Has innovation stagnated over the past half century? One version of the argument for the prosecution is that your great-grandma from 1900 would be astonished if she were whisked forward in time to 1950. But if your parents from 1950 were whisked forward to 2011, they'd mostly yawn. Aside from the internet, everything would seem pretty familiar.

But Matt Steinglass points out that there's one area where this isn't true:

The situation with health care is almost the reverse of that with most other consumer technology. While someone from 1890 would have found a hospital in 1950 pretty much familiar, with a bunch of tweaks and upgrades, someone from 1950 would find a hospital today unrecognisable and startlingly futuristic. From widespread use of blood banks and antibiotics to defibrillators, epidural anaesthesia during delivery, heart surgery and angioplasty, laboratory diagnosis of viruses and bacterial infections, tumor biopsies and chemotherapy, and of course organ transplants, MRIs, and so forth, most of what we expect to see when we go to a hospital these days was developed in the second half of the 20th century. Not to mention the drugs we buy, both prescription and over the counter: birth-control pills, antihistamines, antidepressants, anti-retrovirals, et cetera.

Is this a good thing? Sure, and yet Matt has reservations: "We celebrate the technological revolutions that shifted us from an economy mainly focused on getting enough food to eat well....I'm happy that people today spend much more on cars, computers, clothes and entertainment than they do on food. I wouldn't be happy with an economy in which people spent more on health care than they do on cars, computers, clothes and entertainment."

I hate to be the one to break the news, but I'm pretty sure we already spend more on healthcare than on those four categories combined. This is a bad thing in a lot of ways, because there really is a lot of waste in the healthcare field. We overpay for services, we demand lots of tests that aren't necessary, and, as Matt points out, we spend a ton of money on end-of-life treatments that are hard to justify.

And yet, I want to argue that there are two reasons the situation isn't quite as bleak as it seems. First: a lot of the innovations of the past 50 years are really, really useful. We're often unhappy because the biotech revolution hasn't given us 100-year lifespans yet, but we obsess too much over lifespan. Hip replacements don't allow you to live longer, but they're pretty damn beneficial. Just ask anyone who's had one. Ditto for heart bypass surgery, which allows you to live a much more active life than otherwise. Ditto again for prescription pain meds, HIV therapies, artificial limbs, blood pressure meds, and a hundred other things. Modern medicine really does allow a lot of people to live far more comfortable and mobile lives than they used to.

Then there's reason #2: I guess I just have more faith in the future of medicine than a lot of people. Right now, I think we're stuck in the early stages of a technological revolution, and early stages of technological revolutions often don't look that great. Steam engines in their first few decades were barely worth operating beause the technology just wasn't good enough or cheap enough to replace very much human labor. Computers in the 50s seemed doomed to highly specialized niches that would benefit the economy only modestly. Even agriculture wasn't really all that promising when it first got started 10,000 years ago.

I think that's where we are with medicine. We understand enough to make some progress, but we don't understand enough to make the jump to truly inexpensive, broad-based therapies that make our bodies fundamentally better than they used to be. It's just a really hard problem. But selective breeding eventually turned wheat into a truly useful staple crop, the separate condenser made steam engines the drivers of the Industrial Revolution, and the development of ICs turned computers into mass-market devices. We haven't gotten there with medicine yet. We're beyond the mechanical calculator stage, so to speak, but not quite past the tube stage. And that stage of development often produces products that are unreliable, expensive, and only marginally useful.

But we'll get past it eventually. And when we do, healthcare will probably once again be a smaller share of the economy than cars (or whatever we use for cars by that point), computers, clothes and entertainment. So there's some reason for optimism. Or, at a minimum, at least some reason not to despair too soon.

So Rick Perry has a new ad up that slams Romneycare in about the same apocalyptic tones you'd normally use to advertise a movie about a zombie invasion of the world. Perry's ad, of course, is plainly not meant to influence the upcoming primaries, which are still months away. It's meant to create a mini-feud on the day before a Republican debate, thus prompting the debate moderators to mention it, or maybe play a clip, and then demand that Romney address Perry's blast.

I guess this is legit. And it's not as if the subject probably wouldn't come up anyway. But I just thought it was worth a note. This is one of the ways that primary battles are waged in the brave new era of YouTube and the endless debate. Creating teensy little controversies right before each confrontation is all part of the game nowadays.

Via Felix Salmon, here's a chart put together by economists Gordon Green and John Coder, based on data from the monthly Current Population Survey. It's an index of self-reported income over the past 12 months and it's bad, bad, bad. As you can see, median incomes plummeted during the recession, and as you can also see, incomes continued to plummet during our so-called recovery. Reported income is now down 10% from 2008 levels. More here from the New York Times, including this pithy comment from Princeton economist Henry Farber: "As a labor economist, I do not think the recession has ended."

Indeed not, though perhaps economists who don't care about labor will disagree. In any case, here's your economics lesson for the day: debt implosion ---> reduced spending ---> layoffs and wage cuts ---> plummeting incomes ---> even less spending, more layoffs and wage cuts, and ever lower incomes ---> Zuccotti Park. Republicans and centrist Democrats, please take note.

From E.J. Dionne, possibly the nicest guy in the whole world, telling George Will he's a bounder and a cad for treating Elizabeth Warren badly:

This is a tour de force. My colleague has brought out his full rhetorical arsenal to beat back a statement that he grants upfront is so obviously true that it cannot be gainsaid. Will knows danger when he sees it.

Here's the backstory. Elizabeth Warren gave a speech a few weeks ago making the unremarkable—almost banal—point that businesses depend on roads and schools and courts and police protection and lots of other products of our tax dollars. They don't just spring out of Zeus's forehead. George Will, obviously in a cold sweat over the possibility that the ragamuffins in Zuccotti Park might take this to heart, admitted that Warren was obviously right but then sprang for her throat, accusing her of not merely making a case for fair levels of taxation, but of wanting to convert the United States into some kind of Leninist collectivist hellhole. It went downhill from there.

I haven't bothered blogging about any of this before, since Will long ago allowed his sense of nightmarish panic over creeping lefty totalitarianism to destroy whatever decent instincts he used to have. But Dionne's column does give me an excuse to post Warren's video, which I haven't done before. So here you go. This is for my sister, who's not especially political but finds Warren an inspiration nonetheless. Bankers beware.

Hey, waddayaknow. My print piece for the magazine this month, "Five Six Myths About the Economy," is now up on the website. That's handy timing, what with Occupy Wall Street in full swing, isn't it? It's not quite as magisterial as Ezra Klein's take on Obama's economic policy this weekend (which I highly recommend), but it makes up for that with several lovely charts.

The chart below illustrates Myth #3, Lower taxes are the best way to grow the economy. I'm all in favor of low taxes if we can afford them, but in the moderate range that we set tax rates in the United States, their effect on economic growth and productivity is practically nothing. All the hot air in the world from our Republican friends just can't change that basic fact.

Anyway, there are more myths where that came from. Just click the link to bone up on what you need to know before you visit the relatives this Thanksgiving.


I just finished Francis Fukuyama's The Origins of Political Order, so I was curious to see what Thomas Meaney had to say about it in his review in The Nation. But I hardly think this is a fair description of the book:

The Origins opens with a chapter on the social life of chimpanzees, which Fukuyama uses as a guide to the state of nature of humans....To encounter this newfound reverence for sociobiology at the onset of the book is disappointing. When Fukuyama relies on neuroscience or evolutionary biology to explain how political institutions develop, he confuses the answer to a second-order natural question (why do people build political institutions?) with the answer to a first-order normative question (what sort of institutions should people build?). One gets the sense that he is willing to enlist just about any explanation of human behavior to combat the economic-centric historical theories of Locke’s laissez-faire descendants such as Friedrich Hayek and Mancur Olson.

Meaney is viewing Fukuyama's thesis through the lens of a decades-long disagreement over basic philosophical questions, but I think this leads him astray. Fukuyama does indeed ask why people build political institutions and why different people build different ones, but the bulk of the book really isn't especially concerned with the kind of institutions they should build, even if Fukuyama's own preferences are plain. To a reader who comes in largely cold, as I did, the book is far more descriptive than it is prescriptive.

In any case, Fukuyama's basic thesis isn't really all that novel. States, he says, basically exist on a continuum of central authority. If you have a strong central authority unchecked by other actors (local nobility, independent cities, religious leaders, etc.) you end up with despotism. If you have a weak central authority and lots of competing power centers, you end up with a state too feeble to get very much done. Western Europe, he says, largely via accidents of history, ended up somewhere in the middle and prospered.

But how do strong central authorities evolve in the first place? Fukuyama spends a great deal of time talking about kinship structures and the way they interfere with state building (thus the brief foray into primate psychology at the beginning of the book). Loyalty to family and tribe is naturally strong, he argues, and tearing down that loyalty is crucial to building an effective state with adequately strong central authority. This, again, isn't an especially novel observation, but his application of this observation to early Christian history was new to me. "The Catholic church," he writes, "took a strong stand against four practices: marriages between close kin, marriages to the widows of dead relatives (the so-called levirate), the adoption of children, and divorce." All of these are things that help kinship groups keep property within the group, and by systematically cutting them off, and then promoting the voluntary donation of land and property to the church itself, the Catholic church enhanced its own power. Later on, rules like priestly celibacy were designed to prevent kinship groups within the church from interfering with the central power in Rome. All of this strengthened the power of the church at the expense of kinship ties, and while undermining the family may or may not have been a deliberate strategy, that was the end result. Tribal and family connections in Western Europe became (and remain) much weaker than in much of the rest of the world.

Fascinating! I'd be interested in learning whether other scholars agree with this interpretation, but unfortunately Meaney doesn't tell us. Instead we get this about Fukuyama's broad comparisons of the rule of law (a necessary precursor to a non-despotic state) under various historical regimes:

Despite Fukuyama’s assurances to the contrary, these sorts of forced comparisons create the impression that The Origins of Political Order is gamed from the beginning, with the book—and history—reaching its foregone climax in the Western European states that avoided Chinese and Indian excesses.

Well, sure it's gamed. But that's not because Fukuyama isn't playing fair, it's because he knows how history turned out. Like it or not, Western Europe did develop a globe-spanning empire before anyone else, and Fukuyama is quite legitimately interested in trying to figure out why. Maybe his conclusions are right, maybe they're wrong, but he doesn't really have any choice other than to seek answers to the question of how things actually turned out rather than how they might have turned out. It's like complaining that Einstein cheated when he developed General Relativity because he knew the real-world observations he had to explain before he started.

So what is Meaney's real problem? I think he gives himself away here:

Fukuyama curiously glides over the major historical problem in The Origins, which is, quite simply, that liberalism, capitalism and democracy have always been uneasy bedfellows. In its raw form, the principle of democracy—rule by and for the people—sits awkwardly with the defining principle of capitalist organization, which necessitates political arrangements that encourage unequal concentrations of wealth. Democracy has prospered in the West largely because its capitalist economies have redefined what democracy means.

Fukuyama may well be too convinced of the historical superiority of market-based democracy — though this hardly tallies with his supposed allergy toward economic-centric historical theories — but Meaney may be making more of this than he should. That there are tensions inherent in late capitalism is hardly an esoteric observation, and it's just not true that Origins "curiously glides over" the subject. It deliberately glides over it because it's a book about pre-Malthusian state building and halts around 1800. Volume 2 will tackle the past 200 years, which is where you'd expect Fukuyama to take up the interplay of liberalism, capitalism, and democracy in the modern world.

It's inevitable, I think, that any account of something as complex and contingent as state building runs the risk of sounding like a just-so story. But if there's a defect to Origins, it strikes me that it's just the opposite: the book is full of fairly dense historical description and fairly light on overarching theory. And Fukuyama spends several chapters, totaling nearly a hundred pages, describing several European states in a deliberate attempt to illustrate just how fortuitous and chancy successful state building is. So, yes, one of his messages is that the subject is more complex than a simple economic-centric model can account for. But that's a feature, not a bug. After all, if you want to understand why human beings do things, you need to understand human behavior, and in a lot of ways we're all still just hairless apes. So bring it on: primate psychology, tribal loyalties, religion, kinship structures, economic and geographic factors, the interplay of interest groups, and ever so much more. Whether Fukuyama can eventually produce a coherent model of state building from all this remains to be seen. But Volume 1 isn't a bad start.

Robert Samuelson writes today about the "backlash against the rich." It's actually a fairly evenhanded column, but at the end he just can't help himself. The super rich just have to be defended:

The trouble is that the wealthy don’t fit the stereotypes: They aren’t all pampered CEOs, hotshot investment bankers, pop stars and athletes. Many own small and medium-sized companies. Half the wealth of the richest 1 percent consists of stakes in these firms. That’s double their holdings of stocks, bonds and mutual funds, according to figures compiled by economist Edward Wolff of New York University. Reid would pay for Obama’s jobs plan by taxing the people who are supposed to create jobs. Does that make sense?

"Many own small and medium-sized companies." Well, sure, if you're talking about really successful doctors and lawyers, who make up about a quarter of the top one percent. Most of the rest are corporate executives and financial professionals.

"Half the wealth of the richest 1 percent consists of stakes in these firms." Hmmm. I clicked the link to the Edward Wolff paper that Samuelson cites, and Table 6 shows that top earners hold 25% of their wealth in stocks and other securities, and 52% in "unincorporated business equity and other real estate." This is indeed double, but what does that category mean? According to a footnote in Table 5, it's "Net equity in unincorporated farm and nonfarm businesses and closely-held corporations."

Does this mean that 52% of the wealth of top earners consists of stakes in "small and medium sized companies"? I suppose it might, but that's not what Wolff's paper says. It just says that 52% of their wealth consists of stakes in non-public businesses. Those could be Koch-sized megacorporations, private equity funds, legal and medical partnerships, real estate trusts, or a hundred other things. Nothing about them has to be small, and they probably aren't. We're talking about people who earn upwards of a million dollars a year, after all. You don't get that from taking a minority stake in your brother-in-law's auto shop.

More than two-thirds of both the top 1% and the top 0.1% consists of corporate executives, financial professionals, doctors, and lawyers. Small businesses of the traditional variety just aren't a big part of this, and it's time to stop pretending otherwise.

I don't know how many of you have seen this already, but I just scrolled through Josh Harkinson's reporting from the Occupy Wall Street site, and it really gives you a great sense of what things look like there. His own reporting is there, updated continuously, plus loads of links to photos and videos and various related rants around the internet. It's all here, along with links to other MoJo reporting from downtown Manhattan. If you'd like to get a better feel for what's going on and how it's unfolding, take a look. And come back periodically to see the latest updates.

And for the rest of you, who just want the whole thing summarized in one quick chart, here you go:

The Obama administration remains unwilling to release the legal memo that gives them the authority to assassinate U.S. citizens abroad, but apparently they are willing to selectively leak it to the press. As a result, it was "described" to Charlie Savage of the New York Times, who passes along the description to us.

It's hard to know what to do with this, since the administration is obviously eager to leak the parts that it thinks are strong but withhold the parts that might not make it look so good. Still, the overall tenor of the memo is quite clear: it's all about Anwar al-Awlaki being an enemy combatant, allied with al-Qaeda, in a declared war against the United States:

Based on those premises, the Justice Department concluded that Mr. Awlaki was covered by the authorization to use military force against Al Qaeda that Congress enacted shortly after the terrorist attacks of Sept. 11, 2001 — meaning that he was a lawful target in the armed conflict unless some other legal prohibition trumped that authority.

It then considered possible obstacles and rejected each in turn. Among them was an executive order that bans assassinations. That order, the lawyers found, blocked unlawful killings of political leaders outside of war, but not the killing of a lawful target in an armed conflict.

A federal statute that prohibits Americans from murdering other Americans abroad, the lawyers wrote, did not apply either, because it is not “murder” to kill a wartime enemy in compliance with the laws of war.

....Then there was the Bill of Rights: the Fourth Amendment’s guarantee that a “person” cannot be seized by the government unreasonably, and the Fifth Amendment’s guarantee that the government may not deprive a person of life “without due process of law.” The memo concluded that what was reasonable, and the process that was due, was different for Mr. Awlaki than for an ordinary criminal.

As a non-lawyer, I can't say too much about this. But I'll say this much: the war against al-Qaeda simply isn't your grandfather's war, and we really need to face up to this. Of course the military has the right to kill an enemy combatant in a war zone, and in a conventional war this is both obvious and generally easy to adjudicate. But in the war against al-Qaeda? A war with no set geography, no boundaries in time (the AUMF is more than ten years old now), no clear enemy, and no way of deciding if and when it's ever over?

The old rules just don't apply to such a war, and Congress needs to actively decide what rules should apply. This isn't a question of whether you, personally, trust President Barack Obama or President Mitt Romney or any other president. It's a question of whether, in an open-ended conflict authorized in the vaguest possible terms over a decade ago, we should allow any president to unilaterally decide on a case-by-case basis whether an American citizen is an enemy soldier who can be targeted for killing.

Maybe he can. But I'd sure feel better about it if Congress set some rules for this and the court system had some oversight over the president's decisions. Hell, even requests to eavesdrop on U.S. citizens at least have to go through the rubber-stamp FISA court, which has to give its OK based on statutory law. In an open-ended global conflict against a steadily redefined enemy, what possible justification can there be for requiring less of targeted killings outside of obvious battle zones?

David Leonhardt writes today that if we expect the economy to eventually rebound the way it did after the Great Depression of the 1930s, we're sorely mistaken. There's obviously something to this: after World War II, which finally ended the Depression for good, the United States had (a) a huge pool of savings that people were eager to put to use, and (b) a strong potential export economy since the rest of the world had been blown to smithereens. We didn't need to import goods from Japan or China, and we didn't need to import oil from OPEC. We had all we needed right here at home.

Today, even after we crawl out of our current malaise, things will be just the opposite. Our debt overhang will probably be a drag on growth for a long time to come, our trade balance is persistently negative, and the price of oil acts as a significant constraint on economic growth. So some pessimism is warranted. But I'm not so sure about this:

Three giant industries — finance, health care and housing — now include large amounts of unproductive capacity. Housing may have shrunk, but it is still a bigger, more subsidized sector in this country than in many others. Health care is far larger, with the United States spending at least 50 percent more per person on medical care than any other country, without getting vastly better results....The contrast suggests that a significant portion of medical spending is wasted, be it on approaches that do not make people healthier or on insurance-company bureaucracy.

In finance, trading volumes have boomed in recent decades, yet it is unclear how much all the activity has lifted living standards....Wall Street has captured a growing share of the world’s economic pie — thereby increasing inequality — without doing much to expand the pie. It may even have shrunk the pie, given that a new International Monetary Fund analysis found that higher inequality leads to slower economic growth.

The common question with these industries is whether they are using resources that could do more economic good elsewhere. “The health care problem is very similar to the finance problem,” says Lawrence F. Katz, a Harvard economist, “in that incredibly talented people are wasting their talent on something that is essentially a zero-sum game.”

I'd treat these three things separately. Housing is a purely short-term issue. There's really no reason to think that it will act as a permanent drag on the economy. Sometime in the next few years it will return to its trend rate of growth and that will be that.

Healthcare is different. There's unquestionably some waste, both in human and economic terms, and this really is a misallocation of resources. At the same time, the big reason we pay more for healthcare than other countries is simply because we pay doctors more, we pay hospitals more, we pay insurance companies more, and we pay pharmaceutical companies more. I happen to think this is a bad thing, but it's not as if the money falls through a sieve and disappears. It all stays in the economy and gets spent one way or another.

And then there's high finance, which as near as I can tell, really has turned into a huge leech on the economy. If I had to guess, I'd say that upwards of a quarter of all financial activity today is actively damaging to the economy, and reforms like Dodd-Frank will have only the slightest impact on that.

So what's my beef with Leonhardt? Just that I think he's overstating things a little bit? No. My beef is with the bolded sentence above. The problem is that there's very little evidence that housing and healthcare and finance are actively sucking away investment dollars that could be better used elsewhere. Rather, the problem seems to be a drought of good investment opportunities, which leaves lots of money idle and looking for something else to do. The result is the same — lots of money going into unproductive sectors — but the arrow of causality is different. If there were lots of great, high-yield investment opportunities in the real world of consumer goods and services, money would flow there instead of blowing up housing bubbles and enriching a bunch of testosterone-fueled Wall Street traders.

A couple of days ago I argued that our capacity for innovation might be healthier than it's often given credit for. But if there's a strong counterargument, I think this is at the core of it. If we really are innovating at the same pace as in the past, why are the world's investment dollars flowing so heavily into useless crap instead? It might be, as I sort of argued on Friday, that present-day innovations are as great as they've ever been, but simply don't cost very much and don't employ very many people. Maybe. But in any case, the great investment drought of the past decade is, I think, at the core of everything. One way or another, we need to figure out why it happened and why it seems to be persisting.