May 31, 2012

Job!

So, I don't think I've mentioned this yet, but I've got an official job at the Washington Monthly. It's basically a handyman kind of job, where I keep the business side going on a daily basis, and do anything else that needs doing, like some guest-blogging.

It's not exactly a well-paid job, and there aren't benefits, but given that it's the Monthly I think it's about as good as could be expected. Obviously there are a lot of opportunities here too, but I think the most important part is that I really like the place and the people. A lot of people I know these days are stuck in jobs making a lot more money than me, but doing things they hate with people they don't like. I'm young, with very low overhead, and I think the side benefits of having a job you really like in the right field is easily worth the low pay. I'll stay here for awhile, count my blessings, and try to get some more stuff published.

Burst DC Pipe a Glimpse at Our Rotting Foundations

Every once in awhile you get a look beneath the surface of things, usually when something breaks. Today it was a water main outside the Monthly office building, which meant that every building affected had to be closed by order of the fire marshal. You can see in the picture I took quite a lot of water was running down the storm drains, but that's nothing compared to the garage flooding nearby. Here's a little local news segment on it.

Apparently the main was 65 years old, which is actually younger than the DC average of 77 years old. (In case you're bad at math, that means the average pipe was put in 1935.) Some DC pipes are even older, dating back to the 19th century. As you might expect, this isn't the only time a pipe has burst--just by accident I found the story of another broken main in DC from earlier this month. Apparently, there are an average of 450 breaks a year. It's a nationwide problem, of course, due mostly to neglect, which is only getting worse, because no one wants to pony up the money.

This kind of thing is a particularly striking example of how foolish budgeting can lead to greatly increased spending in the long term (or, just general economic rot). We could have paid the money it would have cost to replace, maintain, or upgrade these systems, but instead we're scrambling from disaster to disaster, each causing expensive damage, which disrupt the local economy as emergency repairs are made, and only make the necessary maintenance even more urgent. The money must be spent, it's only a question of when and how. As Ezra Klein said awhile back:
We have literally trillions of dollars in unmet infrastructure needs. We have massive unemployment in the construction sector. Materials are unusually cheap because of a depressed global economy. Borrowing is unusually cheap because we're one of the few safe havens left in the global financial market. And it's cheaper to repaid an aging bridge today than rebuild a crumbled one 10 years from now. So waiting to do the bulk of our infrastructure passing a half-measure on infrastructure investment later is like waiting till after the big sale ends to buy your groceries. It's just bad financial planning. 
It's not a choice between big and small government, it's a choice between effective and hapless government. That we can't see that is a symptom of the political system's increasing inability to even try to address major challenges.

May 30, 2012

Broadband Could Be Cheaper

Matt Yglesias says if American broadband sucks, we should blame the customers:
But in this particular case, we're not really talking about innovation at all. What's galling—to those of us who are galled by it—about America's broadband infrastructure is that we don't need more innovation. The relevant technology has been invented. What we need are more holes in the ground so that we can fill them with fiber optic cables. This is an expensive proposition, and the basic problem here is that when Verizon dipped its toes into making the investment it turned out that customers didn't want to pay for it. People who write about tech policy on the internet for a living place an unusually high subject value on high-speed internet access, so the resulting situation is frustrating for us. But the problem is really with the customers rather than the companies. There simply aren't enough people who want to pay a premium price for premium service.
An iPhone, which I don't have.
Now, I suspect his views might be a bit more nuanced than that, given this column arguing for breakup of the broadband trusts, so this is mostly a convenient excuse to talk about something that pissed me off, but I think this is partially mistaken.

Yglesias is surely correct that we don't need more technological innovation to drastically increase the average American's internet speed, but we could stand for a whopping dose of business innovation, in the form of good old-fashioned competition. America's broadband trusts are simply too large and sclerotic to chase down the business that's waiting for them out in the hinterlands.

Here's an example: the other day the internet went down at work. I thought that perhaps I could just "tether" my internet-capable phone to my computer, which is how I got internet back in South Africa. (Back in those days, 2 GB for a month was a ridiculous extravagance, which I happily bought.) The best way to do it there was with Linux, which has all the relevant connectivity information built into the OS, for nearly any country in the world. You just bought some data for your SIM card, plugged in your phone, picked your carrier (either MTN or Vodacom, usually), and the rest was done for you. Once you have the data access, really all you need is to teach the computer how to talk to the phone.

So, since I have a Linux/Windows dual-boot setup on my new laptop, I tried doing that here. I set up the system, and got a screen from Verizon saying if I want to tether my phone, I have to pay $20 a month for it. This isn't a case of forgetting to turn something on--all I wanted was to use the data I have already paid for, just through my computer instead of my phone. There isn't some mystical portal needed here either, the relevant protocols are available for free. This is a case of Verizon deliberately crippling that particular functionality in order to extract money from their customers.

To me, this is overwhelming evidence that America's telecom trusts are roughly half about providing a service and half about extracting money from their consumer base. Is it any surprise they can't be bothered to extend broadband to somewhat dubious locations? That's hard, gritty work. Much easier to try and loot your subscribers through bullshit fees and the like.

UPDATE: I had forgotten about this piece of evidence from earlier this month:
Unless you're paying $26 a month for unlimited phone calls, unlimited text, free international calls, and 3 gigs of data, per month, you are being royally ripped off. Because that's what they pay in France for far more service on their iPhones, and other phones, than we pay in the states for three times as much.

May 29, 2012

More on the FDA

One of the posts I did at the Monthly was on the FDA's approval process. Rand Paul got a proposal passed saying the FDA must accept science done in the EU and elsewhere in the developed world into their approval process, with the idea of speeding things along. Alex Tabarrok proposed that any drug or treatment approved in the industrialized world (meaning Canada, the EU, Japan, Australia, New Zealand, and South Korea) would receive automatic approval here in the US in 90 days, and I somewhat hastily agreed.

The background here is that the FDA is notoriously slow about new drug and treatment approval; personally I'd like to see the artificial pancreas delivered as fast as possible for my father, who despite being a generally healthy, slim guy, developed type I diabetes a couple years back.

Commenters on the post brought up thalidomide, which is surely worth considering. Briefly, that was a drug used for a short time in Britain, Australia, and elsewhere used to treat morning sickness. Turns out, it causes horrible birth defects, and the US mostly dodged a bullet when the FDA administrator of the day refused to approve it, saying more studies were needed.

But that was a long time ago, and before the modern rules were implemented. These days the big problem is pharma lobby capture of the approval process. These days, what is needed to demonstrate efficacy of a new drug is two positive-result studies. The drug companies can sponsor as many studies as they like, and don't have to reveal any they don't like (i.e., negative results), as they're considered proprietary and therefore confidential. That distorting influence is what leads to things like the Vioxx .

On further thought, I think the commenters that disagreed with Tabarrok are right. That kind of automatic process would probably lead to the pharma lobby concentrating their power on the weakest regulators to get mechanical, rubber-stamp approval. However, I still think Paul's proposal is good. More studies from credible sources can seldom hurt, especially in the current environment. I would combine it with mandatory open-access rules for publicly-funded studies, and more journals dedicated to publishing negative results.

May 28, 2012

Blogtastic

Reflecting back on my stint blogging for the Monthly's Political Animal headliner blog, I have a few thoughts:

1) It ain't easy. Being able to crank out ~12 posts in a day is, when I think about it, an extremely strange skill. You've got to be a fast writer, a faster reader, and able to come up with a coherent point (little ones count) about issues extremely quickly.

2) I have some talent at it. Not to toot my own horn, but I think given that it was my first time I did a reasonable job. By the standards of, say, Matt Yglesias, I'd say it was pretty amateurish--I had some repurposed posts from this blog, and a couple posts that I knew were half-assed when I was writing them--but on the other hand, I thought I had a couple of solid ones too. That was by far the most blogging I've done in a single day, and adjusting for my lack of experience I'd give myself a B+. Give me a bit of practice and I think I could keep up with the big dogs.

3) Most importantly, I had a great time doing it. Even though I felt intense pressure to perform, and barely slept the night before for nervousness, it was an absolutely great experience. It was the good kind of pressure, where you feel a chance to succeed in doing something that you love. And then I managed to, if not hit a home run, hit a double. That is a great feeling, and I am yet more convinced that I have chosen the right career.

May 27, 2012

Antietam


It seemed like a good idea for Memorial Day to go out to one of the Civil War battlefields, so we took a trip out to Antietam. A good time, but also practice for the future. Anyone know of some good, basic podcasts for the classic battles? Anything that gives social context and not just a dull accounting of who died where and how would be the best.

May 25, 2012

The Big Time

I'm doing an emergency guest-blog over at the Monthly's Political Animal blog. Check it out!

May 23, 2012

Private Equity and Extractive Institutions

Chris Hayes sparked a debate on Twitter last night with the following debate proposal:
Resolved: Bain Capital is bad for America. Or Resolved: It would be better if there was no private equity industry.
Which prompted Noah Smith to leap to private equity's defense:
Anyway, I generally support private equity. Why? Because of Japan.
Fact 1: In Japan, there is no big private equity industry, because it is very difficult to do a leveraged buyout of a company. The Japanese government allows companies to defend themselves from takeovers in ways that are illegal in America. Also, Japanese companies often hold each other's shares, a practice known as "cross-shareholding", which tends to prevent hostile takeovers. Cross-shareholding creates huge financial risks; however, many of the Japanese companies that engage in cross-shareholding are big banks that are backed by the government (much as ours are here in the U.S., but more explicitly), so this risk is assumed by the Japanese taxpayer. For a comprehensive primer on Japanese corporate governance, see here
Upshot: In Japan, private-equity firms cannot buy companies and force them to restructure. 
Fact 2: Japan has a productivity problem. We think of Japan as being super-productive, and in fact some industries (and most export-oriented factories) are. But overall, Japanese productivity kind of stinks. Since at least the 90s, Japan's Total Factor Productivity has lagged far behind that of the U.S. Nor is this due (as Ed Presott has tried to claim) to a slowdown in technology; it appears to be a function of how resources are allocated within and between Japanese companies.
And Matt Yglesias to theatrically scratch his head:
From where I sit, what we've actually been having is an extremely confused and confusing debate that has almost no content beyond affect.
But let's try to bring some substance to the debate. Noah Smith has an interesting laudatory post about private equity, suggesting a lack of leveraged buyouts explains some of Japan's problems, but the specific policy content is to disparage the huge legal tools the Japanese legal system gives incumbent managers to prevent their firms from being bought by outsiders. By contrast, Eileen Appelbaum and Rosemary Batt did a very disparaging policy report (PDF) for the Center for Economic and Policy Research back in February. They conclude that based on this that there ought to be more economy-wide limits on the permissable degree of leverage, and also that we ought to reduce the tax arbitrage opportunity represented by the deductibility of debt. They don't advocate adopting Japan-style rules to protect incumbent managers, and Smith specifically sites the tax arbitrage issue as a real one that should be curbed. Which is to say that Smith, who likes private equity, and Appelbaum and Batt who dislike it don't appear to have any policy disagreements.
Jay Gould, the
"Mephistopheles of
Wall Street"
I think Hayes is sort of mistaken in trying to point to any individual industry or business or company as being "bad for America." Surely Smith is right that it's eminently possible for businesses to become rotten, sclerotic, and dysfunctional, and that sometimes a buyout and restructuring can serve as a much-needed clearing out of dead wood. However, it's at least possible for Hayes to be right about Bain. Surely amoral rich people are more than capable of taking control of a good, functional business, and sucking the life out of it through financial trickery, or abuse of political influence, or manipulation of tax loopholes. Jay Gould was famous for doing this back in the Gilded Age. And while Countrywide was no one's idea of an honest business, Angelo Mozilo was still looting it back during the housing bubble.

I find, again, Why Nations Fail's extractive/inclusive spectrum to be useful here. When we're talking about whether private equity is bad or good, I think the relevant metric is whether they're (broadly speaking) serving as good faith entities, which play by the established rules of the market and try to make tangible improvements in businesses (which may lead sometimes to failure and mass layoffs, of course), or whether they're buying companies only to strip out their value into their own pockets. Smith's examples look like a different kind of extraction, where incumbent company managers use the law to protect their own position, which quickly turns into propping up tottering, failed companies.

I don't think we can a priori draw clear distinctions about what kind of law or business will be guilty of this. Hayes is wrong in that he draws too small a circle. As WNF says, all elites are potentially extractive (though I'd say due to their position astride the money streams financiers are more susceptible than most). From what I've read about Romney's time at Bain, they seemed to be on both sides of this spectrum.

That was a long time ago, and in my opinion the entire financial sector has become largely extractive since then, but in any case when we talk about the societal worth of financial companies this is what we're talking about.

Do Authors Have a Moral Right to Profit?

I'd like to come back to this post again, talking about copyright and author's right to sales. Since it's been awhile, let's establish again that it's a response to a point from Kevin Drum:
I am, as always, speaking only for myself, but I think this is too cramped. The Constitution says that the purpose of patents and copyright is to "promote the Progress of Science and useful Arts," but the fact that the Constitution says this doesn't mean it's the only reason to grant patents and copyrights. There's another reason too: because creators have a moral right to profit from their works. In real life, pretty much everyone acts as if they believe this, and I suspect that for most of us it's the real underpinning of our support for IP law.
 To which I replied:
I don't think this works, though as a broke-ass writer I would much like it to be true. The act of writing, or making music, or whatever, is not an intrinsically worthy undertaking. Suppose I write some book and put it in a cabinet in my basement. Do I deserve to profit from that, simply from the act of creating it? If Hitler yet lived would he have a moral claim to monopoly rents from Mein Kampf? Does everyone who borrows a book from a friend, or checks one out from the library, have a moral obligation to pay the author? This is absurd.
Which, reading again, sounds pretty cringingly stupid. (Seriously, Hitler? WTF was that about? Another foot of dirt on the already-buried corpse of my potential political career.) Anyways, I've been kicking this around in my head and I can't quite come to a decision. Here's my thought process, maybe you can help me.

There are two ways to think about this. We could say that intellectual property is merely a byproduct of a system to incentivize the creation something socially desirable, in this case artistic works, and so getting paid for producing it is just a knob on the art-making machine. If people got no money for their efforts that would be fine so long as society got a decent quantity of artistic works. Or, like Kevin, we could say that intellectual property is more like property. When you sell your property, you deserve any money that's to be made off it, and people have no right to access your work without paying you first if that what you want.

We could compare this to owning land, but I don't think that analogy works. Land, actually, seems even more than IP to be a case of "knob on a machine," in this case the machine of the economy. It's a good thing to develop land (in some cases, anyway), and property rights are a good way to accomplish that. But land is an inherently scarce commodity, the value of which is largely derived from external factors like its location, political developments, or rent-seeking from the landowner. As people move into cities and we're unable to deal with skyrocketing rents, more and more it seems like we're heading towards a society where most of the economic surplus falls through to landowners, who do nothing save sit on property, like the feudal days of old. So let's alter the point, and compare IP to a single, non-land possession like a jacket.

I find this idea at least a little appealing. Artists are people who often pour their heart and soul into their work. Surely they deserve to profit in some way from the copy and use of their work; after all, they made it! On the other hand the way all artists (and innovators generally) do that work is through copying and remixing previously existing ideas and material, often quite blatantly. Without copying and borrowing, there would be no creativity.





So I don't think I can accept Kevin's premise in a strong form. First, it would clearly rule out a lot of preexisting content distribution, like libraries and borrowing. After all, strictly interpreted, every checkout from the library is depriving an author of potential revenue.

I think it can be salvaged though, by attaching some important qualifications. Yes, authors have a moral right to profit from sale of that work. But, because all new art is built on previously existing work, 1) authors and publishers have a moral responsibility to make that work available with a minimum of hassle and expense. Thus we can make a space for some limited free lending, like libraries or borrowing a friend's copy. Additionally, 2) artists are obligated return their work to the public domain in a reasonable amount of time (which at the minimum means the moment the creator is dead). Creative works are built from the collective culture, so artists have a moral responsibility to feed and nourish that culture. To the extent that artists or corporations are violating these amendments, then they lose their right to profit from their work. You're not morally entitled to profits from the collective commons if you're free-riding on everyone else's fertilizer.

In my ideal world, creative works would be available online easily (but not free, if that's what the author wants), while copyright terms would be limited to 30 years or the lifetime of the author, whichever is shorter, and there would be strong, broad, and well-defined exceptions for fair use of copyrighted work. What do you think?

May 22, 2012

Poor Man Blogging

Pardon a bit of poverty bitching. I had what might be a decent post all planned out for last night, but instead of writing I spent most of the evening trying to fix a leak in my crappy inflatable mattress which came with the basement.

It's actually pretty good sleeping, by my standards anyway, but I like a firm bed and this one was getting saggy quick. I found the hole, but couldn't get one of the included patches to hold, so had to get up several times during the night to reflate.

Anyway, here's a picture from some National Park-ing I did last weekend with friends. Be with you later.


May 20, 2012

"Of course we believe these things..."



Stumbled onto this little clip here, and it really stuck in my head. Obviously, it's pitch-perfect for current times, but it's interesting to watch the self-control that FDR could muster. Watch his hands tremble as he touches his nose, but how he keeps the grinning jauntiness going, just short of smug but not hitting it. He looks every inch the confident leader.

Also funny how scathing folks could be with the sarcasm back then. Politics has never been for the thin-skinned.

Programming note

As much as I loathe low-density suburbs near heavy rail stations, it is sort of nice to walk around the quiet leafy streets near my house.

Anyway, I'm visiting a friend in Virginia today, so regularly scheduled posting will resume shortly.


May 17, 2012

TED and Economic Inequality



The above TED talk, by Richard Wilkinson, is from October 2011, and it's all about economic inequality. There's quite a lot of buzz today about another talk on economic inequality which was recorded, then quashed by TED officials. You can check out the full transcript here, from National Journal.

At first glance, this is quite a strange discrepancy. Both talks are on economic inequality, and they do differ a bit, but if anything the Wilkinson talk is more radical. The gist of his is that once a country has reached "developed" status, wealth doesn't much matter for the health of that society, broadly speaking (including things like longevity, mental illness, crime, prison population, poverty, etc). Instead equality is what matters. More equal societies are better.

The censored talk, given by venture capitalist Nick Hanauer, makes a fairly banal point that starting a successful business depends entirely on having a population of people with the ability to buy your product:
I have started or helped start, dozens of businesses and initially hired lots of people. But if no one could have afforded to buy what we had to sell, my businesses would all have failed and all those jobs would have evaporated.
That's why I can say with confidence that rich people don't create jobs, nor do businesses, large or small. What does lead to more employment is a "circle of life" like feedback loop between customers and businesses. And only consumers can set in motion this virtuous cycle of increasing demand and hiring. In this sense, an ordinary middle-class consumer is far more of a job creator than a capitalist like me.
Listen to his tone, though:
Significant privileges have come to capitalists like me for being perceived as "job creators" at the center of the economic universe, and the language and metaphors we use to defend the fairness of the current social and economic arrangements is telling. For instance, it is a small step from "job creator" to "The Creator". We did not accidentally choose this language. It is only honest to admit that calling oneself a "job creator" is both an assertion about how economics works and the a claim on status and privileges. 
The extraordinary differential between a 15% tax rate on capital gains, dividends, and carried interest for capitalists, and the 35% top marginal rate on work for ordinary Americans is a privilege that is hard to justify without just a touch of deification.
He's not just talking about inequality, he's saying that the title of "job creator" is undeserved. He's being blunt, and rude. We're all familiar with the titanic egos of the plutocrats, and how they react to sharp criticism. Check out this email TED curator Chris Anderson sent Hanauer, fisking his talk:
"Only consumers can set in motion this virtuous cycle." ...except when a company is thinking ahead of what the market wants; exhibit A: Apple ... 
"An ordinary consumer is more of a job creator than a capitalist." ...really? as an ex entrepreneur who agrees with your overall stance, I don't think that statement is literally true. There are numerous jobs that exist because of the imagination, energy and risk-taking of individual capitalists or entrepreneurs such as you... 
"hiring more people is a course of last resort, done if and only if rising consumer demand requires it". ...I launched numerous magazines for each of which, at time of their launch, there was zero consumer demand...I think a lot of business managers and entrepreneurs would feel insulted by that statement as given.
Emphasis mine. Setting Anderson's obviously bogus quibbles aside, it seems that the perceived slight to the status and value of the "entrepreneur" class is what doomed Hanauer's talk.

The interesting thing to me is how Wilkinson's far more radical talk inspired no controversy at all. Looking at the charts, the US is shown as the worst developed country, sometimes by an enormous margin (as in incarceration rates). And check out this section, starting at about 9:58:
The other really important point I want to make on this graph is that, if you look at the bottom, Sweden and Japan, they're very different countries in all sorts of ways. The position of women, how closely they keep to the nuclear family, are on opposite ends of the poles in terms of the rich developed world. But another really important difference is how they get their greater equality. Sweden has huge differences in earnings, and it narrows the gap through taxation, generous welfare state, generous benefits and so on. Japan is rather different though. It starts off with much smaller differences in earnings before tax. It has lower taxes. It has a smaller welfare state. And in our analysis of the American states, we find rather the same contrast. There are some states that do well through redistribution, some states that do well because they have smaller income differences before tax. So we conclude that it doesn't much matter how you get your greater equality, as long as you get there somehow.
The political implications of this are enormous. Taken just to the next logical step, this means that the Republican ideas around incentives for work, and tax incentives for "job creators"--exactly the same thing Hanauer was talking about--are completely mistaken. The evidence is in, according to Wilkinson, and developed countries should forget everything else and pursue equality by any means at hand.

Now, that sounds good to me, but the point is it's rather remarkable how this kind of thing goes over fine with the rich job-creatin' TED attendees, while a more moderate but less polite version gets censored. It's almost like they're sitting in their seats, blissfully unaware of what the speaker is actually talking about, but feeling good about being part of a hip, trendy, high-status event.

UPDATE: They've since released the talk.



Dude isn't that great at giving a speech; it actually reads better in the transcript. But still, relatively moderate point from the view of mainstream American consensus--the middle class is the economic backbone of the country. In any case, good on TED for releasing it, other things equal. Anderson's view here.

May 15, 2012

Cowen Done Right

Lest you think I'm just about bitching how Tyler Cowen sucks, take a gander at this post. It's Cowen at his best:
Another practical upshot is that you still can believe in labor market hysteresis, as presented by DeLong and Summers. Without some analysis like the above, the DeLong/Summers claims are otherwise contradicted by American post-Depression productivity once joblessness lifted. Where were the long-term scars? Well, they were fixed but it wasn’t easy. So the relevance of hysteresis can be saved, but we still are left with proper stimulus being very difficult to do, unemployment being quite sticky, and proper policy requiring lots of structural attention. The Great Depression is evidence for all of those views, not against them.
Important things to be thinking about for the future.

The Good Thing About Uncontrolled Financial Panics

Matt Yglesias had some recent skepticism about the idea of breaking up too-big-to-fail banks:
This all just backs in to the point that even though the phrase "too big to fail" has caught the public imagination, it's never been clear that size is relevant. The point of bailouts is generally to prevent panics where insolvency at one institution leads to a liquidity crisis at many institutions. If you have a larger number of smaller institutions, it's perhaps true that any given failure is less likely to spark panic but you're also more likely to have failure.
He continued today:
Contrary to myth, there's no such thing as a "small enough to fail" depository institutions in the United States nor are small banks immune to terrible decisions and bankrupting themselves. But what happens is that in the FDIC resolution process the depositors get the overwhelming majority of their money back, the stockholders get nothing, and the managers get fired. It's not a costless outcome and it doesn't replace the need for prudential regulation, but the basic functioning of the system doesn't rely on the prudential regulation being perfect it relies on the FDIC resolution process halting panics without propping up shareholders and managers.
The argument for getting rid of TBTF megabanks to me seems essentially political. Look at what happens when JP Morgan takes a large hit, but a relatively minor one compared to the size of their balance sheet. They get wall-to-wall coverage in the media. If they were in real trouble the incumbent management would, as they did in 2008, bring stupendous pressure to bear on the government. CNBC would lead the rest of the lickspittle financial press running nonstop breathless hysteria speculating if Obama would "let the economy fail?"  Probably JP Morgan would get themselves another no-strings-attached bailout.

Contrast that with the failure of small banks, which died by the hundreds during the crisis. Atrios did a continuing series on that, and hardly anyone noticed aside from him.

Yglesias is right both that small banks can be every bit as systematically risky as large ones (it sometimes only takes a small stone to start a landslide) and that it's possible to imagine a process where a megabank goes tits-up and the government smoothly steps in to secure the system while wiping out shareholders and management. But the politics are impossible. I mean, look at the sweetheart deal the big banks got for committing systematic mortgage fraud. Someone at MF Global stole something like $1.6 billion and no one got in trouble. If the government can't thread that needle without giving the banks more than token punishment, then there is zero chance that they're going to be able to orchestrate a restructuring of the country's largest bank which wipes out management and shareholders.

The good thing about the Depression was that the power of the banks was broken. Like back during the Gilded Age, a lot of the very wealthy lost their fortunes, and the obvious failure of Hoover utterly discredited his conservatism. This cleared the path for FDR and the New Deal, which was loathed by the corporate and media elites back then for basically the same reasons similar policies are loathed now.

We seem to be stuck in a political bog where increasingly extractive corporate elites have failed the country and their own businesses, but through the action of the taxpayer bailout, managed to prop the system up enough to avoid total collapse. They thereby preserved their own power and avoided creating rampant despair, which would lead to political revolution, but at the cost of preserving a rotten system.

We've already had one bankruptcy and one massive loss gambling down at the dog track. Soon enough we'll have another full-blown crisis. Here's hoping the next President has the good sense to break the banks when she's got the chance.

UPDATE: Someone on Twitter raised the counter-example of MF Global as a firm that was allowed to fail. True, but it had assets of around $41 billion. JP Morgan has assets of $2.26 trillion.

May 14, 2012

Tyler Cowen and Convincing People

There was a recent object lesson in the limits of Tyler's Delphic Oracle approach that I was talking about the other day. He was talking about austerity, and how the anti-austerity faction, broadly speaking, hasn't properly analyzed it:
Going back to my initial post on European fiscal policy, there are many upset commentators but in general they are not grasping these points much less responding to them or showing some level of understanding which is deeper than my own. 
I am more than willing to admit that there are deeper understandings yet than what I offer in this post, but we are not at them yet, not in this discourse at least. 
I don’t wish to respond point-by-point to some of the writings in the blogosphere, but given the above, Ryan Avent also is not looking deeply enough. Both he and Brad Plumer did not see that the posts in question clearly distinguished between spending cuts and “austerity” (Brad did issue what is arguably a correction.) I admire both bloggers and read them regularly, but these two posts both fail; here are some comments from Veronique. I would say there is a dominant narrative, repeated many times in not always precise language, which people find it very hard to think outside of. 
Most of the time “austerity” is a misleading word and more precise concepts — readily intelligible I might add — are available. There really are some times when we should relabel austerity as “mostly tax increases,” but many people are reluctant to do so.
I've read this post a dozen times and I don't really see what he's driving at, and neither did Ryan Avent. I've basically concluded that there is not much of a point here, and that Tyler is flirting with trying to con us again (and jeepers, man, turn down the pretentious a bit). I think Matt Yglesias described it best:
We can argue until the end times about the correct English word to describe these trends. So to try to use jargony value-neutral language let's just say a Noteworthy Change in Spanish fiscal policy occurred. And let's also say that this Noteworthy Change occurred in the direction that you would expect to be favored by people associated with the Mercatus Center and the George Mason University economics department. If the entire argument is really over whether or not this Noteworthy Mercatusward Change in Spanish fiscal policy deserves to be called "cuts" rather than "rapid deceleration" then I suppose we've all wasted our time.
Tyler's "mission of the blog" is to get people to see things from a different light so they don't succumb to simplistic good vs evil narratives. But if you make these sorts of Nostradamus pronouncements (think deeper, man...) without actually spelling out the terms in detail, and impute people's thinking to boot, they're not going to be convinced, they're going to be pissed off. Ezra Klein and Avent both got rather irritated with Tyler on Twitter, and when you're pissed at someone, you're thinking about how to refute their arguments, not how they might be right.

May 13, 2012

Robert Caro and History, ctd

On Twitter Alec MacGillis graciously responded to my previous post, making the appropriate point that I had not addressed Caro's support for the filibuster. Here's the quote, from a WSJ profile:
In 2004, when Senate Republicans were threatening to end Democrats' filibustering of judicial nominees by implementing "the nuclear option," Kennedy called Mr. Caro "out of the blue" and asked if he would come to Washington, D.C., and explain to the freshman senators the importance of preserving the filibuster. After their joint lobbying effort succeeded, Kennedy asked Mr. Caro to introduce him for a speech at the 2004 Democratic National Convention.
I agree, that's a foolish speech in hindsight, but I'm not sure we can take this at face value.

Here's the thing. Caro says his books are about power, and he is well known for having an extremely realistic view of how power actually operates in this country. His portrayals of Johnson and Robert Moses are utterly unsentimental. And while he eventually concludes that Moses was a monster who devastated New York, he is grudgingly respectful of Johnson's Great Society accomplishments, even though on the way he betrayed some of his best friends, repeatedly broke the law, stole elections, used government contacts to make himself rich, and so on. One of the most important things Johnson did, actually, was rewrite the Senate rules on seniority to give himself more power and make the body more functional (so that he could accomplish more).

Check out the next graf of that profile:
In exchange, Kennedy offered to help Mr. Caro with the book. Mr. Caro recounts: "I said, 'If you really want to help me, you can get the instructions from your [1960] campaign headquarters about what you did in the different states.'" John Kennedy's presidential campaign had sent Teddy, a 27-year-old political neophyte, to the Western states to win over delegates. Why? "Because they thought it was lost." To his credit, Kennedy delivered the instructions.
So Kennedy got Caro to help maintain his power in the Senate, and in return Kennedy helps him with some important documents. Did Caro really believe what he was saying, or was he engaging in a bit of logrolling? I find it hard to believe that he at least wouldn't have understood the subtext. I haven't seen him pressed on this point, but I find it very hard to believe that if he were faced with the standard argument against the filibuster he wouldn't concede the point. Anyone know of an interview with that question asked?

May 12, 2012

The Graveyard of the Colorado, Part II

Dead Horse Point, via Wikimedia
[This is part II of my dad's story about Cataract Canyon. Part I is here.]

We boatmen types were anxious to see the first rapid anyway, so we take off at a lope trying to catch a glimpse of the Moki boat going through, but it’s a half mile and hopeless. He’s gone. The rapid is a quarter mile long and has but two waves. Two tumultuous heaving Himalayan waves with whirling vortices of confused turbulence erupting on their surface and crests of foam and backlit amber water that built and broke from all directions and rolled down the looming face in rushing fronts the height of a man. It took your breath away. Our tallest Scandinavian boatman, Eric, rounded the last corner, raised his eyes to the spectacle, missed a step and twisted his ankle, big time. We cut him a crutch and went back to camp.

Our first few minutes at Spanish Bottom hadn’t been all positive. Downstream prospects were nil. Eric was a functional monopod. Another boatman, Greg, had climbed in with the news chopper and flown off. We were down by 30% in twenty minutes, worse than the battle of Bull Run. I suppose I should mention that Greg wasn’t just one of the boatmen. He also owned the permit under which we were running the trip. We had leased the use of his start-up river outfitting company but brought our own boats and staff and clientele. That’s where the murky part comes in. He was really just another boatman, but it was technically also his trip and he wasn’t looking forward to writing a lot of refund checks.

Eric’s ankle swelled up like a football and misery was at large. It was hot and buggy and dusty and humid and the river was a voracious grasping thing nobody wanted to go near. One commercial trip had been on the beach for three days and was out of food. Another trip’s lead boatman had refused to proceed because of the quality of the gear he had been sent out with. He had rolled up his “trash” pontoons and was waiting for new tubes to be delivered by jet boat from Moab. “You can’t point that many directions at once even when your boat does hold air,” he said. Later, when he unrolled the replacements to find they were in worse shape than the originals, he would hike out Red Lake Canyon and never be heard from again.

Back at their “Bug Camp” the Ranger’s radio crackled. It was the Park’s rescue boat stationed down below the rapids. “Moki motorboat capsized in Big Drop Two and went through Satan’s Gut upside-down. May have been entangled in timber. Boat came apart. At least one injury. Broken leg. Assisting with rescue.” It had been about 15 minutes since they’d left.

Next morning comes early. We’re thinking of trying to set up a jet boat shuttle to take our people back to Moab. “Hey it was a bad call, OK?” one might explain. “Who coulda known? Drinks are on the house and please don’t sue. Better than drowning any one of you, eh? Except maybe you, Martha. Just kidding.” That sort of thing. Might work. Except, who then floats around the corner on a Gypsy wagon of a big rubber boat than Greg and five other susceptible late night patrons of the Poplar Place bar, whom he has primed to row some dories through the biggest white water in North America. They had launched after midnight and floated down in the dark.

The suggestion was obvious and didn’t sit well. “I have brought some non-pussies to row these boats out through the scary water.” The boatman who had recently become my wife was ready to tear his throat out. People had died. There was no room on the beach for macho. The last boat to try it tipped over. It was 33 feet long and weighed 5 tons. We’ve been “practice” flipping the dories on the way down here by having everyone stand on one side. They tip right over. We weren’t taking those people into the Big Drops. No way.

Greg retreats, but not far. There’s a way to complete the trip, within reason and not kill us all, he maintains. We’ll get a helicopter. We’ll run the boats to the top of Mile Long rapid and chopper them to the lake from there. It’s not that far. Greg knows the guys at Rocky Mountain Helicopters. He does heli-skiing with them in the La Sals in the winter. He’ll set it up on the park radio.

We’re all at cross purposes. The Rangers have been told from on high that if a rowing trip decides to leave they must accompany it in their spanky new 20 foot Zodiac with twin 50’s for back up. They don’t want to. The boatmen aren’t frightened exactly, but they’ve seen it now and recognize the gravity. Still, there is a once in a lifetime experience available here. Nobody had ever made bold to try Cataract at this level or even half this level in a dory before. How cool would that be, if we lived? The passengers are still game. Lacking any alternative, they still believe us.

We decide to try it first thing in the morning. We’ll go down the river as far as Range Creek, where the big shit starts. We’ll run a few drops, give the folks a helicopter ride over the biggest damn rapids anyone has ever seen and drop them off at the top of the lake. Somehow or another we’ll get them home from there. Terrific plan. Thus begins the longest day.

We arise early, shovel down some pancakes, load the boats, rig flip lines, check and recheck spare oars, life lines, latches, everyone’s life jacket and shove off. We run a rapid, totally helpless. There’s two feet of vertical relief in the water at the eddylines and the towering waves won’t stay in one place long enough to point at them. They rear up suddenly off the beam and slap the boat a dozen yard sideways, spinning it like a top and tilting from rail to rail. It’s not boating, it’s rodeo. Just trying to hang on for eight seconds, then eight more. Range Creek seems a long way but we make it and that is quite enough. We pull the boats up the beach clear into rocks, where they will be dry till the next ice age begins to melt off. Just like we’d planned it, a helicopter soon comes clattering around the corner, and sets down on the beach.

We had dampened a patch of sand for him to land in and had a guy out on the beach indicating wind direction. As it just so happened we’d been doing a lot of stuff with helicopters around that time. The previous fall we had airlifted a whole trip out of the Grand Canyon as an experiment in avoiding the three day misery and 500 mile road trip of a Lake Mead take-out. We had woken up in the morning below Lava Falls and had breakfast on the rim at Toroweap Point, a mere 80 miles from the warehouse. It turned out to be too expensive to do regularly and the helicopters had a hard time getting the boats off the ground. Too much flat surface catching the downwash. “It’s like trying to lift yourself by your bootstraps,” the pilot had said.

Big Drop 2, taken by the Kolb brothers at low water
The captain of this craft shuts the thing off and climbs out. His name is Doug and he’s a little wiry guy in cowboy boots and ranch wear whose first step is to stop and roll a cigarette. Greg thinks all the boatmen should take the first ride and go scout the whole canyon by air. Sounds prudent to me and I climb in shotgun. The ship, an Alouette Llama, looks pretty well used. There are rips in the seat, a big ding in the windshield, the glass in a couple of the gauges is shattered and missing in others. When he gets the thing fired up it rattles and shakes so badly it doesn’t matter if you can see the gauges or not. The needles are bouncing from peg to peg like pinball flippers. It comes right off the ground though in a deafening racket and we’re quickly at the dogleg in the canyon where there’s a long straight section of nearly continuous rapids that ends in the Big Drops. From five miles away you can instantly see the legendary reversal at the top of Big Drop 2, drawing in the unimaginable mass of the river like a white black hole. They call it Niagara.

Doug laid the ship over on its side as we did an abrupt U-turn directly above the great hole and I could stare directly down into the foaming maw with nothing but air between me and it. Doug had taken off the doors for a better view. When we set back down on the beach I was certain that the Llama was the only proper craft for Cataract that day.

[That's it for today. Stay tuned next week for the final installment!]

May 10, 2012

Robert Caro and History

Alec MacGillis is not a fan of Caro's attachment to the "great man" theory of history:
But it’s also been clear to me for some time now that Caro’s exhaustive, colorful depiction of Johnson’s rise to power in Washington has not exactly been helpful when it comes to our country’s weakness for the Great Man Theory of politics and history. How many times in the past few years did you hear pundits and liberals lamenting that Barack Obama was unable to get more of his agenda passed because he lacked the strong-arm, big-cojones gumption of ole LBJ? Never mind that the Congress of LBJ’s day was vastly less polarized by party (Southern Democrats had not yet flipped to Republican) or that the filibuster was reserved for only certain matters (say, blocking civil rights legislation) rather than as a matter of routine. No, all this country needs is a true ball-busting leader to save the day.
Reading Caro's books and listening to him talk, it's definitely the case that he believes strongly in the ability of single persons to radically change a country, or even the world. I'd say that he probably underrates the importance of institutions, as opposed to personalities. I think that his study of power is somewhat peculiar to the United States, in that our institutions of governance are so cumbersome and unwieldy that it often takes a certain kind of ruthless manipulator to accomplish anything significant.

But I think MacGillis is underestimating the quality of Caro's work. His books are so brilliant and thorough that all kinds of truths about institutions are in them as well. As he is always saying, this isn't just about Johnson, it's about the times in which he lived. I think (I can't find any interviews on this subject) that if you pressed Caro he'd freely admit that the circumstances and institutions matter nearly as much as who is actually holding power.

But I also think that individuals actually matter too. Obama really could have used some of LBJ's ball-busting manipulation. Johnson wouldn't have been stymied by the filibuster--he would have forced a quick rules change that eliminated it, and then rammed through his legislation on a party line vote. Furthermore, he would have fully flexed the muscle of the federal bureaucracy, not let important posts go unfilled for years on end. Obama has been bizarrely uninterested in things like Federal Reserve Board seats, which are critically important to his re-election. Great accomplishment requires leaders who are comfortable with (and, probably, desperately crave) wielding great power.

Glow Opera With a Helicopter

Robert Caro, Live



Here's the video of last night's event with Robert Caro and Mike Allen. It was very good, despite what were mostly insipid DC insider questions from the insipid DC insider Allen. Caro was so charming and genuine and took Allen's dumbass questions so seriously that there was a great discussion almost in spite of the moderator. It was interesting to me that despite Allen's self-conscious attempts to be clever and witty, Caro was by far the funnier participant. He has this great self-effacing genuineness that is hard to find these days.

Anyway, that's one big benefit of living in an important city. Furthermore, I got a copy of the book signed by the author!


May 8, 2012

More on South Africa and Unemployment

Tyler Cowen very graciously links to my explanation of unemployment in South Africa: "I told him I would try to answer the question, but after a bit of research I don’t find myself getting much further than his suggestions." I take that to mean not that I've captured all the nuances, but that my (probably pretty half-assed) explanation at least hits most of the major points.

For me, the important thing about South Africa in this regard is it's a gut check for how seriously one takes ideas. The place is a kind of a dark mirror of the United States, where the optimal policies really include a lot of neoliberalism and Republican union-busting. (In moderation.) Exercises like that are important to avoid sloganeering and tribal groupthink.

"See these fists? They're getting ready to f*ck you up."

Today in vicious jackbooted thuggery comes via Reason, with a video of a swarm of cops tasing and beating a mentally ill homeless man, Kelly Thomas, into a coma (from which he later died) while he apologizes and cries for his father. I've watched this, and I warn you, it takes a strong stomach. I think it's important to realize how this thing went down, but I won't judge you if you don't watch. The beating starts about 15:00.



It's another example of the rot in our elite institutions. Law enforcement are among the most powerful government employees--tasked with exercising violence in the name of the state. They should in a just society be among the most restrained and careful with that power, heavily trained to avoid confrontation and escalation, to use violence only when absolutely necessary. They should be professionals.

Watch, if you can, the swaggering, swinging dick cop, who is clearly just looking for the tiniest excuse to pound the piss out of this wretched guy. He says, "See these fists? They're getting ready to fuck you up," when Thomas is being sort of snotty and uncooperative. Watch how, when Thomas brushes off the cop's hand, then backs away, open hands raised, the cops shout "get on the ground," then immediately start taking heavy, full-power swings with their clubs at Thomas' knees and head. Violence is the first resort.

Then, when they've wrestled him to the ground, Thomas immediately starts apologizing, even while they're still beating him: "Okay, I'm sorry, dude!" He repeats this over and over and over. Instead of trying to talk him down, or just restrain him until he calms down, the cops are satisfied with nothing less than absolute surrender. They yell commands at him, and when he doesn't comply immediately they use more and more force. As more cops arrive, making additional force less and less necessary, it actually gets more violent. At one point one cop is yelling commands at him while another is tasing him, while he screams in agony and flops around. (See here for the DA's description of what happened.)

This was, literally, a Cartmanesque bunch of thugs. This mentally ill homeless person didn't properly respect their authoritah, so they tortured him to death.

May 7, 2012

Bring Forth the Book of Genocides

I'm onto Kings II in the KJV, and boy it's nice to be past the worst of the bloodcurdling genocides:
And Moses was wroth with the officers of the host, with the captains over thousands, and captains over hundreds, which came from the battle. And Moses said unto them, Have ye saved all the women alive? Behold, these caused the children of Israel, through the counsel of Balaam, to commit trespass against the Lord in the matter of Peor, and there was a plague among the congregation of the Lord. Now therefore kill every male among the little ones, and kill every woman that hath known man by lying with him. But all the women children, that have not known a man by lying with him, keep alive for yourselves.
Not an original thought, surely, to read that passage and recoil in horror. Modern Christians have developed some elaborate rationales to excuse God and their holy book. I think it's a worthy exercise--better by far to have an expurgated religion than a literal one, especially since Christianity is here to stay--but I find them utterly, utterly unconvincing.

Mostly it adds up to "whatever God does is good." But really, the overwhelming impression I have from reading the Bible and the associated history is that this is basically how things worked back then. Barbaric, savage slaughter of children and the systematic rape and enslavement of whole peoples were routine. Thank God we're graduated out of that dark time.

May 3, 2012

Wall Street as Electoral Power Source

The big read today is Nick Confessore's lovely piece in the New York Times Magazine about the big Wall Street financiers who are deserting President Obama in droves:
For the next hour, the donors relayed to Messina what their friends had been saying. They felt unfairly demonized for being wealthy. They felt scapegoated for the recession. It was a few weeks into the Occupy Wall Street movement, with mass protests against the 1 percent springing up all around the country, and they blamed the president and his party for the public’s nasty mood. The administration, some suggested, had created a hostile environment for job creators. [...]
Obama far outraised his Republican rival, John McCain, on Wall Street — around $16 million to $9 million — and Goldman Sachs executives sent Obama more money than employees of any other company in the world. But four years, one recession and a host of battles — over financial regulation and the nomination of Elizabeth Warren, over Dodd-Frank and the Buffett Rule — have taken their toll. Some on Wall Street are apoplectic. One former supporter, Dan Loeb, compared Obama to Nero; the president’s enemies insinuated worse. In 2010, Stephen A. Schwarzman, a founder of Blackstone, said that an Obama proposal to raise taxes on “carried interest” — the main source of income for most private-equity managers — reminded him of “when Hitler invaded Poland in 1939.” [...]
The huge gulf in super PAC donations terrified the Obama campaign. If they wanted, financiers could pour unlimited money into Restore Our Future, meaning that voters in Ohio, Florida and Pennsylvania might see nothing but negative ads about the president from September through Election Day. (It’s no wonder that the Obama team has already held more major fund-raisers than George W. Bush did during the entire 2004 campaign.)
Of course, Obama is still pulling in huge sums, though it looks like Romney will probably out-raise him with Wall Street financiers. But it seems to me that there are two political miscalculations being made here. The first is from the Obama team, which seems to have over-estimated the value of money for a sitting president. Thanks to Citizens United, the political world is being flooded with money, which would seem to diminish the marginal utility of the normal kind of political convincing that one can buy with money. I mean, suppose the Wall Street titans buy up literally every second of ad time from September to election day in all swing states. Would that guarantee Romney victory? Or would voters just be pissed off at never getting a moment's rest from Romney's smiling visage? The idea that there might be a diminishing or negative return to endless propaganda, or that the politicians are being fleeced by their campaign people, never seems to cross anyone's mind.

The second mistake, which is probably more important, is that these Wall Street cretins have no idea what real people think of them. They're completely out of touch. Closing the carried interest loophole is like Hitler's invasion of Poland? WTF?? These clueless chumps are just begging to be demagogued, and it's quite clear that nothing Obama can do short of publicly licking their boots twice weekly would satisfy their bloated egos. If the president really went on a tear against them*, it seems highly likely that they would badly over-react and provide more outrageous fodder for the opposition. Plus, if he stopped worrying so much about Wall Street money, (or, heaven forbid, stopped taking it altogether), he could then run against the fat-catness of the the fat-cat funded former fat-cat vulture capitalist who makes a "sweet baby Jesus I'm rich" gaffe every third breath.

Now, it would have to be rather mild-mannered and serious sounding, because Democrats don't react well to spit-flecked tirades, but it should be an easy needle to thread. Just imagine:
If saying that a hedge fund manager who makes $30 million a year should pay the same tax rate as a public school teacher causes a hedge fund manager make comparisons to Hitler's invasion of Poland, then that tells me the financial class in this country has lost its collective mind. They are parasites, who make their money largely by directing the concentrated output of thousands of hardworking Americans into their own pockets though complex financial chicanery, and it's time they were taken down to size.
The speeches almost write themselves!

*Obviously, Obama has been captured by the financial elites, and won't do anything like this. But what gives me hope is the tremendous power that awaits someone who would. This generation's potential FDR is probably cheating on his wife somewhere, just waiting to make this realization.