Saturday, November 26, 2011

Science - this is what people use to predict the future

Opinions differ. But if I have to express an opinion based on my education as an egineer, I would say that science is a method of analyzing the facts and coming up with a theory that explains them and allows to predict the future. No more, and no less. A theory or a suggestion is not a science - but a method which is to discover that theory and test it against existing and new facts is science. Albert Einstein is famous for proposing a "Special Theory of Relativity" - a theory that nicely described existing facts. What is less known is that Einstein worked very hard to develop a set of experiments that could test his theory. The great scientist refused to conclude that his ideas were correct until they were compared with the results of 4 rather complex experiments.

And this introduction brings us to Paul Krugman, probably the most talented and famous among the liberal economists.

The Comeback Continent, 2008, Paul Krugman
Today I’d like to talk about a much-derided contender making a surprising comeback, a comeback that calls into question much of the conventional wisdom of American politics. No, I’m not talking about a politician. I’m talking about an economy — specifically, the European economy, which many Americans assume is tired and spent but has lately been showing surprising vitality.
Why should Americans care about Europe’s economy? Well, for one thing, it’s big. The G.D.P. of the European Union is roughly comparable to that of the United States; the euro is almost as important a global currency as the dollar; and the governance of the world financial system is, for practical purposes, equally shared by the European Central Bank and the Federal Reserve.

But there’s another thing: it’s important to get the facts about Europe’s economy right because the alleged woes of that economy play an important role in American political discourse, usually as an excuse for the insecurities and injustices of our own society.

In fact, however, tales of a moribund Europe are greatly exaggerated....

Since 2000, employment has actually grown a bit faster in Europe than in the United States — and since Europe has a lower rate of population growth, this has translated into a substantial rise in the percentage of working-age Europeans with jobs, even as America’s employment-population ratio has declined.

In particular, in the prime working years, from 25 to 54, the big gap between European and U.S. employment rates that existed a decade ago has been largely eliminated. If you think Europe is a place where lots of able-bodied adults just sit at home collecting welfare checks, think again.

I don’t want to exaggerate the good news. Europe continues to have many economic problems. But who doesn’t? The fact is that Europe’s economy looks a lot better now — both in absolute terms and compared with our economy — than it did a decade ago....

What’s behind Europe’s comeback? It’s a complicated story, probably involving a combination of deregulation (which has expanded job opportunities) and smart regulation. One of the keys to Europe’s broadband success is that unlike U.S. regulators, many European governments have promoted competition, preventing phone and cable companies from monopolizing broadband access.

What European countries definitely haven’t done is dismantle their strong social safety nets. Universal health care is a given. So are a variety of programs that support families in trouble, helping protect Europeans from the extreme poverty all too common in this country. All of this costs money — even though European countries spend far less on health care than we do — and European taxes are very high by U.S. standards.

In short, Europe continues to be a big-government sort of place. And that’s why it’s important to get the real story of the European economy out there.

According to the anti-government ideology that dominates much U.S. political discussion, low taxes and a weak social safety net are essential to prosperity. Try to make the lives of Americans even slightly more secure, we’re told, and the economy will shrivel up — the same way it supposedly has in Europe.

But the next time a politician tries to scare you with the European bogeyman, bear this in mind: Europe’s economy is actually doing O.K. these days, despite a level of taxing and spending beyond the wildest ambitions of American progressives.

Learning from Europe, 2010, Paul Krugman
As health care reform nears the finish line, there is much wailing and rending of garments among conservatives. And I’m not just talking about the tea partiers. Even calmer conservatives have been issuing dire warnings that Obamacare will turn America into a European-style social democracy. And everyone knows that Europe has lost all its economic dynamism.

Strange to say, however, what everyone knows isn’t true. Europe has its economic troubles; who doesn’t? But the story you hear all the time — of a stagnant economy in which high taxes and generous social benefits have undermined incentives, stalling growth and innovation — bears little resemblance to the surprisingly positive facts. The real lesson from Europe is actually the opposite of what conservatives claim: Europe is an economic success, and that success shows that social democracy works.

Actually, Europe’s economic success should be obvious even without statistics. For those Americans who have visited Paris: did it look poor and backward? What about Frankfurt or London? You should always bear in mind that when the question is which to believe — official economic statistics or your own lying eyes — the eyes have it.

In any case, the statistics confirm what the eyes see.

It’s true that the U.S. economy has grown faster than that of Europe for the past generation. Since 1980 — when our politics took a sharp turn to the right, while Europe’s didn’t — America’s real G.D.P. has grown, on average, 3 percent per year. Meanwhile, the E.U. 15 — the bloc of 15 countries that were members of the European Union before it was enlarged to include a number of former Communist nations — has grown only 2.2 percent a year. America rules!

Or maybe not. All this really says is that we’ve had faster population growth. Since 1980, per capita real G.D.P. — which is what matters for living standards — has risen at about the same rate in America and in the E.U. 15: 1.95 percent a year here; 1.83 percent there.

What about technology? In the late 1990s you could argue that the revolution in information technology was passing Europe by. But Europe has since caught up in many ways. Broadband, in particular, is just about as widespread in Europe as it is in the United States, and it’s much faster and cheaper.

And what about jobs? Here America arguably does better: European unemployment rates are usually substantially higher than the rate here, and the employed fraction of the population lower. But if your vision is of millions of prime-working-age adults sitting idle, living on the dole, think again. In 2008, 80 percent of adults aged 25 to 54 in the E.U. 15 were employed (and 83 percent in France). That’s about the same as in the United States. Europeans are less likely than we are to work when young or old, but is that entirely a bad thing?

And Europeans are quite productive, too: they work fewer hours, but output per hour in France and Germany is close to U.S. levels.

The point isn’t that Europe is utopia. Like the United States, it’s having trouble grappling with the current financial crisis. Like the United States, Europe’s big nations face serious long-run fiscal issues — and like some individual U.S. states, some European countries are teetering on the edge of fiscal crisis. (Sacramento is now the Athens of America — in a bad way.) But taking the longer view, the European economy works; it grows; it’s as dynamic, all in all, as our own.

So why do we get such a different picture from many pundits? Because according to the prevailing economic dogma in this country — and I’m talking here about many Democrats as well as essentially all Republicans — European-style social democracy should be an utter disaster. And people tend to see what they want to see.

After all, while reports of Europe’s economic demise are greatly exaggerated, reports of its high taxes and generous benefits aren’t. Taxes in major European nations range from 36 to 44 percent of G.D.P., compared with 28 in the United States. Universal health care is, well, universal. Social expenditure is vastly higher than it is here.

So if there were anything to the economic assumptions that dominate U.S. public discussion — above all, the belief that even modestly higher taxes on the rich and benefits for the less well off would drastically undermine incentives to work, invest and innovate — Europe would be the stagnant, decaying economy of legend. But it isn’t.

Europe is often held up as a cautionary tale, a demonstration that if you try to make the economy less brutal, to take better care of your fellow citizens when they’re down on their luck, you end up killing economic progress. But what European experience actually demonstrates is the opposite: social justice and progress can go hand in hand.
In the real world, the European paradise appeared to be built on sand. Apparently, Paul Krugman's theories are proven wrong - the European continent, instead of coming back, is taking it in the backside - and rather hard. Here is just the latest news about Europe...

Europe's Crisis to Overshadow U.S. Data in Coming Week, 2011

U.S. investors will return from the Thanksgiving holiday weekend to face continued uncertainty over Europe's debt crisis.

Since spiraling into chaos in the early summer months, Europe's debt crisis has confounded policymakers' attempts at containment.

As Americans were gorging on deep-fried turkey and stuffing on Thursday, European officials from Italy, Germany and France were busy shooting down proposals that might have helped put the eurozone on the path toward fiscal stability.

Among the rejected proposals was the creation of eurozone bonds. Meanwhile, European Central Bank policymaker Jose Manuel Gonzalez-Paramo said eurozone nations should not rely on the central bank to resolve the debt crisis, confounding observers who contend more ECB action is needed.

By Friday, Italy was forced to pay record interest rates at a government bond auction in order to raise a planned 10 billion euros. Italian 10-year bond yields rose to 7.32%, considered too high to be sustainable. Economists are doubtful that Italy, which faces a debt pile equal to 120% of its gross domestic product, will be able to escape trouble purely through fiscal austerity measures.

Pessimism surrounding Europe's debt dilemma remains persistent, with analysts anticipating a worsening of conditions next week. A report from Barclays Capital on Friday predicted Europe would slip into a recession in the fourth quarter as Italy and Spain were forced to seek financial aid from outside sources to prevent a collapse.

Does Europe circa 2011 look in any way like the Europe that Krugman described in 2008 or 2010? If I were cruel, I would say that Krugman's prediction of Europe's future is only matched by his marvelous ass kissing of Enron in 1999 (after all, he was Enron's paid consultant). But I want to be fair now, and I must concede that one of Krugman's statements was undeniably correct and struck into the heart of the European economic model: "...what European experience actually demonstrates is... : social justice and progress can go hand in hand."

In reality, social justice and progress always go hand in hand. There are no "ifs" or "cans" - one follows the other, like the seasons. If YOU take from the man who earned, and give it to the man who did not - YOU commit the social injustice. And when economic progress comes to a screeching halt - don't ask who caused it, because YOU did it, it's YOUR fault. We cannot achieve economic progress without social justice - and Europe abandoned all the pretense of the standards of justice when they decided to build welfare socialism. And now, the bell tolls for you, Europe - and for all the pseudo-scientists like Krugman. And if America does not wake up and abandon the road to serfdom - this country will be next and follow Europe into the abyss. Economic science had long discovered it - which is why conservative, libertarian and objectivist economists knew that Europe was about to fail, while liberal economists like Krugman were blind to this eventuality. If Krugman were a scientist, he would be brave enough to concede that welfare socialism was a failure. But Krugman is not a scientist, he is a left-wing ideologue who does not a crap about science. The poor shmuck is paid to to give left-wing spin to whatever news NYT chooses to publish - which is why he was never able to develop a theory consistent with the facts observable in real life. And this why nothing that he writes can be used to predict the future. The end.


Anonymous said...

Science for many has become a religion. A sad pathetic religion.

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