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You may say that what we need is reconstruction from the ground up — an economics with no vestige of equilibrium analysis. Well, show me some results. As it happens, the hybrid, eclectic approach I’ve just described has done pretty well in this crisis, so you had better show me some really superior results before it gets thrown out the window.

if you think you’ve found a fundamental logical flaw in one of our workhorse economic models, the odds are very strong that you’ve just made a mistake.

it’s quite clear that the teaching of macroeconomics has gone seriously astray. As Saraceno says, the simple models that have proved so useful since 2008 are by and large taught only at the undergrad level — they’re treated as too simple, too ad hoc, whatever, to make it into the grad courses even at places that aren’t very ideological.

to temper your modeling with a sense of realism you need to know something about reality — and not just the statistical properties of U.S. time series since 1947. Economic history — global economic history — should be a core part of the curriculum. Nobody should be making pronouncements on macro without knowing a fair bit about the collapse of the gold standard in the 1930s, what actually happened in the stagflation of the 1970s, the Asian financial crisis of the 90s, and, looking forward, the euro crisis.

he has seen mounting evidence that using a smartphone, or even hearing one ring or vibrate, produces a welter of distractions that makes it harder to concentrate on a difficult problem or job. The division of attention impedes reasoning and performance.

Another 2015 study, appearing in the Journal of Computer-Mediated Communication, showed that when people hear their phone ring but are unable to answer it, their blood pressure spikes, their pulse quickens, and their problem-solving skills decline.

The researchers recruited 520 undergraduates at UCSD and gave them two standard tests of intellectual acuity. One test gauged “available working-memory capacity,” a measure of how fully a person’s mind can focus on a particular task. The second assessed “fluid intelligence,” a person’s ability to interpret and solve an unfamiliar problem. The only variable in the experiment was the location of the subjects’ smartphones. Some of the students were asked to place their phones in front of them on their desks; others were told to stow their phones in their pockets or handbags; still others were required to leave their phones in a different room.

In both tests, the subjects whose phones were in view posted the worst scores, while those who left their phones in a different room did the best. The students who kept their phones in their pockets or bags came out in the middle. As the phone’s proximity increased, brainpower decreased.

In subsequent interviews, nearly all the participants said that their phones hadn’t been a distraction—that they hadn’t even thought about the devices during the experiment. They remained oblivious even as the phones disrupted their focus and thinking.

In a 2013 study conducted at the University of Essex in England, 142 participants were divided into pairs and asked to converse in private for ten minutes. Half talked with a phone in the room, half without a phone present. The subjects were then given tests of affinity, trust and empathy. “The mere presence of mobile phones,” the researchers reported in the Journal of Social and Personal Relationships, “inhibited the development of interpersonal closeness and trust” and diminished “the extent to which individuals felt empathy and understanding from their partners.”

the “integration of smartphones into daily life” appears to cause a “brain drain” that can diminish such vital mental skills as “learning, logical reasoning, abstract thought, problem solving, and creativity.”

 Smartphones have become so entangled with our existence that, even when we’re not peering or pawing at them, they tug at our attention, diverting precious cognitive resources. Just suppressing the desire to check our phone, which we do routinely and subconsciously throughout the day, can debilitate our thinking.

They found that students who didn’t bring their phones to the classroom scored a full letter-grade higher on a test of the material presented than those who brought their phones. It didn’t matter whether the students who had their phones used them or not: All of them scored equally poorly.

A study of nearly a hundred secondary schools in the U.K., published last year in the journal Labour Economics, found that when schools ban smartphones, students’ examination scores go up substantially, with the weakest students benefiting the most.

Social skills and relationships seem to suffer as well.

Because smartphones serve as constant reminders of all the friends we could be chatting with electronically, they pull at our minds when we’re talking with people in person, leaving our conversations shallower and less satisfying.

A second experiment conducted by the researchers produced similar results, while also revealing that the more heavily students relied on their phones in their everyday lives, the greater the cognitive penalty they suffered.

The evidence that our phones can get inside our heads so forcefully is unsettling. It suggests that our thoughts and feelings, far from being sequestered in our skulls, can be skewed by external forces we’re not even aware o

 Scientists have long known that the brain is a monitoring system as well as a thinking system. Its attention is drawn toward any object that is new, intriguing or otherwise striking — that has, in the psychological jargon, “salience.”

even in the history of captivating media, the smartphone stands out. It is an attention magnet unlike any our minds have had to grapple with before. Because the phone is packed with so many forms of information and so many useful and entertaining functions, it acts as what Dr. Ward calls a “supernormal stimulus,” one that can “hijack” attention whenever it is part of our surroundings — and it is always part of our surroundings.

Imagine combining a mailbox, a newspaper, a TV, a radio, a photo album, a public library and a boisterous party attended by everyone you know, and then compressing them all into a single, small, radiant object. That is what a smartphone represents to us. No wonder we can’t take our minds off it.

The irony of the smartphone is that the qualities that make it so appealing to us — its constant connection to the net, its multiplicity of apps, its responsiveness, its portability — are the very ones that give it such sway over our minds.

Phone makers like Apple and Samsung and app writers like Facebook, Google and Snap design their products to consume as much of our attention as possible during every one of our waking hours

Social media apps were designed to exploit “a vulnerability in human psychology,” former Facebook president Sean Parker said in a recent interview. “[We] understood this consciously. And we did it anyway.”

A quarter-century ago, when we first started going online, we took it on faith that the web would make us smarter: More information would breed sharper thinking. We now know it’s not that simple.

As strange as it might seem, people’s knowledge and understanding may actually dwindle as gadgets grant them easier access to online data stores

In a seminal 2011 study published in Science, a team of researchers — led by the Columbia University psychologist Betsy Sparrow and including the late Harvard memory expert Daniel Wegner — had a group of volunteers read forty brief, factual statements (such as “The space shuttle Columbia disintegrated during re-entry over Texas in Feb. 2003”) and then type the statements into a computer. Half the people were told that the machine would save what they typed; half were told that the statements would be erased.

Afterward, the researchers asked the subjects to write down as many of the statements as they could remember. Those who believed that the facts had been recorded in the computer demonstrated much weaker recall than those who assumed the facts wouldn’t be stored. Anticipating that information would be readily available in digital form seemed to reduce the mental effort that people made to remember it

The researchers dubbed this phenomenon the “Google effect” and noted its broad implications: “Because search engines are continually available to us, we may often be in a state of not feeling we need to encode the information internally. When we need it, we will look it up.”

as the pioneering psychologist and philosopher William James said in an 1892 lecture, “the art of remembering is the art of thinking.”

Only by encoding information in our biological memory can we weave the rich intellectual associations that form the essence of personal knowledge and give rise to critical and conceptual thinking. No matter how much information swirls around us, the less well-stocked our memory, the less we have to think with.

As Dr. Wegner and Dr. Ward explained in a 2013 Scientific American article, when people call up information through their devices, they often end up suffering from delusions of intelligence. They feel as though “their own mental capacities” had generated the information, not their devices. “The advent of the ‘information age’ seems to have created a generation of people who feel they know more than ever before,” the scholars concluded, even though “they may know ever less about the world around them.”

That insight sheds light on society’s current gullibility crisis, in which people are all too quick to credit lies and half-truths spread through social media. If your phone has sapped your powers of discernment, you’ll believe anything it tells you.

Data, the novelist and critic Cynthia Ozick once wrote, is “memory without history.” Her observation points to the problem with allowing smartphones to commandeer our brains

When we constrict our capacity for reasoning and recall or transfer those skills to a gadget, we sacrifice our ability to turn information into knowledge. We get the data but lose the meaning

We need to give our minds more room to think. And that means putting some distance between ourselves and our phones.

Harvard Business School professor emerita Shoshana Zuboff argues in her new book that the Valley’s wealth and power are predicated on an insidious, essentially pathological form of private enterprise—what she calls “surveillance capitalism.” Pioneered by Google, perfected by Facebook, and now spreading throughout the economy, surveillance capitalism uses human life as its raw material. Our everyday experiences, distilled into data, have become a privately-owned business asset used to predict and mold our behavior, whether we’re shopping or socializing, working or voting.

By reengineering the economy and society to their own benefit, Google and Facebook are perverting capitalism in a way that undermines personal freedom and corrodes democracy.

Under the Fordist model of mass production and consumption that prevailed for much of the twentieth century, industrial capitalism achieved a relatively benign balance among the contending interests of business owners, workers, and consumers. Enlightened executives understood that good pay and decent working conditions would ensure a prosperous middle class eager to buy the goods and services their companies produced. It was the product itself — made by workers, sold by companies, bought by consumers — that tied the interests of capitalism’s participants together. Economic and social equilibrium was negotiated through the product.

By removing the tangible product from the center of commerce, surveillance capitalism upsets the equilibrium. Whenever we use free apps and online services, it’s often said, we become the products, our attention harvested and sold to advertisers

this truism gets it wrong. Surveillance capitalism’s real products, vaporous but immensely valuable, are predictions about our future behavior — what we’ll look at, where we’ll go, what we’ll buy, what opinions we’ll hold — that internet companies derive from our personal data and sell to businesses, political operatives, and other bidders.

Unlike financial derivatives, which they in some ways resemble, these new data derivatives draw their value, parasite-like, from human experience.To the Googles and Facebooks of the world, we are neither the customer nor the product. We are the source of what Silicon Valley technologists call “data exhaust” — the informational byproducts of online activity that become the inputs to prediction algorithms

internet companies operate in what Zuboff terms “extreme structural independence from people.” When databases displace goods as the engine of the economy, our own interests, as consumers but also as citizens, cease to be part of the negotiation. We are no longer one of the forces guiding the market’s invisible hand. We are the objects of surveillance and control.

By removing the tangible product from the center of commerce, surveillance capitalism upsets the equilibrium. Whenever we use free apps and online services, it’s often said, we become the products, our attention harvested and sold to advertisers

this truism gets it wrong. Surveillance capitalism’s real products, vaporous but immensely valuable, are predictions about our future behavior — what we’ll look at, where we’ll go, what we’ll buy, what opinions we’ll hold — that internet companies derive from our personal data and sell to businesses, political operatives, and other bidders.

Unlike financial derivatives, which they in some ways resemble, these new data derivatives draw their value, parasite-like, from human experience.To the Googles and Facebooks of the world, we are neither the customer nor the product. We are the source of what Silicon Valley technologists call “data exhaust” — the informational byproducts of online activity that become the inputs to prediction algorithms

Another 2015 study, appearing in the Journal of Computer-Mediated Communication, showed that when people hear their phone ring but are unable to answer it, their blood pressure spikes, their pulse quickens, and their problem-solving skills decline.

The smartphone has become a repository of the self, recording and dispensing the words, sounds and images that define what we think, what we experience and who we are. In a 2015 Gallup survey, more than half of iPhone owners said that they couldn’t imagine life without the device.

So what happens to our minds when we allow a single tool such dominion over our perception and cognition?

Not only do our phones shape our thoughts in deep and complicated ways, but the effects persist even when we aren’t using the devices. As the brain grows dependent on the technology, the research suggests, the intellect weakens.

he has seen mounting evidence that using a smartphone, or even hearing one ring or vibrate, produces a welter of distractions that makes it harder to concentrate on a difficult problem or job. The division of attention impedes reasoning and performance.

internet companies operate in what Zuboff terms “extreme structural independence from people.” When databases displace goods as the engine of the economy, our own interests, as consumers but also as citizens, cease to be part of the negotiation. We are no longer one of the forces guiding the market’s invisible hand. We are the objects of surveillance and control.

Social skills and relationships seem to suffer as well.

In both tests, the subjects whose phones were in view posted the worst scores, while those who left their phones in a different room did the best. The students who kept their phones in their pockets or bags came out in the middle. As the phone’s proximity increased, brainpower decreased.

In subsequent interviews, nearly all the participants said that their phones hadn’t been a distraction—that they hadn’t even thought about the devices during the experiment. They remained oblivious even as the phones disrupted their focus and thinking.

The researchers recruited 520 undergraduates at UCSD and gave them two standard tests of intellectual acuity. One test gauged “available working-memory capacity,” a measure of how fully a person’s mind can focus on a particular task. The second assessed “fluid intelligence,” a person’s ability to interpret and solve an unfamiliar problem. The only variable in the experiment was the location of the subjects’ smartphones. Some of the students were asked to place their phones in front of them on their desks; others were told to stow their phones in their pockets or handbags; still others were required to leave their phones in a different room.

the “integration of smartphones into daily life” appears to cause a “brain drain” that can diminish such vital mental skills as “learning, logical reasoning, abstract thought, problem solving, and creativity.”

 Smartphones have become so entangled with our existence that, even when we’re not peering or pawing at them, they tug at our attention, diverting precious cognitive resources. Just suppressing the desire to check our phone, which we do routinely and subconsciously throughout the day, can debilitate our thinking.

They found that students who didn’t bring their phones to the classroom scored a full letter-grade higher on a test of the material presented than those who brought their phones. It didn’t matter whether the students who had their phones used them or not: All of them scored equally poorly.

A study of nearly a hundred secondary schools in the U.K., published last year in the journal Labour Economics, found that when schools ban smartphones, students’ examination scores go up substantially, with the weakest students benefiting the most.

Data, the novelist and critic Cynthia Ozick once wrote, is “memory without history.” Her observation points to the problem with allowing smartphones to commandeer our brains

Because smartphones serve as constant reminders of all the friends we could be chatting with electronically, they pull at our minds when we’re talking with people in person, leaving our conversations shallower and less satisfying.

In a 2013 study conducted at the University of Essex in England, 142 participants were divided into pairs and asked to converse in private for ten minutes. Half talked with a phone in the room, half without a phone present. The subjects were then given tests of affinity, trust and empathy. “The mere presence of mobile phones,” the researchers reported in the Journal of Social and Personal Relationships, “inhibited the development of interpersonal closeness and trust” and diminished “the extent to which individuals felt empathy and understanding from their partners.”

The evidence that our phones can get inside our heads so forcefully is unsettling. It suggests that our thoughts and feelings, far from being sequestered in our skulls, can be skewed by external forces we’re not even aware o

 Scientists have long known that the brain is a monitoring system as well as a thinking system. Its attention is drawn toward any object that is new, intriguing or otherwise striking — that has, in the psychological jargon, “salience.”

even in the history of captivating media, the smartphone stands out. It is an attention magnet unlike any our minds have had to grapple with before. Because the phone is packed with so many forms of information and so many useful and entertaining functions, it acts as what Dr. Ward calls a “supernormal stimulus,” one that can “hijack” attention whenever it is part of our surroundings — and it is always part of our surroundings.

Imagine combining a mailbox, a newspaper, a TV, a radio, a photo album, a public library and a boisterous party attended by everyone you know, and then compressing them all into a single, small, radiant object. That is what a smartphone represents to us. No wonder we can’t take our minds off it.

The irony of the smartphone is that the qualities that make it so appealing to us — its constant connection to the net, its multiplicity of apps, its responsiveness, its portability — are the very ones that give it such sway over our minds.

Phone makers like Apple and Samsung and app writers like Facebook, Google and Snap design their products to consume as much of our attention as possible during every one of our waking hours

Social media apps were designed to exploit “a vulnerability in human psychology,” former Facebook president Sean Parker said in a recent interview. “[We] understood this consciously. And we did it anyway.”

A quarter-century ago, when we first started going online, we took it on faith that the web would make us smarter: More information would breed sharper thinking. We now know it’s not that simple.

As strange as it might seem, people’s knowledge and understanding may actually dwindle as gadgets grant them easier access to online data stores

In a seminal 2011 study published in Science, a team of researchers — led by the Columbia University psychologist Betsy Sparrow and including the late Harvard memory expert Daniel Wegner — had a group of volunteers read forty brief, factual statements (such as “The space shuttle Columbia disintegrated during re-entry over Texas in Feb. 2003”) and then type the statements into a computer. Half the people were told that the machine would save what they typed; half were told that the statements would be erased.

Afterward, the researchers asked the subjects to write down as many of the statements as they could remember. Those who believed that the facts had been recorded in the computer demonstrated much weaker recall than those who assumed the facts wouldn’t be stored. Anticipating that information would be readily available in digital form seemed to reduce the mental effort that people made to remember it

The researchers dubbed this phenomenon the “Google effect” and noted its broad implications: “Because search engines are continually available to us, we may often be in a state of not feeling we need to encode the information internally. When we need it, we will look it up.”

as the pioneering psychologist and philosopher William James said in an 1892 lecture, “the art of remembering is the art of thinking.”

Only by encoding information in our biological memory can we weave the rich intellectual associations that form the essence of personal knowledge and give rise to critical and conceptual thinking. No matter how much information swirls around us, the less well-stocked our memory, the less we have to think with.

As Dr. Wegner and Dr. Ward explained in a 2013 Scientific American article, when people call up information through their devices, they often end up suffering from delusions of intelligence. They feel as though “their own mental capacities” had generated the information, not their devices. “The advent of the ‘information age’ seems to have created a generation of people who feel they know more than ever before,” the scholars concluded, even though “they may know ever less about the world around them.”

That insight sheds light on society’s current gullibility crisis, in which people are all too quick to credit lies and half-truths spread through social media. If your phone has sapped your powers of discernment, you’ll believe anything it tells you.

A second experiment conducted by the researchers produced similar results, while also revealing that the more heavily students relied on their phones in their everyday lives, the greater the cognitive penalty they suffered.

When we constrict our capacity for reasoning and recall or transfer those skills to a gadget, we sacrifice our ability to turn information into knowledge. We get the data but lose the meaning

We need to give our minds more room to think. And that means putting some distance between ourselves and our phones.

Google’s once-patient investors grew restive, demanding that the founders figure out a way to make money, preferably lots of it.

nder pressure, Page and Brin authorized the launch of an auction system for selling advertisements tied to search queries. The system was designed so that the company would get paid by an advertiser only when a user clicked on an ad. This feature gave Google a huge financial incentive to make accurate predictions about how users would respond to ads and other online content. Even tiny increases in click rates would bring big gains in income. And so the company began deploying its stores of behavioral data not for the benefit of users but to aid advertisers — and to juice its own profits. Surveillance capitalism had arrived.

Google’s business now hinged on what Zuboff calls “the extraction imperative.” To improve its predictions, it had to mine as much information as possible from web users. It aggressively expanded its online services to widen the scope of its surveillance.

Through Gmail, it secured access to the contents of people’s emails and address books. Through Google Maps, it gained a bead on people’s whereabouts and movements. Through Google Calendar, it learned what people were doing at different moments during the day and whom they were doing it with. Through Google News, it got a readout of people’s interests and political leanings. Through Google Shopping, it opened a window onto people’s wish lists,

The company gave all these services away for free to ensure they’d be used by as many people as possible. It knew the money lay in the data.

the organization grew insular and secretive. Seeking to keep the true nature of its work from the public, it adopted what its CEO at the time, Eric Schmidt, called a “hiding strategy” — a kind of corporate omerta backed up by stringent nondisclosure agreements.

Page and Brin further shielded themselves from outside oversight by establishing a stock structure that guaranteed their power could never be challenged, neither by investors nor by directors.

What’s most remarkable about the birth of surveillance capitalism is the speed and audacity with which Google overturned social conventions and norms about data and privacy. Without permission, without compensation, and with little in the way of resistance, the company seized and declared ownership over everyone’s information

The companies that followed Google presumed that they too had an unfettered right to collect, parse, and sell personal data in pretty much any way they pleased. In the smart homes being built today, it’s understood that any and all data will be beamed up to corporate clouds.

Google conducted its great data heist under the cover of novelty. The web was an exciting frontier — something new in the world — and few people understood or cared about what they were revealing as they searched and surfed. In those innocent days, data was there for the taking, and Google took it

Google also benefited from decisions made by lawmakers, regulators, and judges — decisions that granted internet companies free use of a vast taxpayer-funded communication infrastructure, relieved them of legal and ethical responsibility for the information and messages they distributed, and gave them carte blanche to collect and exploit user data.

Consider the terms-of-service agreements that govern the division of rights and the delegation of ownership online. Non-negotiable, subject to emendation and extension at the company’s whim, and requiring only a casual click to bind the user, TOS agreements are parodies of contracts, yet they have been granted legal legitimacy by the court

Law professors, writes Zuboff, “call these ‘contracts of adhesion’ because they impose take-it-or-leave-it conditions on users that stick to them whether they like it or not.” Fundamentally undemocratic, the ubiquitous agreements helped Google and other firms commandeer personal data as if by fiat.

n the choices we make as consumers and private citizens, we have always traded some of our autonomy to gain other rewards. Many people, it seems clear, experience surveillance capitalism less as a prison, where their agency is restricted in a noxious way, than as an all-inclusive resort, where their agency is restricted in a pleasing way

Zuboff makes a convincing case that this is a short-sighted and dangerous view — that the bargain we’ve struck with the internet giants is a Faustian one

but her case would have been stronger still had she more fully addressed the benefits side of the ledger.

there’s a piece missing. While Zuboff’s assessment of the costs that people incur under surveillance capitalism is exhaustive, she largely ignores the benefits people receive in return — convenience, customization, savings, entertainment, social connection, and so on

hat the industries of the future will seek to manufacture is the self.

Behavior modification is the thread that ties today’s search engines, social networks, and smartphone trackers to tomorrow’s facial-recognition systems, emotion-detection sensors, and artificial-intelligence bots.

All of Facebook’s information wrangling and algorithmic fine-tuning, she writes, “is aimed at solving one problem: how and when to intervene in the state of play that is your daily life in order to modify your behavior and thus sharply increase the predictability of your actions now, soon, and later.”

“The goal of everything we do is to change people’s actual behavior at scale,” a top Silicon Valley data scientist told her in an interview. “We can test how actionable our cues are for them and how profitable certain behaviors are for us.”

This goal, she suggests, is not limited to Facebook. It is coming to guide much of the economy, as financial and social power shifts to the surveillance capitalists

Combining rich information on individuals’ behavioral triggers with the ability to deliver precisely tailored and timed messages turns out to be a recipe for behavior modification on an unprecedented scale.

it was Facebook, with its incredibly detailed data on people’s social lives, that grasped digital media’s full potential for behavior modification. By using what it called its “social graph” to map the intentions, desires, and interactions of literally billions of individuals, it saw that it could turn its network into a worldwide Skinner box, employing psychological triggers and rewards to program not only what people see but how they react.

spying on the populace is not the end game. The real prize lies in figuring out ways to use the data to shape how people think and act. “The best way to predict the future is to invent it,” the computer scientist Alan Kay once observed. And the best way to predict behavior is to script it.

competition for personal data intensified. It was no longer enough to monitor people online; making better predictions required that surveillance be extended into homes, stores, schools, workplaces, and the public squares of cities and towns. Much of the recent innovation in the tech industry has entailed the creation of products and services designed to vacuum up data from every corner of our lives

“The typical complaint is that privacy is eroded, but that is misleading,” Zuboff writes. “In the larger societal pattern, privacy is not eroded but redistributed . . . . Instead of people having the rights to decide how and what they will disclose, these rights are concentrated within the domain of surveillance capitalism.” The transfer of decision rights is also a transfer of autonomy and agency, from the citizen to the corporation.

What we lose under this regime is something more fundamental than privacy. It’s the right to make our own decisions about privacy — to draw our own lines between those aspects of our lives we are comfortable sharing and those we are not

Other possible ways of organizing online markets, such as through paid subscriptions for apps and services, never even got a chance to be tested.

Online surveillance came to be viewed as normal and even necessary by politicians, government bureaucrats, and the general public

Google and other Silicon Valley companies benefited directly from the government’s new stress on digital surveillance. They earned millions through contracts to share their data collection and analysis techniques with the National Security Agenc

As much as the dot-com crash, the horrors of 9/11 set the stage for the rise of surveillance capitalism. Zuboff notes that, in 2000, members of the Federal Trade Commission, frustrated by internet companies’ lack of progress in adopting privacy protections, began formulating legislation to secure people’s control over their online information and severely restrict the companies’ ability to collect and store it. It seemed obvious to the regulators that ownership of personal data should by default lie in the hands of private citizens, not corporations.

The 9/11 attacks changed the calculus. The centralized collection and analysis of online data, on a vast scale, came to be seen as essential to national security. “The privacy provisions debated just months earlier vanished from the conversation more or less overnight,”

Striking the right balance between markets and government is the central issue in policy debates over economic developmen

What is the role of governments in promoting economic growth?

What can governments do to seize the opportunities of globalization, while minimizing its downsides?

we have to recognize that the tension between markets and government is not new. In fact, it has been the central issue in the evolution of political economy over the last 200 years.

There have been three distinct phases in this evolution.

Phase One: The rise of the market

The “rise of the market” began in the late 18th century, shaped by the writings of Adam Smith and David Ricardo. The “invisible hand” of the market guided supply and demand toward equilibrium and efficiency.

This phase came to an end in the 1930s, when the concept of self-correcting markets collapsed under the weight of the Great Depression.

Falling prices, instead of bringing demand and supply into equilibrium,

Phase Two: The rise of government

markets were inherently unstable. Left on their own, they may not always self-correct

Government intervention was necessary to boost aggregate demand during periods of high unemployment.

The 1940s also saw the advent of the welfare state.

The welfare state was enabled through redistributive taxation and government regulation.

Phase Three: The return of the market

This phase began with growing disenchantment with government’s ability to deliver and was driven forward mainly by U.S.-based economists

The stagflation of the 1970s — persistently high inflation and unemployment — called into question the ability of governments to fine-tune the economy. Meanwhile, the welfare state began to impose an unsustainable fiscal burden,

Friedrich Hayek and Milton Friedman led the charge against “Big Government.” They argued eloquently how an overreaching government dulled the fundamental human instincts that power the capitalist system:

In the 1980s, U.S. President Ronald Reagan and UK Prime Minister Margaret Thatcher reduced taxes, deregulated industries, privatized state-owned enterprises, curbed union power, and scaled back welfare programs. The global economy boomed.

Phase Four: Balancing markets and governments

The financial crisis has revealed significant imperfections in market mechanisms: information asymmetry, moral hazard, systemic risks and behavioral or nonrational motivators of choice.

In a more globalized and complex economy, governments have fewer levers to pull

It has also revealed the inherent limitations of governmen

Neither market fundamentalism nor central planning has worked.

Yet one thing is certain: The choice is not between big government and small government. It is about creating effective government. What matters is what governments do, not how big they are.

Language evolved to solve the crisis of visual theft and to exploit cooperation and exchange

Humans use discrete pulses of sound -- their language -- to alter the internal settings inside someone else's brain to suit an individual's interests. Because language is not a solitary pursuit, language is a form of social learning.

thousands of languages evolved

Can humans afford to have all these different languages, asks Professor Pagel. In a world where we want to promote cooperation, in a world that is more dependent than ever on cooperation to maintain and enhance humanity's levels of prosperity, multiple languages may not be practical.

languages reflect the myriad ways that the human mind perceives and responds to the world, and to lose any of them is to (slightly) diminish and limit the variety and expressive depth of human intellectual, creative and experiential capacity.

Economies dominated by hedge financing—that is, those with strong cashflows and low debt levels—are the most stable. When speculative and, especially, Ponzi financing come to the fore, financial systems are more vulnerable. If asset values start to fall, either because of monetary tightening or some external shock, the most overstretched firms will be forced to sell their positions. This further undermines asset values, causing pain for even more firms. They could avoid this trouble by restricting themselves to hedge financing. But over time, particularly when the economy is in fine fettle, the temptation to take on debt is irresistible. When growth looks assured, why not borrow more? Banks add to the dynamic, lowering their credit standards the longer booms last. If defaults are minimal, why not lend more? Minsky’s conclusion was unsettling. Economic stability breeds instability. Periods of prosperity give way to financial fragility.

Minsky’s insight might sound obvious. Of course, debt and finance matter. But for decades the study of economics paid little heed to the former and relegated the latter to a sub-discipline, not an essential element in broader theories.

Minsky was a maverick. He challenged both the Keynesian backbone of macroeconomics and a prevailing belief in efficient markets.

t Messrs Hicks and Hansen largely left the financial sector out of the picture, even though Keynes was keenly aware of the importance of markets. To Minsky, this was an “unfair and naive representation of Keynes’s subtle and sophisticated views”. Minsky’s financial-instability hypothesis helped fill in the holes.

His challenge to the prophets of efficient markets was even more acute. Eugene Fama and Robert Lucas, among others, persuaded most of academia and policymaking circles that markets tended towards equilibrium as people digested all available information. The structure of the financial system was treated as almost irrelevant

In recent years, behavioural economists have attacked one plank of efficient-market theory: people, far from being rational actors who maximise their gains, are often clueless about what they want and make the wrong decisions.

But years earlier Minsky had attacked another: deep-seated forces in financial systems propel them towards trouble, he argued, with stability only ever a fleeting illusion.

Investors were faster than professors to latch onto his views. More than anyone else it was Paul McCulley of PIMCO, a fund-management group, who popularised his ideas. He coined the term “Minsky moment” to describe a situation when debt levels reach breaking-point and asset prices across the board start plunging. Mr McCulley initially used the term in explaining the Russian financial crisis of 1998. Since the global turmoil of 2008, it has become ubiquitous. For investment analysts and fund managers, a “Minsky moment” is now virtually synonymous with a financial crisis.

it would be a stretch to expect the financial-instability hypothesis to become a new foundation for economic theory. Minsky’s legacy has more to do with focusing on the right things than correctly structuring quantifiable models. It is enough to observe that debt and financial instability, his main preoccupations, have become some of the principal topics of inquiry for economists today

As Mr Krugman has quipped: “We are all Minskyites now.”

Behaviors strongly associated with depression—reduced physical activity and human contact, overconsumption of processed food, seeking endless distraction—are the very behaviors that more and more people now can do, are even forced to do by the nature of their sedentary, indoor jobs.

e we are gathering scientific evidence for the benefits of living close to nature, not simply for enjoying its beauty or getting spiritual sustenance but for keeping our brains and nervous systems in good working order.

Human beings evolved to thrive in natural environments and in bonded social groups. Few of us today can enjoy such a life and the emotional equilibrium it engenders, but our genetic predisposition for it has not changed.

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It may seem baffling, but the explanation is simple: the human body was never designed for the modern postindustrial environment.”

Possibly, the deterioration of emotional well-being characteristic of contemporary urban life represents a cumulative effect of lifestyle changes that have been occurring over many years, an effect that is now suddenly obvious.

Not only do we suffer from nature deficit, we are experiencing information surfeit. Many people today spend much of their waking time surfing the Internet, texting and talking on mobile phones, attending to email, watching television, and being stimulated by other new media—experiences never available until now.

The allure of synthetic entertainment—television, the Internet—is eerily reminiscent of the false promise of industrial food. It seems like a distillation of the good aspects of a social life, always entertaining yet easy to abandon when it becomes tedious or challenging. But, like junk food, it is ultimately unsatisfying and potentially harmful. Our brains, genetically adapted to help us negotiate a successful course through complex, changing, and often hazardous natural environments, are suddenly confronted with an overload of information and stimulation independent of physical reality.

concluded from their study comparing identical and fraternal twins that “the correlation between religious importance and conservatism” is “driven primarily, but usually not exclusively, by genetic factors.” The substantial “genetic component in these relationships suggests that there may be a common underlying predisposition that leads individuals to adopt conservative bedrock social principles and political ideologies while simultaneously feeling the need for religious experiences.”

the Democratic Party — supportive of abortion rights, same-sex marriage and the primacy of self-expressive individualism over obligation to family — is irreconcilably alien to a segment of the electorate.

If these predispositions are, as Friesen and Ksiazkiewicz argue, to some degree genetically rooted, they may not lend themselves to rational debate and compromise.

based on the correlations presented here, knowing the scores of one identical twin gives you a pretty good indication of the scores of the other.”

the outcome of the 19 presidential elections since 1940: Nine Republican victories; 10 for Democrats. In those races, the winner received less than 53 percent of the vote in 10 elections. This equilibrium suggests that political opinion may be less volatile, and more firmly grounded, than is sometimes suspected.

“To the extent that my political opinions can be predicted by my genome, or by an identical twin separated from me at birth who grew up halfway across the world,” Pinker writes, “I have reason to question whether those opinions are justifiable by reason or evidence rather than a reflection of my temperament.”

“the discovery that political ideologies are partly heritable points our attention to what the common psychological threads of competing ideologies are – namely temperamental differences such as authoritarianism, conscientiousness, and openness to experience, together with intellectual differences such as intelligence. These could help pinpoint some of the common denominators beneath competing ideologies which cut across the particular hot buttons of the particular era.”

such research can enhance our understanding of the larger framework within which public discourse and debate shape key outcomes.

We need every tool available to increase our understanding of our systems of self-governance and of how we came to be the political animals that we are.