Is the Other Shoe Dropping?

Just when U.S. economy began to stabilize and shows signs of recovery out of the Late-2000s recession, politically and ideologically driven fiscal policy debates heat up again like a wild fire that threatens to set the economy back to a much feared double-dip recession.  After contentious and protracted political battles for months, U.S. Congress passed the complicated Budget Control Act of 2011 on August 2^nd at the last minute to kick the can of “2011 United States debt ceiling crisis” down the road.  Shortly after, as agreed and stipulated by the bill, a congressional “Super Committee” (the formal name is the Joint Select Committee on Deficit Reduction) was created which has until Nov. 23, 2011, the day before the Thanksgiving Day, to recommend (a simple majority suffices) to the full Congress for an additional deficit reduction of $1.5 trillion dollars or more over next ten–years.

This carefully chosen (by four House and Senate leaders of the two political parties) 12-members “dream team” is consisted of: for Democrats, Senators Pat Murray of Washington (committee co-chair), John Kerry of Massachusetts, Max Baucus Montana, and House Representatives Xavier Becerra of California, James Clyburn of South Carolina, and Chris Van Hollen of Maryland; and for Republicans, Senators Jon Kyl of Arizona, Pat Toomey of Pennsylvania, Rob Portman of Ohio, and House Representatives Dave Camp of Texas (committee co-chair), Dave Camp and Fred Upton of Michigan. 

If you take a look of committee members’ credentials and stands, you would agree that this is the first positive response to the call for “balanced approach” by President Obama throughout the crisis (you know I am being sarcastic, don’t you?) The sixty four trillion dollars question is how the next episode of this political reality TV show is going to be played out?

You might ask why the gridlock?  The answer is pretty obvious and a familiar one: the Democrats want no cuts to entitlements and the Republicans want no increase to taxes.  At the same time, the majority of people would agree that the rational and most sensible solution to the long-term debt problem is the opposite: cuts in run-away dominant expenses (in entitlements) and increase of total revenue through taxes.  But if you were to run on such a platform, do you think you will be elected to any public offices?

You might ask how much is too much debt?  Technically, the debt ceiling mentioned above applies to the total federal debt (thus excludes state and local debts) or gross debt that reached about $13.6 trillion or a little over 90% of GDP at the end of Sept 2010. By this latter measure of debt-to-GDP ratio, Japan, the third largest economy in the world (by GDP), has the dubious honor of being the highest which had reached 225%.  Singapore, one of the most well-off nations in the world (by GDP per capita) has a debt-to-GDP ratio of about 100%.  All these only suggest the difficulties with the single index approach. Note the gross debt consists of two components: public debt – debts held by investors other than federal government (e.g., treasury bonds held by Chinese government), and intra-governmental debt held by e.g. Social Security and Medicare Trust Funds (operated by federal government).  To add more to the confusion, there are also debates among the economists if and how the intra-government debts should be accounted for.  At the end of Sept 2010, the latter part was over $4 trillion, more than 30% of the total debt. 

Let us accept for the moment the notion that the total debt is too high, you might ask then the most important question what should we do and what should we tell the government do?  The truth is no one is really sure but that never stopped many from offering opinions as if they do know for sure. 

In reality, the government has two powerful tools – monetary and fiscal policies. The former belongs to the independent Federal Reserve which has pretty much used up its ammunitions with its continuing “zero interest rate” policy and Quantitative Easing in response to the recession started by the 2007 financial crisis.  The latter is under the control of executive and legislative branches – the congress and the president.   It is necessarily political and is where all the confusions and actions have been.

The essence of the current debt debate is simply the question of austerity or stimulus.    Unfortunately, economists (Nobel laureates included) do not have a solid grasp of the problems and solutions nor consensus.  It gives politicians and media a huge platform to play their agenda as we are all participating, like to or not, in this giant new social economic experiment.

So far, the best available diagnosis of the problem we have been facing appears to be the Balance Sheet Recession.  It is a notion developed by Richard Koo years ago from the experience with the Great Recession (aka the Lost Decades) of Japan starting in 1990. Richard is an American educated economist and now the Chief Economist of Nomura Research Institute in Tokyo.  He has suggested that what U.S. and Europe have been going through is a replay of what Japan has which is not the familiar traditional recessions of the past decades. The symptom and underlying dynamics is vastly different in that the private sector is not spending because the overriding priority for them is to pay down the debts on balance sheets (that is, income minus liability) that arose from the burst of their asset bubbles.Below is Richard Koo’s April 9, 2011 presentation at a Panel in INET's Bretton Woods Conference.

Richard Koo’s recommended treatment is clear for the balance sheet recession when private sector is not spending and waiting for demand.  He argued convincingly with Japan as an example that government, as the only remaining player, must provide stimulus to keep the economy going.  He also argued that austerity is the wrong medicine which could result in a spiraling down of economy.  Unfortunately, that is exactly where the wave is heading and against which we are swimming.  I am for having disciplines in fiscal policy. But it is not a question of big or small government; it is a question of smart or stupid government!

In the 1957 movie classic 12 Angry Men, justice were served because one cool headed juror #8 (played by Henry Fonda) prevailed.  Will the 12 member Super Committee produce something good?  In real life, with the two-party construct in our political system, there is a strong tendency for adversarial framing in conflicts by the opposing parties, not unlike what happens in our justice system.  As a result, it is very difficult for resolution of this protracted political conflict to even pass the antagonism. Grounded and rigorous reasoning gets drawn out by 30 seconds sound bites and videos which is not the way to help solving a complex problem.

Despite the built-in trigger, the Budget Control Act of 2011 contains no credible threat of mutual destruction.  I am thus not optimistic that the Super Committee and the congress can come to any meaningful and productive resolution; a “hung jury” would be the more likely outcome.  After all, these are merely elected politicians who are supposed to represent us, the 300 millions imperfect, confused, frustrated, and sometimes angry ordinary people.  Should we be surprised about how we get ourselves into this situation?  A situation which Chinese describes as 盲人騎瞎馬 (南朝宋．劉義慶《世說新語．排調》) - the blind rides a blind horse (a similar metaphor in the West would be the blind lead the blind)?  Will we get ourselves out of this mess in time?  What I did not tell you was the second half of the quote “盲人騎瞎馬 - the blind rides a blind horse”.  It is “夜半臨深池 – coming to the edge of a deep pond in a dark night.”  May God bless us all!

Talk to you soon!

The Tithonus Predicament: Immortality and Aging

In the first chapter of his 2008 book The Living End: the future of death, aging and immortality, Dr. Guy Brown of the University of Cambridge cited the following Greek mythology: Tithonus was a handsome mortal who fell in love with Eos, the goddess of dawn.  Eos realized that her beloved Tithonus was destined to age and die.  She begged Zeus to grant her lover immortal life which Zeus did.  Being jealous and deceptive, Zeus granted Eos’ wish without eternal youth that Eos had neglected to include in her wish.  As Tithonus aged, he became increasingly debilitated and demented, eventually drove Eos crazy with his constant babbling.  In despair, she turned Tithonus into a grasshopper (or cicada, according to some other versions).  Well, this myth may explain why grasshoppers (or cicada) chirrup nonstop, like some demented old men.  It raised obviously a much more serious issue – with aging, how desirable could immortality possibly be?

Physical mortality and death must have started as a fairly straightforward notion since it is a visible certainty in life.  Dr. Brown calls it the digital theory of life and death; either one is clearly alive or dead, that is, it is either on or off like many familiar devices such as light bulb.  For some mysterious reasons however, we seem to be reluctant in accepting death and consequently continue fighting it with fear.  This might be more understandable in ancient days when people generally die at a much younger age and we can attribute it to animal’s survival instinct.   However, life expectancy of people (at birth) has increased dramatically in last 200 years.  It has more than doubled from 30 years to 67 years by the beginning of 21st century.  There is no known evolutionary reasons why we need to hang around way after the prime age of reproduction! 

Nevertheless the continual increase of life expectancy sounds so promising and tempting, doesn’t it?  If the rate of increase holds up and continues, perhaps we can be approaching immortality!  Well, it is not so simple.  The primary reasons for the significant improvement of the last 200 years were better public health and nutrition.  As a result, the leading causes of death then such as infant mortality childhood death and death due to infectious diseases were greatly reduced.  For a fascinating visualization of the story, see the following video 200 years that changed the world by the Swedish Professor of International Health Hans Rosling.  By the way, wealth beyond some low threshold, is not necessary for high life expectancy.  Indeed there isn’t whole lot of differences (less than 10 years) in life expectancy between developed and developing countries.  Experience in 1950’s China demonstrated it clearly although the country was extremely poor.

The bad news is if one distinguishes the healthy vs. unhealthy parts of our life expectancy (at birth), Professor Brown showed evidences from UK (thus likely similar for other developed countries as well) that the unhealthy part of late life is the one being extended while the healthy part increased at much slower rate for the last two decades of the 20^th century.  In other words, the data support the prediction of The Failures of Success by late Professor Ernest Gruenberg of Johns Hopkins University that expansion, rather than compression, of morbidity - diseased state - is happening.  At least partly to blame is our relentless efforts in advancing medical technology to prolong life at all cost.  Death is no longer short or quick.  Death is a taboo; we herded the old and sick into nursing homes and hospitals to die in desolation.  The boundary of death and aging is getting blurred as we are left bare, dying alone ever more slowly with possibly agonizing chronic diseases such as dementia.

A digression; you may ask what is aging anyway?  Can we alter it?  The first reaction by most of us is likely to associate aging with the “chronological age” which gives a numerical measure of the progression towards to the inevitable but unknown time of death.  Behind the chronological age are the more familiar and common signs of aging.  Ted Fishman gave a long list of them in his 2010 book Shock on Gray which includes: in 30’s, our metabolism begins to slow down and body to begin redistribute the fat and lose muscle mass and strength; in 40’s, our joints begin to stiffen, hairs begin to turn grey, and vision begin to decline; in 50’s, we begin to forget things, gums start to recede, and for many, high blood pressure, blood sugar, and cholesterol arrive; in 60’s, our skins begin to change with age spots and we begin to walk more slowly and lose some hearing; in 70’s, we have more and more memory lapse, we lose our balances more often and our sensory functions deteriorate visibly; in 80’s, we lose the fat under our skins that now appear thin and saggy, and a significant number of us suffer from dementia.

These signs, while useful in sharing astute observations, are qualitative and less than satisfactory for scientists.  One more useful and robust quantitative measure of aging is the rate of aging which is defined as the mortality doubling time, or the amount of time it takes for the population death rate to double.

 

Surprisingly the Mortality Doubling Time is basically a constant for each species when deaths caused by external events are negligible.  It is about 1-2 years for dogs and 14 years for killer whales.  For humans, the death rate doubles about every 8 years for population between ages 30 and 80 which is the Gompertz Law of human mortality, named after the English actuary Benjamin Gompertz who discovered this constant in 1825.  Not that this law is of fundamental importance to life insurance business as we know it today.  It also supports the hypothesis that the “max” life span of human is about 125 years although there are some believe that figure can be much higher as the mortality doubling time appears to slow down after age 80.

Interestingly, human mortality doubling time has not changed since the Stone Age although the value of death rate itself has decreased significantly especially in the last two centuries as we mentioned earlier.  Note also that even though the expected lifespan of humans has increased significantly, the appearance and functions of say a 65 years old man a century ago is still more of less the same as those of today; the signs of aging remain pretty stable by age.  All these suggest that there is a biologic limit in life. They beg for an answer to the question of why or how does aging work. 

At a micro level, there have been many theories and hypothesis about why and how cells die but many mysteries remain.   What we do know for some time from modern biology is that each of us is made of about 100 trillion cells where cell is considered the basic functional unit of all known living organisms and is the smallest unit of life.  We now know that cells are programmed to die to, e.g., make room for other or new cells to grow and to perform designed functions.  Cells may also experience accidental or disease-induced death due to insufficient oxygen and energy/glucose supply from the blood flows.  We also know by the Hayflick limit discovered in 1961 that normal cells cannot replicate indefinitely.  The bottom line is at the cellular level, normal cells are not immortal and will die in finite time. 

At a more macro level, we understand that cells from the same origin together form tissues to perform particular functions and multiple tissues together then form a structural functional unit referred to as organ such as lung, bladder, heart etc.  Cells are born, aged, damaged and repaired (for some), and eventually commit suicide or killed.  Today’s medical advances have reached a point where we can repair some tissues with stem cells, we can replace parts or whole of some organs including the lung with other’s or with an artificial one.  Is immortality possible then even though individual cells are dying at different rate?  Have you seen this wonderful British science fiction television series Doctor Who and the arch-villain mad scientist Davros?  What does it mean to be immortal if parts or all of us have been replaced or “enhanced”?  Are you still yourself? 

The key must ultimately lie with the brain.  Other than heart cells, neuron is the only cell that cannot be replaced.  That is why strokes (and heart attack) can cause irreversible damages once neurons (and muscle cells) are suffocated or scarred.  More importantly, unlike heart which is the (mechanical) pump that keeps our organs alive with supplies, brain is defining who we are as it receives and processes signals, and issuing signals that command our body.  It weighs only about 3 lb with a volume of about 1130 cm³ for women and 1260 cm³ in men. Some estimated the human brain has about 100 billion neurons and more than100 trillion chemical, electrical and immunological synapses. These neurons develop and work together to perform our daily functions such as muscle control, memory, cognition, language, etc.  We pay a 20% premium of our energy consumption to keep it active and healthy.  For these and other reasons, clinically, death is defined today as an absence of brain activity (as measured by EEG).  A more intuitive and philosophical definition is, as Dr. Brown suggested, “the permanent loss of consciousness.”  

Wikipedia entry of consciousness refers to it as “a variety of aspects of the relationship between the mind and the world with which it interacts”.  It also refers as to common definitions such as “subjective experience; awareness; the ability to experience feelings; wakefulness; having a sense of selfhood;” etc.  Indeed, as we are born, grow and develop, we continue to accumulate our experiences and undergo changes at every level. 

If you think further, the continuity of self is actually maintained through our memory which is formed and shaped from vague and fluid associations of fragments of data scattered among huge number of neurons, unlike digital computers.  When youngsters and adults suffer from neurological diseases or brain dysfunction, we consider them “abnormal” inferring from their behaviors and interactions.  When old people developed dementia – loss of cognitive ability, we refer them as “not behaving like themselves, erratic, or hallucinating”.  (By the way, as a side note, more than 15% of people over age 70 are believed to have some forms of dementia and this percent is expected to increase.)  When some suffer from late stage Alzheimer’s disease, there is only present and there is no past any longer.  The continuity through memory has been broken and the individual can no longer interact with the world as we know.  Where is the self and consciousness then even though he or she is physically alive?

The silver lining is that there are many known ways to address the fear for death and mortality beyond the physical.  At the instinctive level, evolutionary needs necessitate our survival genetically via reproduction which is manifested through off springs and families.  Our ancestors have also found a long time ago that we one can become immortal by leaving our work, deeds and legacy that are carried forward, however little, indefinitely as parts of the culture and the society.  For those who are more curious about the after-life, there is always the religion that has developed various theories and teaches people how to live their lives and deal with death. 

For myself, being pragmatic, I would follow Confucius’ 2,600 years old advice in his Analects: Ji Lu asked about serving the spirits. Confucius said, “If you can't yet serve men, how can you serve the spirits?” Ji Lu added, “May I ask about death?” Confucius said, “If you don't understand what life is, how will you understand death?”(translation by Charles Muller) 子路問事鬼神。 子曰：'未能事人，焉能事鬼？  ''敢問死。  '曰：'未知生，焉知死？  '”《論語·先進》

Talk to you soon!