Control Thyself

I don’t know if it has always been this way (I suspect it has), but people today do seem to have a tendency to want to control the world around them by dictating what other people should do.

I’ve spent a lot of time driving, possibly more than average, and I’ve observed myself and others while doing this. We aren’t just driving, we’re also judging every other driver we encounter. Ultimately, each of us is thinking, “Why can’t everyone just drive the way I drive?” But the sad fact of the matter is that they are driving the way we drive; they’re driving along thinking, “Why can’t everyone just drive the way I drive?”

We bring the same attitude, the same self-justified view of things, to life in general: “Why can’t everyone just live the way I live?” And the problem is the same: Everyone does live the way we live: self-absorbed and thinking we know better than everyone else.

The philosophical attitude is of course somewhat different: We should examine ourselves first, and only when we’re sure we’ve gotten it all figured out (which of course, philosophically speaking, is never) should we turn our attention to telling other people what to do.

This approach tends to strike people as unrealistic, impractical, other-worldly. And those criticisms are true. The truly philosophical life contributes nothing to the growth of the economy, the advance of science and technology, the expansion of human domination over nature. On the contrary, it tends to heap scorn on the pursuit of such things, to call attention to the impermanence, and thus the emptiness, of all achievements along these lines.

This leaves philosophers open to the criticism of being anti-humanistic: Science and medicine and so on have improved the human condition immeasurably over the centuries, and surely no one can claim that there’s no value in this improvement. There’s a certain amount of exaggeration in this claim of progress, but there’s also a certain amount of truth: People do live significantly longer today than they did even a century ago, and anyone who wants to argue that this isn’t an improvement is going to have a hard time convincing anyone.

At the same time, however, we seem to have paid, and are continuing to pay, a steep price: in consumption of the Earth’s resources, destruction of the environment and deterioration in our social, political and spiritual circumstances.

There are lots of rhythms in life. In human life in particular, there’s an upbeat, an inhalation, a rising tide in our youth as we grow and go out into the world to make our mark, raise families, change the institutions and situations into which we’re born. And there’s a downbeat, an exhalation, an ebbing tide in our later years as we seek to preserve and conserve what we’ve learned and what we’ve found worthy of valuing, and to protect what we’ve acquired.

There will always be a tension between these movements, and likely a swinging of the pendulum between one and the other. What seems likely to be most harmful, most likely to render us unable to keep our social world going, is the belief that we can freeze the pendulum at some point in its swing, to believe we can say, “This much freedom, this much exploration, and no more.” And that applies to the carved-in-stone principles of science as much as it does to the conventions of bourgeois society or the commandments of religion.

It’s precisely at the point when we think we have it all figured out that the stuff we don’t know comes up behind us and clubs us on the back of the head.

Spin Cycle

The big economic news this morning was the report that Germany’s gross domestic product declined in the third quarter, marking the second quarter in a row that Europe’s biggest economy has posted a decline in output. That two-quarter decline of course prompted finance reporters to proclaim that Germany now has met “the technical definition of a recession,” which they said is “two or more quarters of decline in GDP.”

Um, no. In the U.S. at least, the organization that more or less officially declares when recessions begin and end, the National Bureau of Economic Research, defines a recession “technically” like this:

“A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. A recession begins just after the economy reaches a peak of activity and ends as the economy reaches its trough.”

In practical terms, most recessions do include two or more consecutive quarters of declining GDP, but a recession can start or end during a quarter that shows an overall increase. As the NBER puts it:

“Most of the recessions identified by our procedures do consist of two or more quarters of declining real GDP, but not all of them. The most recent recession in our chronology was in 2001. According to data as of July 2008, the 2001 recession involved declines in the first and third quarters of 2001 but not in two consecutive quarters. Our procedure differs from the two-quarter rule in a number of ways. First, we consider the depth as well as the duration of the decline in economic activity. Recall that our definition includes the phrase, "a significant decline in economic activity." Second, we use a broader array of indicators than just real GDP. One reason for this is that the GDP data are subject to considerable revision. Third, we use monthly indicators to arrive at a monthly chronology.”

So far, the NBER hasn’t declared that the U.S. economy is in a recession, but they’re often a little slow to make such determinations; it wasn’t until July 2003 that they decided the 2001 recession had ended in November of that year.

Interestingly, the NBER body that makes these determinations is called the Business Cycle Dating Committee. Until recently, a casual observer of the talk coming out of Wall Street and Washington might have gotten the idea that the “business cycle” was a thing of the past, there would be no more downturns, just an endless vista of rising prosperity until the end of time, because our god-like regulators and CEOs would exercise their miraculous powers to make it so.

These of course would be the same regulators and CEOs who are now running hysterically around seeking taxpayer handouts and warning of the imminent collapse of our entire economic system if they don’t get them.

Cycles play a large role in the natural order and are often related to the kind of yin-yang/creation-destruction/attraction-repulsion systems found widely in philosophy and physical science. Given the fundamental dualism of financial and economic dynamics (buy or sell), it would be pretty surprising if we didn’t see some evidence of cyclicality in the economy and markets.

Well, no surprise here:



The chart shows the daily closing price of the Dow Jones Industrial Average from 1897 to the present, on log scale (click to enlarge). The gridlines are set to a time interval of three and a quarter years, and as you can see if you look closely, many of the most significant lows in the index occur pretty close to those lines.

That cycle is even clearer in this next one:



What this chart shows is the 52-week average of the daily percentage price change in the Dow over the same period shown in the first chart. The cyclicality in this time series is pretty obvious, though it clearly isn’t precise enough to be useful in making investment forecasts.

Possibly the most interesting thing about this chart is the fact that the Oct. 27 low in the Dow at 8175 came just seven days shy of the exact predicted date for the 3.25-year cycle low. The index and the average rate of change both rebounded from that point, possibly signaling the start of an upswing that could last a year or more. However, for that interpretation to retain any validity, the index will have to stay above the 8175 level; it’s succeeding so far, but just barely.