THE geopolitical story

For the past 65 years, the world has experienced massive economic growth, combined with massive growth in world trade. Most of that trade is in the form of ships crossing the ocean. Therefore, it seems like not too much of a stretch to hypothesize that one of the biggest factors encouraging global economic growth since WW2 has been freedom of the seas. And freedom of the seas has been assured in no small part thanks to the dominance of the United States Navy and its allied navies of Japan and Europe. Pax Americana, in other words, is an enormously important public good, and is primarily a naval phenomenon (though ICBMs also probably help).

Thus, the biggest geopolitical story of the new century may be the rise of the first naval power since WW2 that has both the ability and the will to challenge the U.S. and all of its allied navies at the same time for dominance of a critical sea trade region. Here's a few articles reporting on this story:

Wired:

China’s decades-long military modernization effort is paying off. After assembling a revamped arsenal of new ships, subs, planes, and missiles, the People’s Liberation Army Navy (PLAN) is showing that they can use all those assets together, in an operation far from its shores. This display of improved military capabilities have occurred in conjunction with messages to the U.S. indicating a more aggressive approach from Beijing on China’s claims over disputed waters of the South China Seas...

[Recent Chinese naval] exercises were conducted a few weeks after Deputy Secretary of State James Steinberg and NSC Senior Director for Asia Jeff Bader visited Beijing. As reported by the New York Times, they were told that the South China Sea is a “core interest” for the PRC. This is an important phrase for Beijing – it raises the South China Sea to the same level of significance as Taiwan and Tibet – and suggests a newly aggressive and provocative approach...

China has long claimed that the South China Sea is within its Exclusive Economic Zone (EEZ), and that the UN Convention on the Law of the Sea (UNCLOS) forces foreign militaries to seek permission from Beijing before they can transit through...[But] the United States has long identified EEZs as international waters through which military vessels can freely pass...

By labeling the South China Sea as a “core interest” and conducting these exercises just days later, China has issued its reply: China will aggressively back its claims with a robust military capability.

The other, more implicit, message from Beijing could not be more stark: China’s military is growing more capable, and the PLA Navy is now at the vanguard of China’s military modernization effort. By acquiring advanced military technologies and developing the ability to conduct complex operations far from shore, China is changing military balances throughout the region with implications far beyond a Taiwan-related scenario...

The South China Sea and the adjacent littoral waters off the coasts of Indonesia, Malaysia, and Singapore will be the most strategically significant waterways of the 21^st century. Already, 80 percent of China’s oil imports flow through the Strait of Malacca, and Japan and Korea are similarly dependent on access to those waters...

China’s claims of sovereignty over the South China Sea, if left unchallenged, would make Beijing the arbiter of all international maritime traffic that passes through, which the U.S. cannot allow.

The Australian:

US officials have warned that Chinese naval expansion is happening much more rapidly than had been expected, with plans for new nuclear submarines and aircraft carriers giving Beijing the power to extend its military might far from its shores...

A new report by the Australian Strategic Policy Institute think tank warned yesterday that China's military expansion was designed to end the US Navy's domination in the region...

The Vancouver Sun:

Tokyo’s shock, horror and alarm at the sighting a few days ago of a flotilla of 10 Chinese warships off Japan’s southern Okinawa island is undoubtedly contrived.

It has been evident for the past two decades as it invested huge amounts of money, time and effort into military modernization that Beijing intends to be able to project military power that supports its growing economic and diplomatic supremacy.

Just a few days before the latest encounter, a helicopter from a Chinese warship “buzzed” a Japanese naval vessel that was keeping watch on the exercises.

And in the past few years there have been other incidents with an increasingly far-roaming and competent Chinese navy.

Last year a Chinese submarine collided with the sonar gear being trailed by the American ship USS John S. McCain near the Philippines.

In 2006 an undetected Chinese submarine surfaced within firing range of the aircraft carrier USS Kitty Hawk.

Indeed, the joint exercise 10 days ago off Japan involving two Chinese Kilo-class nuclear-powered submarines and eight surface warships, including two missile-armed destroyers and three frigates, is a harbinger of shocks yet to come...

Despite its efforts at obfuscation, Beijing’s evident determination to build and operate a navy capable of projecting power throughout Asia has worried China’s neighbours.

It has prompted an arms race in Asia, especially with the acquisition by China’s neighbours of submarines, which because of their stealth and multiple weapons systems offer great deterrent value.

India, which sees itself as Beijing’s main regional rival, is pursuing a massive naval expansion and modernization program designed to keep ahead of China.

Australia is doubling its submarine fleet to 12. Malaysia, Vietnam, Pakistan, Bangladesh, Singapore, Indonesia and South Korea are all in the process of acquiring or expanding their submarine fleets.

Without any apparent appreciation of the irony, Chinese military officers and associated academics have been warning at regional defence conferences in recent weeks that this arms race, especially the widespread acquisition of submarines, is inherently destabilizing in Asia...

Beijing’s claimed “maritime interests” include disputes with Vietnam, the Philippines, Malaysia, Taiwan and Indonesia over the ownership of islands and submarine resources in the South China Sea[.]

The Sri Lanka Guardian:

Since the beginning of last year, the Chinese Navy, which no longer makes a secret of its aspiration of becoming a Pacific naval power on par with the US, has been adopting a dual strategy...

Its assertiveness in the South and East China Seas is marked by repeated reiteration of its territorial claims in the area and its determination to protect its rights to fisheries, minerals, and oil and gas in the areas claimed by it. It is also marked by the expression of its readiness to use its Navy to protect its rights...

Simultaneously with its increasing assertiveness in the South China Sea, the Chinese have also stepped up their assertiveness in the East China Sea where their claims and interests clash with those of Japan...

Instead of being defensive and low-profile about the presence and assertiveness of the Chinese Navy in the South and East China Seas, the Government/Party controlled Chinese media have been openly asserting China’s readiness to protect its traditional rights and defend its territorial claims in the area through its modernized Navy. They project the increasing assertiveness as a message that a modern and powerful Chinese Navy has arrived on the Pacific scene as a force to be reckoned with...

The Chinese Navy is there to stay and grow and assert China’s claims and rights. That is the message loud and clear.

CNS News:

China’s Global Times, a state-run paper linked to the Communist Party mouthpiece People’s Daily, published an editorial Tuesday responding to the “fuss” in Japan and taking issue with those who see the PLAN as a threat.

“A stronger navy is a result of China's growing economic strength and ongoing modernization of its military power,” it said. “It is a strategic requirement of a big power, which must defend its interests to the best of its ability.”

The editorial conceded that the transformation of the Chinese navy would naturally bring changes to a regional “strategic pattern” that has lasted for five decades.

“But the transformation is positive. China does not hold an intention to challenge the U.S. in the central Pacific or engage in a military clash with Japan in close waters, though it is willing to protect its core interests at any cost.”

The editorial went on to declare that “the time when dominant powers enjoyed unshared ‘spheres of influence’ around the world is over.”

Call me a Mahanian, but it seems to me that when the naval balance of power changes, the geopolitical equilibrium undergoes a rapid breakdown. That balance of power has held at least since the Battle of Leyte Gulf, when the U.S. defeated the last major contender for naval supremacy. And it has been surprisingly robust; all the al Qaeda goons on the planet pose essentially no threat to Pax Americana and the explosion of globalization and wealth it has brought. But China's growing naval power, coupled with its desire to challenge the U.S.-led order, will make Pax Americana history in perhaps two decades.

That will be...an interesting day.

To explore strange new worlds...is expensive.

When I was a kid, I was a big supporter of manned space exploration. New frontier! Push the boundaries of the human race! Escape this limited little planet! Onward and upward! Give humans some bigger future to hope for, etc. etc....

But now I read articles like this one and find myself nodding:

Consider the enormity of an effort to send astronauts to Mars. When Mars is closest to Earth, the distance is still about 200 times that between Earth and the moon, which means it would take several months to reach Mars. The amount of food, water, oxygen and other basic supplies necessary for such a journey would require a far larger spacecraft than anything built yet. And it's by no means certain that humans could survive the trip.

The astronauts would be exposed to cosmic radiation and other dangers when in outer space or in the Mars environment for two years...

And the physical issues are enormous. Even with vigorous daily exercise, will an astronaut be able to walk on Earth after two years under no gravity? Will the astronaut's digestive system operate properly? What of the heart and other organs? What if there is a medical emergency? Finally, upon arriving on Mars, astronauts would find blood-freezing temperatures (more than 100 degrees below zero Fahrenheit at night, even at the equator) and a suffocating atmosphere of carbon dioxide and no air.

And the logistics are overwhelming, from the massive solar arrays that would be necessary to provide constant electric power to the challenges of resupply and refueling.

The difficulties of manned missions to Mars are only part of a larger truth: manned space exploration is now too expensive to justify economically. Orbital travel will be viable as tourism, but missions to the other planets - whether for science, or for some commercial venture like mining - can be done almost as well by robots, at a tiny fraction of the cost in money and lives.

But let's consider the question: what would justify putting humans all over the Solar System? As I see it, it would be worth going if we could live there indefinitely in large numbers. Assuming we don't break Einstein's laws, and are thus stuck in this Solar System, being able to live offworld would require either:

A) the ability to terraform other worlds, or

B) the ability to adapt humans to be able to live indefinitely in zero-G.

(A) is going to take amazing new energy sources (i.e. fusion); for that matter, building the fast, reliable, safe spaceships to ferry us quickly back and forth between our newly terraformed colonies would take awesome energy too. I'm not talking about total energy (which, with solar power, is unlimited), I'm talking about energy density, i.e. the energy a spaceship can carry on it. The best thing we have right now is fission, which, even if we made it safe (by using thorium), involves taking a very limited resource from an overpopulated and energy-hungry planet. Until we get fusion or its equivalent, factories in China and farmers in the Midwest are going to be able to outbid space exploration a thousand times over.






(B) is an interesting possibility, since all it takes is really spiffy biotech. If we could design humans to live in zero-G, we could conquer space with only slightly better technology (mostly radiation shielding) than we have now. Of course, those humans wouldn't be quite the same as the rest of us, so it's not clear if people would support creating a race of spacemen if that left the rest of us stuck in this gravity well. But it's certainly a thought.

If we don't get at least one of those technologies, manned space exploration will have to wait until Earth is no longer resource-constrained - until the human race either improves its efficiency dramatically or decreases in number significantly, or both.

In the meantime, we should remember that explorers didn't cross the Atlantic in oared galleys. They waited until they had lateen sails, compartmentalized hulls, compasses, astrolabes, etc. You and I may not live to see the golden age of manned space exploration. We'll have to comfort ourselves with the thought that it will come...someday.

Yglesias on utopia

Yglesias:

[I]f you look at how life in the developed countries has changed from 1930 to 2010 what you see is that people spend more and more time in school, more and more time retired, and more and more time on vacation. In other words, people are step-by-step liberating themselves not from market capitalism as a means of obtaining consumer goods but from wage slavery in the worker-capitalism relationship...

[I]t’s more possible than ever for people’s non-commercial labors to have a meaningful impact on the world. I think open source software is very exciting. I think amateur mashups are very exciting. I think digital distribution of albums recorded on the cheap by people playing music for fun while holding down day jobs is exciting. I think fan fiction is exciting. I think people who work at universities and other non-profits writing blogs to inform and entertain is exciting. I think people diligently recording the progress of their neighborhood and organizing for a better city is exciting. Wikipedia is, of course, indispensable these days and Wikileaks has done a tremendous job of making a difference...

Meanwhile, of course, for many people around the world the big story of life in 2010 isn’t the promise of transcending capitalism but the promise of adopting it and thereby escaping what Marx called “the idiocy of rural life.”...what’s happening in China today looks, from a number of points of view, an awful lot like the original dawning of the industrial revolution in northwestern Europe and that, in and of itself, is an enormous progressive change compared to what was happening before.

So that’s the agenda I have to offer. For rich countries—productivity growth, social insurance, and efforts to improve public health all aiming at allowing people to live more and more of their time outside the bonds of commercial work. For poor countries—capitalism, to get the process of prosperity and social betterment rolling.

This is a brilliant and far-sighted post. In talking about the limits of pure market capitalism, I often talk about public goods (i.e. why we need a government in addition to private companies). But Yglesias has hit on something much deeper - the existence of incomplete markets. It's just not possible to buy everything. Human nature has a great many needs that cannot be satisfied by proxy, and so cannot be traded for. Among these are: a sense of self-worth, a sense of accomplishment, a feeling of individuality, true friendship, a feeling of being at ease in social situations, the excitement of discovering new ideas, and a feeling of hope for a better future.

Oh yeah, and love.

Of course, money helps a lot with getting these things. It's hard to pursue self-actualization while trapped in poverty; you need leisure, you need mobility, you need communications, and you need a lot of other things that money can buy. Which is why capitalism, which provides us all with money, is absolutely essential to human progress. Socialism is a failure because socialism kills the goose; by restricting the economic activity that makes us rich, socialism also denies us the opportunity to go beyond material happiness.

In fact, as capitalism progresses (i.e. as productivity improves), we'll have so much material stuff that we'll just give tons of it away, and spend most of our effort going after the stuff we can't buy with money. The dream of the socialists - material equality - will one day be realized, but via a path quite the opposite of what many of them envisioned (although I'm sure that some early socialists realized the possibility of what I'm talking about). That won't be utopia, of course - there will always be "rich in love, poor in love" - but it will be better than the materially stratified societies of yore.

I suppose the central point here is: the question of "capitalism vs. socialism" has been settled in favor of the former. But that does not mean that material wealth should be the one and only goal of our society. It's only the first step.

Immigration: THE most important issue

As Congress struggles to pass a financial reform bill, I think we should start looking past finance to a far, far more important issue: immigration reform.

Much has been made of America's short-term decline relative to other countries. But in the long run, America's future looks much brighter than China's or anyone else's, for one simple reason: immigration. Our ability to draw in and assimilate the world's population is a strength no other country on this planet (except Canada and Australia) possesses. In addition to keeping our population eternally young (while other countries struggle with aging societies and overburdened pensions), we get to skim off the cream of the crop - the most entrepreneurial, the smartest, the hardest-working. Immigration is America's ultimate trump card.

There are two big problems with our immigration system. the first is that, for reasons entirely unknown, we have made it much harded for super-talented people to work here. Increasing numbers of international grad students are going home. That means that we pay foreign people to get a world-class education, and they walk away and go apply their skills in other countries.

Why in Yahweh's name are we doing this public service for China and India when we could put those people to work inventing technologies and starting companies that give the rest of us Americans jobs? Massively increasing the number of H1-B visas is only the start; we must expand our green card quota and bias the system toward people who have studied here. In fact, we should give every single foreign grad student a green card upon completion of their studies.

The second immigration problem is, of course, illegals. Not that they are here, but that they are illegal. This means that they don't assimilate fast, and faster assimilation is better. If illegals have to be afraid of getting deported, they won't put their kids in public schools, they won't get jobs at companies where English is the first language, and they won't meet (and marry) a lot of people who speak English as their first language. In other words, they will stay foreigners forever, and only their native-born children will become true Americans.

We cannot afford this permanent-foreigner underclass. Not if we don't want to become France. So when reactionary anti-immigrant jerks make laws like the one just passed in Arizona, it hurts all of America. The only thing that can stop states from cracking down on illegals is a federal amnesty, like the one Reagan passed in 1986.

The constituency for immigration reform - basically, everyone except the hysterical nativists - is diffuse and disunited. This presents a formidable barrier to taking any kind of collective political action. But, however slowly, the word must spread - immigration reform is THE policy we need to pull our nation out of the (temporary) decline in which we currently find ourselves.

Welcome to Noahpinion

This is an intro for people who are new to Noahpinion, to get you up to speed. Welcome, traveler!

Q: What is NoahOpinion?
A: I have no idea what that is, but people often seem to confuse it with the name of this blog. I think it's a Danish pop band or something. My blog's name is a pun on "No opinion". See?

Q: Who writes the blog?
A: My name is Noah Smith, I'm an assistant finance professor at Stony Brook University in New York.

Q: What is the blog about?
A: It's generally about economics, but also includes stuff about finance, politics, culture, political philosophy, philosophy of science, and whatever else I feel like writing about on any given day. Mostly economics, though.

Q: How did you get started blogging?
A: I was a PhD student in economics at the University of Michigan. I had thought I would be a macroeconomist, but despite liking my macroeconomist advisor (the great Miles Kimball) a lot, I just got too annoyed at the way macroeconomics is done. So I sort of "rage-quit" the field, and while I was looking for something else to do, I decided to start a blog and vent some of the things I had been thinking. This started out as me basically criticizing anything I read on the internet that seemed wrong, but eventually turned into me explaining why I had quit macro and why I didn't like macro as a field. Eventually I discovered behavioral finance, liked it a lot more, and got a job doing that, so my blog became less angry, and my topics broadened in scope.

Q: What are you known for in the blogosphere?
A: In the early days, I just went around criticizing everything I disagreed with, so I became known for writing "smackdowns", taking on such eminent figures as George Will and Niall Ferguson. I also wrote about my experience in econ grad school, and what I learned there.

I also got involved in a number of the arguments that periodically roil the econ blogosphere, particularly with regards to macroeconomic issues. I began to take an interest in chronicling these debates.

Later, I started using my knowledge of macro to try to explain macro ideas to outsiders. I also started to criticize macro itself, especially DSGE models and the ideas of the people called "Freshwater macro" people.

I also started trying to write about the experience of the econ PhD - why it's a good career path, how to get into a PhD program, how blogging might affect your career, and what it's like to look for a job as an economist.

In addition, I've written a lot about Japan, where I lived for about 3 years. Usually this is about the Japanese economy, sometimes about other stuff.

I occasionally write a post that people find funny (for reasons I don' always understand), and these have proven to be my most popular posts. There was the time I categorized my comment trolls into a bestiary, or the time I defined the internet slang word "derp" in terms of Bayesian probability theory.

Since I became a finance professor, I've tried to write a little more about finance, and I expect to do more of that in the future.

Finally, I often write about pretty random stuff, like what it's like to be clinically depressed, or why I think our society should have more equality of respect, or what science fiction novels economists might like to read.

Q: Do you write anything else besides the blog?
A: I occasionally write articles for The Atlantic, Quartz (often with Miles Kimball), and The Week, and once in a while I have articles in other publications like Foreign Affairs. These articles are often about economics or public policy, but sometimes about different stuff altogether. I also am on Twitter.

Q: Why "No opinion"?
A: Because I am generally pretty skeptical about stuff.

Q: But I don't get why it's a double entendre. What would "Noah pinion" mean? Pinioning Noah? I don't get it.
A: I'll explain when you're older.

Q: What makes you think you know so much about [insert topic here]?
A: If you really think I don't know about [insert topic here], then you're unlikely to think I have a good reason for thinking I know about [insert topic here], so I'm assuming your question is rhetorical.

Q: What is your commenting policy?
A: "Comment at your own risk!"

Q: Why is this post dated April 23, 2010, when it was obviously written long after that?
A: I find that life is more fun when some things are left as mysteries.

Q: Hi, Mr. Smith. My name is XX XXXX, and I work for XXXXX. We're putting together a list of promising young finance bloggers. Would you be interested in contributing to --
A: Stop right there. Now put down whatever you're doing and go jump in the nearest pool. Thank you. Next question?

Q: What other blogs do you recommend?
A: See here.

Q: Who would win in a fight between monkeys in robot suits, and robots in monkey suits, and why?
A: Monkeys. Because monkey rage.