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Tuesday, September 16th, 2014
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Making the case for Keynes In 1919, when the victors of World War I were concluding their settlement against Germany — in the form of the Treaty of Versailles — one of the leading British representatives at the negotiations angrily resigned his position, believing the debt imposed on the losers would be too harsh. The official, John Maynard Keynes, argued that because Britain had benefitted from export-driven growth, forcing the Germans to spend their money paying back debt rather than buying British products would be counterproductive for everyone, and slow global growth.
Keynes’ argument, outlined in his popular 1919 book, “The Economic Consequences of the Peace,” proved prescient. But Keynes is not primarily regarded as a theorist of international economics: His most influential work, “The General Theory of Employment, Interest, and Money,” published in 1936, uses the framework of a single country with a closed economy. From that model, Keynes arrived at his famous conclusion that government spending can reduce unemployment by boosting aggregate demand.
But in reality, says Peter Temin, an MIT economic historian, Keynes’ conclusions about demand and employment were long intertwined with his examination of international trade; Keynes was thinking globally, even when modeling locally.
“Keynes was interested in the world economy, not just in a single national economy,” Temin says. Now he is co-author of a new book on the subject, “Keynes: Useful Economics for the World Economy,” written with David Vines, a professor of economics at Oxford University, published this month by MIT Press.
In their book, Temin and Vines make the case that Keynesian deficit spending by governments is necessary to reignite the levels of growth that Europe and the world had come to expect prior to the economic downturn of 2008. But in a historical reversal, they believe that today’s Germany is being unduly harsh toward the debtor states of Europe, forcing other countries to pay off debts made worse by the 2008 crash — and, in turn, preventing them from spending productively, slowing growth and inhibiting a larger continental recovery.
“If you have secular [long-term] stagnation, what you need is expansionary fiscal policy,” says Temin, who is the Elisha Gray II Professor Emeritus of Economics at MIT.
Additional government spending is distinctly not the approach that Europe (and, to a lesser extent, the U.S.) has pursued over the last six years, as political leaders have imposed a wide range of spending cuts — the pursuit of “austerity” as a response to hard times. But Temin thinks it is time for the terms of the spending debate to shift.
“The hope David and I have is that our simple little book might change people’s minds,” Temin says.
“Sticky” wages were the sticking point
In an effort to do so, the authors outline an intellectual trajectory for Keynes in which he was highly concerned with international, trade-based growth from the early stages of his career until his death in 1946, and in which the single-country policy framework of his “General Theory” was a necessary simplification that actually fits neatly with this global vision.
As Temin and Vines see it, Keynes, from early in his career, and certainly by 1919, had developed an explanation of growth in which technical progress leads to greater productive capacity. This leads businesses in advanced countries to search for international markets in which to sell products; encourages foreign lending of capital; and, eventually, produces greater growth by other countries as well.
“Clearly, Keynes knew that domestic prosperity was critically determined by external conditions,” Temin and Vines write.
However, in their view, Keynes had to overcome a crucial sticking point in his thought: As late as 1930, when Keynes served on a major British commission investigating the economy, he was still using an older, neoclassical idea in which all markets reached a sort of equilibrium.
This notion implies that when jobs were relatively scarce, wages would decline to the point where more people would be employed. Yet this doesn’t quite seem to happen: As economists now recognize, and as Keynes came to realize, wages could be “sticky,” and remain at set levels, for various psychological or political reasons. In order to arrive at the conclusions of the “General Theory,” then, Keynes had to drop the assumption that wages would fluctuate greatly.
“The issue for Keynes was that he knew that if prices were flexible, then if all prices [including wages] could change, then you eventually get back to full employment,” Temin says. “So in order to avoid that, he assumed away all price changes.”
But if wages will not drop, how can we increase employment? For Keynes, the answer was that the whole economy had to grow: There needed to be an increase in aggregate demand, one of the famous conclusions of the “General Theory.” And if private employers cannot or will not spend more money on workers, Keynes thought, then the government should step in and spend.
“Keynes is very common-sense,” Temin says, in “that if you put people to work building roads and bridges, then those people spend money, and that promotes aggregate demand.”
Today, opponents of Keynes argue that such public spending will offset private-sector spending without changing overall demand. But Temin contends that private-sector spending “won’t be offset if those people were going to be unemployed, and would not be spending anything. Given jobs, he notes, “They would spend money, because now they would have money.”
Keynes’ interest in international trade and international economics never vanished, as Temin and Vines emphasize. Indeed, in the late stages of World War II, Keynes was busy working out proposals that could spur postwar growth within this same intellectual framework — and the International Monetary Fund is one outgrowth of this effort.
History repeating?
“Keynes: Useful Economics for the World Economy” has received advance praise from some prominent scholars. French economist Thomas Piketty calls the book “highly relevant for today’s world,” while the Oxford economist Simon Wren-Lewis says it “brings Keynesian thinking alive,” and is “a fascinating exploration of a revolution in economic thought.”
Nonetheless, Temin is guarded about the prospect of changing the contemporary austerity paradigm.
“I can’t predict what policy is going to do in the next couple of years,” Temin says. And in the meantime, he thinks, history may be repeating itself, as debtor countries are unable to make capital investments while paying off debt.
Germany has “decided that they are not willing to take any of the capital loss that happened during the crisis,” Temin adds. “The [other] European countries don’t have the resources to pay off these bonds. They’ve had to cut their spending to get the resources to pay off the bonds. If you read the press, you know this hasn’t been working very well.” | | 9:27a |
Catherine “Kay” Stratton, wife of MIT’s 11th president, dies at 100 Catherine N. “Kay” Stratton — the wife of former MIT President Julius A. Stratton, and for decades a great friend of the arts at MIT — died Sept. 10 at her beloved farm in South Newfane, Vt. She was 100 years old.
Born in Los Angeles, Stratton was brought up in Charlottesville, Va., and attended the University of Virginia’s Mary Washington College before enrolling in Wellesley College after her marriage in 1935.
Long after serving, from 1959 to 1966, as the wife of MIT’s 11th president, Stratton made extensive contributions to the Institute, enriching the lives of students and faculty through her dedication to the arts and her commitment to a more vibrant campus.
“Kay never stopped imagining ways that MIT might become a better place,” says Lawrence S. Bacow, president emeritus of Tufts University, who served as MIT’s chancellor from 1998 to 2001. “I first met her shortly after I became chancellor, when she came to talk to me about creating senior housing for MIT’s retirees. Later she enlisted me as a participant in the lecture series that she organized annually: Kay assembled leading experts from the Institute and beyond to focus attention on major issues of the day. Kay was a gem: the youngest, liveliest centenarian I have ever known.”
Stratton co-founded the MIT Arts Committee in 1960 to foster the creative and performing arts at MIT, and to “bring to MIT a new emphasis on art as a necessary counterbalance to technology.” The Arts Committee’s recommended policy, still in place today, designates that 1 percent of every construction budget at MIT be designated for art for that building.
The Arts Committee was later expanded into the Council for the Arts at MIT; during Stratton’s tenure as its co-chair, MIT’s permanent collection acquired works by prominent artists such as Henry Moore, Alexander Calder, Pablo Picasso, Louise Nevelson, Robert Motherwell, and Andy Warhol. Today, MIT students may borrow artworks annually through the Catherine N. Stratton Collection of Graphic Arts to enliven and enrich their dormitory rooms and living areas.
“I have been with the Council for the Arts at MIT in one role or another since 1990, and one of the greatest parts of a great job has been the honor and privilege of calling Kay Stratton a friend,” says Susan Cohen, director of the Council for the Arts at MIT. “I remember when I first started, and I was addressing her as ‘Mrs. Stratton,’ she turned to me and said, ‘Please call me Kay, all my friends do.’ I felt like I had been ushered into a sort of charmed world. She was so much fun to be around, and such a positive force. She was what we all should aspire to be: honest, graceful, gracious, and a little mischievous.”
Stratton’s vision, energy, and wide-ranging interests spurred others to activity within the MIT community. “It would never occur to me to just sit and rock,” she once said. “I adore putting ideas and people together.”
In 1988, Stratton created the “Aging Successfully” lecture series at MIT to explore health topics of concern especially — but not exclusively — to an aging population. MIT created a Lecture on Critical Issues series in her honor in 1994, which has included such varied topics as Internet security, population growth, control of nuclear weapons, and microfinance.
While living in New York when her husband was chairman of the Ford Foundation from 1966 to 1971, Stratton served on the board of the Bank Street College of Education. New York Mayor John V. Lindsay named her chair of the Visual Arts Committee of the New York City Cultural Alliance. She was a member of the boards of both the national and world YWCA, and was named Volunteer of the Year by the Cambridge YWCA in 1981. Stratton was also a longtime trustee and board chair of Lesley University, from which she received an honorary doctorate in 2004.
While these activities consumed Stratton’s energies and excited her intellect, her family says that her heart lay in South Newfane, Vt., where she and her husband (who died in 1994) bought “Toby Hill,” the family’s summer home, in 1941.
“It is here that Kay exercised her gardening genius, created the ‘jam lab,’ and brought together frequent and joyous gatherings of family and friends,” says her daughter, Cary S. Boyd.
At Kay Stratton’s 80th birthday celebration at MIT, another daughter, Cay Stratton, regaled the audience with Vermont tales of her mother teaching blackjack and poker to the young sisters “to sharpen our computational skills; efficiently dispatching garden-stalking woodchucks with a .22 rifle; and avidly engaging in sport with family and guests — no one is spared the vicious slash of her ping-pong forehand or the merciless drive of her croquet mallet.”
Stratton is survived by three daughters: Cay Stratton, who lives in Chapel Hill, N.C., with her partner, Barry Popkin; Cary S. Boyd, of Newbury, Mass., and husband Lew Boyd; and Laura S. Thoresby, of Kent, England, and husband Jerry Blanchet. She is also survived by a granddaughter, Caroline Boyd Kronley; her husband, Neal Kronley; and a great-granddaughter, Sarah Finch Kronley, all of Brooklyn, N.Y.
Burial will be private, with a memorial service to be held at MIT at a later date. Memorial contributions may be sent to the Council for the Arts at MIT or Grace Cottage Hospital in Townshend, Vt. | | 11:00a |
How to hide like an octopus Cephalopods, which include octopuses, squid, and cuttlefish, are among nature’s most skillful camouflage artists, able to change both the color and texture of their skin within seconds to blend into their surroundings — a capability that engineers have long struggled to duplicate in synthetic materials. Now a team of researchers has come closer than ever to achieving that goal, creating a flexible material that can change its color or fluorescence and its texture at the same time, on demand, by remote control.
The results of their research have been published in the journal Nature Communications, in a paper by a team led by MIT Assistant Professor of Mechanical Engineering Xuanhe Zhao and Duke University Professor of Chemistry Stephen Craig.
Zhao, who joined the MIT faculty from Duke this month and holds a joint appointment with the Department of Civil and Environmental Engineering, says the new material is essentially a layer of electro-active elastomer that could be quite easily adapted to standard manufacturing processes and uses readily available materials. This could make it a more economical dynamic camouflage material than others that are assembled from individually manufactured electronic modules.
While its most immediate applications are likely to be military, Zhao says the same basic approach could eventually lead to production of large, flexible display screens and anti-fouling coatings for ships.
In its initial proof-of-concept demonstrations, the material can be configured to respond with changes in both texture and fluorescence, or texture and color. In addition, while the present version can produce a limited range of colors, there is no reason that the range of the palette cannot be increased, Craig says.
Learning from nature
Cephalopods achieve their remarkable color changes using muscles that can alter the shapes of tiny pigment sacs within the skin — for example, contracting to change a barely visible round blob of color into a wide, flattened shape that is clearly seen. “In a relaxed state, it is very small,” Zhao says, but when the muscles contract, “they stretch that ball into a pancake, and use that to change color. The muscle contraction also varies skin textures, for example, from smooth to bumpy.” Octopuses use this mechanism both for camouflage and for signaling, he says, adding, “We got inspired by this idea, from this wonderful creature.”
The new synthetic material is a form of elastomer, a flexible, stretchable polymer. “It changes its fluorescence and texture together, in response to a change in voltage applied to it — essentially, changing at the flip of a switch,” says Qiming Wang, an MIT postdoc and the first author of the paper.
“We harnessed a physical phenomenon that we discovered in 2011, that applying voltage can dynamically change surface textures of elastomers,” Zhao says.
“The texturing and deformation of the elastomer further activates special mechanically responsive molecules embedded in the elastomer, which causes it to fluoresce or change color in response to voltage changes,” Craig adds. “Once you release the voltage, both the elastomer and the molecules return to their relaxed state — like the cephalopod skin with muscles relaxed.”
Multiple uses for quick changes
While troops and vehicles often move from one environment to another, they are presently limited to fixed camouflage patterns that might be effective in one environment but stick out like a sore thumb in another. Using a system like this new elastomer, Zhao suggests, either on uniforms or on vehicles, could allow the camouflage patterns to constantly change in response to the surroundings.
“The U.S. military spends millions developing different kinds of camouflage patterns, but they are all static,” Zhao says. “Modern warfare requires troops to deploy in many different environments during single missions. This system could potentially allow dynamic camouflage in different environments.”
Another important potential application, Zhao says, is for an anti-fouling coating on the hulls of ships, where microbes and creatures such as barnacles can accumulate and significantly degrade the efficiency of the ship’s propulsion. Earlier experiments have shown that even a brief change in the surface texture, from the smooth surface needed for fast movement to a rough, bumpy texture, can quickly remove more than 90 percent of the biological fouling.
Zhenan Bao, a professor of chemical engineering at Stanford University who was not involved in this research, says this is “inspiring work” and a “clever idea.” She adds, “I think the significant part is to combine the ability of mechanochemical response with electrical addressing so that they can induce fluorescence patterns by demand, reversibly.” Bao cautions that the researchers still face one significant challenge: “Currently they can only induce one kind of pattern in each type of material. It will be important to be able to change the patterns.”
In addition to Zhao, Craig, and Wang, the team also included Duke student Gregory Grossweiler. The work was supported by the U.S. Office of Naval Research, the U.S. Army Research Laboratory and Army Research Office, and the National Science Foundation. |
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