Taking Sides: Head In Sand vs. Deer In Headlights

[koganbot]

Paul Krugman can't make up his mind ("EMU Gets Ostrichized"):

Or maybe head in the sand isn't the right metaphor — maybe it's deer in the headlights, with policy makers paralyzed as it all goes wrong. Anyway, I'm with Tim Duy: I'm losing confidence in European leaders, which is hard because I had hardly any confidence to start with.

And if you click Krugman's Tim Duy link, you get Duy saying:

The devastating train that is the debt crisis keeps rolling right along, currently crashing through Spain's economy.

— which of course is an allusion to the venerable Slow-Motion Train Wreck.

But fortunately I'm not running into Kicking The Can Down The Road this time, not where I'm looking; that was always a problematic metaphor anyway. Not that it's never apt, but the tendency is for it to be appropriated by Fake Adults who look and feel mature when they're ignorantly demanding that we need to ward off inflation NOW, and solve debt problems by immediately cutting spending, etc.

Btw, since Krugman's and Duy's posts, Mario Draghi of the ECB said the board would do "whatever it takes" to save the euro, which some investors interpreted as a hinted promise to buy Spanish bonds. Rates on the ten-year bond went down nearly a point in two days to 6.744, which still isn't very good. In the past you could argue (or someone who knows more than I do could argue) that simply saying you'll buy bonds if necessary will do the trick: rates will fall and the board won't actually have to buy any. But I'd think at this point, for the board to seem credible, investors are going to want to see it actually making purchases.

Comments

[dubdobdee.livejournal.com]

I think all of these cliches are pretty terrible: precisely because they do the wrong thing -- they switch attention away to a situation we feel we do understand, when what we need to achieve is a visceral grasp of the actual concrete problem, not some switch-hit allegory.

Head and deer both imply a unitary agent of decision: but -- and this is generally the case in the ecnomics -- this exactly isn't the case: whatever's going on is the consequence of an aggregate of many minds and decisions (sometimes caught up in the fever of a shared ideology or idee fixe) essentially unable to know or trust how others are going to decide (investors and bankers who recognise the nature of idee fixe can make money betting against its demise etc).

Train-wreck fits this best: except of course a slow-motion crash is an unproblematic shunt. (You can't handwave the speed of time as an irrelevant variable in economics ; it makes a huge difference... which is essentially what the pro-kicking-the-can people are aware of... that if they can defer the culmination, which means slow the process, then the issue may actually simply go away thanks to other economic developments) (this is the basis of the philosophy of all borrowing: nearly everyone would go instantly broke if all debts were called in today...)

i have been kicking the can of painting my bedroom ceiling down the road: till i've finished my coffee...

[koganbot]

Kicking the paint can or the coffee can?

[koganbot]

By not-quite coincidence I've been mulling over the part-whole conundrum for the last few days in relation to both language and economics. Will probably give it its own post; it's a reaction to this post and thread at Noahpinion (should be about when microfoundations are possible or useful, but doesn't seem to get there):

http://noahpinionblog.blogspot.de/2012/07/microfoundations-would-be-nice-if-we.html

[koganbot]

So the question is how much is the aggregate just an aggregate and how much is it some sort of whole that can't be reduced to its parts. "Head in sand" applies to some players but not all players, but for the decisions that require substantial unanimity, a small number of players being blind can paralyze the whole. So "deer in headlights" can work better than "head in sand" for the whole.

"Slow-motion" isn't the problem for me that it is for you, since I'm thinking of an analogy to humans seeing things in slow motion (even so slow that we have trouble seeing the motion) in relation to, e.g., geologic time, climate-change time, and so forth, including, here, economic time. But "train wreck" is confusing anyway, because two or three separate ideas are at work: (1) Unnecessary damage is being done now, and the longer we let it accumulate the longer it will take to recover (and some things may never be recovered), this in regard not just to people's lives (unemployment) but to a country's being able to get the income to pay down its debts (Krugman and crew believing that austerity in this situation creates just the opposite: falling revenue from austerity far outpaces the rise in savings from spending cuts). (2) This ongoing damage potentially takes us beyond a point of no return where neither a significant number of banks/investors nor a significant number of sovereign treasuries can avoid collapse. (3) Leading to an actual, rather rapid, economic crash, and soon after a break-up, of the eurozone (over months rather than years, probably). So, on the one hand the metaphor gives us an ongoing crash (actual damage that hurts the trains and makes them unsteerable), but on the other it gives us a future crash — kaboom! — that's on its way. I suppose Roubini could say that we've already got metal on metal, we're just watching it through slow human eyes. But others (and maybe Roubini too) think a kaboom! probably is still at least hypothetically avoidable, which is what makes the deer in headlight problem so vexing. (Were the deer already hit, its cognitive process would be of no matter.)

As for the possible use of "deer in headlight," think of one part of the brain (the IMF, for instance) having both a clear idea of what's coming and why, and what should be done, but this part of the brain has no idea how to work the muscles of government, and meanwhile other parts of the brain are busy rationalizing away the info that IMF is receiving and trying to communicate, choosing the info that's easiest on the very short-term political and bureaucratic muscles.

Assuming — what may not be true — that Draghi* at the ECB knows what he's doing when it comes to the macroeconomics (not that I would know what to do, since I'm not an economist), his political muscles may be good for surviving as a bureaucrat and cajoling Germany into better stances and less obstructionism. But what if what's required is to force Germany to take steps it doesn't believe it should take? This may require a whole different kind of politics. IMF is going beyond diplomacy into blunt talk, and commentators (well, at least one or two the New York Times has talked to) worry that this will backfire and cause Germany to harden its stance. (More metaphor problem "Harden a stance"? Dig in?) But has not being blunt worked up to now? That's not a rhetorical question; maybe a lot more has been accomplished through subtlety and care than would have been otherwise. I don't know the situation well enough to know. Being blunt — not to mention pointed — suits my temperament, but that doesn't mean it's the best course. (Course? Strategy? How are clubs and spears a course? I suppose they can be used strategically.)

*Draghi believes, probably correctly, that monetary steps won't be sufficient even if they all were allowed. But he's been using this belief as an excuse to do little or nothing. (At least, that was DeLong's take at one point.)

Have You Seen Your Catchphrase, Baby, Standing In The Shadows?

[koganbot]

Associated Press acting self-conscious regarding a figure of speech:

Syria resurrects 'mother of all' catchphrase

(But note that Ben Franklin's "A full belly is the mother of all evil" makes use of the meaning of "mother" — as a progenitor, similar to "Necessity is the mother of invention" — whereas "the mother of all battles," "the mother of all bailouts," "the mother of all liability claims," etc. completely lack the idea of something giving birth to or causing something else. Rather they seem to be claiming, "This is uniquely big," or some such.)

Krugman: Here Be Draghi

[koganbot]

Beyond the "do whatever it takes" sentence [cue photo of Malcolm X with automatic weapon], Draghi said:

Then there's another dimension to this that has to do with the premia that are being charged on sovereign states borrowings. These premia have to do, as I said, with default, with liquidity, but they also have to do more and more with convertibility, with the risk of convertibility. Now to the extent that these premia do not have to do with factors inherent to my counterparty — they come into our mandate. They come within our remit.

To the extent that the size of these sovereign premia hampers the functioning of the monetary policy transmission channel, they come within our mandate.

This statement has the merit of not being understood by me. It does seem to be saying "Interest rates on bonds are within our mandate/remit" — assuming my guess as to what "premia" means is correct, and assuming "within our remit" actually implies some action (rather than no action).

If you get the chance, you should read the linked Draghi excerpt (about a page's worth). As Krugman says, it's "considerably stranger than you'd gather from the coverage."