决战1010精英组Economist阅读汇——toywang分贴

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The opposition's rebuttal remarks
Mar 24th 2010 | David Sandalow

In his defence of the notion that [可以换成，in the defence of
the argument~~~~]government should do "least", Amar Bhidé states his support for[用在issue表达立场里]
carbon taxes, emissions rules, pollution rules more broadly, vehicle inspections, air traffic control, aircraft certification, spectrum regulation and antitrust laws. He notes that construction of the US interstate highway system (one of the largest government projects of modern times by some metrics) was a boon to the US economy.【有利于~~~的发展，很地道】
Professor Bhidé and I have common ground.
We have disagreements, to be sure, which I will come to in a moment. But before doing so, it is worth pausing for a moment on the motion, which asks whether "innovation works best when government does least". I applaud Professor Bhidé's recognition of 表赞成很好the many benefits government provides, yet note that this might be seen to sit oddly with his call for minimal government.可以很流畅的表达
基本上是赞成~~的，但是有~~为条件
In fact this is quite typical. Words criticising 【批评的言论】government seem often to be combined with grateful acceptance of government services.【这样的
开头很舒畅。下面直接例子说明】
In the United States, this regular part of the political dialogue may have reached its zenith【topic】 last summer when a man at a town hall meeting in South Carolina told his Congressman to "keep your government hands off my Medicare". Now to be 100% clear, I am not ascribing such views or confusion to归结于 Professor Bhidé. But I note that—especially in the United States—there is a deep cultural tendency to denigrate 【侮辱，辱名】government even as government's many benefits are routinely enjoyed.这是什么奇怪的现象？就是对政府无论怎样的行为都会表示不满吗？
This is not harmless. When government is repeatedly cast as the problem without celebrating its many contributions, support for government erodes【腐蚀】. Over time, the ability of government to deliver benefits withers【衰退了】. Services that are best or even uniquely provided by government are abandoned. California's public schools, for example, have slid in the past several decades from one of the nation's best to among its worst, the victim of severe limits on the ability of local governments in the state to raise funds for this classic governmental function.
This brings us to Professor Bhidé's argument. He notes that, despite Silicon Valley's high-tech prowess, "the State of California pays its bills in IOUs.". Well, yes, but not because Silicon Valley entrepreneurs failed to create jobs or improve the quality of life, but because state laws limiting the ability of the people of California to fund their government collided with 【抵触】a deep recession and expectations from those same people for continued government services.
Professor Bhidé is on equally shaky 【不稳定】ground in his assertions regarding Israel (often praised for its innovation culture) and neighbouring countries. He is wrong in asserting that GDP per head in Israel is lower than in Cyprus or Slovenia, at least according to WTO figures. But more to the point, innovation is of course just one determinant of GDP.这种句子里的of course的插入，自己要学会
Countries have different comparative advantages, including location, resource wealth and stable legal systems. They may (and often do) adopt growth-limiting policies unrelated to innovation. After flourishing in the 1980s thanks in part to innovations in its manufacturing sector, Japan floundered in the 1990s due in part to problems in its financial sector. Yet the benefits of those innovations were still very real.
A substantial body of economic literature demonstrates that innovation is correlated with GDP growth. Indeed for his work on this topic, Robert Solow won the Nobel Prize. Solow's work suggests that innovation is more important to GDP growth than capital accumulation or increases in the labour market. If governments have it within their power to enhance the rate of innovation, the benefits of doing so would be huge.
很好的例子。表现innovation 在GDP 中对用，同时还和其他因素进行了对比
And they do. Classic government functions such as basic research, education and patent protection are central to innovation. Would innovation "work best" with less of such things? Quite the contrary.
疑问：在AW中可以用rhetoric question 吗？
Government funding of basic research led to the creation of the internet, one of the greatest sources of innovation of all time. Government funding led to DNA mapping, a breakthrough revolutionising medicine. Government funding led to countless other advances in decades past, and could lead to many more in decades to come. Yet that will depend on adequate budgets. It will depend, crucially, on political support. It will depend on government doing more than the "least" to support innovation.
很鲜明的对比，led to 的条件就是depend on
In his essay, Professor Bhidé takes particular aim at government funding for batteries. In one respect, this is tangential 【直接接触】to the main argument. One could easily believe that government programmes to promote development and deployment of advanced batteries are misguided, yet agree that innovation overall deserves strong government support. But I happen to believe there is a strong case for government work on batteries, so will take this opportunity to explain why.
Modern energy systems are in many ways a marvel【罕见的例子】. Yet they impose social costs, which could be reduced by cutting pollution from electricity generation and diversifying the fuel mix in vehicles. Better energy storage technologies would help with both objectives.
Solar and wind power, for example, can help cut pollution. Yet those technologies are limited by their intermittency: they produce no power when the wind stops blowing or day turns to night. Advances in energy storage could help overcome these problems.
Electric vehicles can help diversify the fuel mix in transport. Yet their advance is limited by high costs and short driving range. Better batteries are the solution.
Government could simply stand back, letting the market decide whether to invest in advances in energy storage. But the market does not recognise the social costs from pollution. It won't fund basic research in adequate amounts. It won't educate children and university students, who form the next generation of innovators. Government is essential to overcome these problems—and more.
What is government's role? To fund basic research. To educate the citizenry. To establish patent protection, helping ensure adequate incentives for invention. To set the regulatory framework, so externalities such as those created by pollution are incorporated into market decisions. To help technologies facing sunk-cost competitors get to market. To guide innovation toward socially beneficial purposes.
这种段落很强大~~·
For innovation to work best, 总结，表目的government needs to do much more than the "least". It must bring its many strengths to the field of play. We should recognise and embrace government's role in innovation.

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Featured guest
John Kao

The proposition【建议，不用suggestion啦】 on the table carries for me some of the flavour of a medieval theological debate【有中世纪神学辩论的味道】. On the one extreme are those who invoke an invisible market hand that should rule and generate innovations free of interference from government. On the other hand are those who look to knowledgeable, action-oriented government stakeholders to address every one of society's ills.
The truth as always lies somewhere in the middle.【perfect 收了】 And to get at the truth, it is important to distinguish between what I would call a dictionary or enterprise definition of innovation, creativity applied to a purpose to realise value, and what I have recently taken to call "large-scale" innovation, new sources of societal value that emerge from the blended capabilities of public, private and NGO sectors as well as civil society.
We would not want government telling the inventor in their garage what to do (the enterprise model of innovation). However, in my view, government cannot help being involved in innovation at a large scale. In every country I am aware of, government regulates health care, provides for the national defence, influences education policy and pursues societal moonshots—both literally and figuratively.【这个例子有说不出来的感觉】
As an example, a national security agenda taken as a whole requires continuous innovation (we need to be smarter/faster than the other guy). Yet simply picking over the fruits of invisible-hand, market-driven innovation might not have led to the development of stealth technology, Kevlar or even the internet, all fruits from the efforts of DARPA, the Defence Advanced Research Projects Agency.
The case of DARPA, which is a part of the US federal government, is instructive because its purpose is to champion the kind of long-range, higher-risk innovation initiatives that might lead to game-changers. One assumption at the heart of DARPA's raison d'etre is that the government mainstream, left entirely to its own devices, might not generate relevant innovation for a variety of reasons (bureaucracy, speed or lack thereof, lack of early-stage funding, inability to go outside its own mindset). The other guiding assumption behind DARPA is that some kind of transmission system with seed investment and talent-scouting capability is needed to identify and bridge with promising technologies and talents outside the national security community.
My larger point should now be clear. 表立场Government has an inevitable role in shaping innovation. At the same time, we would be right not to trust omniscient technocrats who believe they are the sole arbiters of what is worth putting on the agenda. Top-down, ivory-tower government is not what I am talking about: it is government's role in innovation. Modern history is replete with expensive examples of how governments have got it wrong. Think Japan and supercomputers, for example.
I believe that government's appropriate role in innovation is rather as a catalyst【催化剂】表起到促进作用, a platform and a convener to enable collaboration among a range of stakeholders from the public, private, NGO and societal sectors. The advent of web 2.0 is a great enabler in fostering such collaboration with multiple vectors: bottom up, top down, inside out, outside in. Government also has a role in identifying the purposes to which innovation should be applied, creating the strategy for addressing them and providing resources as needed. And this, parenthetically【插入的】, is why it is important for America to have a national innovation strategy, not as a warmed up, top-down version of industrial policy, but as a living, breathing strategic conversation among stakeholders to determine priorities, generate road maps and requirements, and create accountability.
The final point about government's inevitable role
in innovation again returns to the optics of the large scale广度上看. Many of today's emerging waves of innovation—synthetic biology, alternative energy, health care informatics—will not be addressed by a few Silicon Valley venture capitalists making a few $5 million investments in the ventures of a few passionate entrepreneurs. Rather, they require bets of considerable size across a spectrum of opportunity. This is particularly true when one thinks about a next generation of societal services—health care and education, for example—that consume a significant portion of GDP and that require societal capabilities for prototyping and experimentation, research funding, large amounts of risk capital, human capital strategies and an enabling regulatory environment to progress. Government is everywhere to be seen in this picture, but as a partner, not a dictator.

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The moderator's rebuttal remarks
Mar 24th 2010 | Mr Vijay V. Vaitheeswaran

Our online debate on the role of government in fostering innovation is off to a fiery start. Both sides are now offering their rebuttals, and, despite minor gestures of conciliation, it is clear that neither debater is really willing to concede much ground.
Amar Bhidé, arguing in favour of the proposition, takes on the favourite example offered up in defence of government funding of innovation: 1）the creation of ARPAnet, 2）the precursor to today's internet. Yes, he accepts, government funding did play an essential role in this example. But he then points to Minitel, a French government network that also had grand ambitions, cost billions but ultimately proved a turkey. Indeed, it held France back from embracing the internet, the obvious winner of that technology race. "Should we have a few decision makers with no skin in the game placing bets on their favoured technologies rather than many independent innovators staking their time and money?", he asks.
Arguing against the proposition,
用动名词开头的句子很赞 David Sandalow offers a robust defence of government's role in fostering innovation. It is not only classical governmental functions such as patent protection, education and basic research that he defends. He takes on the charge that government must not pick technology winners, insisting that the American government's efforts to spur investments in battery technology are justified in part because of the externalities associated with energy use are not recognised by the market framework. Not only is government intervention required to internalise those social costs, he insists, but only can the wise hand of the state "guide innovation toward socially beneficial purposes".
The battle lines are drawn. Our combatants are intellectually clear on their differences, and not afraid to attack the other side's weaknesses. Which side do you believe has the upper hand? Cast your vote now.

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The proposer's rebuttal remarks
Mar 24th 2010 | Amar Bhidé

Mr Sandalow's assertion that Google's search engine "grew directly from government funding" is puzzling. I was once a satisfied user of Alta Vista search. In 1999 I switched to Google mainly because its interface was much cleaner and to some degree its results were better related to my queries. In what way did the government fund the idea of the cleaner interface? And as my friend Jim Manzi, a contributing editor at National Review, and a senior fellow at the Manhattan Institute puts it, which Federal Department of Critical Insight caused Google co-founders, Larry Page and Sergey Brin to think about the "page rank" algorithm?
The Google case in fact underlines the importance of decentralised innovation that is not directed by the government. Alta Vista was on the surface a perfectly satisfactory search engine. Two graduate students figured out on their own how to make it better in aesthetic and non-technical ways without having to curry favour with funding agencies.
Mr Sandalow is on firmer ground in pointing out that the internet evolved from the Pentagon-funded ARPAnet. But think of France's grand Minitel scheme. Starting in 1982, the state-owned telephone company gave away millions of free Minitel terminals, which could be used to make online purchases and train reservations, trade stocks, look up phone numbers and chat. Just like the internet. Except it wasn't quite as good or versatile. Worse, Minitel held back the adoption of the internet and France's entry into the information age, as Lionel Jospin, French prime minister, pointed out in 1997. Yet by then Minitel had acquired a life of its own: in 2000 France Telecom poured money as never before into a publicity campaign to promote a service widely recognised to be obsolete.
What accounts for the difference between the success of the internet and the failure of Minitel? It seems unlikely that it is because the French are worse at managing large publicly funded projects. Compared with the Train à Grande Vitesse (TGV), Amtrak's Acela is a bad dream.
It could be bad luck, since all innovative projects are a gamble. But then do we want the government to be gambling with taxpayers' money? Should we have a few decision-makers with no skin in the game placing bets on their favoured technologies rather than many independent innovators staking their time and money on a chance that their offering will beat the status quo?
The difference between ARPAnet's and Minitel's ambitions also is noteworthy【显著的】. ARPAnet was not a grandiose scheme to create a ubiquitous national network. Rather the project involved a small number of players and was undertaken to advance the Pentagon's mission. Very likely this helped limit the risks of overreach.
Now of course the Pentagon's mission of ensuring national security is vital and cannot be outsourced to private enterprise. And technology is a paramount ingredient of modern defence. It is inevitable, therefore, that the Pentagon is an important high-tech buyer and (like any large customer) helps shape the new technologies it wants. Which is as it should be, and not at all inconsistent with the principle of limited government. Conversely debacles like Minitel are likely to occur when governmental bodies go beyond their assigned, essential roles.
And although ARPAnet's contribution was valuable, it is far from certain that without Pentagon funding, there would have been no internet. The telephone network was in its time every bit as revolutionary. Yet Alexander Bell invented the telephone and Theodore Vail created a nearly universal nationwide network with no military or other developmental grants. Similarly Thomas Edison became the most prodigious inventor in American history without a receiving penny in research subsidies.
History also shows that unlike say national defence or air traffic control, a significant governmental role is not essential even for fundamental research. Revolutionary advances occurred even when government funding for scientific research was minimal. Darwin's research on evolution, Michael Faraday's work on electromagnetism and electro-chemistry, Newton's discoveries of calculus and the laws of motion were all done without government grants. In 1905 Albert Einstein produced four path-breaking papers—on the photoelectric effect, Brownian motion, special relativity and the equivalence of matter and energy—while employed as an examiner at the Swiss patent office.
A common argument made in favour of government subsidies for fundamental research is that contributions that the likes or Darwin, Faraday, Newton and Einstein might make on their own are not enough. Mr Sandalow asserts, for instance, that the private sector naturally under-invests in fundamental research because profit-seeking businesses cannot fully capture the returns. First off, the private sector is not all for-profit. A great deal of basic research is done through private resources (such as foundations) that do not seek to maximise financial return.
And who is to say how much and what kind of investment in basic research is right? There is a vast range of valuable knowledge whose returns accrue more to society as a whole than to the producers of the knowledge. In medicine, creating routines to ensure that surgeons wash their hands before they operate is no less valuable a public good than decoding the genome. IBM's development of a professional sales process, which was then adopted throughout the high-tech industry, was as vital to the diffusion of information technology as the discovery of the transistor principle. Virtually every day I turn to the internet to learn about how to solve computer problems that other users have discovered and share it at no charge.
Of course these different kinds of knowledge are rarely perfectly in balance. Sometimes fundamental science runs ahead of concrete user-generated knowledge, for instance, and sometimes it is the other way round. But that is not an argument for turning to government. If the brightest and the best economists at the Fed continue to assert that a large nationwide housing bubble was unrecognisable, which government agency can we charge with identifying and correcting these subtle knowledge imbalances? Why not trust the autonomous, competing judgements of for- and not-for profit innovators seeking fame, fortune or excitement while the government focuses on those activities that only it can perform?

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这个debate做的时候，未完全理解目的，是为了写作文而作，而不是阅读，因而重点有所偏离。
下面一个debate很有动力

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GDP 一个广受好评的debate （上个debate做的很失败，学到的很少）

目的：地道表达，词汇，行文安排

About this debate

When economists want to compare living standards in one country with those in another, or to track how much richer a country has become over time, they usually look at gross domestic product (GDP). The growth of GDP, adjusted for changes in population and prices, is the commonest measure of changes in living standards. But is it a good one?

GDP was designed to estimate the value of goods and services produced in a country. Critics say that as a measure of living standards it misses out too much, such as the state of the environment, people's health, leisure and the distribution of income. Does a rising GDP mean that people are happier as well as richer? Is it time, as a Nobel economics laureate has said, for an end to "GDP fetishism"? Or is GDP, for all its flaws, a good enough estimate of society's material well-being? Should GDP be ditched【被抛弃】, or is the search for better measures afool's errand【差事】?

本来是有background reading的，可是PDF格式的
Opening statement

Defending the motion

Andrew Oswald

Professor of economics, University of Warwick

GDP is a gravely dated pursuit.
【这句怎么理解？】The first reason is the Easterlin Paradox(the empirical finding that countries do not become happier as they grow wealthier); the second is that global warming means it is necessary for Homo sapiens 【现代人】to make fewer things, to travel less, and to lean on the direct energy of the sun and water.这种段落是典型的TS+扩展（用到了相对论和现实例子）

Against the motion

Steve Landefeld

Director of the Bureau of Economic Analysis

GDP is a key measure of a country's economic activity—the purpose for which it was designed.这个句子的转化很好It was not designed to be, nor should be regarded as, a comprehensive measure of society's well-being. Nonetheless, it has also proven useful as a gauge 【测量器】of an economy's capacity to improve living standards.

如此鲜艳的一个开头，为什么弄上来是这死样子，烦躁~~~

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The moderator's opening remarks

Apr 20th 2010 | Patrick Lane   

Finding ways to improve humanity's living standards is the point of economics. 【可以用在解释一个事物是由多种事物导致的】Having a good measure of living standards, you may think, is therefore pretty fundamental to the discipline. For decades economists have turned to gross domestic product (GDP) when they want an estimate of how well off people are. By how much are Americans better off than Indians, or than their parents' generation?[用于illustrated GDP的实际用途] Chances are the answer will start with GDP.

GDP is really a measure of an economy's output, valued at market prices (to the extent that you have them). As societies produce more, and therefore earn more, their material well-being rises. So it is no surprise that so many economists and official statisticians broadly accept GDP as a measure of living standards.

It isn't the only measure. Even before the recent recession, a lot of debate over American living standards was based not on GDP, which was growing healthily¬, but on median incomes, which were not: the point was that national output was growing, but that its fruits were not being evenly shared. It doesn't cover everything: not all the things that we value are bought and sold in the marketplace. But when economists want to measure the living standards of whole societies, GDP is where they usually start.

That said, economists and statisticians have been debating for years whether GDP measures what truly matters. It may capture material wealth, broadly, but is that enough? If it is not enough, with what should it be replaced—or, more likely, supplemented? With assessments of the environment? Measures of people's health? Estimates of their happiness? And how might all these different aspects be combined? If some new measure is closely correlated with GDP, then GDP, though imperfect, may be good enough. If it is not, then focusing on GDP could be an error of more than just measurement: governments that pursue GDP growth may be making their citizens worse off than they might be.

The Economist's latest online debate is intended to wrestle with these questions. Andrew Oswald, of the University of Warwick, is proposing the motion that "GDP growth is a poor measure of improving living standards". Opposing him is Steven Landefeld, director of the United States Bureau of Economic Analysis (BEA), which produces America's national income and product accounts, of which GDP is a prominent feature.

Mr Oswald's starting point is a report published last year by a commission chaired by Joseph Stiglitz, a Nobel economics laureate【获奖者】. The Stiglitz commission (of which Mr Oswald was a member, and which was written about in The Economist last September argued that official statistics should shift away from measuring production to measuring "well-being". Mr Oswald points to two pieces of evidence in particular: 【用于引出例子】the Easterlin Paradox, the finding that increasing wealth does not make countries happier; and global warming, which is a sign that people should produce less and enjoy the planet more.

Mr Landefeld remarks that GDP was not intended to be a comprehensive measure of society's well-being. Even so, he says, it has stood up well as a measure of living standards. Nothing has bettered it yet. That isn't to say that GDP can't be improved, though—and Mr Landefeld points to ways in which the BEA has been trying to bring that about. He too notes the conclusions of Mr Stiglitz's commission.

This promises to be a lively and enjoyable 【用于argu结尾处的展望】debate on an important subject: how much use is GDP in measuring how well off people are? Mr Oswald and Mr Landefeld have set out what they think. I'm glad that we have two such prominent people to lead the debate. And I'm looking forward to the next round of arguments and to what you, on the floor of our online chamber, have to say.

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The proposer's opening remarks

Apr 20th 2010 | Andrew Oswald

"A … key message, and unifying theme of the report, is that the time is ripe for our measurement system to shift emphasis from measuring economic production to measuring people's well-being." 【这里的well being 想到了昨天eleven bs里关于question authority里对 well-being的分类，物质的和精神的】
(Executive Summary: Stiglitz Commission Report)

GDP is a gravely dated pursuit.这个怎么理解？ It is time to listen to the Stiglitz Report.

The first reason is the evidence known as the Easterlin Paradox (the empirical finding that countries do not become happier as they grow wealthier). The second reason is that global warming means it is necessary for Homo sapiens to make fewer things rather than more, to travel less except on their feet, to lean on the direct energy of the sun and water rather than on the smashed fuel of buried trees, to value tranquil beauty more and 160mph motor cars less.

These arguments are key parts of the recent Stiglitz Report.

1.
Life is now more complex and services dominate ("The time has come to adapt our system of measurement … to better reflect the structural changes which have characterised the evolution of modern economies.")

2.
We, as a society, need to measure well-being per se. ("A … unifying theme of the report is that the time is ripe for our measurement system to shift emphasis from measuring economic production to measuring people's well-being.")

3.
Official government statistics should
blend objective and subjective well-being data. 【blend 要比combine好听】("Statistical offices should incorporate questions to capture people's life evaluations, hedonic【享乐的】 experiences and priorities in their own survey.")

4.
Sustainability must be a criterion. ("Sustainability assessment requires a well-identified dashboard of indicators … the components of this dashboard should be … interpretable as variations of some underlying "stocks".)

I am optimistic. Eventually the green movement will discover the data of the Easterlin Paradox, named after Richard Easterlin, a famous Californian economist, and also become aware of the statistical evidence on declining emotional prosperity that I describe below. Although fine young scholars like Betsey Stevenson and Justin Wolfers doubt the veracity 【正确性】of it【对于argu提供的数据可以用这个表达】, they are heavily outnumbered: the weight of published evidence is in line with 【和。。。符合一致】Mr Easterlin's paradox. Moreover, Ms Stevenson and Mr Wolfers themselves agree that America, perhaps the iconic GDP-chasing nation, is not becoming happier through time.

If we look at broader measures of psychological well-being, the newest longitudinal 【纵向的】research suggests there are reasons to be more pessimistic 【悲观的】than Easterlin. Although further research evidence needs to be collected, this is what we currently know.

Worryingly, emotional prosperity and mental health appear from the latest data to be getting worse through time. This disturbing conclusion emerges from these seven studies:

·
Sacker and Wiggins (2002)

·
Hodiamont et al. (2005)

·
Verhaak et al. (2005)

·
Green and Tsitsianis (2005)

·
Wauterickx and Bracke (2005)

·
Oswald and Powdthavee (2007)

·
Sweeting et al. (2009)

Why? We are not yet certain. But, first, humans are animals of comparison (some of the newest evidence, from brain scans, is reported in Fliessbach et al., 2007). What I want subconsciously is to have three zoomy BMWs and for my colleagues in the office corridor at work to have mere rusting, spluttering Fords. Unfortunately, the tide of economic growth lifts all boats, so where having three glamorous cars was unusual, eventually it becomes the norm, and any relative gains are thereby neutralised. Second, people choose things—such as high-pressure kinds of work and long commutes away from their families and their dogs and their fishing buddies—that, despite what they think, will often not make them happier. Economists have ignored the research on "affective forecasting mistakes" by psychologists like Daniel Gilbert; they need to wake up to it.

Unsurprisingly, the citizens of the rich nations find it difficult to grasp that higher gross domestic product from this point onwards will not make society happier. Like people in earlier times who could not conceive of themselves as creatures glued by gravity onto a spherical planet, they trust their intuitions (because as individuals they like to become richer and assume whole countries must be the same). One cannot blame them. But the evidence shows they are wrong.

As an undergraduate, I was taught that economics is a social science concerned with the efficient allocation of scarce resources. In 2010, a better definition is needed. Economics is a social science concerned with the way to allocate plentiful resources to maximise a society's emotional prosperity and mental health.

The opposition's opening remarks

Apr 20th 2010 | Steve Landefeld

Gross domestic product (GDP) is a key measure of a country's economic activity—the purpose for which it was designed. It was not designed to be, nor should be regarded as, a comprehensive measure of society's well-being. Nonetheless, 不过it has also proven useful as a gauge of an economy's capacity to improve living standards. It was a catastrophic【悲惨结局的】 decline in living standards that prompted the development of national, or GDP, accounts. Trying to design policies in the 1930s to combat the Great Depression, President Roosevelt had only such sketchy 【粗略的】data as stock prices, freight car loadings and incomplete indices of industrial production on which to rely. In response, the US Department of Commerce developed a set of national economic accounts that for the first time provided a comprehensive framework to guide policy decisions to assist the millions of people who were out of work.

GDP, and the broader set of national income, product and wealth accounts, has stood the test time and no other measure has proven a worthy alternative. Simon Kuznets, one of the early architects of the accounts, in 1941 recognised the limitations of focusing on market activities and excluding household production and a broad range of other non-market activities and assets that have productive value or yield satisfaction. Yet 75 years and lots of research later, there is no broader social measurement tool that officials would agree is valid and useful.

It would, therefore, seem irresponsible to abandon the most comprehensive and reliable system currently available to tell us how a society is faring economically. GDP may not be a complete measure of improving living standards, but that does not make it a poor one, especially when considering what could possibly replace it today.

There is, of course, room to improve GDP through better measuring of the distribution of the gains from economic growth and the sustainability of that growth, and selected measures of non-market activities that affect the economy—and these concepts have merit. Rather than replacing GDP, the goal might be extending and supplementing GDP and the national accounts, rather than their replacement.

Over time the national accounts have been constantly updated and extended to address changes in the economy and to keep them relevant, and many of the measurement issues raised in the current debate can be addressed within the context of these accounts. Yet extensions of the national accounts cannot be allowed to subject a critical tool for economic policy to uncertainty. Past efforts to expand conventional GDP have foundered on the inevitable problems of subjectivity and uncertainty inherent in measuring happiness, household work and other non-market activities. Critics rightly fear that the inclusion of such uncertain and subjective values in GDP will seriously diminish the essential role of the national accounts to financial markets, central banks, tax authorities and governments worldwide in measuring and managing the market economy.

Much work has focused on how to successfully broaden the utility of GDP, while preserving its core integrity. Several National Academy of Sciences studies on accounting for the environment (Nordhaus and Kokkelenberg, eds, 1999) and non-market production (Abraham and Mackie, eds, 2005), as well as the System of National Accounts (1993) guidelines for compiling GDP, have concluded that an expansion of the GDP accounts should take place in supplemental, or satellite, accounts that extend their scope without reducing the usefulness of the core GDP accounts. They also conclude that such an expansion should focus on economic aspects of non-market and near-market activities—such as energy and the economy's use of natural resources, the impact of investments in research and development (R&D), health care, or education—and not attempt to measure the welfare effect of such interactions.

Recognising the concerns of subjectivity and uncertainty, the focus should remain on creating "new" estimates within the framework of the existing accounts. For example, the Stiglitz-Sen-Fitoussi Commission (2009), which explored expanded welfare measures, has suggested a number of ways that "classical GDP issues" can be addressed within existing GDP accounts or through an extension and improvement of measures included in existing accounts.

The US Bureau of Economic Analysis focuses on just such improvements, and President Obama this year proposed extensions within the scope of the existing accounts that would provide new measures of:

·
how growth in income is distributed across households, other sectors and regions;

·
the sustainability of trends in saving, investment, asset prices and other key variables important to understanding business cycles, economic growth and living standards.  

There are, however, limits to what can reasonably be included in GDP. For many years the problem has not been with GDP, but rather the singular focus on GDP alone as a measure of society's welfare. Many non-market measures of welfare may be better included in such measures as the newly authorised US National Academies Key National Indicators System.

These and other efforts in the coming years will lead to a more inclusive set of measurement tools that will enhance our understanding of countries' standards of living. This progress is inevitable, but it does not render current GDP data inadequate. GDP will continue to play a crucial role in measuring social progress in and among countries.

整篇文章很流畅，没有大问题，用作以后写comment。即使有很多因素，但是GDP依然不可以取代

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The moderator's rebuttal remarks

Apr 23rd 2010 | Patrick Lane

Welcome to the second, "rebuttal" stage of the debate. From what both Andrew Oswald and Steve Landefeld say, and from the comments from the floor, it's clear that whether you support or reject the motion depends to a large extent on how you define "living standards". Are they limited to material comfort, or do they cover broader, less tangible concepts, not least happiness? This difference of view emerged in the first few online remarks, and it's been a constant theme. Pythian Legume, for instance, is "relatively certain that a claim that it [ie, GDP] does not measure national happiness is off point". Belfast citizen argues: "It is quite true for Mr Landefeld to say that GDP was not designed to be a well-being measure—though that concedes Prof Oswald's case at the outset—but it is treated by most OECD governments as if it were a proxy for well-being."

Here's another dividing line, not yet obvious on the floor but plain between the protagonists【主角】: is GDP simply out of date, or can it be improved or supplemented by other measures of living standards, however defined? Mr Oswald says that, given the apparent decline in psychological measures of well-being in rich nations, GDP has not (as Mr Landefeld believes) "stood the test of time". It is too narrow an indicator of things that matter to remain a valuable indicator today. Mr Landefeld remarks that if measures of happiness have not moved much over time, their merits as measures of living standards are in question. Better, he says, to augment GDP with other measures on an economic "dashboard". He suggests that GDP will remain the most closely watched.

On the floor, other themes have emerged.【突然发现是个好词】 One is perhaps best illustrated by KCCM, who believes that the debate "exemplifies【举例解释】
the economic and attitudinal gulf 【深渊】between developed and developing economies". GDP may seem out of date in the rich world, he says, where most people have satisfactory food and shelter, but in poorer countries, "quantity reigns supreme because many simply do not yet have enough". High GDP growth numbers are a symbol of rising living standards—or, as KCCM puts it, of "ability to provide more of what their growing populations really need and, eventually, want". 严重同意此观点

Another topic is the tension between living standards of whole societies and those of individuals or households. A related subject is the distribution of income. Plainly, GDP can capture only aggregates or (if you divide by population) averages. It won't tell you about the living standards of individuals, the gap between rich and poor, or the concentration of riches at the top. It's not supposed to, some may say—GDP per person is a measure of central tendency, not dispersion—but for many participants that's not the point.

Mehmet Asici suggests that GDP may be a fair measure of living standards in fairly equal societies with strong welfare states, but not in places where the distribution of income is highly skewed【歪斜的，像中国】. Several participants have said that the answer is not to measure GDP alone, but to have lots of indicators of material and psychological well-being. That in turn raises another question: can these meaningfully be combined into a single measure, or does it make more sense to look at several (back to the "dashboard"), sometimes paying more attention to one indicator and sometimes to another? Quite a few people mentioned the UN Human Development Index. One speaker, haripolit, said flatly that it was pointless to look any farther. Others thought the answer was more complicated.

Before we hear Mr Oswald's and Mr Landefeld's closing statements, we'll have contributions from guest speakers. The first of these will be Enrico Giovannini, formerly chief statistician of the OECD and now head of the Italian national statistical agency. The rebuttals and the guests' statements will, I'm sure, provoke more debate.

读到现在发现 not to…but to …的句型用的很广泛。

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The proposer's rebuttal remarks

Apr 23rd 2010 | Andrew Oswald

GDP is too narrow a measure of the things that truly matter to humans to be viewed as a valuable indicator in developed nations like ours in 2010.可以改写为 argu中很多结果只理解为某一因素所导致的问题

Steve Landefeld presents his view cogently, but he proposes an old-fashioned vision that is driven by conventional ways of thinking rather than modern evidence, and he makes no mention of green issues or sustainability.  

Here is an example:

It was a catastrophic decline in living standards that prompted the development of national, or GDP, accounts. Trying to design policies in the 1930s….

I agree with this assessment about the origins of GDP measurement. But of course such days are long, long gone. This is not an issue relevant to the case for or against GDP in 2010。

用于描写时间变化而导致的观点变化

Here is a further example:用于举第二个例子

GDP, and the broader set of national income, product and wealth accounts, has stood the test [of] time and no other measure has proven a worthy alternative.

This is an assertion for which Mr Landefeld gives no evidence. On some measures of mental health, for example, as I tried to explain in the first stage of the debate, there is research evidence that levels of psychological well-being in rich nations are worsening through time. If so, it would seem to me, and I presume to other observers, that the "test" has been failed.

Mr Landefeld also argues that:

There is no broader social measurement tool that officials would agree is valid and useful.

This is not true: see the Stiglitz report.

Mr Landefeld suggests that it would seem irresponsible 【不负责任的】to abandon what he sees as the most comprehensive and reliable system currently available. Readers will have to judge for themselves. In my opinion, this takes us back to the kind of status-quo 【现状】positions adopted in debates since at least the Middle Ages when it was proposed to give up the view that the Earth was the centre of the universe. Presumably we should choose our intellectual positions on the basis of modern data and not because ideas are familiar to us or previously long-accepted.

Mr Landefeld says that the Stiglitz-Sen-Fitoussi Commission (2009), which explored expanded welfare measures, has suggested a number of ways that "classical GDP issues" can be addressed within existing GDP accounts or through an extension and improvement of measures included in existing accounts. Yet, as a read of the report on the web will make clear, his is not in an obvious way an even-handed assessment of the Commission (on which I served).  For example, he does not mention the central recommendations in the Stiglitz Report about the need to measure human well-being rather than GDP.

Mr Landefeld believes that alternatives to GDP have…"foundered on the inevitable problems of subjectivity and uncertainty inherent in measuring happiness, household work and other non-market activities". Unfortunately, this is an assertion without data to support it. More important, it is time to think about what economists would call the right maximand.   

Consider this possibility. 在考虑多因素是用One of Mr Landefeld's close relatives or friends comes to him and says: "Steve, confidentially, I am really hating my job and my marriage isn't working and I am feeling deeply depressed." Surely he would not say to his relative: "Not interested. Don't give me your subjectivity. Go home and count dollars."

The opposition's rebuttal remarks

Apr 23rd 2010 | Steve Landefeld

If the motion were about measuring welfare, the answer might be that GDP is a poor measure. However, as a measure of standards of living—that is, a measure of the level of comfort provided by privately purchased and publicly provided goods and services—GDP is a pretty good measure of living standards. While it may need to be supplemented by distribution of income and other information, it is a concrete measure of the economic output and incomes available to meet the material needs of society and advance standards of living.

I will concede that GDP is an imperfect measure of living standards, but as an objective measure of the contributions of the economy to living standards, it is a better measure than gross national happiness or any of the other measures that have been proposed. 这种长句很有感觉The question of whether it is a poor measure is directly related to the quality of alternatives.

I am reminded in this debate on GDP and standards of living of the debates on democracy as a form of government and Winston Churchill's famous words: "No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the worst form of government except all those other forms that have been tried from time to time."

GDP may not (yet) measure the distribution of incomes, the effect of the economy on the environment, or the happiness of society, but it is an objective and measureable index of what the economy can contribute to standards of living. 对GDP的定性Taxes, public spending and transfer programmes play an important role in determining how GDP is distributed. But it is the level and growth of GDP that determine how much a nation can afford to spend on such things as housing, medical care, food, and other goods and services, as well as the alleviation 【缓和，减轻】of poverty, better schools, transport and pollution abatement【减轻缓和】.   

Consider the alternatives. What would be the result of America and other developed economies following Bhutan and replacing GDP with gross national happiness? The main result would be a set of measures that do not change over time and thus are of little value in assessing the effect of specific events or policies.  

Existing measures of happiness for the developed economies in Europe, America and Japan are virtually flat over the entire post-second-world-war era, with no significant increase over time despite real GDP per head in these countries more than tripling over this period (Landefeld and Villones, 2009). Except for the richest and poorest countries, there is little difference in recorded happiness. There is almost no variation to reflect wars, recessions, or natural disasters—each of which clearly has a material affect on these countries and their living standards. Yet they barely register on the existing happiness indices【index的负数】. The reality, as Mr Oswald pointed out, is that individuals adapt to changes in their circumstances and register little change in their happiness when their incomes or circumstances change—up or down【这种语言习惯o(╯□╰)o】. Or as one of the online "comments from the floor" points out, "our troglodyte forebears were doubtless just as happy as we are". Yet I feel certain that few Economist readers would choose to return to the standard of living, as measured by the level of goods and services, including medical care, available in the Cro-Magnon era. Interesting stuff, but not a tool that is likely to be helpful in guiding economic or other policies.

Other alternatives to GDP, such as the genuine progress indicator, suffer from the second fatal deficiency of subjective measures: the absence of an objective set of weights for aggregating and comparing the various indicators included in such measures. Without a widely accepted and objective means of weighting, it is impossible to provide an overall measure of a nation's progress in raising living standards. 用作对survey的批判中，很直接Without objective weights it is also not possible to compare the value of cleaning up the environment with the value of investments in early childhood education. Subjective weights from some new welfare-based index cannot take the place of the public debate and legislative processes necessary to the evaluation of such complex, multifaceted issues.

As an economist, and head of a statistical agency, I suggest that we in the field have no special expertise in developing subjective social weights, and that such weights would not be accepted by the public or legislative bodies as a reasonable substitute for political decision-making.

What would be helpful to public policy would be an extension of the existing GDP accounts to measure the economic effects of pollution control, health and other public programmes. An extension of the national accounts would use proxies 【代理】for market prices—the avoided costs of medical treatment associated with child health and environmental problems, the avoided work loss days from illness, and so on—to compare and aggregate. Such measures would be limited to the market effects of non-market programmes, and would need to be supplemented by explicit social and legislative judgments. But they would provide a consistent means of comparing the economic effects of such programmes. This is the appropriate contribution for economics to make.

A useful analogy 【类似的】for economic indicators is that of a car's dashboard. The speedometer, tachometer and fuel gauges are all important. Other dials tell you the temperature, how far you've travelled and how much oil you have. At any given time, these separate dials give you much of the information you need to drive your car, but you would never want to add up the readings on all the indicators and put them on one gauge. That would make no sense.
【很赞的例子，简单明了】

GDP is the economy's speedometer, measuring the growth rate of the economy. It's only one of several indicators. And other components of the GDP accounts represent many of the other dials.

To address some of the gaps in the existing dashboard, BEA is looking at adding new gauges to improve the existing dashboard, rather than developing a single new index that attempts to measure concepts as diverse as the distribution of income and sustainability. These plans are laid out in the paper "GDP and Beyond: Measuring Economic Progress and Sustainability" included in the background reading section of this debate site.   

GDP may be an imperfect measure of living standards, but it is not a poor one, at least not in comparison to the alternatives.

Oh, and by the way—which dial on your car's dashboard do you look at the most?

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Featured guest

As the Nobel Prize winner Amartya Sen said, "to discuss about indicators is a way to discuss about the ultimate goals of a society". This is why this debate is so important and can lead to a change in the way our societies work. We value what we measure and we measure what we value. For 50 years we have been focusing on GDP and several countries have been able to increase it and improve the living conditions of millions of people. More recently this process has interested billions of people.【在论述了成就之后转折】 But, at the same time, we know that the consumption patterns followed by developed countries cannot be replicated by the rest of the world, because of ecological limits that we had forgotten. We observe in several developed countries that the correlation between GDP and life satisfaction decreases or disappears beyond a certain level of income, but we also see how the current economic crisis hits millions of people around the world, showing that a decrease in GDP does not necessarily make people happier. So, what should we conclude?

Since 2003, as chief statistician at the Organisation for Economic Co-operation and Development (OECD), I have been involved in the debate on how to measure well-being and sustainability. After organising the first OECD World Forum on "Statistics, Knowledge and Policy" I established the Global Project on "Measuring the Progress of Societies" (see www.oecd.org/progress). Lastly, as a member of the Stiglitz Commission, I tried to contribute to this debate, stressing the need to measure societal progress going beyond GDP. But what does "societal progress" mean? And can we reach a consensual view of what constitutes progress?

On the first point, at the OECD we have defined "societal progress" as 【用于开头对概念的解释，可以是自己的】an increase in what we call "equitable and sustainable well-being". In our view, the principal dimensions of what, according to the most recent academic research, constitutes well-being (health, knowledge, material well-being, environment, personal relationships, and so on) need to be integrated with two cross-cutting dimensions: the first is intra-generational (equity); the second is inter-generational (sustainability).  If we believe that all these dimensions matter for a good life, at individual and societal levels, it is clear that GDP cannot measure all of this. Fortunately, GDP is positively correlated with several good things, but not necessarily with all of them; in some cases, the correlation can be absent or negative. Furthermore, we have to recognise that it is not possible to aggregate all the necessary indicators to measure these dimensions into a single measure, expressed in monetary terms. Therefore, we can only conclude that measures of economic well-being (like GDP) should be complemented by other measures, which should be communicated to people as frequently and widely as GDP.

Unfortunately, for many years official statisticians have been investing their limited resources to refine GDP and other similar measures, instead of paying attention to the other dimensions of well-being. So, what we need is a reorientation of the research efforts towards these other measures, to rebalance the picture that official statistics provide. And media should do the same, to change the culture and focus of political discourse.

Fortunately, there is good news that make me optimistic. 【很好的开头】First, in several countries, a lot of good statistics on the other dimensions of well-being already exist; so these countries could do much better right now to inform citizens about the overall progress (or regress) of their communities and societies. Second, we discovered that there are hundreds of initiatives around the world, in developed and developing countries, where communities try to use the debate about indicators to develop a shared view of what to do to improve their societies, assembling indicators and communicating them to citizens. This is emerging as a possible new governance model for democracy in the "information age" and confirms the importance of this debate for our future. Third, there is a growing consensus among political leaders that a new model for the prosperity of our societies is needed therefore, we need better indicators to drive new policies and to make policymakers accountable.

All these elements show how this debate goes well beyond statistical issues and touches upon the demand for a future different from the one that the current crisis is stimulating. It is the perfect time to provide a concrete answer to this need and I believe that with a joint effort of statisticians and other scientists, media, civil society and policymakers we could improve the understanding of our world and, in doing that, contribute to improving it.  感觉很大众

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允诺今天做完的，看来还是不行了~~~
Closing statement

The moderator's closing remarks

Apr 28th 2010 | Patrick Lane

We've nearly reached the end of this online debate. 【做结尾】The closing statements from both sides are in. During the rebuttal phase, we've had remarks from two guests: Enrico Giovannini, of Istat, and Michael Boskin, of the Hoover Institution. We'll hear from another guest, Keith Hennessey, who was director of the National Economic Council under George Bush, before we finish.

From the outset【开端】, a lot of the debate—especially on the floor—has centred on the meaning of two words in the motion: "living standards". In the rebuttal stage Aaron Goh put it this way: "The way the debate motion has been framed is not conducive for discussion. Whilst most of us (as shown by poll numbers) believe that the GDP is a poor measure of living standards, this does not detract from the fact that it does indeed do the job it was made to do—measure the growth in economic output in a country."  XzvmSnMTef wrote:  "Before trying to change the GDP indicator, it may be useful to discuss the very concept？
of ‘living standards' and well-being. If we don't know what it is, we can hardly measure it."

This focus on definition, I think, can be either a strength or a weakness in a debate. In this debate it's been a strength, on balance, because it invites us to think about what, exactly, we mean by living standards and hence what it is we are trying to measure. The obvious starting point is material. And because output, income and consumption are three points on the same circle of economic activity,【这个数据可以用】 GDP—an estimate of the output of the economy—is an obvious measure. If we stop there, the chief question is how well GDP captures material living standards.

As we've said before, we know GDP (or GDP per head) captures averages. Criticising it for not measuring the distribution of income is, depending on your point of view, either a killer point (of course distribution matters!) or beside the point (yes, distribution matters, but don't ditch GDP; add the Gini coefficient or the ratio of the 90th percentile of the income distribution to the 10th). Perhaps, if we limit ourselves to material living standards, the main omissions that should worry us are things not reflected in GDP that make us materially poorer or richer: a cleaner or dirtier environment, better or worse provision of public goods, and so forth. Important policy questions follow: does the pursuit of GDP growth lead not to higher living standards but to lower ones, because it comes at the expense of things we do not measure?

But should we stop there? Australian Actuary thinks we should, urging me to "get the debate back on track" and arguing that living standards and well-being are not the same thing. Many of you plainly think we shouldn't. We certainly get into deeper waters once we ask what the point of higher material living standards is. If the point is not to make us happy, or to improve our well-being, then what is it?

We're then asking a different question: does GDP make us better off, not just materially but in some broader sense? Many of you argue that this is all very well, but believe that happiness cannot be measured, or can be measured only subjectively. 【agree】Andrew Oswald disagrees, vigorously—and moreover, says that happiness and GDP do not walk hand in hand. He points to evidence that in rich countries GDP growth does not do those things: wealth makes us no happier. Few of you want to do away with GDP altogether. Just about all of you seem to think it should be supplemented. So does Steve Landefeld—although GDP would continue to get most of his attention.

The proposer's closing remarks

Apr 28th 2010 | Andrew Oswald

Steve Landefeld has not mentioned the modern research evidence that, in the first round, I listed for Economist readers. Moreover, most of the points made in Mr Landefeld's rebuttal are factually incorrect.

It may be useful to begin more broadly. My unspoken assumption, which it seems I will have to make explicit, has been that this debate is not about about whether GDP is a measure of GDP. Truisms do not need to be debated. Yet I feel that a lot of Mr Landefeld's arguments, and those of a few web commentators, have come close to that. We are instead debating something important—something that our grandchildren and great grandchildren will have to face.

The first reason to doubt that GDP is a useful measure is the evidence known as the Easterlin paradox (the empirical finding that countries do not become happier as they grow wealthier). Large numbers of researchers have doubted this, then looked at the data, then beaten the data, and then, often through gritted teeth, ended up accepting that Richard Easterlin's paradox really does show up in the numbers. A good example of such a study is that in the Journal of Development Economics by two distinguished researchers, Rafael Di Tella of Harvard and Robert MacCulloch of Imperial College London. The second reason is that global warming means it is necessary for homo sapiens to make fewer things rather than more, and to burn fewer of the fossil fuels that have fuelled, literally, the GDP race. I do find it frustrating that Mr Landefeld has not offered us an opinion on this. The third reason, and a twist in the intellectual story that is Mr Easterlin's work, is that, as I explained in the opening round—with listed references for anyone who does not know the modern literature—there is evidence that mental health and emotional prosperity are declining. 【真是长啊】The fourth reason is that the recent Stiglitz Commission has produced a weighty report saying: "A … unifying theme of the report is that the time is ripe for our measurement system to shift emphasis from measuring economic production to measuring people's well-being."

Let me try to swallow some of the medicine I recommended to my colleague—and address key points explicitly.

Point 1. "What would be the result of America and other developed economies following Bhutan and replacing GDP with gross national happiness? The main result would be a set of measures that do not change over time and thus are of little value in assessing the effect of specific events or policies."

I have not mentioned Bhutan. But it is simply false to say that the result would be a set of measures that do not change over time. Although Mr Landefeld appears not to have the read the research literature, we know that, for example, there are strong business cycle movements in nations' happiness and mental-health data. Read Justin Wolfers (2003) and Rafael Di Tella et al. (2001) and the ensuing literature. When unemployment rises, happiness falls. When inflation drops, happiness increases. And much else.

Point 2. "Except for the richest and poorest countries, there is little difference in recorded happiness."

This statement seems a strange one to me (except for the tallest people and the smallest people, humans are about the same height?) but insofar as it makes logical sense it is incorrect.

There are large differences in recorded happiness and life satisfaction across countries. Read the literature. Look at the scatter 【分散的】plots in the work of Betsey Stevenson and Mr Wolfers and a psychology literature going back decades. It would be amazing if this were not true; rich countries have democracy, public education systems, good public health systems, and so on. But the issue is whether AFTER a nation has those there is any real point in pushing up GDP.

Point 3. "… individuals adapt to changes in their circumstances and register little change in their happiness when their incomes or circumstances change—up or down. Or as one of the online ‘comments from the floor' points out, ‘our troglodyte forebears were doubtless just as happy as we are'."

The first of these is wrong; the second is somewhere between unknown and surely ridiculous. The new research literature on longitudinal data does not show that happiness is barely affected by changes. And the idea that cavemen and cavewomen were as happy as we are is silly and not consistent with any research evidence, known to me, on poor societies.

Point 4. "Subjective weights from some new welfare-based index cannot take the place of the public debate and legislative processes necessary to the evaluation of such complex, multifaceted issues."

By subjective I assume Mr Landefeld means human. Well, human weights are just what we do need. Moreover, Mr Landefeld does not appear to notice that GDP itself does not take the place of public debate and the legislative process; nor should it. So this is a red herring.

Point 5. "By the way—which dial on your car's dashboard do you look at the most?"

The milometer. I want to know whether I am going forward.

Western society is not.

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commentery

In fact, almost 30 days past in this group and I want to say something not only the comment to economic debate but also to my 30 days. I have to admit that in this way i learned a lot and see many firends who fight together with me, but some one also left with different reasons.  what  I need to write here is about debate, but to tell the true the construction of material and the use of the word are both perfect, and my comment only make me feel how large the gap is between my own level and my set goal. So today , I just want to  use this to make myself more confident in the next way and told myself what i need to do in addition to finish the work what is required.

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Financial markets

Doing the hokey-cokey

Financial markets have been shaking it all about so far this year

May 13th 2010 | From The Economist print edition

TWO steps forward, two steps back. The financial markets have been conducting a strange dance so far in 2010. And after all that effort, by May 12th the MSCI index of global equities was virtually back where it had started the year.

The past two weeks have provided a perfect illustration of the markets’ frantic footwork. An astonishingly volatile session on Wall Street on May 6th saw the Dow Jones Industrial Average plunge by nearly 1,000 points at one stage (see article). But the announcement of the euro-zone bail-out package in the early hours of May 10th saw a violent rally, albeit one that only lasted 24 hours.

The markets’ stuttering performance reflects continuing confusion about the economic environment. On the positive side, the American economy appears to be recovering well and the first-quarter results season has showed rapid profits growth. Very low short-term interest rates also encourage investors to seek higher returns by moving into risky assets such as equities and corporate bonds.

There are negatives to set against this picture. European economies have been disappointing (first-quarter GDP growth was just 0.2% in the euro zone). Wall Street has become more jittery战战兢兢
thanks to the SEC’s fraud charges against Goldman Sachs and the likely shape of the financial-reform bill. And there are worries about how the steady tightening of Chinese monetary policy will affect the world’s fastest-growing big economy 这个怎么理解？经济体？.

Investors are also in two minds about fiscal policy. They would like governments to cut their deficits and they feared, before the European rescue package was revealed, that contagion from Greece would cause a financial crisis across the euro zone and even beyond.

But if investors want individual countries to tighten fiscal policy, they also worry about the impact of many developed countries doing so at once. As Greg Gibbs of the Royal Bank of Scotland wrote in a research note this week: “Imagine the carnage if major economies were forced from double-digit deficits to surplus, you are talking a Great Depression-type scenario or worse. Even getting close to that outcome is too bad to consider, so when borrowing costs start to rise, as they did recently in the euro-zone periphery, making borrowing difficult, the contagion spreads to equities and global asset markets.”

This debate highlights a tension at the heart of the rally that started in early 2009. The economy has been bolstered by government-stimulus programmes, packages that are enormous in scope but must be temporary in nature. If the economy is rebounding as normal, is all this official support really needed? And if the support is withdrawn, how will the economy cope?

As investors have grappled with this problem, there have been days when a bunch of assets known as the “risk trade” (equities, commodities, the Australian dollar) have gone up, and other days when risk-averse investors have bought a separate basket including government bonds and the American dollar. Over the past two weeks, the risk-trade basket has had the worst of it: the Australian dollar, for example, fell by 6% against the yen in the course of just four days.

Asset-allocation decisions are becoming more complex, too. In 2008 and 2009 investors earned big money if they made the correct calls on buying equities versus corporate bonds, or on favouring mining shares, say, over financial stocks. The euro-zone crisis has emphasised that they now also need to worry more about country and currency risk.

The clearest measure of recent investor uncertainty is the VIX or volatility index, traded on the Chicago Board Options Exchange. In effect, this index shows the price investors are willing to pay to insure themselves against substantial market moves. Having declined pretty steadily since the middle of 2009, the index more than doubled in early May (see chart).

The only asset that has steadily inched higher in price this year has been gold, which reached a record closing price of $1,237 an ounce on May 12th. Bullion is seen as a two-way bet. It acts as a haven for risk-averse investors and as a hedge against the risk that governments will be tempted to inflate away their debts, a risk that is perceived to have increased after the European Central Bank agreed to buy euro-zone government bonds as part of this week’s rescue package.

In a sense, this period of market consolidation was inevitable. Stockmarkets rose in almost a straight line from March 2009, as fears of a further meltdown in the financial sector receded and the global economy hit bottom. As a result, share-price valuations moved from being slightly cheap on the best long-term measure (the cyclically-adjusted price-earnings ratio) to expensive. The spread (excess interest rate) on high-yield corporate bonds has fallen from more than 16 percentage points at the start of 2009 to less than six points. The Economist’s own commodity-price index rose by 54% between its low at the end of 2008 and late April. Such prolonged rallies do not continue indefinitely.

Chris Watling of Longview Economics says that this is a classic “phase two” of a cyclical bull market, in which investors take stock after an initial rally. Much remains unclear about the economic and political outlook, from the likely direction of monetary and fiscal policy to the impact of additional government regulation on economic growth and profits. The slowdown in quantitative-easing programmes (under which central banks created money to buy assets) may also have deprived the markets of crucial liquidity support. It would have been more surprising if the markets had not paused for breath.

conducting a strange dance
have provided a perfect illustration of
inflate away
There are negatives to set against
pretty steadily

On the positive side

contagion from 从~~传染
scenario  剧本，情节
periphery  周边

highlights  高度关注
bolstered  支持

grappled with  抓住
receded   后退，减弱
valuations  评估
albeit  虽然

jittery战战兢兢


steady tightening of Chinese monetary policy
SEC’s fraud charges against Goldman Sachs

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Fair trade or free trade

This house believes that making trade fairer is more important than making it freer.

About this debate

Driven in part by a progressive lowering of barriers to trade in both rich and developing countries, global trade expanded faster in the decades leading up to the crisis than the global economy grew. Economists argue that free trade makes everyone better off, allowing more, and more varied, goods, and lower prices, than would otherwise be possible. Some also argue that it leads to faster economic growth and less poverty.

Some critics of free trade argue, however, that its supposed benefits for poor people and developing countries are illusory. [用来表示不切实际]Trade, they say, benefits rich countries at the expense of poor ones, increasing inequality between nations. Others say that it hurts rich-country workers, particularly the less skilled, thus increasing economic equality within rich countries. All would rather that the world concentrate its efforts on making trade "fairer" rather than further attempt to reduce trade barriers.

What does the balance of the evidence say? What does it actually mean to make trade fairer? Fairer for whom? Must the two goals be mutually exclusive? These are some of the questions this debate will tackle.