Webdiary - Founded and Inspired by Margo Kingston

From the end of February 2007, Webdiary will no longer be publishing articles sourced from Project Syndicate, including those from J Bradford DeLong. Subsequent articles in Professor DeLong's Anatomy of the Global Economy series can be accessed via the Project Syndicate site here.

A number of thoughtful observers have expressed puzzlement in recent months about financial markets’ perceptions of risk. While markets have judged today’s world  – especially the dollar and securities linked to it – to have low risk when viewed in historical perspective, geopolitical risks in fact appear to be large.

How much should we worry about inequality? Answering that question requires that we first answer another question: "Compared to what?" What is the alternative against which to judge the degree of inequality that we see?

"What do we owe to our great-great-great-grandchildren? What actions are we obligated to take now in order to diminish the risks to our descendants and our planet from the increasing likelihood of global warming and climate change? Almost everyone – except the likes of ExxonMobil, US Vice President Dick Cheney, and their paid servants and deluded acolytes – understands that when humans burn hydrocarbons, carbon dioxide goes into the atmosphere, where it acts like a giant blanket, absorbing infrared radiation coming up from below and warming the earth.": J Bradford DeLong

"I do not know whether Keynes or Friedman was more right in their deep orientation. But I do think that the tension between their two views has been a very valuable driving force for human progress over the past hundred years.": J Bradford DeLong

"The neo-liberal story may be true. But it is an excuse. It may not be true. Having witnessed Mexico’s slow growth over the past 15 years, we can no longer repeat the old mantra that the neo-liberal road of NAFTA and associated reforms is clearly and obviously the right one." J Bradford DeLong

"Over the course of the late twentieth century, these causes of desperate poverty have largely fallen away. Governments as bad as Kim Jong-Il’s in North Korea are now extremely rare. Nearly all countries in the world are at most one generation away from near-universal literacy. The fast pace of technological progress has created a cornucopia of invention and innovation that is open to every place that can send someone away to get a master’s degree in engineering." J Bradford DeLong

"For any poor segment of the world economy, getting attached to the global container network is an immense opportunity. But it is an opportunity that requires that everything – infrastructure, scale, public administration, governance, and foreign knowledge of your production capabilities – work just right. And if you have not first built up the social networks that enable your workers and their bosses to know what kinds of manufactured goods would generate high demand in the rich post-industrial core of the world economy, it doesn’t matter even if you are attached to the global container network.": J Bradford DeLong

"The world is a complex and intricate place. So how are we to understand even just a piece of it, say, the United States government and its economic policies? It is a big problem, for the standard sources that I was taught as a child to rely upon – newspapers and television news – are breaking down.": J Bradford DeLong

"There are psychological and moral failures at all levels – individuals, firms, unions, insurance companies, and governments. Difficult problems of institutional design compound the difficulty of reforming social-welfare programs. ... These problems are not America’s alone, for they are inherent to all efforts to privatize social welfare. ... We should learn one thing from the example of Tony Snow: the vision of an “ownership society” espoused by Bush is simply not plausible.": J Bradford DeLong

As more time passes with neither the value of the dollar declining sharply nor market forces beginning to shrink America’s current-account deficit – which may well reach $1 trillion this year – two diametrically opposed reactions are emerging. Most international finance economists are becoming increasingly frightened that a major international financial crisis could erupt. Indeed, they fear that the scale of that potential crisis is becoming larger and larger." J Bradford DeLong.

"As support for President George W Bush in the United States has crumbled over the past year, perhaps the most surprising element is the revolt of economists and observers of economic policy. Last week, Peggy Noonan, a speechwriter for both President Reagan and the first President Bush declared in the Wall Street Journal that had she known what George W Bush’s fiscal policy would be, she would have voted for Al Gore in the 2000 presidential election." J Bradford DeLong

"In the United States, individual states that follow unsound fiscal policies face a penalty. Their bonds sell at a discount relative to those of better-managed individual states. The higher debt service they must pay serves – to some degree – as a form of discipline against the temptation to spend now and pay later." J Bradford Delong

"In today’s world, only national governments are large enough to be able to do so with any assurance that the pension assets will actually be there when workers retire. I am enough of a social democrat to believe that if there is an economic service or benefit that citizens value extremely highly and that only the government can provide, then the government should provide it." J Bradford DeLong

"Shiller was wrong. Unless the American stock market collapses before the end of January, the past decade will have seen it offer returns that are slightly higher than the historical averages – and much, much greater than zero. Those who invested and reinvested their money in America’s stock market over the past decade have nearly doubled it, even after taking account of inflation." J Bradford DeLong

This week the world’s countries – including Australia – meet in Montreal to discuss where we go next on climate change. Today on Webdiary two commentaries on the meeting and potential outcomes. In the first J. Bradford DeLong states "the world's industrial core must create incentives for the developing world to industrialize along an environmentally-friendly, C02- and CH4-light, path". In the second, Bjørn Lomborg argues that "they are wrong about our priorities, and they are advocating an inefficient remedy." Read on for the two perspectives.