity in a part of the brain called the anterior cortex, which is involved in conflict, uncertainty and monitoring errors.
During the research, the participants were given a plus sign, meaning they performed the task well; a minus sign, meaning improvement was needed; or a question mark with no further explanation.
Those considered more neurotic demonstrated more brain activity in response to the question mark — unclear feedback — than to the negative feedback, while those who were considered less neurotic were not bothered by the question mark response, but were upset by the critical feedback, Hirsh said.
Robert Leahy, director of the American Institute for Cognitive Therapy and a clinical professor of psychology at Weill-Cornell University Medical College, New York-Presbyterian Hospital, said the problem is that “people who are anxious tend to equate uncertainty with a negative outcome.”
Leahy pointed to one study of students who predicted negative outcomes for various concerns, like an exam or a relationship. But follow-up studies found that 85 percent of the outcomes were neutral or even positive.
In addition, said Leahy, who also wrote The Worry Cure, people underestimate their ability to cope with a bad situation.
“You can’t just say don’t worry and everything will turn out fine — people will think you’re an idiot,” he said. “But there’s productive worry and unproductive worry. Productive worry is thinking about something you can do in the next 24 hours.”
That could mean re-examining your investment portfolio, getting a real fix on your checking and savings balance or putting your resume together. Unproductive worry, on the other hand, Leahy said, is fretting about whether the stock market and entire economy will decline by 25 percent — something you can’t do anything about.
There are ways to keep your sanity even in a world that seems increasingly crazy. Don’t obsessively watch television or check the stock market online because people who are already worried tend to overvalue negative information, Leahy said. That’s known as confirmation bias.
But don’t just stick your head in the sand, tempting as that may seem. If you have a real concern that can be addressed in a concrete way, “get as much information as possible,” said Jerilyn Ross, president of the Anxiety Disorders Association of America and author of One Less Thing to Worry About, to be published in April.
If you’re worried that you’re going to lose your job, don’t avoid the boss.
“Try and find out what is really going on,” she said. “Knowledge is power.”
Also, put all this in some sort of context and remind yourself of the historical realities that many of us have been too eager to ignore in recent times. Markets have always gone up and down. So has real estate. Most jobs nowadays, are, in reality, temporary, and in any situation people should be trying to improve their skills.
Finally, Leahy said, try and put money in perspective.
“Your portfolio is not simply financial, but a life portfolio,” he said.
Although it’s easy to nod and tune it out when you’re told that money isn’t everything, it helps to really focus on what is important in life besides making money, like your family relationships, friendships and your role in your community.
“You are not just a consumer product,” he said. “It will sound corny to some people, but if your life portfolio is greater than your financial portfolio, then you’re diversified.”
It’s not going to be an easy ride, especially for those of us who lean toward the high anxiety end of the spectrum. But the good news is that we have almost 11 months to prepare for the next “Coping With Uncertainty Day.”

About alwayscola18

*Always be misunderstood. *Majored in business administration, but contributing to satisfaction of primary living needs. *Prefer to speak out, and enjoy silence. *A Mandarin speaker, but not a grand-China nationalist; a Hokkien dialect speaker, but not an aggressive grass-root activist; an English reader, but not negative to my homeland; a baby Christian, but not a confrontationist to the God of earth. *With personalities of patience, cleverness, discernment, toleration, self-confidence, and friendliness.
本篇發表於 筆記。將永久鏈結加入書籤。


在下方填入你的資料或按右方圖示以社群網站登入: Logo

您的留言將使用 帳號。 登出 / 變更 )

Twitter picture

您的留言將使用 Twitter 帳號。 登出 / 變更 )


您的留言將使用 Facebook 帳號。 登出 / 變更 )

Google+ photo

您的留言將使用 Google+ 帳號。 登出 / 變更 )

連結到 %s