A Disappointing Legacy

We were the generation of change, enlightened societal change and better social thinking. We were the '60s generation and the baby boomers. We would author movement to higher ground: greater civic virtue, and elevated democratic and humanitarian principles. A new and better vision of society would be our gift to the great unwashed of other generations and other places. We would make this happen.

But it is hard not to see the fingerprints of the baby boomers, and especially we '60s folk--our presumptuousness and collective self-indulgence--on the stock and housing market excesses of the last 15 years, the indulgences and indiscretions of Wall Street, those too, and the resulting financial crisis and great recession now weighing upon us all. And we without any sense of culpability for all that we authored, all that resulted, for the tarnished and diminished legacy visited upon our children and grandchildren.

What It's Often About

It is often more about personal depths to be plumbed, an internal voice faintly heard, a truth at first more sensed or apprehended than articulated or understood. It is about peace with that which passes and that which endures. It challenges us to understand ourselves as a passing experience, identity and consciousness, which is somehow part of a greater purpose and existence that endures. It challenges us with notions of humility and transcendence. This understanding and peace, ever incomplete but continually unfolding, seems more often extended by invitation and accepted than pursued. And it appears that the more attentive we are to the unfolding, the more open we are to the invitations, the deeper, more intimate the journey becomes.

America Needs A Better Political Right: The Economist

The Economist believes we deserve better. A better political Right in America. A more worthy counterpart to the Democrats, a more responsible, more effective advocate for America's future. They call for a more constructive, balanced Republican Party with better ideas for America and the world, the kind of party that can be elected by most Americans because it better represents most Americans. It takes the voice and credibility of The Economist, the foremost voice and defender of the free-market high ground, for this critical truth to be heard by the Right and Center-Right. And I couldn't agree more. It is important.

Even though I have been an unapologetic supporter of President Obama and essential elements of his 21st-century agenda for our more challenging times, I had been a life-long moderate Republican. I have always been an unequivocal advocate of an open, robust market economy, intelligently regulated, and of necessary and appropriate government social support programs, especially universal public education, health care, and support of the poor, infirm, and aged. I could be that and also be a moderate Republican. But that was before George W. Bush, Dick Cheney, Karl Rove and the narrow, polarizing politics of the extreme ideological and religious Right, the new "base." And as the credibility of the case for global warming has become continually stronger, and the need for immigration reform, including legalizing millions of productively employed illegal immigrants, has become increasingly clear, the Republicans remain absent from an informed dialogue and the development of intelligent political responses. As a result, by conviction and a lack of meaningful choices, I now find myself an Independent who must most often vote Democratic.

So, I have an earnest interest in a credible, responsible, inclusive Republican party of competitive ideas. For it took an intolerable situation among the Republicans for me to recognize more credibility and responsibility in the perpetually undisciplined and uncoordinated voices of the Democratic party, and its rather consistent inability to lead. And while it has left me without clear political identity, I'm getting used to it, and now prefer it.

In an earlier post I assailed the regrettable content and tone of the Right's undereducated, strident public voices, the unintelligible and irresponsible blather of the likes of Limbaugh, Beck, Hannity and Rove. I concluded with these thoughts:

The reason I make these points is that Americans need to hear the Republican-Democratic debates carried on by the best educated, trained and experienced exponents of each point of view. Both parties represent important ideas and claims that are historical and complementary parts of American life, economics and values. If Americans are to be well informed citizens and voters, we need the most able explanations and defenses of each party's current policy prescriptions for our country. It's that simple. And if that's what the current Republican Party believes we have been offered, then we cannot be surprised that they don't understand why so many have fled them for Independent status or the Democratic Party, why a recent poll found only 21% of American voters now willing to admit being Republicans.

But that is the state of things. Speaking for the Republican Party today are three undereducated radio and TV personalities, an undereducated former political campaign operative and master of misinformation, the discredited Dick Cheney, the Religious Right, and the legacy of George W. Bush. [And I didn't even address Sarah Palin.] This could be the sad obituary of the GOP. But it doesn't have to be. America still needs to hear credible voices from a modern, inclusive, socially adaptive and politically evolving Republican Party. But there are no such voices being heard.

In a recent edition, The Economist (6.12.10) takes up the gauntlet in a summary "Leadership" piece, "What's Wrong with America's Right?" and a longer "Briefing" article, "The Risks of 'Hell, No!" Allow me to share with you excerpts from the "Leadership" piece:

This newspaper supported [Mr. Obama] in 2008 and backed his disappointing-but-necessary health-care plan. But he has done little to fix the deficit [but Fed Chairman Bernanke has made clear the risks of moving too fast on this], shown a zeal for big government and all too often given the impression that capitalism is something unpleasant he found on the sole of his sneaker [but Wall Street, banking, and BP irresponsibility might place that in perspective]. America desperately needs a strong opposition. So it is sad to report that the American right is in a mess: fratricidal, increasingly extreme on many issues and woefully short of ideas, let alone solutions.

This matters far beyond America's shores. For most of the past half-century, conservative America has been a wellspring of new ideas—especially about slimming government. At a time when redesigning the state is a priority around the world, the right's dysfunctionality is especially unfortunate.

The Republicans at the moment are less a party than an ongoing civil war (with, from a centrist point of view, the wrong side usually winning). There is a dwindling band of moderate Republicans who understand that they have to work with the Democrats in the interests of America. There is the old intolerant, gun-toting, immigrant-bashing, mainly southern right which sees any form of co-operation as treachery, even blasphemy. And muddying the whole picture is the tea-party movement, a tax revolt whose activists (some clever, some dotty, all angry) seem to loathe Bush-era free-spending Republicans as much as they hate Democrats. Egged on by a hysterical blogosphere and the ravings of Fox News blowhards, the Republican Party has turned upon itself (see article)...

As for ideas, the Republicans seem to be reducing themselves into exactly what the Democrats say they are: the nasty party of No. They may well lambast Mr Obama for expanding the federal deficit; but it is less impressive when they are unable to suggest alternatives. Paul Ryan, a bright young congressman from Wisconsin, has a plan to restore the budget to balance; it has sunk without a trace. During the row over health care, the right demanded smaller deficits but refused to countenance any cuts in medical spending on the elderly. Cutting back military spending is denounced as surrender to the enemy. Tax rises of any kind (even allowing the unaffordable Bush tax cuts to expire as scheduled) are evil.

This lack of coherence extends beyond the deficit. Do Republicans favour state bail-outs for banks or not? If they are against them, as they protest, why are they doing everything they can to sabotage a financial-reform bill that will make them less likely? Is the party of "drill, baby, drill" in favour of tighter regulation of oil companies or not? If not, why is it berating Mr Obama for events a mile beneath the ocean? Many of America's most prominent business leaders are privately as disappointed by the right as they are by the statist Mr Obama.

Out of power, a party can get away with such negative ambiguity. The real problem for the political right may well come if it wins in November. Just as the party found after it seized Congress in 1994, voters expect solutions, not just rage. The electorate jumped back into Bill Clinton's arms in 1996. Business conservatives are scouting desperately for an efficient centrist governor (or perhaps general) to run against Mr Obama in 2012. But tea-party-driven success in the mid-terms could foster the illusion that the Republicans lost the White House because Mr McCain was insufficiently close to their base. That logic is more likely to lead to Palin-Huckabee in 2012 than, say, Petraeus-Daniels.

Britain's Conservatives, cast out of power after 18 years in 1997, made that mistake, trying a succession of right-wingers. Only with the accession of the centrist David Cameron in 2005 did the party begin to recover as he set about changing its rhetoric. There may be a lesson in that for the Republicans—and it is not too late to take it.

Amen. So, how about a more robust marketplace of competitive political ideas, economically and socially responsive ideas, responsible and supportable ideas? And competitive, effective leadership, responsible leadership, yes, that too. I know, not in my lifetime.

On Christian Meditation

Thomas Merton on Christian meditation, a part of his larger reflection on contemplative prayer:

Meditation is not merely the intellectual effort to master certain ideas about God or even to impress upon our minds the mysteries of our Christian faith. Conceptual knowledge of religious truth has a definite place in our life, and that place is an important one....[But] the knowledge of which we are capable is simple knowledge about Him. It points to Him in analogies which we must transcend in order to reach Him. But we must transcend ourselves as well as our analogies, and in seeking to know him we must forget the familiar subject-object relationship which characterizes our ordinary acts of knowing.

Instead we know Him insofar as we become aware of ourselves as known through and through by Him. We "possess" Him in proportion as we realize ourselves to be possessed by Him in the inmost depths of our being. Meditation or "prayer of the heart" is the active effort we make to keep our hearts open so that we may be enlightened by Him and filled with this realization of our true relationship to Him. Therefore the classic form of "meditation" [among others] is repetitive invocation of the name of Jesus in the heart emptied of images and cares.

Hence the aim of meditation, in the context of Christian faith, is not to arrive at an objective and apparently "scientific" knowledge about God, but to come to know Him through the realization that our very being is penetrated by His knowledge and love for us. Our love of God is paradoxically a knowledge not of Him as the object of our scutiny, but of ourselves as utterly dependent on His saving and merciful knowledge of us....We know Him in and through ourselves insofar as his truth is the source of our being and His merciful love is the very heart of our life and existence. We have no other reason for being, except to be loved by Him as our Creator and Redeemer, and to love Him in return. There is no true knowledge of God that does not imply a profound grasp and an intimate personal acceptance of this profound relationship.

The whole purpose of meditation is to deepen the consciousness of this basic relationship of the creature to the Creator, and of the sinner to his Redeemer.

--Contemplative Prayer, Excerpts from Chap. 14, Thomas Merton (1971)

Republicans, Democrats, Both

They're half the story claiming to know it all. They're half the questions claiming all the answers. They're a half-way effort claiming complete success. They're about winning and imposing their will, not governing. They're about evading responsibility, or placing it on others. They're about political "spin" and legerdemain. They do not allow for political, cultural or social accommodation, not really. Solving problems and serving people is what they talk about, not what they do. They're insulting to my intelligence and yours. Republicans, Democrats, both.

Possibilities & Resentments: Immigration Policy

Isn't this what it comes down to: America needs its continuing flow of immigrants seeking a better life. We always have. Yet, it's always been a clumsy, unsettling process of realigning opportunities and roles, of new possibilities and resentments, too. But we still need the additional labor resources, the intellectual and creative potential, the challenge to us to become more than we are. We still need the personal and cultural growth and enrichment, the increasing strength and resiliency it brings to America as a nation. Right now, we need the legal and illegal immigrants that have been absorbed into productive work and life here. We do.

Bernanke: Unsustainable Deficits

Fed Reserve Chairman Ben Bernanke's most recent testimony to the House Budget Committee seemed to some contradictory, or at least inconsistent. But no, not really. Not if we are willing, at least, to go with him just a little deeper than simple, black-and-white ideological or populist restatements, just a little further down the time line that recognizes that crises are most often evolved conditions, and so are their resolutions. Then it all starts to make a lot more sense. The New York Times, to begin:

WASHINGTON — When it comes to the deficit, Ben S. Bernanke has a story, and he's sticking to it. Mr. Bernanke, the Federal Reserve chairman, warned on Wednesday that "the federal budget appears to be on an unsustainable path," but also recognized that an "exceptional increase" in the deficit had been necessary to ease the pain of recession.

--"Bernanke Warns of 'Unsustainable' Debt," by Sewell Chan, The New York Times (6.9.10)

So, yes, we have a considerable federal budget problem, an unsustainable condition, a potential crisis in itself. And congress must start serious work on how that deficit will be brought back into reasonable balance and under control. And yes, that unsustainable problem was exacerbated by an "exceptional increase" in government spending necessary to lift us out of an extraordinary financial crisis that could easily have pushed us into a disastrous depression. Of course, as pointed out by a few friends, no mention was made of the now not-so-exceptional annual defense spending outlays, the now commonplace, seeming chronic condition of war in Iraq and AfPak which has contributed dramatically to the evolution of annual budget deficits. And yes, there are other reasons, too. There are lots of stones to throw.

Regardless, the problem has to be brought under control; the way out has to be thoughtfully, responsibly planned; and that plan has to be put into effect. But not just yet, says Bernanke. The Times article:

Mr. Bernanke suggested that the United States had a while longer — but not much — before it would have to pull in the reins. "This very moment is not the time to radically reduce our spending or raise our taxes, because the economy is still in a recovery mode and needs that support," Mr. Bernanke told Representative Bob Etheridge, Democrat of North Carolina.

In the next breath, however, he added that continuing deficits risked a "potential loss of confidence in the markets."

So, yes, it is also a little complicated. It is not just a question of how, but also, when? Democrats' tax increases and Republicans' social spending cuts will have to wait a little longer until the economy is a little stronger--strong enough to sustain itself with reductions in both individual disposable income (higher taxes) and government program spending. And the timing is critical: if effected too soon it will stall or reverse the recovery; if delayed too long, the deficit condition worsens, threatening more the longer-term health of the economy.

Not simple, to be sure, but clearly understandable if our concerns and purposes are something more than the polarized, short-term political power relationships between Republicans and Democrats. But, God help us, that is our regrettable situation, the circumstances that will likely limit our options and possibilities, and define our fate. Politicians on both sides of the aisle, it seems, would rather keep things misleadingly simple and properly cast for the ideologically faithful. That allows articulation of the circumstances in terms consistent with their respective social or economic views and values. As always, facts and context, particularly complex facts that call simple answers and views into question, are not often welcomed or shared by those who pass for statesman-leaders in our time.

But Chairman Bernanke refuses to be the stooge for either of these camps of political gamesmanship. Nor will he do their jobs for them. More from the same article:

In nearly two hours of questioning by the House Budget Committee, however, Mr. Bernanke gave potential succor to members of both parties, while refusing to side with either of them. To Republicans, he offered warnings about the fiscal perils of an aging population and the potential threat of soaring long-term interest rates. To Democrats, he made it clear that persistently high unemployment was a drag on growth and said that additional short-term stimulus spending might be needed.

All the while, Mr. Bernanke refused to endorse any particular spending cuts or tax increases, or even specify the balance between the two. And he was not subtle about his strategy.

"I'm trying to avoid taking sides on this because it's really up to Congress to make those decisions," he told Representative Michael K. Simpson, Republican of Idaho. "But we need your expertise on it," Mr. Simpson pressed. "Well, no," Mr. Bernanke replied. "Plenty of people have that kind of expertise, including the Congressional Budget Office and others."

I like and respect Ben Bernanke. Most of you know that. I liked the courage, honesty, and competence with which he managed and led us through the financial crisis we faced. I like the way he has now settled back into a strong, competent, and politically dispassionate interpretation of his role as Fed Chairman. I like his independence and unwillingness to be gamed or manipulated by Congress. Not surprising for a moderate Republican economist respected as much for his experience in government service as his expertise as a scholar, respected enough to be first appointed by a conservative Republican and reappointed by a liberal Democrat. I know he will not always be right; no one is. But for me, he is the only person in government I feel I can trust in matters such as these.

The Frog in the Frying Pan: The New Economic Paradigm

I think we may be at one of those historical junctures where we must recognize a new paradigm governing our economic condition and future cycles, one of those situations where John Mauldin's general economic negativity and economic reality occasionally cross over. Which is to say that his column--written this week by Jonathan Tepper--now appears to me to be reflecting a more accurate and balanced view of where we are in the economic cycle, secular changes defining the new paradigm, and what that may mean for us in terms of new economic and investment cycles. Short and to the point, it is worth the read. Mssrs. Mauldin and Tepper:

Tonight I am in Venice, but I have arranged for a special edition of Thoughts from the Frontline, written by Jonathan Tepper of Variant Perception, a research firm in London... And now let's turn the letter over to Jonathan.

The Frog in the Frying Pan

"My best guess is that we'll have a continued recovery, but it won't feel terrific. Even though technically we'll be in recovery and the economy will be growing, unemployment will still be high for a while and that means that a lot of people will be under financial stress,"

--Benjamin Bernanke, Chairman of the Federal Reserve in a Q&A at the Woodrow Wilson International Center for Scholars

After the dot com bust, John Mauldin wrote frequently about "the Muddle Through Economy," where the economy would indeed be growing, but that growth would be below the long-term trend. The Muddle Through Economy would be more susceptible to recession. It would be an economy that would move forward burdened with the heavy baggage of old problems while facing the strong headwinds of new challenges. Mauldin's description of the world was accurate then, and it is even more accurate now.

The current recovery from the Great Recession has surprised to the upside, given the extremely negative estimates that analysts had last year, when almost everyone was predicting the Apocalypse. Since then GDP has been robust, industrial production has shot up, retail sales have bounced back, and the stock market has rebounded strongly. However, compared to previous recoveries, growth does not look that great and people don't "feel" the recovery. This is unlikely to change.

The Muddle Through Economy is the product of several major structural breaks in the economy, which have important implications for growth, jobs, and the timing of a future recession.

Three Structural Changes

Investors are good at absorbing short-term information, but they are much less successful at absorbing bigger structural trends and understanding when secular breaks have occurred. Perhaps investors are like the proverbial frogs in the frying pan, who do not notice the slow, incremental changes occurring around them.

There are three large structural changes that have been slowly but steadily happening. Going forward, the US economy will have to deal with: (1) higher volatility, (2) lower trend growth, and (3) higher structural levels of unemployment.

1) Higher volatility

The period of low volatility of GDP, industrial production, and initial unemployment claims is now over. For a period of over twenty years, excluding the brief 2001-02 recession, volatility of real economic data was extremely low.

The two decades of lower economic volatility have been called "The Great Moderation." We believe that going forward higher economic volatility, combined with a secular downtrend in economic growth, will create more frequent recessions.

You can measure economic volatility in a variety of ways. Our preferred way is on a forward-looking basis. We have recently seen the highest volatility in the last forty years across leading indicators. (These typically lead the economic cycle.) This means only one thing: higher volatility going forward.

2) Lower Trend Growth

We are also seeing a secular decline over the last four cycles in trend growth across GDP, personal income, industrial production, and employment.

Another view of declining trend growth is the decline in nominal GDP. As the following chart shows, the 12-quarter rolling average has been on a steady decline for the last two decades.

A combination of lower trend growth and higher volatility means more frequent recessions. The closer trend growth is to zero and the higher volatility is, the more likely US growth will frequently dip below zero. We believe this has very important implications for equity and bond investors across asset classes. Indeed, the last three economic expansions lasted almost ten years, but in previous decades they averaged four or five years. From now on we will likely see recessions every three to five years.

3) Higher Levels of Structural Unemployment

There is a growing disparity in unemployment rates between the well-educated and the poorly educated; between the "haves" and "have nots." This is a structural shift that began before the recession and has only grown stronger during the recession. The disparity in the unemployment situation is far more dramatic if you look at the breakdown of unemployment rates by educational attainment.

Looking at unemployment by length of time unemployed also shows growing divergences.

There are clear trends developing. Those who have attained a higher level of education are not suffering to nearly the same extent as those on the lower end of the educational scale. Indeed, conditions for less-skilled workers could be described as tight.

Furthermore, those who find themselves out of work stay out of work longer, on average. The average time of unemployment has sharply increased from less than 20 weeks only 2 years ago to over 30 weeks now – a 50% increase. Those unemployed for shorter lengths of time now make up much less of the total than they used to. Instead, the majority of unemployed workers is comprised of those in a chronic state of joblessness. Such people find it ever harder to get back to work, as their skills become rusty.

This phenomenon is not confined to the US. A similar pattern is developing in the UK, as the following chart shows.

Charts by: www.variantperception.com

The Economy Won't Produce Enough Jobs

What do we get when we put the three structural breaks together? Higher volatility and lower trend growth produce more frequent recessions. More frequent recessions and stubbornly high unemployment rates mean that recoveries will not be long-lasting enough to put everyone back to work who would like to work. This in large part explains why high unemployment is currently so problematic.

What are the investment implications for the Muddle Through Economy? Investors will have to adjust to this new reality. Reducing leverage is one way. Another is to reduce the average holding period of investments. Investors will have to become more nimble. This in itself may add to market volatility.

For longer-term investors, this change of paradigm will mean achieving consistent returns is even more difficult. However, investors with a shorter-term, more tactical outlook may find these new, more volatile conditions a source of great opportunities.

The End Game

John Mauldin and I are writing a book called The End Game, about how government policies around the world will likely play out.

The End Game will be about the structural changes affecting the US and many other developed economies and how this impacts you, the reader. Currently the world is caught in a tug of war between deflation and inflation. The global economy faces powerful deflationary forces, which have induced equally powerful responses from governments around the world. Governments have ratcheted up the creation of monetary reserves and increased public spending across the board. Much of the spending is unsustainable, and the monetary reserves may eventually become a problem, resulting in inflation. The outcomes are binary, and they are not good.

Policymakers have not even begun to deal with the problems. As Chairman Bernanke has pointed out, "A variety of projections that extrapolate current policies and make plausible assumptions about the future evolution of the economy, show a structural budget gap that is both large relative to the size of the economy and increasing over time." He stated that "the federal budget appears to be on an unsustainable path." Those are strong words for a Fed chairman. I hope Congress is listening.

In the current economic environment, there are bad choices and worse ones. We hope governments around the world will know how to choose wisely.

It is not all doom and gloom, though. As John Mauldin wrote back in 2003: "The Muddle Through Economy means businesses and entrepreneurs will have to adjust to new and different ways of growing their companies and making a profit. Individuals, especially the Baby Boomer generation, will have to adjust their expectations about retirement and the future. The good news is that "adjusting" is what Americans do better than any people in any country in the world. Change is something we have lived with all our lives. Responding to change and new opportunities is what drives the American free enterprise economy."

It has been a pleasure to share some thoughts with you in John's weekly email, and I look forward to finishing The End Game soon and sharing it with all of you.

Jonathan Tepper
Partner and Chief Editor
Variant Perception
www.variantperception.com

John Mauldin
John@FrontLineThoughts.com

Image in the Mirror

But if views are now changing, will they change fast enough? Responsible voices are calling for a wiser approach, a change of policy. Surely it is time to agree on a new plan, a revised course and scope of action, and the need to effect it now. But if we continue to delay, or further allow delay, and those in authority fail to act or prescribe too little, who can we blame? Then, all we can do, the only act of honesty left to us, is to look in the mirror with despair and resignation, and recognize in ourselves both the face of Apollo's resentful self interest and that of Cassandra's tears.

Our #1 Pastime? The Pleasures of Imagination?

I misunderstood, and was disappointed. The article's title suggested a question and answer at first both surprising and intriguing. I really liked the idea, the possibilities, too. But as it turned out, not so much. It's all in defining the terms of reference, isn't it? But I'd not thought carefully enough about the question: what is our favorite pastime? Nor had I given much thought to what the answer categories might be, how they might be defined, how inclusive they might be. From The Chronicle Review:

How do Americans spend their leisure time? The answer might surprise you. The most common voluntary activity is not eating, drinking alcohol, or taking drugs. It is not socializing with friends, participating in sports, or relaxing with the family. While people sometimes describe sex as their most pleasurable act, time-management studies find that the average American adult devotes just four minutes per day to sex.

Our main leisure activity is, by a long shot, participating in experiences that we know are not real. When we are free to do whatever we want, we retreat to the imagination—to worlds created by others, as with books, movies, video games, and television (over four hours a day for the average American), or to worlds we ourselves create, as when daydreaming and fantasizing. While citizens of other countries might watch less television, studies in England and the rest of Europe find a similar obsession with the unreal.

--"The Pleasures of Imagination," by Paul Bloom, The Chronicle Review (5.30.10)

My natural inclination was to think of "pleasures of the imagination" in terms of one's own imagination, fantasy, creative thinking or work. I would not have naturally extended it to invitations to enter and experience someone else's, including their novels, plays, movies, video games or comics. Those things can constitute imagination or fantasy, to be sure, just not ours. The personal imaginative initiative, the creativity and related enjoyment are absent. We are most often vicarious participants, passive observers of others' imagination and creative process, even if we emotionally enter into it and are experientially carried along with it. That would have constituted another category or two for me. I was not thinking of the broader treatment of experiencing all things that are not "real" (in the sense that they are not phenomena in the external world), as opposed to all things that are.

So I was immediately disappointed with the definition and scope of the topic, and the mostly pedestrian observations and statements made about it. For if we are to include novels, video games, computer media, even television in broad brush, whatever the programming or genre, and whether or not it really constitutes imagination or fantasy--well, those are such broadly inclusive and commonplace experiences that it is hard to be intrigued or surprised by commonplace observations about them. My immediate reaction was, So what? Tell us something most people do not already know. Tell us something new and life affirming; tell us something illuminating about who we are and what our highest potential is.

For me, at least, the better, more broadly understood and acceptable definition of these pastimes addressed is simply entertainment, broadly defined. And again, whether or not there is any personal imagination called into play in experiencing the medium, whether it provokes or inspires imagination on the part of the viewer, the entertained, is very much open to question. And, accepting that, the observations, speculation and conclusions that followed are for the most part rather unexceptional, even predictable, except on the one point, which is imaginatively speculative. Still, they are worth visiting just as a useful reminder of what we should know, and what some social scientists are doing and thinking. Dr. Bloom:

Instead, 2-year-olds pretend to be lions, graduate students stay up all night playing video games, young parents hide from their offspring to read novels, and many men spend more time viewing Internet pornography than interacting with real women. One psychologist gets the puzzle exactly right when she states on her Web site: "I am interested in when and why individuals might choose to watch the television show Friends rather than spending time with actual friends."

One solution to this puzzle is that the pleasures of the imagination exist because they hijack mental systems that have evolved for real-world pleasure. We enjoy imaginative experiences because at some level we don't distinguish them from real ones. This is a powerful idea, one that I think is basically—though not entirely—right. (Certain phenomena, including horror movies and masochistic daydreams, require a different type of explanation.)

The capacity for imaginative pleasure is universal, and it emerges early in development. All normal children, everywhere, enjoy playing and pretending. There are cultural differences in the type and frequency of play. A child in New York might pretend to be an airplane; a hunter-gatherer child will not. In the 1950s, American children played Cowboys and Indians; not so much anymore. In some cultures, play is encouraged; in others, children have to sneak off to do it. But it is always there. Failure to play and pretend is a sign of a neurological problem, one of the early symptoms of autism.

Developmental psychologists have long been interested in children's appreciation of the distinction between pretense and reality...The pleasure children get from such activities would be impossible to explain if they didn't have a reasonably sophisticated understanding that the pretend is not real...

Why do we get pleasure from the imagination? Isn't it odd that toddlers enjoy pretense, and that children and adults are moved by stories, that we have feelings about characters and events that we know do not exist? As the title of a classic philosophy article put it, how can we be moved by the fate of Anna Karenina?

The emotions triggered by fiction are very real. When Charles Dickens wrote about the death of Little Nell in the 1840s, people wept—and I'm sure that the death of characters in J.K. Rowling's Harry Potter series led to similar tears. A friend of mine told me that he can't remember hating anyone the way he hated one of the characters in the movie Trainspotting, and there are many people who can't bear to experience certain fictions because the emotions are too intense. I have my own difficulty with movies in which the suffering of the characters is too real, and many find it difficult to watch comedies that rely too heavily on embarrassment; the vicarious reaction to this is too unpleasant.

These emotional responses are typically muted compared with the real thing. Watching a movie in which someone is eaten by a shark is less intense than watching someone really being eaten by a shark. But at every level—physiological, neurological, psychological—the emotions are real, not pretend....

In the end, though, those brought to tears by Anna Karenina are perfectly aware that she is a character in a novel; those people who wailed when J.K. Rowling killed off Dobby the House Elf knew full well that he doesn't exist. And even young children appreciate the distinction between reality and fiction; when you ask them, "Is such-and-so real or make-believe?," they get it right.

Most often, it seems, Dr. Bloom is merely surveying explanations for these commonplace phenomena that are reasonably well understood, experientially if not neurologically or cognitively. And when he doesn't, he indulges speculation that cannot be proven about things already understood in part in terms of existing behavioral science and research. For example, he embraces the notion of an "alief," a concept developed by a colleague:

Why, then, are we so moved by stories?

In an important pair of papers, Gendler introduces a novel term to describe the mental state that underlies these reactions: She calls it "alief." Beliefs are attitudes that we hold in response to how things are. Aliefs are more primitive. They are responses to how things seem. In the above example, people have beliefs that tell them they are safe, but they have aliefs that tell them they are in danger. Or consider the findings of Paul Rozin, a professor of psychology at the University of Pennsylvania, that people often refuse to drink soup from a brand-new bedpan, eat fudge shaped like feces, or put an empty gun to their head and pull the trigger. Gendler notes that the belief here is: The bedpan is clean, the fudge is fudge, the gun is empty. But the alief is stupid, screaming, "Filthy object! Dangerous object! Stay away!"

We all instinctively understand this. And research by learning theorists in classical and operant conditioning go further in providing useful understandings than the more imaginative observation offered by Dr. Bloom and friends. His need to explain things in terms of deeper psychological elements or faculties would seem to turn us back toward neo-Freudian intuition, analogy or metaphor that does not really advance scientific understanding--even if it may be more fun and provide to some a more appealing explanation of things.

No, if better understandings are to be had, they will more likely be found in the complex predispositions and dictates of the human genome, genetic complexities that capture and control many of our most useful, adaptive behavioral traits and responses. But, aren't the good professor's observations helpful in understanding why such behaviors evolved, why they are useful and adaptive, why they were likely captured and transmitted in our genetic material? To some extent, yes. But I fail to recognize any advancement in research findings or theory that adds anything both new and credible to our understanding or insight into those "why" questions. Just my view.

Still, it is entertaining to be invited into the experience of Dr. Blooms more speculative, imaginative suggestion. Some may enjoy this vicarious sharing of the more creative side of his spirit and thinking. All good, as long we bear in mind what it is and what it isn't. And, although I find his concluding statement as prosaic as most of his broader observations, I share it with you because it so appropriately brings them to closure:

So while reality has its special allure, the imaginative techniques of books, plays, movies, and television have their own power. The good thing is that we do not have to choose. We can get the best of both worlds by taking an event that people know is real and using the techniques of the imagination to transform it into an experience that is more interesting and powerful than the normal perception of reality could ever be. The best example of this is an art form that has been invented in my lifetime, one that is addictively powerful, as shown by the success of shows such as The Real World, Survivor, The Amazing Race, and Fear Factor. What could be better than reality television?

I know I have been unappreciative, even uncharitable toward this article which, if nothing else, is a thoughtful and unoffending survey. And I know that his broader topic is worthy and the work useful. But wouldn't it have been so much more interesting and illuminating, so much more uplifting and life enriching, if he had actually spoken to the topic offered in his title: "The Pleasures of Imagination"--personal imagination and creativity, that is. If a new or more definitive statement could have been made about the operation, importance and possibilities of that exciting topic, that would have been something really worth writing about--and worth reading, to be sure. I know, it's not what he intended to do, not what he did. I just wish it were.

http://chronicle.com/article/The-Pleasures-of-Imagination/65678