I don't know whether or not Charles Schwartz -- the cop accused of helping Justin Volpe beat Abner Louima -- is guilty or not. But this is extremely disturbing.
Good editorial on accounting in the New York times. It charges that companies are overstating their income by about 20%, half through neglecting to charge stock options as an expense.
As anyone who follows this page knows, I'm in favor of reforming the accounting for options. But the politicians, inexplicably, aren't. And don't tell me that it's all Bush, my pinko pals; the Dems are tap dancing around the incentive problem as fast as they can, pushing for more rules without removing some of the incentives to break the ones we've already got.
So what's going on? The issue's a no brainer; what's more, it would be popular. So why not pass it? My guess is campaign finance reform.
Huh? You say. Let me explain.
Soft money allowed both parties to get a substantial portion of their bankroll from the core; the highly committed who will tolerate a fair number of blows and still donate. Now they've got to get $2000 apiece from a whole lot of people.
Now, Richard Mellon Scaife is going to donate to the Republican Party no matter what you do to his stock options. He would rather have all his teeth removed, sans anaesthesia, than see a Democrat elected. By the same token, I think it's fair to note that no matter what position the Democratic party takes on censorship of media violence, Barbra Streisand's going to whip out the checkbook year after year. But now that they need to hit up a large number of rich people, both parties are afraid to toy with the stock options that often made them that way. I think both parties are competing for the socially liberal but economically conservative Silicon Valley types, and neither wants to upset the apple cart.
Longtime readers are possibly confused: haven't they heard me argue that politicians can't be bought and sold for campaign donations? No, not quite. What I've said is that politicians don't get bought and sold the way that campaign finance reformers think. No Senator votes against raising CAFE standards because Ford gave him money; that's a quick road to unelection. Any votes against CAFE are traded to Michigan Senators for their vote on something that the first Senator can take home to his state at campaign time. Campaign finance reform won't change that one whit.
What I do think that campaign contributions can do is favor one company or industry over another, usually through small provisions that make it hard for the others to compete. Imagine a bill that requires rental car companies to pay the damage if someone without insurance gets into an accident. Sounds like Avis would hate it, right? Not necessarily. They can afford to self-insure like that, while smaller companies that compete with them can't. So while it costs them money, it makes them more money by killing off their competition. Provisions like that, especially ones that demagogue well with the "public interest" groups, get inserted all the time, and yes, I think they're related to campaign contributions. But when the affected group is large, it can't happen. No matter how much money you give their campaigns, politicians will not make votes that will shove them out of office.
In this case, the Dems are hoping that calling for more regulation will give them a twofer: they brickbat the GOP while keeping their donors happy. The GOP -- well, God knows what they're thinking. But the upshot is that the simplest, most obvious regulatory reform is the one that won't happen.
Aziz Poonwalla responds to my critique of his post responding to Den Beste. (Whew!).
His response is well worth reading, but I think he missed the thrust of my argument.
I was not arguing that he was wrong; I was arguing, rather, that his argument rested on a number of unstated assumptions that severely qualify the reliance we can place on them. So he comes back saying "you can't know that this assumption is wrong", and my response is "My point exactly." We don't know whether the assumption is right or wrong. Until we do, we can't simply proceed as if these assumptions were correct.
There's only one that I really want to address, and that's the question of whether education can work there the same way it does here. Obviously, the details will change, but I think even the larger issues are substantially different.
First, we have to look at the widespread assumption that we slowed AIDS by making sure heterosexuals were using condoms. Wrong. The risks of transmission within the heterosexual, non-drug abusing, American population are extremely low. Yes, heterosexual women were at one point the fastest growing group of new infections, but this is in large part because the initial population was so small to begin with. And those heterosexual women were, by and large, not contracting it from their heterosexual spouses; they were getting it from the drug users or bisexual men with whom they were partnered. Suburban housewives who want a terrifying sight: go to Eighth Avenue at night and watch the Volvos with Jersey plates and a baby seat in the back cruising the male prostitutes.
The reason is that it is extremely hard for men to get AIDS from the women they sleep with. An epidemiologist I sat next to at a friend's wedding explained it thus: a woman sleeping with an HIV positive man has only a 7% chance of getting HIV. A man sleeping with a heterosexual woman who is HIV positive has a sub .1% chance of getting HIV. This transmission rate is simply not high enough to develop a reservoir of infection within the exclusively heterosexual community; the men can give it to the women, but it's very hard for the women to give it to the men, which stops the disease from spreading.
Our public health efforts thus did not succeed because we convinced everyone in America to wear a condom; they succeeded because we convinced one smallish, fairly tight-knit group in which the infection rate was 50%+, the transmission rate was higher both ways than the heterosexual rate, and everyone's friends were dropping like flies, to wear condoms. And we developed needle exchange and hygeine education systems for drug addicts. And we cleaned up the blood supply. And at that, people I've met doing AIDS education tell me that the gay community has an emerging problem with young men who didn't live through the epidemic deciding that condoms aren't necessary because they're 20 and immortal and if it happens there's always the drugs.
I think it's an enormous leap from there to deciding that you can convince the entire country to use condoms. Especially since the community where this effort really succeeded was, I think it's fair to say, on the radically liberal end of the spectrum on sexual morality. No shame about talking about it, no people who won't buy them because if they had them it would demonstrate that they're the kind of immoral person who plans to have sex, no community leaders denying that their community could possibly be having extramarital sex. The gay community, despite the early resistance, capitulated fairly quickly on "morality" issues like the bathhouses. But the gay community, as a large and open community, was a recent construction and its mores were in flux. (I'm dealing with gays because it's my impression that their community leaders shaped the American response to the epidemic much more than whatever "community leaders" drug addicts could be said to have.) How well does that extrapolate to customs and beliefs that are hundreds of years old? It seems obvious to me that it will be more difficult to achieve the revolution in sexual practices that we achieved here; how much more difficult, I can't guess.
It's also a financial leap to assume that you can take the amount that was spent educating Americans and sort of extrapolate that effectiveness to Africa. We didn't spend that much per capita on each American -- but we spent vastly more on efforts targeted at the gay community, on a per-capita basis. It's that latter per-capita number you have to look at, not the former.
Finally, let's look at who pushes the condom use. Women. Men here were aware that they were at lower risk than women; that's why all the ads focused on women telling their boyfriends "Not without a raincoat".
But the power relationships here and in Africa are substantially different. Women here had the power to say "wear it or get out." Do women in Africa? The women who are dependant on the men to keep them from starving? The women who are living in societies that tell women their duty is to obey without question? Women living in societies where rape is viewed as a crime against a woman's family, rather than the woman herself? I don't think that Africans are primitives who can't be educated; I do think that they are culturally different from us, and that it is folly to assume that success here translates to success there.
Clearly, since heterosexual sex is a major vector in Africa, the men too should be willing to go along, but frankly, based only on my years of observation, I'm going to go out on a limb and say that there are biological determinants dictating which party will assume responsibility for preventing disease and other complications.
Also check out Lynne Kiesling's outstanding post on the aftermath of the California crisis; seems that some of the desperate measures taken last year have made the market less efficient, and thus the system more vulnerable, this year:
Today's San Jose Mercury News story hits the same notes, including the unexpected outage of a plant in Southern California; the outage was due to a fan breaking, which is easier to distinguish from strategic witholding than the types of overuse outages that lots of peaking plants experienced in 2000 and 2001 (the distinction between engineering tolerance outages from overuse and "economic witholding" continues to be a major issue in the California electricity crisis post-mortem). Interestingly, the headline refers to the state's request to reduce electricity use, but nowhere in the article is there a single reference to the fact that big users used to have good price signal incentives to cut peak use, when they had direct access contracts with generators and had more ability to use metering and something approximating real-time pricing. But last fall the California PUC abolished direct access, unabashedly stating that the state needed large users to buy their power from the state's new power authority, because they had to earn revenue to pay for those high-price contracts signed in spring 2001. A few large users are on interruptible contracts, but that's a drop in the bucket. So now the only ways to get large users to cut back during peaks is to issue public pleas for conservation. Gee, you know, I think price signals to the large users would do the job a heck of a lot better, with less hand-wringing.
Steven Den Beste has been playing whack-a-mole with the Mac folks again, and Jason Rubenstein has put of a good post on the subject, the gist of which is: you use the right tool for the job. There is no such thing as "best" without reference to the question "for what?"
The Mac people are, of course, a beleaguered minority, and as such, they're a little nuts on the subject. I can't tell you what rage I engendered by pointing out that Macs cost more than comparable PC's. A flood of email, aimed at proving that the total cost of ownership was lower if you added a stream of things that the writer believed indispensable, most of which I wouldn't use unless you paid me. (I'm sorry. I just have absolutely no interest in editing my own multimedia productions.) Clearly, the Mac was best for their needs, but they simply wouldn't accept that not every considers a video editor or graphics design program to be an integral part of their computing life. I eventually gave up the correspondance; there was no point.
Now, I'm an agnostic. But when I watch the Apple "I switched" ads, what they really make me want to do is short the stock. Not because I am in any doubt that Apple makes a fine machine for many purposes. But because it looks to me like Apple has read its market about as accurately as the Pepsi Clear execs. Now, of course, I could be wrong. It's not like I have any talent for picking what sells; one of the surest ways to identify what shows will succeed is to find out what I like. Those shows will be off the air within a year. (Except Law and Order, the exception that proves the rule.)
Nonetheless. The commercials are snide; they're excellent for preaching to the Elect, but I don't think they're going to win many converts. The gist of the commercials is that anyone who sticks with PC's is a beknighted fool who doesn't know what they're missing. The problem with this approach is that the consumers to whom they are trying to sell are currently among those who have stuck with PC's despite Apple's best efforts. People generally do not respond well to being told that they're beknighted fools who don't know what they're missing. Mac people ought to know this, because this is approximately what they've been saying to their PC-using cousins for years, and the reaction has been. . . well, let's say, somehwat crisp.
There's one in particular that just makes me laugh. It's a guy who says he switched because he's tired of wrestling with PC's at work, and when he comes home, he just wants his computer to work. Then he tells us that he's a PC Lan administrator.
Tee-hee! I'm a PC LAN administrator who wants to get up in the middle of the night and haul his ass into work because I can't get secure access to the NT network from home. I'm a PC LAN administrator who's decided that I like being the third assistant system administrator for the marketing department just fine, so I won't be upgrading my skills by installing software at home to test and/or practice. I'm a PC LAN administrator who isn't going to have a job much longer when my boss finds out that I made commercials saying that the PC's he pays me to install and take care of suck.
Having done my time in such jobs, I find it awfully hard to imagine someone who does this as a serious career would not have at least one PC, and probably more, at home to work on. Even more, to imagine that he would make a commercial advertising that fact to his coworkers; he might as well have handed his boss a note saying "I'm a disaffected and unmotivated person who hates his job. If you're still seeking ways to meet this quarter's budget cuts, look no further." I have no idea who this chap actually is, but my best guess is that he's the LAN administrator/Office manager/Mail boy at a small business somewhere who never really knew what he was doing with PC's, and doesn't care to start now. Or he actually has more than one PC at home, and keeps his Mac for certain uses. But an intel-based Paul on the road to Damascus, he most definitely ain't.
I've been watching Michael Jackson's antics with some interest. Last night, as I was watching him whine on some video clip, it suddenly occurred to me for the first time that Jackson may actually believe what he is saying. Which is fascinating, really; he seems genuinely unaware that the major source of all his troubles is that he is one of the five wierdest human beings on the planet.
So some group apparently connected to James Carville and funded by the AFSME (the union for government employees of all all stripes) is running these "sly like a fox" ads on the cable stations aimed at connecting the Administration to the accounting scandals.
[What do government workers care about accounting reform, you ask? They don't, my child; they care about the Bush Administration trying to soften civil service protections for Homeland Security workers so those heartless bastards can fire incompetent, criminal, or dangerous people who are charged with protecting our security.]
I like the tag line they're using for the Harken and Halliburton issues: "Enron-Style Accounting". Does that bear the same relation to Enron's accounting as "Family Style Restaurants" do to eating food prepared by someone who actually cares about how it tastes and served in a clean environment? Or that the "Turbo Style" Porsche bears to a car with actual power and performance?
Of course, given who made the commercial, it's possible the authors really don't understand the difference between style and substance.
Tom Daschle was on TV saying that accounting fraud has cost thousands of jobs. No it hasn't, at least not in the way he means. It may eventually cost jobs, as increased risk premiums put a damper on entrepreneurial job creation, but the fraud of WorldCom did not cost WorldCom workers their jobs, etc.
How can I be so cruel, you shout. Well, the fraud was designed to cover up the fact that the companies were heading rapidly down the tubes. Except for Enron, which might not have levered itself into a very dangerous if it hadn't been able to jigger its earnings, the companies had problems with their business model that were going to cost those jobs anyway: the fraud is the symptom of the same underlying problem as the job losses, not the cause.
What the accounting fraud did is cost investors money. But of course it made other investors money; the ones who sold at the top. The net effect is not on shareholders or employees; it's on debt holders who lent money that otherwise would not have been lent, and on future companies that will face investors demanding a stiff premium for investing in their IPO. And on the rest of us who are feeling a lot of pain in our mutual funds (but since I still think the market is overvalued, I can hardly complain).
My father sends this insightful opinion from Ireland:
You might also consider in your analysis of AIDs treatment in Africa that it has become a tradeoff between the treatment of people in the wealthy world and the treatment of people in the poor world. If AIDS treatment depends on the use of trained medical staff, then the traetment is doomed. The professional staff being trained in the third world is becoming an export commodity,making their way to the wealthy world to substitute for the failures of domestic training and wage policy in the treatment of the citizens of the wealthy world. This was happening thirty years ago for poor people, as many of the nurses and house officers in public hospitals were imported, but now it is happening for everyone. And the demand for nurses and health professionals being driven by the aging populations, the importation can be expected to continue so that everyone can get the treatment in the wealthy world that they desire.
So, what's the answer? It's totally unclear. You can't enslave people anymore, so you really can't deny people the opportunity to migrate for better wages and a better life style for their family. So, for every nurse that leaves South Africa to help keep people alive in a UK hospital, there is a South African victim of the denial of care. Perhaps we should be deliberately subsidizing the cost of professional training in the Third World, so that they have staff and we can have exported staff. There ain't anywhere else that they are going to come from!
Okay, for anyone who's confused: I'm not an economist. I'm an MBA with a fairish background in the subject. My opinions are my own, not the opinion of the God of Economic Policy that I consult at my home altar every morning, who mostly just rants about rent control. Nor, when I am considering a question, do I run down to the Bat Cave and start up the supercomputer to crunch some numbers for y'all.
I am also not clairvoyant. Any predictions I make about the outcome of elections are just as likely to be correct as those of any other random stranger on the web. Use your brain and evaluate what I say. I'm not the Oracle of Delphi, and I'm not claiming to be.
I just wanted to be absolutely clear on this because I've gotten a number of emails castigating me for pretending that:
1) I am an economist 2) The charts and models I post up here are at the same level of accuracy as you would find in a peer-reviewed journal of economics, the kind in which I would not be allowed to publish, because I am not an economist. 3) No one else could possibly ever be right about anything except me. (Which is true if their initials are [cough]. But I digress) 4) I can predict the future in terms of elections results or hard-number policy results. 5) I am a beautiful fairy princess who lives in a castle, and if you disagree with me I can have you executed by order of my father, the King. 6) I am a professional economist.
So let there be no mistake. All of these items are false; we sold the castle years ago. I don't know how I managed to convey these impressions. But now you know.
Update We have a late entry from someone on a forum that linked to my rules for debate.
But what right does she have to force them on people? Huh? What right does she have to play God like that? Who is she to judge?
Let me be ABSOLUTELY CLEAR. I am not God. I do not even play God on TV. And what I may or may not do in the privacy of my own home with a couple of old sheets and a tub of dry ice is absolutely no one's business but mine.
The rules were just something I thought up one morning. They were not supposed to be The Final Word on debating. And they have absolutely no relationship to whether or not I am omniscient, omnipotent, and omnipresent, because that's only true at 3 am at the cocktail party you mistakenly invited me to. As for who I am to judge -- well, I guess we'll find out when the Final Trump sounds, won't we?
It seems to me that the Democrats have assessed the possibility of claiming that Bush is responsible for the accounting disasters, and have wisely decided that this would hurt them worse than the administration. So now they're going after Harvey Pitt.
I don't think that Pitt's done either a particularly good or a particularly bad job, though I'm horrified at the way both he and Arthur Leavitt are making the media rounds to declare "I wuz framed!" But I hope that whoever we get, it's not some reformer whose only qualification is that he's not connected to the industry -- which translates as "No idea what he's doing". I'm not sanguine. But we shall see.
Aziz Poonwalla has a good post on the possibility of treatment, but it suffers from a major flaw: it assumes that the two populations are similar.
It assumes that the drugs we use will work the same way in Africa, even though the major AIDS strain there is different from the one here.
It assumes that education will have the same effect there as it did here (although given that AIDS education is only apparently about 50% effective here, and unsafe behavior seems to be -- anecdotally -- on the rise again with the advent of the "cocktails", that may not be enough of a goal to shoot for)
It assumes that a disease vectored primarily through heterosexual sex will respond to education and/or treatment the same way as one vectored primarily through homosexual sex and blood-to-blood contact. This is actually pretty likely to be wrong, in my estimation. Media reports to the contrary, heterosexuals, unless they are the partners of bisexual men or drug users, are at a very low risk for contracting AIDS. The most successful public health efforts here have been extremely targeted: needle exchange, addict counseling, gay groups that made a fetish out of condom use. (I mean that in a good way, like Lister made a fetish out of cleanliness). It wasn't the campaign to get every heterosexual in America using condoms that slowed the epidemic; it was the flood of resources into the high-risk communities.
Most of all, it assumes that the drugs we send can be administered in Africa the same way they are here. I'm sorry, I just don't see it. Roads. Clinics. Electricity. Health care workers. Education, to believe that little bugs you can't see can really make you sick. (Don't snicker. It took your ancestors a hundred years to believe it.) Population density. Attitudes about sex. Look at where AIDS campaigns are working -- Southeast Asia and America/Western Europe, both with relatively shame-free attitudes about most sorts of sex, both with high levels of population density and a functioning health care infrastructure, both with compact high-risk populations that could be targeted and identified.
Vaccines? I'm all for 'em. But I'm not going to talk about an AIDS policy that relies on vaccines, any more than I'm going to talk about an environmental policy that relies on cheap renewable energy -- I'll be the first one waving the flag if it happens, but it hasn't yet, so let's stick to realities.
Now, I'm not saying that it can't be done. But I've had a couple of friends who were on the cocktails, and it strikes me as unlikely. Some of their meds had to be refrigerated (though I don't know that they were anti-AIDS drugs, as they were pretty sick when they went on). Others required careful monitoring of side effects. Everything had to be timed and regimented like a Busby Berkley musical number. They went to the doctor all the time. Now, maybe they didn't need to do all this. And maybe you could train people in Africa as AIDS workers. I don't know what's vital and what's not, but I do know that we'll have one shot to get it right -- because if we get it wrong, we'll be creating drug resistant viruses that won't give us a second shot.
You may disagree with Den Beste when he says that anti-HIV drugs aren't the answer in Africa. But this is why you can't just dismiss him as mean and hard-hearted.
In the San Francisco gay community, 13% of newly identified cases of HIV are resistant to two or more classes of drugs -- up from 6% five years ago.
Unless the strains are significantly less infectious or deadly than the non-resistant strains, they'll spread more quickly -- their fitness advantage will give them a heavy head start. That means that the change will be geometric, not arithmetic; in other words, it won't be 20% of cases in 5 years; it could be 30% or more.
Drug resistance is an enormous problem. It requires careful medical management -- the kind Africa doesn't have and can't afford, no matter how much money we ship them. We can't give them an entire modern medical infrastructure overnight.
One of the moral questions we have to face -- and answer -- is whether we are morally justified in withholding drugs from African nations without the infrastructure to police their administration in order to prevent drug-resistant strains from developing and coming here.
