Monday, December 31, 2012

The Use of History

What's the practical use of history? Well, it's mostly captured in Edmond Burke's

"Those who cannot remember the past are condemned to repeat it"

Those who do can often exploit it. In Guns, Germs, and Steel, Jared Diamond gives an example of a simple trap that Pizarro used to to help his tiny army defeat the millions strong Inca empire. His advantage, he claimed, was literacy, and his knowledge of the uses of the strategem from time immemorial - or rather from time memorialized in historical record. Without literacy, the Inca fell for the trap.

Most literate civilizations have practiced some sort of history, and the West imbibed the spirit of Greek and Roman history and has been diligent in it's practice.

The great exception is India. The oldest extant civilization has been singularly remiss in recording its own track through time. It's hard to believe that it hasn't sometimes paid Burke's penalty for that neglect. Almost all that we know about Indian history comes from foreigners, mostly invaders. Even today, it seems, Indians are slow to take to writing history. (via Arun)

Historical Sciences

The historical sciences - economics, anthropology and history - are viewed rather dismissively by a lot of those who read me. I think that's a mistake. Geology and astronomy used to be historical sciences too, but physics invaded with it's equations and "redeemed" them. Economics has imbibed a mighty dose of mathematics but still has trouble feeling respectable.

One of the things I got from reading Feynman - YMMV - is that science starts with narrative. The story is the primary tool we humans use in explaining the universe and mathematics is one of the ways we keep track of the implications of our stories. That's worked out wonderfully for physics, astronomy, meteorology and some other sciences, but slightly less well - so far - for economics.

One very crucial scientific idea Feynman emphasizes is the necessity for honesty and self criticism. These traits are not especially congenial for human nature, and I think economics has provided a perfect growth medium for these anti-scientific elements, mostly because the incentives for stacking the deck are so great when such huge opportunities for rent extraction exist.

Neils Bohr once remarked that a crucial advantage that physicists had over philosophers was that they had "all written papers that were subsequently proven wrong." Of course this advantage is less clear cut in the age of string theory, when experiment hardly ever has anything to say. A good test of an economists character is to ask when he or she has been wrong and admitted it.

Lumo Will Never Understand Loschmidt's Paradox

...Or the scientific method.

Nonetheless, he does make a sincere effort to deal with the problem - while refusing to acknowledge that Sean Carroll is doing the same thing. The problem is that his solution effectively assumes what he is trying to prove - which leaves him in good company, since Boltzmann was forced to a similar expedient.

Of course, when the past is determined by the correct method – the method of retrodictions which is a form of Bayesian inference – we will find out that the lower-entropy states are exponentially favored. We won't be able to become certain about any property of the Universe in the past but some most universal facts such as the increasing entropy will of course follow from this Bayesian inference. In particular, the correctly "retrodicted past entropy" will more or less coincide with the "actual past" curve.

The secret sauce is the statement that in retrodictions

...the lower-entropy states are exponentially favored.

I'm putting that in my "remains to be demonstrated" file.

What is Science?

We have been arguing about what is, and what is not a science, in particular, about economics. On such matters it's often useful to consult the experts. Who better than Feynman: What is Science?

You might not learn whether economics is a science, but you will learn not to trust such matters to experts.

Refuting Keynes

Like everybody else, Keynes made mistakes. A lot of people who accepted his ideas also have made mistakes. His core ideas, the ones that have provided the the subject of innumerable policy debates, are a critique of Neo-classical economics with the follwing key elements (Wikipedia):

Keynes' theory was significant because it overturned the mainstream thought of the time and brought about a greater awareness that problems such as unemployment are not a product of laziness, but the result of a structural inadequacy in the economic system. He argued that because there was no guarantee that the goods that individuals produce would be met with demand, unemployment was a natural consequence. He saw the economy as unable to maintain itself at full employment and believed that it was necessary for the government to step in and put under-utilised savings to work through government spending. Thus, according to Keynesian theory, some individually rational microeconomic-level actions such as not investing savings in the goods and services produced by the economy, if taken collectively by a large proportion of individuals and firms, can lead to outcomes wherein the economy operates below its potential output and growth rate.

Prior to Keynes, a situation in which aggregate demand for goods and services did not meet supply was referred to by classical economists as a general glut, although there was disagreement among them as to whether a general glut was possible. Keynes argued that when a glut occurred, it was the over-reaction of producers and the laying off of workers that led to a fall in demand and perpetuated the problem. Keynesians therefore advocate an active stabilization policy to reduce the amplitude of the business cycle, which they rank among the most serious of economic problems. According to the theory, government spending can be used to increase aggregate demand, thus increasing economic activity, reducing unemployment and deflation.

Keynes argued that the solution to the Great Depression was to stimulate the economy ("inducement to invest") through some combination of two approaches:

A reduction in interest rates (monetary policy), and

Government investment in infrastructure (fiscal policy).

There is no doubt, by the way, that these two prescriptions are not the cure for every variety of economic ill. Penicillin was a wonderful drug in its day, but it couldn't cure cancer or old age or anything viral.

It does drive me nuts though, when somebody like Cochrane claims something like 1946 as a failure of Keynes theory when in fact nothing about 1946 met the conditions for Keynes intervention strategy. There was no depression. There was no failure of aggregate demand. True enough, some Keynesians expected that there might be, but there wasn't.

On the other hand, the situation today in Europe, especially Southern Europe fits Keynes rather well - but nobody (OK, Germany) will permit giving his ideas a try.

Sunday, December 30, 2012

The Other Side of the Jungle

In Conrad's The Heart of Darkness, the jungle that borders the river is a wall or barrier between the river boat our narrator captains, and the darkness beyond. This barrier is both real and metaphorical - beyond are black limbs and white eyes peering out and sometimes firing arrows and spears.

Chinua Achebe wrote Things Fall Apart, he says, as a response to Conrad. As a response, I find it more counterpoint than counter. It tells the story of a man in an Ibo village, with the first part coming almost entirely before any vestige of contact with whites, but the final grim conclusion impelled by the coming of missionaries and soldiers.

Obviously Achebe lived many years after Conrad, but I suspect we can trust his depiction of village life. The life he depicts is neither idyllic nor squalid, but eventful, human and highly organized by principles of community and ritual. It was also sometimes violent, brutal and to our eyes terrible - twins were always murdered by abandonment, for example.

It's a short but fascinating look at the lives of some of the people behind the jungle wall. A fragment:

“Somebody told me yesterday,” said one of the younger men, “that in some clans it is an abomination for a man to die during the Week of Peace.”

“It is indeed true,” said Ogbuefi Ezeudu. “They have that custom in Obodoani. If a man dies at this time he is not buried but cast into the Evil Forest. It is a bad custom which these people observe because they lack understanding. They throw away large numbers of men and women without burial. And what is the result? Their clan is full of the evil spirits of these unburied dead, hungry to do harm to the living.”

Achebe, Chinua (2010-10-06). Things Fall Apart: A Novel (African Trilogy) (Kindle Locations 357-362). Random House, Inc.. Kindle Edition.

Real Science

We have been talking about whether economics is a real science. Physicists are mostly pretty suspicious of economics, because it isn't enough like physics. The problem with that defining principle, I think, is that it depends far too much on the state of the science at a given point. Physics, today, is a very mature science - possibly even an arthritic science. The same might be said of chemistry and geology, and biology isn't far behind. If you want to compare economics, you might need to compare it with pre-Galilean physics, or chemistry before Lavosier, or geology before continental drift.

Saturday, December 29, 2012

"The Horror! The Horror!"

I just finished the first of my "novels for 2013" - oops - it was short and I finished early. It was Conrad's The Heart of Darkness, often considered the best short English novel of African colonialism. For balance, I also read the acclaimed Nigerian novelist Chinua Achebe's highly critical review.

Beside's closely paralleling certain event's in Conrad's life, Heart of Darkness was also the inspiration and pattern for Apocalypse Now, the parallelism extending to the names of the critical characters Mr. Kurtz (Conrad) and Colonel Kurtz (Coppola) and their respective last words.

Conrad's narrator is a sailor named Marlow who undertakes a journey up the Congo river to relieve Mr. Kurtz, a charismatic character who's dealing seems to produce an incredible bounty of ivory.

Achebe's critique of the novel charges Conrad with racism, mostly on the basis of his portrayal of Africans and Africa. It's certainly true that no African character is sketched as a fully realized person, but I consider that an irrelevant critique - any novel is guilty of not being about what it is not about. Conrad's very short novel is about Europeans' reaction to Africa, especially the reaction of the narrator and another central character to Africa.

Is the narrator character racist? Well, he is a man of his times, equipped with many of the prejudices of his milieu - and he would be a bizarre anachronism if he wasn't.

Whether he is or is not, the point is that the character is not the novel. The picture we get of the Africans is a distorted one - a vision seen through the dark glass of European eyes that can't speak their language or understand their culture, but it is not an uncompassionate one, or one without insight into their common humanity. No character in the book, except possibly the peculiar Russian wanderer, treats the Africans as equals. That's racist of course, but it's the real racism of history, the racism that actually existed. Neither Conrad nor his narrator is unaware of that racism, but again, it would be anachronistic for the narrator to forthrightly reject it.

In short, I consider Achebe's critique mostly nonsense. It's short though, so feel free to click the link and read it yourself.

Here is a fragment:

The Christian Science Monitor, a paper more enlightened than most, once carried an interesting article written by its Education Editor on the serious psychological and learning problems faced by little children who speak one language at home and then go to school where something else is spoken. It was a wide-ranging article taking in Spanish-speaking children in America, the children of migrant Italian workers in Germany, the quadrilingual phenomenon in Malaysia, and so on. And all this while the article speaks unequivocally about language. But then out of the blue sky comes this:

In London there is an enormous immigration of children who speak Indian or Nigerian dialects, or some other native language.

I believe that the introduction of dialects which is technically erroneous in the context is almost a reflex action caused by an instinctive desire of the writer to downgrade the discussion to the level of Africa and India. And this is quite comparable to Conrad's withholding of language from his rudimentary souls. Language is too grand for these chaps; let's give them dialects!

Well, I'm inclined to think that it might be the almost instinctive desire of the writer to avoid using the word language too many times in one sentence, and that Achebe's reaction to it is an almost instinctive reaction to the giant (but no doubt well-earned) chip on his shoulder.

For my penance, I have bought and started reading Achebe's Things Fall Apart.

Economics Debate MCXXI

Wolfgang and I have managed to bait each other into another of our usually fruitless debates on the Eurozone. Rather than continue in the ever narrowing margins of the Disqus comment system, let me start by specifying a few points on which we may agree:

(a)Other things being equal, higher taxes tend to suppress economic activity.

(b)At some point, said Art Laffer, that suppression is so great that tax revenues actually fall despite the higher rates. I don't think that this is controversial either, though my understanding is that the available evidence points to this occurring at marginal rates about twice as high as the highest current rate in the US.

(c)Taxes are a lot higher today in Greece, Ireland, Spain and Portugal than they were in 2005.

I want to also specify what I mean by austerity: a combination of higher taxes and lower government spending.

That said, I still believe that the troubles of the PIIGS all stem from excessive borrowing/reckless lending. Greece is a special case, since both government and individuals borrowed recklessly and irresponsibly. That's not the case with Ireland, Spain, and probably Portugal. Ireland and Spain ran conservative governments, limited spending and taxes, and trusted the markets to manage their own affairs. The markets failed miserably.

Local banks lent money recklessly and borrowed more from Germans to exacerbate the problem. Once it became clear that the borrowers could not afford to pay, various devices were created to transfer the liabilities from the debtor banks to the national governments. That spared German lenders immediate pain, but forced the PIIGS into painful austerity - raising taxes and cutting expenditures.

The austerity occurred mostly because the countries were in the Euro zone and desperately wanted to stay. Iceland, which suffered an even more catastrophic collapse, wasn't Euro and told it's lenders to suck it, and it's doing much better.

Thursday, December 27, 2012

The Big One

The total gravitational potential energy of the Earth, that is, the amount of energy necessary to disperse the planet to dust at infinity, is a bit more than 2.2x10^32 Joules. That's roughly the energy in an earthquake of magnitude 18.37 on the steeply logarithmic Richter scale (2.25 x 10^32 Joules). Phil Plait of Bad Astronomy reports that about 8 years ago, the planet got hit with the after effects of a Richter Scale magnitude 23 event.

Fortunately, it wasn't terribly close (50,000 light years):

Eight years ago today—on Dec. 27, 2004—the Earth was rocked by a cosmic blast so epic its scale is nearly impossible to exaggerate.

The flood of gamma and X-rays that washed over the Earth was detected by several satellites designed to observe the high-energy skies. RHESSI, which observes the Sun, saw this blast. INTEGRAL, used to look for gamma rays from monster black holes, saw this blast. The newly-launched Swift satellite, which was designed and built to detect bursts of gamma-ray from across the Universe, not only saw this blast but was so flooded with energy its detectors completely saturated—think of it as trying to fill a drinking glass with a fire hose. Even more amazingly, Swift wasn’t even pointed anywhere near the direction of the burst: In other words, this flood of energy passed right through the body of the spacecraft itself and was still so strong it totally overwhelmed the cameras.

It gets worse. This enormous wave of fierce energy was so powerful it actually partially ionized the Earth’s upper atmosphere, and it made the Earth’s magnetic field ring like a bell. Several satellites were actually blinded by the event. Whatever this event was, it came from deep space and still was able to physically affect the Earth itself!

The quake in question occurred on a magnetar, a rapidly spinning and highly magnetic neutron star.

The sheer amount energy generated is difficult to comprehend. Although the crust probably shifted by only a centimeter, the incredible density and gravity made that a violent event far beyond anything we mere humans have experienced. The quake itself would have registered as 23 on the Richter scale—mind you, the largest earthquake ever recorded was about 9 on that scale, and it’s a logarithmic scale. The blast of energy surged away from the magnetar, out into the galaxy. In just 200 milliseconds—a fifth of a second, literally the blink of an eye—the eruption gave off as much energy as the Sun does in a quarter of a million years.

Of course there are magnetars that are quite a bit closer.

Irredeemable Corruption of Economics

You can make really big bucks whoring for corporate crooks. Brad DeLong excerpts Matt Taibbi's piece on the "work" of W's former Chairman of the Council of Economic Advisers and and Columbia Dean Glenn Hubbard in defense of bankrupt junk mortgage factory Countrywide.

A sample: source

Matt Taibbi observes:

Glenn Hubbard, Leading Academic and Mitt Romney Advisor, Took 1200 an Hour to Be Countrywide's Expert Witness: What's fascinating in the deposition is the way Hubbard repeatedly tries to avoid answering the question about what kind of research he did, or didn't do…. His sneering annoyance shines through as brightly as it did in Inside Job, but this time he couldn't just say, "You've got three more minutes." Here, for instance, he actually tries to play dumb when asked if he looked into Countrywide's origination practices:

Q. Did you make any inquiry into how Countrywide actually originated its loans?

A. I'm not sure exactly what you mean by that.

Hubbard here is just being intentionally obtuse: he's trying to see how much of an appetite MBIA's lawyers have for fighting through his dickishness. They press on:

Q. You understand there was a process by which Countrywide originated the loans that it included in the securitizations?

A. Yes.

Q. And there was also a process by which Countrywide examined the loans that it purchased from other originators inclusion in securitizations?

A. Correct.

Q. Did you make any factual inquiry into the nature of either the process of origination or the process of due diligence by Countrywide?

A. I'm not an underwriter in this proceeding, so neither of the assignments that I told you would require such.

He knows it's a yes or no question, but he's letting them know they're going to have to beat it out of him:

Economics can't be a real science as long as guys like Hubbard are deans of prestigious colleges.

Wednesday, December 26, 2012

Probably Churchill's Fault

Via Tyler Cowen.

Tyler doesn't mention comparisons with other countries, but his commentators do.

The Creators of Wealth

Bryan Caplan proposed this libertarian thought experiment:

Suppose there are ten people on a desert island. One, named Able Abel, is extremely able. With a hard day's work, Able can produce enough to feed all ten people on the island. Eight islanders are marginally able. With a hard day's work, each can produce enough to feed one person. The last person, Hapless Harry, is extremely unable. Harry can't produce any food at all.

Questions:

1. Do the bottom nine have a right to tax Abel's surplus to support Harry?

2. Suppose Abel only produces enough food to support himself, and relaxes the rest of the day. Do the bottom nine have a right to force Abel to work more to support Harry?

3. Do the bottom nine have a right to tax Abel's surplus to raise everyone's standard of living above subsistence?

4. Suppose Abel only produces enough food to support himself, and relaxes the rest of the day. Do the bottom nine have a right to force Abel to work more to raise everyone's standard of living above subsistence?

Evolution ensured that the real world is nothing like this. There are Hapless Harrys today, of course, but most differences in wealth accrual are only slightly related to absolute ability.

If Able Abel achieves ten times the productivity of the average worker on his island, it's because he managed to seize control of some scarce and valuable resource, for example, a highly productive pond that produces most of the Islands food. Whether he managed this control by first discovery, military conquest, or dumb luck, it is what gives him productive advantage. In short, Able Abel is probably really just Rentier Ron with a good publicist.

I think that fact changes the moral calculus a lot.

The very rich seem supremely confident that they are the creators of the vast wealth from which they extract their tithe - or, more usually, double tithe plus management fee. In fact, they are almost as dispensable as the lowliest worker in their empires. True, they achieved their position by wit, pluck, and luck, but there are plenty more right behind them who could have done as well, or almost as well. They are the winners of the rentier tournament.

The Third IR

Paul Krugman takes on the third industrial revolution, and is nearly perfect in his analysis:

And this means that in a sense we are moving toward something like my intelligent-robots world; many, many tasks are becoming machine-friendly. This in turn means that Gordon is probably wrong about diminishing returns to technology.

Ah, you ask, but what about the people? Very good question. Smart machines may make higher GDP possible, but also reduce the demand for people — including smart people. So we could be looking at a society that grows ever richer, but in which all the gains in wealth accrue to whoever owns the robots.

And then eventually Skynet decides to kill us all, but that’s another story.

Of course smart AI people have been saying all this for a while. And I think the earlier part of his essay underestimates how fast this is happening.

Second Amendment Solution?

Josh Marshall points out Amy Gardner's rococo tale about the right-wing propaganda house FreedomWorks in the Washington Post:

The day after Labor Day, just as campaign season was entering its final frenzy, FreedomWorks, the Washington-based tea party organization, went into free fall.

Richard K. Armey, the group’s chairman and a former House majority leader, walked into the group’s Capitol Hill offices with his wife, Susan, and an aide holstering a handgun at his waist. The aim was to seize control of the group and expel Armey’s enemies: The gun-wielding assistant escorted FreedomWorks’ top two employees off the premises, while Armey suspended several others who broke down in sobs at the news.

The coup lasted all of six days. By Sept. 10, Armey was gone — with a promise of $8 million — and the five ousted employees were back. The force behind their return was Richard J. Stephenson, a reclusive Illinois millionaire who has exerted increasing control over one of Washington’s most influential conservative grass-roots organizations.

Tuesday, December 25, 2012

Conquering Religions

The Pew report on world religions has a figure that shows the scope of conquest by the two aggressively proselytizing Middle Eastern religions.

Much of this was the product of military conquest, but not quite all. Only the ancient and sophisticated civilizations of Asia and their indigenous religions were able to resist - and even them imperfectly.

Monday, December 24, 2012

Oh, The Humanities!

The Maya, and Sheldon, were right. The world has in fact ended.

PASADENA – They have gathered in a modest room on a brisk Thursday night to assemble a makeshift stage, run lines and finalize light cues. Their mood is light but purposeful as "curtain time" nears.

Soon, the director leads the company in a warm-up to loosen their limbs and vocal cords. This is one of their final rehearsals at the Armory Center for the Arts in Old Town Pasadena.

Most are students at the California Institute of Technology, renowned for cultivating the minds that helped produce the personal computer and the Mars rovers, and for developing the world's future leaders in science and technology. But these students are learning how to move on stage, project to the back row and yes, put on a show.

Students here are among the brightest mathematicians and scientists, but another, lesser-known aspect of life at the Pasadena campus is an interest in the arts and humanities.

A small but slowly growing number of students are choosing majors like English and history and coupling them with a science or math major. And recently, officials changed the core curriculum, reducing the math and physics requirements from five quarters to three each as part of a total of 13 courses in math and science.

My emphasis. The world is going to hell in a handbasket, and the next generation of techers might as well be at some liberal arts school like Bennington or MIT.

Sunday, December 23, 2012

Scamming the Eurozone

Landon Thomas, writing in the NYT, tells the story of how the hedge funds once again outmaneuvered the Eurozone and scarfed up big profits in the process. Makes me suspect once again that the whole bailout farce is mostly a scam to reward the already rich.

When the results were tallied on Dec. 12, Greece had reached its target of buying back enough bonds at a discount to retire 21 billion euros, or about $27 billion, of its debt. The bigger winners, though, were hedge funds, which pocketed higher profits than many had expected, in yet another Greek bailout financed by European taxpayers.

To some experts, this latest chapter in the long-running Greek drama is another reminder of how private investors have outmaneuvered European officials at various stages of the debt crisis. And they caution that each time it happens, future debt workouts in the euro zone will become even more costly.

“I just don’t understand why they did this,” said Mitu Gulati, a sovereign debt specialist at Duke University School of Law, who argues that Europe could have saved up to 2 billion euros. “This would have been an easy transaction to do, and still the hedge funds would have come out with a hefty profit.”

Opportunistic hedge funds have profited handsomely from the euro zone crisis, be it by speculating in Greek bonds or by buying up the senior debt of failed Spanish banks. They have successfully bet that Europe, ever fearful of Greek-style contagion, will prefer taxpayer-financed bailouts to forcing concessions from the private sector.

One reason they can keep on playing this game is that Europe is not nation and certainly not a democracy. The bankers figure they have the continent over a barrel and keep on rolling the loaded dice.

Change We Can't Believe In

What the heck do you do with a penny? The one cent coin is certainly more of a disincentive to commerce than the reverse. Nickels, dimes and quarters are little better - I mostly spend them only on junk from the coke machine. Most of us hate walking around with a pocket (or pocket book) full of metal. We can, and should, get rid of the one and five cent pieces immediately. Dime and quarter may need to wait for electronic money.

On the whole, brick and mortal businesses would benefit. Many of their transactions require use of coins, while none of those of on-line stores do. Vending machines would adapt.

Bye Bye SF

One trouble with science fiction and fantasy is that there are fewer and fewer cool things we can imagine that haven't been done yet. BuzzFeed has 27 cool/mind blowing/scary as hell discoveries of the year here.

A certain amount of skepticism might be called for - especially re the invisibility cloak.

Conquest and Culture

Arun and I have been "discussing" the role of conquest and colony in cultural spread. In today's world of movies, television, and the internet, there is certainly a fair amount of cultural spread by means less direct than conquest, and there was some even in the distant past, but the evidence is strong that conquest was the big driver, especially of linguistic change. Languages are hard. The big linguistic changes that we have seen in history (Latin, Arabic, English, and Spanish, for example) were driven purely by conquest. There is good reason to suspect the same of prehistoric language expansions.

Such linguistic expansions have brought vast cultural shifts in their wake, including massive changes in agriculture, economic organization, and political institutions. None of which proves that colonialism is good, or even had good side effects. But it does mean that essentially all of our cultures have been strongly shaped by those conquerors.

One of the huge mysteries of the prehistoric past is that of the origin and spread of Indo-European languages and culture. It's probably not important whether you accept one of the standard theories (origin in central Asia or Anatolia) or one of the fringe theories, like the Out of India theory, there is very good reason to suspect that conquest was the mechanism of spread. You might voluntarily copy a foreigner's technology, but you don't adopt his language unless there is overwhelming necessity to do so.

Saturday, December 22, 2012

Informed Criticism

Krugman:

OK, so I’ve just spent a number of hours on domestic flights, the kind that show sitcoms on screens down the middle of the aisle. (Which is why I was too tired for Friday Night Music — next week). I didn’t listen to any of the dialogue – I was reading – but I did find myself watching some of the acting. And with the sound off, you can really see just how artificial the conventions of sitcom acting are: the telegraphed double-takes, the faux-angry declarations of the men, the perkiness of the women, etc., etc. – none of it resembling at all the way real people behave. It’s an art form, if you like, that’s as deeply stylized and full of conventional signifiers as Kabuki theater or Chinese opera; the actors might as well be wearing ritual masks representing their alleged characters and emotions.

It’s also, of course, a cultural form that’s very, very stupid.

CIP:

I just spent a few hours looking at economics textbooks, which is why I'm too tired now to write anything coherent. Of course I didn't read the words - I was busy watching my favorite sitcom - but I did look at the pictures. I noticed that they were not only rare but deeply stylized, with a whole lot of big X s on otherwise unadorned graphs.

All in all, a deeply stupid science.

Friday, December 21, 2012

Shut Up and Get Stupid?

Elite universities in the US have long had so-called diversity programs. The diversity programs were originally a response to the SAT test. When colleges started admitting students on the basis of academics, the elite quickly found that they had an alumni annoying problem - too many Jews. The answer was the diversity program, a set of policies intended to ensure that they had a broad representation of the public. With affirmative action, these programs expanded to encourage acceptance of disadvantaged minorities, which in practice meant those whose academics would otherwise exclude them.

Nowadays, the main point of such programs has been limiting the proportion of Asians in the student body. Carolyn Chen's Op-Ed in the NYT (Are Asians Too Smart for their Own Good?) is the latest essay on the topic.

Asian-Americans constitute 5.6 percent of the nation’s population but 12 to 18 percent of the student body at Ivy League schools. But if judged on their merits — grades, test scores, academic honors and extracurricular activities — Asian-Americans are underrepresented at these schools. Consider that Asians make up anywhere from 40 to 70 percent of the student population at top public high schools like Stuyvesant and Bronx Science in New York City, Lowell in San Francisco and Thomas Jefferson in Alexandria, Va., where admissions are largely based on exams and grades.

In a 2009 study of more than 9,000 students who applied to selective universities, the sociologists Thomas J. Espenshade and Alexandria Walton Radford found that white students were three times more likely to be admitted than Asians with the same academic record.

California's elite public universities and the private California Institute of Technology all have race blind admissions and 40% plus Asian students - almost twice as large as the equivalent percentages at Stanford and MIT, and three times the percentages of the top Ivies.

The Hobbit

I enjoyed Peter Jackson's The Hobbit. Mostly that's because I like Tolkien, but the sets and and scenery were also nice. That said, it's easy to imagine how any non-fan of Tolkien -- the benighted few -- would find a lot to dislike. The interminable fight scenes - mostly a pure invention of Jackson's - were awful. Trite, boring, and absurd. It's amazing how thoroughly he managed to remove suspense from a very suspenseful story.

Jackson took some liberties with the plot. It's pretty hard to find the dangling over a cliff gimmick very suspenseful after the characters have survived repeated thousand foot falls without suffering any discernible harm. I'm guessing that the White Council might have been more successful against Sauron and friends if Galadriel hadn't been stoned all the time. Radagast the Brown and his rabbit-mobile were OK though.

So how did Jackson, who made a mostly pretty good version of Lord of the Rings, make such a hash of The Hobbit?

I blame Potter envy. After condensing the six books of LOTR to three, he realized he could have made another zillion dollars by making six movies, or maybe even seven. So The Hobbit had to be blown up to three movies, and the bloat is everywhere.

I predict that the Silmarillion will be ten movies.

Did I mention that 3-D still sucks?

Thursday, December 20, 2012

American Empire

Some historians have argued that Americans need to study empires because the US is the current big one. Is that fair? Yes and no, I think. The US is more dominant as a superpower today than Britain at its peak. Our adventures in ruling overseas colonies have been relatively limited, though, in both time and space. With relatively few exceptions, we have avoided grabbing up huge chunks of the rest of the world and occupying them in long term fashion. The big exceptions we acquired as the result of WWII (Japan and parts of Germany, plus some Pacific Islands) and most of them we were happy to turn loose fairly early. Iraq was an aberration and is now independent.

We do have a large list of client states, though, countries that are allied with us and under a certain amount of pressure to follow our lead. NATO is one prominent institution of the type. We also have a history of meddling around the world, by military, economic, and other means. For the most part, however, being part of the American empire is voluntary and the client states control how far in they want to be.

Why be part of anybody's empire, anyway, especially if you have a choice? Mostly, I think, for protection. Cortez was able to conquer Mexico with his tiny Army mostly because he found ready allies among the locals against oppressive Aztec power. NATO was built out of fear of Communist Russia. Japan likes us better now that China is an emerging superpower.

In any case, analyzing the entrails of past empires has its own rewards in understanding.

Wednesday, December 19, 2012

Evils of Empire

"They grabbed what they could get for the sake of what was to be got. It was just robbery with violence, aggravated murder on a great scale, and men going at it blind– as is very proper for those who tackle a darkness. The conquest of the earth, which mostly means the taking it away from those who have a different complexion or slightly flatter noses than ourselves, is not a pretty thing when you look into it too much." ............Marlow in

Conrad, Joseph (2012-11-01). Heart of Darkness (Kindle Locations 103-106). . Kindle Edition.

The sins of empire are easy to catalog, but also easy to exaggerate. Not everything bad that happens to a nation that becomes a colony can be fairly attributed to the colonizers. Plagues and famines happen to free countries as well as colonies. It's also easy to ignore the evils colonialism ended. It was not so long ago that the British found and figured out how to eliminate the most brutal kind of human sacrifice in India. In America, the Spanish ended Aztec power, one of the most brutal regimes we have ever heard of.

The worst fate a conquered people can face is extermination, and the native Americans have been the world's most prominent victims, but they were hardly the first. Their situation is also a bit unusual in that most of the extermination was entirely accidental, because it was old world germs that killed them.

Plunder on massive scale might be number two on the list of calamities, and here again the native Americans of Peru and Mexico were extreme examples.

What about cultural destruction? For me that's the toughest one to weep for. I'm happy that colonial regimes wiped out human sacrifice and a whole lot of other customs I dislike. Cultural destruction is painful for those who lose it, but I think a good case can be made that much of it is being replaced by something better.

Books

Although I read a fair amount, I have gotten out of the habit of reading novels. I rarely read any contemporary literature, or lately, any novels at all. I thought I might promise myself to attempt ten novels next year. I'm probably most attracted to the classics, so I started surfing the 100 best lists. Modern Library has a list, or rather two lists, one by a panel of supposed experts and the other by the public. The public list is pretty much a joke, as it was obviously hacked by a few flavors of nutcase. Their top ten has four by Ayn Rand and three by L. Ron Hubbard. My skepticism about Hubbard is founded purely on hearsay, but I did force myself a couple of Rand's garbage books.

I can't be too thrilled with the choices of the pros, either. Ulysses leads the list and more Joyce follows not far behind. James Joyce was a genius, no doubt, but his attempt to transcend narrative form was a bad idea that didn't work. I've read a number of books, by no means a majority, on both lists, so I suppose I might pick some more.

I would be interested in recommendations, preferably with a short endorsement. some of my own past favorites: Tom Jones, War and Peace, Brothers Karamazov, Anna Karenina, Pride and Prejudice, Moby Dick, Huckleberry Finn, Tom Sawyer.

Monday, December 17, 2012

Cost and Benefit of Empire

There is pretty good evidence that humans have been conquering and often exterminating each other for more or less ever. It's likely that our pre-human ancestors behaved similarly.

By that grim standard, empire building has mostly been a less brutal alternative, though often not a whole lot less brutal. According to Niall Ferguson, the former colonies collectively asked in the UN that they be paid an idemnity of 777 trillion dollars for the harm they suffered in conquest. Well, they shouldn't hold their breath. One problem, of course, is that most of the perps and victims have already passed from the world, and the survivors, in many cases, are descended from both. More to the point, we are all of us survivors of those who stole, murdered, and otherwise competed viciously for the privilege of bringing us into the world.

The peoples of the former colonies are not the people that the conquerors found. They have been transformed and usually racially mixed. That is even more true in a cultural sense than a genetic one. The political institutions of, say, India, or Egypt, owe less to those of their ancestors of 400 years ago than they do to those of Britain. They expelled their Western rulers but kept huge portions of the culture those rulers brought. Of course that trend is even more pronounced in the settler colonies like the US, Australia, and Latin America, where the emigrants form a large proportion of the population.

Representative government, Western television and cell phones are evidence that the colonies got something they wanted out of the arrangement.

Sunday, December 16, 2012

Cosmaic Wisdom

Cosma Shalizi, as quoted by Brad DeLong, on economics:

The realization that this applies to economists --- that much of the discipline is not a branch of science or even of dialectic, but merely of rhetoric (and not in an inspirational, D. McCloskey way either) --- cannot come too soon.

The Course of Empire

I'm reading a new book, The Empire Project: The Rise and Fall of the British World-System, 1830-1970 by John Darwin. An early quote:

It was also the case that British expansion had no master-plan. It had almost always been true that colonial schemes or their commercial equivalents were devised not by governments but by private enthusiasts in search of wealth, virtue or religious redemption. Sometimes they dragged Whitehall in their wake, to get its protection, secure a monopoly or obtain a licence to rule through a charter or patent. By ‘insider-dealing’ in the political world, they might conscript Whitehall's resources for their colony-building. Sometimes Whitehall insisted on an imperial claim on its soldiers’ or sailors’ advice, or to appease a popular outcry. But, once entrenched at their beachhead, the ‘men on the spot’ were hard to restrain, awkward to manage and impossible to abandon.

Darwin (2009-10-15). The Empire Project (p. 3). Cambridge University Press. Kindle Edition.

That last sentence explains exactly why the Israeli expansion into the West Bank is likely to end in catastrophe.

Capitalism and Colonialism

It's a familiar notion, at least on the economic left, that capitalist industrialism was built on the surplus extracted from Europe's colonies. I wonder if the truth might not be almost the reverse: that the colonies were build from the surplus extracted from industrialization.

Spain and Portugal were the foremost early colonial powers, and extracted fantastic fortunes from their brutally oppressive colonies. The trouble with extractive colonialism in the model of the various East India companies is that they give enormous profits to a few individuals but at great cost to economic efficiency. Rent extraction adds little or nothing to technology or production, but it also penalizes all sorts economic productivity, especially in the colonies, but also in the colonizers.

Settler colonialism, in the model of the US, Canada, and Australia has generally been a big success - for the colonizers, though of course catastrophic for the victim nations). They have developed industrially without the dubious benefits, in most cases, of foreign colonies of their own.

The word colony has it's root in a Roman word for settled land, and much colonization has been driven by population pressure at home. That kind of colonialism tends to be more catastrophic for the colonized, but practically guarantees that the colonies will becomes clones and rivals of the metrepole, or colonizer.

Imperial Rents

Arun has me thinking about Capitalism and and Colonialism. Many, perhaps most, of colonial ventures started with trade, or ambitions of establishing trade. That is a very capitalistic enterprise. It's when the capitalist sees an opportunity to establish a exclusive license, as in the British East India Company that he becomes transformed into a rent seeker. Many of the worst evils of colonialism are associated with the consequences of this rent seeking.

As usual, the successful rentier makes a great fortune, but as Adam Smith pointed out in The Wealth of Nations comes at the expense of both the colony and the colonizing nation. It's a matter of economic efficiency.

My attempts to find a good, reasonably brief, reasonably ideologically uncontaminated book on colonialism have so far failed.

Saturday, December 15, 2012

Book Review: Plutocrats Again

Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland probably didn't restructure my world view quite so drastically as Guns, Germs, and Steel but it is another book packed with deep insights into the way today's world works. Freeland knows her subjects very well, and has spent a couple of decades observing them. It is by no means a "life-styles of the rich and infamous" book, though there is a sampling of that, but rather, a detailed economic history.

It's pretty clear that she combines a certain admiration for their intelligence, diligence and entrepreneurial spirit with a well-justified suspicion of the risks their ascendancy poses for the rest of us. I have written extensively on her ideas in these previous reviews, but her final chapter deserves some additional commentary.

It's theme is the natural human tendency of those who have scaled the heights to pull up the ladder after them, and the method is to seize control the levers of power in the state and cultural institutions. It's not a new trick. She illustrates her case with the story of the rise and fall of the trading empire of Venice.

In the early fourteenth century Venice had become the richest city in Europe.

Venice owed its might and money to the super-elites of that age, and to an economic and political system that nurtured them. At the heart of the Venetian economy was the commenda, a basic form of joint-stock company that lasted for a single trading mission. The brilliance of the commenda was that it opened the economy to new entrants. It was a partnership between a “sedentary” investor, who financed the trip, and a traveler, who did the hard and risky work of making the journey.

Freeland, Chrystia (2012-10-11). Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else (p. 278). Penguin Group. Kindle Edition.

This system led to high social mobility, as reflected in the records of the city, but the wealthy of the day could not resist pulling up the ladder. The paths to economic and social power were closed off to all but their descendants, and the economic disintegration of Venetian power commenced. Adam Smith warned that the capitalists would be unable to resist trying to undermine the market, and Marx counted on that inclination to destroy capitalism. Well, it hasn't, at least not yet.

Marx understood the dangers of a capitalist Serrata— indeed he was counting on it. “The capitalist system carries within itself the seeds of its own destruction,” he famously argued. Marx predicted that the rising capitalist class, like the shortsighted Venetian elite, would overreach itself and create a system that so effectively consolidated its supremacy that it would eventually choke off economic growth and become politically unsustainable. The most astonishing political fact of the past two centuries is that that didn’t happen. Unlike the Venetian elite, Western capitalists submitted themselves to creative destruction, to the competition of new entrants, and created ever more inclusive economic and political orders. The result is the most vigorous era of economic progress in human history.

Freeland, Chrystia (2012-10-11). Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else (p. 284). Penguin Group. Kindle Edition.

We would wise to limit the power of the Plutocracy precisely to make sure things stay that way.

Thursday, December 13, 2012

Books

I'm a big believer in the power of books. The most important books alter your life, or least your understanding of how the world works. I've read a lot of such books, but mostly a long time ago. The only one I've read this year was Jonathan Haidt's The Righteous Mind. I've written a good deal about that here, but if you want to understand the roots of moral behavior and the reasons for moral differences, I can't think of a better place to start. Take that, Plato, Aristotle, and Augustine.

The last book I can remember of similar impact was Jared Diamond's Guns, Germs and Steel. I'm a big fan of all his books, but this one for me is the go to place for understanding the underlying dynamics of history.

As a young person, I read Will Durant's The Story of Philosophy, which led to an infatuation with the subject, mercifully short lived enough that the only serious damage I accumulated was to my book buying budget. Robert L Heilbroner's The Worldly Philosophers, about economics and it's practitioners, did more lasting damage. Nowadays, though, I read mostly economics blogs and an occasional paper. It won't surprise any regular readers to hear that Paul Krugman's columns, blog, and books are at the core of what I think I understand about the subject.

I have always liked history, and three books that made early impressions were Momsen's History of Rome, Gibbon's Decline and Fall of the Roman Empire, and Thayer's The Influence of Seapower on History. I read less history these days, but it hasn't entirely lost its charm for me either.

Of course this is a tiny sample. Anybody else want to volunteer influential books?

The Republican Problem

According to Paul Krugman:

Since the 1970s, the Republican Party has fallen increasingly under the influence of radical ideologues, whose goal is nothing less than the elimination of the welfare state — that is, the whole legacy of the New Deal and the Great Society. From the beginning, however, these ideologues have had a big problem: The programs they want to kill are very popular. Americans may nod their heads when you attack big government in the abstract, but they strongly support Social Security, Medicare, and even Medicaid. So what’s a radical to do?

The answer, for a long time, has involved two strategies. One is “starve the beast,” the idea of using tax cuts to reduce government revenue, then using the resulting lack of funds to force cuts in popular social programs. Whenever you see some Republican politician piously denouncing federal red ink, always remember that, for decades, the G.O.P. has seen budget deficits as a feature, not a bug.

Krugman thinks the tide has turned against the Republicans, but they can still do terrible damage.

It’s a dangerous situation. The G.O.P. is lost and rudderless, bitter and angry, but it still controls the House and, therefore, retains the ability to do a lot of harm, as it lashes out in the death throes of the conservative dream.

Our best hope is that business interests will use their influence to limit the damage. But the odds are that the next few years will be very, very ugly.

No Dice for Rice

UN Ambassador Susan rice has apparently withdrawn her name from consideration for Secretary of State. Part of this is doubtless do to the phony hysteria whipped up by the McCain-Graham sisters, but there also has been a critique of her temperament - and her undiplomatic temper. Reportedly, she once gave Holbrooke the finger in a meeting. Much as I liked him, any chick who gives him the finger is OK in my book. He was a temperamental bully himself.

Colbert vs. Carroll

Sean Carroll has a new book out on the Higgs particle. I haven't read it, but I did catch his interview on the Colbert Report. Sean is a good writer, and the book has been well received, but Colbert had a couple of questions that stumped him.

The request for a twenty second explanation elicited the "Higgs is like molasses" explanation. Of course nobody yet has explained Higgsy in 20 seconds. It's pretty hard to explain to quantum field theory students in less than a week or two.

Even tougher was the question "What's it good for?" Aside from the amusement of the several thousand or so geeks in the world who actually do understand it.

When a British PM asked Faraday the same question about electromagnetism, he told the PM that he didn't know, but that someday it would be taxed. It's much harder to make that case for the Higgs. The technological implications, if any, are not even hinted at.

I suppose it's possible, though, that someday the Higgs will give us a quicker way to blow up the world.

Now That's a Big Boat

299 Gigatons?

Yachts of the rich and famous.

Ironically, though part of a yacht’s appeal stems from the privacy it offers its owner, very large yachts (in excess of 299 gigatons) are required by the International Maritime Organization to publicly transmit their location at all times via an Automatic Identification System transponder. (You can see the current location of all such yachts—and other very heavy boats—at marinetraffic.com.)

That's about 4 million times the mass of a Nimitz class aircraft carrier. I guess you need a big boat if you are going to land your private A 380 on it.

Wednesday, December 12, 2012

Two Cheers for the Fed

Matt Yglesias is cheering the Fed's targeting of employment and inflation.

This is huge. With today's policy announcement, the Federal Reserve's Open Market Committee has stopped screwing around and started doing real expectations-based monetary easing.

The new policy is a version of the plan from Charles Evans that I wrote about in March. They've said that interest rates will remain low until unemployment falls below 6.5 percent or the inflation rate exceeds 2.5 percent. That is a softer and weaker form of monetary easing than Evans originally proposed, but apparently a meager inflation target is the price you have to pay politically to get this done. As I explained yesterday, this kind of strategy should be partially successful in getting corporate cash off the sidelines in a way that "certainty" and "confidence" won't. The higher inflation target makes cash-like safe liquid investments look slightly less reasonable than they did yesterday, while the faster real growth implied by the unemployment target makes real investments in increased capacity look better.

If I had my druthers, I'd have taken a more aggressive action involving a permanent increase in the inflation target back up to a Reagan/Volcker era 4 percent, but this is good stuff. As I wrote a month ago, we're getting a new FOMC present for Christmas.

Less than employment hawks would like, but better than nothing. If this works, and the Republicans don't crash us at the bottom of the fiscal & debt ceiling cliffs, then it will be time to mock the doomsayers. Of course if it doesn't, maybe it will be doom after all.

Capital Allocation: Delusions of Galt

The mostly off-stage hero of Ayn Rand's Atlas Shrugged is John Galt, purportedly an engineer, but actually an evil magician who plots the destruction of human civilization out of pique. His magical powers include conjuring electric power out of the air, creating invisibility shields, and a variety of other handy plot drivers.

Today's Plutocrats can't do any of those magical things, though most of them are pretty handy with a spreadsheet. In their own minds, though, they are Galt and more. They are the job creators, the masters of technology. What they actually do, aside from bribing and hustling government officials, is allocate capital. That is a very important job, and a far from trivial one. It also has enormous rewards for those who chose, or guess, correctly.

Given those immense rewards, and the resultant sycophantic bubbles they live in, it's pretty easy for them to convince themselves that they were indispensable. In reality, though, I suspect that there are millions more who could easily have replaced them. Steve Jobs, Bill Gates, and Mark Zuckerberg won their respective tournaments, but if they had died suddenly at an early age, it is nearly certain that someone else would have accomplished something very similar to what they did. Ditto for all the robber barons, oligarchs, and plutocrats.

So is their role so crucial to society that we can't afford to deprive them of political power, or some of their cash? Their role is crucial, I think - we don't have any better ideas for efficient allocation of capital. But I don't think somewhat higher taxes is going to make the species disappear.

Tuesday, December 11, 2012

Bot Sourcing

It's not news that factory employment is dropping globally. People are being replaced in such jobs by robots. The trend is hardly confined to manufacturing. Such traditionally person-intensive occupations as law and education are also being impacted.

Persons familiar with robotics see huge current areas of employment likely to be swept away in the next decade or two. This is a familiar pattern in human history, as one economic regime after another disrupted familiar patterns of life. Agriculture, trade, industrialization, and related events produced similar convulsions. One familiar pattern in these disruptions is a huge transfer of wealth from labor to capital. Robotics seems certain to repeat the pattern, more dramatically than ever.

The irony that those directly responsible for producing the goods that others, and especially the capitalists, consume, has expressed a weak constraint on greed. It was that irony, rather than any internal coherence, that gave Marxism it's peculiar emotional power. Of course that irony disappears when the actual work is being done not by people but robots.

At that point, the non-capitalists become redundant in the capitalistic scheme. Of course, the robots might find the capitalists unnecessary too.

They Hate Us, They Really Hate Us

Being the bully on the block may make you popular, but it doesn't make you well liked. It seems we have that problem with the Syrian Rebels.(ANNE BARNARD and HANIA MOURTADA in the NYT

As the United States tries attempts to rally international support for the Syrian rebellion, trying to herd the opposition into a shadow government that it can recognize and assist, on the ground in Syria it faces an entirely different problem: Much of the rebellion is hostile toward America.

Frustration mounted for months as the United States sat on the sidelines, and peaked this week when it blacklisted the Nusra Front, one of the uprising’s most effective fighting forces, calling it a terrorist organization. The move was aimed at isolating the group, which according to Iraqi and American officials has operational ties to Al Qaeda’s franchise in Iraq.

But interviews with a wide range of Syrian rebels and activists show that for now, the blacklisting has appeared to produce the opposite. It has united a broad spectrum of the opposition — from Islamist fighters to liberal and nonviolent activists who fervently oppose them — in anger and exasperation with the United States. The dissatisfaction is over more than just the blacklisting, and raises the possibility that now, just as the United States is stepping up efforts to steer the outcome in Syria, it may already be too late.

I guess they weren't that impressed with our moral support.

Monday, December 10, 2012

The Bush League

Since I have always regarded the Bush family as a bunch of upper crust confidence men, this news doesn't surprise me. It seems that a high-profile Miami businessman just got busted for running a big scam. Part of his MO was recruiting high profile guys for his board of directors.

Chris Korge, a shrewd Miami developer and lawyer, said Osorio assured him that his company had about $40 million in cash and a lucrative deal with Middle Eastern investors to purchase $500 million in company stock. Korge invested $4 million before he began to suspect that something didn’t add up.

“Jeb Bush was on the board, there were a lot of successful people convincing me. We went out and we met and I just began to realize that the cost-effectiveness of building with the materials would never work,” Korge said. By that time, however, it was too late.

Some guys like to treat these board positions as free money, but that money comes with real legal liability. Will this affect Bush's credibility as a Presidential candidate in 2016? TBD.

Old People

It's fashionable in some quarters to blame low fertility for situations like the aging of the Japanese population. This is almost entirely nonsense. The real problem is that too many people are living to old age. If Japan had enough people under 65 to have an over 65 population ratio like that of say, Kuwait, its total population would be nearly a billion and a half. It's simply not practical to breed ourselves to a small over 65 population ratio.

Unless you adopt policies that will kill off large numbers of oldsters - for example the Ryan budget - you have to face that fact that society will need to devote a significantly larger portion of its resources to caring for them.

Saturday, December 08, 2012

Baby, You Can Drive My Car

story


How Economists and Others Get Co-opted

Most important, academics in fields the plutocracy values can multiply their salaries by working as consultants and speakers to super-elite audiences, often in the emerging markets. As Niall Ferguson told me, during a whirlwind weekend when he had given a speech to a private equity conference hosted by a Turkish plutocrat in Istanbul, followed by a speech in Yalta for Ukrainian plutocrat Victor Pinchuk, the roads out of Cambridge, Massachusetts, get jammed on Thursday afternoons as Harvard Business School professors rush to the airport to get to their international speaking gigs. A bestselling New York nonfiction writer likes to tell his more literary— and less well-off— friends that his secret is to write books businesspeople can read on a transatlantic flight.

Even as they cash their speaking fees from the super-elite, these academics shape the way all of us think about the economy. That is mostly through their work in the classroom and at their computers, but also in their role as “independent” experts in legislative debates. A 2010 study by three of my colleagues at Reuters found that of ninety-six testimonies given by eighty-two academics to the Senate Banking Committee and the House Financial Services Committee between late 2008 and early 2010— a crucial period when lawmakers were debating their response to the financial crisis— roughly one third did not reveal their ties to financial institutions.

Freeland, Chrystia (2012-10-11). Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else (pp. 268-269). Penguin Group. Kindle Edition.

If nothing else, it explains how Ferguson went from respected academic to Republican hack.

Can Football be Fixed?

Football is a great spectator sport, almost as good as Christians vs. lions. It has more tactical and strategic depth - probably more than any other physical sport, and certainly more than soccer, basketball, and hockey. Like Christians vs. lions, though, it's very tough on the competitors.

There have been some measures taken - trying to teach proper tackling technique, penalizing hits on so-called defenseless players, and so on, but their effectiveness has been very limited. A major problem is the size and strength of the players. Fast moving 150 kg (330 lb) players are just extremely dangerous.

Limiting substitutions drastically would probably cut the weight of the biggest players by 40 to 70 lbs. Shortening the time between plays by 10 seconds or so would take off another 15 lbs or so. If most players played every down, the really big guys simply could not keep up.

It would also make football teams smaller and cheaper, and coaches less valuable.

The NCAA is a Lot More Evil Than the NFL

Every great cause begins as a movement, becomes a business, and eventually degenerates into a racket.....Not quite what Eric Hoffer wrote, but good anyway.

A bunch of former profession football players are suing the National Football League for concealing the evidence that playing football is likely to destroy your brain. I am pretty sure that they have a good case, but ambitious personal injury lawyers really ought to think about a more deserving target - the National College Athletic Association. The NCAA has degenerated into a terrible racket, one whose principal occupation is to churn out vast profits for television, football coaches, and the business of professional college football while exploiting the nearly free labor of some young people.

The NFL has taken some tentative steps to try to address the concussion problem. The NCAA has not. The reason it hasn't isn't just reckless disregard for athletes safety. It's mainly fear that they are going to get sued. The best way to relieve them of this fear is to sue their asses off - the NCAA, the coaches, the university Presidents, and the university corporations.

For the NCAA, this hands-off approach to concussion protocols is a calculated legal maneuver. "The NCAA doesn't want to be seen as the entity responsible for taking care of the student-athletes," says Paul D. Anderson, the attorney who writes the NFL Concussion Litigation blog. The NCAA is currently facing a class-action suit alleging that it failed to protect athletes from the dangers of concussions. But Anderson sees that suit as an uphill battle, partly because the NCAA has delegated responsibility for student-athletes' health to its member institutions.

Thursday, December 06, 2012

Oops!

Some time during breakfast today I noticed that I was an idiot - not alas, a new discovery but unwelcome anyway. As the politicians, say, I had spoken "inartfully." That is to say, I had written the following:

So he buys Japanese stuff, like a bunch of Canon 1D X's which may be cheaper (due to inflation) and the Japanese economy is stimulated to the tune of a zillion Yen.

Claiming that inflation would make things cheaper. WB thought I might be joking, but in fact I was serious. Seriously in error, of course, since the actual effect of inflation is opposite, so that I literally had it backwards.

Nonetheless, I claim, that I had a certain point, which, of course, I failed to make. Start with the theory that people save money with the idea of someday spending it, or having it spent by someone of their choice. If you have an economy with failure of aggregate demand, that means, in effect, that savers are deferring spending to an extent that others are losing their jobs. Deflation makes future goods cheaper than present day goods, so in a deflationary economy deferring spending saves you money in the long run. In inflation, it's the opposite. For a country experiencing inflation, you can expect future goods to cost you more than present goods. Inflation tells you to buy that new Canon 1 D-X this year rather than next year. That's the point I intended to make.

It's true, by the way, whether you are an elderly Japanese retiree or a bank in Frankfurt that just sold a big euro bond for a bunch of yen.

Lordy, Lordy, Look Who's Fordy

...er, Forty.

Special Issue on String Theory.

Sample: Giddings

Wednesday, December 05, 2012

Stagflation

A good introduction to this important topic here, including Monetarist, Keynesian, new-Keynesian and Real Business Cycle theories, and especially, what distinguishes such episodes from other situations.

Tumbrels and Hubris

ALONG THE PARIS STREETS the death-carts rumble, hollow and harsh. Six tumbrels carry the day’s wine to La Guillotine. All the devouring and insatiate Monsters imagined since imagination could record itself are fused in the one realisation, Guillotine. And yet there is not in France, with its rich variety of soil and climate, a blade, a leaf, a root, a sprig, a peppercorn, which will grow to maturity under conditions more certain than those that have produced this horror. Crush humanity out of shape once more, under similar hammers, and it will twist itself into the same tortured forms. Sow the same seed of rapacious license and oppression over again, and it will surely yield the same fruit according to its kind - Charles Dickens, A Tale of Two Cities

I can’t wait to see the tumbrels rumble up and down Wall Street picking up the heedless and greedy financial aristocracy that plundered and sundered free-market capitalism - Maureen Dowd in the NYT

...a private equity baron who divides his time between New York and Palm Beach pinned blame for the collapse on a favorite golf caddy in Arizona, who had bought three condos as investment properties at the height of the bubble. It is this not-our-fault mentality that accounts for the plutocrats’ profound sense of victimization in the Obama era. Freeland, Chrystia (2012-10-11). Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else (p. 242). Penguin Group. Kindle Edition.
We celebrate income disparity and we applaud the growing margins between the bottom 20 percent of American society and the upper 20 percent for it is evidence of what has made America a great country - Dennis Gartman, bond trader and celebrator of the 1% Freeland, Chrystia (2012-10-11). op. cit.(p. 248).

Let them eat cake - not, apparently, Marie Antoinette.

Your average billionaire is more pampered and cossetted than even a rock star. Which is probably why they are so deeply offended by any challenge to their self image. Most of them seem to think that they are powerful magicians like John Galt and have summoned electricity from the air. Even, or perhaps particularly, those who bribed, swindled and stole their way to fortune.

Chrystia Freeland devotes a big chunk of Plutocrats to what they think of the rest of us. Now these are all, or virtually all, very smart men - and yes, they really all are men. With a number of exceptions, they are as contemptuous of the rest of us as Mitt Romney showed himself to be. They are outraged that government should dare to impede their personal objectives.

It an old story that power corrupts. It might be more precise to say that it desensitizes. Being surrounded by sychophants make you think you can get away with anything, and many do. Here and there a Strauss-Kahn may get caught up in his own fantasy narrative and overreach.

China has been by far the most successful country in harnessing its plutocrats but there the vast cartel that still calls itself The Chinese Communist Party has its own brutal methods for maintaining control.

Freeland again

...between 2003 and 2011, at least fourteen Chinese billionaire businessmen were executed.

Freeland, Chrystia op. cit. (p. 256).

Don't Cry for Me Argentina

Or, Japan, Inflation and the Carry Trade.

Japan is in a somewhat peculiar position. It has an enormous national debt (230% of GDP, compared to basket case Greece with about 160%), but its citizens are tremendous savers. Most of the Japanese debt is owed, in fact, to those very savers, who put their money in the Japanese Postal Savings bank. That means that the Japanese people collectively are simultaneously on the hook for 230% of their GDP and equipped with large personal savings.

Japan's problem, as I noted elsewhere, is that its economy is in the doldrums. Ultimately a country's ability to provide for its citizens depends on its economic output, though, and big numbers in your savings passbook won't help if your country can't produce and nobody else wants your money because you have nothing valuable to sell for it. The policy of running a the economy at a small inflationary rate is an idea to try to rev up the economy. The theory of how it works and when (when you are against a zero interest rate bound on conventional monetary policy)is that inflation makes save money less valuable, and hence encourages spending, on the one hand, and borrowed money less onerous, because you are going to pay it back with less valuable future money.

WB was kind enough to point our that the carry trade poses a complication or two. The idea behind carry trades is to borrow money at a low interest rate in one currency and invest it at a higher interest rate in another. Of course the relevant interests are the real interest rates, so any inflation in one currency or the other needs to be taken into account - which is where carry traders lose their shirts.

The obvious carry play is also stimulative, since money borrowed in Japan and traded for dollars or euros puts yen in the hands of those who can only really spend it in Japan. Of course inflation might push Japanese savers to start sending their money overseas but that's also stimulative for the same reason.

Monday, December 03, 2012

Inflation: the Friedman Solution

Just to be clear, we are talking about Milton Friedman here, and the Japanese economy. Most of the West is in the economic doldrums right now, and nobody has been longer becalmed in those dread seas than the Westernmost of the West, Japan. The political party currently leading in Japan has proposed a radical solution, which I call the iCure.

. . . Shinzo Abe, the overwhelming favorite to lead the Liberal Democratic Party to victory, is running on a bold platform of unlimited quantitative easing and more inflation. If this works—and the odds are that it will—Abe will not only cure a great deal of what ails Japan, he’ll light a path forward for the rest of the developed world.

Given that the original idea came from conservative economist Milton Friedman, and that it has been strongly backed by Japan experts of the center Ben Bernanke, and liberal Paul Krugman, why is the idea so radical?

Because the rentier classes really, really hate it.

What is proposed is inflation. Now everybody knows that inflation is a dangerous drug - the economic equivalent of chemo-therapy. The Germans have turned fear of inflation into a sort of cult religion.

Of course there is a moral dimension, or at least a dimension of morality play melodrama. Your attitude toward the actual effects of a policy of moderate inflation might depend on whether you regard the rentiers as thrifty savers reaping the rewards of their virtue or as blood-sucking parasites draining the economy of all vitality.

The crucial question though, is not the virtue of one class or another, but the vitality of the economy. If policies advocated by one group or another are bad for the overall economy, they need to be changed. In modern society most of us play both roles as worker and rentier, at least at some point in our life.

So just how radical is the proposed Japanese plan? The central bank, the BoJ, would pursue a goal of 2% inflation, rather than the current 0% target. For comparison, the inflation rate in the US over the last thirty years has varied between a high of 5.4% (1990) and a low of 1.5% (1998), with an average near 3%. Germany averaged 1.9% over the last twenty years.

Sunday, December 02, 2012

Against Stupidity ...

Ross Douthat is the New York Times designated op-ed moron. OK, I mean he is an even bigger moron than David Brooks, whom I sometimes suspect of merely playing the part of a moron.

Since Tyler Cowen often writes sensible things, it really discourages me when he writes nonsense like this, which he entitles, I basically agree with Ross Douthat here:

The retreat from child rearing is, at some level, a symptom of late-modern exhaustion — a decadence that first arose in the West but now haunts rich societies around the globe. It’s a spirit that privileges the present over the future, chooses stagnation over innovation, prefers what already exists over what might be. It embraces the comforts and pleasures of modernity, while shrugging off the basic sacrifices that built our civilization in the first place.
His link is here, and I willingly admit that I am in some ways part of the problem.

Low fertility is a huge factor in producing economic prosperity. Check out this gapminder chart.

More children in today's world will only produce more wars. The planet already has many more people than it can comfortably support.

Tyler Cowen on the Euro Mess

Tyler Cowen has a nice article on the Euro situation in the NYT. He outlines both the many reasons for pessimism and the rather fewer for optimism (it has crashed yet). I also think he has most of the bottom line right:

Still, we shouldn’t forget that a solution exists. In essence, the required debt write-down is a large check lying on the table waiting to be picked up. No one knows how costly it is, but estimates have ranged from the hundreds of billions to the trillions of dollars. It need only be decided how to divide the bill. The reality is this: The longer that the major players wait, the larger that bill will grow. That they’ve yet to split the check is the worst news of all.

I would just add that it's not necessarily just a one time check and that the austerity path to wage adjustment is highly destructive.

Saturday, December 01, 2012

Sorry Lumo: Your Latest Climate Nonsense

One of the expected consequences of global warming is global sea level rise. There are a few mechanisms responsible for this, but at present the main one is thermal expansion of the oceans. Another, currently slightly less important mechanism is the melting of mountain glaciers and the glaciers of Greenland and Antarctica.

Lubos likes the sea level rise as a measure of global temperature increase, apparently because he has found a set of tide gauge measurements that appear to show a nearly linear increase. It's typical of his climate science naivete that he thinks that measuring sea level change in one place is good enough. Of course it isn't, for all sorts of reasons* well documented in the literature, and more systematic and scientific analyses show a different pattern of sea level increase - slower at first, and more rapid recently, just as temperature change patterns would lead us to expect.

Most of his acolytes remain faithful, though.

* To name just a few potential confounding factors: major changes in land use, tectonic effects, and post glacial rebound.

Kindle and the Spanish Classics

Latin America has produced a number of superb writers, but it's hard to find their work on Amazon Kindle. Amazon boasts 30,000 books in Spanish on Kindle, but most of them are either aimed at young readers or translations from English. I recently started reading on of the few South American classics they do have on Kindle in Spanish, One Hundred Years of Solitude..

It's actually very difficult for me - my vocabulary is too small - but the first three sentences blew me away. Each is a small but gorgeous work of art.

Anyway, I want more of these books for my Kindle.

Tattoos and Sacrifice

Via Tyler Cowen, Peter T Leeson has an interesting article on the economics of human sacrifice. He links human sacrifice to property rights and rational choice theory, but the fundamental idea doesn't depend on these right-wing shibboleths for its validity, IMHO.

It's one of the many disreputable bits of human history, but it seems to be a fact that human sacrifice has been pretty widely practiced at certain stages of human history. Why? Economists have their own fish to fry, but to me a good explanation needs to explain some selective advantage to the practice. Leeson's theory does that.

Besides the libertarian mumbo-jumbo, Leeson cloaks his model in a sort of Rube Goldberg mathematics - some funky algebra where a straight forward minimization would be more to the point - but the key points don't depend on either of those.

His model subjects are the Konds of Orissa India, who practiced a truly gruesome form of human sacrifice in historically recent times. These people lived in a loosely organized hierarchy at the smaller scale but consisted of highly competitive and mutually warring communities at the largest scale. As farmers, they were subject to the vicissitudes of nature as well as predation by their neighbors. In this situation, Leeson argues, the wealthiest communities were the biggest target for predators and hence the most vulnerable. For them, Leeson argues, ritual destruction of wealth was a way of making themselves less vulnerable to attack and hence adaptive.

You should read the paper to see the details of the logic, but the principle is illustrated by another practice of the same people: tattooing their women. According to their own accounts, they did this not because they thought that made them more attractive, but the opposite. It seems that a neighboring power liked to seize their women, so tattooing them uglified them enough to make them unlikely targets.

The British, on discovering their ritual immolations, tried a lot of things to suppress them: violence, bribes, and so on. But when they asked the Kond what they would take to stop the sacrifices which were ostensibly to appease their blood-thirsty gods, they asked for law and order. So the British stopped the inter-community violence and the human sacrifices stopped.

One and a Half Cheers for the Robber Barons

I wrote a bit ago about the rent seeking billionaires who made their fortunes off the fire sale of the assets of formerly government owned enterprises. We should resent them them for the bite they have taken out of GDP and their corruption of the political process but we should not forget the positive role they played either. The political machinations of Carlos Slim played a key role in making him the richest man in the world, and probably played a role in the fact that Mexico has grown much more slowly than some other similar countries, but it's undeniable that he has done a far better job of managing those enterprises than their former socialist managers. The same thing can be said of the Russian and Indian oligarchs and a fortiori, of their Chinese counterparts.

Why are governments so bad at managing(at least some) enterprises? It's probably complicated, but one component is surely rent seeking by the managers, workers, and above all, politicians. The incentive structures are wrong, and the decision making authority is too separated from the ownership.

On the other hand, it is interesting to ask why the privatization has been so successful in China and less so in Mexico and India. The dynamics were different for the American robber barons, perhaps because we never had a large public sector. That idea might be wrong though, since the government did own a lot of land.

Irreconcilable Differences

I've had a number of arguments over the years where logic and information don't seem to settle things one way or the other. My theory is that that fact is due to actual differences of interest - the Sinclair principle that it's very hard to persuade somebody of something when his paycheck depends on his not being persuaded.

The part I have trouble with is the ideological component of such arguments. That is, I have no trouble figuring out why oil executives and coal miners are skeptical of global warming despite the evidence, but why do random right wingers - and not just the bought and paid for right wingers - nod in such ferocious assent.