Why Cancun Trumped Copenhagen

Why Cancun Trumped Copenhagen  I wrote about this in some detail in my December 13th essay, “What Happened (and Why): An Assessment of the Cancun Agreements.” The challenges awaiting delegates later this year (December, 2011) at COP-17 in Durban, South Africa, will be tremendous, particularly in regard to trying to negotiate the massive divide that exists between most Annex I countries and virtually all non-Annex I countries on the fate of a second (post-2012) commitment period for the Kyoto Protocol. However, on this first day of 2011, it may be helpful to reflect again on the recent success in Cancun, and ask – in particular – why it occurred, because understanding that could provide some valuable lessons for the organizers and hosts of COP-17 in Durban.  However, on this first day of 2011, it may be helpful to reflect again on the recent success in Cancun, and ask – in particular – why it occurred, because understanding that could provide some valuable lessons for the organizers and hosts of COP-17 in Durban.  This was the question I addressed in a brief December 20th Op-Ed in The Christian Science Monitor, and so rather than attempting to summarize or expand it, I simply reproduce it below.

A SUBSTANTIAL part of all stock trading in the United States takes place in a warehouse in a nondescript business park just off the New Jersey Turnpike.  Few humans are present in this vast technological sanctum, known as New York Four. Instead, the building, nearly the size of three football fields, is filled with long avenues of computer servers illuminated by energy-efficient blue phosphorescent light.  Countless metal cages contain racks of computers that perform all kinds of trades for Wall Street banks, hedge funds, brokerage firms and other institutions. And within just one of these cages — a tight space measuring 40 feet by 45 feet and festooned with blue and white wires — is an array of servers that together form the mechanized heart of one of the top four stock exchanges in the United States.  The exchange is called Direct Edge, hardly a household name. But as the lights pulse on its servers, you can almost see the holdings in your 401(k) zip by.


Computers That See You and Keep Watch Over You – Perched above the prison yard, five cameras tracked the prisoners, and artificial-intelligence software analyzed the images to recognize faces, gestures and patterns of group behavior. When two groups of inmates moved toward each other, the experimental computer system sent an alert — a text message — to a corrections officer that warned of a potential incident and gave the location.  The computers cannot do anything more than officers who constantly watch surveillance monitors under ideal conditions. But in practice, officers are often distracted. When shifts change, an observation that is worth passing along may be forgotten. But machines do not blink or forget. They are tireless assistants.  The enthusiasm for such systems extends well beyond the nation’s prisons. High-resolution, low-cost cameras are proliferating, found in products like smartphones and laptop computers. The cost of storing images is dropping, and new software algorithms for mining, matching and scrutinizing the flood of visual data are progressing swiftly.

What about those Option ARMs? – There were many subprime defaults in 2007 and 2008, and many people have been worried about a "2nd wave" of Option ARM and Alt-A defaults. Here is an updated chart from Zach Fox at SNL Financial as of February 2010: Credit Suisse: $1 trillion worth of ARMs still face resets Most of the resets are expected to occur through 2012. Between 2010 and 2012, the chart indicates that $253.25 billion of option ARMs will adjust, while Alt-A loans totaling $163.71 billion will reset over that time. Altogether, $1.010 trillion worth of ARMs will reset or recast during the three-year period. The chart is labeled "resets" with a comment on "recasts" at the bottom. Resets are not a problem right now with low interest rates.Looking at the 2nd chart, it appears there is another wave coming in 2011 and 2012 – but probably not a large wave for several reasons. First, many of the loans have already defaulted. Second, some of these loans were modified (Option ARMs and Alt-A loans were targeted by the banks for internal modification programs), and some of these borrowers have probably refinanced – the few that had some equity.
Japan population shrinks by record in 2010 – Japan’s population fell by a record amount last year as the number of deaths climbed to an all-time high in the quickly aging country, the government said Saturday. Japan faces a looming demographic squeeze. Baby boomers are moving toward retirement, with fewer workers and taxpayers to replace them. The Japanese boast among the highest life expectancies in the world but have extremely low birth rates. Japan logged 1.19 million deaths in 2010 — the biggest number since 1947 when the health ministry’s annual records began. The number of births was nearly flat at 1.07 million. As a result, Japan contracted by 123,000 people, which was the most ever and represents the fourth consecutive year of population decline. The top causes of death were cancer, heart disease and stroke, the ministry said. Japanese aged 65 and older make up about a quarter of Japan’s current population. The government projects that by 2050, that figure will climb to 40 percent.

Contrary to the NYT’s Assertion, Japan Does Not “Face a Looming Demographic Squeeze” – The article tells readers that the share of the population over 65 is projected to rise from 25 percent in 2010 to 40 percent in 2050. Given that roughly 20 percent of the population is under age 20, this implies that the current ratio of people ages 20-65 to people over age 65 is approximately 2.2 to 1. Assuming the under 20 portion falls to 15 percent of the population by 2050, in that year the ratio will be 1.4 to 1. If productivity growth averages just 1.5 percent annually (it has been averaging more than 2.0 percent in the U.S. over the last 15 years), then output per worker will be more than 80 percent higher in 2050 than it is today. If the average retiree currently consumes 70 percent as much as a prime age worker, then this increase in productivity would allow retirees in 2050 to enjoy a 50 percent rise in living standards above current levels, while still leaving workers almost 30 percent better off.

Chinese Intellectual Property Acquisition Tactics Exposed – "In an interview published in Sina.com.cn, Chinese rail engineers gave a detailed account of the history, motivation, and technologies behind the Chinese high-speed rail system. More interestingly, they blatantly revealed the strategies and tactics used in acquiring high-speed rail tech from foreign companies (Google translation of Chinese original). At the beginning, China developed its own high-speed rail system known as the Chinese Star, which achieved a test speed of 320km/h; but the system was not considered reliable or stable enough for operation. So China decided to import the technologies. The leaders instructed, ‘The goal of the project is to boost our economy, not theirs.’ A key strategy employed is divide-and-conquer: by dividing up the technologies of the system and importing multiple different technologies across different companies, it ensures no single country or company has total control. ‘What we do is to exchange market for technologies. The negotiation was led by the Ministry of Railway [against industry alliances of the exporting countries]. This uniform executive power gave China huge advantage in negotiations,’ said Wu Junrong, ‘If we don’t give in, they have no choice. They all want a piece of our huge high speed rail project.’ For example, [Chinese locomotive train] CRH2 is based on Japanese tech, CRH3 on German tech, and CRH5 on French tech, all retrofit for Chinese rail standards. Another strategy is buy-to-build. The first three trains were imported as a whole; the second three were assembled with imported parts; subsequent trains contain more and more Chinese made parts."

Resolved – Fix the Filibuster – Walter Mondale – WE all have hopes for the New Year. Here’s one of mine: filibuster reform. It was around this time 36 years ago — during a different recession — that I was part of a bipartisan effort to reform Senate Rule 22, the cloture rule. At the time, 67 votes were needed to cut off debate and thus end a filibuster, and nothing was getting done. After long negotiations, a compromise lowered to 60 the cloture vote requirement on legislation and nominations. We hoped this moderate change would preserve debate and deliberation while avoiding paralysis, and for a while it did.  But it’s now clear that our reform was insufficient for today’s more partisan, increasingly gridlocked Senate. In 2011, senators should pull back the curtain on Senate obstruction and once again amend the filibuster rules.  Reducing the number of votes to end a filibuster, perhaps to 55, is one option. Requiring a filibustering senator to actually speak on the Senate floor for the duration of a filibuster would also help. So, too, would reforms that bring greater transparency — like eliminating the secret “holds” that allow senators to block debate anonymously.


Beauty as a public good – Public provision is typically deemed justified in cases of coordination or market failure. Vaccination is a classical example: if all kids but one are vaccinated against a particular disease, the parents of the remaining kid have little incentive to vaccinate her, since she would never catch that disease from her friends. But if all parents free-ride with the hope that others will vaccinate their children, then too few might actually do so. Hence schools mandate a certain vaccination schedule as a pre-requisite for admittance and health services provide vaccinations for free for those who haven’t received them otherwise. Against what disease does beauty immunize us? Beauty is the antidote to white noise. Beauty, in the sense meant here, is not in the eye of the beholder, not a matter of taste. The Taj Mahal, Bach’s ciaccona, the double helix, Godel’s incompleteness theorem don’t gratify us – almost the opposite: they arrest us. They strike us against our boundaries, against the inevitable necessity of the world, with tension, proportion, balance.


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