Economist Michael Chwe has written a book called "Jane Austen: Game Theorist." Do you need more of a reason to read this post? Video from Michael Chwe's YouTube channel.

I'm a specialist in game theory, the mathematical analysis of strategic thinking. Probably the best-known game theorist is John Nash, who received the Nobel Prize in economics and was featured in the movie "A Beautiful Mind."

I have published mathematical economics papers in journals such as the "Journal of Economic Theory." But my latest book is built around the theoretical insights of Jane Austen. This popular and beloved writer used little mathematics or economics. But Austen's novels, written in the early 1800s, anticipated by more than a century the most fundamental game-theoretic concepts, including the emphasis on choice, the theory of utility, and the theoretical analysis of strategic thinking. In fact, Austen's novels contain game-theoretic insights not yet superseded by modern social science.

Before going into Austen's theoretical contributions, let me briefly introduce how game theory is used in economics.

How Game Theory Is Used in Economics

For most of its history, economics concentrated on the analysis of what it calls "perfectly competitive" markets: markets with a multitude of buyers and a multitude of sellers, with no single firm having any influence over market prices.

But even back in the 19th century, economists realized how imperfect markets were becoming. This was the era of "oligopoly" -- a "market situation in which producers are so few that the actions of each of them have an impact on price and on competitors." The oligopolists of the era were the industrial giants like Rockefeller's Standard Oil, the American Tobacco Company, and U.S. Steel. Some oligopolies, like Rockefeller's, were partially dismantled, but many oligopolies, old and new, exist today.

Economists today routinely analyze oligopolies using game theory, once described as the discipline of looking ahead (to what others will do) and reasoning backward (to figure out what you should do in anticipation of what others will do). Game theory's popularity is relatively recent. Its mathematical techniques were pioneered in the 1940s and 1950s by John Nash, John von Neumann and Oskar Morgenstern, although one of the earliest game-theoretic analyses of oligopoly was by Antoine Augustine Cournot in 1838.

Most economics students are taught first about monopolies and perfectly competitive markets because they are easier to analyze. Analyzing monopolies is not difficult: since there is only one firm, it simply acts in order to maximize its profits.

Analyzing perfectly competitive markets is not difficult either: each firm only worries about overall market conditions and not specific competitors because no single competitor is big enough to change market conditions by itself. For example, among taco trucks in Los Angeles, each taco truck worries only about the going price for tacos, not about the decisions of any other particular truck; each truck is a "price taker" and takes the going price of tacos as given.

In oligopolies, however, the situation is more complicated. Each firm must think carefully about its competitors: for example, before releasing a low-cost iPhone for emerging markets, Apple must consider whether its major competitors, Samsung and Huawei, will respond by making smartphones that are even cheaper. Apple must anticipate what Samsung and Huawei will do.

Of course, many markets are perfectly competitive (the restaurant business is a common example). But I suspect that today most economists would say that oligopolies, in which each firm must worry about each of its competitors, are more typical, or at least more interesting.

In other words, competition (and cooperation) among firms these days is usually not a matter of "price taking" -- accepting the price that a perfectly competitive market determines by the interplay of supply and demand - but of "price making," a situation that demands strategy. This is where game theory, the mathematical analysis of strategic thinking, comes in.

How Jane Austen Used Game Theory in her Books

Might it be useful in understanding Jane Austen? I am not the first to use game theory to approach literature. In 1980, Steve Brams wrote a book using game theory to interpret the Bible. The economists Bertrand Crettez and Régis Deloche have written on coordination in Molière's play "Tartuffe." Ilias Chrissochoidis and Steffen Huck have analyzed the mythic plots of Richard Wagner's operas "Lohengrin" and "Tannhauser."

But let's stick with Austen. Maybe it's just me, but as a game theorist, I am sensitive to how her characters act strategically in anticipation of the actions of others. For example, Marianne Dashwood in "Sense and Sensibility" seems to indulge in emotional paroxysms, in one case not changing out of her wet clothes, falling ill and almost dying. But, hearing that she is close to death, her one-time suitor Willoughby abruptly visits to tell her that he did indeed have true affection for her, and married someone else only because of money.

A game theorist might suspect that Marianne broadcasts her suffering anticipating that Willoughby would come back to her or at least acknowledge that he had loved her. Later, Marianne tells her sister Elinor: "My illness, I well knew, had been entirely brought on by myself."

I believe that Austen is a game theorist herself, interested in how people make choices and how people anticipate the choices of others. Like any game theorist, Austen's interest is both practical and theoretical.

For example, what distinguishes game theory, and economics generally, from other social science approaches is its emphasis on individual choice. That's how economists explain behavior. For Austen, choice is an obsession.

She mentions "the power of choice" and states that it is "a great deal better to chuse than to be chosen." When Fanny Price, in "Mansfield Park," receives the proposal of the rich but smarmy Henry Crawford, her entire adoptive family pressures her to accept, but Fanny heroically resists, telling her uncle Sir Thomas that it is simply her choice: "I -- I cannot like him, sir, well enough to marry him."

Economists love results that are not intuitive. One such result, which still gives people pause, is that a country technologically worse at producing everything should still trade with a technologically superior country -- as long as it has a comparative advantage in producing one good relative to another.

Austen loves non-intuitive results too. Fanny Price has an amber cross ornament, a gift from her beloved brother William, but has nothing to wear it with for the upcoming ball. Mary Crawford, Henry Crawford's sister, gives Fanny a gold necklace. Edmund Bertram, the young man whom Fanny really likes, gives Fanny a gold chain. Fanny must choose between Mary's necklace and Edmund's chain. This choice is difficult because Edmund likes Mary, and thus Edmund asks Fanny to wear Mary's necklace in order to show gratitude toward Mary. But Fanny would much rather wear Edmund's chain.

Fanny is relieved to find that "upon trial the one given her by Miss Crawford would by no means go through the ring of the cross. She had, to oblige Edmund, resolved to wear it -- but it was too large for the purpose. His therefore must be worn; and having, with delightful feelings, joined the chain and the cross, those memorials of the two most beloved of her heart ... she was able, without an effort, to resolve on wearing Miss Crawford's necklace too."

With this episode, Austen illustrates how in some situations, not having a choice can be better. This is a nonintuitive result well known in game theory. But Austen does it one better. She is so committed to individual choice that she cannot leave it at this: she has Fanny choose to wear Mary's necklace too. Even when it seems better not to have to make a choice, Austen shows that another choice can make things better still.

Essential to economic theory is the idea of utility: when a person chooses among several alternatives, the economist models this by assigning to each alternative a number corresponding to that alternative's "utility."

For example, if a person chooses between two houses, one house might be in a better location but have fewer bathrooms, while the other might have a quieter backyard but have higher maintenance costs. Economists assume that when a person chooses among houses, the many aspects of a house in the end reduce to a single utility number.

People who are not economists might find this strange, but not Jane Austen. Austen consistently argues for commensurability: the many aspects of an alternative are in the end reducible to a single feeling. In "Northanger Abbey," Catherine Morland plans a walk with Henry and Eleanor Tilney but they do not show up, perhaps because of the rain. Thus she decides to go with her brother and John and Isabella Thorpe on a carriage ride. "Catherine's feelings ... were in a very unsettled state; divided between regret for the loss of one great pleasure, and the hope of enjoying another, almost its equal in degree, however unlike in kind.... To feel herself slighted by [the Tilneys] was very painful. On the other hand, the delight of [the carriage ride] ... was such a counterpoise of good as might console her for almost any thing."

Austen even sometimes uses numbers to quantify feelings: in "Pride and Prejudice," when her sister Lydia runs off unmarried with Wickham, Elizabeth Bennet worries that her love interest Mr. Darcy's opinion of their family will further decrease, and thus "had she known nothing of Darcy, she could have borne the dread of Lydia's infamy somewhat better. It would have spared her, she thought, one sleepless night out of two."

Non-economists often object that real people surely do not calculate as economists do in complicated mathematical models. But for Austen, calculation is not the least bit unnatural. For example, in "Emma," after Emma and Mr. Knightley reveal the news of their engagement to their friends, they predict together how quickly the news will spread through the town: "they had calculated from the time of its being known ... how soon it would be over Highbury ... with great sagacity."

Austen has several names for strategic thinking, including "foresight" and "penetration." For example, Mr. John Knightley warns Emma that Mr. Elton might be interested in her, but Emma is certain that Mr. Elton is interested in Harriet Smith. Mr. George Knightley had earlier warned Emma that Mr. Elton would never marry Harriet because of her lack of wealth. After Mr. Elton drunkenly proposes to Emma in a carriage, however, Emma admits to herself, "There was no denying that those brothers had penetration."

Game theory assumes that a person thinks strategically about others. However, sometimes a person clearly does not. The conspicuous absence of strategic thinking, what I call "cluelessness," is not something modern game theory tries to explain. But Austen does.

For example, in "Northanger Abbey," General Tilney thinks that Catherine Morland is an heiress and thus invites her to Northanger Abbey to encourage her progress with his son Henry. When General Tilney finds out that Catherine is not wealthy at all, he ritually expels her, sending Catherine home without even a servant to accompany her.

But this move backfires badly: "Henry's indignation on hearing how Catherine had been treated ... had been open and bold ... He felt himself bound as much in honour as in affection to Miss Morland."

General Tilney's action only increases Henry's attachment to Catherine, and his sending Catherine home without an escort provides the perfect excuse for Henry to visit her to see if she arrived home safely. During this visit, Henry proposes.

General Tilney could have foreseen all this if he weren't clueless. He did not think strategically about Henry; he did not consider how Henry would react. "The General, accustomed on every ordinary occasion to give the law in his family, prepared for no reluctance."

What explains General Tilney's lack of strategic thinking, his cluelessness? Austen offers several explanations. One is that high-status people believe that they should not have to enter into the minds of low-status people, and in fact, not doing so is a mark of their higher status.

Thus, when a high-status person interacts with a low-status person, the high-status person has difficulty understanding the low-status person as strategic. This is an advantage that the low-status person can exploit. This can help us understand why, for example, after the U.S. invaded Iraq, the resulting Iraqi insurgency came as a complete surprise to U.S. leaders, even though anyone who puts himself in the shoes of an Iraqi commander would easily see the futility of engaging U.S. forces conventionally.

For a possible example in economics, Clayton Christensen finds that companies that are industry leaders often underestimate the disruptive potential of low-status competitors that start by producing cheap, low-quality goods but gradually improve.

It might be a while before we know how useful game theory is for studying literature in general. After all, game theory was around for 20 to 30 years before economics fully embraced it. In the meantime, I look forward to more conversations between the social sciences and the humanities. Perhaps in the future, the connections between economics and the study of literature will no longer be considered surprising.

Michael Chwe is a professor at University of California, Los Angeles who teaches courses on game theory to graduate and undergraduate students. His books include "Rational Ritual: Culture, Coordination, and Common Knowledge" and now "Jane Austen: Game Theorist.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight.

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Britain's chancellor of the Exchequer George Osborne, center right, at the start of the G7 finance ministers and central bank governors meeting on Friday, May 10 in Aylesbury, England. The role of central banks in shoring up the global economic recovery is set to be a key point of discussion among top financial officials from the world's seven leading economies when they gather in the UK this weekend.Photo by Alastair Grant - WPA Pool / Getty Images.

A note Paul Solman: The G7 finance ministers met in England last week and had "intense discussions," said Reuters, about international monetary policy and currency exchange rates, a source of tension in the world economy for, oh, about 100 years now.

According to the economic history books, the one great conference that resolved that tension -- for a quarter century -- was "Bretton Woods," a convocation of 44 countries in the White Mountains of New Hampshire less than a month after D-Day and the beginning of the end for the axis powers in World War II. What would the post-war world economy look like? That was the question in July of 1944. The answers were a loosely dollar-based world currency regime, the International Monetary Fund and what was to become the World Bank.

So, do we need another Bretton Woods today? Benn Steil, editor of the scholarly journal "International Finance," has written a book that ponders this and other questions: "The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order." Paul Volcker has called it "full of lessons relevant today." Alan Greenspan said it's "a must-read work of economic and diplomatic history" and The New York Times wrote that "it should become the gold standard on its topic."

Critics like history professor Eric Rauchway, by contrast, take Steil to taskfor for overemphasizing Bretton Woods' weaknesses and the Soviet connections of its chief American negotiator, Harry Dexter White.

Benn Steil: In the wake of the great financial crisis of 2008, world leaders, from French President Nicolas Sarkozy to British Prime Minister Gordon Brown, began calling for "a new Bretton Woods" to restore discipline and calm to world financial markets. The very words "Bretton Woods," it seemed, had become shorthand for enlightened globalization. Simply invoking the name of the remote New Hampshire town, where representatives of 44 allied nations came together 65 years earlier, in the midst of the century's second great war, was to put oneself on the side of order, stability, vision, cooperation, and peace. But was the actual 1944 Bretton Woods conference, the most important international gathering since the Paris peace talks a quarter century earlier, really such a kumbaya moment? Could we recreate it? And if we could, would we want to?

Consider the conference itself -- the men who drove it and its goals.

President Franklin Roosevelt told the assembled that their agenda marked "a vital phase" among "the arrangements which must be made between nations to ensure an orderly, harmonious world." He hoped it would speed the war's conclusion by sending the enemy Axis powers the message that it was America and its allies that had the compelling postwar vision.

But FDR had little interest in the actual ins and outs of international economic affairs, and it was his Treasury -- led by Sec. Henry Morgenthau, but powered by his ambitious, temperamental deputy, Harry Dexter White -- which scripted its details.

Morgenthau years later told President Harry Truman that his ambition at Bretton Woods had been "to move the financial center of the world from London and Wall Street to the United States Treasury and to create a new concept between the nations of international finance." That concept was given its flesh by Harry White, and its centerpiece was to be a dollar-based international monetary system overseen by a new U.S.-dominated International Monetary Fund.

With the exception of two delegations, the Soviet and the British, the governments represented at Bretton Woods bowed to this concept with only modest grumbling because they felt they had no choice. The United States controlled nearly 80 percent of the world's monetary gold stock at the time, and U.S. dollars were the only credible surrogate for gold. Without American monetary and financial support, barter was the only way to trade, and therefore to survive.

The Soviets, whose trade with the world was entirely state-controlled, had no practical use for the American scheme, and signed on for reasons which were transparent, but to which White was willfully blind: Stalin had hoped to get cheap American loans, that he could repudiate at his convenience, and liked the idea of the world fixing currencies to a gold-backed dollar because it would boost the value of Russia's large gold stocks. (When the loans were not forthcoming, the Soviets refused to ratify the agreements.)

The British delegation head, the storied John Maynard Keynes, tussled with White for two years in the run-up to the conference, trying with increasing desperation to sustain some remnant of an international role for the pound sterling, which functioned as the monetary foundation of Britain's fraying global empire.

The world's first-ever celebrity economist, Keynes was an unlikely diplomat: he was eloquent and quick-witted, yet also irascible and condescending. But with war-torn Britain on the verge of bankruptcy, its colonies braying for London to start paying its way in dollars, Keynes emerged as London's last-ditch financial ambassador because he had what the Americans respected: star power.

For his part, White had a longstanding obsession with Britain and its currency, having as early as 1935, nine years before Bretton Woods, begun working actively to undermine the sterling's status by, for example, forcing China to unpeg its currency from sterling in favor of a peg to the dollar. All this was to pave the way for an international conference at which the dollar would be enthroned as the world's unrivaled monetary standard.

Bretton Woods was ultimately part of a Faustian bargain that Britain was obliged to make with FDR's Treasury. In return for American [Lend-Lease] (http://www.ourdocuments.gov/doc.php?flash=true&doc=71) aid to survive the war, and a transitional loan to get through the immediate post-war period, Britain was told to:

1. End imperial trade preference, the arrangement by which Britain gave itself privileged access to the markets of its colonies and dominions
2. Make the pound sterling fully convertible into dollars at a fixed rate by July 15, 1947 (a day that lives in infamy for the British, as it triggered a collapse of the country's dollar reserves)
3. Accept the U.S. dollar as the global unit of account. It was a brutal deal, but as British economist and Bretton Woods delegate Lionel Robbins put it at the time, "we need[ed] the cash."

The Americans triumphed at Bretton Woods. Yet, looking back nearly 70 years later, it is clear that it was a pyrrhic victory.

There had been four pillars to White and Morgenthau's postwar vision:

1. Britain's empire could be peaceably dismantled
2. The Soviet Union could be co-opted into a permanent peacetime alliance
3. Germany could be safely deindustrialized and dismembered (the so-called Morgenthau Plan)
4. Short-term IMF loans would be sufficient to restart international trade. Three years after Bretton Woods, the Marshall Plan repudiated all of this.

These beliefs, it turned out, had been based on "misconceptions of the state of the world around us." Future secretary of State Dean Acheson later reflected, "both in anticipating postwar conditions and in recognizing what they actually were when we came face to face with them ... Only slowly did it dawn upon us that the whole world structure and order that we had inherited from the nineteenth century was gone and that the struggle to replace it would be directed from two bitterly opposed and ideologically irreconcilable power centers."

By early 1947, Britain was no longer seen as a political and economic rival but as a desperate ally that needed to be saved from communism and collapse. The Soviets could not be co-opted, and needed now to be contained (in George Kennan's famous word). West Germany had to be built into a vital bulwark against Soviet expansion -- this through rehabilitation and resurrection as the industrial engine of a new integrated Western Europe ("Western Europe" being an American conception). Finally, the IMF, together with its loan-based salvation mechanism, would be mothballed in favor of massive U.S. grants-in-aid to its allies.

(Note to Angela Merkel, Germany's iron chancellor: do you not see parallels with your handling of today's eurozone crisis?)

Although the quarter-century period from 1945-1971 is typically referred to as "the Bretton Woods era," the monetary regime called for in the conference agreements could not be said to have become operative until 1961, when the first nine European countries met the requirement that their currencies be convertible into dollars. By this time, however, the system was already coming under strain owing to a deteriorating U.S. balance of payments and corresponding loss of gold reserves.

"There is no likelihood," White had insisted when urging congressional ratification of Bretton Woods in 1945. "The United States will, at any time, be faced with the difficulty of buying and selling gold at a fixed price freely." Yet this is precisely what transpired after his system entered into normal operation in the 1960s.

On Aug. 15, 1971, President Richard Nixon made a dramatic announcement. Following on the heels of a French battleship arriving in New York to take home its gold from the New York Federal Reserve, Nixon announced the closing of the American "gold window." Facing imminent depletion of the once-vast U.S. gold stock, Nixon would remove the foundation of the Bretton Woods international monetary system - never again would the dollar be convertible into gold.

One strange and fascinating legacy of the 1940s that lives on at the IMF today is one which no one present at Bretton Woods could ever have imagined. My archival research uncovered some remarkable new evidence that the Fund's architect, Harry White, despite being a staunch American monetary nationalist, was a passionate believer in the success of Soviet socialist economics, and was bitterly critical of what he saw as western hypocrisy towards Soviet Russia. President Truman was certainly unaware of this when he nominated White to be the first American executive director of the IMF in 1946. He was also on the verge of nominating him to be the first head (managing director) of the Fund when he received a long memorandum from FBI director J. Edgar Hoover warning him not to. Hoover charged that White was actually a Soviet spy.

Truman did not trust Hoover, but knew he had a political problem on his hands. In order to avoid the questioning that would follow appointing another American above White at the IMF, he had his Treasury secretary, Fred Vinson, tell Keynes that, despite White being a "natural" for the Fund's top post, the administration had decided to back an American for the top World Bank post instead. And it would not be "proper," they had concluded with uncharacteristic fair-mindedness, "to have Americans as the heads of both bodies."

In 1997, after exhaustively reviewing a trove of recently declassified Soviet intelligence cables from the 1940s, intercepted and decrypted by wartime U.S. military intelligence, a Senate commission headed by the late Democrat Daniel Patrick Moynihan declared that "the complicity of Alger Hiss of the State Department seems settled. As does that of Harry Dexter White of the Treasury Department."

To this day it is a European, and not an American, who runs the IMF.

Bretton Woods was truly a fascinating saga, but it was most surely not the triumph of economic thinking and international comity it is often painted to be. An ascendant anti-colonial superpower, the United States, used its economic leverage over an insolvent allied imperial power, Great Britain, to set the terms by which the latter would cede its dwindling dominion over the rules and norms of foreign trade and finance. Britain cooperated because the overriding aim of survival seemed to dictate the course.

The monetary architecture that Harry White designed, and powered through an international gathering of dollar-starved allies, ultimately fell of its own contradictions: The United States could not simultaneously keep the world adequately supplied with dollars and sustain the large gold reserves required by its gold-convertibility commitment. The IMF, the institution through which it was launched, though, endures -- however much its objectives have metamorphosed -- and many hope that it can be a catalyst for a new and more enduring "Bretton Woods."

Yet history suggests that a new cooperative monetary architecture will not emerge until the United States, the world's largest creditor nation in the 1940s, but now the world's largest debtor, and China, today's dominant creditor nation, each comes to the conclusion that the consequences of muddling on, without the prospect of correcting the endemic imbalances between them, are too great. Even more daunting are the requirements for building an enduring system; monetary nationalism was the downfall of the last great effort in 1944.

Benn Steil is Director of International Economics at the Council on Foreign Relations in New York.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight.

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Nick Corcodilos started headhunting in Silicon Valley in 1979, and has answered over 30,000 questions from the Ask The Headhunter community over the past decade.

In this special Making Sense edition of Ask The Headhunter, Nick shares insider advice and contrarian methods about winning and keeping the right job, on one condition: that you, dear Making Sense reader, send Nick your questions about your personal challenges with job hunting, interviewing, networking, resumes, job boards, or salary negotiations. No guarantees -- just a promise to do his best to offer useful advice.

Question: I have been a debt collector for over 14 years and have worked at the same law firm for five years. I was promoted to team leader with no increase in pay. The year after that I was promoted to supervisor with a 4.5 percent pay increase.

Fast forward to last Friday, when my manager accidentally sent out an email that showed everyone's pay. I am one of the lowest paid employees even though I have more experience in the industry than 90 percent of my co-workers.

My general manager said this is always the case in business, that new people hired with less experience get paid more. I'm always in the top 5 percent of money collected, and I spend five to six hours each week coaching, training, motivating, molding four to five people who all have minimal experience -- but they make more money than I do. I have my annual review in 30 days. I want to know how to handle the conversation without sounding angry or rude.

Nick Corcodilos: That's an interesting bit of double talk from your general manager, who has already told you what the problem is. The firm pays more to get new hires, and less to seasoned employees who train new employees. In other words, they're taking advantage of you. There's nothing illegal about it. This is how employers can lose their best workers.

I know you want something magical to tell your boss so that he or she will raise your salary to reflect your contributions. And I'll offer some advice about how to do that. But first you need to establish leverage. My first advice is to decide whether it's time to leave your employer. (See "The Wall Says It's Time to Go.") Then immediately start looking for another job, even if you can solve your problem at your current firm.

If your boss rejects your request, you must be ready to live with lower pay, or you must be ready to move on. Having another job to go to will make you a more powerful negotiator and it will give you control over your future, which is the real objective here.

Finally, show your boss the email you received that shows the salary disparity. Now, keep in mind -- it's your boss's right to pay you anything he or she sees fit. But it's your prerogative to decline unfair pay. Now you see why you need leverage.

Another job offer will give you that. My guess is, if you can show your boss why you're worth more, you can do the same with another employer that needs the top-quality services you offer. Find another employer first, or you'll have no control over negotiations with your boss.

If your boss declines to pay you fairly, don't argue. Don't get angry. Be respectful. But be ready to resign. Just don't do it during that meeting. Take time to collect yourself and your thoughts. Plan your exit so it's on your terms and on your schedule.

The best way to negotiate for what you want is to prove what you've done, commit to what you will do next, and have somewhere else to go immediately if you can't negotiate a deal that makes you happy. This is not just about getting more pay. It's about taking control of your career and your future. I wish you the best.

Nick Corcodilos invites Making Sense readers to subscribe to his free weekly Ask The Headhunter© Newsletter. His in-depth "how to" PDF books are available on his website: "How to Work With Headhunters...and how to make headhunters work for you," "How Can I Change Careers?" and "Keep Your Salary Under Wraps."

Send your questions to Nick, and join him for discussion every week here on Making Sense. Thanks for participating!

Copyright © 2013 Nick Corcodilos. All rights reserved in all media. Ask the Headhunter® is a registered trademark. This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow Paul on Twitter.

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If Social Security benefits increase, will they rise enough to give beneficiaries more money in hand? Expert Larry Kotlikoff answers this question, along with others from readers. Photo by Flickr user 401(K) 2012.

Larry Kotlikoff's Social Security original 34 "secrets", his additional secrets, his Social Security "mistakes" and his Social Security gotchas have prompted so many of you to write in that we now feature "Ask Larry" every Monday.

We are determined to continue it until the queries stop or we run through the particular problems of all 78 million Baby Boomers, whichever comes first. Kotlikoff's state-of-the-art retirement software is available, for free, in its "basic" version. His considerable and often very useful output is available on his website.

Gwendolyn Miller -- Wilmington, Del.: I am 73 years old, still working, and have been collecting my Social Security since age 65. I plan to fully retire this year and want to know: will my Social Security monthly amount increase?

Larry Kotlikoff: If your highest 35 years of covered earnings have continued to rise because you've continued to work and get raises, as I recently urged, your benefits have increased. But once you retire, you will no longer be raising what's called your Average Indexed Monthly Earnings (AIME) computed (as I said) on the basis of your 35 highest years of covered earnings.

Your monthly check will, however, continue to go up if the Consumer Price Index does. That's because of the automatic inflation adjustment that's part of the Social Security formula, the inflation adjustment President Obama has recently offered to make less generous by tweaking the formula to account for consumers substituting cheaper goods and services for more expensive ones. As of Jan. 1, 2013, your Social Security check increased by 1.7 percent to reflect inflation.

Currently, inflation is running at an annual rate of 1.5 percent over the past 12 months; 1.4 percent if the President's proposal of the so-called "chained" consumer price index (CPI) is used instead. If it remains at the current rate of inflation, you will get another cost-of-living adjustment (COLA) of 1.5 percent in 2014 -- or 1.4 percent if the chained CPI should by some chance become the measure.

Bob D. -- Southport, Maine: I'm 59. My wife of 16 years died four years ago at 68. I'm still working and plan to continue, though making less than $15,000 a year. Can I apply for survivors benefits? How do I do it, and what percentage of her benefit would I receive?

Larry Kotlikoff: First, I'm sorry for your loss. Second, you can apply for survivor benefits starting at age 60. But take heed of what has come to be my almost weekly warning in this column: survivors benefits will be permanently reduced if you take them prior to full retirement age.

At your full retirement age, your survivors benefits will equal your wife's full retirement benefit, assuming she died prior to full retirement age, but before taking benefits. If she was taking benefits and you wait until 66, you'll get what she was getting, adjusted for inflation. If you wait until 66 and she was beyond full retirement age but hadn't taken her retirement benefit yet when she passed, you'll get her full retirement benefit, adjusted for the delayed retirement credit.

But, if you take your own retirement benefit while also taking your survivors benefit, you'll only get the larger of the two. So, by taking both benefits simultaneously, you can wipe out your survivors benefit entirely.

What's the smart move here? To take one benefit first and let the other grow. For example, Social Security benefit maximization software might show that taking your survivors benefit at 60 and your own retirement benefit at 70 is best. Or it might show that taking your own retirement benefit starting at 62 and your survivors benefit at full retirement age -- 66 in your case -- is best. Given the complexity of Social Security's rules, what's best for people in your situation depends on both their own earnings record and the size of the survivors benefit to which they are entitled.

Marie -- San Diego, Calif.: In my mid 70s. How to arrange my money so that it goes to two kids in "stages," not all at once, when I die?

Larry Kotlikoff: This question ventures beyond, Social Security, the usual compass of this column. But as I've devoted a fair portion of my career to retirement planning and the NewsHour's Making Sense page has offered my free ESPlanner Basic software for years, I suppose I'm as qualified as anyone to answer your question.

One approach is to buy your children simple, single-life, inflation-indexed annuities. Annuities will continue to make payments that will be adjusted for inflation throughout your children's entire lives. Make sure you trust the insurance company. Better yet, buy from multiple companies to spread the risk that any given company might fold.

Carolyn Weinzapfel -- Wilmington, N.C.: My husband is 62 and just started collecting Social Security. I am 54. When I turn 66, can I collect a spousal benefit even though I make a lot more than my husband? His Social Security benefit is $1,572 a month. My projected Social Security benefit is $2,465 a month if I take it at 66 or $3,150 if I wait until 70. If I can get a spousal benefit, would it be half of what my husband would have received if he had waited to take his Social Security? I'm assuming -- from reading some of your other answers -- that I can't do this at 62.

Larry Kotlikoff: You are correct. If you wait until full retirement age, you can apply just for a spousal benefit and receive half of his full retirement benefit. Then at 70, you can apply for your own retirement benefit.

Don B. -- Northport, N.Y.: I started receiving reduced Social Security benefits at age 63 and 5 months. My wife stopped working this year, 2013, and will turn 63 in June. Is it better for her to apply for spousal benefits on my Social Security retirement benefit or to apply for her own reduced benefit? Thanks for your time.

Larry Kotlikoff: Since you have already filed for your retirement benefit, if your wife applies for either a spousal or a retirement benefit before full retirement age, she'll be deemed to be applying for both. In this case, she'll get the sum of her own reduced retirement benefit and her reduced excess spousal benefit, which could be zero. The excess spousal benefit is the difference, if positive, between half of your full retirement benefit and 100 percent of her full retirement benefit.

A better strategy may be for her to wait until full retirement age (66) to start collecting her full spousal benefit and then wait until age 70 to collect her retirement benefit, when it will start at its largest possible level, a strategy that I have urged again and again.

A full spousal benefit is available for someone who hasn't filed or been forced to file, via Social Security's deeming provisions, for her retirement benefits. And the full spousal benefit is calculated as 50 percent of your full retirement benefit, so it's clearly larger than the excess spousal benefit.

Rosemarie Smith -- Eugene, Ore.: My husband is 61 and receiving Social Security Disability Insurance (SSDI). I am 59 and working. How does SSDI work in terms of spousal benefits when I turn 62?

Larry Kotlikoff: When you turn 62, you can collect spousal benefits, but they will be reduced for every month you start collecting them prior to full retirement. Also, due to Social Security's deeming provisions, you will be forced to apply early for your own retirement benefit, which will be permanently reduced.

And because you are going to be forced to file for a retirement benefit, your spousal benefit will be calculated as an excess spousal benefit and then reduced because you are taking it early. The excess spousal benefit is the larger of A., the difference between half your husband's disability insurance benefit and B., 100 percent of your full retirement benefit.

So, I don't think collecting at 62 is likely to be your best strategy. Software would likely suggest that you wait until full retirement age, take just your spousal benefit at that point, and then go for your full retirement benefit age 70, at which point it will start at an inflation-adjusted value that's up to 76 percent larger than if you start it at 62.

Also, your spousal benefit will be calculated as your full spousal benefit, which is half of your husband's disability benefit. And there will be no reduction, since you are starting to take your spousal benefit at full retirement age. The reason that you get the full spousal benefit and not the excess spousal benefit under this strategy is that the excess spousal benefit formula is only used if you have filed or, via the deeming rules, been forced to file for your own retirement benefit.

This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight.

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Economist Zvi Bodie, perhaps the country's foremost expert on pension finance, insists that every American at least consider an investment that financial advisors almost never mention.

Photo by Peter Gridley/Getty Images.

A note from Paul Solman: Zvi Bodie has influenced my thinking about financial economics for 20 years. He has also been my trusted -- and extremely wise -- financial advisor for most of that time. And we have featured him often in stories about America's pension crisis on PBS NewsHour: corporate pension sleight-of-hand and public pension mismanagement, though my favorite Bodie appearance came when he helped us explain the housing Crash of '08, many months before the eventual Lehman collapse.

I regularly beseech Zvi to contribute to this page. Occasionally, he deigns to do so. Today is one of those occasions.

Zvi Bodie: Recently, Paul Sullivan wrote in his Wealth Matters column about financial advisors' increasing interest in technology. He raises two questions about expanded use of technology: Will it help advisers do their job better? And will it be better for clients or confuse and frustrate them? A friend asked me how I would answer those questions. I thought Making Sense readers might be interested too.

Remember the old saw about computer forecasting models? GIGO -- Garbage In, Garbage Out. Technology can make good advice more accessible and less costly, but it cannot turn bad advice into good advice. If the technology is designed to pitch some investment service that is not in the best interest of clients, employing sophisticated technology and interactive software will only serve to deceive the client more efficiently. Fancy software is not a substitute for trustworthiness and good science.

Let me give an example to make clear what I mean. As many of you know if you've read earlier posts of mine on I Bonds or how to pick a financial advisor, I recommend that for people concerned about preserving the purchasing power of their savings, an investment program should start with the purchase of US Treasury Series I Savings Bonds, of which you can purchase up to $10,000 per year per person.

To quote the Treasury Department's write-up online, which I urge everyone to read in full:

"You can cash them in after one year. But if you cash them in before five years, you lose the last three months of interest. (If you cash in an I Bond after 18 months, you get the first 15 months of interest.)"

I Bonds provide the ultimate in long-run liquid financial security to residents of the U.S. An investor in these bonds cannot lose any money or any purchasing power for up to 30 years, despite either inflation or deflation. They provide a return at least equal to the rate of inflation and, often, have paid a "premium" of interest above and beyond inflation.

At the moment, because of historically low interest rates, that premium is zero, but it is reset every six months. If, in September (or the following March or a year from September, etc.), new I Bonds do offer a premium, you can sell the current ones and use the money to buy the new ones. The U.S. Treasury started issuing I Bonds in 1998, and over the intervening 15 years technological improvements have made it easier than ever for people of modest means to purchase them online through TreasuryDirect.gov and keep track of their increasing value, a value that by the terms of the bonds keeps pace with inflation.

You might wonder why a bond that pays, at the moment, only the rate of inflation, is a good investment. The answer is simple. Compare it to an equivalent investment, issued by the very same U.S. Treasury, that is not inflation-protected. The equivalent would be a six-month Treasury "bill." It is paying less than 1/100th of a percent at the moment. Since inflation is running at 1.8 percent right now and an I Bond automatically pays you the inflation rate, the I Bond would seem to be rather obviously the debt instrument of choice.

Yet despite their clear value as a safe and liquid anchor for any investment portfolio, few clients of investment advisors even know of the existence of I Bonds. Bona fide advisors who are truly fiduciaries serving the best interest of their clients would inform them about I Bonds, direct them to the U.S. Treasury's TreasuryDirect.gov website, and assist them in setting up accounts for themselves and their children. To the best of my knowledge, no major investment advisory firm in the U.S. does this.

When the chief financial officer of a West Coast nonprofit followed my counsel on this page (see "How to Find a Financial Advisor, Step by Step") he asked the several financial advisors he auditioned if I Bonds were part of their advice. He told Paul Solman that not one of the advisors said they were. That is not a function of their mastery -- or lack of mastery -- of technology. It can only be explained in terms of self-interest or ignorance. There is no profit margin in advising clients to purchase I Bonds. And of course, if you don't know about them, how can you suggest them?

Instead of practicing prudence, however, investment advisors tend to deploy the latest innovations in digital technology to promote the products of those with an even greater incentive to steer you wrong -- members of the financial services industry. That industry specializes in pushing the product with the highest profit margin, stocks. The content of financial services materials is often deceptive and in some cases flatly contradicts what financial economists recommend as sound.

As I have shown repeatedly on this website and Making Sense broadcasts, no matter how broadly diversified a portfolio of stocks, conventional bonds, and cash may be, it cannot offer the protection afforded by I Bonds. The proposition that the risk of stocks diminishes with the length of one's time horizon is a fallacy, as is the notion that stocks are a hedge against the risk of inflation. I figure it's about time for every American to be told -- or in the case of the Making Sense audience, told again -- about I Bonds.

Zvi Bodie appeared in this 2011 story on assumptions used for public pension funds.

Zvi Bodie is a professor of management at Boston University. His books include "The Future of Life Cycle Saving" and "Investing and Foundations of Pension Finance." For more, see his website. Zvi's videos are on his YouTube Channel.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight.

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Two "senior" entrepreneurs (women in their 50s) explain how to overcome the reluctance to start your own business when you're older. These days, entrepreneurship is simply self-reliance, they explain.

NewsHour economics correspondent Paul Solman reports on late bloomers who decided to take the plunge into self-employment. Read the full transcript.

A note from Paul Solman: Judi Henderson-Townsend is the 55-year-old mannequin entrepreneur who, with her social media consultant Cynthia Mackey, fascinated NewsHour viewers a few weeks ago by extolling the virtues of "senior entrepreneurship." Graciously responding to my request, she and Mackey then offered readers of this page "Ten Tips for Senior Entrepreneurs". A further excerpt from my original interview with Townsend soon followed and high tech entrepreneur Vivek Wadhwa joined the discussion by explaining "Why Older Entrepreneurs Are Crucial, Even in Silicon Valley".

In Thursday's Making Sense post, Judi Henderson-Townsend and Cynthia Mackey address a familiar figure in America's latest "jobless recovery": the reluctant senior entrepreneur. They were plenty reluctant themselves, they write.

Judi Henderson-Townsend and Cynthia Mackey: Senior entrepreneurship is a trending topic. Yet for every senior who sees entrepreneurship as an exciting opportunity, there is another senior who sees entrepreneurship as an intimidating option of last resort.

Age discrimination, job layoffs, dwindling 401(k) accounts and the potential erosion of Social Security benefits are a few of the reasons why seniors are turning to entrepreneurship in large numbers. In our previous blog post we listed 10 tips for senior entrepreneurs looking to start a business. But owning a business can be an anxiety-ridden experience, and the anxiety is magnified if you are an entrepreneur because you "have to" vs. "want to."

As two senior entrepreneurs who were once reluctant to take the plunge, we want to share some advice that made a difference to us. But first a little background on our entrepreneurial journeys.

Cynthia's story: I enjoyed my corporate experiences but always felt constrained by the bureaucracy. As a consequence, I was always pushing the envelope, often a little too far. My first entrepreneurship experience was working for a small military sub-contractor. I had no desire to start my own company, but wanted to be part of a team. I loved this new opportunity and being part of the decision-making process! Despite the growing number of contracts the company brought in, we were blind to financial decisions of the chief executive that ultimately caused its demise. Similar situations occurred at other small companies I later worked for. I realized that working for others wasn't working out for me. So I figured there was one other thing I hadn't tried -- going out on my own.

Judi's story: An early experience in entrepreneurship when I was in my mid-30s was a disaster for me. I was so emotionally crippled by the experience that I swore I would never do that again. I became an accidental entrepreneur while purchasing a mannequin from someone on craigslist.com. The buyer ran the only mannequin rental service in town and was closing shop. I impulsively bought his entire inventory thinking this would be a fun hobby to do while still working full-time. Granted I had never touched a mannequin before or worked in retail. What began as a sideline business has become my full-time venture for the last 11 years. At 55, I am not thinking about retirement, but how I can further expand my business.

1. Entrepreneurship -- Another Name for Self-Reliance
In the days of an agriculturally based economy, if crops didn't grow, one had to find another way to feed the family. Perhaps services were bartered or a product was created and sold. You had to use your talents and resources to solve a need -- which is what an entrepreneur does. However, today's meaning of the word can conjure up images of having to meet payroll, lease a building and deal with human resource issues -- which may seem daunting. It can be less intimidating if you see yourself as fulfilling a need and if you perhaps call yourself a freelancer, consultant, solo-preneur or independent contractor.

2. Lean Into it
If possible, don't leap into entrepreneurship, but start gradually. When Judi first started her mannequin business, she still had a full-time job. She eventually negotiated to work there part-time so that she could still have benefits and a steady source of income while investing in and building up her business. When 9/11 put an end to her day job, she already had the foundation laid for her entrepreneurial venture, making the transition much easier. Cynthia put a little money aside for several years, and eventually reduced her personal expenses over time. She also took on extra contractual work to fuel the business and shore up financial resources. There is no specific or right way to do it, but "leaning in" gives you a great way to build as you are able.

3. Create an Ad-hoc Advisory Team
Before you launch your venture, conduct informational interviews with senior entrepreneurs to get advice and bolster your confidence. If you don't know anyone in your field, Job Shadow is a website that allows you to conduct online interviews with entrepreneurs from a variety of industries. Walking the path of an entrepreneur can be isolating at times. As much as they love you, family and friends don't fully know what it's like unless they have done it before. So identify a trusted colleague or two, perhaps even an advisory board that supports your vision but is objective enough to be candid with you.

4. It Takes More Than Passion
While passion is important, identifying a business that is suited to your personality and skill sets is equally as important. For example, if you have a passion for cooking, that doesn't mean restaurant ownership is for you. Perhaps there are other related ventures that may be a better fit for your skills, personality and finances such as catering or becoming a personal chef, restaurant critic, or instructor. Taking seminars for entrepreneurs can assist you in determining what your strengths are. Organizations such as the Service Corps of Retired Executives (SCORE), Small Business Development Centers and nonprofit organizations focused on developing small businesses can provide consultants, courses and resources at little to no cost. Search the Internet for online courses and free white papers to help you become better informed in your field and the latest technologies that affect it.

5. Monetize Your Expertise
If you've developed expertise over the years in a certain discipline, entrepreneurship can be a chance to capitalize on your experience. Judi's 58-year-old bookkeeper worked for a number of years in the finance departments of large corporations. She now works as an independent contractor for several small businesses. The flexible schedule and variety of skills she gets to use fulfill her in a way that working as an employee did not.

6. Turn Your Hobby or Interest Into Your Livelihood
Have you ever imagined your hobby providing your entire income? Entrepreneurship can be a chance to explore interests that you could only dabble in when you worked full-time. A friend of Cynthia's worked for many years in retail before starting a bed and breakfast. Stories of seniors who have turned a personal interest into a business, like the therapist who became a perfume maker, can be found on the Senior Entrepreneurship Works website.

7. Avoid Analysis Paralysis
Sometimes we can't get started because we are still trying to figure everything out. I mean, everything! Perhaps it's the perfect manufacturing process for your product or the logo that's exactly right for your brand. Often the best way to learn is by doing something, and if a mistake is made, then readjust. A business plan is an organic process not cast in stone.

In Cynthia's case she has pivoted her business based on the needs of clients. She initially provided web design services for a wide variety of clients. But since her clients were uncomfortable using social media, she started offering education and training for baby boomers so they could use social media to grow their business.

Judi initially started out just renting mannequins. But as a result of requests from clients, she expanded her business to include mannequin sales, mannequin recycling, mannequin repairing and even renting her mannequin warehouse out for events.

In other words, sometimes you have to take the first steps and feedback from clients will direct you to the next step.

Judi Henderson-Townsend is the owner of Mannequin Madness, an award-winning small business that rents, sells and recycles mannequins.

Cynthia Mackey is a tech-savvy online marketer and founder of BabyBoomerBusinessOwner.com, a website offering courses on how small business owners can use social media to grow their business.

This entry is cross-posted on the Rundown- NewsHour's blog of news and insight.

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A note from Paul Solman: Former Goldman Sachs trader, biotech entrepreneur, money manager and economics professor at Harvard's Business School and Kennedy School of Government (where he taught me microeconomics), Terry Burnham, now teaching at Chapman College, is best known for his books "Mean Genes" and "Mean Markets and Lizard Brains." But he may be better known to NewsHour viewers from his appearances in stories on the dot.com crash, evolution and economics and the neuroscience of economics.

Burnham says we are headed for another stock market crash and Great Depression, due to the wanton printing of money by central banks like the Federal Reserve.

"How can we believe," he asks, "that printing money will make us rich?" Here's his answer. My skeptical response follows.

Terry Burnham: We are hostages to the destructive actions of central banks. Printing money destroys value. The puzzle is not economic, but rather psychological. Why do we allow Central Bankers to make us poorer and endanger us physically?

Patty Hearst holds an M1 carbine during the April 1974 Hibernia bank robbery. Photo by Federal Bureau of Investigation.

The answer lies in our non-rational brains. One aspect of our psychology, labeled the Stockholm Syndrome, is the human propensity to develop positive feelings towards captors in a form of traumatic bonding.

Nils Bejerot coined the phrase after a 1973 Stockholm bank robbery where four hostages were held for close to a week. Even after being released, the hostages showed sympathy for the robber, and blamed the police. The most famous U.S. incident is that of Patty Hearst, who joined the organization that kidnapped her and took part in a bank robbery with her abductors.

The phrase "economy supported by central banks" generates more than half a billion Google hits. Can it really be true that printing money is going to make us rich? No.

Printing money can destroy an economy, or its effects can be close to neutral. Destruction occurs when the money printing severely distorts economic decision-making. My catastrophic view is that printing money by central banks in recent years has had three main impacts:

1. Printing money destroys wealth.
   We cannot see the full impact yet of recent printing, but we can look at the last round of printing. After the NASDAQ crash in 2000, the Fed funds rate of very short-term (overnight) interest rates was cut from 6.5 percent to 1 percent. The unemployment rate at the time was a little over 5 percent. The subsequent problems created by the Fed were much larger than any short- term benefits during the low-rate periods.
2. Printing money shifts wealth from the prudent to the profligate.
   The Federal Reserve is specifically trying to drive down interest rates. Borrowers are happy to pay fewer dollars in interest. For every dollar not paid in interest, there is a saver that is made poorer. To the extent that the Fed is able to reduce interest rates, it transfers money from savers to borrowers.
3. Distorting prices leads to bad decisions.
   Interest rates are prices and incorrect prices lead to bad choices. The most obvious of these are investments in risky assets because lower risk assets have rates close to zero. We will only see the impact of the bad decisions in the future, but we can be sure they are being made now.

Even the supporters of the Fed's creation of money argue that at best, it would be only slightly positive. So we return to the central question. How can we believe that printing money will make us rich?

To repeat, the answer lies in an economic version of the Stockholm Syndrome. Wikipedia states that the syndrome does not require physical kidnapping, but, citing scholars Dutton and Painter, states, "strong emotional ties that develop between two persons where one person intermittently harasses, beats, threatens, abuses, or intimidates the other."

Imagine that you are a retiree with financial assets of $120,000, which is the median wealth of American retirees. If you invest this money as safely as possible - in 3-month Treasury bills -- you will earn a total of $60 a year in interest before taxes and inflation. So you have barely $1 a week to live on. This is the financial version of intimidation and abuse.

Many of us suffer the Stockholm Syndrome and support the central printers (I mean bankers). The outcome will not be pretty and the guilt lies with the bankers, not with the hostages.

If I'm right, the current "boom" will end with a bang, not a whimper. Or more accurately, perhaps, a deafening thud. The stock market is booming because of the Fed printing money and using it to buy U.S. Treasury bonds.

As a result, the Treasury doesn't need to offer much in the way of an interest rate to attract buyers of its debt. Low interest rates on Treasury bonds punish investors, who become desperate for higher returns. They flood the stock market.

In addition, low interest rates allow speculators to gamble, borrowing cheap to chase higher returns. Again, the cheap money fuels the stock market - and all other speculative markets as well. Why not invest in almost anything if you can do so with money you can borrow, short term, at close to zero percent?

Moreover, as long as the Fed continues to create new dollars and use them to buy U.S. bonds, the bond market will be propped up as well.

I don't know when this will end. Neither does anyone else. But end it will. After that, there are no certainties, only probabilities. But I believe there is a substantial probability that the outcome will be worse than the Great Depression. In retrospect, people will feel contrite about having believed in printing our way to prosperity. But, like Patty Hearst, they will probably tell themselves they had no choice. In any case, it will be too late.

Paul Solman responds: Too much money? Too late? Maybe. Then again, maybe not. Maybe the Fed (and other central bankers) are doing what it takes to reinvigorate economies that have been artificially depressed in the wake of the Crash of '08. Maybe they're being careful about how they do it, by paying interest to banks -- the so-called "Interest on Excess Reserves" (IOER) -- so that the money being created doesn't rush out into circulation. IOER is something we've tried to explain here for years. Maybe they're trying to put the tens of millions of unemployed people in the developed world back to work.

How should one assess Terry's doomsday scenario? It's good to remember that even those who cry wolf are sometimes right. So, is there evidence of wild, unsustainable speculation? A stock market bubble, for example? Well, yes, the market is scaling new heights. But compare it to December of 1999, when the Dow Jones hovered near 11,500. With the Dow at 15,000 today, that's a compound rate of return of less than 3 percent a year, just barely keeping pace with the rate of inflation. In other words, by 1999 standards, the Dow hasn't returned a dime in real, inflation-adjusted returns. So is it really at some kind of new speculative high?

Sure, sure, December of 1999 was the height of the dot.com "bubble." And yes, today's price-earnings ratio of American stocks is higher than average. But at a ratio of something like 20:1, today's P/E is less than half what it was 1999.

Mightn't an alternative explanation to Burnham's and David Stockman's bubble hypothesis be that the stock market is expensive because shares of American companies are actually worth more these days than they used to be? Profits, as opposed to wages, account for a historically unprecedented share of corporate income, but is that a one-off bubble-like event or a function of labor's deteriorating bargaining power, a trend likely to continue?

And what about housing? A speculative bubble? Yes, prices are rallying, but they're still 30 percent or more below their levels of 2006-2007.

Meanwhile, the budget deficit is down, unemployment is down (if still stubbornly high), millions of Chinese and others are still leaving the farm for the city, where they keep world inflation in check by working cheap.

And for all the hand-wringing about a productivity slowdown, technology is working wonders. Hey, with the natural gas revolution, America even has excess fuel to burn!

But perhaps most persuasive, as I suggested to David Stockman when he made this same doomsday argument in an interview the other day, is that world interest rates are at historically unprecedented lows. That simply makes no sense if the world's central bankers, like the Fed, are out of control.

If the Fed and friends are "printing" too much money (they're actually creating it electronically), then interest rates would have to reflect the fact.

What is an interest rate composed of?

Three things:

1. The value of having the use of the money as opposed to someone else having the use of it. In other words, the rental cost of the money; how much you will get paid to wait for its return.

2. The risk of default: how much you will get paid for taking the chance that you might not get paid back.

3. The risk of inflation: that you might get paid back, but in dollars (or yen or euro) that are worth a lot less, in buying power, than when you loaned them out.

So, what are world interest rates right now? Give me a moment while I check the Bloomberg app on my iPhone. Let's see. The United States: 1.76 percent to borrow money for 10 years. No, that must be a mistake. The historical price or rental cost of money or risk-free rate of interest is something like 2 percent, at least. The world's collective investors can't be lending Uncle Sam money for a decade as a gesture of good will, can they?

Oh, and wait a second. I forgot about the default risk. That must be worth a few hundredths of a percent, no? And OMG! We all forgot about inflation. (Let me look that up.) Hmm, inflation is running at an annual rate of 1.8 percent at the moment.

In short, the impossible is happening: investors are lending the US money for less -- much less -- than it figures to be worth when they get paid back 10 years from now.

Oh, but that must be because, as economist Douglas Holtz-Eakin famously pointed out, America "is the best horse in the glue factory." That is to say, people are lending us money (by buying our bonds) for safe-keeping; everywhere else in the world is even riskier. So all we have to do is look at interest rates elsewhere to get a true picture of the money printing madness that's taken hold globally.

Okay, how about England? 10-year bond rate: 1.77 percent. France, one of those countries where they take to the streets if you threaten to cut their pensions? 1.81 percent. Italy, totally dysfunctional, where that Silvio Berlusconi character is still a power broker? 3.83 percent. That's not much more than a bank would charge me and my wife for a mortgage and it's got our house as collateral -- a house in which our equity stake is probably 70 percent.

And in case you (and Terry and David Stockman) remain skeptical, I offer you Japan. Ten-year interest rate? 0.6 percent. Japan. The country where they're desperate to create inflation. The country with a ratio of government debt-to-GDP well above 200 percent while people go nuts in America because, by the most generous reckoning, our ratio has reached 100 percent.

Admittedly, things could change quickly. It was suddenly spiraling interest rates that triggered the demise of AIG, of Lehman, the formal government takeover of Fannie Mae and Freddie Mac.

Admittedly, it is a probabilistic universe and disaster could strike at any time. All one can do is place one's bets. I may wind up feeling as bad about what I'm about to write as Patty Hearst must feel about her stick-up attempt but at the moment, I won't be putting my nest egg on double zero.

This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow Paul on Twitter.

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Ever feel like a company wasted your time after an interview because they never got back to you about their hiring decision? Headhunter Nick Corcodilos says that when employers ignore deadlines for hiring decisions, job seekers have a right to be compensated for their time. Photo by Altrendo Images/Getty Images.

Nick Corcodilos started headhunting in Silicon Valley in 1979, and has answered over 30,000 questions from the Ask The Headhunter community over the past decade.

In this special Making Sense edition of Ask The Headhunter, Nick shares insider advice and contrarian methods about winning and keeping the right job, on one condition: that you, dear Making Sense reader, send Nick your questions about your personal challenges with job hunting, interviewing, networking, resumes, job boards, or salary negotiations. No guarantees -- just a promise to do his best to offer useful advice.

Question: The rudeness of employers seems to be pervasive out there. I had interviews with a company recently. The second round involved four finalists meeting 12 employees over eight grueling hours. In mid-March, they said that they would make a choice by April 1. On April 7, I called the HR person and got her voice mail. I said that, based on the timetable she had provided, I wanted to know their decision and asked her to call me. On April 17, I emailed the hiring manager to reinforce my interest and asked if they had made a decision.

The next day the HR manager responded that they had hired a candidate who had started work the last week of March. She said that a formal notice would be sent to other applicants within the week.

April is over. There's been no notice. One of the other three finalists told me she has heard nothing at all. Are manners and simple courtesy totally dead?

Nick Corcodilos: Job applicants appear promptly for interviews, devote hours of unpaid professional time to an employer, and then wait patiently for a hiring decision by the promised date. And yet a company ignores its own timeline without any update or comment to the candidates. Why? Because candidates are free.

You could be bold instead of free. Send the HR manager -- certified mail with a copy to the hiring manager and the CEO of the company -- an invoice for your time.

Am I crazy to suggest this? Would you be crazy to actually do it? Imagine the note:

Dear [name]:

My time for our first interview was free, as it was an exploratory meeting. You requested more time for the second round of meetings, which I provided at no cost, contingent on your company fulfilling its commitment to respond with a decision by the date you chose, April 1. You ignored my calls, emails, and your own deadline, without the courtesy of a notice.

I am thus billing you for the eight hours of my professional time spent in the second round of meetings with your team. As a professional, I would never dream of being irresponsible with the time of my clients, my vendors, or my employer. Time is money. I live by the deadlines I commit to, and I expect others to do the same. Anything less would be irresponsible to our industry and to our profession. None of us could operate with integrity if we ignored our commitments. This is not a joke. I expect payment within 10 days.

Yours truly,

If this seems extreme, why should it? Is there a more polite way to notify a company that it has erred? Sure -- but you've already done that, several times.

Every day, companies ignore these time commitments with impunity. Why is a deadline for a hiring decision any less important than a deadline to deliver a product to a customer? The company's ability to meet either deadline establishes its reputation. (See "Death By Lethal Reputation.") Yet, while companies worry plenty about dissatisfied customers, they don't give a thought to what other professionals in their industry will say about them.

A job applicant treated with disrespect can do as much -- if not more -- damage to a company's business as a dissatisfied customer. Do employers really think word doesn't get around?

Maybe hiring managers assume that their HR departments handle all the necessary niceties with applicants. But just how accountable are HR departments? Does this company's public relations department realize that while it's spending millions on good press, the HR department is scuttling it? If you're a hiring manager, and you're not sure how job candidates are treated after they leave your office, please read "Respecting The Candidate."

Your HR department might explain that processing applicants, job offers, hires, and rejection letters is cumbersome. Tell that to your customer who cancels the order that's a month late, or to the prospect who's waiting for a sales rep to return her call.

The technology to keep candidates informed is here. The will isn't. Why? Because job candidates don't cost anything. Companies can get all your professional time they want, for free, without any obligation to you whatsoever.

That's wrong. Don't you think it's time for employers to put some skin in the game, if only because it would make them think twice about the costs they impose on applicants?

What if employers had to pay for job interviews? Should you really send an invoice if an employer ignores its obligation to you?

Good questions. Would it make any difference if you actually sent in that invoice? It might, if you copy the company's public relations department and three leading industry publications. (Don't forget to add me to your list.) To paraphrase Arlo Guthrie's song, "Alice's Restaurant," can you imagine 50 people a day sending interview invoices to employers? They may think it's a movement. And something might finally change.

You don't want to ask an employer to pay you for an interview? Then consider Conrado Hinojosa's provocative "The No-Nonsense Interview Agreement."

Bad behavior is un-businesslike. I challenge any HR manager to explain why it's okay to ignore even an implied commitment to a job candidate. If your company shines in this regard, I'd like to hear from you, too. In fact, I'll gladly highlight your company in an upcoming column. In the meantime, I think employers should start paying to interview applicants -- perhaps then they'd behave the way they expect applicants to behave.

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Social Security expert Larry Kotlikoff makes the case that the program is $220 trillion in the hole. Counter-expert Alicia Munnell disagrees, and shows how little it would take to fill the hole.

Photo by Flickr user Fabricator of Useless Articles/Creative Commons.

Larry Kotlikoff's Social Security original 34 "secrets", his additional secrets, his Social Security "mistakes" and his Social Security gotchas have prompted so many of you to write in that we now feature "Ask Larry" every Monday.

We are determined to continue it until the queries stop or we run through the particular problems of all 78 million Baby Boomers, whichever comes first. Kotlikoff's state-of-the-art retirement software is available, for free, in its "basic" version. His considerable and often very useful output is available on his website.

Stephanie Rosen -- Bronx, N.Y.: None of the NewsHour's recent panel of economists seem to consider the most sensible "cure" for Social Security: RAISE the income level on which Social Security is levied (as the New York Times' recent editorial recommended). Isn't this the fairest method?

Those who are fortunate enough to make higher salaries can likely afford to pay Social Security tax on their higher incomes more readily than every worker having a higher percentage deducted from their salaries for Social Security.

Larry Kotlikoff: I assume you're referring to this discussion on the NewsHour in mid-April. I cannot, of course, comment on why the various panelists did not comment on your (and the Times') supposed fix for the huge Social Security shortfall as we move ahead in time.

However, I can comment on it myself -- and have. In fact, your question has been posed before on The Business Desk. Please see this column: "Why Not Raise the Social Security Payroll Ceiling and Other SS Questions".

The essence of my answer was and remains simple: raising the ceiling on taxable earnings for Social Security would cover only about 60 percent of Social Security's long-term funding shortfall, using an infinite time horizon. Also, the system is already more progressive than most people realize due to its highly progressive benefit schedule. So looking just at the highly regressive nature of the tax itself is not quite fair to high earners.

Paul Solman adds: I too answered this question last summer. At the time, I laid out in somewhat greater detail the financial ramifications of raising the ceiling, as I had in a broadcast story in 2005. So too did Jared Bernstein on The Business Desk in his post "Solving for Solvency: A Menu for Closing Social Security's Long-Term Budget Gap."

Whatever one thinks about fairness to high earners, a discrepancy between Larry's numbers and the others' needs to be explained. Most people project the Social Security deficit no further ahead than to 2075; at the outside, to the next 75 years. Larry projects the shortfall from here to eternity. His calculation of the deficit is therefore larger than the number others come up with. As a result, by Larry's reckoning, removing the ceiling on taxable income would presumably (or conceivably) cover less of it.

Recently, I put a question to another great expert on retirement finance and Social Security, economics professor Alicia Munnell, the director of the Center for Retirement Research at Boston College. I asked about the economic implications of Americans working past the traditional age of retirement:

Paul Solman: When Larry Kotlikoff says that we have a shortfall in terms of what we promised and what we are going to take in of something like $220 trillion dollars, if you buy that number or even if it's a lower number, this is still a drop in the bucket?

Alicia Munnell: So when I'm talking about Larry Kotlikoff, whom I love, I need to separate some things that I agree with him on and some things that I don't agree with him on. I agree with him that the effect is small but I think going around and using this $200 trillion dollar number is not very helpful at all because big numbers happen over a long period of time and other stuff also happens over a long period of time.

Paul Solman: Changes, you mean?

Alicia Munnell: We have benefit commitments, but we also have people earning longer and payroll taxes being paid for longer and perhaps at a higher rate. I find the most useful way to think about the deficit to Social Security is in terms of the payroll tax. So, how much would the payroll tax have to be raised to solve the problem for 75 years, which is the Social Security's planning horizon, and how much would it have to be raised to solve it for infinity? And for 75-year time horizon, the number is 2.36 percent.

Paul Solman: So right now the payroll tax for Social Security is 12.5 percent, split between employer and employee. So it would have to up to something like 15 percent?

Alicia Munnell: Yes. Half. Right. So that's 1.2 percent more from you and 1.2 from the employer. Now think about that number. We recently had a payroll tax cut of two percentage points and I couldn't even tell. And then they raised it again by those same two percentage points and again I couldn't tell. I think some low earners felt it, but there wasn't jubilation when it happened and it wasn't cataclysmic when it went back. From the employee's perspective, the change that we're talking about is half of what we just went through in terms of this payroll tax cut and then increase.

And that's if you say I'm going to solve this whole problem just by raising the payroll tax. If you do anything else -- raise the taxable wage base or do any number of things -- the amount you need to raise from the payroll tax becomes smaller. I think that's a more sensible way to think about Social Security's finances than this $200 zillion trillion dollar shortfall.

To be fair, 75 years is only part of the story because we have an increasing ratio of retirees to workers and so when the 75 year period moves forward, you lose a year of surplus, you pick up a year of deficits. So if you just solve the problem for 75 years, it's not enough. To really solve it, you've got to have something like a 4 percent increase in taxes, 2 percent for you, 2 percent for the employer. But it I think solving it for 75 years would be just fine and all those numbers are manageable.

Larry Kotlikoff responds: First, the infinite horizon projection is not my number. It's calculated by Social Security's Office of the Actuary and reported each year in table IVB6 of Social Security's annual Trustees Report.

Second, I love Alicia at least as much as she loves me. But she surely knows that there is no economic basis for looking out any fixed number of years and saying that's far enough.

The reason economic science doesn't let us look out just 75 years is not only that it ignores the benefits Paul's grandchildren are being promised. The real reason is that nothing in economic science pins down how governments must label annual receipts and payments. Consequently they have complete leeway to choose accounting that pushes recognition of the underlying problem into the distant future while not changing the problem whatsoever. The infinite horizon Social Security shortfall does not suffer from this problem. Moreover, looking out just 75 years repeats the sin Alan Greenspan committed back in 1983 when he and his famous Greenspan Commission claimed to fix the system for good. As you may have noticed, they didn't.

Jim, Inglewood, Calif.: My partner's mother is an unemployed 62-year-old divorcee. She is bilingual and used to work as a travel agent and has been trying to find work for the last three years -- without success. She has no income, no savings, no car and no retirement and is currently sleeping on our couch. I was told that she can take early retirement from Social Security based on her earnings, and then, when she turns 67, she can switch to her former husband's Social Security. Her former husband had a much higher income and he is currently 58 with no plans to retire early. Is that a possible solution for her?

Larry Kotlikoff: Not a fun scene. Your partner's mother can begin her retirement benefit now and when her ex reaches age 62, she can collect an excess spousal benefit based on his work record. Given that she is otherwise penniless, this is probably the best strategy.

Herbert King: I will be 62 on Oct. 8, 2013. When can I apply for my Social Security?

Larry Kotlikoff: You can start collecting your retirement benefits when you reach age 62, but please realize: they will be only 75 percent of what their value would be were you to wait until full retirement age, which is 66 in your case. And they will be roughly 57 percent of what they'd be were you to wait until 70 to collect.

(Our other Social Security expert, Jerry Lutz, adds: You would first be entitled to benefits for November 2013. You could apply as early as July 2013, and your first check would be due to arrive on the second Wednesday of December, 2013.)

Laura Kaplan, Northport, N.Y.: My husband and I lost everything during the economic downturn of 2008-2009. He has been sick for a few years and is now residing in a nursing home. He is 77 and I am 59. It took over a year to get him on Medicaid. He was already receiving his Social Security.

The Social Security checks are still being deposited every month into our joint account. I called the nursing home and was told that his costs are now covered by New York Medicaid. Does this mean I can keep receiving his Social Security checks? Why would they keep sending them to our account if they are supposed to go the nursing home?

Larry Kotlikoff: I am terribly sorry for your situation. Life, as we just saw in Boston, is a terrible game of roulette -- Russian or American -- and we can only survive by grasping at momentary joys, no matter how small.

I am surprised that Medicaid is not taking your husband's Social Security check to pay, in part, for his nursing home costs. I think you had better check with Medicaid. I wouldn't advise taking the risk that they'll surprise you one day with an unmanageable bill for past overpayments.

This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight.

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