I know that this will astonish you but I want to recommend Fareed Zakaria’s most recent column. It’s about the decline of new business formation in the United States and the complex interrelationships among government policy, technology, and business activity. It might be summed up by Peter Thiel’s wisecrack: “We wanted flying cars. We got 140 characters.”

The article is not without flaws. For example, in one section he sings the praises of government-funded basic research and then does a pratfall by citing something that isn’t basic research as an example:

And then there was government funding for research, which is sometimes thought of simply as large grants to universities for basic science but often was far more ingenious. My favorite example comes from Walter Isaacson’s fascinating new book, “The Innovators.” In the 1950s, the U.S. government funded a massive project at MIT’s Lincoln Laboratory, employing equal numbers of psychologists and engineers who worked together to find ways “that humans could interact more intuitively with computers and information could be presented with a friendlier interface.” Isaacson traces how this project led directly to the user-friendly computer screens of today as well as ARPANET, the precursor of the Internet.

This is what comes of having people who know little of business, science, or engineering write about business, science, or engineering. A handy rule of thumb is that if it has practical application it’s not basic research.

I have an amusing story about this. When I was in grad school I had a friend, a mathematician, whose area of study was a particularly abstract area of topology. One day I saw my friend who was looking particularly down at the mouth. “Pete”, I said, “what’s wrong?” He turned to me and replied “Somebody found a practical application for my work.”

But stick with him. He’s on a roll.

I just read something to the effect that the dream of owning your own home with a white picket fence is gone. It sure is. Around here it’s at least a seven foot stockade fence. I’ve never seen anyone tear down a stockade fence to install a white picket fence but I’ve seen the reverse plenty of times.

IMO that tells you a lot about life in the United States today.

Repeat after me: Keynes never said or wrote that all government spending was stimulus. It might be or it might not be depending on circumstances.

That’s what made me sputter in this New York Times article:

NAPLES, Fla. — For a long stretch, government spending cutbacks at all levels were a substantial drag on economic growth. Now, finally, relief is in sight.

For the first time since 2011, local, state and federal governments are providing a small but significant increase to prosperity.

“There’s not a lot of positive contribution coming from the government sector, but when you’re talking about economic growth, less of a negative is a positive,” said Chris Varvares, senior managing director and co-founder of Macroeconomic Advisers.

Again, it depends on the circumstances. State and local governments are generally required by law to have balanced budgets. That means that spending at that level is generally redistributive. You tax some people and give the proceeds to others. In some cases that might stimulate the economy but I think it’s more likely that it will be neutral or even counter-productive.

I wish that people who should know better would stop promoting the myth that government spending always provides stimulus to the economy. The reality is that it can provide stimulus, it can be neutral, or it can impede economic activity. It can also shift economic activity in time, from the future to the present which, depending on the conditions that prevail in that future, may be beneficial or harmful. The specifics matter. The devil is in the details.

Every year at the turn of the year I used to make a series of predictions here at The Glittering Eye. Last year I gave up the practice. It’s not that my track record wasn’t good; more than 85% of what I predicted in any given year actually game to pass. It was that what I predicted was inconsequential. Like everybody else I never predicted the really important events that would happen in any given year.

That still leaves what feels to me like a gaping hole. I don’t make New Year’s resolutions so that doesn’t satisfy the requirement.

Instead I’ll express a series of hopes for the coming year. Not dreams but things that have some remote possibility of actually happening and I’ll ask you do to the same.

Sam Clemens once said “Always do right. This will gratify some people and astonish the rest.” I hope that the members of Congress will do the right thing and return to the practice of review, deliberation, and compromise that has been so rare lately so that they can get on with the business of the country. I’m not sure whether that would gratify me or astonish me. Probably some of both but it’s sorely needed. The implicit assumptions of not acting at all are that the status quo is the best that can reasonably be accomplished and that nothing ever changes. That is so manifestly not true when it comes to legislation it’s a wonder to me that anyone could believe it.

The most important bilateral relationship in the world today is between the U. S. and Russia and that relationship is too hostile now. I hope that American and NATO officials come to the realization that Russia has legitimate interests and can no more be expected to abandon those interests than we would. The Ukraine is a vital interest for Russia and only an interest for the U. S. in abstract terms. Russia cannot tolerate an openly hostile regime in the Ukraine any more than we would accept an openly hostile one in Mexico or Cuba.

I hope that the relationship between police officers and public officials in the U. S. becomes no more strained than it is now and, indeed, that tensions begin to ease. There are some legitimate, practical problems and some psychological ones. We should distinguish between them and take the appropriate measures to deal with each on its own terms.

2014 was the deadliest year in Iraq since 2007. I hope that officials in the United States come to the realization that, while there’s a literal not figurative battle being waged over the soul of Islam, it’s a war for Muslims to fight and we have no productive role in it other than from the sidelines. Our emphasis should be on mitigating risk rather than attempting to dictate the outcome.

I hope that our elected officials turn their concerns to correcting the deficiencies of the PPACA rather than trying to tear it down on the one hand or casting it in bronze on the other. I’m afraid that’s more of a dream than a hope.

The Ebola epidemic is still raging in West Africa. I hope that we come to the realization that just because something isn’t on the nightly news doesn’t mean it’s not happening or that it can’t affect us. The number of deaths and the number of new cases (which means the number of future deaths) continue to rise. The longer the epidemic continues the more likely it is to become endemic which would be a tragedy.

Personally, I hope that my own good fortune continues and I wish happiness, health, prosperity, and peace of mind to all of my readers in the coming year.

Please contribute your own hopes for the new year in comments. You’ve got to accentuate the positive, eliminate the negative.

Okay. Right off the top of your head pick the single worst policy idea of 2014. I’d bet a shiny new dime it isn’t on this list from WP’s Wonkblog.

There are so many candidates it’s hard to choose. Cozying up to the government of Ukraine has got to be up there. Increasing our troop strength in Iraq has got to be another.

The problem must be me. I think that policies that increase the amount of death and destruction are pretty good candidates for “worst”. I must have the wrong priorities.

I was intrigued when I saw this article on a city that had eliminated poverty. I was disappointed when I saw that the city was Dauphin, Manitoba.

Conspicuously absent from the article was any discussion of the demographics of Dauphin. Fortunately, Wikipedia provides a ballpark figure. Dauphin is about 80% white and most of the remaining 20% are aboriginals, or as we south of the border would put it, Native Americans.

The only speculation I would make about this is something I’ve mentioned here from time to time: it’s a lot easier to muster political support for something when the population is extremely homogeneous. Or even homogenous. You know, like milk.

What I’d like to see is a city in New York that had eliminated poverty. Or Illinois.

I’m going to confess that I did not read Eugene Robinson’s column this morning so I don’t actually know what it’s about. I suspected that I could tell as much as I needed to about it from its caption, “Economic Facts Get in the Way”.

Whether you have a job or not is an economic fact. Whether you can or do pay your bills or not is an economic fact. The size of your paycheck is an economic fact.

Reports from the CBO or BEA are mostly not facts. That they wrote and published them are facts but not what they contain. With the exception of economic tautologies they are predominantly interpretations or opinions of facts.

GDP is a construct, an abstraction, not a fact. The same is true of the unemployment rate, the rate of new business formation, or the rate of inflation. When the price of gas at your local station plummets from $4.00 to $2.00, that’s a fact. Whether that means there’s a change in the rate of inflation or not is an opinion. It may be variously informed but it’s still an opinion

If it’s something you can see, hear, smell, taste, or feel or something that hits you in the pocketbook, it’s a fact. Nearly everything else is an opinion and that goes double for the stuff you read in the CBO’s or BEA’s reports.

What seems to bother Jason Delisle about the explosion in educational debt is the possibility that borrowers might defer repaying their debts or default on them entirely:

It is time to re-evaluate how we measure the performance of student-loan programs—particularly whether borrowers are or are not meeting their obligations. The traditional measures of nonrepayment—delinquencies and defaults—might be fine for most types of loans, but not for outstanding student loans, nearly all of which are held or backed by the federal government. Lawmakers have provided students with options that let them punt on repayment without triggering delinquency or default. Lately, students have been availing themselves of those options at rising levels.

The forbearance benefit, for example, lets borrowers postpone payments for up to three years. By law, loan-servicing companies have a lot of discretion to grant forbearances, and getting one usually takes only a phone call on the part of the borrower. Some borrowers might have to complete a simple form and meet a payment-to-income test. But overall it is the easiest and fastest way for a borrower to suspend student-loan payments.

rather than that it is “crippling students, parents, and the economy”:

It’s a negative sum game for both student-borrowers and the economy. According to the Consumer Financial Protection Bureau, student loan debt has reached a new milestone, crossing the $1.2 trillion mark — $1 trillion of that in federal student loan debt.

This pushes student loan debts to dizzying new heights, as they now account for the second highest form of consumer debt behind mortgages. With the federal debt at $16.7 trillion, student loan debts measure at 6% of the overall national debt. This is no small figure, and national debt carries many consequences including slowing economic growth (translating into fewer jobs being created) and rising interest rates. Capital will not be as easy to access.

My own view is that student debt is a colossal waste of resources, predicated on an error that has been made by three consecutive presidential administrations—that college degrees will result in better jobs. It’s cargo cult thinking: because people with college degrees have jobs that pay more you’ll get paid more if you have a college degree. It’s not the college degree. It’s the jobs. If burger flippers at McDonalds all have college degrees, they’ll still be paid minimum wage. They’ll just have debts they will never be able to pay off which means they’ll consume less and there will be less economic activity than there otherwise might be which will make us all poorer.

However, let’s play along. Imagine that we really do want, say, 60% of Americans to have college degrees. Leave alone that a supermajority of kids who enter college aren’t ready to do college level work (many never will be). We’ll just assume it away.

From a societal standpoint what’s the most efficient way to pay for it? I think it’s obvious that what’s needed is a very much less expensive college degree, presumably by putting some or all of the process online.

And even if you insist on continuing the absurd method we have of financing college educations, more of a persistent subsidy to colleges than a practical way of financing an education, how can financing art history or communications majors be considered anything but an unacceptable risk? When you apply for a business loan or a home loan what you’re financing has at least some bearing on whether you get it. That future creditworthiness has no apparent bearing on whether a loan is issued is a clear sign that the scam is on. Is Mr. Delisle upset that the scam is being detected?

This morning the editors of the Wall Street Journal have enunciated a sweeping critique of the president’s and, indeed, all progressives’ approach to U. S. foreign policy. In contradiction of my longstanding policy I will quote the editorial in its entirety at the bottom of this post.

My own views on the best approach to U. S. foreign policy could hardly be more different from those of the editors of the Wall Street Journal but they’re also far removed from those of the Obama Administration. One need hardly point to the errors of the preceding Bush Administration but I find those of the Obama Administration objectionable as well. Although it isn’t frontpage news, the situation in Libya continues to deteriorate and the president’s foreign policy is responsible for that. Despite the Obama Administration’s proclamation of the war in Afghanistan as over (and successful!) U. S. casualties there continue the number of civilian deaths has never been higher.

I won’t belabor the point.

I believe that our foreign policy should be predicated on three principles:

1. Our national interests and security should be considered much more narrowly. If we cannot muster the political will to achieve the objectives we are purportedly setting out to accomplish, they are not national or security interests.
2. Other countries have national and security interests which they will not negotiate away and cannot be deterred from. We only have two alternatives in dealing with those. We can either accept them or use force.
3. The use of force should always be a last, unavoidable alternative. It should never be just another tool in the diplomatic arsenal or, worse, a first resort.

In conclusion, I would appreciate your reactions to the WSJ editorial which I reproduce below:
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