From the desk of Jane Galt:

Outstanding editorial from the WSJ

Outstanding editorial from the WSJ asks where the hell are all the economists who were lauding Argentina's de-pegging the peso, now that it looks like this may have singlehandedly destoryed both the peso, and the Argentinian economy?

When Argentina dumped its law linking the peso to the dollar late last year, international conventional wisdom hailed the move. Funny, but those same global wise men aren't taking credit for their handiwork now that all hell is breaking loose in Buenos Aires.

They suddenly have the same profile as the Argentine peso, which is to say almost no profile at all. Back before it was "floated" in December, the peso traded with the greenback one to one. Now it's worth about 33 cents, assuming anyone is still willing to hold pesos at all. Despite bank holidays and partially frozen bank accounts, Argentines are standing in lines stretching for half a mile to buy dollars rather than hold their own currency.

The police have been arresting currency traders on the street, banana republic style. . . Forty-three percent of the population now lives below the poverty line, Equis says, and with inflation set to rise so will the number of poor. El Clarin reported on Tuesday that the "middle class basket of goods and services" has risen 27% post-devaluation. Yesterday's La Nacion told of Buenos Aires bakeries threatening to close if the price of flour doesn't fall. As for the trade "competitiveness" that devaluation was supposed to bring, Uruguay says it plans to raise tariffs on 300 Argentine products.

All of this is a tragedy, but it was hardly an accident. The devaluation was the product of years of intellectual attack on the peso's dollar anchor; we know because we were on the other side of that debate. We're still waiting for the architects of the Argentine "float" to explain how all of their splendid schemes went awry.

One such would be Ricardo Hausmann, the former chief economist at the InterAmerican Development Bank. Writing in the Financial Times last October, Mr. Hausmann opined that "the government has to find creative ways to reduce the debt burden and gradually gain competitiveness." His "workable" solution to this was to convert the country's dollar debt to pesos and to float the exchange rate. . . There was another way out, as some of us argued at the time. That path was to remove all doubt about the peso's future value by dollarizing the economy. Yes, the country would still have to reschedule its suffocating debt. But it would have avoided the catastrophic loss of Argentine faith in the value of its own currency, which is the bedrock of any decision to invest or start a business. Even now the country might be able to stop the peso hemorrhage if it decided to dollarize, as Ecuador did to emerge from its death spiral in 2000."

From the desk of Jane Galt:

Gary Farber takes me to

Gary Farber takes me to task for my post on public housing and drug use, saying that I read the decision incorrectly. I didn't, but I apolologize if my post implied that the issue is whether criminal tenants can be evicted. The issue, of course, is whether criminal residents who aren't primary tenants can be evicted.

Public Housing authorites have had and do have, the authority to evict criminals, people who have broken the law. That wasn't at issue. In the slightest. In the least. So I have no idea what Megan McArdle is on about.

What was at issue was whether public housing authorities can evict people who have broken no law, and have no awareness of any law being broken, merely because someone in their household used drugs at one time, at some entirely different place, utterly without the knowledge of the primary renter.

Which is a whole different kettle of squid from what Megan McArdle says she is concerned with, and which is why this went up to the Supreme Court, whereas the utterly settled issue of whether criminals can be evicted certainly need not and did not.

I may be misreading the opinion. But from what I have gleaned, the opinion is indeed on whether the behavior of secondary defendants is grounds for eviction. And it was directed at people who say, "Well, I didn't know little Fred was using drugs" or "Well, I can't control him". I worked in the public housing sector in the mid-nineties, and while I certainly could have missed a decision that allowed the eviction of primary tenants for the behavior of those who live with them, this was indeed a huge problem back then, and not one that the Court had addressed.

The Supreme Court overturned the Court of Appeals, and held that tenants may be evicted regardless of whether the tenant knew, or should have known, of the drug-related activity. Specifically emphasized in the decision is that ... any drug-related activity engaged in by the specified persons is grounds for termination, not just drug-related activity that the tenant knew, or should have known, about.... [...]

The court [of Appeals --ed] ultimately adopted this reading, concluding that the statute prohibits eviction where the tenant for a lack of knowledge or other reason, could not realistically exercise control over the conduct of a household member or guest. Id., at 1126. But this interpretation runs counter to basic rules of grammar.

Are we clear here? Third-party actions that it isn't reasonable for the tenant to have known about are grounds for eviction, because of the grammar of the law, says SCOTUS.
Pause and marvel at that fine "strict constructionism." Imagine what one would have said if that was the reasoning of a Soviet court.

Keep in mind two things: the public housing authorities are dealing with an enormous problem of tenants claiming that they "didn't know" about drug use going on in their house, and thereby evading responsibility. Some of them probably didn't. But some of them obviously did, and the Housing Authority couldn't do squat. The opinion also, as far as I can tell, is issuing a ruling on whether people can be evicted for behavior of the secondary tenants that the primary tenants can't control. Hard on the primary tenants -- but sons, boyfriends, daughters, etc. that the tenant "couldn't control" have also been historically a huge source of crime in the projects. If you can't evict the primary, how do you get rid of the sixteen year old of whom that tenant is a legal guardian?

The agency made clear that local public housing authorities' discretion to evict for drug-related activity includes those situations in which [the] tenant did not know, could not foresee, or could not control behavior by other occupants of the unit. So much for individual responsibility. No, the new rule is collective responsibility. Conservatives and libertarians have long rightly held popular the meme that zero-tolerance laws and regulations were an absurd, if not inane, over-reaction of the liberal nanny-state, despite the fact that most liberals agree. Here is another case one would think is an example of zero-tolerance run amuck. But somehow Megan McArdle disagrees; based on what she wrote, I have to wonder if she read either the decision, or the story she linked to.

I don't necessarily agree with the particular application the housing authority is making of zero tolerance laws. Farber goes on to talk about the four cases, which are, of course, extremely disturbing; the Times rendition makes it sound as if the housing authority is evicting people because their grandson smokes the occasional mary jane in the parking lot. I say "of course" because those cases were hand-picked by the activist groups that pressed the case for maximum sob-appeal; most such cases I heard about were more along the lines of "her thug of a grandson is dealing from her apartment, but she says she doesn't know anything about that, and anyway, she's afraid of him."

Bad cases make bad laws. The Supreme Court was not ruling on whether these four people deserved to be evicted; it was ruling on a principal. The question was whether you can, or cannot, evict primary tenants from public housing for the behavior of those who live with them, even if they can't control that behavior. I say yes. It's hard on the tenants, but easier on their neighbors. So did the Supreme Court. Whether or not zero-tolerance drug policies are a good idea, or drugs should be legal, or conservatives are mean, is not the issue.

UPDATE: Here's a summary of the decision, via Edward Boyd

In Department of Housing and Urban Development v. Rucker (00-1770), Respondents were threatened with eviction from their public housing by the Oakland
Housing Authority after persons associated with Respondents' households were found to have engaged in drug-related criminal activity on or near the premises. The basis for the evictions was a clause in Respondents' leases that requires tenants to "assure that the tenant, any member of the household, a guest, or another person under the tenant's control, shall not engage in . . . [a]ny drug-related criminal activity on or near the premises." The clause closely tracked the language of 42 U.S.C. § 1437d(l)(6), which provides that each "public housing agency shall utilize leases which . . . provide that any criminal activity that threatens the health, safety, or right to peaceful enjoyment of the premises by other tenants or any drug-related criminal activity on or off such premises, engaged in by a public housing tenant, any member of the tenant's household, or any guest or other person under the tenant's control, shall be cause for termination of tenancy." HUD, in turn, promulgated regulations under this statute that
allowed local housing authorities to consider all of the circumstances in deciding whether to evict tenants for this type of infraction; HUD further clarified that such tenants could be evicted even if "[the] tenant did not know, could not foresee, or could not control behavior by other occupants of the unit."

Respondents sued HUD , OHA, and OHA's director in Federal court after the OHA began state-court eviction proceedings. Respondents argued that HUD's application of the statute to "innocent" tenants violated the Administrative Procedures Act (i.e., was an unreasonable interpretation of § 1437d(l)(6)) and, alternatively, that the statute is unconstitutional. The district court agreed (with the first argument) and entered a preliminary injunction in Respondents' favor. A Ninth Circuit panel reversed, but the en
banc posse reversed and reinstated the injunction.

The Court today reversed, with the Chief writing for all participating Justices (Breyer sat this one out-presumably as a result of his brother's role as district judge here and not because he signed one of these leases when occupying his swank-o Georgetown pad). Although dragging on a bit by his standards, the Chief quickly explained that § 1437d(l)(6) unambiguously requires lease terms giving local housing authorities the power to evict tenants for household members' drug-related activities, without regard to the tenant's knowledge of the activity. The word "any" clearly modifies "drug-related criminal activity," and, therefore, a knowledge requirement is not consistent with the statute. Moreover, although "under the tenant's control" obviously modifies "other person," it would be nonsensical for it also to modify "member of the tenant's household" and "guest," as the en banc Ninth Circuit found. That interpretation, of course, would deprive the disjunctive "or" of its meaning, and no one wants to see that happen.
Furthermore, elsewhere in the 1988 Anti-Drug Abuse Act that gave us § 1437d(l)(6) Congress expressly imposed an "innocent owner" defense where it wished to do so. The plain language therefore makes it unnecessary to resort to legislative history, but, even so, that effort would not support Respondents' position.

The Chief then took a moment to reject the en banc Ninth Circuit's attempt to rely on the canon of constitutional avoidance to read a knowledge requirement into the statute. After reiterating that avoidance is unnecessary because the language is unambiguous, the Chief went on to dismiss that court's suggestion that the lease provision presented problems under the Due Process Clause. Not only had Respondents contracted with the government for these lease provisions, he explained, but also they would receive adequate notice of any deprivation in their state-court eviction proceedings. Revealing that his main beef was with that insolent Ninth Circuit, the Chief relegated the Respondents' constitutional arguments to a lowly footnote, simply adopting Judge O'Scannlain's refutation for the initial panel of the First Amendment and Excessive Fines Clause challenges.

In other words, not only did the court rule on a broad array of issues on secondary tenants; it also allowed for broad discretion on the part of the HUD authorities. The authoritites may have made a bad call on some of the cases, but that doesn't give those tenants a constitutional case.

From the desk of Jane Galt:

A lot of anger about

A lot of anger about the labeling issue. Andy Freeman writes that there's too much disagreement about porn to label it:

Some folks think that it's topless. Some folks think that it's bottomless. Some folks think that it's suggestive behavior. Some folks think that it's smoking. Some folks think that it's violence/blood. (Is the opening 10 minutes of Saving Private Ryan porn?) I can go on and on. (Abortion information? Saudi articles about Jewish pastry ingredients?) Note that many of the smoking/violence folks aren't bothered by exposed flesh, and visa versa.

Well, first of all, this merely implies a set of, say, twenty labels instead of one. This is not an insurmountable problem.

Second of all, parents -- raise your hand if you're okay with your kid looking at porn as long as she's wearing a g-string. Or if your children are unaware of what smoking looks like and you want to make sure they don't get any pictures of it.

Movie standards were promulgated as much to prevent things that the "busybodies" don't like from looking cool as to keep kids from looking at adult content. Smoking is a public activity, unlike (in most cases) parading around au natural It's not really that hard to draw most of these distinctions. Sure there will be room around the edge -- there's room around the edge in any standard ever promulgated for the conduct of human relations.

Nor do I think it is fair to refer to them as busybodies. The social libertarian idea that the most permissive standard should become the de facto public one is every bit as oppressive as the Jerry Falwell idea that we should all hew to his idea of morality in the public sphere. The fact that many people want to have adult content on the net should not mean that parents have to watch their children every minute to keep them from being exposed to content they don't approve of. Personally, my parents were liberal on that sort of thing -- I saw my first R rated movie at aged 10, with my Dad (National Lampoon's Vacation, it was, and I can't remember why it was rated R). But they also didn't have to contend with the possibility that I might discover pictures of behavior that might frighten or appal me in casual cruising, which is not as hard to do as my correspondants have implied. I've stumbled across things I hadn't even known existed by following links that looked perfectly innocuous. (Yes, I suppose I'm sheltered. No, I'm not going to elaborate. Shame on you!)

Lane McFadden weighs in with the sensible point that the stuff we're arguing about is less than 1% of the porn on the net. I think a 99.5% effective filter is about as well as one can expect to do in an evironment as large as the net, and I'm pretty sure that most parents would agree it's better than nothing.

I'm not so much advocating labels as kicking the idea around and looking at it. I don't know what the solution is. But I think that anti-label advocates are going to have to come up with better arguments than

1) People who don't want their kids (or their employees) looking at porn are just prudes and they need to get with the program
2) It's too hard -- it can't be done. (The MPAA shows it can. Whether it's worth the social cost is another question)

From the desk of Jane Galt:

I know my posts have

I know my posts have been pretty thin the last few days. . . I've been busier than the proverbial one legged man in a derriere kicking contest. Starting tomorrow, there'll be a plethora of thrilling posts on everything that's built up for the last few days. . . but right now I'm exhausted and I'm going to bed. 'Night.

From the desk of Jane Galt:

Do you know why I

Do you know why I keep a dog? It's because of the way his eyes get all big and round when I wave his plush soccer ball around. To get a person to look that excited, you'd have to be waving a Porsche in the air, but the velvety toy does the dog just as well. And not only that -- by the second or third time someone gave you a Porsche, your eyes wouldn't get so wide. It'd be old hat. But for the dog, each and every brandishment of the fuzzy orb produces the same wondrous glee. As long as you keep the plush toys and the bones coming, they live in magic.

From the desk of Jane Galt:

People opposed to smut filters

People opposed to smut filters complain that they don't work. So a sensible economist asks why we don't require content providers to label their adult content and then let consumers decide.

From the same site (just discovered it, and boy, it's good): will boredom save Microsoft from the Linux threat? I've been arguing here for a while that the problem with Linux is two-fold: first, that I haven't seen an actual realistic revenue model for a largely open-source world; and second, that it is good code but bad marketing, insufficiently responsive to the needs of the ordinary consumers who would have to use it, rather than the desires of the advanced users who code it. This bit points to a real-world example of what you might term an open source market failure.

And on the well-traveled subject of faculty bias, he makes a suggestion that I've approached asymptotically: the next time your college calls you for money, ask how many Republicans are on the faculty. If enough of us demand to know, colleges will respond to the fundraising market by getting some conservatives on board.

Market-based solutions for social problems -- who would have thought that stuff this good could come out of Smith College?

From the desk of Jane Galt:

Okay, I just noticed this

Okay, I just noticed this post on Social Security and Democratic Strategy from Ipse Dixit, but it's a goodie, so I'm posting it. It covers the suicidal plans the Dems are making in a desperate attempt to hold the Senate:

What's perhaps even more amazing is that their budget - which they presumably plan to be the groundwork for a claim that they're the fiscally responsible ones - predicts a higher deficit than the one about to be passed by the GOP-controlled House. It's true, yes, that it's smaller than the one in the President's budget, but the two "GOP" versions fully fund the President's military spending request; Conrad's diverts some of it to social spending. Why they think that will go over with the electorate is quite a mystery, I must say.

Conrad's right, of course. Securing the future of Social Security is a vital test of the current Congress' mettle. And, so long as Tom Daschle is Senate Plurality Leader, they will fail it miserably. Their only hope of long-term survival as a party is to keep as many Americans as possible on the public teat. So they will demagogue Social Security right up to the day (now likely to arrive before I am eligible to retire) that the United States government defaults on its promises.

Perhaps the saddest non-legacy of the Clinton Administration is that he could have secured himself a permanent legacy, a place in the pantheon of greats so strong that no number of scandals could ever have dislodged him, if only he had had the courage to reform Social Security in the manner proposed by President Bush. Just as, in the words of the ancient Vulcan proverb, "only Nixon could go to China", so Bubba could have privatized Social Security. He was largely successful pulling his party - kicking and screaming - up to a level of sustainable credibility on such things as the economy and crime; he could have done the same for entitlements.

From the desk of Jane Galt:

So here's my opinion on

So here's my opinion on racial profiling: legalize drugs and concealed carry.

Think about it. All those traffic stops, the stop-and-frisks that humiliate and anger a large sector of society -- what are the cops looking for? When they make some kid drop his pants in the middle of the street, they're not checking to see whether he's carrying a stolen tv in there -- they're looking for weapons or drugs. Legalize concealed carry and drugs and you eliminate any payoff, in terms of making cops' quotas, to the searches. We also get rid of a lot of the payoff to the crime that leads to the environment in which the searches are necessary or permissible.

Now here's a question: If we legalize drugs, do we allow money to flow into the inner city, by creating a more stable environment, or pull money out of the inner city, by removing idiot bankers dropping $500 on a whiff of cocaine?

From the desk of Jane Galt:

Strike a blow for common

Strike a blow for common sense: Yes, you can evict drug users from public housing.

Now, followers of this page will know that I am in favor of legalizing drugs. All of 'em. Don't care how much they weigh, what class they are, or to what extent they resemble or do not resemble crack cocaine. Take the laws off the books.

However, given that the laws are still on the books, drug use is accompanied by a great deal of other crime and anti-social behavior. And unlike other people, the other residents of the housing projects can't move away from trouble; they're stuck with whatever the government chooses to let live there. I'm always entranced by the thought of forcing the ACLU lawyers who argue these cases to live next door to the tenants they're willing to inflict on our minimum wage workers.

Predictably, poverty advocates are screaming that this is discrimination. Wake up, Moonshine; the sixties are over. The problems of the poor today are no longer lack of the basic necessities for survival; the problems of the poor can be divided into three categories: lack of status goods (Wal-Mart sneakers instead of Nikes); their own behavioral problems, for which they lack the safety net that middle class status affords; and the behavior problems of other poor people with whom the government forces them to live. We have a choice between guaranteeing, for those at the bottom, either a respectable if not glamorous standard of life for those who choose to live respectably; or squalor for everyone. There is no way of both guaranteeing everyone a place to live, and making the places that we offer to the less fortunate meet a minimum standard of decency; the two aims are mutually exclusive, because the essential problem with many of these places is the tenants. Not all of the tenants; just a significant minority that make it unliveable for anyone else. (I realize we have a third option, which is to bulldoze the places, but that's another discussion) While personally I'd like to see drugs decriminalized, I still heartily endorse the principle that we can kick criminals out of public housing, even if they're not the primary tenant.

From the desk of Jane Galt:

Meanwhile, SmarterTimes lets us know

Meanwhile, SmarterTimes lets us know that the New York Sun is almost here! I don't know if it will be good enough to threaten the Grey Lady, but I'm willing to give it a try for $2.50 a week, their special subscription rate. I heartily encourage anyone in New York to take a subscription; even if your politics jibe with those of the Times, it can't be a bad thing to have more intelligent voices in the arena. Help us shake things up a little!

From the desk of Jane Galt:

A chance conversation today reminded

A chance conversation today reminded me of a long family tradition of doing the wrong thing in the middle of a crisis; specifically, when assaulted.

About 18 years ago my grandfather, then 70, was working in his gas station when a man came in and demanded the cash. This man was 35, over 6 feet tall, and weighed considerably more than my grandfather, who weighed in at 6 feet and 150 pounds. Rather than doing the sensible thing and handing over the take, my grandfather leapt over the counter and lunged at him. When the cops arrived, the would-be robber was begging them to pull this crazy old man off him. The local papers wrote him up as a sort of geriatric wonder, which angered my grandfather deeply. My mother was angry too -- because he'd risked his life for the contents of the cash register drawer. She tried to get him to promise that next time, he'd comply quietly.

A few years later, my mother's purse was snatched by someone who was also, coincidentally, younger and larger than she was. Rather than doing the sensible thing, she chased him four blocks, threw him against a wall, retrieved her purse, and held him there for a little while before she realized that, this being New York, no one was going to go for the cops whilst she detained him. She let him go. I furiously lectured her on the relative values of her wallet and her continued good health.

A couple of years after that, I was sauntering down Osage Street in the lovely Philadelphia dusk when two teenagers appeared out of a corner. One of them grabbed my wrist; the other said "Give me your money, [Expletive deleted]". A flash of metal indicated that this one had some sort of a weapon, although I didn't see it too clearly, so for all I know they were holding me up with a roll of Reynolds Wrap.

I should mention that at the time I was dating a fellow who was a black belt in Karate and who had endeavored to teach me same. Unfortunately up to that point, all I had mastered was the scary yell and the fighting stance. Yet such was my rage at the thought of these little twerps trying to get their grubby hands on MY MONEY that rather than doing the sensible thing and giving them the eighty dollars and change that I was carrying, I emitted my best scary yell, yanked my wrist out of the hand of Perp #1, and assumed fighting stance.

The second I had done this I recognized that it was completely insane. What was I going to do if they called my bluff -- say, "ha, ha, glad to see you fellows can take a joke," and hand over my money? I frantically sought ways to get myself out of the now deeper predicament I was in.

I needn't have bothered. The one with the reynolds wrap said, "Oh, [expletive deleted], man, she knows karate!" and the two of them took off down the street. Amusingly, the other one kept looking behind him to see if I was chasing them. I suspect that I may have been their first foray into the dark underworld of crime; hopefully, I was their last. Thank you, Jean Claude Van Damme.

The point is, you can't know what you would do in a real crisis until you're in it. We like to believe that we will do the exact right thing; that we would be the ones hiding Jews in Nazi Germany; fighting against apartheid in South Africa; that in battle we would be heroic, and that in extremes of personal need we would hew to our deepest principles. But if you can't even plan a simple thing like what you're going to do when you get mugged, how sure can you be that you'd take heroic risks when the stakes are higher?

From the desk of Jane Galt:

I don't know about you,

I don't know about you, but I watched the Oscars for about ten minutes. After suffering through Tom Cruise's speech, which sounded like the live version of the painfully earnest essays people write to get into film school, I thought "I'd pretty much rather be doing anything else" and went off to finish my taxes. Luckily, Cintra Wilson has suffered for all of us by sitting though the entire thing and producing a summary that is vastly more entertaining than the original.

From the desk of Jane Galt:

I don't have anything in

I don't have anything in particular to say about this, except that over the past week or so I have been recalling the sort of righteous anger that suffused every fibre of my moral being six months ago, as the tributes roll out to the dead. This is a particularly moving one, because all it is is a description of the ordinary lives the people on Flight 93 were living, right up to the time they had to become heroes.

From the desk of Jane Galt:

Another reason why the H-P

Another reason why the H-P merger is a bad idea.

From the desk of Jane Galt:

The law of unintended consequences

The law of unintended consequences is everywhere, even Afghani textbooks.

From the desk of Jane Galt:

From over at Jumping to

From over at Jumping to Conclusions, there's a possibility that two of the hijackers were treated for Anthrax last June. It's a retroactive diagnosis, of course, but could put paid to the widespread rumor that the Feds know who the anthrax guy is, and he works for us.

From the desk of Jane Galt:

Here's what I don't understand

Here's what I don't understand about the Democrats refusal to pass amnesty, while Bush pushes it: is this really not going to push some of their latino base into the arms of the Republicans?

From the desk of Jane Galt:

Slow news morning, so I'm

Slow news morning, so I'm going to post something I've been meaning to do for a while: the answers, if anyone cares, to the emails that I got regarding my article on the Microsoft Anti-trust case. Of course, they tend to stress the same broad themes, so I'll just condense here, though you can see a good sample of criticisms, and applause, for the article here in the Salon letters section.

The amazing thing to me is how many people who emailed seemed to be trying to continue an argument with me that they'd started with someone else. The purpose of the article was not to argue that Microsoft played fair; it was to argue that the lawsuit Netscape is bringing is full of holes. But rather than responding to that, something I said touched off a hotbutton in their heads, and they commenced a familiar argument as if I were taking the other side.

You can too buy an Apple/Sun station for under $1000!
This has two answers. The first is that $1000 was essentially an arbitrary number: the point was that the cheapest PC's are about 25% cheaper than the cheapest Apple, more than 50% cheaper than the cheapest Sun. I could have said $900, and then you wouldn't have anything to email about.

The second answer is that I priced systems with the following criteria: CPU, printer, monitor, extended warranty (on the assumption that we are talking about the most computer illiterate consumers). The iMac comes in over $1000; the Sun comes in around $1600 (that $949 price didn't include a monitor). Yes, but. . . many of you argued that one or the other component was unecessary. Fine. Strip off everything and the Dell is $549, the Apple $799, the Sun $1200 (I refuse to concede that a monitor is optional).

Yes, but. . . there's actually more "value" in an Apple/Sun when you count software, performance, or whatever. That's a value judgement. Firewire maybe fantastic, but it's not something that everyone wants, as evidenced by the fact that not everyone has it. YOU may value your iMac at well over what it cost, but assuming that your hierarchy of values represents some absolute, objective standard is what made Communism such a rousing success. (Comrade Oblenko likes black pants better than brown -- therefore, we will only produce black pants and save many rubles on dye!)

Bundling Was Unfair Competition
The best argument I've heard on this score is that IE loads faster because it loads at startup; this makes Netscape compare unfairly.

Here's the thing, though -- I have a hard time believing that consumers make their software choices based on the extra 10 seconds they have to wait for Netscape to load.

If they do, however, then this is a genuine advantage of the browser to the conumer, one that Netscape couldn't replicate. Remember, the Appellate court ruled that the purpose of the Anti-trust legislation was to protect the consumer, not Netscape. You're going to protect the consumer by forcing them to give up a feature they like?

There is a compelling argument to be made about some of the API's, except that Netscape didn't make it. We can't try the case in the papers.

Microsoft designs its code so other programs run badly
Sigh. Also not in the complaint. Nonetheless:

Find me a Microsoft programmer who admits this, please -- and not one that your brother-in-law met at a party; one who's actually put it in writing. I've met several (current and former) who deny it adamantly, but then they would, wouldn't they? But short of a confession, or your looking at the Windows source code, you don't actually have any evidence that the reason that Microsoft programs run better is that Microsoft sabotages its competitors, rather than that the code is better. I'm not saying it doesn't happen. But you don't know and neither do I. And I know enough programmers to know that they'll blame anything when their code doesn't work, from sunspots to their officemate sending "evil thoughts" at them.

Users are lazy and stupid
That's a tech's perspective. I'm sure those dolts down in accounting feel the same way about what you do with your checkbook. The evidence just isn't there that they are imprisoned by whatever software is on the desktop; as I point out in the article, they proved perfectly capable of downloading Netscape when the dreadful I.E. 3.0 was on teh desktop. They stopped when it was no longer necessary to do so.

Internet Explorer isn't actually a "single platform"
It may well be that IE violates the "write once, run anywhere" ideal; I'm not a web developer. But the point I was trying to make is that if there are network effects in the browser market, they come from the web developers; the software isn't hard enough to use to create real switching costs, and of course users don't create files to share with other users, the source of the network effects for programs like Microsoft Office.

If the point is that network effects aren't as strong as were previously thought, I agree with you. So does Microsoft; that's why they compete like hell in every market they're in.

Unix is better
The argument that I was discussing was not about the Unix kernel, which is undoubtedly better (as many people pointed out) than Apple's old core; it was about Unix as implemented in Solaris, etc. Which is expensive and requires extensive training for users because it's harder to use. I frankly don't understand why people want to argue with me about this; it is empirically more expensive, and if you want empirical evidence of its ease of use, plop one computer illiterate user in front of a Unix box, the other in front of a Windows machine, and see which one's working faster. Linux is great -- and requires a lot of time to custom build a stable system, since the problems that were inherent in Windows are also inherent in Linux -- a whole lot of third party drivers that can interfere with eachother. That's why (I imagine) I know so many people who perfected their Linux system two years ago after much fiddling -- and haven't touched it since. Unix doesn't have to be all things to all people to be a great system; I don't understand why its fans can't accept that.

Netscape was free too
Check your facts. Netscape was free -- initially, while they built market share to that 70%+. At the point where Microsoft started to eat their market share, they were charging $40 a pop.

Microsoft's not Free -- You pay for it as part of your Windows license
So far, no one's been able to prove this. Arguments rely on one of two things:

1) It's not free for other platforms Check your facts. At least for Unix and Mac, it's free as far as I can tell. Go to Microsoft & download it if you don't believe me.

2) Pricing has changed Extremely hard to prove. Most proofs seem to relate to Microsoft's practice of raising the price of it's old operating systems to that of its newest release, which has more to do with other strategies than its browser prices. It's hard to generate a "true" price for Windows, because the makers of the other main competitive OS's either don't charge (Linux), or are integrated software/hardware makers, which changes the economics of their business.

In a larger sense this is true, of course; some of the profits from Windows go to pay for browser development -- but that doesn't mean that the company would necessarily charge less for WIndows; those profits might otherwise go into Bill Gates' pocket. Unless, of course, Netscape had succeeded in its strategy to seize the strategic monopoly position of Microsoft, in which case you'd be paying those profits to Netscape.

I'm an evil, pro-Microsoft shill
Did you read the article, or just the headline? Saying that Microsoft should win the lawsuit is not the same thing as saying that Microsoft is a good guy. I just don't think you should indict someone for something they didn't do, just because you can't make a case for something you know they did.

Best technology doesn't necessarily win in the marketplace
What's "best"? Every single person who made this argument achieved it -- if they offered examples at all, rather than just stating it, a priori, by leaving out attributes that they didn't care about, like price, or compatibility, or customer support, or something. Perhaps there are compelling examples, other than the widely debunked QWERTY or VHS ones, of a better technology losing, but I haven't seen it.

The Total Cost of Ownership of Unix is lower
As a consultant, I ran TCO's for Unix and Windows (and the person running the TCO for Unix was our Unix guru, not me). It isn't. Again, such comparisons are usually achieved by leaving out little things like training and availability of software. When it was lower, we used Unix.

Netscape server isn't as integrated with Netscape as IE is with Windows
That's true. That's because there's another viable product on the market. It's not seriously in question that Netscape initially planned to have a server platform that would work better than rival systems for the same reason Netscape advocates claim IE works better than Netscape. That's why investors were throwing so much money at them -- they thought the browser franchise would be a license to mint cash.

Microsoft's giving away its browser was predatory pricing
No argument here. Which I said in my article. Problem is, it's not in the complaint.

AOL isn't better
Than what? Than MSN it is. Consumers said so.

Personally, I wouldn't use AOL if they paid me. But a lot of people seem to disagree.

Microsoft themselves admitted Netscape is better
Not quite. What they said was that they didn't see how they could gain market share without leaning on their distribution network. That doesn't mean their product was necessarily worse (though that is indeed how Netscape cast it in their complaint); it could just as easily be taken to mean that Netscape's monopoly power was so locked in that the only way anyone could compete would be by leveraging the network. Which doesn't mean that the Microsoft executive was correct. Remember how many e-mails AOL had to sift through to get that one, out of context, quote.

The decision to use a browser is not the same as the decision to use a web browser
True, but hard to see how this is relevant. Emails on this topic seemed to point to the fact that browsers have lower switching costs (once you've got an email address, it's harder to switch to another service). However, this should have helped Netscape, not harmed them, if the desktop icon were truly decisive.

I don't understand how Microsoft tried to take over open standards to force people to their browser
Au contraire. But I didn't have time to elaborate on it; the article was long as it stood. And the core point is, that it wasn't in the darn complaint, so Netscape can't get money based on it. Not that Netscape could anyway, since they don't own the standards you're emailing me about.

The fact that IE may have been better is not proof that it should have won
I'll quote directly from a Salon letter:

Even the "free browser" argument gets garbled in McArdle's presentation. The point is that Microsoft can afford to support a free product indefinitely, while a company like Netscape cannot. This is a brilliant bullying tactic on Microsoft's part, since a free product is a boon to the consumer, and their motives appear less predatory.

Netscape isn't as good, but that's not the point of the antitrust suit. Netscape's 70 percent market dominance was not "monopolistic" as McArdle contends in her opening. Saying that IE is better, so nothing unseemly happened, is like saying that Nicole Kidman turns out to be a pretty good actress, so her marriage to Tom Cruise must have nothing to do with her success. Nepotism and Monopoly work the same way; they ensure success, even when the success is deserved. And that apparently is too subtle an idea for Ms. McArdle.

Predatory pricing -- don't need to go over it again.

70% market share is usually considered in the monopolistic range, at least when considering mergers and such.

The last is an interesting point, but the problem is that the writer has it backwards. Microsoft doesn't have prove it would have won the market share anyway; Netscape has to prove it wouldn't have. Which it can't.

Using IE as the help file made it more likely to win
Don't buy it. Browsers just aren't that hard to use, and the version used for the help file is stripped down and altered so that the relevant parts (the navigation buttons) are features of both Netscape and IE.

Microsoft didn't succeed just because its superior
I didn't say it did. I said it didn't succeed just because of its distribution practices, which is what Netscape is trying to argue.

From the desk of Mindles H. Dreck:

Stop Hollings Now

Click here for petitions, etc.

From the desk of Jane Galt:

Live from the WTC has

Live from the WTC has received a coveted 4.5 stars from the most excellent John and Antonio (unfortunately, no permalink, but that's okay because you should read the whole thing anyway). Guys, when I said that I loved Europeans, I most especially meant ones who say nice things about me.

From the desk of Mindles H. Dreck:

Curses, Foiled Again!

I haven't been able to access blogspot sites today. Blogger itself is working (it powers my "Rapid Droppings" to the right). Sitemeter suggests a few sites have commented (Coyote, for instance), but I can't read them.

I guess this means I have to work on my taxes.

Incidentally, next week stands to be even busier than last, including a multi-city tour, so don't look for heavy volume.

From the desk of Jane Galt:

Blogger's down. I'm waiting for

Blogger's down. I'm waiting for the day when my host, my comments, my stats, and my blogging software are all working at the same time for more than a couple of hours. Then it's me for a bottle of Dom and a copy of the Critical Review!

From the desk of Jane Galt:

Krugmanwatch: Social Security

Warning: Long column with more numbers than commentary. Not for the faint of heart or those with narcoleptic disorders.

In reading Paul Krugman’s latest piece, I’m reminded of a story.

A long, long time ago, in a galaxy far, far away, when Jane Galt was just another computer consultant in the vast swamp of the New York financial community, I was working on a project that involved duct-taping together the technology infrastructure of two firms that had merged. My firm had produced a new design; it had been signed off on; and yours truly was about to implement it, when wait! A technology manager whose job was about to go bye-bye saw a golden opportunity to save his career by putting himself in charge of the project. To that end, he fashioned an alternative proposal and put it forward.

Now, I am the first to admit that there may be many ways to solve a single design problem, and that many of the variables hinge on value judgments, hazy priority assessments, and aesthetic considerations. Too, I have made my fair share of boneheaded design moves, the stupidity of which, in retrospect, seemed blindingly obvious. So I feel that I am on solid ground when I say that this was the single worst design of anything that I have ever seen, and I include Pepsi Clear.

This fellow was an old mainframe chap, and he took one look at our distributed, high-availability, high-redundancy plan and shuddered. Instead he proposed an enormous NT 4.0 server, the largest then made, maxed out with every bit of memory and hard drive space that any company would sell you. Actually, he proposed two of them, using server mirroring software called Octopus. One server. Running all the file, print, and auxiliary services, excluding market data, for a user base of between 500-1000 users. It was expensive, slow, and it provided a lovely, large single point of failure for the entire firm.

Friends to whom I showed this design were awestruck by its stupidity. “It’s breathtakingly idiotic,” said one. “It has its own weird logic that makes me wonder if I’m missing something.”

“This man needs help,” said another. A third, my most trusted mentor, called me ten minutes after I emailed him the proposal.

“I hope you’re not letting this man near your servers,” he said.

We pointed out all the design flaws in a long letter, and ultimately I ended up in a meeting where we were supposed to discuss the merits, or lack thereof, of the proposal. I started by pointing out some of the more pressing concerns, like the way a bad disk sector could take down the single, enormous volume on which his design depended. And he began to lie.

He made technical claims for his system and its software that were not only untrue of this particular system, but unavailable in any Intel-based system anywhere. No matter what I said, he had a refutation. Which is easy, of course, if the board doesn’t know a NIC from a knicknack, and you have no compunctions about making up features that violate the laws of physics. I gave up when he claimed that the motherboard was hot-swappable. How do you answer that? “My system is not only faster and better than yours, but also shines your shoes and dispenses ice cold beer” would have been the only rational response, but I felt uncomfortable advancing such claims in the presence of other sentient beings.

And now I feel it all again: the tingling on the back of my neck; the icy chill in my veins; the helpless rage forming an aching knot in my stomach. That’s right, Paul Krugman is talking about Social Security.

Remember the "bring out your dead" scene in "Monty Python and the Holy Grail"? It's the one where the old man declares, "I'm not dead!" "Yes, he is," insists his younger companion, who persuades the undertaker to hit the old man over the head and cart him away.

Now you understand the Bush administration's policy toward Social Security.

Makes me feel kinda dumb for running the numbers, when all I really needed was a Blockbuster card.

Ordinarily, the annual trustees' report on Social Security is released at a morning press conference, and simultaneously posted on the Web; this gives reporters a chance to read the material and discuss it with outside experts before filing their articles. Last week, however, the first copies were made available late in the afternoon, leaving hardly any time for analysis. One wag joked that the information was being closely held to keep it out of the hands of terrorists.

But the real reason was surely to avoid too much attention to the report's unwelcome conclusion: that Social Security is in very good shape. True, the rest of the government is running big deficits, and borrowing heavily from the retirement fund — but Social Security isn't the source of that problem.

How does he do it? He knows exactly what went on in the minds of the Bush Administration without talking to a single person in it – knows to virtual certainty. Now I know how he performs his statistical wonders – he reads our innermost thoughts by remote control.

The introductory summary — which, unlike the report itself, is mainly a political document — does its best to make the worst of a good situation. But the bottom line is that the long-run sustainability of Social Security looks better than ever. The staff of the Social Security Administration, using conservative assumptions, now says that the system could operate without any changes at all — no cuts in benefits, no additional revenue — until 2041, three years longer than it projected last year.

I'm sure that 2041 sounds comfortably far off to Krugman; in all likelihood, he'll be dead. I, on the other hand, will be just entering my golden years when -- oops! -- there will only be enough money to pay 73% of current benefits.

I hope this satisfies readers who, when I criticize bogus arguments for privatizing Social Security, demand to hear my answer to the crisis. There isn't any crisis: the system looks good for 40 years, and with a bit of extra resources can survive indefinitely.

And this is where he says “the motherboard is hot-swappable and I don’t have to worry about electrostatic shock because this server won’t run on electricity” and my eyeballs begin to sizzle.

How in hell do you get that from this (or for the hard core numbers fans, this)?

While Federal law designates the Social Security and Medicare accounts as "trust funds," the accounts are not "trusts" in the private accounting sense in which funds of one party are held by a second party as a fiduciary. Rather, the Social Security and Medicare trust funds are financial accounts in the U.S. Treasury into which all income to these programs is credited and from which all benefits and administrative costs of the programs are paid. These accounts are established by Social Security and Medicare legislation. This legislation names the Secretary of the Treasury as the "Managing Trustee" with responsibility for overseeing the trust fund accounts. All revenues into the system not required to pay current expenses are used by the U.S. Treasury for general government expenses or to reduce the outstanding publicly held debt. In return, the Social Security and Medicare trust funds are issued special non-marketable U.S. Treasury bonds that by law carry an interest rate equal to the average market yield on all medium and long-term marketable Treasury securities. Interest on these bonds is paid through the issuance to the trust funds of additional special non-marketable U.S. Treasury bonds.

As financial accounts, these Federal trust funds have income, expenditures and assets. The 2002 Social Security Trustees Reports show the Social Security trust funds, for example, as having $1,213 billion in assets at the end of last year, and anticipated Social Security and Medicare surpluses over the next 10-15 years promise to further increase the assets in the trust funds by a substantial amount. These non-marketable U.S. Treasury securities are properly entered under "assets" on the financial accounting balance sheets of the Social Security system, and are available to the system to meet future obligations. It is this availability to meet future program obligations that results in this year’s Trustees Reports identifying 2041 as when the Social Security trust funds will be exhausted, even though under current law Social Security tax revenues are projected to fall short of expenditures beginning in 2017.

Unified Budget Viewpoint of Trust fund Surpluses

While the bonds held by the trust funds are assets from the vantage point of the Social Security and Medicare programs, from the viewpoint of the unified budget they are liabilities of the U.S. Treasury. No one doubts the U.S. Government will honor the bonds. But since the U.S. Treasury is the ultimate payer of the programs’ benefits and the trust fund assets are also debts of the U.S. Treasury, neither the interest paid on the bonds, nor their redemption, provides any net new income to the U.S. Treasury. When annual revenues from earmarked taxes for Social Security and Medicare begin to fall short of annual expenditures, such shortfalls inevitably must be made up by increased taxation, increased borrowing (i.e., the sale of more U.S. Treasury bonds to the public) and/or a reduction in other government expenditures. This fact is the basis for the view that trust fund assets have no "real" economic value. From a unified budget viewpoint, the trust fund surpluses are a budget accounting device and make no meaningful contribution to funding future Social Security or Medicare expenditures. They simply reflect the fact that in the past, surplus Social Security and Medicare revenues have been used by the U.S. Treasury to fund other government programs or to reduce outstanding Federal debt.

Actually, that's a trick question. I know where he got it: he cribbed it from two reports (found here and here) from the Center on Budget and Policy Priorities, which is, you’ll be shocked to hear, a liberal think tank opposed to Bush’s tax cuts. Paul Krugman’s column is a rehash of their talking points.

More specifically: The long-run actuarial shortfall of Social Security is less than half the revenue that will be lost due to last year's tax cut. The common perception that the tax cut was no big deal, but that Social Security faces a terrible crisis, is completely upside down. But the powerful forces that want to dismantle Social Security won't take yes for an answer; they insist that the system is doomed.

Those numbers are a little funny, given that the CPBB itself estimates the cost of the tax cut at $2.5 Trillion, and the shortfall at $4.9 trillion -- how does he get them? By projecting the "Bush tax cuts" out for 75 years. But wait a minute, I hear you say; those tax cuts expire in 2010. Well, yes, technically that's correct. But if we pretend that they don't, you can see that the Social Security crisis is really all Bush's fault. You do see, it don't you?

Never mind trying to imagine the accuracy of a tax revenue forecast for this year from 1927; Krugman is telling us that the current problem with Social Security is a tax cut that hasn’t been enacted yet.

It isn’t. This is the problem:

Chart C-Number of Workers per OASDI Beneficiary

Which is what’s causing this:

How do you call plain numbers “political”, except in the sense that the real world is getting in the way of your ideals? I’m sure Mr. Krugman would like to ignore that bit about outlays exceeding intake in 2017, 24 years earlier than the date that Krugman tells us we’ll be “just fine”, but it’s hardly a political statement; it’s a mathematical extrapolation from numbers we can guess relatively well, at least compared to tax revenues: the number of people in the labor force, and the number of retired people.

Let’s go over it one more time. There is no trust fund, any more than you can start a “trust fund” by writing yourself IOU’s due in 2017 and spending the hell out of all your income now. Come 2017, you're gonna have exactly the same annual income whether or not you take those IOU's out of the "lockbox". Now I'm sure that 2017 sounds comfortably far away. But remember how awfully far off the year 2000 used to sound? It is later than you think.

The system is broke the minute outlays begin exceeding intake; that’s when we have to cut spending, raise taxes, or start borrowing. In 2017. Actually, we’ll feel the pinch even before, as the Social Security Surplus that’s been masking our deficit disappears and we have to make hard choices about spending. Hard choices Krugman doesn’t want us to make – a lightbulb goes off -- that’s why he’s using Social Security to campaign against the tax cut now, even though he knows that restoring every bit of those taxes won’t save us.

2041 is the year when it becomes a total frigging catastrophe. Best summed up in this email I received from Mindles H. Dreck:

Look at the table on page 67 of the report.

I added at the bottom a line that indicates the percent of payrolls that the
"balance" is deficient in the year the "trust fund" disappears:

Intermediate (2041) =4.5%
Low Cost = NA
High Cost (2029) = 15.4%

So, in those years, taxes or debt, of one sort or another, might have to be
raised by 4.5% or 15.4% of total payrolls just to fund that year's retirees. And
that deficit persists.

As Mindles points out, saying that we’ll be fine until 2041 is like saying that people who jump off the Empire State Building will be fine – until they hit the ground.

Krugman also conveniently leaves out Medicare, which itself has an unfunded liability of $8.9 trillion (unfunded liabilities are what we call "Promises we've made to give people money at some date in the future without setting aside the money now to cover those promises". Like, for example, when you promised little Johnny you'd send him to the best college he got into.) That unfunded liability is how much we're gonna owe Medicare benificiaries after we subtract the imaginary trust fund.

Notice Krugman likes to discuss Social Security and Medicare separately, never in the same column – that way he can blame the shortfalls in both programs on the Bush Tax Cut, with room left over for The Poor Condition of Our Public Parks and The Disgraceful Behavior of Young People Today. Now, Paul, you have to pick. Either the tax cut is responsible for the Medicare deficit, or it could cover Social Security. Even if the Evil Bush Administration makes the cut permanent and throws in a free week at the Palm Beach Hilton for all its billionaire buddies, it can’t be responsible for both.

No, no, no! Says Paul. It’s not the fault of demographics – it can’t be! Not my beloved welfare state! It must be the Bush Administration, eager to starve the old people so their rich friends can use the bodies as mulch on their diamond ranches.

Never mind the rhetoric about retirement security; the real reason for the attack on Social Security is ideology. Here's what Edward Fuelner, president of the Heritage Foundation, wrote to supporters: ". . . today's policies are a product of the Great Society of the 1960s, which grew out of the New Deal of the 1930s, which was an assault on founding principles articulated in the 18th century. . . . Connecting the historical dots is no small task." For Great Society, read Medicare; for New Deal, read Social Security. And the real task is to connect the contemporary dots.

For Heritage is the intellectual engine driving today's conservative movement. The foundation's Web site proudly quotes Karl Rove: "We stole from every publication we could; we stole several key staff persons; we want to steal more of your ideas." Indeed, before Elaine Chao became secretary of labor — and hence a trustee of Social Security — she was a fellow at Heritage. And the influence of Heritage spreads far and wide, from employees like Virginia Thomas (wife of the Supreme Court justice) to the stable of columnists featured on its opinion site TownHall.com, most notably Ann Coulter ("We need to execute John Walker in order to physically intimidate liberals, by making them realize that they can be killed too").

Honey, get the torches -- the freemasons are poisoning the wells!

And it won't surprise readers of my last column to hear that Heritage was founded with financial backing from Joseph Coors and Richard Mellon Scaife.

But I digress. The important thing is to understand what's really going on here. The ideological powers behind the current administration want to do away with Social Security — not to offer retirees a better deal, but because they are opposed to the program in principle. Unfortunately, that's an argument that won't work in the political arena; Social Security is very popular. So the strategy they have adopted is to declare that the program is already dead, or nearly so. If the facts say, on the contrary, that Social Security is very much alive, the administration doesn't want to hear about it. And it doesn't want you to hear about it, either.

The important thing is not to address our demographic crisis. It is certainly not to look at the actual numbers and try to fix things.

No, the important thing is to make sure that we all know that Joseph Coors and Richard Mellon Scaife and their friends in the Bush Administration are trying to kick the old people out of their condos and make them live on the street so that all the billionaires can use them as slave labor in their yacht factories. The ones where Johnnie Walker Lindh’s dead body will be hung on the wall as a visible reminder of what can happen if you cross the Bush Administration.

Hell, I don't have to tell anyone, Democrat or Republican. You can add -- go look at the report. Then look at what Krugman says about it. You tell me whether he's being up front or lying through his teeth.

I’m reminded of another story. Actually a quote. From my economics textbook: “Economic value (wealth) is created when resources are moved from lower-valued to higher valued uses.”

I don’t know about you, but I’m sure glad Paul Krugman’s moved from writing books on international monetary theory to this.

From the desk of Jane Galt:

What is up with the

What is up with the WTC cough? I've been sitting across from the Pile for six months now, and given that my asthma already had a nice head start, if anyone's got it, it should be me. But my asthma's about what you would expect if I was sitting on any construction site, even one where only 100% organic dirt from dispossessed Third World workers was floating around in the air. I'm waiting for Michael Fumento or someone to give me the straight talk on what's going on.

From the desk of Mindles H. Dreck:

Keller Pegs the President

Bill Keller takes on President's character today in the Times today. First he deals with his smarts:

...to put it generously, Mr. Bush is not himself an intellectual. The sometimes skillful work of his speechwriters, which he sometimes delivers with conviction, cannot disguise the fact that he is not a deep thinker, a student of ideas, or even a very curious man. For all the spoon-fed portraits of the president exuding new gravitas since the war began, President Bush is still an easy man to take lightly.

Contrast this with Andrew Sullivan who is taking on the topic in his book club:

Some of the questions about Bush's intelligence arose from what can, I think, justly be called his poor brain-to-mouth coordination, and from his relative inelegance or simplicity in talking about policy. That's a yardstick that gets used, and it's probably a shallow one. But there are so many other yardsticks -- knowledge of one's own strengths and weaknesses, the ability to make accurate visceral judgments about people, the mental discipline it takes to keep an eye on the forest without getting distracted by the trees, a good and accurate sense of the atmosphere around you at a given time. And by these yardsticks, which are also incomplete and probably insufficient, Bush fares much better, I think.

Conclude what you will. I also found Bush came across as an imbecile during the campaign, but a flair for public speaking and ad-libbing really is only one form of intelligence. Any business person will tell you that many who are not smooth public speakers are extremely effective leaders within organizations.

Whether you like Reagan or not, he was an effective leader, and my memory of him as a speaker was actually similar to Bush. I often found it hard to pay attention to the "Great Communicator".

Clinton was great unscripted, but his speeches were horrible (and interminable). As a manager or leader, I always thought Clinton might have been taking on too much. Good leaders have a few clear priorities. Running around addressing every wrong, as demanded by the Times editorial pages, is a recipe for making no progress on many things. This is one of the great humiliations for those of us educated in elite Northeastern institutions. Our ability to juggle contrary ideas and B.S. our way through any confrontation is of little use, most of the time, in actually getting things done. It is salesmanship, not execution. At the risk of being criticized for your simplisme sometimes you have to hammer on a select few things, at the expense of others, in order to make them happen. That steel tariffs should even audition for that short list is a big disappointment.

Incidentally, one of the best public speakers I ever saw was Newt Gingrich. He had an amazing command of facts and a wonderful ability to use history in lively analogies. He is also very fast on his feet, and would not be tripped up in debates or press conferences. Much like Clinton, his most severe challenges came from his on flaws.

Keller's agenda, however, is not only to re-cast the standard "stupid W" line, but to extend it into something horribly sinister. By the end of this editorial, he has painted Bush as Senator Greg Stillson, the moralistic warmonger (played by Martin Sheen, of course) whose quest for the White House (and Armeggedon) is thwarted by the supernaturally prescient Christopher Walken in The Dead Zone:

"On tactics, he may be listening to Colin Powell," said Norman Podhoretz, the influential conservative editor and author. "But he's very clear as to his strategic objectives — not just to clean up Al Qaeda cells but to effect regime changes in six or seven countries and to create conditions which would lead to internal reform and modernization in the Islamic world."

Whether the president will, in the end, take us to a multitude of wars in the cause of liberating the world from evil, or whether the mission will lose some of its energy when the cost (literal and political) grows, I can't tell. But I think Mr. Podhoretz correctly reads the president's heart.

If you were hoping for the right-of-center moderate Mr. Bush campaigned as, or if you shared the patronizing view of the president as a good-natured boob tugged along by avuncular ideologues, this may strike you as chilling. But have no doubt, it is très sérieux.

A bit of ominous French at the end, non?. Forgive me for putting words in Keller's mouth, but I'm hearing "He has rope-a-doped us. He is capable of a master plan, and it is hegemony through warfare."

This is not an analytical piece, it's a trial balloon for the next characterization the Democrats will try to foist on the President, and it reminds me of the intentionally frightening behavioral extrapolation used to turn a philandering and dissembling President into some master criminal or "freedom's greatest enemy". All's fair in campaigns, I suppose, but why can't Keller let Terry McAuliffe come up with this stuff instead of using the NYT Op-Ed pages? And if he thinks Bush is an unbalanced and dangerous crusader, why won't he just say so, instead of leaving it hanging in the air? Perhaps because he doesn't really believe it himself.

There is, however, some interesting material in the article about "libertarian conservatives" becoming disenchanted with Bush over free trade, military tribunals, etc. Enough, in fact, to make me wonder if Keller has been dabbling in the blogosphere.

From the desk of Jane Galt:

Via OpinionJournal comes this tale

Via OpinionJournal comes this tale of a man who shot the armed men who were trying to rob the video store where his son worked. The police seem to be behaving with uncommon sense:

From his DeLand home Tuesday, Shockey recalled the events. The door burst open and two men rushed in. Ski masks covered their faces. One brandished a rifle and both were shouting violent, obscenity-laced threats."They made it clear that they would kill us," Shockey said. . . .

The gunman first pointed the rifle at Robert Shockey and then at an employee, identified only as Brian. While the rifle was pointed at the young employee, Shockey reached for the pistol tucked in his belt against the small of his back. He drew the weapon.

"I shouted, "Freeze!" he said. The man with the rifle--standing only about 6 feet away--turned and pointed it at Shockey. . . .

Detectives say Shockey fired at least two shots, hitting the gunman once in the throat and once in the chest. The man detectives say was an accomplice then reached for the rifle, so Shockey fired again, hitting him in the chest.

Robber James Franklin Wince died; his alleged accomplice, Darius Bennett, is charged with his murder. As for Shockley, "He is going to get the good-citizenship award," says a sheriff's department spokesman.

Chalk one up for moral order. Contrast this to Britain, where if you shoot an armed robber, you're at fault -- and watch them wonder why their crime rates are rising while ours fall.

From the desk of Jane Galt:

Eve Tushnet's Questions for Objectivists

Eve Tushnet's Questions for Objectivists is chock full of thorny philisophical arguments. There may not be any definitive answers -- but, oh, such interesting questions!

From the desk of Jane Galt:

This is extraordinarily neat. They're

This is extraordinarily neat. They're going to make a PBS show about three families trying to live in Montana just as families would have in the 1880's. I can't wait.

From the desk of Jane Galt:

I have to say, I

I have to say, I really like the Democrat's new bumper sticker. No, that's not a prelude to some sarcastic comment -- I just think it's a cute design. I may get one to stick on my bumper, just so I can watch my sister the social conservative hop up and down like the Energizer bunny on a handful of Crystal Meth -- but not unless they drop the price below $25.

Yes, that's right -- I'm still getting the Democratic party emails. Thanks to whatever kind soul signed me up for their mailing list. This week: Bush is trying to help pharmaceutical companies kill our babies, and the Evil Trent Lott is unfairly holding up Democratic proposals after the Dems bent over backwards to make sure that Grand Wizard Pickering got a fair hearing.

From the desk of Jane Galt:

Follow up to my post

Follow up to my post below: Are professional journalists paranoid about us because we're harsher to them than we are to each other? Must think about this. . .

From the desk of Jane Galt:

William Quick asks where all

William Quick asks where all the journalist angst about the Blogosphere is coming from. Well, the vanity answer is that we're so darn challenging and fresh that those sad old hacks feel threatened. But I think there might be a simpler reason: Google. Google loves us. It can't get enough of us. And so when those journalists Google themselves, guess who pops up early and often, making fun of their deathless prose? Because we form so much of the criticism they see, we come to seem much more threatening than we really are, though much less so than most of us would probably like to be.

From the desk of Jane Galt:

One of the core reasons

One of the core reasons that governments and taxation come into being is what’s known as the Free Rider Problem. As the name implies, the Free Rider Problem comes into being when it is impossible to keep others from enjoying the benefits of a public good, which tempts them to try to get by without paying as much as that item is worth to them. The classic example of this is the military. We all want a safe country; however, once the borders are defended, it’s impossible to keep everyone inside those borders from enjoying the benefits of the added security – we can’t issue those who pay for the defense a special tag that tells enemy soldiers not to shoot them. We have to tax to pay for this, because otherwise people will be tempted to free ride on the generosity of others, and we’ll all end up with less military than we want.

Another classic example of the free rider problem is this weblog. You’ll note it has a tip jar on the side. Yet, curiously, not everyone uses it. Just remember – if you’re not a part of the solution, you’re part of the problem.

Anyway. Europe’s public health system has been free riding on America’s for years. (Even if this is old ground for you, bear with me – I’m going somewhere with this, and not just to another telling point about European perfidy, either) Because the government is pretty much the sole purchaser in many or most European nations, they exert enormous pricing pressure on pharmaceuticals and other medical technology. Faced with the choice of offering European countries sweetheart deals or selling nothing there at all, providers end up selling their wares in Europe at prices quite close to their Marginal Cost, which is to say the cost of the extra stuff, from electricity to raw materials, that it takes to produce one additional unit of product.

Lefties in America have been screaming about this for years – screaming, that is, that we are allowing our evil Pharmaceutical Giants to charge outrageous prices for their products, when prices in Europe show that the actual price of the product is really much lower.

If you haven’t picked out the problem with this argument already, it’s that the lefties have forgotten one little thing: the ENORMOUS cost of developing drugs. The average drug has to make $500 million to earn back all the R&D costs, not only for itself but for the 999 other compounds that didn’t work.

This R&D is a Fixed Cost -- it doesn’t change depending on how much product you produce. Because of this, (most) drugs have a high fixed cost, but a low marginal cost. This is what makes it possible for drug companies to sell to Europe at low prices near their marginal cost. Anything they make above marginal cost is essentially gravy.

But they’ve got to make up that R&D cost somewhere; otherwise, shareholders will pull out their money and sink it something more profitable – like changing their money into singles and using it to economize on toilet paper. And guess where they get that money for the research costs? That’s right – right here in the good old USA. You’re paying through the nose for your blood pressure meds so that the French can have cheap Viagra. They’re not only jamming us with the “Oops, I missed the schoolbus” school of military operations – they’re getting lucky on your dime.

So the next time someone tells you that nationalized health care will solve our problems, and points to lower health care costs elsewhere, ask what they think those costs would look like if we weren’t subsidizing their drugs. Prepare for a drooling stare – or if you’re sparring with someone who’s been through this wringer before, a misinformed soundbite, of which the speaker understands not a word, about the “absurdly high” Return on Assets (ROA) in the pharmaceutical industry.

ROA is the percentage of the value of a firm's assets that it earns back every year. To take a simple example: if I have a bakery, with equipment valued at $100, and I make $10 a year, my ROA is $10/$100 or 10%. Clear? In fact, it’s true that pharmaceutical companies have an absurd ROA, but the reason isn’t that the pirates of the boardroom are greedily grabbing all our money so they can throw it all on that gazillion-foot table and roll around in it like Demi Moore in Indecent Proposal (and if you’ve ever seen what the average corporate boardmember looks like, you’ll be awfully glad they don’t). The reason is that the main assets of the pharmaceutical companies, their patents, are not counted as assets under the rules of financial accounting, unless they’ve been purchased from another firm (there are good reasons for not counting the patents, but it does skew the books). This makes the assets on the balance sheet of your average pharma company much lower than they actually are. Let’s imagine that for some reason, I only show $10 worth of ovens and such on the bakery’s books -- suddenly my ROA is $10/$10, or 100%. Lowering the asset total makes a huge difference.

But I digress. What I meant to talk about, when I began this, is the broader question that I have been pondering over the last few days: is Europe free-riding on America’s growth?

One of the mysteries, after all, for free marketeers, is why Europe’s growth isn’t much lower than it is. History teaches, after all, that excessively regulated societies are generally stagnant, yet Europe has managed respectable, if not stellar, growth.

Now, there are three basic ways that you can increase growth in an economy: you can increase one of the inputs, either capital or labor, or you can increase the productivity of your inputs. In the demographically declining European nations, labor isn’t increasing at all -- in fact, often the labor force is getting smaller, for reasons I discussed elsewhere. Capital flows are, but far more capital pours into the US than into Europe – that’s one of the prime reasons for the decline of the Euro against the dollar. And then we get to productivity.

Productivity isn’t as high in most European nations as it in the US. And though it’s been growing, it hasn’t been growing as fast as that in the US, leading to a relative decline in European living standards against those in America. Now, broadly, productivity growth can come from two places: technology, and structural changes in the economy. Most economists, outside the French “What is the socially just thing for my numbers to say?” school, agree that the structural changes in the European economies have been, currency integration aside, mostly in the wrong direction. So we have to look to technological innovation for productivity growth. And where does that come from, boys and girls?

That’s right – the lion’s share of the original invention comes from the US, with the price and engineering refinements emerging mostly from Asia. Now, technology doesn’t have quite the same free rider problem, although the EU is a little more generous with patent violations than we are. But in a broader sense, they are free riding on our entrepreneurial economy. We bear the social costs of creative destruction, and get all the benefits; they get some of the benefits, without the costs. Yet the relationship is fundamentally parasitic: we could get along quite well in every sense without Europe (we would not be better off; trade, after all, is beneficial to all parties, and Europe does do some innovation. But we would still cruise along quite nicely without them.), while without more vibrant economies to export innovation to it, Europe would stagnate or even experience absolute decline.

So the next time one of your friends starts waxing lyrical about how much better life would be if America were more like Europe, tell them they have to trade in their PC for a Minitel before they’re allowed to talk about it.

From the desk of Jane Galt:

Looks like Louis Rukeyser will

Looks like Louis Rukeyser will finally be exiting stage left from Wall Street Week. I confess that I've never cared much for his corpse-like pallor or monatonic delivery, and his guests seem to confirm the efficient markets theory that says no one beats the market over the long run. So I'm not too sad -- but my mother, like the millions of her generation who've watched the pallid prophet religiously, is going to be bereft.

From the desk of Jane Galt:

Suggested campaign slogans from Eve

Suggested campaign slogans from Eve Tushnet made me laugh:

THE DEMOCRATIC PARTY. Asking what your country can do for you.
Don't settle for the market wage.

THE REPUBLICAN PARTY. Because we have to have rules.
Remember Communism? Didn't that suck?

Go read them all.

From the desk of Jane Galt:

Go read this bit by

Go read this bit by Ken Goldstein. It's funny.

From the desk of Jane Galt:

Andrew Olmstead reacts to the

Andrew Olmstead reacts to the much-blogged Jonah Goldberg column calling for a "return to horror" by posting a site I haven't seen for a while, but should have. Every one of us should watch this movie ever so often, so that we don't forget what this War on Terror stuff is really all about.

Excercise for the class: whatever your opinion on Israel -- watch that movie, and then ask yourself if you'd take whatever solution you think the other side should accept.

From the desk of Jane Galt:

I love James Lileks, except

I love James Lileks, except that pieces like this from the Michael Moore screed give me an inferiority complex so massive that the only way I can work it out is by becoming sheriff of a small Southern town on television and using my power to bullyrag and batter until all who know me cower at the sight of my looming shadow:

There’s Moore in a nutshell. We have “the masses,” that big doughy heap of sodden proles, heads bent from their daily lashing by The Man, wondering if they’ll have enough left over after they’ve paid off Consolidated Coal and Gruel so they can pool pennies with the rest of the tenants of State Housing Block 432 and buy a copy of Moore’s book - they say a light shines from the pages when you open it! Brother Sam was reading it at the Borders before the police beat him with clubs for browsing, and now he can cure your chilblains just by describing the book’s typeface!

I'll get you one day, Mr. Lileks. Then we'll see who doesn't get asked to the Winter Wonderland dance . . .

From the desk of Mindles H. Dreck:

See you in Montana

If this idea ever gets anywhere, I'm buying a bunch of guns and moving to a ranch out west. Galt's Gulch, with broadband.

From the desk of Jane Galt:

2000 Elections Continued I'm about

2000 Elections Continued

I'm about 2/3 of the way through the legal essays (I'm reading two books: one in which insiders discuss how they conducted the campaign and post-election campaign; the other a compendium of legal essays on the Florida dispute). So far, the most decisive point I've gleaned is that legal writing is harder to understand than I thought.

My reading strategy, when I attack a topic I don't understand very well, is to read a bunch of books on the topic and attempt to absorb, as if by osmosis, what I'd call the operating environment of the topic. It's hard to read eighteenth century literature until you've read enough of it that you can occupy the world of the work without conscious effort; the same holds true of economics, or technical writing, or anything else more difficult than a regency romance -- and even then, in 150 years or so people will be laboring mightily to immerse themselves in the fantasy world of the 20th century American female.

Right now I've got five or six books I'm reading on various legal topics, and while I don't think I'm going to turn into a legal expert, I'm hoping that at the end I'll be sufficiently comfortable in the legal operating environment to comfortably assimilate arguments as they're made by legal academics. (My, that sounds arrogant, doesn't it? I'm not suggesting that I'll be able to correctly resolve them -- just wrassle 'em a little).

So it's slow going for me -- I'm considerably under four pages a minute, since I have to keep re-reading. But I have gleaned some interesting points. One of the most interesting so far is just how badly Gore shot himself in the foot with his strategy. (Don't think I started this to bash on Gore. But Gore had the more active, and of course, less successful, strategy in the Florida dispute, so it lends itself more readily to commentary.)

I'm about to get shouted at again, but I think that it's obvious to everyone, no matter what you think of the merits of the position, that each side in the dispute took the position most likely to benefit them. Bush, of course, wanted the recounts stopped. Gore wanted them conducted in such a way as to get many votes for him, while systematically excluding counties where either the Democratic party did not control the counting process, or Republicans were the majority of the voters, and therefore likely to be the majority of the votes gained from any recount. The Florida Supreme Court's first decision told Gore, in effect, to go ahead. This made it extremely hard for honest observers to argue that the Florida court was not being nakedly partisan.

It also made it extremely hard for the Supreme Court to ignore what was going on. If Gore had requested a statewide recount, he not only might have won (this contention is apparently not as clear as the New York Times would have you believe), but also would probably have slid under the radar of the Supreme Court -- no matter how partisan you think the justices were, they would not have reversed a ruling just because it favored Gore. The Gore team instead chose to contest only in counties where it thought it might win. But rationally, this couldn't stand. Other than Palm Beach, there weren't specific allegations of error in other counties; counting only where it would glean for one candidate was a naked attempt to alter the totals in the state. It undercut Gore's argument about "Counting every vote" in the public, and made it almost certain that the Court would put a stop to it.

That first ruling from the Florida Court also hurt the Gore campaign in extending the certification deadline to November 26th -- because it put off the Supreme Court review until there was not time to conduct the statewide recount that the Supreme Court probably would have had to accept. Recall that the Court ruled, 7-2, that the recount as formulated by the 2nd Florida ruling, was unconstitutional. With good reason; the way the count had been conducted, and the standards were formulated, favored Democratic votes over Republican votes. The 5-4 split was not over whether the recount was acceptable -- it wasn't -- but whether there was time to send it back to fashion a uniform standard and perform a recount. Democrats understandably regret that the recount wasn't attempted, but practically speaking, the outcome would have been the same, because the statewide recount couldn't have been completed under any new standard, and 7 justices of the Supreme Court had said that you couldn't do a partial recount. So while it might have been better for the Court to send it back, ultimately it was a moot point.

If, on the other hand, Gore had asked for a statewide count, or the Florida court had ordered one with uniform standards, the Supreme Court would have passed. Enough votes might have been found to throw the contest to Congress, and some legislators might have found it impossible to vote against the popular vote. No one knows what would have happened -- but it's clear that Gore threw away his best shot at the presidency by adopting the cynical, "pragmatic" approach.

From the desk of Mindles H. Dreck:

Estrogenron

Maureen Dowd penned the following yesterday:

A monsoon of sickening stories lately illustrates how twisted societies become when women are either never seen, dismissed as second-class citizens or occluded by testosterone: the church subsidizing pedophilia; the Afghan warlords' resumption of pedophilia; the Taliban obliteration of women; the brotherhood of Al Qaeda and Mohamed Atta's mysogynistic funeral instructions; the implosion of the macho Enron Ponzi scheme; the repression of women, even American servicewomen, by our allies the Saudis. (emphasis mine)

Regarding the civilizing and fraud-preventing influence of women on business, Maureen Dowd, may I introduce you to the story of Warnaco?

Do we really need to characterize women as all-powerful agents for good in order to condemn discrimination against them? That's a bit of a setup, don't you think?

When I was adding the italics tags around the phrase about Enron, I actually typed "/enron" in the second tag. The NYTimes pundits need an "enron" tag, so they can insert the overheated Enron analogy into their thrice weekly columns with a bit less strain on their worried fingers. It will make holding the frappacinos easier.

From the desk of Mindles H. Dreck:

Department of Prognostications Department

Here's a quote from Harry S. Dent's The Great Boom Ahead, which was published in 1993:

New forecasting tools tell of a coming era of prosperity with the Dow reaching 8500 by 2007, mortgage rates falling to 5 to 6 percent, the taming of inflation and the resurgence of America as the premier global economic superpower

Today's dow: 10,501
mortgages: 6.64%
Inflation: miniscule
America: what he said

So, um, can we just take the next five years off?

I originally wrote this in Megan's comment threads, but it tickles my funny bone as well as my valuation bone, and I have no time for a more substantial post tonight. New Carpeting!

From the desk of Jane Galt:

Happy Spring! Hard though it

Happy Spring!

Hard though it may be to feel on this cold, wet, and thoroughly miserable day, it is the first of Spring. And as you know, one of the many Jane Galt mottoes is "A Poem for Every Occasion, No Matter How Slight":

Earliest Spring TOSSING his mane of snows in wildest eddies and tangles, Lion-like March cometh in, hoarse, with tempestuous breath, Through all the moaning chimneys, and 'thwart all the hollows and angles Round the shuddering house, threating of winter and death. But in my heart I feel the life of the wood and the meadow Thrilling the pulses that own kindred with fibres that lift Bud and blade to the sunward, within the inscrutable shadow, Deep in the oak's chill core, under the gathering drift. Nay, to earth's life in mine some prescience, or dream, or desire (How shall I name it aright?) comes for a moment and goes— Rapture of life ineffable, perfect—as if in the brier, Leafless there by my door, trembled a sense of the rose.

--- William Dean Howells

From the desk of Jane Galt:

Department of Non-Leading Indicators All

Department of Non-Leading Indicators

All right, I'm now going to shamelessly plug for a cause near and dear to my heart: the University of Chicago GSB Follies, a show put on by the grad students. I was one of the producers last year, bringing the world such memorable hits as "Down, down, down went the Nasdaq" (to the tune of "The Trolley Song" from Meet Me in St. Louis) and "Oops! We Admitted All Men" (to the tune of that Brittany Spears Oops song that I hate -- but ours was funny).

It costs a surprising amount to put on a show, especially when the University considers the business school students to be a lower form of life and charges for the tiniest of services. Usually this is made up in corporate contributions, but due to the recession, contributions are down 95%. The show is threatened with death after 25 years. So if you've got a buck or two to spare, and you want to put a smile on the face of some students who are $100,000 in hock (and 60% of whom are unemployed), click through this link and donate. I imagine few of you will -- but the Chicago alums had better, or I'm going to know the reason why. And the rest of you would be giving a little rest to some very stressed students. Plus if you live in the area, you could think about buying tickets to what actually is a pretty good show, even if you don't go to the business school.

Click Here to Donate!

From the desk of Jane Galt:

Dr. Weevil says that the

Dr. Weevil says that the solution to the perils of incumbents using computers to draw ironclad gerrymanders is using computers -- to draw districts using objective criteria that don't include race, voting habits, or where current incumbents happen to live.

I think it's a great idea. Those who've been following my opinion on the 2000 elections know that I am extremely suspicious of partisans on either side fudging the criteria we use to decide elections in order to benefit one side or the other. Set up the criteria in advance, proof it against interference by either party when their ox gets gored, and let the thing run. Sounds like a huge improvement on the current system -- which is why we can be sure it'll never pass.

From the desk of Jane Galt:

Looks like another high tech

Looks like another high tech worker is leaving Canada for less regulated climes.

From the desk of Jane Galt:

Now go read this interesting

Now go read this interesting dialogue on the effects that the demise of Blue Sky laws had on the Internet bubble.

From the desk of Jane Galt:

I'm sure most of you

I'm sure most of you already read the National Review Online -- but make sure you don't miss this fascinating article on how firefighters may be putting themselves out of business (that's a good thing).

From the desk of Jane Galt:

Forget minimum wage . .

Forget minimum wage . . . how about a "living profit" program!

From the desk of Jane Galt:

Spam of the Day Invites

Spam of the Day

Invites me, Janegalt, to meet other singles just like me! I seriously doubt that there are other singles just like me. And if there are, who would want to meet them?

From the desk of Jane Galt:

We're collecting emergency numbers from

We're collecting emergency numbers from the workers today. One guy came in here and said he didn't have a number to give us. Parents? Raised in an orphanage. Girlfriend? Nope. Exasperated, the girl taking the forms asked him "Well, who would care if you died or got hurt?" (She didn't say it in a nasty way; he was dithering). He looked doubtful, then said, "Well, I guess I could get you the number for my next door neighbor."

Note to self: be grateful for what you have.

From the desk of Jane Galt:

Department of Non-Leading Indicators Goldman

Department of Non-Leading Indicators

Goldman says it's laying off more people, and other banks expect to follow suit:

Guy Moszkowski, a financial-services analyst with Salomon Smith Barney, said that while Goldman is among the last firms to actually reduce its head count, it is almost certain most brokerage houses will continue to make cuts this year. "I would say the staffing picture isn't going to turn up unless there's a dramatic pickup in business," he added, noting the woes that now plague many firms will stall the recovery.

Wall Street has so far this year logged $76.2 billion in merger and acquisition business, less than half of the $167.9 billion it had done this time last year. "It's been a real anemic quarter, and it's still waiting to be resuscitated," says Richard Peterson, chief market strategist at Thomson Financial in New York.

Equity-related activity, including initial public offerings, is doing better, up about 3% this year to date to $46.5 billion, according to Thomson, although such activity still is sharply down from the same period in 2000. The issuance of U.S. corporate debt has slipped 4% to $156.4 billion.

Why is this significant? Well, aside from the number of newly-minted MBAs this is going to unleash on a previously unsuspecting public, it means that most of the activity in the market reflects changes in the prices of existing assets, rather than new investment. Now consider this: the Dow hit a high for the year yesterday, pulling closer to the all-time high for the index.

A little note on stock valuation: at a (very) simple level, the valuation of a stock should reflect

1) The probable future value of its earnings which are hard to estimate accurately beyond the fairly short term, but which we can derive by taking future earnings and multiplying by an estimated growth rate.
2) A discount for inflation Inflation makes a dollar today worth more than the same dollar a year from now; at 10% inflation, for example, that Year One dollar only has the purchasing power of $9.09 in today's dollars. There is a formula for discounting future earnings by the expected inflation rate. Because of this, the farther out earnings are, the less they affect the value of the stock.
3) Adjustment for risk You should be willing to pay less for $100 worth of stock than you are for $100 worth of not-too-tisky debt, because the company might go belly up and you'd be last in line for a payout.

Other factors of course intrude, but broadly, the price of stocks should fluctuate around a trendline reflecting investors best assessment of that risk-adjusted, inflation discounted cash flow value. This is simple, of course (I'm sure the professionals, if such are reading my little effort, are cringing at my simplification) but broadly true.

Now, there aren't many deals being done, which means that there isn't much public investment in new money-making schemes, either for existing companies or new companies going public. What deals are being done seem to be being financed by debt. So any increase in the value of the market should reflect an increase in investors assessment of the earnings prospects of these stocks. So lets look at our three criteria:

1) Are earnings prospects higher than they were a year ago? Maybe. Then we were heading into a recession, now we seem to be heading out. But valuations are approaching the peaks. Is a realistic assessment of earnings prospects really as high as the rosy evaluations of the boom's peak? -- especially with the War on Terrorism taking assets from wealth-producing uses and moving them to assets that are destroyed as soon as they're used? (This is not to say that we shouldn't do this -- only that the removal of resources from the wealth-creating sectors of society should be reflected in our estimates of future growth). I think we're also going to see a productivity slowdown because of increased security, particularly airport security. So I don't think that we can look to earnings growth for an explanation.

2) Is inflation permanently lower? Remember that after a year at 10% inflation, a Year One dollar only has the purchasing power of $9.09 of today's dollars. However, if you lower the inflation to 5%, it's worth $9.52. 10 years out, the difference is even more powerful: $3.85 at 10%, $6.13 at 5%. So lowering inflation can affect prices powerfully.

The problem is that when you lower inflation, you also have to lower your expectations for future cash flows, because some of those flows come from higher prices you were able to charge due to inflation. On the other hand, you also have lower interest rates on your debt, which raises your earnings. . . the point being that it's not a simple calculation. For our purposes, it's enough to say that lowering inflation has positive growth effects. But expectations for inflation were already low last year. Today's low interest rates reflect the Fed's rate cutting (or in other words, the price of money) not the long term inflation expectations for the economy. So I don't think we can look to inflation expectations either.

3) Has the risk proposition changed since last year? Three words: Osama Bin Laden. I don't think so.

So what this tells us is, in my opinion, that the current markets reflect investors churning securities at prices that reflect still-unrealistic expectations of the economy, while they wait for a take-off that I don't think will come short of further speculative boom. Partly, I think this has to do with who's in the market: baby boomers who need equity appreciation to retire. They can't cash out at a loss (or think they can't) because that means trading in the condo in Florida for an apartment in Minneapolis and 20 hours a week at the A&P. Because they invest in both stocks, and mutual funds that have to invest whatever the boomers pump in, they're setting a sort of floor on prices. While stability sounds like a fine thing, there are many problems. Among the ones I've heard floated is that this may price out young investors; that it prevents new equity investment by setting a floor at which it doesn't make sense to do IPO's; that it could be setting the stage for a period like the 20 years prior to 1982, when real returns were negative; and of course, that when those boomers do cash out the crash will be disastrous. The interesting question is how long boomers will watch the market stagnate before they start looking for other options.

That's not the only explanation, of course -- anyone who wants to tell you that there's only one explanation for anything that happens in the market is trying to sell you something. Nor does it mean you shouldn't invest in equities. Current idea (worth approximately what you pay for it) if this broad stasis in the markets continues, start looking into whatever stock-picking strategies made money in the 60's and 70's. Those who do learn from history may be doomed to repeat it anyway.

From the desk of Mindles H. Dreck:

'Bias' Refuted; dogs and cats, etc.

On Fresh Air today, Geoff Nunberg debunked the label usage allegations in Bias. Specifically, he has run Nexis searches that demonstrate a bias towards using the "Liberal" label MORE often than "conservative".

He has posted his results in a web page, available here.

I said when I read Goldberg's book that it was amusing but lacked substance. Unfortunately, it has come to stand for many broader concerns about the major newspapers and networks, and its lack of substance has become a liability. Bias will now be the straw man to avert any discussion about the major papers' leanings - even their editorial biases, I'm afraid.

UPDATE: Richard Bennett recalls Patrick Ruffini's similar research on the terms "right wing" and "left wing" with a very different conclusion. Unfortunately, people's perceptions of which terms are loaded are different, so no amount of statistics will prove or disprove the point. However, Bias looks bad either way because Goldberg didn't even attempt Nunberg or Ruffini's level of analysis.

Since Bias is the poster boy for the argument now, we will be hearing the term "discredited" within five words of "Bernard Goldberg" or arguments of "Liberal Bias". Run that Nexis search in a few weeks, guys.

SECOND UPDATE: A commenter introduced me to his analysis on Free Republic, backing Goldberg. There are many more. For instance, Erin Shosteck for National Journal, Robert McFarland and Allan Levite. These latter studies focus on words like "extremism" and "attack" connected to party or left-right labels.

From the desk of Jane Galt:

Can't seem to find the

Can't seem to find the post (may have been eaten by blogger problems) but I did say at one point that the Michael Moore book signing imbroglio was a symptom of his tendency to view incidents which tend to prove his cosmic insignifigance in the lives of most Americans as proof instead of a vast conspiracy devoted to keeping Michael Moore down. Via Matt Welch comes an article showing that I was right. You (should have) heard it here first!

From the desk of Jane Galt:

Turns out that Orson Scott

Turns out that Orson Scott Card isn't just damn fine novelist. . . he's also a clearheaded, persuasive thinker on global issues like piece in Israel and the escalating cycle of Geraldo Rivera silliness.

From the desk of Jane Galt:

Stephen Green, a.k.a. the Vodkapundit,

Stephen Green, a.k.a. the Vodkapundit, has a moving tribute to the smokes of yesteryear on the occasion of Hawkgirl's decision to quit.

I miss that first morning smoke with a hot cup of coffee. That Camel after a big dinner, when there's still some Cabernet left in the glass. And did I mention those after-sex cigarettes? Do you know what non-smokers do after sex? We lay there and cuddle. Let me tell you, that is not all it's cracked up to be.

I think the hardest thing about quitting smoking was not the nicotine withdrawal (no more painful than a middling tough diet) -- it's that most of the best things that ever happened to me happened when I had a cigarette in my hand. It's not any particular time of day that I miss smoking, it's the moments: the perfect evening dress, waiting on a windy evening in autumn with your coat wrapped tight around you, and most of all the end of a hot summer afternoon as day trickles into dusk . . . they have lost some of their luster without that little piece of fire cupped in your hand. It's been three years since I had a cigarette and I still can't pass a certain kind of stoop on a certain kind of street without thinking, God, I'd like to stop there and smoke awhile.

It's a hard thing to quit after ten years. When you stop, you're not just bidding farewell to contemptuous sniffs and a dry hack; you're letting go of that Dash-and-Lilly claim on immortality. So before you quit, Emily, have a smoke for us. And for all those who have reluctantly relinquished their favorite vices, or perhaps didn't give vice enough of a chance, I hereby command you to go and read this most excellent book. It's a compilation of works by a number of damn fine writers, including Mark Twain, Charles Bukowski, Henry Miller, Vladimir Nabokov, Spalding Gray, and Dorothy Parker, that offers tribute to the peccadilloes we regret.

From the desk of Jane Galt:

Looks like HP's going to

Looks like HP's going to get to merge with Compaq after all. The technology market of the aughts is going to look more like Clash of the Titans than The New Economy.

What does Jane Galt think? Well, if you've been reading, you know that Jane Galt thinks most mergers don't work very well. This one isn't going to establish a monopoly -- there's still Dell out there. Cost savings are often hard to realize, and those that are usually get eaten by the merger costs. No cospecialized assets here. Overall, five gets you seven we see a decline in shareholder value over the next two years. A good indication that the market suspects the same thing is that the stock has followed the usual pattern of stocks after a merger is announced: the buyer (HP) is down, while the seller (Compaq) is up, indicating that the market expects the buyer to get the worst of the deal while the Compaq shareholders walk away with a nice windfall.

From the desk of Jane Galt:

Want to know what really

Want to know what really launched a thousand ships? Poison Gas.

From the desk of Jane Galt:

Story Hour

So let’s imagine that you have a small business. Perhaps you sell annuities to the many employees of the local fur-bearing trout farms. Let’s say that you recently inherited this business from your father, who started it during the great Fur-Bearing Trout Boom of the 60’s, when women everywhere were wrapping themselves head-to-toe in lustrous trout pelts, and the number of farms in the area quintupled.

For years, this has been a great business. You take in a lot of cash; you pay out a little money to the retired trout skinners and pelt-tanners. Your family’s fortunes wax along with those of the trout farms, which are growing like wildfire. Everything has been so good, in fact, that your father several times raised the promised annuity, to the general acclaim of all. Prosperity seems assured.

Then one day, perhaps a day much like today, you notice that some of the trout-skinners are getting a little long in the tooth. Not quite ready for the glue factory, perhaps, but certainly no longer spring chickens. It occurs to you that someday soon, they are going to expect to live off those annuities you’ve been selling.

As you walk among the green fields and gently burbling streams of the farms, you notice something else: there are a lot of old workers, but not so many young ones. When you gently query one of the farm owners about this, he explains that the pelt business isn’t what it used to be; many people no longer care for trout fur, and have switched to Jackalope Skin jackets, hats, and toaster cozies. Moreover, to stay competitive the farms have switched to machinery for many of the tasks that used to be done by hand The labor force isn’t growing anymore.

Back at the annuity building, you do a little calculating. While you’ve been coasting along briskly when there were a few retirees supported by a lot of workers, it looks like in about ten years there are going to be almost as many retirees as workers. The annuity business suddenly doesn’t look so profitable. A quick calculation indicates that over the next fifty years, you’re going to have to pay out $13 million more than you’re taking in.

If you haven’t guessed yet, I’m talking about Social Security. Now, let’s see where this goes.

In a panic, you ask your Chief Operating Officer and your CFO to give you plans to deal with this crisis.

Your COO, who we’ll call Al, goes first. He suggests paying down all of the debt you’ve accumulated, mostly in the form of loans from the Trout Valley Bank, which holds all the deposits for the trout workers. He also suggests offering more generous benefits to attract new customers and bring in more cash.

Your CFO points out that offering more benefits is hardly the recipe for solvency.

The COO retorts that people need the benefits, and anyway, the important thing is paying down your debt.

Your CFO points out that since the present value of your debt is less than a quarter of the present value of the annuities you owe payments on, it’s not mathematically possible for this to solve the crisis.

The COO stutters.

The CFO points out that the only thing paying down the debt is good for is lowering interest expenses a little, producing a trivial delay in the onset of the crisis, but making it easier to borrow money in the future. If there’s anyone to borrow money from, that is, since all the money for the loans comes from the trout skinners and pelt-tanners who will be living off their savings, not making new loans.

Your COO goes into the corner and sulks. However, the non-financial departments think that his idea sounds swell, since it doesn’t involve cutting benefits.

The CFO presents his idea: do a partial liquidation. Hand some money back to the customers both by reducing rates, and opening a mutual fund arm of the annuity business where part of their payments can be funneled. The mutual funds can channel money into productive investments, like buying Jackalope ranches, and by the time the future arrives, hopefully there will be enough money to pay off the annuity holders; at the very least, one hopes they’ll have something to live on, what with the Jackalope ranches.

The COO comes out of the corner to point out that if we give the money back to the customers, it will be even harder to pay them off when the time comes.

The CFO rejoinders that overhead expenses are out of control, largely because of your brother-in-law Tom, the sales manager, who lards every budget with gifts for his friends in the form of “investments” like, oh, say, light rail systems for their backyards. Cutting the budget will funnel money away from chump choo-choos into whatever more productive investments the people can make for themselves.

The COO points out that this will leave the firm incredibly over budget. Ands anyway, we can always do that later. Like, after the COO retires.

The CFO points out that it’s going to be hard to make productive investments after the bailiffs have carted away all the furniture and equipment.

The COO punches him.

Meanwhile, a guy from payroll asks why, since the firm is bankrupt, you don’t just say so and give people as much of their money back as is possible before it’s too late.

The COO and the CFO both punch him. Everyone else goes out for drinks.

Perhaps you can see now why the Bush plan is better, even though it’s inadequate. It at least tries to address the problem; the Gore plan to “fix” things by retiring a little 5% debt is like trying to save for your kid’s education by prepaying your mortgage. The Bush plan is partial, and didn’t stand up like a man and say “some of you aren’t going to get paid.” But at least the hope was that that 2% would ease things a bit for those who got the short end of the stick. Al Gore’s plan was to tell everyone everything was okay so that brother-in-law Tom wouldn’t have to give up his friends. (Would you be friends with him unless he paid you?)

Still a better plan would be the Chilean radical surgery approach: guarantee current benefits for those over 55 and move everyone else towards defined-contribution plans. Unfortunately, it may well be that you need a dictatorship to accomplish it. Anyway, hopefully you now understand a little about why I get so $#%! mad when Paul Krugman pretends that the Democrats have a better Social Security plan.

It’s not that he disagrees with me. It’s that it’s bad economics.

From the desk of Jane Galt:

ChomskyWatch Seems friend Noam (no

ChomskyWatch

Seems friend Noam (no relation to the ex-boy) will be speaking at USF today. Here's a tasty quote to start the blood pressure off.

Chomsky, the noted MIT linguistics professor who is best known for his scathing critiques of U.S. foreign policy, says the United States itself was practicing terrorism when it bombed Afghanistan and forced the Taliban from power. And it was terrorism, Chomsky says, when President Bush -- without publicly providing conclusive proof, and without going to an international court of law -- decided he wanted Osama bin Laden "dead or alive."

"By the U.S. definition, those are textbook illustrations of international terrorism, which is the use of force or violence to attain political ends (and) the targeting of civilians through intimidation and fear," Chomsky said in a weekend phone interview from his Massachusetts home, before flying to the Bay Area to make a weeklong series of talks.

Yup, Noam, that's what pissed us off. It's not the deliberate targeting of civilians (although apparently, Chomsky thinks that deliberate targeting isn't when civilians are the only people you're going after; it's when you target a regime that builds military targets near housing projects). No, the reason we're mad is that Bin Laden didn't visit an International Court of Law first.

Question for the legalists out there: does that make the 72 virgins Fruit of the Poison Tree?

From the desk of Mindles H. Dreck:

OH FOR CRYING OUT LOUD!

Half brother says bin Laden is alive and well:

"We grew up together in the same house," he said. "Osama is known for being a simple person, very merciful, a very soft heart. It's impossible that anyone would sit with him and not like him or get bored. Frankly, Osama is very close to the heart and very popular."

...Whatever his brother's fate, Sheikh Ahmad said he would like to portray his brother should Hollywood ever make a movie about him.

Attempting to reconcile the Sheikh's comments renders the term 'hypocrisy' utterly inadequate. The Onion couldn't have written this.

From the desk of Jane Galt:

Via Kevin Holtzberry comes this

Via Kevin Holtzberry comes this hilarious tale of a young man apparently too stupid to live, who when he meets a girl he likes, immediately rushes to the public weblog he operates under his own name to record his hopes for sexual consummation, a practice not helped by his previously recorded inadequacies in that area. But the remedy offered is a little extreme.

"A little humiliated," she said. "I mean, what if people realize I went out with this loser?"

"It's not like you were married for five years and then discovered it."

"I suppose," she said. "There should be a law about these people with web diaries or they should all wear identifying clothing or something, so that innocent bystanders who don't need some perverse kind of public fame can know to steer clear."

"Your story is safe with me," I said. Joe, or Joel, or whatever he wants to call himself, shall live in perpetuity in the Mercury archives. If he thinks he's inadequate now...

This is how it starts: the special blogger patch. . . then the ghettos. . . and finally the camps. When they came for the software companies I said nothing, because I was not a software company. . . when they came for the fair use pirates, I said nothing, because I did not use content. . . when they came for the code makers, I said nothing, because I had nothing to hide. . . and when they came for me, there was no one left to speak.

From the desk of Mindles H. Dreck:

Feeling Vulgar in the Colonies

Several bloggers have picked up on Terror's march backwards , a Guardian column with a Rall-ish sense of humor about WTC victims. The article is famous for such whimsical gems as this:

Less than two weeks into the bombing campaign, the US admits its new range of smart weapons may be too intelligent. Sources say the $7m Supersophic missiles have a range of only 50 metres because less than a second after launch the onboard computer has worked out that violence only leads to more violence and that all war is futile. Realising there's no point any more, the weapon either deliberately crashes itself into a beautiful woman or flies back home to America to spend the rest of its days buzzing round a farm. The Pentagon orders that, from now on, missiles must be 'no more intelligent than a steelworker'.

I found it interesting to note, however, that everybody hates Hollywood (except that they love it):

Hosting the film Baftas, Stephen Fry delivers an unspeakably trite and fucked-up heap of shit urging film makers to 'keep telling stories' in the face of world events - as if films make any fucking difference to anything, least of all the advancement of peace, as if in fact they don't more often promote, through piss like Black Hawk Down, the very surfeit of self-regarding superiority that makes the American West so unpopular in the first place. Naturally the audience of actors and industry luvvies spontaneously applaud like the blinkered, solipsistic, self-congratulating cunts they are.

Nice language for a major paper. It's quite an achievement to do condescending and common at the same time. On the other hand, it must be lonely when everyone you know is a "stupid steelworker" or a "self-congratulating cunt."

James Lileks speaks of "being mocked by those whose cleverness barely conceals their loathing." The loathing is out in the open here, unconcealed by cleverness.

From the desk of Mindles H. Dreck:

Martyrdom by Proxy

I received a response from my correspondent today. I shall call him by his first name - Ted.

Incidentally, he is very much real, and I expect him to show up in the comment threads at some point. He is a 73 year old retired civil servant living in London, and an expert on World War I.

Ted writes to agree with my characterization of the Arab side of the Arab-Israeli dispute but to accuse me of viewing Israeli military action through rose-coloured glasses.

He has also looked at the lgf and Clueless posts I recommended - 1,2,3,
4, and finds them "frightening". To Ted, these sound like "armchair warriors, who do not know what war is really like."

This is a theme to which he, and many Europeans warm. He trots out the number of deaths suffered by the U.S. vs. Europe in World War II, and the low number of casualties in subsequent wars. I presume I am to take appeasement talk from Europe more seriously due to their experience in war and higher casualty rates.

My first reaction was to point out that the USSR/Russia owns the title in most World War II dead, with China close behind. Both these countries lost people in numbers that just dwarf the rest, with the exception of Germany:

The human cost of the war fell heaviest on the USSR, for which the official total, military and civilian, is given as more than 20 million killed. The Allied military and civilian losses were 44 million; those of the Axis, 11 million. The military deaths on both sides in Europe numbered 19 million and in the war against Japan, 6 million. The U.S., which had no significant civilian losses, sustained 292,131 battle deaths and 115,187 deaths from other causes. The highest numbers of deaths, military and civilian, were as follows: USSR more than 13,000,000 military and 7,000,000 civilian; China 3,500,000 and 10,000,000; Germany 3,500,000 and 3,800,000; Poland 120,000 and 5,300,000; Japan 1,700,000 and 380,000; Yugoslavia 300,000 and 1,300,000; Romania 200,000 and 465,000; France 250,000 and 360,000; British Empire and Commonwealth 452,000 and 60,000; Italy 330,000 and 80,000; Hungary 120,000 and 280,000; and Czechoslovakia 10,000 and 330,000. (source)

Does this mean we should "listen" to Russia and China before Europe and the UK?

But on further reflection the casualty-count arguments don't have any validity. Is there really some high ground of authority that Europeans can take on the subject of war? For that matter, hasn't it been a while? Ted was 16 when World War II ended, he has not spent a lifetime at war. In addition, familiarity with the World Wars provides little insights on the next war. Unfortunately, the next one would be unrecognizable to the World War II vet.

An awful lot of high-minded dialogue degrades to these patronizing fallacies - "you don't really know what it's like"..."I've been there"..."I knew people who died".."I have a close friend who was there." You hear it from people who lived during the depression (even if, like my parents, they were toddlers!) when they criticize contemporary lifestyles and mores. It is as false as if I claimed some authority from having distant unknown cousins that died in Auschwitz. Or from having been a few blocks away from the WTC on September 11.

In our society, being a martyr often means never having to do the tough work of defending your opinions on a logical basis. These claims to a history of war suffering are a form of martyrdom - or martyrdom by proxy.

Guardependent America-bashing aside, we would do well to keep close counsel with our NATO allies. But not because they "really know war".

Incidentally, Ted remarks that it is a pity most Americans did not see IRA terrorism as clearly as we see September 11 or the suicide bombings in Israel. I must confess, I know the details of only two IRA actions off the top of my head, one of which was entirely civilian-targeted (Canary Wharf). He has a point there.

UPDATE: Of course, then there are the ultimate "people who know of war", the Israelis.

From the desk of Jane Galt:

Matthew Yglesias says that the

Matthew Yglesias says that the real threat isn't media bias, but fundamentalism:

THE NY TIMES EDITORIAL BOARD, not very surprisingly, has come out against "intelligent design" quacks in Ohio. Conservative bloggers should recall that while liberals such as myself have various anti-trade, anti-war loons lurking somewhere to our left, that the American right has some dubious characters in it as well. Plus, America being a pretty conservative country, the threat from, say, anti-evolution fanatics is significantly more real than that posed by assorted left-wing academics who are increasingly becoming jokes on their own campuses.

While I'm the first to lampoon the various crackpots on the left, from Pat Buchanan to Harry Browne, I wouldn't go so far as to call intelligent design advocates quacks, even if I don't think such material belongs in the high school science curriculum. And I take issue with the idea that anti-evolution people pose a serious threat. I think that liberals perceive such a threat because they see. . . well, pretty much no columns on media bias in, say, the Grey Lady, while there are a number of columns implying that the Rev. Falwell is but a short step away from running the White House by remote control. We're all prone to assume that the number of media reports we see on various phenomena reflect their frequency and probability of the events; such assumptions are unconscious, which is why people are so shocked to find, for example, that the number of accidental gunshot deaths of children under fourteen is smaller than the number of accidental drownings. The shootings show up in the news; the drownings don't.

Evolution, despite the NYT's hysteria on the subject, is not going anywhere. The legislatures won't allow it; if they did, the state courts wouldn't allow it, and if they did, the Supreme Court wouldn't allow it. End of story. The occasional nativity scene on a village square is not a harbinger of the new Inquisition.

From the desk of Jane Galt:

Go look at this presentation

Go look at this presentation by Peter Norvig and then ask yourself whether or not Microsoft is making the world a better place.

From the desk of Jane Galt:

The nine states seeking

The nine states seeking tougher antitrust penalties against Microsoft Corp. are renewing their efforts to force Microsoft to release the source code for Internet Explorer.

"Internet Explorer, your honor, is the fruit of Microsoft's statutory violations," said Brendan Sullivan, the lead attorney for the nine states that have refused to settle with Microsoft. "And it should be denied them."

No, Microsoft's market share may have been the result of their statutory violations (though not, as I wrote, the ones that the court let stand), but the code itself is not a result of those violations, though the location of some of the API's may or may not violate anti-trust law.

Mr. Sullivan said forcing the company to give up its blueprints for Explorer, which now dominates the Web browser market after a bitter battle with rival Netscape, would provide "fertile ground for nascent competitors."

Exactly! Because one of the best ways to encourage innovation is to make sure people know that the government may seize the fruits of your labors at any time and hand them to your competitors.

From the desk of Jane Galt:

Live From the WTC: Number

Live From the WTC: Number 15 on your list for "Michael Collins Terrorist Libertarian"

From the desk of Jane Galt:

I'm currently reading a couple

I'm currently reading a couple of books on the 2000 election, so stand by for a bunch of posts on the subject over the next few days. My first impression is this: vanishingly few people are objective about the election. Stop a minute and look deep into your heart and ask yourself: if the case were Bush v. Gore (Bush narrowly loses the initial count), does the deal you think the other side should have accepted look fair to you if it's turned around and offered to your side?

Republicans, if a Secretary of State who had served in the Gore election campaign used the most restrictive reading of the law possible to halt recounts that might have favored George Bush, would you think that was fair?

Democrats, if a state court filled with Jeb Bush appointees and not a single Democrat had rigged things so that

1) Recounts were done only in heavily Republican counties
2) With Canvassing Boards dominated by Republicans
3) The ballots were examined by three person committees on which two people were Republicans, one Democrat, so that a Republican always cast the deciding vote
4) The recount used the broadest possible standard to allow those Republicans, if they wished, to count every paper fault or smudge as a vote
5) The court ordered a statewide count that would include Democratic dominated counties only when it would have been too late for those counties to get their results in.

Would you think justice was being done?

Awww, come on guys, there's no one here but us chickens. . . that deal you were offering doesn't look so gosh-darn fair, does it?

I get the feeling that many of the people involved wanted to behave honorably, but were afraid to allow the other side any leeway for fear that they would behave dishonorably. For example, it's been suggested that Katherine Harris should have recused herself. Perhaps she should have. But Democrats, if it were you, and the recusal would have left the process in the hands of a Republican that you couldn't trust to be non-partisan, would you do it? Spare me the theatrics, of course you wouldn't. In her case, I suspect that Katherine Harris was somewhat partisan, but I also suspect that she was afraid to leave the process in the hands of Democratic canvassing board that was equally partisan, judging from the routine 2/1 splits on the ballots. And the Florida Supreme Court was afraid to leave the process in the hands of a Secretary of State who they felt had acted in a partisan manner.

The problem with this is that it's hard to restrain the other side without helping your own; and once you've excercised "restraint", the temptation is overwhelming to give your side just a little nudge to help them out. In handing the canvassing boards an unprecedentedly broad standard for which subjective judgements were required, the Florida Supreme Court moved beyond restraining the Secretary of State to something that looked suspiciously like trying to rig the rules in favor of their candidate, allowing canvassing boards dominated by the members of one party to scrounge for every last vote. An assessment which even Democratic members of the Supreme court appeared to agree with, which is why they voted 7-2 that the system set up by the Florida Supreme Court was unconstitutional. And before you start fuming that the Supreme Court didn't have the authority to rule on state law, this is a common misconception, but untrue; because it's a Federal Election, the legislature's statutory power comes from the US Constitution, not the Florida state constitution. The Florida Court can no more abrogate this than the Alabama court can overturn Roe v. Wade.

The point being that the election was such a mess because neither side could trust the other to do a fair job, a distrust which was eminently justified by the behavior of both sides. And (now you'll accuse me of being partisan, but I can't help that) this is why hand recounts should not have been done.

Actually, there are several reasons that they shouldn't have been done. The first is that punch cards are notoriously delicate things, especially the perforated ones used by election machines. Those cards are only meant to survive a couple of runs through the machines before they are so degraded as to reduce, rather than increase, the probability of approximating the right results. Try this experiment, if you can. Get one of those punch cards, unperforated. Pack it and unpack it a few times; drive it 400 miles in a truck; handle it repeatedly; then leave it lying around your house for a few days. After this, check the card to see who you "voted" for in the 2000 election. Programmers I know who used to work with the things (some of them Democrats) guarantee you'll have cast at least a couple of ballots unwittingly.

The second is that there was no hope of producing a result that both sides saw as legitimate. And Democrats will pardon me, but which would you think was more unfair: a ballot of accidentally poor design costing you votes, or a recount conducted by Republican party hacks costing you votes? The cure was worse than the disease.

Third, the error most amenable to correction was the first time voters who spoiled their ballot by voting for Gore and then writing in his name on the second page under the "other" space. This error is easy to identify, agree upon, and repair. It also wasn't part of the recount: overvotes were excluded.

Fourth, you don't want to establish a precedent for allowing courts to change the rules of an election after the votes have been cast. No matter how much you wanted this particular result, imagine how you'd feel in four years time if, say, the Texas courts got to set the standard by which the Democratic candidate was elected or unelected? Because there didn't seem to be any way of establishing a non-partisan procedure, it was vitally important that the state adhere strictly to procedures established before anyone knew who would benefit from them. This is why Katherine Harris' decision, partisan as it may have been, was closer to right than that of the Florida Supreme Court, however well they might have meant. In an age of ever-closer presidential elections, letting the Florida Supreme Court do a choose-your-own-standards excercise, when they knew that the standard they set would tend to benefit a particular candidate (the statewide standard which should have been less partisan, was put in place too late to actually finish the recount in Republican counties), would have been a disaster. Democrats may not think so now, but five gets you ten that the same people content to rely on the wisdom of an all-Democratic court would be the first to cry foul when it was their own ox being gored.

I don't mean to minimize just concerns about people whose votes weren't counted. I just think that the effort to count every last vote is a value subordinate to the effort to ensure that elections are governed by principle of the rule of law, which says that you can't change the rules after the fact. Otherwise, we risk returning to the delightful practices of the old style city machines in which every vote might be counted, but the outcome was pre-determined by which gang controlled the election boards. Only with strict, fair standards, does every vote truly count.

From the desk of Jane Galt:

Tracy Byrnes in the Wall

Tracy Byrnes in the Wall Street Journal on serving on the audit committee:

The history of the audit committee is a bit grim. For a long time, getting put on the audit committee has been akin to being a pledge in a fraternity who had to scrub toilets and spend hours sitting naked on ice blocks before he become a brother. While we assume new board members don't have to swallow goldfish to be initiated, many still have to spend time on the audit committee. The job has most often been seen as hazing rather than an honor.

But the Enron debacle has changed all that. Now the audit committee isn't an ice block, it's a hot seat. Moreover, its role has become of utmost importance to investors worried about aggressive numbers crunching.

Investors now must be active in making sure that audit committees are up to the job of overseeing a world gone mad about accounting.

Tee-hee! The article also notes that new rules will require board committee members to be financially literate. Next: members of the press required to be economically literate before they make pronouncements about potential policy changes.

From the desk of Jane Galt:

The Professor posts a heartfelt

The Professor posts a heartfelt defense of Russell Yates. I myself have wondered why everyone was so quick to pile on the guy. Okay, I don't share his religious beliefs, and the decisions he made turned out to be disastrously wrong -- not unlike many personal decisions I myself have made, and persisted in, in the face of evidence that others found compelling. It's easy to look at it from outside and say, "I would have gotten her help", "I would have made sure she wouldn't get pregnant again", "I would have helped more around the house", "I would have noticed". Yeah, sure you would. Because we all know how easy it is to get people with serious problems to deal with them, which is why none of us have friends or loved ones who've, say, OD'd on drugs. And we all know how easy most men find it to stay abstinent, never in the heat of passion convincing themselves that this one time couldn't hurt, which is why we don't have 1.5 million abortions every year, a greater number of surprise! babies, and the most embarassing presidential scandal in history. And we all know how willing we are when we have a demanding job and five kids to add the full time care of the house and a mentally ill adult to the docket with a happy smile, which is why our relationships don't waste time on fights about household duties, and we wouldn't stick our parents in any nursing home when they'd be happier having their diapers changed by us. And we all know how easy we would find it to pull the trigger on someone we'd loved for 10 years and say, "Yup, hopelessly insane. Stick her in the bin -- I'll visit on Sundays".

I probably wouldn't like Russell Yates if I met him, and he didn't show up too well when he was tested. But then, the majority of us don't. The majority of us aren't heroic people who instantly know what to do when their life is catastrophically upturned, and flawlessly execute on that knowlege. The guy was stuck between a rock and a hard place, and he seems to have been somewhat obtuse, but everyone seems to forget that he had absolutely no idea that this was going to happen. He didn't think he was risking the execution of his kids; he thought he was muddling through a life that had become extraordinarily onerous.

Many of the op-ed columnists glibly excoriating him now will have the pleasure in the future of dealing with a parent with Alzheimers. They should think of what they've said about him each and every time they have to make hard decisions about what to do with someone who formed the center of their universe, who isn't themselves anymore. Will none of their decisions be self-serving, instead of in the best interest of the patient? Will they never give themselves false hope, because they can't bear the alternative? Will they turn themselves into perfect martyrs for someone else's illness? I'm not saying Russell Yates did the best he could; I have no idea what went on in his head. But neither do the people writing about him.

From the desk of Mindles H. Dreck:

How to Look Stupid by Not Really Trying

When I see mainstream reporters perpetuate myths about money management like this, I wonder how many other businesses they fail to understand.

Ben White, of the Washington Post, heads the above-mentioned article with the following:

Why the Rich Get Richer: Exotic and complicated investments, unavailable to the rest of us, help explain . . .

Perhaps there's more to it than exotic and complicated. If exotic and complicated investments make you rich, Enron should have been the best buy of all time.

show up with $50 million and you can toss the humdrum out the window and sit down in a cozy dining room with Chris Wolfe, chief equity strategist at the J.P. Morgan Private Bank on Park Avenue. Sport that kind of cash and you can order filet mignon from a tuxedoed waiter and chat about going long on the Norwegian kroner and short on the yen.

So far, I only see things that make you poorer. Does an equity strategist really advise people to make currency plays? Not in the universe I inhabit.

Long on the kroner. Short on the yen. Of course! It seems so obvious now. But maybe you want a few more details. So you drop by to see Laurie Cameron, global currency strategist at the Morgan private bank. But you will have to wait. She's on the line to Geneva, speaking fluent French. When she's free, she'll tell you that going long on the kroner and shorting the yen was a hot trade. Like three weeks ago. Now it's tired.

"Everybody is already into that," she'll say. The really smart money got in when the price of oil spiked (Norway exports oil).

So now the equity trader was not only giving advice out of his field, but he was three weeks out-of-date?

Look. Take it from me, unless you are a currency dealer or have a spare bilion, don't trade currencies. The currency markets are the only market in the world where it is legal and common practice to use your knowledge of order flow. Banks and brokerages have customers buying and selling large orders, so they know where the next trade is coming from. You don't, so stay away from second-guessing them. I strongly suspect that the institution White is profiling doesn't recommend speculative currency trades for their high net worth clients on a regular basis.

The article goes on to mention a number of specific strategies, that e hedge fund or mutual fund might employ. The investor willing to use derivatives or leverage, i.e. the hedge fund investor, can execute the strategy more precisely. That, if anything, is the benefit of "complexity". But all these strategies are broad, macro-economic bets. Where is the company research, where are the strategies exploiting structural market inefficiencies? That's where the "rocket scientists" add real value.

White is playing into the industry's hands, implying that the purveyors of pricy services to the rich have some inside track on stupid macro/directional transactions that most institutions wouldn't even let their trading floors execute in size. Then he turns his dithering gaze on hedge funds.

By now you probably know all you care to about hedge funds, the clubby, regulation-lite limited partnerships open mainly to "high-net-worth individuals," generally those with at least $1 million in investment capital. You know that some hedgies, most notably billionaire financier-turned-philanthropist George Soros, drove their funds to astronomical returns, beating the markets by factors of 400 percent or more and making some people very, scarily, rich. You probably also know that overall, the 6,000 or so hedge funds thought to exist (no one really knows how many there are, since they don't have to register with the SEC) have not, over the long run, beaten the market.

Well, that would probably be because a huge chunk of the hedge funds market is "absolute return" or "market neutral". Take for example, the "long-short" fund. These hedge funds will buy certain stocks and sell short others, leaving themselves exposed primarily to the difference between the two stocks, not the level of the market. So these funds don't beat the market, but they tend not to go up and down with it either. Many funds aren't trying to beat the market.

If an investor wants to link his hedge fund returns to the market, he can add the hedge fund's return to the index by buying index futures (a technique called "equitizing") or buy an existing equitized fund (a number of long-short shops offer an equitized and non-equitized fund). This is a technique called "portable alpha" and its one of the real reasons the rich get richer. If White spent a little time talking to actual money managers he might learn about portable alpha, which allows you to find excess returns in inefficient, out-of-the-way asset classes or techniques and graft that excess return on to that of an efficient asset class like the S&P 500. Why do all that research, though, eh Ben?

Hedge funds that specialize in stocks of financial services firms performed best in 2001, returning 16 percent on invested capital, in part on shrewd bets that firms with large loan exposure, such as J.P. Morgan Chase, would suffer.

Which proves my point. They were short the lending banks and long the service providers.

I love it when journalists or business pundits think that the way to get rich is to make huge macro bets on currency or economic trends. It's funny, also, that the industry tends to encourage the public to think that's what they do. It's not. Good professional money managers pay a lot of attention to risk management, and often run trades so as to eliminate broad market directional risks and concentrate on the exposure on which they have a view. In fact, one of the most productive uses of leverage and/or derivatives is to shed the parts of a bet you don't want - usually the dumb macro/directional stuff.

Let's return to the long-short technique. If a hedge fund manager thinks that XYZ Bank will outperform ABC Bank, he places two similarly sized bets. He might buy $100,000 of XYZ Bank and sell short $100,000 of ABC Bank. He profits if XYZ goes up, and profits if ABC goes down. If the market (or the banking sector) goes down, affecting both stocks equally, he profits on ABC and loses on XYZ coming out even. If the market goes up, he loses on ABC and profits on XYZ, again coming out about even. The real exposure is the relative movement of XYZ and ABC Banks' stocks. If XYZ does better he profits, if it underperforms ABC he loses. The market's direction is irrelevant.

What this trade tells you is the trader only has an opinion on the relative merits of the two companies, not the market as a whole. This is the opposite of a market directional bet. And this is the type of bet that good traders can make money on consistently, because they can actually research the two companies and develop unusual or counter-consensus insight, a requirement for outperforming the market. The Kroner/Yen bets have too much noise from international events, domestic policy, and unpredictable international capital flows.

Sophisticated investors, like the Harvard and Yale endowments, focus most of their active equity management on long-short techniques. They are usually long the equity markets, to take advantage of the upward direction of the market over long time periods, but their excess return over the market (or "alpha") usually comes from long-short positions.

Long-short is just one example. There are certainly hedge funds that find opportunities in fixed income and currency markets. generally, however, their bets are as focused and non-directional as those made by long-short funds. If you look at Harvard's or Yale's asset allocations, you will see no capital explicitly dedicated to currency or macro strategies. In fact, If you do want to see what the world's most sophisticated investors are doing, these two endowments are a good place to start. David Swensen, director of the Yale Endowment, even wrote a book about it.

Journalists like White want to tell you that the best investors get rich through "have a hunch, bet a bunch" machismo. "Nothing could be further from the truth" (OK, last time I use that phrase, Rand). The business has its share of lucky fools, but the consistently successful don't play roulette. In a casino, you head for the craps table to get the best odds. In money management, you look for hidden and inefficient places where your research can provide reliable and profitable insight.

From the desk of Jane Galt:

Mark Byron takes an interesting

Mark Byron takes an interesting whack at some unanswerable questions. I don't have any answers either, but I agree that deciding there is no God because you wouldn't run the world this way if you happened to be omniscient, omnipotent, and immortal, is silly, as is the related folly of deciding that God believes that whatever beliefs you find comfortable/enjoyable/convenient are okay. (Not that I have any particular insight into the mind of God, but I firmly believe that if such a thing is to be gained, it will come at the expense of long study and careful reasoning, not by starting from the premise that it has to agree with whatever political/philisophical/spiritual beliefs you adopted, casually or not, in college. In other words, if you start from the premise that any theology you pick has to be pro-choice, or gay-friendly, or culturally conservative, or involve no kooky rituals or funny clothes or untoward demands on your time, you're not looking for insight into the mind of God, you're looking for validation.)

From the desk of Jane Galt:

Patrick Ruffini says supply-side economics

Patrick Ruffini says supply-side economics is coming to the heart of Philadelphia, the tax-and-spend paradise.

From the desk of Jane Galt:

All right, Moonbeam, call me

All right, Moonbeam, call me when the shuttle lands. . .

A reader thoughtfully sends along this excerpt from OpinionJournal:

Sometimes, though, the mental-health lobby goes completely off the rails. The Minneapolis Star Tribune reports on the case of Abu Kassim Jeilani, a 28-year-old man whom police fatally shot on Sunday. As this chronology shows, a policeman had spotted Jeilani walking down a Minneapolis street carrying a machete and a crowbar. He called the police department's crisis intervention team, which was on the scene in two minutes. Jeilani ignored orders to drop the weapons, and police twice tried unsuccessfully to immobilize him with a stun gun before resorting to bullets.

The response of "some mental health professionals," the Star Tribune reports, is to say that the police never should have bothered Jeilani. Instead, a "mental health specialist" should have rushed to the scene--to confront a man with a machete. "We don't think it should be [in] the police hands. . . . It should be in the mental health hands," Theresa Carufel, of the Friends of Barbara Schneider Foundation, tells the paper. "We would love to replace the police." (Barbara Schneider was fatally shot by Minneapolis police in 2000 when she came at them with a knife and called them the "Satan squad.")

I know that the Friends of Barbara Schneider mean well, but they're a perfect example of the perils of hidden costs in Public Policy. To wit: the Friends of Barbara Schneider assume (probably correctly) that the tragedy of her death could have been averted if the policeman had not fired. However, they ignore the probability that in this case we would have the Friends of John Jacobs, Erwin Melville, and Tania Jones, the police officers or innocent bystanders that the knife-wielding psychotic killed, to contend with. Mental illness is tragic. Clearly, we all hope that there are better ways to contain a crazy person with a weapon than shooting them. But risking the lives of innocent bystanders, or even police [I say this from no lack of regard for the lives of policemen, but because we pay them to take risks, to a certain extent, with their lives in order to protect the rest of us] is no more appropriate than shooting to kill when there's the possibility of talking someone down. However, when people like the Friends of Barbara Schneider talk, we never hear about poor John, Erwin, and Tania, who didn't die -- only the woman who did. The costs of alternative action are hidden because they were averted by the action that did.

This is how we get a great deal of regulation in this country. Take an example you may or may not be aware of -- fuel efficiency. While some of the costs, like higher car prices, are visible (although not, due to the byzantine methods car manufacturers use to shake every last dime out of our pockets, visible enough), others, like safety, are not. Reputable data seems to suggest that the mandated increases in CAFE standards currently cause an additional 5,000 deaths a year. This cost is not explicit, because no one death can be pinned on the weight of the metal in the car (higher fuel efficiency = lighter cars = less metal = more deaths. And before you tell me that this is due to SUV's, the rise in death, according to my sources, is the same in accidents involving two small cars as it is in accidents involving a small car and a truck. He also says that there hasn't been a significant rise in collisions between trucks (SUV's) and cars because the shift to SUV's has been marked by a decline in the number of other light trucks.) Nonetheless, the cost is there, and if it were made explicit (most people seem unaware of the tradeoff), we might have a very different national opinion on fuel standards.

Or take another classic example, the FDA. If a bunch of people die from taking a drug the FDA has approved, the FDA gets in big-assed trouble. If a bunch of people die because the FDA was slow to approve a drug, the FDA gets in less trouble. If a bunch of people die because a drug was never invented because having the FDA makes drug development prohibitively expensive, the FDA gets in no trouble at all. This makes the FDA extraordinarily risk averse. This is not to say that we shouldn't have the FDA (that's another argument) but that because we don't examine these hidden costs -- and in this case, it's pretty hard to examine drugs that weren't invented -- we may well be producing sub-optimal outcomes.

It's fine to ask the police to check their procedures for dealing with the mentally ill. But saying that we should let someone deranged wander around with a machete while we wait for the mental health professional -- that's just nuts.

From the desk of Jane Galt:

If you managed not to

If you managed not to snooze through opportunity costs and highly co-specialized assets, you're going to be really excited by No Watermelons Allowed, which has a nifty piece on electricity reserve margins that is a fairly brief, extremely interesting, and somewhat unnerving look at issues we might face this summer. Plus it disses Ralph Nader, so you know you'll love it.

From the desk of Jane Galt:

The Sarge gives us the

The Sarge gives us the lowdown on steel tariffs:

Dude, let me clue you into something:

NOBODY GIVES A [Expletive Deleted] ABOUT STEEL TARIFFS

I can see it now: "Honey, how about we go out to the porch, sit on the swing and watch the grass grow as we discuss the finer points of trade law and it's effects on the economy?"

"Oh, Robert..."

Or how about, "Timmy, I think it's time we've had a talk. You're going to be growing up fast soon and going through changes at a rapid pace. You'll be confused, you'll experience new sensations, and you'll be looking at Steel Tariffs in a whole new way."

Tee-hee! That's the first time I've ever seen steel tariffs made funny.

From the desk of Jane Galt:

Wow. This piece suggests that

Wow. This piece suggests that Jane Fonda should have been tried for treason. Not that they're the first to say it. But it's not screechy -- its tone is quite understated, and it makes an interesting case. I, for one, was not aware of the way that Jane Fonda was apparently able to meet with severely beaten and malnourished POW's and turn around and tell their families that they were not only being well treated, but wished their families and loved ones to actively campaign for the regime that was holding them hostage.

From the desk of Mindles H. Dreck:

Profile of Paul Wolfowitz

The March Atlantic is chock full of terrific essays that will not be on-line for a while. The profile of Paul Wolfowitz by James Fallows is available, however, and worth a read:

As for impatience with procedure, around the world the Bush foreign-policy team is criticized as "unilateralist"—a group that scoffs at alliances and international organizations and doesn't take treaties seriously. To people who share Wolfowitz and Rumsfeld's views, these criticisms reflect a confusion of ends and means. If arms-control talks simply continue the arms race, these people think, then it's time to step away from the table. As long as the United Nations or NATO goes in the general direction the United States thinks wise, we should act through those alliances. But humoring allies counts for little in itself, and negotiating for its own sake has no appeal. The NATO countries complained when Ronald Reagan put intermediate-range missiles in Europe, and they complained when Bill Clinton took them out.

Among the unavailable gems, there is a blog-style dissection by P.J. O'Rourke of the joint statement of Nobel prize winners :

To sum up, here we have a statement beginning with a thesis that had been disproved before it was uttered and ending with a palpable untruth. The logic meanders. The ideas are banal. The text exhibits a remarkable prolixity, considering that it is only 284 words long.....Possibly the statement is simple proof, if proof were needed, that nothing good ever comes out of a committee.

Finally, there is a succinct piece by Jonathan Rauch on the increasingly undemocratic nature of the European Union:

Let's face it, voters are a nuisance. They have an inconvenient habit of refusing to follow where social reformers want to lead. And so reformers are always on the prowl for ways to bypass electorates.

You may just have to buy this magazine.

From the desk of Jane Galt:

This is pretty damn cool.

This is pretty damn cool.

From the desk of Jane Galt:

I like this article on

I like this article on blogging from the register, although I suspect I may be one of the "attack blogs" he criticizes as an infinitely repeating punditry loop, and I don't think I merit making fun of because I'm not succeeding in being revolutionary. I'm not trying to be revolutionary; I'm saying things that I believe because I enjoy saying them, and for some reason a ridiculous number of you stop by every day to listen. I'd like to think that I'm getting a little word out about some basic economics, but I'm afraid that the people I'd like to reach will dismiss me because what I say doesn't agree with what they've already decided to believe. So I'm left with (hopefully) giving fellow travelers the correct tools to make their case. Not revolutionary. But nothing to sneeze at either.

From the desk of Jane Galt:

When Mindles said capitalism isn't

When Mindles said capitalism isn't perfect, he wasn't kidding.

From the desk of Jane Galt:

What I'm Reading This Week

What I'm Reading This Week

Bias: A CBS Insider Exposes How the Media Distort the News While I wait for my next infusion of books from Amazon I've been dipping into the book collection of my sister, the social conservative, who has an extensive assortment of books I would broadly label conservative polemics. I was obviously particularly interested in this one because I'd read so many reviews: Tom Shales hates it, for reasons decidedly biased. Jonathan Chait's tone is more reasonable, but his assertions that there's really no media bias were handily refuted by Jonah Goldberg. The most balanced review I saw came from Lou Cannon in the National Review, whose assessment agrees with mine: the phenomenon Goldberg is covering is real, but the book is hopelessly sloppy.

All of its evidence is anecdotal, but that's all right; I can enjoy anecdotal evidence even if I wouldn't want to use it to make policy. But there's too little even of this; the evidence offered to support the central thesis is thinner than Calista Flockhart on Slim Fast. The book certainly has its moments -- but they are widely interspersed between long plaints about how badly the network treated Bernie Goldberg, how much Bernie Goldberg was hurt by Dan Rather, how disgusted Bernie Goldberg is with modern newstrends . . . all bolstered mainly by inanely detailed recounting of petty incidents in the life of -- you guessed it -- Bernie Goldberg. I suspect this is why so many reviews have focused on the question of whether or not there is media bias -- there's just not enough meat in the book to write a good review on. Media accounts that have tried to dissect the facts in the book have ended up in the sort of exchanges

You did!

Did not!

Did too!

That's because you're a big fat [liberal] [conservative] dooty-head!

that make you wonder if the proper place to hash this all out isn't the principal's office.

That said, it's the sort of book you have to read, because everyone else is talking about it. It reminds me of The Bell Curve, which no one I know except me has read, but about which everyone I know -- except me -- has a strong opinion. Once you have read it, you'll find to your amusement that people make all sorts of wildly inflated or just downright odd assertions about it's contents, and it provides a glorious moment of superiority when you can trump someone's argument by cooly asking whether they've read the book. So go ahead: click the link and buy it. Then you can join the rest of us in wondering what all the fuss is about.

From the desk of Jane Galt:

Margin of error I read

Margin of error

I read with some hilarity this item on the Democrat's strategy in the New Republic, which seems to be a case study in poor polling:

The fundamental problem facing these Democrats is a familiar one: how to please faithful liberals without alienating moderate voters in the rural districts and states on which control of Congress hinges. One message already on display posits a battle of "local interests" versus "special interests." Voters will be urged not to support Congressman Jones because his votes for corporate allies of the White House--Enron and other big energy companies, for instance--put local highway projects, or health clinics, or whatever, at risk. One leading party strategist recently described it as "basically `The People versus The Powerful' again." For instance, Democrats recently polled the following question: "Enron, like many of the biggest corporations, used money and influence to get their way, at the expense of the public. We need leaders who will attack the abuses by big corporations that have too much influence over what happens in Washington." Fifty-eight percent of registered voters polled agreed a "great deal," while another 26 percent agreed a "fair amount."

One can imagine similar Republican poll questions showing "wide support" for their issues:

"Clinton, like many of the Democrats, is a lying, cheating horn-dog of the first order. We need leaders who will pay more than lip service to the truth and keep their hands to themselves."

"The Kyoto Treaty, like many environmental initiatives, would most likely contract our economic growth rate by between 33% and 50%. We need leaders who don't want to throw your wife out of work and force your brother-in-law to take up permanent residence on your couch."

"Social Security is having trouble and Tom Daschle, like many Democrats, wants to fiddle while Rome burns. We need leaders who can make sure that you spend your golden years on the golf course instead of the work house."

Make your own -- it's fun!

Poll questions like this are useless. Not only do they make prejudicial statements that your opponents, like it or not, will have ample time to refute during the campaign, but they produce abnormally high favorable responses to whatever it is you're proposing to curb whatever it is you just told them was wrong. No wonder the Dems are floundering.

From the desk of Jane Galt:

Andreas (a.k.a. Mindles H. Dreck)

Andreas (a.k.a. Mindles H. Dreck) over at More than Zero has an excellent rejoinder to Mickey Kaus which points out that democracy and free markets aren't supposed to be perfect, just the best option in an imperfect world.

it is nearly impossible for the private sector to not to be the cause of a recession, as the private sector represents the bulk of the economy. But let's not forget something - all that growth prior to this mild recession was from the same place. This was a capital spending and productivity boom, and a capital spending bust (the productivity boom is holding up so far). Also, capital spending busts have happened before; not every recession, even recently, is the result of an external shock.

So if someone gives you $10 and takes back $1, net-net you have a problem with that? To put it another way, if 10 telecoms beat each other up to give you cheaper long distance, and some of them go bust trying, you have a problem with that? If we create the extraordinary medium (and resource) through which I communicate now but make many seriously ill-advised investments along the way, the system needs second-guessing? I disagree.

The "right" economic solutions are extremely hard to find. It is a dynamic process. Some failed experimentation (and "wasted" investment) is necessary to achieve success. The two cannot be separated.

I read the Kaus piece, which says

Mighty Instapundit ridicules Congress for passing a "stimulus" bill just as the recession ends -- and sneers at the idea of "these guys second-guessing corporate executives on their business judgment." But wait a minute. What caused the recession in the first place? Wasn't this the first downturn in a long time to be produced, not by some sort of policy mistake or external shock but by a colossal failure of business judgment on the part of the executives, corporate and non-, who wasted billions on idiotic dot.com projects? They could have used some second-guessing! A little humility seems in order from the defenders of executive acumen. The dot.com bust is the sort of thing that wouldn't happen if the market were as perfect as it's sometimes cracked up to be, right? ....

and had the exact same reaction as Mindles. I was going to blog on it, but he did it first, and better. Unnecessary activity avoided! Productivity increases! Kill the bill -- we'll be out of the recession any minute!

From the desk of Jane Galt:

Meanwhile, while researching that last

Meanwhile, while researching that last post, I stumbled across this hilarious little item: yet another reason to loathe the French. . .

From the desk of Jane Galt:

A phrase in this excellent

A phrase in this excellent Economist article on businesses saving money during the recession caught my eye:

Europeans are shocked by the ruthlessness with which American firms slash jobs. In France earlier this year, the Constitutional Council decided to trim new legislation designed to make it even harder for French employers to lay off workers. It was, the council said, “a manifestly excessive attack on freedom of enterprise”. France's socialist prime minister, Lionel Jospin, did not like it. “Freedom of enterprise”, he reminded his country's industrialists, “is not the freedom to sack people.” But he is powerless to overturn the court's ruling.

Freedom of enterprise isn't the freedom to choose who you hire and fire. It's not the freedom to determine what you pay them or how many hours they work. It's not the freedom to determine what you sell or the words you use to sell it. No, freedom of enterprise is the freedom to choose the color of the drapes in your coporate headquarters.

From the desk of Jane Galt:

A New York judge has

A New York judge has put some brakes on BT's attempt to patent the hyperlink.

In a related story, a similarly short-sighted appellate judge has thrown out my appeal of the US Patent Office's decision to reject my patent application for my breathtaking new invention: the apostrophe. The judge noted that while I do, indeed, hold the patent on the comma, I failed to establish either that the apostrophe was, as my lawyers had argued, just a variant application of the initial technology, or that the apostrophe represented a "unique contribution to human knowlege". While I had originally planned further appeals, my lawyers have curtailed these plans by informing me that they will no longer accept payment in cigar bands.

From the desk of Jane Galt:

The Economist says that grade

The Economist says that grade inflation isn't inflation -- it's grade compression, an important difference. Inflation would be a slow steady rise in all grades, including the top ones (A+, A++, A++*. . . whatever) and would only mean that people seeking information about candidates from, say, Harvard, would merely have to periodically adjust the "exchange rate" they use to compare graduates with those from other schools. Grade compression, however, dilutes the value of the information and forces employers and others to substitute more time consuming and possibly less reliable metrics.

At my business school, grades were curved to a strict 3.25, which limited inflation but had its own consequences. Because there were no half-grades (you could get an A, B, C, D, or F -- no +/-) this lead to some gamesmanship. The ultimate goal was to get a low A or a low B, putting in the efficient amount of effort needed to produce a desired outcome. Many students gamed the system by determining what classes they simply lacked the background or the ability to get an A in, and exerting the bare minimum effort necessary to avoid a C. Conversely, lots of people had the experience of getting a 95 average in a class and still getting a B because there simply weren't enough A's to go around. The appearance in a class of a couple of real slackers was a sign of delight to fellow students, who knew that they would pick up the C's that would subsidize a few more A's for the rest of us. So the system wasn't perfect.

We also faced the fact that most other business schools don't curve, so recruiters who weren't familiar with Chicago's practices would take a 3.5 average as a sign of a substandard performer, rather than someone pulling significantly above average. This could be dealt with if they asked -- but only if they asked.

Nonetheless, I think it was better than the alternative. I've heard (unconfirmed) rumors that at some schools the average GPA is a 3.8 -- in other words, all but the worst screw-ups get A's. Why bother? The grades no longer convey any information. Personally, I'd like to see a nationwide return to a time when a C was an average grade for someone working fairly hard, not a sign of disgrace.

From the desk of Jane Galt:

If you're not absolutely sick

If you're not absolutely sick of economics, we'll (finally) be getting Ricardo & more book reviews tomorrow. Off to meet old friends for a drink.

From the desk of Jane Galt:

Jonathan Rauch offers a prescription

Jonathan Rauch offers a prescription for peace in Israel that is actually interesting and original

From the desk of Jane Galt:

The 19-year old isn't in

The 19-year old isn't in the office today, so we're listening to the classic rock station, which seems to be trying to develop an "All Pink Floyd, All the Time" theme. It reminds me of that fake album commercial on Saturday Night Live: "You loved Stairway to Heaven once. . . you'll love it even more seventy five times, as recorded by our top recording artists. . . " I've heard no fewer than four songs from the Wall, plus standards like "Wish You Were Here".

Ahhhh. . . remember the days when listening to "Comfortably Numb" made you feel like you were really deep? When SD&RR were more than just a hobby? When you thought it was possible to be a Pulitzer Prize winning novelist and a supermodel? Sigh . . .

Meanwhile, just in case I wasn't feeling old enough, a friend sends me a this article, presumably designed to help me beat the biological clock. Is that a hint, Matt?

Update Stairway to Heaven just came on. All I need is a pack of Camel Lights and some Mad Dog and the flashback to 1989 will be complete.

From the desk of Jane Galt:

Shocking! Jonathan Last at The

Shocking! Jonathan Last at The Weekly Standard does an article on blogs and what do we see. . . Instapundit, Andrew Sullivan, and Joshua Marshall get top billing. Where are the women? Where is the empowered, inclusive community we dreamed of, back when web browsers were all natural native crafts made out of macrame and organic produce by underprivileged third world women? Well, once the big corporations invaded our precious space, it should have been obvious that the white male power structure couldn't be far behind. Just as in any Capitalist Imperialist system, the rich and famous get richer and famouser, while poor, honest working people like me get the shaft. Could Last spare a precious few words of column space for a fine woman blogger like myself? No, not him -- he was too busy reinforcing the pernicious stereotype that only men are interesting or have important things to say. Oh, I know some people will say that the reason Jonathan Last didn't mention me is that he's never heard of me, or that I'm not as funny and interesting as Sullivan, Reynolds, or Marshall. That just goes to show that they're trapped in the patriarchalist paradigm, espousing "rules" that serve to reinforce the hierarchical, androcentric structure of the Blogosphere.

Well, I'll show Last. I'm going on a fast until I'm mentioned in his column. But since it might be a long fast, and I don't want to contribute to the perpetuation of the White Male Power Structure with my early demise, I'll still be eating enough calories to maintain life. At a healthy weight, I mean. In fact, some people who haven't been radically empowered might call it more of a reducing diet. Or just "eating right". But you can bet your copy of The Feminist's Guide to Saving the Earth that not one piece of Auntie Em's Organic Coffee Cake will pass these lips until this weblog appears at the Weekly Standard Online.

From the desk of Jane Galt:

Dave Tepper wonders why Medicare

Dave Tepper wonders why Medicare patients are surprised that their coverage isn't what they would get on the free market.

From the desk of Jane Galt:

The other half of the

The other half of the two part series on the Netscape suit is up on Salon. The author, JJ Gifford, agrees with me that the appeals court gutted the core arguments Netscape had against Microsoft, and that the company is relying on the jury's emotions, rather than the law, to sustain the case. However, he (?) believes that Microsoft's behavior is so egregious that the company should be punished anyway, a conclusion I can't agree with -- taking aside the moral aspect, the effects on the business community, especially the technology business, would be disastrous. The more we turn the law into a lottery system, the more difficult it becomes for businesses to predict the outcomes of their actions. The more risk there is in the legal environment, the less investment. If Netscape wins, we're essentially saying to other companies: "even if the law is with you, your competitors can put you out of business if you're cuter." Which is not to minimize Microsoft's nasty tactics; only to point out that there really is a slippery slope to outsized legal verdicts. Many of the things competitors want Microsoft punished for, like bundling and exclusive distribution agreements, are perfectly legal -- how do I figure out where the tipping point is if I have a successful software business? This does not per se argue against anti-trust suits, but it does indicate the high cost of successful litigation in this area.

He also makes an extremely interesting point that I didn't address: monetary damages are meaningless to Microsoft, with its $36 billion cash hoard, so the companies will be aggressively seeking behavior remedies to cripple Microsoft. Yes, I mean cripple. AOL, Sun, Oracle and others are not interested in making Microsoft play fair; they want the company out of business. That's why they sought draconian remedies from the court, which Penfield Jackson obligingly provided. Gifford thinks that the breakup would have been the best remedy:

A so-called "structural remedy" -- a breakup -- would likely have been more effective. It would have replaced Microsoft with a pair of smaller but still strong companies, in a market suddenly open to competition. The collusion between operating systems and applications development that has long fortified Microsoft's monopoly would be erased. Unfortunately, the government declined to pursue such a breakup and instead opted merely to slap Microsoft's wrist. With these private actions, perhaps the company will at least get a spanking.

This ignores economic history. First of all, the anti-trust remedies that broke up great behemoths either moved along regional lines (AT&T), or along the fault lines left by previous mergers (Standard Oil). Breaking up an integrated company doesn't produce smaller, stronger companies in the short term; it's catastrophic, as centralized departments for everything except the product lines have to be dismantled and reassembled piecemeal.

It also makes it extremely time consuming to break the company up, as the court has to negotiate every last minor department, asset, and share. How will you compensate the shareholders? How do you split the stock up -- hard assets, soft assets, revenue, profit? Who gets Bill Gates and Steve Ballmer? Heads of department will try to poach the best employees for whatever company they're going to, leave the worst ones for the other company -- how do you prevent this? There's a thousand questions like this to be resolved, and the court will ultimately have to settle most of them. After years of economist and business leader testimony, negotations, and politicking, you finally produce a result -- and it takes further years to implement. You can require that every decision more complicated than what paperclips to buy get court approval, which eats up time but forces the company to stand still for the five or ten years the process takes, so that you can get a true handle on what's going on. Or you can let the company pretty much go about business as usual while you decide, which in the constantly changing technology industry means that the remedy will probably be inappropriate. Either way, by the end of this time, both Microsoft and Netscape will probably be close to death. Then the shareholders get to sue the government. Whee!

It's a very good article, but I'm extremely uncomfortable with Gifford's confidence that the legal system can easily intervene in a complex system like the technology market or a software company to produce results that will be desireable for the rest of us, not just the plaintiffs. Luckily I think that any outsized remedies handed down by a jury will be rapidly overturned on appeal.

From the desk of Jane Galt:

Steven Den Beste analyzes the

Steven Den Beste analyzes the Barcelona summit on European integration by comparing the EU to a corporate merger and asking whether it's likely to cause growth.

It's an interesting question, though I think there's a question that bears on this one that Steven doesn't ask directly: what makes a merger successful?

The classic answer is "synergies", which in my experience is a weasel word that means "I'm not quite sure, but this is the amount we need to hit the EPS numbers that will make this deal sell on the street." Call me cynical. The AOL/Time Warner deal, which was supposed to create the amazing synergies by vertically integrating content, network, and access points, has yet to create shareholder value. As Den Beste points out, glomming two big companies with problems together by itself just creates a bigger company with bigger problems.

The idea that the AOL/Time Warner merger was a terrific idea was based on a flawed conception of what creates value in a merger. The story on the street was that ownership of the cable assets and the content would allow AOL to dominate the internet market, while AOL would be a massive promotion/distribution venue for Time Warner's assets. But it's hard to see what the merger accomplished that couldn't have been done much more cheaply with a distribution agreement. The problem with trying to up your shareholder value by purchasing a scarce asset (like Time Warner's near-monopoly cable network) is that whoever owns the asset charges full price for it. It's an economically neutral transaction, neither creating nor destroying value; it just transfers money from place to place. In order for such a transaction to create value, AOL would have to be better able to use the assets than Time Warner -- but since AOL had no particular expertise in managing cable infrastructure, there was no reason to think that the transfer would create value.

The other common fallacy is that it's somehow a moneymaking proposition for AOL to give Time Warner advertising, or for Time Warner to give AOL exclusive use of its assets. This comes from not fully pricing the cost to the company of giving away goods or services to other parts of the company. Let's say that I own an ice cream machine and you have a waffle-cone maker. We merge, and you start giving me waffle cones in which to sell my ice cream. I save the 10 cents it used to cost me for each cup to put the ice cream in, and I can charge 15 cents more for the resulting ice cream cones. Simple accounting shows this as a 25 cent increase in profits.

What this leaves out an important economic concept called opportunity costs. The opportunity cost of a project is the income from the next best alternative use of the resources necessary to complete the project. If you have a choice between two jobs, one at $100,000 and one at $125,000, and you take the higher-paying job, your opportunity cost is the $100,000 you could have been making at the job you didn't take. When opportunity costs exceed the income from the project, it's a bad investment of time and resources.

In this case, let's say that if you weren't giving them to me, you could sell your waffle cones to my competitor across the street for 30 cents. Suddenly the merger doesn't create value -- it destroys it. This is essentially what people were suggesting AOL/Time Warner could do -- hand over valuable resources, like advertising space or exclusive use of the cable assets -- to each other at less than they would sell them on the market. In fact, mergers encourage such behavior all the time, which is why over the long run they tend to destroy shareholder value.

There are two classic ways in which economists believe mergers can create value: redundancy, and co-specialized assets. The first is easy to understand. Say that, instead of a waffle cone maker, you also own an ice cream machine. In order to compete, we spend aggressively on advertising, signs, and the like. We also both have to be on our corner all day every day. If we consolidated, one of us could cover the store some days, the other the rest of the time. We could have one nicer sign. We could save money on milk by buying in bulk. Perhaps we could get rid of one expensive-to-maintain machine and just use the other. Such savings are called economies of scale, and while I have made them very simple in this example, the basic idea is that there is a profit-maximizing size for any given type of firm, and a merger of two like companies can produce value by achieving that size. This is the argument behind the HP/Compaq merger.

The other way that mergers create value is by merging firms that have prohibitively high transaction costs preventing them from making otherwise profitable deals. A transaction cost is any monetary or non-monetary cost, aside from the price, associated with making a deal. The amount of time you spend looking for a house is a transaction cost, as is the broker fee, the lawyer fee, the escrow fee, the filing fee. . . you get the idea. The price of the house you buy is not a transaction cost.

The most common transaction cost preventing otherwise profitable deals is something known as highly co-specialized assets. Consider the waffle cone maker. Suppose I come out with a bubble-gum flavored ice cream, and I want you to make a novelty cone in the shape of a bubble. I can sell this cone for $3.00 instead of $1.50 at little extra cost to me. However, for you to do this, you'll have to completely retrofit your waffle-cone maker. It won't be good for making anything except bubble-gum shaped cones. If the cone doesn't take off, or I get sick of bubble gum, or someone famous dies a horrible bubble-gum related death that kills the cone's popularity, you're stuck with an expensive cone-maker that's not good for anything. Moreover, since I know this, once you've done the retrofit, I might decide to tell you that my new price for bubble-gum shaped waffle cones is 5 cents -- take it or leave it. Since leaving it would mean going out of business, you're at my mercy as soon as you commit to the transaction. In this case, merging makes sense; I get my bubble-shaped cones, and you get a guaranteed share of the profits.

Whew! Hang in there . . . we're coming to the home stretch.

So let's look at the EU "merger". Is there redundancy? Absolutely. Tons of it. But over half the French population is employed by the government -- think they're going to initiate massive cutbacks? The "merger" is introducing another layer of redundancy, not removing it.

How about transaction costs? Well, here we hit the mother load, in the form of national differences that restrict the flow of capital and labor between countries. I'm talking of work restrictions and the like, of course, but I'm also talking about regulations not intended to restrict the flow, which nonetheless have that effect. Small differences in the tax code, for example, increase the cost of moving capital because you have to learn what the differences are before you can invest. The largest of these barriers -- language -- probably won't be resolved soon. But the second largest, currency, just got taken down. This is huge. Companies or individuals wishing to invest abroad no longer have to factor currency risk into their calculations. It also allows for increased competition between countries, which is always good for the world economy -- but there's the rub.

There's a third reason to merge, of course, and that's the hope that you can get rid of competition. If the two companies merging control enough of the market, there's the hope (on their part, not ours) that they can lock up a monopoly or near-monopoly and get fat and sloppy while raising prices and providing indifferent products. When it's two companies trying to do this, the FTC or its European equivalent screams like a banshee. When it's governments, obviously, there's no such restraint.

So it really depends on how the merger is implemented, and whether lowering transaction costs or restraining competition becomes its prime driver -- something which very much remains to be seen.

From the desk of Mindles H. Dreck:

Counting The Dead

As you can see to the right, I have been participating in the very popular googlebomb to raise awareness about the Herold Study on Afghan Civilian Casualties. Nonetheless, I have always had some misgivings about dignifying the count at all. If the civilian casualties in Afghanistan were indeed higher than the September 11 attackes, I'm not sure it would make the least bit of difference, given that the September 11 attacks deliberately targeted civilians. The civilian casualties in the war are an entirely separate issue.

One of the repugnant things about the study is just that "eye-for-an-eye" calculus it suggests. Surely Herold didn't mean to imply that if the casualty count were lower, that in itself justified the war? The justification remains elsewhere - primarily in the prevention of future terrorism and, at least in consequence, the liberation of the Afghan people.

Citing the Herold count as an antiwar argument also completely ignores the distinction in how the civilians were killed in the WTC and in Afghanistan. Andrew Sullivan recently linked this article by Michael Walzer addressing problems of the left in the U.S., and referencing the body count:

A few left academics have tried to figure out how many civilians actually died in Afghanistan, aiming at as high a figure as possible, on the assumption, apparently, that if the number is greater than the number of people killed in the Towers, the war is unjust. At the moment, most of the numbers are propaganda; there is no reliable accounting. But the claim that the numbers matter in just this way, that the 3120th death determines the injustice of the war, is in any case wrong. It denies one of the most basic and best understood moral distinctions: between premeditated murder and unintended killing. And the denial isn’t accidental, as if the people making it just forgot about, or didn’t know about, the everyday moral world. The denial is willful: unintended killing by Americans in Afghanistan counts as murder. This can’t be true anywhere else, for anybody else.

Go read the rest of it, it's excellent.

From the desk of Mindles H. Dreck:

"Worrying About You Crowd"

Just now I received the following disturbing letter from an English friend.

I am writing  because, like lots of people on this side of the water, I am beginning to worry about you crowd over there. We find it difficult to support the US but without being drawn along willy nilly in your wake and we have a nasty feeling that none of your leaders take the slightest notice of anything said to them. Is anyone asking what has sparked all this hostility from the Islamic world? Is it not obvious that Israel, like the speck of grit in the oyster except that nothing as nice as a pearl is resulting, is at the root of it? We admired the Israelis up to the invasion of Lebanon but, as they have become more and more fundamentalist, one begins to see what their policy really is. Settlements plus control of the water supplies means that the West Bank, not yet formally annexed, will never provide a satisfactory Palestinian state, just a collection of disconnected bits and pieces where a helot population live at Israeli sufferance. Gross misuse of "military in aid of civil power" eg tank machine guns firing on 10 year old boys throwing stones, leaves them in no position to complain about suicide bombers. Still less can one describe those bombers as "cowardly" when they are willing to die themselves. But the Palestinians are right to despair. The rest of the Arab world, having kept them penned in their camps to embarrass Israel now certainly do not want their own states upset by admitting them nor do they intend to supply the simple hand held anti-tank weapons which would nullify by far the best bit of Israel's forces, the armoured units.   But the Arab states are all, more or less, failures, not really supported by their own populations. They cannot satisfy the aspirations of their own best and brightest and these inevitably turn to terrorism, the weapon of the weak.   Israel is wholly dependent on American support. No two ways about it. The US is therefore held responsible for Israel. How can one deny it? The Saudi proposal, the only glimmer of hope , is plainly being wrecked by the latest Israeli incursions.   All this seems to me to be obvious. Why can Americans not see it?

I have already sent two emails in response dealing with some of the suggestions in the letter, most notably the supposed moral equivalence between Israel and Palestinian terrorists, which I reject.

What is bugging me is, I'm not sure what "Europe" would like us to do. I understand the criticism, but I'm missing the proposed solution. I am afraid the real answer, much like the true Arab sentiment, would involve the end of Israel, but they don't want to come out and say it. If that's the solution, is there any wonder we don't "take notice"?

Comments? Proposed responses?

From the desk of Mindles H. Dreck:

Hmmm. Big Government is...Bigger?

This chart shows the trends of total federal spending as a share of the economy (measured by national income) over the past 50 years, with the total broken down into 4 components: Defense, Social (sum social security, Medicare, Medicaid/health, welfare income) and net Debt Interest, and Other (meaning all items not covered in the first 3 components, which is balance of spending, incl. such items as Dept. of Energy, IRS, State Dept., etc.).

Click for the source (which I don't yet know well enough to vouch for)

From the desk of Jane Galt:

What I'm reading this Week

What I'm reading this Week

Betty Crocker's Original 1950 Picture Cookbook Whenever I'm a little stressed, I take out my Betty Crocker Picture Cookbook and get lost in 50 years ago. It's the gift I give at every bridal shower, partly because it has some downright hilarious recipes (for hors d'oeuvres, have your guests roast Vienna Sausages over candles!) and passages like these helpful hints:

Harbor pleasant thoughts while working. It will make every task lighter and pleasanter. . .

Every morning before breakfast, comb hair, apply makeup, a dash of cologne, and perhaps some simple earrings. Does wonders for your morale. . .

Notice humorous and interesting incidents to relate at dinnertime, etc. . .

If after follwoing all these rules fro proper rest, excercise, diet, you are still tired and depressed, have a medical check-up and follow doctor's orders.

Helloooo, valium.

But that's not the only reason I love it. The best reason is that it is the single best guide I know to producing comfort food, even for beginniners. I wouldn't follow the instructions for preparing roasted meats (although I did pick up a good technique for stovetop barbeque chicken), but my mother, who's studied with Craig Claiborne and Julia Child, still uses this for most of her baking, from basic bread to airy, homemade cakes. It's perfect for beginners because while most of the recipes are simple, they were written before the advent of cooking oil, margarine, mixes, and other cooking evils that make all food taste like it came out of your high-school cafeteria. From four recipes for macaroni and cheese to our family's special Christmas bread, almost everything is awfully good. How can you not love a cookbook that has a supper dish called Pink Bunny? If you like comfort food, good basic dishes, or just retro stuff, highly recommend it.

From the desk of Jane Galt:

Meanwhile, this little tidbit from

Meanwhile, this little tidbit from the Wall Street Journal (Sorry, no link -- it requires a subscription):

WASHINGTON -- An attorney representing AOL Time Warner Inc. helped write a controversial agreement between two agencies dividing antitrust enforcement that steers future AOL merger reviews to the Justice Department's antitrust division -- headed by one of his former law partners.

The funny/sad thing about the Netscape lawsuit is that it is no longer a scrappy little David against Goliath -- it's one huge corporation against another, both of which are widely disliked by "serious" technology people.

There's been a large minority in the tech community that felt that, regardless of Microsoft's practices, the close involvement of key competitors in lawsuits was a dangerous precedent. In particular, questions have been raised about the involvement of Oracle, which has not been harmed by any of Microsoft's predatory practices yet is a key player, going through the garbage and writing briefs for DOJ lawyers. Why is Oracle involved? Because Microsoft makes database software that's cheaper than Oracle's -- and as Microsoft relentlessly improves it, it threatens Oracle's core business. Now there are serious concerns about whether certain key competitors, notably AOL/Time Warner (which as a media company is a veteran of working the regulatory system), are too good at litigation for comfort.

From the desk of Jane Galt:

Arnold Kling has a very

Arnold Kling has a very interesting pieceon Netscape's server software that also functions as a useful addendum to my Salon article.

As someone who attempted to use Netscape's server technology, I can tell you that if there ever was a company that deserved to lose, it was Netscape. The software was expensive, bug-ridden, horrendously documented, and miserably supported.

Netscape would set up support forums for their server software that required paid subscriptions (on top of what you already paid for their server software) where there were no Netscape engineers to available to answer questions! Ultimately, these turned into buyer-venting sessions, where we ranted against Netscape and suggested alternatives to one another.

With its engineers totally walled off from the user base, each release of the Netscape server was worse than its predecessors. Ultimately, for my company, I chose the JavaWebServer.

The funny thing about the Netscape/Microsoft battle is that it's possible to argue that it was Netscape that acted like a monopoly: sitting there fat, dumb, and happy while someone else took their market share away.

Microsoft's initial releases are almost always junk that no one wants to use (I'd say always, but just because I can't think of an exception, doesn't mean there wasn't one). That's because Microsoft's business strategy relies on getting a product -- any product -- out early to establish a market presence, and then using the feedback from the market presence to relentlessly improve the product. You may not like the kind of code they write, but they are awfully good at developing a "look and feel" that makes consumers happy. As I argue in the article, this consumer focus, at the expense of developing innovative or elegant technology, is what gives the company its bad rap among technology people.

Netscape, on the other hand, is highly technology focused (which is why it was so funny/sad to see them eaten by the other great consumer conglomerate, AOL.) They built a great product, but they were not as aggressive about improvements as Microsoft was, especially on the consumer side. Unfortunately, they got a little soft in the days when they were the only game in town. Confident that there was no real competition from Microsoft, they introduced a passable browser -- Communicator 4.5 -- and some reportedly iffy server software. Unlike Microsoft, they didn't maintain an aggressive focus on consumers, as Kling's piece shows. Every release of a Microsoft product gets better. Netscape products got worse. In fairness, some of the decline in the server software was allegedly due to the fact that they had slowed the pace of browser development to focus on other things, and when IE 4.0 turned out to be decent, they had to pull back resources from everything else to hurl at the browser development team. Which didn't seem to help, of course, because Netscape 6.0 was worse than Communicator. And also in fairness, Netscape pretty clearly thought that it could takes its customers for granted because -- well, because it was Netscape. That's monopoly thinking.

Netscape was too confident that users would continue to use its technology simply because it was already the dominant technology in the market. They took the wrong lessons from Microsoft. Microsoft is not the technology leader in the market (by a long shot), but that doesn't mean the company doesn't innovate. It focuses its innovation on consumer features, which is what makes it so successful. Netscape assumed that once it had established dominance, it didn't matter that much what the company sold because the brand and the network effects would carry it. That's an assumption Microsoft never made, which is why it's around today.

From the desk of Jane Galt:

Andersen is walking away from

Andersen is walking away from talks with the feds, refusing to plead guilty to anything.

Which makes sense. What can the feds offer the partners? No matter what they do, I'm pretty confident that every single Andersen partner is going to be stripped of all his/her assets in shareholder lawsuits -- unless a judge somehow moves to protect less senior partners in distant practices from the one that gave a pass to Enron. Which would be fair, in my opinion, since the junior folks in Seattle didn't have any idea what was happening in Houston -- but I don't know how likely it is. At any rate, the senior partners who are doing the negotiating are most probably going to have their pockets turned out for every last dime no matter what they do, so why settle with the feds? Those who aren't linked to the shredding order aren't going to see jail time anyway, and I doubt they feel so kindly to the partners who were involved that they're interested in undergoing financial and legal pain in order to spare them the rigors of life in one of our many penal institutions.

From the desk of Jane Galt:

Sleepy now, so I'm going

Sleepy now, so I'm going off to bed without getting up the book reviews, but they'll definitely be up tomorrow, along with the long awaited discussion of free trade and tariffs, including Ricardo's Theory of Comparitive Advantage. It's much more interesting than it sounds, for you non-economists -- it's the whole foundation of modern international economics. And it can be described in simple, interesting terms. (Now beginning shameless plug) So if you've wandered in from Salon or beyond, and you like what you see, don't forget to bookmark!

From the desk of Jane Galt:

Via William Quick: Does anyone

Via William Quick: Does anyone else find something more than a little odd in having states invest their money from the tobacco settlement in tobacco stocks and payments to tobacco farmers?

From the desk of Jane Galt:

It's up! My Salon article

It's up! My Salon article on why Netscape should lose its anti-trust case is now available to the public here. I'm the first of a two-part series!

From the desk of Mindles H. Dreck:

"Best" isn't "Perfect"

Democracy is the best system of government going. The idea of government by, of and for the people is an incredible innovation that has brought rights, choice and dignity to billions of people in the last few centuries. I would fight for our democracy, and I think almost everybody who reads this would as well.

Before you say "gee - you're out on a limb here", answer me this: Did I just say democracy is perfect?

Obviously, I didn't, and you probably don't think I did. I vociferously defend democracy on principle, but it has flaws. It doesn't seem to help us deal effectively with long-term problems such as social security. We need a system of constitutional rights to protect the minority from the majority. Politicians represent their constituents to the detriment of voters outside their districts or likely support groups. Nonetheless, a non-democratic system would be vastly inferior, and I feel strongly about it.

So let me now express my feelings about capitalism and free markets: They are responsible for enormous benefits to mankind, and represent the most efficient and meritocratic way to allocate capital and resources. Non-capitalist systems tend to limit social mobility and impede economic progress. So I believe capitalism and free markets have a moral foundation, and I would fight to defend them.

What's interesting is that when I say things like this, others seem to hear "capitalism/free markets are perfect". I'm wondering why that is.

Capitalism and free markets aren't perfect. One problem is the business cycle. We have growth, and then we have recessions. During the 1990s some wondered if the business cycle had been repealed. Apparently not, because we have just been through what can only be called an extremely mild recession. It is possible we will "double dip" and it will be worse, given the vast reductions in capital spending and the possible retrenchment of the American consumer. The markets have given us growth for a long time (consistent economic growth is, interestingly, a 20th century phenomenon), but always in this three steps forward - one step back fashion.

So I take slight issue with Mickey Kaus' comments:

What caused the recession in the first place? Wasn't this the first downturn in a long time to be produced, not by some sort of policy mistake or external shock but by a colossal failure of business judgment on the part of the executives, corporate and non-, who wasted billions on idiotic dot.com projects? They could have used some second-guessing! A little humility seems in order from the defenders of executive acumen. The dot.com bust is the sort of thing that wouldn't happen if the market were as perfect as it's sometimes cracked up to be, right? ....

Well, it is nearly impossible for the private sector to not to be the cause of a recession, as the private sector represents the bulk of the economy. But let's not forget something - all that growth prior to this mild recession was from the same place. This was a capital spending and productivity boom, and a capital spending bust (the productivity boom is holding up so far). Also, capital spending busts have happened before; not every recession, even recently, is the result of an external shock.

So if someone gives you $10 and takes back $1, net-net you have a problem with that? To put it another way, if 10 telecoms beat each other up to give you cheaper long distance, and some of them go bust trying, you have a problem with that? If we create the extraordinary medium (and resource) through which I communicate now but make many seriously ill-advised investments along the way, the system needs second-guessing? I disagree.

The "right" economic solutions are extremely hard to find. It is a dynamic process. Some failed experimentation (and "wasted" investment) is necessary to achieve success. The two cannot be separated. It was a long, huge boom and many of the benefits are still here. It stands to reason there will be colossal failures. The private sector is the right place for that experimentation, as that is where the risks and rewards will be most keenly felt (and the freer the market, the more that is true). So I'm with Glenn, the market allocates capital and makes economic decisions better than second-guessing politicians. Free markets are far from perfect, but like democracy, they are the vastly superior alternative.

I'll end with two Churchill quotes:

Many forms of Government have been tried, and will be tried in this world of sin and woe. No one pretends that democracy is perfect or all-wise. Indeed, it has been said that democracy is the 'worst' form of Government except all those others that have been tried from time to time.

The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.

From the desk of Jane Galt:

Aaron Burr is a Treasonous

Aaron Burr is a Treasonous Viper!

In the department of "Just let it go already", via Andrew Olmstead comes Robert Scheer's groundshaking revelation that -- steel yourself -- Richard Nixon was a bad, bad President. The article is predicated on the newly released Nixon tapes which promise to completely change the way we see Nixon. We now know not only that he obstructed justice, lied under oath, and orchestrated breathtaking abuses of his presidential power, but also that he tossed off anti-Semitic remarks, made silly off-hand comments about the conduct of the Viet Nam "police action", and considered ways to turn the assassination attempt on George ("Segregation Today. . . Segregation Tomorrow. . . Segregation Forever!") Wallace to his political advantage.

I don't know what to say. It's like I've lost a father figure. Where is that kind, gentle hero to whom I turned in my mind at times of crisis to ask, "What would Nixon do?" It is a dark day indeed for the many millions of us who thought of the man I like to call "Uncle Dick" as everything good and fine in the American character.

From the desk of Jane Galt:

I'm Famous! (Sort of) The

I'm Famous! (Sort of)

The following appeared in the Corner:

"If you're going to blast anyone for `advocating' use of nuclear weapons, the person to go after would be me. Then again, since I'm obscure that wouldn't serve your fund drives too well. I'm just an ordinary working stiff who sees a need for the US to deter further acts of aggression. Look at blogs like Sgt. Stryker, VodkaPundit, Live from the WTC and you'll see I'm far from alone -- even if Mr. Lowry and the NR crew don't agree with me. . . "

I want to thank my reader for bringing me to the attention of the NR crew (well, actually, I have no evidence that I've been brought to their attention. But it was nice to see the blog named on the NR site). However, I would like to point out that while I do advocate a "credible threat" strategy in the War on Terrorism, I am not actually advocating the use of nuclear weapons, at least not in the sense that Steve Forbes is advocating the flat tax, or Ralph Nader is advocating a wholesale abdication of common sense. If I've confused anyone on this subject, I apologize.

But of course I haven't, and the person Lowry quoted wasn't advocating using nuclear weapons either. It's just that The American Prospect thought that made better copy.

From the desk of Jane Galt:

You heard it here first:

You heard it here first: Ernst & Young is declining to pursue a merger (one presumes that D&T, the earlier tout, already has), citing concerns about liability. I think Arthur Andersen partners may end up losing more, collectively, then Enron execs. The article tells us that "Ernst & Young is the first of the 'Big Five' accounting firms to say it definitely won't pursue Andersen", which I suppose is technically true, although as a member of the Big Five, Andersen would have some difficulty merging with itself. That leaves PWC, D&T, and KPMG as potential suitors, though I doubt any of them will bite.

From the desk of Jane Galt:

You're not going to believe

You're not going to believe this. Actually, what's worse is that it's all too believable.

From the desk of Jane Galt:

The New York state assembly

The New York state assembly just voted to make September 11th a state holiday.

From the desk of Jane Galt:

TANSTAAFL Watch Via Libertarian Samizdata:

TANSTAAFL Watch

Via Libertarian Samizdata: a mainstream British columnist calls for the abolition of the National Health Service because it sucks.

From the desk of Jane Galt:

John Fund calls for a

John Fund calls for a long, hard look at gerrymandering. It's about time. Computer technology has become so good at drawing districts to the whims of whichever party controls the state legislature, that in a very real way, the individual votes of the majority of the US population just don't count. It's like eating at your Mom's versus eating at a restaurant. What she cooks may be good; you may even like it a lot. But the only way you can get a different meal is by going to a whole different house. That's not a good thing for democracy, especially combined with the newly passed Incumbent's Protection Act of 2002.

From the desk of Jane Galt:

A new study shows that

A new study shows that obesity is worse for health than smoking or drinking, raising a person’s healthcare costs by 36% and medication costs by 77%.

I find this interesting for two reasons. First, because, as the article points out, advocates are much less vocal about smoking and drinking than they are about obesity, even though an astounding 61% of Americans are overweight or obese, at least according to this article. I wonder whether this is because they know they'll get shot down if they even try to enact the kind of puritan legislation that has effectively banned smoking in many places, or because obesity is harder to address.

The other reason that I find this interesting is that with the amazing popularity of Fast Food Nation, which in essence accuses the fast food industry of manipulating consumers to make them fat, not to mention quack weight loss nostrums, I think we're going to see more activism on this front. While I haven't read the book, I've read his article in The Atlantic and seen him on television, and his thesis seems to be that our weight problem isn't our fault -- it's the fault of the fast food industry, which manipulates us to eat enormous portions of unhealthy food.

I find it ultimately unconvincing, although as I say, the argument may be more subtle in the book. On television, he tells us that portions get larger and larger -- which is true -- without pointing out that the reason this is so is that consumers like them that way. While I agree that portion size has something to do with our current epidemic of obesity -- people tend to eat what they're given, rather than stopping when they're full -- all those fast food places have smaller portions on the menu. People choose the supersize double-quarterpounder meals.

The anti-fat crusaders will be fighting something even more powerful than nicotine addiction: a billion years of evolution. We crave fat and sugar because in a scarcity environment, they are the most intense source of energy. This is not news to anyone.

But with Fast Food Nation, we've taken the first step towards a public health crusade: offloading the blame from individuals onto corporations.

When I started smoking, cigarettes cost $1.30 a pack. When I quit, almost 3 years ago, they were near $4.00. Now they're $5.00 a pack or more in New York. Unsurprisingly, when you raise the price of somthing, people demand less of it, which has given the states a nasty surprise as money from the tobacco settlement begins to dry up. This was a major triumph for anti-smoking forces, and was apparently a driving force behind the lawsuits -- forcing behavior changes with a price increase that they never could have gotten legislatively.

This is not the only way in which the anti-tobacco activists have curtailed smoking, of course; by curtailing where we can smoke, they've made it much less attractive to do so. The important point is that successful strategies work on a macro level. Efforts to change individual behavior through advertising, insurance premiums, and the like have been much less effective. And efforts which target businesses start with the declaration that undesirable behavior is the responsibility of someone other than the person engaging in it.

So I think that studies like this, and books like Fast Food Nation, and groups like The Center for Science in the Public Interest (one of the many activist offspring of my beloved beloved Ralph Nader) are paving the way for an assault on the fast food industry as a proxy for our poor eating habits and worse exercise regimes. Perhaps it will make us healthier, although I doubt it. But even if it does, I’m still against this “by any means necessary” approach to changing people’s lives for their own alleged good by stealthily abrogating their freedom of choice.

From the desk of Jane Galt:

Notes and Asides Although this

Notes and Asides

Although this is a labor of love, I'm not above trying to make a fast buck where I can. (My student loan officer is hungry). So here's the deal: from now on, when I permalink a book from Amazon, I get a small cut if you click through and buy it right then (not if you stick it in your shopping cart and pay for it later). This is not a plea to buy books you wouldn't otherwise buy, or accelerate your purchases or anything to make me money; I love you all just for coming to the site and listening to me rant. It's just full disclosure so that you know that if you happen to click through off one of my links and buy, I'll get a little money. This does not mean that I'm about to go hog wild with book links; it's just that I do link books fairly often, either because I'm reading them or they're relevant to something I'm discussing, and a couple of readers who noticed this said "why not get a cut?"

It does, however, coincide with something I started doing at the beginning, and then stopped, but am now going to resurrect: a "What I'm Reading" feature that gives you the Meggish perspective on whatever I happen to be putting in my brain. Reviews will be short, non-polemical, and (hopefully), amusing. This feature will continue regardless of association with Amazon.

Here's the thing though: this website is not about my making money, so if any of you are mortally offended (or even mildly put off) by the practice, drop me a line. If I hear from enough people, I'll stop, and put a hold on the plans for the Megan McArdle Signature Coffee Cup and T-Shirt line from CafePress. I'll halt talks for the Megan McArdle Memorial Little League Field in Central Park. I'll take my name off my building. I'll stop renting myself out by the hour to people who want to hear a good 500-word refutation of the Labor Theory of Surplus Value. I'll. . . I'll do anything, for you, dear, anything, cause you mean everything to meeeee. . .

Thank you for listening. We will now return to our regularly scheduled programming.

From the desk of Mindles H. Dreck:

Too Good to Be True

A certain brokerage has been bragging to the street that they have a computer system that can consistently and reliably beat a treasury market index trading only Treasuries. In other words, they have a black box that allows them to accurately predict interest rate movements of and within the treasury yield curve and generate a small excess return very consistently without taking any credit risk.

One of Long Term Capital Management's most successful trades early on was arbitraging different maturities of treasuries to take advantage of the higher demand for treasuries near certain benchmark maturities (1, 5, 10 and 30 year maturities, for instance) relative to odd maturities (i.e. 4.5 years). They would buy the "off the run", or odd-dated security and sell short a nearby on-the run issue. Since the off-the-run issue had a slightly higher yield to maturity, the trade would ultimately "converge" at a profit. And since it is a "long-short" transaction, it ties up very little capital. The yield discrepancies were very small, so this is a strategy that requires size. LTCM and a handful of bond dealers were big enough, and leveraged enough to turn these small individual profits into easy profit centers.

Funny, I don't remember the big banks offering clients ways to get in on this trade. That's because they didn't need the clients to make money, and because if too many people get in on any trading strategy, the profit potential goes to zero. That is, in fact, what happened to this strategy in about 1997. LTCM and the trading floors of the major investment banks took every bit of spread they could out of the on-the-run/off-the-run trade, and had to look much further afield for ways to put their capital to work.

So back to our friends with the black box. The first question that comes to my mind is - if you have this ability, why don't you guys have the biggest treasury inventory on the street by a factor of ten? A big investment bank can lever up a treasury portfolio very easily (in fact Treasuries are the easiest investment to leverage). Why start pushing your fancy model to customers as research instead?

If I had a model that worked that well, and the means to finance it, I wouldn't tell a soul. If I can make a huge profit, or leverage a small but consistent profit into a huge profit, I'm not going to waste time marketing it. There'll be spies in my shop, for crying out loud, who needs to spend time marketing?

So I'm kind of skeptical of "can't-miss" trading strategies offered as if it were some gift to mankind. To say nothing of my reaction when I get emails like this one I deleted today:

Fire Your Broker & Beat The Market Today Guaranteed!

If you are a short term trader or would like to become one,
the ********** is for you. We have been giving traders
daily updates on short term trading ideas for 12 years now. We profit
in up markets and down markets and keep our subscribers on the right
side of the market especially in the volatile markets that we have seen
in the recent years. Our average winning percentages are usually
between 65-85%.

We specialize in short term trading, from a day or two up to a
week or more. Our picks are both in buys and short sales and 95% of
the stocks we recommend have options, which allow you to trade with
a smaller amount of cash. Our S&P 100 (OEX) option trading has been
used by professional and smaller traders for 12 years. Our winning
percentages in hese (sic) trades are in the 80-95% range week in and week
out. About 35% of ur subscribers trade nothing but OEX options.

We would like to offer you a 2 week free trial of the *************
to see if it fits your style of trading. We are one of the oldest trading services
on the Internet and have thirty years of trading experience. Check out our
website at ************* and click on the Free Trial page.
You will receive 2-3 updates each day to keep you on top of the fast moving
markets. We are sure that you will find the service a help to your trading and
enable you to profit in any market condition.

Options provide tremendous leverage. Trust me, if you were right 80-95% of the time trading index options (and the other 5-20% weren't 100% losses..), you wouldn't be spending your days doling out spam to to the netizenry. You'd be buying up sports teams and wondering where you were going to rank in the next Forbes billionaires list.

That word "guaranteed" is a big no-no too, and will get them in serious trouble if a regulator gets hold of it. I deleted the name of the organization and its url above simply because this is obvious rubbish and I don't want any part of it that isn't finger-pointing ridicule.

From the desk of Jane Galt:

Andrea Yates has been convicted

Andrea Yates has been convicted of capital murder. It's just. But I find it hard to rejoice. The woman is pretty clearly as nutty as a busload of Skippy.

Now the jury votes on whether or not to give her the death penalty. I doubt she cares. Which makes me doubt the wisdom of executing her.

From the desk of Jane Galt:

Reader Myria does some fact

Reader Myria does some fact checking inspired by this post on the column by Nicholas Kristof in the New York Times, who apparently didn't think to do any of his own; to wit, he used Japan as an example in support of this statement:

there's abundant evidence that having more handguns also means more gun thefts, more armed robbery, more suicide and more murder.

Myria got the data:

FWIW, out of curiosity I did some quick checking and what I had heard was wrong. The Japanese suicide rate alone exceeds the US Murder/Nonnegligent Manslaughter/Suicide rate by 1.2/100,000. United States 1998 Suicide: 11.3/100,000 1998 Murder/Nonnegligent Manslaughter: 6.3/100,000 Total: 17.6/100,000 Source - WHO FBI

Japan
1997 Suicide: 18.8/100,000
1997 Murder: 1/100,000 (roughly - Pop: 126,166 thousand, Murders: 1,282)
Total: 19.8/100,000

Source -
WHO
Japan Crime
Japanese Census

Years chosen based on last available WHO suicide data.

Somehow I doubt anyone is going to make the argument that gun ownership reduces suicide rates, however. But given that the Japanese Suicide rate alone apparently exceeds the US violent death rate in total, it
would seem to me that the Japanese make a rather poor example for the anti-gun
types to point to.

Is it too much to hope that Mr. Kristof will stumble in here and find the evidence of his silliness? Undoubtedly. But a girl can hope, can't she?

From the desk of Mindles H. Dreck:

The Twin Lights

I watched from Exchange Place, Jersey City, as the lights went up last night. I have a few pictures, including one framed by the fire engines parked at exchange place hoisting a flag between the raised ladders.

Due to my recent technology problems, I don't yet have photo-editing or FTP functionality, so I'll post the pictures later.

There were hundreds of people on the waterfront at Jersey City, which made attending the debut worthwhile. The event itself was anticlimactic - the lights went up, they tweaked the focus to define the columns and then there they were.

The surf was up a bit, so some of the folks at the railing trying to steady their cameras for night-time photography (like yours truly) had to dodge the spray.

From the desk of Mindles H. Dreck:

Credit Where Credit is Due

An excellent and thoroughly-researched article by Diana Henriques appeared in Saturday's times. Since I regularly pop veins in my forehead over the Times, I thought I would mention it. This is detailed, informative business journalism, and it deserves recognition in a world of tainted Jack Welch interviews.

Do try to get past the "Three Little Piggies" lede and read the article. It makes some excellent points about how Enron abused structured finance techniques that have been a tremendous boon to financing of legitimate businesses. If we eliminate or over-regulate structured finance we are in danger of throwing the baby out with the bath water:

Home mortgages, car loans, credit card debt, student loans, equipment leases — all these assets, and more exotic ones like future receipts from British pubs and the box-office take for Steven Spielberg's future movies, have been remodeled into asset-backed securities. Those securities can now be found generating handsome returns for pension funds, mutual funds, banks, brokerage houses, insurance carriers, hedge funds and even some individual investors. A result, bond market experts say, has been the expansion of credit to consumers, greater liquidity and flexibility for lenders and the modulation of risk for corporations.

There's just one problem: The same financial tools used to create asset- backed securities were also used to construct the elaborately camouflaged and booby-trapped partnerships that have been blamed for Enron's collapse.

[...] in fact, many of Enron's off- balance-sheet partnerships, on paper, are simply wildly complicated permutations of the basic structures involved in the creation of asset- backed securities: special-purpose entities, credit enhancements and contractual arrangements — including interest-rate swaps and other derivatives — that move assets, and the risks and rewards of owning them, from one entity to another.

Consequently, whatever courts, regulators, lawmakers, accountants and investors decide about the permissible uses of special-purpose entities could have far-reaching and unintended consequences for Wall Street's highly profitable structured- finance business. And that, in turn, will affect the companies that rely on structured finance to solve legitimate credit and cash-flow problems.

The solution, as I've suggested before, is disclosure, and plenty of it:

Companies that want to use complicated structured-financing techniques should be prepared to explain them completely, he (Professor Gilson) said. And in plain English, please — if only to demonstrate that the board of directors and chief executive understand the deals themselves. (Don't even try to persuade anyone that a structured-finance deal involving a closely related party — the company's chief financial officer, for example — is a good idea, he added.)

From the desk of Jane Galt:

Craig Biggerstaff has an interesting

Craig Biggerstaff has an interesting post on Social Security, in which he makes this observation:

Since Social Security is the retirement plan of last resort, it must be made immune to individual stupidity or chance. This is due to Biggerstaff's Law: it will not become acceptable in the future to let a voting bloc of elderly grasshoppers starve, so any grasshoppers will inevitably be funded (again) by responsible taxpaying ants.

A purely private investment scheme, like a mandatory 401(k), would give individuals the most control. It would also be subject to Enron-like investor madness, followed by the application of Biggerstaff's Law above.

Fans will be surprised to find that I agree with Mr. Biggerstaff, and this is because of a phenomenon economists call Moral Hazard.

The premise of Moral Hazard is simple: when you buy fire insurance, you suddenly don't care as much whether your house burns down. (No, I'm not talking about people who burn the house down to collect the insurance; economists call that Insurance Fraud, just like everyone else does). Oh, you still care -- there's all those pictures of the wedding, and little Timmy with his first goldfish, and that precious light-up plastic statue of James Joyce you bought the night you won your first scrabble tournament. But you don't care as much as you would if you were going to have to scrape up the 200K to buy and furnish a new house on your own. You're not as careful about smoking in bed. When you use up the fire extinguisher on the Portieres du Salon au Cherries Jubilee, you forget to buy a new one. After little Timmy gets bronchitis from staying out in the garage for hours during the winter, you agree to let him practice his fire-eating in the house.

This is what's known as moral hazard: the act of taking a large precaution (insurance) has caused you to stop taking small precautions. Fraud aside, one of the most reliable predictors of accidents is the size of the insurance coverage against those accidents. Think of HIV. When treatment became available, unprotected sex became more popular.

Regulations intended to protect people from catastophe work the same way. People build houses in areas prone to regular flooding because they know that FEMA will swoop in and bail them out. Farmers plant crops that generate the highest yield, rather than those that are appropriate to local conditions, because the DOA will bail them out of any crop failures based on -- you guessed it -- yield per acre. Savings and Loans executives take off on a massive jackalope-ranch-buying-and-junk-bond-trading spree and the investors at those institutions don't bother to look up from their Bingo cards, because they know the government will cover any losses.

Even most hard-core libertarians aren't going to let some poor schmuck who bet on the wrong horse in the market starve to death when he's too old to work. People know this, which makes them more likely to take outsized risks with their portfolios.

Imagine two retirement investments. One has a 100% chance of paying off $60 for every hundred you put in. The other has a 50% chance of getting a $100 payoff, and a 50% chance of getting nothing. In a laissez-faire economy, risk-neutral or risk-averse investors (there's no such thing as a risk loving investor, not even your idiot cousin Bob who bought the jackalope ranch. Risk-loving investors, in theory, are people who, given the choice between a 50% chance of $40, and a 100% chance of $60, would take the 50% chance at $40 just for the thrill of it) will choose the sure thing, rather than the 50% chance of a higher return, because the Expected Value, or the probability wieghted value of a choice, is $60 for the first, but only $50 ($100 x .5 + $0 x .5 = $50) for the second. With me so far?

All right, now imagine social insurance. Let's say that you know that if you lose everything, your fellow taxpayers will kick in some amount -- let's call it $25 -- to keep you alive. Let's look at that expected value again:

Expected value of the sure thing: $60

Expected value of the risky investment:

Upside: $100 x .5 = $50
Downside: $25 x .5 = $12.50 (I lost, but my fellow suckers. . . excuse me, citizens, are keeping me in Geritol)

So my expected value for the risky investment is $62.50. The rational choice is to gamble, and count on the taxpayers to make up my losses, at least in part. Note that in order for me to choose the sure thing, social insurance has to be less than or equal to just 1/5 of my potential high return.

This is a vastly simplified scenario, of course, and it leaves out the question of whether most people can actually make qualified investment choices, but you see my point. Even in a world of rational, informed actors, the moral hazard of the implied social promise could lead people to take on a lot more risk than they should. And a lot of that risk will be taken on on behalf of the future taxpayers they're expecting to cushion the downside, which could severely undermine the stability of a private system. So government will have to take some sort of measures to mitigate this. What those measures might be, I shall leave for brighter minds and another day.

From the desk of Mindles H. Dreck:

Fresh Air From John McWhorter

Terry Gross interviewed John McWhorter, Berkeley professor and critic of a "cult of victimology", on today's Fresh Air.

He defends "ebonics" on its own merits, disputing arguments that it should enjoy some sacred status merely because of the culture from which it came. It's interesting that McWhorter has drawn so much criticism for ascribing intrinsic value to this dialect without making the proper obeisance to external circumstances that accompanied its development. He argues that ebonic constructions can express certain subtleties that are lacking in so-called "standard english".

I find myself attracted to his more positivist view that a contemporary dialect such as ebonics should be viewed as a linguistic innovation.

There is also an interesting discussion of race and stigmas associated with studying hard or being smart, i.e. the "nerd" stigma vs. the "being white" stigma. He actually leads this discussion into an argument for vouchers.

When I was in high school, the "being white" stigma was attached with the label "oreo" (black on the outside, soft and white on the inside). One of my best friends from high school is a British and American-raised Nigerian (now a TV reporter for CNN), and he fought the "oreo" label quite a bit. Unfortunately, many white students adopted the term.

Just add that to the many things I don't miss about high school.

From the desk of Jane Galt:

I saw them turn the

I saw them turn the memorial lights on this evening, and the most amazing thing was that they seemed to stretch forever into the heavens. Those of us familiar with the area argued over the question: were they really that tall?

Yes, they were. They were really that tall. And the lights tracing their heights are heart-breakingly beautiful. Go look for yourself.

From the desk of Jane Galt:

Poor Little Dems The New

Poor Little Dems

The New Republic reports with horror that it may just be the Democrats who get shafted by the CFR bill they just passed:

Party operatives tell of numerous calls from nervous Democratic officeholders asking precisely that question. "[P]eople are discovering to their discomfiture that they did not understand the bill as well as they thought they did," says one party lawyer. One party staffer canceled a luncheon interview with me last week because, he said, he had to spend the entire day explaining to House members that, contrary to their expectations, there were no easy end runs of the law already mapped out.

Okay, so they kept up the pressure on the issue for yearsto pass a law that it turns out they only voted for because they thought they'd be able to sneak around it. I'm supposed to feel sorry about this?

From the desk of Jane Galt:

Oh my stars and garters!

Oh my stars and garters! Arthur Andersen is desperately trying to salvage some vestige of its partners' net worths by selling its practice to a rival.

I'm curious to see whether it will work, or whether the taint associated with its practice has killed even the asset value of its business practice, which, after all, is mostly clients (who no longer want to do business with the firm), brand (I don't have to talk about that one) and people. I'm especially curious to know whether those who've worked with Arthur Anderson will find it hurts their chances of getting another job.

And with this rather thin set of assets comes a potential indictment, and a virtually guaranteed raft of civil suits which could quite possibly bankrupt the partners. Look at the way that liability on asbestos has attached to companies that had possession for a couple days of an asbestos-using subsidiary of some company they bought -- Deloitte partners or anyone else would have to be crazy to take the risk. IMHO.

From the article, it seems like they're trying to set up some structure where they sell the assets to Deloitte, while leaving a shell of Anderson to deal with the Enron liability. I think that they must have access to much better drugs than I do if they think this is going to fly. Essentially what they're trying to do is sell the business operations, leaving as little as possible in the shell to pay off creditors. It'll be a cold day in hell when the FTC, the SEC, or whoever has charge of such things, allows that to go forward, unless they can prove that they're getting a higher price for the assets than a bankruptcy sale would -- in which case, why wouldn't Deloitte wait for the fire sale?

From the desk of Mindles H. Dreck:

No Words

Just this one post during work -

I watched the special last night, and stopped by Engine Company 4 to pay my respects on the way to work. While we did not formally observe the minutes of silence, it was silent nonetheless.

That's the way today is. Most of the people around me were right here on September 11, plotting a way out of downtown and checking in with family, fearing the worst about friends, clients and others trapped a few blocks away.

I don't have time to try to describe the feeling here. It is apparent, however, that the passing of a discrete chunk of the calendar means something to everyone.

So far it has been an entire morning of silence. But it isn't a sign of productivity.

From the desk of Jane Galt:

Nowhere To Run We're sending

Nowhere To Run

We're sending troops to Yemen to head off any Al Quaeda folks who might want to escape there, especially any whose initials might be OBL.

But I think he's dead. If he weren't, I think that we would have seen another "na-na-na-boo-boo, I'm a psycho kill-er" videotape by now.

From the desk of Jane Galt:

In Memoriam In Flanders Fields

In Memoriam

In Flanders Fields

In Flanders fields the poppies blow
Between the crosses, row on row,
That mark our place; and in the sky
The larks, still bravely singing, fly
Scarce heard amid the guns below.

We are the Dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved, and were loved, and now we lie
In Flanders fields.

Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold it high.
If ye break faith with us who die
We shall not sleep, though poppies grow
In Flanders fields.

From the desk of Jane Galt:

Very interesting article on Cuban

Very interesting article on Cuban v. American infant mortality shows one of the trickiest aspects of using statistics: making sure you're not comparing apples to oranges.

The reason this is so difficult is that often statistics which sound like they're the same thing actually aren't. For example, comparing rape statistics. Most of us think of rape as being forcible intercourse with an unwilling victim. However, there are studies that have included such things as statutory rape (which may be appalling, but isn't what we're trying to get at, which is the rate at which people are sexually assaulted), "rapes" in which the victim never struggled or said no, but merely reported later that she was uncomfortable, or other definitional expansions that make it hard to establish valid comparisons with other studies that focused on forcible intercourse.

In this case, the article points out that while Cuba seems to have a lower infant mortality rate than America, this appears to be because extremely low-weight births for which American doctors perform heroic intervention (and thus get recorded as a live birth in America, followed by a death a few hours later), get reported as stillbirths in Cuba. So it's very important, when you see a statistic, to ask yourself if the two numbers are really comparing the same thing.

From the desk of Jane Galt:

Sgt Stryker demonstrates that military

Sgt Stryker demonstrates that military preparedness isn't just a buzzword: it's a way of life.

From the desk of Jane Galt:

Another outstanding tribute to Ted

Another outstanding tribute to Ted Rall.

From the desk of Jane Galt:

Question of the Day for

Question of the Day for New Yorkers: Are you going to watch it?

The answer for me is that yes, I am. I don't like violent things, and I have been extremely put off by the voyeurism of some of the tourists down at the trade center, munching popcorn and chatting gaily away as they filmed what they could of the carnage. So why am I watching it?

Like a lot of people from the city, I still find out, every month or so, about someone else I know who was lost, most recently the first guy I dated in college. And I guess that I want to know what happened to them. And part of me thinks that we ought to know, so that we know exactly why there are boys dying a long way away from here. For us, in the most real sense. . . to avenge our city. Perhaps that makes me hypocritical, given how I feel about the Daniel Pearl tape . . . but what bothers me about the Daniel Pearl tape is not that people want to watch it, but why . . . it's the same thing I feel about those tourists. Many of them come with a sense of -- well, reverance isn't quite the right word, but with a sense of respect for what happened there. They're trying to understand what happened there; to experience it, emotionally. It's not those who make me angry . . . it's the ones whose emotions are so shallow that they experience it only as the tawdriest sort of thrill that something really BIG took place there, or a forum to display ersatz sentiment.

So I'm going to watch it. But I am not without reservations.

From the desk of Mindles H. Dreck:

COMPLETE XP MELTDOWN

My home PC has completely melted down subsequent to multiple automatic "upgrades" from Microsoft that failed to install. System repair crashed. Dirty install crashed. I fear all is lost. I am posting this from my wife's PC while diagnostics run on mine.

This will take all my free time to fix. I apologize for the lack of posting.

UPDATE (9:00PM): Nothing wrong with my predictions so far. Ultimately had to reformat and start from scratch. My last two months of email is gone, including a variety of codes etc., needed to reinstall various utilities.

My shoulder has developed some sort of problem from leaning over my computer, or from flipping the bird in the general direction of Seattle.

I'm a mess. The WTC special is tivo-ing upstairs and I've had it with PCs for a while.

From the desk of Jane Galt:

All right, my little chickadees,

All right, my little chickadees, I’ve come out of retirement to talk about a topic that I am sure is on the minds of us all: Unemployment!

No, not how to collect it, though as a veteran of multiple layoffs, you can be sure that I’m an expert on that as well. No, today I’m going to talk about an exciting term you may never have heard: NAIRU, or the Non-Accelerating Inflation Rate of Unemployment. (It will not surprise you that this term was invented in the 60’s, when even economists tried to make their acronyms sound like something with which their hippy-dippy students could identify.) Actually, I won't quite be talking about NAIRU itself (really, I just love saying the word), but about it's kissing cousin, Full Employment

What brought all this to my mind is that, as sharp-eyed observers may have noticed, unemployment just dropped to 5.5% from 5.6% the month before. Now, that may not seem like much of a drop to you, but the fascinating thing about this is that 5.5% is well below what believed the full employment level to be in the mid-90’s. Full Employment describes a situation where pretty much everyone has a job that wants one. So where’d the 5.5% come from, you ask? The answer is that full employment doesn’t actually mean that everyone’s employed. There are people who are just entering the job market, like students or housewives, who just haven’t found the right job; there are people moving between jobs; and there are people who are supposed to be looking for a job, and tell their wives they are looking for a job, and put on a suit every couple of weeks so that they can look the guy at unemployment right in the eye and tell him how hard they’re trying to find a job, but who don’t actually want to find a job. The first two are known as Frictional Unemployment; the last is usually known as “that goddamn bum you married” or some such.

That last group is also a symptom of what’s known as Structural Unemployment. In simplest terms, this is the unemployment that is introduced into the system by the regulatory structure of the markets. These can raise unemployment either by making it more attractive for people to stay unemployed, or less attractive for employers to hire people. The most common things that can cause structural unemployment:

Minimum Wage Laws Minimum wage laws, as any reputable economist will tell you, cause a loss of jobs. Depending on their politics, they may argue about how large this is, and whether the social cost is offset by the benefit of some people getting higher wages, but few will argue about whether or not the jobs get lost. Those that do, like Card and Krueger, who tried to refute this using possibly the worst dataset in economic history (it relied, among other things, on self-reporting), end up getting ripped to shreds by other economists. (When I asked my b-school professors about the study, they told me that Card-Krueger, who like the minimum wage, are highly respected by op-ed columnists. Becker, and others who refuted their study, are highly respected by economists. You decide). The idea that minimum wage laws do not cause unemployment goes against the basic proposition that when you increase the price of anything, suppliers (workers) want to provide more of it, while consumers (employers) want to buy less of it. Yet economists who would never be caught arguing that if you increased the price of paper by 15%, companies would use the same amount, somehow get all giggly and foolish about the minimum wage.

Imagine that there were a “minimum car price law” that set a floor of $20,000 for cars. Sure, some people might trade up from a Geo to a Ford Taurus, but what about your layabout Cousin Todd, whose entire income comes from selling the Grade Z reefer he grows in his basement? Bummer, dude . . . guess he’s walking. Minimum wage laws work the same way. There are some employers who simply up the wages they pay, and either take it out of profits, or pass it onto consumers in higher prices. But there are some employers whose businesses are marginally profitable; raising the minimum wage means they either go out of business, or do the work themselves. There are other employers who currently use labor because it’s cheaper – but with higher wages, would find it more profitable to switch to machinery. Hand carwashes and dry cleaners are good examples of businesses that simply aren’t economical at the current minimum wage – people won’t pay $20 to get a shirt cleaned. There are also employers who don’t care too much right now about efficient use of labor, but might care a whole hell of a lot if you raise the price of that labor by 20%. All of those companies will cut jobs if you raise the minimum wage.

Meanwhile, everyone and their cousin (though possibly not Todd) enters the job market, because the wages make working more attractive. Unemployment is measured by how many people are looking for work at a given time. More people seeking fewer jobs make unemployment jump. How high it will jump depends on how responsive workers and employers are to the price of labor; but it’s idiotic to say that there will be no response (or, as I heard on television the other day, that minimum wage laws actually increase employment because. . . I don’t know, Ralph Nader beamed it to the pundit from his Organic Space Capsule or something. That actually sounds more intelligent than the argument he made, which was so dumb that I can’t make my mind hollow enough to reproduce it here. This is what I get for watching TV).

The rise in unemployment due to minimum wage is a rise in structural unemployment; it is a permanent increase in the equilibrium level of unemployment in the economy.

High Payroll Taxes on Employers like, for example, Social Security and Unemployment contributions, work much the same way as minimum wage laws do – they raise the cost of labor, so employers use less of it.

Making it difficult to fire people This seems counterintuitive, but the harder it is to fire someone, the more risky it becomes to hire someone. What if you accidentally got a Cousin Todd, smoking up in the alley before he drives the forklift? You can’t let him drive the forklift – and if you can’t fire him either, he ends up sitting in the break room, drawing a salary and making funny fish faces at the TV.

This is one of the main reasons that Spain has 22% unemployment. If you can get a job, you’re in Sucker Heaven – that’s why this is the nation that gave the world the 3-hour lunch break. But as we’ve seen, anything that makes employment more attractive to workers makes it less attractive to employers, and this is no exception. Companies desperately try to substitute machinery for people, or temporary workers for permanent ones – anything to keep from adding someone to their payrolls that they might be stuck with for the next 40-50 years.

Interestingly, this, along with the minimum wage, is a major factor in inner-city unemployment. Firms won’t take a risk on anyone, because discrimination suits and other laws increase the risk that you might get stuck with someone awful. For people with a spotty unemployment record, this makes it very difficult to break into the labor market, because the minimum wage prices them out, and firms hire friends and family of current workers whose work habits they can verify.

Productivity Lowering Regulations Though they are not the precise econometricians some extreme free marketers would have you believe, meticulously measuring every input from paperclips to people to ensure that they are getting an adequate return, employers do have a pretty good idea of how much work they have to get out of employees to make them pay for themselves – especially at the lower end of the job market. Anything that lowers an employee’s productivity brings him closer to the point where he’s not worth his salary.

Examples of productivity lowering regulations:

o Union-type rules specifying minimum staffing, minimum hours, or maximum speed of work, otherwise known as “featherbedding”
o Safety regulations that force employees to work less efficiently
o Environmental regulations that alter work practices
o ADA regulations that force changes in work area configurations
o Any sort of regulation that forces employees to spend time documenting how they complied with the regulation

Note that some of these regulations may, depending on your politics, be something you support. However, the next time you hear employers talk about the implied productivity loss in a regulation, realize that this means that a real, live person may really lose their job.

High Unemployment Benefits make it more attractive for the Goddamn Worthless Bum to stay firmly planted on the couch. This isn’t much of a worry in the United States, because almost no one is willing to do any work, even lying on the couch, for a maximum benefit of less than $8,000. In Europe, however, it’s a major contributing factor to “natural” (read equilibrium) unemployment rates not seen in the US since the Great Depression.

All welfare benefits can contribute to this effect, most especially ones that require recipients to be looking for work. Since many such programs define things like sitting around and visualizing what it would be like to actually have a job, looking for work doesn’t necessarily correlate strongly with getting work – and oops! There goes the unemployment rate.

Now back to NAIRU (I just love saying it – I can practically smell incense and the Oaxaca ditch weed). NAIRU is thought by many to be the equilibrium level of employment that an economy can sustain over the long run without throwing itself into an inflationary tizzy. There are differing explanations for why this is, with which I won’t bore you, but most economists do agree that there is some level, which differs between economies, below which unemployment cannot sustainably drop.

The interesting thing is that NAIRU rose for decades in the US and Europe. In 1960, when JFK ran on the slogan “Let’s get this country working again!” unemployment was a whopping 3.6%. In 1996, it was widely agreed that the “Full Employment” level was somewhere around 6%.

Oops. What happened?

Well, welfare reform, for one – a lot of people suddenly found that they couldn’t just look for work; they had to actually find some. Turned out a lot of them had had some all along, under the couch cushions maybe, and others found it was less of a hassle to just get a job then go through the arduous process of pretending to look for one.

For another thing, productivity, which had dropped like a stone for decades, suddenly started rising again in the 1990’s – we think. As with any economic figure, people argue – in this case, about whether those gains were really felt outside of the computer industry. So the jury’s still out.

And, of course, the idea of NAIRU itself is taking a beating these days, although some would argue that those who criticize it are wild-eyed radicals trying to drive the stock market to ever loftier heights.

Anyway, by some mysterious process, we’ve arrived at a recession level of unemployment that’s lower than the expansion level of five years ago. Pretty neat stuff. Which only leaves us one question:

Where the hell’s my job?

From the desk of Jane Galt:

John Boyd III writes in

John Boyd III writes in to remind me that there are guys out there who like hooters in all sizes. [Image is actual size -- ed.]

From the desk of Jane Galt:

Every time I edit a

Every time I edit a post, blogger sends it off into the ether. I'm mad as hell. . . but I tricked it. I kept a copy of the damn post this time, so all I lost was my edits. It'll be back up soon.

From the desk of Jane Galt:

Is this the best that

Is this the best that the gun control movement can come up with?

Nicholas Kristof's column on the Second Amendment Sisters at Mt. Holyoke puts forth what may be the worst argument for gun control that I've ever seen in a New York Times column, which is really saying quite a bit.

The tone is alarmist:

Alas, one of the most far-reaching consequences of 9/11 is a surge in gun sales around the country.

So while we don't know whether more Americans will be killed by anthrax, we can be quite confident that plenty of us will be killed by these additional handguns. . .

. . . as a country hick, I'm comfortable with guns. But there's abundant evidence that having more handguns also means more gun thefts, more armed robbery, more suicide and more murder.

This in an article on the Mt. Holyoke SAS chapter, mind you. This is what I like to call the "Sauron's Ring" theory of gun control: guns are so dangerous and powerful that merely owning one can send previously law-abiding upper-middle class lit majors rampaging through the green hills of New England, murdering and robbing as they go.

I think he's trying to hide how laughable this is with that "gun theft" remark -- except that this is disingenous in the extreme, because unless Mt. Holyoke's rules are strangely different from those of other New England womens' colleges, those guns aren't being kept in the dorms -- they're being stored at a firing range, a highly secure location. Which I suspect Kristof knows, because he tries to frighten us with the image of bullet-creased target sheets lying around otherwise girl-y dorm rooms. If the guns were there, we can be sure we would have heard about it.

Even worse is that abundant "evidence" he was talking about -- or at least, the examples he chooses to give us:

Japan, where I used to live, allows only about 50 people (all leading target shooters) to own handguns, and while criminals do smuggle them in, there were only 28 gun deaths (murders and suicides combined) in 1999, the most recent year for which figures are available. By contrast, the United States had 26,800 gun deaths in 2000.

England has higher rates of assault, vehicle theft and burglary than the United States. But tight controls on handguns mean that England's murder rate is only one-sixth of America's.

He can't be serious. Japan is also a country where you can leave your car running with the keys in it, and the only thing that will happen is that someone will turn the engine off to keep you from running out of gas. It's crime is almost entirely of the organized variety. Are our nation's colleges really graduating journalists who think that correlation is causation?

England's gun crime rate has gone UP in lockstep with the tightness of it's gun controls, and is skyrocketing now that they have been banned completely. These are his best arguments? Kristof closes with a suitably apocalyptic graf:

Our desire to defend ourselves from terrorism by buying firearms will mean, almost certainly, that thousands more Americans will die in the years ahead from gunfire. It's not terrorism, but it should be terrifying.

Perhaps it should. But if that's the best evidence the gun control folks can come up with, I'm not losing any sleep.

From the desk of Mindles H. Dreck:

The Quaker Petition

I have been reading Founding Brothers, which has an extraordinary chapter (called "The Silence") about the debate over slavery in the the last two decades of the 18th century. It describes several speeches and texts delivered and written by Benjamin Franklin, George Washington, Elbridge Gerry and others. Each of these men chould be given some credit for opposing slavery, particularly Franklin, who condemned it even in his last published work and consistently maintained it was a heinous violation of the principles outlined in the Declaration of Independence.

The The 1783 Quaker Petition to Congress regarding the Abolition of Slavery stands head and shoulders above others as a moral proclamation, calling evil, "evil", and foreseeing the future destructiveness of slavery even as others compromised on it to "save the union". This is a document worth remembering:

We have long beheld with sorrow the complicated evils produced by an unrighteous commerce which subjects many thousands of the human species to the deplorable State of Slavery.

The Restoration of Peace and restraint to the effusion of human Blood we are persuaded excite in the minds of many of all Christian denominations gratitude and thankfulness to the all wise controller of human events; but we have grounds to fear, that some forgetfulness of the days of Distress are prompted from avaricious motives to renew the iniquitous trade for slaves to the African Coasts, contrary to every humane and righteous consideration, and in opposition to the solemn declarations often repeated in favour of universal liberty, thereby increasing the too general torrent of corruption and licentiousness, and laying a foundation for future calamities.

We therefore earnestly solicit your Christian interposition to discourage and prevent so obvious an Evil, in such manner as under the influence of Divine Wisdom you shall see meet.

Unfortunately, the will to eliminate slavery was overcome by the fear that the union would not survive the debate, economically or politically. There were some who sought to justify slavery on religious grounds (!), but most of the arguments merely cited the dangers to a fragile new country or the cost to the Southern economy, recognizing the practice itself as unjustifiable.

I had not reviewed this history since high school. Reading "The Silence", I shook my head and thought how close we came to cutting off 82 more years of horror, avoiding the slaughter of the civil war, and living up to our own principles. What an ungodly compromise.

I would love to read a book that focused on the arguments for and against slavery during this period (like an extended version of "The Silence", but including the full text of the various speeches and publications). If you have a recommendation, please let me know.

From the desk of Jane Galt:

Blogger's wonky. Posts that were

Blogger's wonky.

Posts that were here before aren't now, including a decent one on gun control.

Oh, well. . . back to the drawing board.

From the desk of Jane Galt:

Department of Non-Leading Indicators Business

Department of Non-Leading Indicators

Business school classmates and others have started generating their own indicators for the general health of their sector, or the economy at large. Some of my favorites:

Sector:

-- Availability of Executive Dining Rooms for non-executives
-- Availability of free sodas
-- Availability of free coffee
-- Air travel: First class, business, coach, or standby
-- Charity funds
-- Recruiting

In the major MBA sectors: Finance, Management Consulting, Tech/Telecomm, and Big Companies That Don't Ask Much of You in Return for Their 85K -- all these indicators are still trending downwards, except availability of Executive Dining Rooms, which isn't a good sign either.

And in the department of economic NLI's:

-- Tech employment is sharply down, which indicates that investment spending has still not picked up
-- MBA jobs, which tend to exist in the highly lucrative, highly volatile sectors of the economy, are way down, with only 40-50% of this year's class of Top 5 MBA's employed. For reference, most MBA recruiting actually takes place in the fall of your second year, so for my class the number was closer to 80%, and even higher for the class before mine.
-- New York city real estate is looking a little better; some people are buying again. This jibes with the continuing rise in home prices across the country, although in New York prices are considerably off their highs, reflecting weakness in the financial sector.
-- Anonymous sources report that a yahoo I used to work with, who lost most of his money in the Internet bubble, has started investing again. I think this means that we should run for the hills.

From the desk of Mindles H. Dreck:

Plane Hits Pentagon - September 12, 5:37 PM

Does it bother you that thePentagon's security cameras are off by more than 22 hours?

From the desk of Mindles H. Dreck:

Noted & Quoted

Blogger is down, so this quotation goes in the main column:

VodkaPundit - Chill Before Serving:

An Open Letter to George W. Bush Dear Mr. President,

Your recent decision to wildly increase steel tariffs leaves me unable to argue against the latest screed from Paul Krugman in today's New York Times.

Now that hurts.

Yours, etc.

From the desk of Mindles H. Dreck:

Risks of Asbestos

The effects of asbestos exposure have come up in several conversations I've had recently, including at the blogfest. After reading Iain Murray's new column on pollution, I remembered to dig up my post on the subject of asbestos from October 11.

Although I am an asthmatic and I work near Ground Zero, there are many reasons I don't worry about airborne asbestos:

1) there isn't much
2) it is surely Canadian Chrysolite asbestos, which is not the type involved in the best documented health risks (as noted in my post)
3) asbestos by itself does not increase lung cancer risks much - unless you smoke. Smoking and asbestos exposure seem to multiply each other. I don't smoke.

Here are some comments from a public health professional near and dear to my heart:

asbestos increases the risk of

1/mesothelioma (a cancer of the lining of the lung that is
extraordinarily rare) by a ton

2/lung cancer (a cancer of the lung-duh) by a modest amount (6x)

3/lung cancer in a smoker by a whole lot but less than a ton (100x) (that is it is synergistic w. smoking, which is by itself a 10x risk for lung cancer)

4/ asbestosis - a type of pulmonary fibrosis

5/ pleural (lung lining) disease consisting of focal and diffuse benign plaques (seen on xray and one of the more common ways that a history of significant exposure to asbestos is diagnosed.

however, even though the risk of mesothelioma is increased the most, you
start from such a rare event that the burden from lung cancer even in non-
smokers is probably greater.

asbestosis (fibrosis of the lungs caused by the irritation of the fibers) has its own disability associated w. it causing a restrictive lung disease (low lung volumes) (as opposed to an obstructive lung disease like bronchospasm in asthma or smoking related obstructive lung disease).

There is some quarrel as to whether the types of asbestos fibers used in most household insulation actually cause asbestosis and increased cancer rates, miners being the ones on whom the numbers are based and they are clearly exposed to the fibers in the form thought to be the worst offender.

"Asbestos is the commercial name for a group of hydrated magnesium silicate fibrous minerals. There are two major types: serpentine and amphibole. Ninety percent of the asbestos currently used in the United States is Canadian chrysolite, a serpentine fiber that is reportedly less carcinogenic"

However, I gather that is irrelevant from the insurance point of view as the courts have taken the view that any product bearing the word asbestos gets to be at fault if someone is unfortunate enough to develop any of the above diseases.

Of incidental note, mesothelioma is not survivable unless you are named Stephen Jay Gould.

some stats:

Asbestos workers are at significant risk for the development of both non-malignant and malignant pulmonary disease.

About eight percent of asbestos workers will die of respiratory failure secondary to asbestosis.

More important, the average asbestos worker has a 50 percent chance of dying
from a malignancy, compared to around 18 percent for the average American. The vast majority of cancers in asbestos workers involve the lung - either primary lung carcinoma or mesothelioma.

The lifetime risk of developing mesothelioma among asbestos workers is thought to be as high as eight to 13 percent. There is a long latency of approximately 30 to 40 years from the time of asbestos exposure to the development of mesothelioma.

From the desk of Mindles H. Dreck:

For The Record..

..the steel tariffs go against everything I believe in and represent either a campaign favor or a loss of spine from a president we had all been hoping was sticking hard to his principles. After Will, Postrel, Blair, the Wall Street Journal, et. al. I really don't have much to add. Until, as I said over in the other column, I find the pundit that wants to defend it on the merits (as opposed to indirectly, like Paul Orwin).

UPDATE: I may have mischaracterized Paul's post above, as it is more about the "hobgoblin of consistency" than steel. You should go see yourself.

While I'm bashing Bush, I'll add that I'm gritting my teeth as proposals come out on corporate responsibility. Both sides are providing lots of feel-good verbiage but I have a feeling common sense may end up the surprise victim when these reform measures emerge fully baked from the misshapen ovens of insincere bipartisanship.

Scrolling through Bush's speech, did he really say this?

In the future, the CEO's signature should also be his personal certification, vouching for the voracity (sic) and fairness of the financial disclosures.

Freudian slip?

From the desk of Jane Galt:

Weirdest Spam Ever Sorry -

Weirdest Spam Ever

Sorry - web down !

Trying to drum up trade - can you foward this to your friends ?

Be back in a few months

Giles

From the desk of Mindles H. Dreck:

Vinnie Barbarino's Ride

Why does John Travolta need a 747?

Because he's upgrading from a 707, of course. Apparently he wasn't able to bring 300 of his closest friends on his last international junket.

And it complements his modified Gulfstream (note groovy porn music on this site).

I hope he keeps his jets in a guarded hangar.

From the desk of Jane Galt:

Typical Male Swen Swenson of

Typical Male

Swen Swenson of Coyote at the Dogshow has just emailed a picture that proves that he's one of the legions of neanderthal men who think of nothing but big hooters.

From the desk of Jane Galt:

Jim Treacher expresses his opinion

Jim Treacher expresses his opinion of Ted Rall quite graphically. Don't forget to click on the "other fans of Ted Rall" to check out the lawsuit Rall is waging against some guy who dared to make fun of him.

From the desk of Mindles H. Dreck:

The Breast Wing

I watched much of Justice League through a bleary haze last night. Nonetheless, I believe I heard the British Ambassador request to fondle the first lady's breasts several times. I had no idea that happens.

I also noticed that everyone except the President was pissed to the gills halfway through the show.

Alas, Goldbach's conjecture remains unsolved. The themes of the show were:

1) Sinn Fein - Terrorists?
2) Men - Jackasses (all)?
3) Expensive primary science - $20 Billion justifiable if your college physics professor has lymphoma?
4) Suddenly Canadian

From the desk of Mindles H. Dreck:

Filling Tables One Block From City Hall

WNYC has run a special report called "6 Months" about the downtown economy after September 11 several times recently. This section in particular caught my ear.

It profiles a restaurant called 20/20, owned by Hussein Hussein. He was renovating the restaurant on September 11, so he is ineligible for much of the assistance available to small business owners. He is running special nightly themes at his restaurant - such as "negligee night", and "comedy night". He is thinking about "women wrestling night". I think the innovative Mr. Hussein is going to make it in the end.

May I suggest a special detachment of NYC blogfesters to help out?

From the desk of Jane Galt:

Darn I was going to

Darn

I was going to post on Paul Krugman's disingenuous column on Social Security, but someone else went and did it better. But, what the hell, I'm going to say it anyway.

Krugman almost redeems himself by making the rational point that Social Security isn't a pension fund:

The truth — which Mr. Bush's economists understand perfectly well — is that Social Security has never been run like a simple pension fund. It's really a social contract: each generation pays taxes that support the previous generation's retirement, and expects to receive the same treatment from the next generation.

But then he uses this to bash Bush's privatisation scheme, as if hesitating to tell voters that they can't have everything they want were somehow unique to Republicans.

He does a little clever tap-dancing along the way to make it sound as if Bush is an inveterate liar:

Last week George W. Bush did it again, contrasting Social Security benefits with what retiring workers would have if they had invested all their Social Security taxes in the stock market instead. As an article in The Times pointed out, this was a misleading scenario even on its own terms; financial planners strongly advise against investing solely in stocks, and a diversified retirement account wouldn't have risen nearly as much in the 1990's bull market

he says, which is true. But somehow Krugman forgot to mention that that diversified account still would have been better than the miserable 1.7% return available to 2000 retirees.

Every time Krugman makes a rock solid, honest point, he strives to somehow make it sound as if the troubles are Bush's fault:

Mr. Bush proposes to allow younger workers to place their payroll taxes in private accounts — in effect, to break this ongoing contract. But then what happens to older workers, who have already paid their dues?

There are only two possibilities. One is default: make room for the trillions diverted into private accounts by slashing the baby boomers' benefits. The other is to buy the baby boomers out — that is, to use money from other sources to replace the diverted funds.

Yup, that's true -- we're going to have to cut benefits or raise taxes on someone. But that's true if we don't privatise. The system's going broke, and the restructuring's going to be expensive. Krugman notably offers no solution of his own, because if he did, a cursory glance would reveal that -- gasp! -- we'd have to cut benefits or raise taxes.

I want to state a proposition that's not controversial, at least among most reputable economists, and shouldn't be controversial with anyone: government is a ludicrously inefficient way to allocate capital. This is true for several reasons: first, programs develop constituencies independant of their intended result (think teacher's unions; whatever you think of them, the intended purpose of the public schools was not to provide jobs for teachers) that spend a lot of time lobbying to prevent the government from abolishing or significantly modifying their program. The result is, effectively, no quality control; programs continue whether or not they achieve their goals. Problems are solved with more funding to the same non-functioning program, or creation of another program that duplicates the services of the first unsuccessful one.

Second, there's an information problem. Prices provide information to firms on how consumers value their services; competition provides them incentive to innovate. Government has neither. Even if they cared, they have only the most inchoate notion of how much or how little people like what they do because feedback systems are limited to sporadic complaints and widespread whining; most of us aren't going to pick up and move to Japan because there was a long wait at the DMV, and we can't stop payment on our checks.

Third, the government is dominated by the civil service, where half the people are competent and the other half can't be fired. Please don't deluge me with email about the last company you worked for. It wasn't like working for the DMV, okay? As a former consultant I consider myself a connoisseur of corporate stupidity and waste, but they don't approach the inefficiencies of the public sector.

Fourth, politicians are spending other people's money. Picture how you'd feel if, say, the guy who makes your refrigerators could set prices by coming over to your house and taking the price increase at gunpoint. Do you think you'd be getting the best available refrigerator at the lowest possible price, or do you think you'd get a box with a chunk of ice in it for $3000? I'm simplifying, of course, because the democratic process offers a check on this, but not as much as you think -- the people who work for the refrigerator guy vote too.

Fifth, government, in order to prevent abuse of the four conditions above, takes recourse in rigidity -- everything not compulsory is forbidden. This is not a recipe for entrepreneurial success.

I hope we can agree now that government is a rotten way to allocate capital. That's why those of us with a Libertarian bent want the government to do the things that only the government can do, like regulate crime, protect property rights, and defend the country -- things so important and otherwise unobtainable that we are willing to put up with the inefficiency. You may disagree, and add a whole long list of other things the government should do, but you have to accept as part of the cost that some of the GDP the government takes will disappear into a welter of useless bureaucratic activity. But I digress.

The point is that any amount of money given to the government generates a significantly lower return than capital privately invested, unless that private investment is Webvan. Therefore, even if the government were trying to allocate the money in such a way that it would increase productivity in order to raise future GDP and hence future tax revenue to help pay off the Social Security beneficiaries, it would not, on average, increase GDP by as much as private investments.

That's why private accounts are the refuge for a battered system. Private accounts have two things going for them: they offer higher returns, and they confer a property right to the pension, which, contrary to popular belief, is not true of Social Security. The more money we allow current beneficiaries to divert into private investment, the more stable the system will be over the long run. This is certainly not risk free; there are serious concerns about what will happen to the stock market as the Baby Boomers and those who follow them try to cash out in retirement. But those concerns are about the prices of the assets in the portfolio. As long as the underlying companies are solid, there will still be value in dividends, stock repurchases, and interest to support today's scrupulous saver. There is no such likelihood when you invest in the Trent Lott Memorial Hogback Research Center at the University of Mississippi.

But there is a cost to all of this: by diverting that money from the current tax system, we create a void that will have to be filled either by raising taxes or lowering benefits. This is what Krugman is talking about. But what if we didn't do this? Well, somewhere down the road -- opinions vary on the date; is it in the next decade, when Social Security stops running a surplus, and we have to cover the shortfall in the budget; the date when outlay exceeds intake; or the date when we've spent down the imaginary "lockbox" (more on this another time). I vote for the second date. There are no assets for Social Security to spend down. So late in the teens or early in the twenties, Social Security is broke. And shortly after that we either raise taxes on the two people left in the workforce a whole lot, or we tell the beneficiaries to get off the golf course and start looking into jobs at Wal-Mart.

The question is not, as Krugman pretends, whether or not we have the crisis. It's when. And with pyramid schemes, earlier is better, because it limits the number of people who get stuck with the bill. Amway and its many followers tend to collapse after ten levels or so, taking the savings of a lot of unfortunate people and leaving them with some shoddy merchandise and possibly, a funny story. Albanian pyramid schemes went on for over a year, involved the whole country, and decimated the entire nation. The push for privatisation is the push to give some security to the young workers who will otherwise be left with nothing but the Federal equivalent of six cartons of unsaleable widgets.

Krugman knows this. Why is he against privatisation? Three answers: the first is that Krugman, by virtue of his politics, wishes to expand the obligation of the state to care for its citizens, not contract it. Fine, but this offers no guideance to whether privatisation is, considered on its own merits, a good or a bad idea. The second is that he is making good points; we can't just talk about privatisation without confronting the need to pay for it. And the third is that the the Republicans are for it, and so Krugman is bound and determined to be a loud voice against. He has a perfect right to all three. But we don't have to take him seriously.

postscript: please don't send me emails about how paying off the debt is the solution. it's a very silly argument, which I will deal with another time. in super-brief summary, it's not so much wrong, as that the effect is not large enough to produce the results the Democrats allege. paying off the national debt is a fine idea, but it won't rescue the program -- it won't even delay its demise by much.

From the desk of Mindles H. Dreck:

New York Frame of Mind

As most of you know, I am a New Yorker. I grew up there, went to school there and started my career there. I still work there, but I live in the suburbs. So I have retained some of my New Yorker identity (one leg in, as it were). My wife and I have even thought we might move back to the city when the kids are older.

I read this post from Asparagirl and it pinged my own strange mix of emotions about working in the city (and neighborhood) islamo-fascists apparently consider target-town:

I don't write or think these awful things because I have become paranoid or morbid, but because it is worse: I have become inured. I am taking a risk by staying here, but dammit, I won't leave. New York is my home. I wouldn't rather be anywhere else- and anyway, everywhere is dangerous now. So I calculate the odds and try to plan for the unplannable, think about the unthinkable.

I do occasionally find myself musing about disentangling from New York. Especially when the lights flicker at work (as they did quite visibly today), or we just hear a loud sound on the street. Then my thoughts suddenly veer in the opposite direction. I want to move back into the city, flipping the bird to the East the whole way. My wife works in NYC, I work in NYC. Screw your envy-driven pseudo-islamic religious drivel-spewing anti-semitic suicidal misanthropy, I'm a New Yorker and you're an idiot. You got a problem with that?

I'll borrow Asparagirl's Talking Head lyric as well:

We live in the City of Dreams
We drive on that highway of fire
Should we awake
And find it gone
Remember this, our favorite town

It's a special place, and you can't have it.

F***ers.

From the desk of Jane Galt:

Moving Day!!! Here it is:

Moving Day!!!

Here it is: the new URL: www.janegalt.net

From the desk of Jane Galt:

Dr. Frank has a long,

Dr. Frank has a long, evenhanded piece about the ways in which the British media subtly legitimizes anti-semitism that's well worth reading.

From the desk of Jane Galt:

Don't let your mouth write

Don't let your mouth write checks your ass can't cash

Frankly, I've been overwhelmed by the multiple $25 contributions my off-the-cuff comment has engendered. I'm super-extremely flattered that this many people are willing to pay money to see someone they've never met.

But I'm a wimp.

I never imagined I'd get even one contribution, otherwise I wouldn't have said it. Because my somewhat reserved personal ethics do not include selling provocative pictures of myself. Plus my parents read the site and they'd faint.

So here's my offer to those who contributed:

1) First, apologies galore for misleading you. Apologies also for not posting this message sooner, but if you're a regular reader, you'll know I've had the flu.

2) I will be more than happy to mail or email you a lovely autographed picture of myself, fully clothed, with or without the debate on Logical Positivism.

3) If this is not satisfactory, I will refund your donation. If you gave because you liked the site, or even just wanted to humiliate me by calling my bluff, you're free to leave it -- but believe me, I would not fault you in the slightest for asking for your money back. So don't be embarassed to ask.

Just shoot me an email stating your preference, and if you're one of my Amazon donors and want your money back, I'm afraid I'll have to ask you for the day and time you donated, since I have no other way to identify you. Paypal donors will note that I have not yet picked up the contribution, and won't until I hear from you.

And thank you to everyone who gave. It's nice to know, after all, that there are still men out there who really are just interested in our minds. ;-)

From the desk of Mindles H. Dreck:

Ponzi Scheme

A Ponzi Scheme works like this:

I promise someone an extroardinary return on their money. he gives me a dollar. I find two more people and repeat the spiel, receiving two more dollars. I give the first guy $1.50, brag about my 50% returns and repeat. But I have to find even more people now ( four or five) because I'm $1.50 in the hole on my second and third investors (there's fifty cents in the bank and my investors have a cost of $2). I'm fine as long as I have a growing pool of new investors. The investment "return" comes from inflows of new money, not returns on invested money.*

This is illegal in the real world. It is also exactly how Social Security works. So we call it "pay as you go" instead of Ponzi scheme, because the government can borrow a lot more than your average Ponzi operator to keep it going. Social Security was built on the flawed extrapolation of continued population growth forever. Population growth has slowed, and the Ponzi scheme is collapsing like a flan in a cupboard. They all do.

Paul Krugman made this point yesterday, in an op-ed.

Except, in Krugman's eyes this is an argument against privatization. It ends the Ponzi scheme and the last generation of "investors" doesn't get paid. The analysis is correct, the conclusion...Krugman.

He also, in outrage, accuses the Republicans of deceptive math for not dealing with the promised payouts honestly:

The point is that when touting its plan to privatize Social Security, the Bush administration conveniently fails to mention the system's existing obligations, the debt it owes to older Americans. As with so many other administration proposals, private accounts are being sold with deceptive advertising.

The truth — which Mr. Bush's economists understand perfectly well — is that Social Security has never been run like a simple pension fund. It's really a social contract: each generation pays taxes that support the previous generation's retirement, and expects to receive the same treatment from the next generation.

Krugman must have been hitting the econ books pretty hard prior to this administration, because very few politicians in the entire New Deal Era have been willing to call social security what it is. They often end up ostracized like Paul Tsongas or Newt Gingrich when they do. In his eyes it is an exclusively Bushian affliction. Nonsense. Did he listen to the "lockbox" speeches?

He's wrong about another thing: privatization would indeed increase the total amount of funds available to pay social security claims, because private accounts could earn a higher return. The problem is they earn that return exclusively for the more recent claimants, not the older ones. It isn't less money in total, it's more money allocated differently.

This is a big problem for us, and an even bigger problem for other developed economies who made cheap and ill-considered promises.

*Incidentally, counting inflows as a return was the "mistake" made by the Beardstown Ladies when they incorrectly claimed to have beaten the street.

From the desk of Mindles H. Dreck:

"Managing Through Absurdity" at the Harvard Business Review

I subscribe to The Harvard Business Review (HBR). Professors and eminent business personalities contribute articles to it that are longer than most business press, and often make concrete suggestions as to how to deal with strategic or HR situations.

But I'm not under any illusions that this isn't a marketing organization delivering exactly what it thinks will pump subscriptions (heavens!). All the push email and articles recently have been about "managing through adversity" or "coping in adversity". The HBR knows its audience is bummed out about the recession and managers are making choices they hate (like lay offs). So out come the feel-good essays confirming the leadership exercised by managers in a bind. A colleague and I refer to it as the "managing through absurdity" genre.

Now the HBR must manage through its own absurdity. We pick up the story as the editor recuses herself from writing up an interview of Jack Welch:

In late December, after the article was in its final editing stages, Ms. Wetlaufer called her boss, Walter Kiechel, editorial director for Harvard Business School Publishing, to recommend that it be scrapped, according to people familiar with the situation.

The reason Ms. Wetlaufer gave was that she "had become too close to Jack" to avoid the appearance that the article wouldn't be objective, these people say. Several weeks before the story was pulled, Ms. Wetlaufer told at least three Review staffers that she and Mr. Welch were having a romantic relationship, people familiar with the conversations say.

Welch's wife is even involved in the story, poor woman:

Ms. Wetlaufer said in a statement that she acted soon after receiving a call from Mr. Welch's wife, Jane. In that call, Mrs. Welch questioned whether Ms. Wetlaufer could be objective given her relationship with Mr. Welch , according to someone familiar with the matter. Ms. Wetlaufer said that "Jane's call was one of several factors that led me to pull the interview." Mrs. Welch called the matter "private."

If all of this doesn't cast a pall over the interview, check out the following:

When the Review approached Mr. Welch last year to ask him for an interview, he initially balked. But he says he changed his mind after learning that Review policy allowed interview subjects to read and make changes to the interviews before they are published. Mr. Welch says he gave Ms. Wetlaufer an initial interview in October at his New York City office. He says he and Ms. Wetlaufer had "good rapport." In the following weeks, Mr. Welch says, there were numerous follow up phone discussions.

Mr. Welch remembers having problems with Ms. Wetlaufer's first draft of the interview and says he nixed the original title, "Jack Bites Back," because it made him sound "defensive." He says the conversations with Ms. Wetlaufer were sometimes heated. "I said I'd burn your house down if you don't change it," he says, recalling a disagreement that he says he won. Eventually, says Mr. Welch , Ms. Wetlaufer was upset because he had made so many changes that she "felt that the article was written by me."

Like I said -
A) no illusions about how content is generated,
B) managing through absurdity

From the desk of Mindles H. Dreck:

Situational Ethics and Moral Relativism? You Decide.

Last night I may have supported kidnapping or exploitation of an infant.

I was riding the Lex line uptown to a dinner. A man pushing a stroller with a baby boy in it makes his way to the center of the car and begins the spiel intended to separate riders from their money. As all New Yorkers know, subway panhandlers usually have a set rap intended to pull heartstrings, embarass, shame, annoy or otherwise evoke a response. I have even run into a subway panhandler who played "martian music" on his flattened saxophone until we gave him "enough money to go away." I rather liked him.

This man used his son. The money was not for him, it was for his son. His son was hungry, he would do anything for his son. There was a longish part about getting ripped off at the welfare office, and he lifted his shirt to show a horrific scar he apparently suffered in a recent robbery. He was an intimidating looking fellow himself, but the infant worked well for him. I don't usually give money to panhandlers in the subway (it's illegal, for one) but I looked this guy in the eye, gave him $10 and wished him luck. I hope the money allowed him to park that kid in a warm safe place for a while and give him some food.

I fear, however, that I am actually supporting something horrible. There may be a mother wondering where her child is while this fellow pushes him around the streets and subways hustling drug money. At the same time, the the Spiel could be completely true. Such is the difficulty of attempting to develop uniform ethical rules for dealing with panhandlers. I chose to take a chance on this man in the hopes some temporary good would come out of it.

My cousin, (an anthropologist and socialist during those hours when he isn't making women swoon with his Gallic Brad Pitt impression) spent more than a year living in a crack den researching his book. His grandmother (my great aunt) used to visit him there. She would always give the most pathetic crack addicts a dollar or whatever she had when they asked. This taxed even my cousin, who would point out that any money would be immediately converted to crack and smoked. Aunt Peggy's response was simply "so what", the money clearly made this miserable person happy, if only for a few minutes.

I saw a TV news report today on New Jersey's needle exchange programs. needle exchangers have been arrested and convicted in New Jersey in the past, despite the fact that the exchanges probably prevent the spread of AIDS and other diseases. In the course of doing their work, they hand out needles to people who didn't have them before. A small price to pay, I would say.

Sometimes we trade evils. We take chances that we can trade long term good for short term compromises, or that some short term relief is worth a chance on a more abstract moral hazard. I took a chance that my $10 would buy a meal for a baby, rather than encourage a continued horrible abuse of children. Aunt Peggy thought bringing a little joy into a dying man's life was worth incremental funding of a crack den and possibly accelerating an addict's demise. One or two people will gain access to intravenous drugs, or take chance on them, with needles received from exchange programs, but a longer-term good is served.

Sometimes we just punt. On some decisions, even the most moralistic people give up and say "I'll have a cheeseburger". It's nearly impossible to weigh the morality of every decision you make in a day. People punt a lot, actually, even when they have plenty of time to think about it. Which is how we get occasional SUV-driving enviro-activists or pacifists who try to put a price on the President's head.

So it goes with international businesses, which are just associations of people. Free people and economic freedom benefits business and most businesspeople know it. If we choose to do business with an undemocratic or abusive regime in another country, we prop up the regime, but we provide economic opportunities to its citizens and, in turn, encourage reform. Maybe not. If we disengage, the elites in that country may just dig in harder.

One of the reasons entrenched elites wail about how America forces its cultural exports down peoples throats is because our culture, driven as it is by market forces, does have an insidious power. It gets under a more closed or elitist society's skin and makes the citizens say "I want some of that" (to say nothing of the indoctrination facility I have in my basement where I run Clockwork Orange-style aversion therapy to elite-approved "culture" and then pump endorphins into my subjects brains while feeding them Mc Nuggets and playing Britney Spears). Exposure to American ways tends to destabilize an entrenched elite. Simply becuase were constantly messing up the board and starting over again. Elites hate that. They value stability of their own regime over everything else.

There are examples where commercial and diplomatic engagement has aided democracy and freedom, and cases where it has not. One could even say the Phillipines has been an example of both in my adult lifetime.

I am intriqued by some overlap between the "end the Iraq sanctions" crowd and those who would commercially disengage with China. It is indeed possible to draw parallels between China's relationship to Tibet and Iraq's former aspirations in Kuwait. The question is, are there enough incidents of popular power in a regime that constructive engagement will accelerate the process of reform, or will it just prop up an opressive elite that might otherwise shrivel (or attack us or our allies and interests)?

If you elect engagement, you will have to maintain some pretty ugly relationships, and make some difficult compromises along the way. Or you may just punt, as we all do more than we would like to admit. You might also punt to save your job.

But it does not mean that improving the condition of your fellow man and actively engaging with an illegitimate regime are mutually exclusive.

Life is messy. Maybe those of you with philosophy degrees can make me an ethical calculator so I can be sure and make the right call every time. I fit Mill in the philosophy test, so the calculator better have a "utiles" mode.

From the desk of Jane Galt:

Welcome to my humble home,

Welcome to my humble home, home on the web! Just as soon as we get the electricity hooked up and the curtains in the windows, it'll be just like the old spot, but better!

From the desk of Jane Galt:

Does anyone else in the

Does anyone else in the blogosphere experience sudden, violent rage when they realize that no matter how hard they try, they will never be 1/20th as funny as UThant?

From the desk of Jane Galt:

Arthur Anderson is done. Merck

Arthur Anderson is done.

Merck is the latest in a long line of companies to decide they'd rather have their books done by someone, you know, legitimate. Which, as far as I can tell, will be pretty damn hard to find among the Big Five. The Wall Street Journal says it best:

Our question is whether such an outcome is the best thing right now for restoring credibility to U.S. corporate governance. We were especially struck by yesterday's Journal story announcing that the "Big Accounting Firms Break Ties With Andersen to Resist Changes." The odor of that one can be detected from 40,000 feet.

Having stood behind Andersen's lead in blocking tougher accounting rules before, the four competitors now want to erase Andersen from the family photo. This would sure be good for their business if Andersen fails; as former SEC Chairman Arthur Levitt points out, 95% of Andersen's clients will then migrate to those four. Andersen's collapse would also mean the remaining Big Four could go back to lathering Congress with campaign money to stop any meaningful accounting reform. With Andersen's failure assuaging our collective guilt, the politicians could also applaud and go back to moralizing as usual.

I honestly don't see how Anderson can survive; the public taint of the Anderson name on one's books doesn't seem likely to go away any time soon. Of course, institutional investors are presumably well aware that there's little difference between Anderson and the others, but they in turn are accountable to the Moms and Pops who invest in their mutual funds, and it's not hard to imagine it being easier to pressure a company to switch auditors than continue to explain why it doesn't matter.

From the desk of Jane Galt:

The Dow: Up 170+ points

The Dow: Up 170+ points yesterday. Down 150+ points today. No enormous information change between yesterday and today; investors just. . . changed their minds. I'm beginning to have flashbacks to the bipolar roommate.

From the desk of Jane Galt:

Okay, I know I said

Okay, I know I said I wasn't going to be crabby, but this is revolting. Ted Rall, apparently sensing that he'd worn out the patience of his viewers for ceaseless whining about the most trivial adventures of the Bush administration, sought out a new target and found: the WTC widows.

Now, I too, have questions about the wrangling over funds by families, which often seems to imply that the purpose of the emergency money is to enrich the beneficiaries rather than keep those affected by the tragedy from financial devastation. Part of me says, "What the hell, they deserve it -- they're suffering is a proxy for all of us as Americans." Another part of me wonders about the level of funding. But the way to make such arguments is by stating them quietly, in a reasonable voice, that tries to establish what obligation the rest of us have to those who were affected by the tragedy.

It is not making fun of the widows in a petty, sarcastic tone heavily redolent of Freshman Composition.

I imagine that Ted Rall thinks he has established himself as a sort of latter-day H.L. Mencken, unafraid to lampoon even the most dearly held prejudice of those of us in the "Booboisie". All I see is someone whose emotional depth seems permanently halted in early adolescence, to whom noone's suffering is worth acknowleging except his own, and who justifies the most gratuitous cruelty by an idealism that cannot stoop to take actual human beings into account. Can Mr. Rall honestly say that if someone he loved were ripped from him, he would be perfectly sanguine about those who disliked him directing this sort of self-righteous editorial at his suffering? Oh, I'm sure that he would say so, but I can't believe he would mean it -- or rather, I can believe it only by believing what I halfway suspect to be true -- that Rall is incapable of experiencing the kind of love that leads to deep grief, and therefore feels free to make brutal fun of the WTC widows for not displaying what he believes to be the proper outward signs of an inward emotion he cannot imagine.

Charles Johnson noted this, and started an email campaign which apparently, at least in part, got the cartoon pulled from the New York Times site. I have no doubt that we will hear much whining from Mr. Rall over the next few days about his "free speech" rights being violated. Mr. Rall of course has a perfect right to write what he will -- just as I have a perfect right to cancel my subscription to the New York Times except, oops! I already did. Anyway, my point is that while he has the right to say anything he wishes, I also have the right not to fund his revolting emissions. What Rall wants, of course, is not free speech but speech without consequences. I will be glad to see him get his wish: when he is sitting alone in his room, mumbling into the mirror.

From the desk of Mindles H. Dreck:

Offensive Rall Removed?

The page containing the cartoon I referred to 2 posts ago was removed, strangely enough, along with the menu selector for Ted Rall. My guess is it was using bandwidth.

The source image isstill there.

If that disappears, I did cache a copy.

UPDATE: Now that I'm home and can catch up on this I see Sullivan, Johnson, Quick, Green et. al. and understand what happened. The source image above is still on the uclick site as of 9:23PM tuesday, however. Click the link above.

It's interesting the Times took it off. This will surely meet with cries of censorship. I bet the bandwidth from the Sullivan link had something to do with it too.

From the desk of Mindles H. Dreck:

Habeas Tuvalu

Habeas Corpus is a great concept. Simple evidence of the crime is necessary before it can be tried. No body, no murder.
Tim Blair reprints an article from the BBC on Tuvalu's legal case against Australia and the United States.

A while back, Shiloh Bucher, Steven Den Beste and I discussed this lawsuit.

The problem is that folks are measuring sea levels in Tuvalu- since 1955, in fact, andTuvalu has yet to sink measurably. If anything, the opposite is true. Apparently, this is not important to the process as these folks define it.

Once we observe it is sinking, we could possibly get to the troublesome part about attributing responsibility for the non-sinking. As I observed before, it is unfortunate that we are exporting our "someone has to pay for my problems" legal system to the rest of the world.

From the desk of Jane Galt:

I just read through some

I just read through some of my archives, being too sick to really post, and I've come to a conclusion: I'm getting crabby. And it's not just because I have one of those painful, "oh my God was that my lung?" coughs and a warmish fever.

Partly, I think, this is because I read so many good conservative warblogs, and when you read a lot of people who share most or all of your views, you start to feel a tremendous anger at people who don't for willfully ignoring things that are perfectly obvious to you. That, I think, is why much of the mainstream media is perpetually snotty about conservative ideas.

So to cure this part of the disease, I'm going to be trying to read more liberal weblogs written by thoughtful, intelligent (if utterly wrongheaded -- ed.) people.

The other part is simply that everyone gets a little crabby now and then. In this sense, being sick's been good, because it made me take a little break from things. Starting tomorow, you'll hopefully see a sunnier, gentler cynicism coming from this weblog.

Even though I'm sick, I have to take some work to the sofa now. Thanks to all the wellwishers, and check back later tonight or tomorrow for some updates.

From the desk of Mindles H. Dreck:

Most Loathsome Award Reviewed

I have had some reaction on my "Loathsome" post below. I continue to be offended by folks who blithely assume that businesspeople spend their days in search of slave labor, but I understand some of the objections to my outrage.

Especially in light of the existence of this abomination by Ted Rall and these disgusting thoughts posted on Indymedia.

That Ted Rall could actually create and release a cartoon making fun of WTC widows is really beyond comprehension. Just look and wonder at how someone who purports to offer a moral message can peddle this crap. How sorely my commitment to free speech is tested today.

Thank you Damian Penny (I guess..) for pointing these out and creating a hard knot of anger in my stomach that won't go away for another five months.

If I may pass along the "top blog" honor bestowed on me by the overly kind Iain Murray, Damian gets my vote today for pointing out the deep, evil darkness of these folks' souls.

And I'm aware this is another non-value added post (at least from my end). I promise to do something about that as soon as I can make the time.

Right now I need to go outside and scream out loud for a few minutes.

From the desk of Mindles H. Dreck:

Just Keep Your Trunks On, Tonya!

CNN.com - Paula Jones replaces Amy Fisher in 'Celebrity Boxing' - March 4, 2002

Some facts defy additional comment.

So I'll add that I am engaged in wall-to-wall meetings that extend into my blogging (and thinking) hours. I hope to resume soon.

From the desk of Jane Galt:

I'm sorry about the recent

I'm sorry about the recent dearth of posts. I have a horrible, disgusting flu that's making it very hard for me to sit up long enough to type.

Incidentally, has anyone noticed that the Martin Sheen Ireland commercials make him look and sound like a drunk leprachaun?

From the desk of Jane Galt:

Quote of the Day Comes

Quote of the Day

Comes from an engineer who just told me that Enron stock went down 168% last year.

From the desk of Mindles H. Dreck:

New Blog Reading

I have been checking in on Lagniappe and A Voyage to Arcturus. They are both useful additions to the daily reading, since the authors have specific expertise (as well as a cunning way with words) with which to amaze and intimidate us poseurs.

Lagniappe received some votes for "best blog-present company not included" at the NYC Blogfest, by the way, tying with old favorite, U.S.S. Clueless.

From the desk of Mindles H. Dreck:

Local Shadow Government

National pundits have their undies in a twist about shadow government. Of course, said underwear would be even more tightly bunched and wrung-out if the same crew had discover that an attack on Washington would paralyze the executive branch. The New York Times is fighting a two-front war on the subject. Except that with regard to New York City, as I suggest above, they are upset because of the lack of "shadow government".

Here is Clyde Haberman, moaning about the mayor leaving town and not telling Mr. Haberman where he is:

In his single-minded pursuit of preserving his privacy, the mayor insists that it is nobody's business where he goes on his days off.

Now look, there is an order of succession (which unfortunately places public advocate Betsy Gottbaum in charge if something happens to Bloomberg) and, as Haberman knows -

Mr. Bloomberg's lieutenants say there is no problem: the mayor is in constant contact, and can fly home in no time on his private jet.

But that's not good enough:

Not if the airports are shut down, he can't. They were closed for days after Sept. 11. And if another huge crisis developed, even some of Mr. Bloomberg's admirers might start asking what he was doing sunning himself, unannounced, in Bermuda.

Does the fact that reporters do or don't know where he is at the moment of this hypothetical attack change his transportation problems? You think the Mayor of New York City's plane might have gotten an escort on September 11? Duh.

This is another one of these stupid columns that has to conjure up hypotheticals in order to criticize. Oh, and by the way, it isn't on the editorial page.

To see the sheer volume of bitching in the Times about this, click here to go to a NYT archive search on the terms "Mayor", "Bloomberg" & "Bermuda".

From the desk of Jane Galt:

A while back, I mentioned

A while back, I mentioned that the thing I really hate about Krugman is that he plays stupid when he's not, so that he can get away with saying simplistic or erroneous things and not get called on them. Now Jonathan Chait, in his defense of Krugman against Sullivan, is doing exactly the same thing.

If you read my colleague Andrew Sullivan's weblog--and, if not, I heartily recommend it to all political junkies who use the Internet for procrastination--you no doubt have come across him attacking Princeton economist and New York Times columnist Paul Krugman. Sullivan first condemned Krugman January 18, then continued on for days, posting twelve items. After that massive output, he wrote, "No more Krugman, I promise." Alas, he failed to keep the promise, mentioning Krugman in 22 more items before once again promising, "I'm gonna lay off (unless I can't help myself.)." Unsurprisingly, he couldn't help himself and has since gone after Krugman in 17 subsequent items.

Sullivan's animus against Krugman actually predates all this. Krugman is a moderate liberal who has criticized what he regards as the silly economic nostrums of both right and left (the latter prompting a lengthy and hostile profile by Robert Kuttner in the American Prospect.) Given the vastly greater power of the economic right, he has devoted far more attention in recent years to stupid right-wing economics than to stupid left-wing economics. So, given Krugman's prestige and influence, he makes a natural target for a supporter of supply-side economic policies like Sullivan.

That's true. And in the last year, he has also made himself a natural target of anyone who likes good, honest economics. But that's not why Sullivan is targeting him. . . he's targeting him because he got caught taking the same money he blasted the Bush administration for taking.

I bring my own biases to this issue. While I know Sullivan and enjoy his company, Krugman is one of my favorite writers and thinkers. We share similar ideological views--Sullivan has linked the two of us, railing in a 2001 column against "the Krugmans and Chaits," an association I find flattering -- and Krugman has been kind enough to cite my work in his column. So I admit that, on balance, I'm predisposed to defend Krugman against Sullivan's accusation. The trouble is that I can't figure out exactly what the accusation is.

Here we go. "This accusation is so stupid that I'm afraid simple, straightforward old me doesn't get it." Give it a rest. Sullivan doesn't like Krugman because he's a hypocrite, and he took money for doing nothing for a company, and the great populist economist doesn't seem to have suspected that there was anything at all odd about this. Sullivan also thinks that journalists shouldn't take money from companies, and has blasted any journalist he's heard about who does. You may disagree -- I do, though I think Krugman's a world class hypocrite -- but it's hard not to understand, since Sullivan says this about eighty times a day. If you don't know why he doesn't like Krugman, it's either willful ignorance or inability to understand simple declarative English sentences.

Sullivan's online obsession began when the Times disclosed that, prior to his joining the paper, Krugman had received $50,000 to serve as a consultant to Enron. Sullivan's interest in this fact, as he explained it, had nothing to do with the fact that Krugman was an influential critic of President Bush's economic policies--policies of which Sullivan happens to be a fawning admirer. "I've banged on about Krugmangate because I feared no one else would," he explained, "It's not ideological."

Subsequently, it came out that conservative pundits Bill Kristol, Irwin Stelzer, Peggy Noonan, and Lawrence Kudlow also received money from Enron. If Sullivan's interest in this were "not ideological," then you'd think these disclosures would outrage him just as much. And indeed, having already worked himself into a lather over Krugman, Sullivan couldn't completely ignore the others. Yet, relative to his hysterical attacks on Krugman, Sullivan treated the others in an utterly pro-forma way--"make of it what you will," he casually remarked about the Weekly Standard's favorable coverage of Enron--mentioning them in a total of 25 items, as against the 57 devoted to Krugman. The disparity is especially glaring given that Krugman is the only member of the group who disclosed his Enron ties before writing about the company.

I hate to accuse Chait of lying, but what else do you call it? Sullivan attacked Noonan and Kristol just as vocally, the difference being that they acknowleged and responded to what he said -- and that they weren't continuing to write columns about how corrupting the influence of Enron money was on everyone but. . . them. Kudlow gets a pass because he got paid for consulting, not lending their imprimatur to Enron's PR efforts.

Around the time this was happening, Sullivan's nobody-else-is-covering-it rationale fell by the wayside, as The Washington Post, The Washington Times, Wall Street Journal Online, and columnists Joe Conason and Jonathan Rauch all weighed in on Krugman. Sullivan kept up his crusade, continuing to insist he was motivated by lofty principles of journalistic ethics. "What this is about is the enmeshment of some of the pundit class in major corporate money," he declared at one point. "Haven't these pundits essentially undermined themselves as independent watch-dogs of the culture?" he wrote in another post.

First of all, Conason & the Washington Post picked it up because Sullivan hammered it; second of all, the WSJ Online "picked it up" by linking to Sullivan's website; third of all, where's the liberal press besides the WaPo and Conason? More importantly, where the hell are Krugman and the New York Times, which still haven't deigned to respond except by personal attack on Sullivan?

You'd think eventually Sullivan's interest in this one bit of media news would eventually wane. And it has. Yet, instead of dropping away, it has simply metastasized into a broader personal attack. "As Paul 'Enron' Krugman has asserted, the war is not actually a war against terrorism, but a war for corporations," he wrote recently, distorting Krugman's views so wildly as to venture into pure fantasy. (Krugman complained that Bush was using his relatively small defense hike to cover for budgetary shortfalls that would have happened anyway.) This week he has begun publishing letters from economists urging him to, as one put it, "keep pounding on Krugman."

No, Krugman said that Bush was using the war to give money to corporations and the rich. Not how Sullivan portrayed it. Also not how Chait portrayed it.

Do these economists want Sullivan to pound Krugman because he violated their exquisite sense of journalistic ethics? Not at all. One letter complains that Krugman is "grinding political polemics instead of offering enlightening and insightful commentary." Another accuses him of becoming "intellectually slack"--the only evidence for this charge being that Krugman described "the immediate implementation of the 2001 tax cut retroactive to the beginning of 2001" as an "advance on future tax cuts." Is there a real difference between the two? No, it's just shorthand, which you'd expect from an op-ed columnist trying to reach a popular audience and facing tight space restrictions.

OK, this is just not true. I can't get to Sullivan's site right now, but at least one of the letter writers said that what he objected to was Krugman's violation of professional ethics by egregiously mis-portraying the facts in the letter-writer's field of specialization: energy economics. (Krugman's specialty is international monetary economics). The letter writer pretty much said that Krugman was lying in order to attack the Bush administration. All of them said -- and most of the economists I've talked to say the same thing -- that while Krugman is capable of very good work, his journalistic efforts have slid from good economics with a center-left slant to egregious stupidity spouted to support Krugman's political positions. Their problem with Krugman is not a semantic one, and portraying them thus is more than disingenous; it's dishonest.

None of these writers, then, have presented any decent evidence that Krugman makes economic errors in his writing.

This is a flat-out untruth, unless you choose to regard an economist saying that Krugman made serious misstatements in the economist's field of expertise as not being evidence.

Yet however weak such protestations may be, Sullivan treats them as proof positive of Krugman's general untrustworthiness. "[T]he constant chorus I keep getting from professionals suggests that the Krugman credibility problem is now much deeper," he writes. So now Krugman's "credibility problem" isn't just about Enron, but about anything he writes. Somehow I suspect that if he stopped writing influential polemics against Bush his "credibility problem" would disappear.

His credibility problem with me would disappear tomorrow if he stopped doing shoddy work. Readers on this page have seen me dismiss supply-siders as well as lefties; if my tone is more measured when I speak of Art Laffer, it's because the tone is more measured in the articles I cite. In dismissing critics as simply idealogues with an agenda despite firm evidence to the contrary, Jonathan Chait is hurting his own credibility to save Paul Krugman's.

From the desk of Jane Galt:

No More Watermelons warns that

No More Watermelons warns that we're still not out of the woods on the power crisis.

From the desk of Jane Galt:

Okay, I'm going to respond

Okay, I'm going to respond to my open source critics here, because I think I need more space than is available in the comments.

First of all, I should rephrase what I said about IBM. My commenters point out that IBM does, in fact, fund open source now. To which I respond, why do you think this is? Because IBM is a nice company that wants to help some deserving kids get a start in the world? Umm. . . no. IBM hopes to kill Microsoft, in the hopes that the hardware manufacturers will regain some leverage in the PC market.

No Microsoft, no free money. As a business matter, pouring billions into something when you have no way of ensuring that its benefits accrue to you rather than competitors is not a sustainable practice -- not if the shareholders get wind of it, it isn't.

And I am aware that the open source folks talk about business models that will support their habit. The problem is, they don't quite think those business models through. Let's think about the financials of open source.

Assume that you can make open source work with approximately the same number of programmers, give or take, as there are in the world now. Maybe you need 15% less because Open Source is so damn efficient.

Well, all the programmers currently working for software companies won't be any more. That's no longer a revenue stream.

Corporations don't need more IT consultants or programmers than they have. Switching from NT administrators to Linux guys doesn't increase the net number of paying jobs in IT.

More than 15% of programmers currently work for software companies, particularly when you leave out the wizened old mainframe guys at large industrials, who won't be working on open source linux code in their retirement.

Companies won't pay a ton for non-proprietary consulting. Look at the differentials between a SAP consultant and ordinary contract programmers. Again, less money in the system.

No software companies means no corporate funding for CSci departments. Look for a reduction in the number of university positions in the US as the Computer Science tries to make do with the same level of funding as the Lit department.

So you just lost more than 15% of your wages; you probably lost (a wild ass guess) 30% of jobs, between the software firms and the university cutbacks. Plus let's throw in a conservative 15% across the board wage reduction for those who are left. What? I hear you scream. That's economics. Consulting services aren't scaleable; you are limited by the number of hours you can work in a week, unlike selling software. Consulting services have considerably higher marginal costs for scheduling, sales, and such. So you have both minimized your revenue stream, and maximized your cost, in relation to selling software. Meanwhile, the proprietary systems which push up revenue, like SAP or Microsoft, are no longer certifying authorities that up your rate. Because customers can't be sure of what they're getting, rates go down for everyone. Plus there's now a glut on the market. All of these things make a 15% average wage reduction not only likely, but timid. Are programmers really going to work at 7-11 to support their Linux habit? Maybe initially. But the flood of entrants into CS will slow, further reducing the programmers we think we need to make good code.

Open source is good code and bad marketing. Linux is great, but it would scare the hell out of your average consumer. And who do they call when it breaks? IBM isn't going to keep a staff of Linux gurus on staff gratis. Microsoft does the troubleshooting on its programs and pushes that data out to the OEM's. Who's collecting a database of all the fixes? How do users know what's good and bad? What's the difference between a legit website and some scary dude who wants to hack your machine? Brands exist for a reason.

Here's the thing: tech people hate Microsoft because Microsoft doesn't produce the kind of software they like. But Microsoft provides a whole slew of services that consumers do like, and for which open source has not yet offered a reliable alternative.

Let me summarize this way: there is, at this point, X amount of money in the world software developement system, squeezed out of corporations and consumers in exchange for the software and systems they like. The "new paradigm" takes out all the money currently gotten from revenues on software, and doesn't put any back. Companies pay for customization and optimization now. A marginal increase in the amount of optimization required does not increase the amount of money in the system to support the developers who write the code. Nor could consulting replace software revenues even with a drastic increase in the amount of consulting, because the cost structure is disadvantageous. Hardware companies are not going to drastically increase their R&D budgets when the benefits accrue as much to their competitors as to themselves. I'm not an idiot who doesn't understand business models; I'm a veteran of three startups who understands TANSTAAFL.

I'm not saying that there's no business model that makes open source work, but the ones that I've seen rely on not examining the hidden subsidies from the software industry that percolate all through the system, from R&D to salaries, and money from companies that are trying to kill Microsoft now in the hopes that they can extract those extortionate market rents instead. IBM isn't looking for a way to redirect the money that Microsoft now gets for its software to Linux programmers; it's looking for a way to redirect that money to IBM. Clearly open source works as a coding system, but I haven't yet seen it work as an economic one. Which is why most of the people predicting that Linux will displace Windows are programmers, not bankers.

From the desk of Jane Galt:

I'm extremely fascinated by Open

I'm extremely fascinated by Open Source prophets because it never seems to occur to them to wonder who is going to pay for the food, shelter, and gadgets of the legions of programmers who will be working on the Open Source code after the software companies go out of business.

From the desk of Jane Galt:

The Beauty of Gray says

The Beauty of Gray says the the Howard Kurtz article on media bias is getting a bad rap:

If you actually read his article, he's not claiming that the mainstream media is unbiased. What he's claiming is that the media in toto is not biased in a way that benefits liberals.

I don't know if it's true or not, but his claim is that the mainstream media has a liberal bias but mutes it (to a greater or lesser degree) in an attempt to be unbiased. In contrast, right wing media outlets like Fox News, the Wall Street Journal OpEd page, and various talk show hosts like Rush Limbaugh, are much more openly partisan. So that these voices, although not as widely distributed or heard, balance out the weaker bias of the mainstream media in public perception and influence, because there is no liberal counterpart to them. You've got a strong voice saying weakly liberal things, and a weaker voice saying strongly conservative things, so the net effect is a wash.

I don't know if I believe this analysis, although it's intriguing. But turning around and showing that there is a bias at the New York Times is not a refutation of what Kurtz is saying.

Well, first of all, he is saying, in effect, that the media isn't biased, or at least that that bias doesn't really affect reporting. And second, the point that Patrick is making is that in being unabashedly partisan, conservative voices give their audiences the opportunity to take their opinions with a grain of salt; liberal voices pretend that they are weighing both sides equally, when in fact they aren't. Need a quote on women? Call NOW. Need a quote on animal rights? PETA. African-Americans? Who the hell is Shelby Steele? I've already got Kweisi Mfume on speed-dial. Make sure that your audience knows that conservative voices are conservative; label liberal activists, even ones pretty damn far to the left, in neutral or positive terms that do not identify their political affiliation. Those are all measurable things that happen on the news pages -- not the editorial pages -- of the New York Times, the WaPo, and most other coastal papers. Nor would I call the New York Times practice of finding the stupidest conservative they can to make the other half on an argument "balanced".

And third, Howard Kurtz is more than a little selective:

Liberal media detractors – you know who you are – take note.

The conventional wisdom is that the mainstream liberal media helps, well, mainstream liberal politicians. That conservatives can't catch a break from the big media companies. That journalists have their thumb on the scale, tilting it to the left.

Those on the right, in this view, have to scramble to get their voices heard but are drowned out by the libs, who don't even know they're libs, since everyone they know in the media is lib.

Maybe so. But there's another theory.

That the conservative press is purely partisan, while the mainstream weenie press is concerned with issues like fairness and balance – and, in fact, often criticized Bill Clinton and other Democrats.

You can tell this is true because the Wall Street Journal, for example, never criticizes the Bush Administration.

That it's not really an even fight, heavyweight boxers versus high school debaters.

That Democrats are actually hamstrung because they try to play to the major editorial pages, while the Republicans, with knives in their teeth, couldn't care less.

That's the argument mounted by Washington Monthly Editor Paul Glastris in a piece titled "Why Can't The Democrats Get Tough?"

It's got a great cover – a menacing-looking Joe Lieberman, Tom Daschle and George Stephanopoulos, in muscleman T-shirts, wielding stillettos, chains and truncheons.

First, the premise: "The Bush team can attack Senate Majority Leader Tom Daschle (D-S.D.), lose $4 trillion of the surplus, and meet with campaign contributors whose company stock they own, and Democrats just watch. ... And then there's Enron. Is there any doubt that if the situation were reversed, Republicans would be exploiting the scandal more aggressively? Would they have hesitated, as Democrats have, to frame Enron as a political scandal, or to bombard the White House with subpoenas? Democrats can't afford to go all wobbly, especially now."

Now the media critique: "The difference in partisan intensity also reflects the different media outlets to which the parties play. Democrats in Washington focus incessantly on the establishment press: The New York Times, The Washington Post, Newsweek, CBS, CNN, NPR. That is where their worldview is shaped, and where they look for validation of their ideas and status. Republican leaders are hardly indifferent to the establishment outlets. But they increasingly take their cue from the expanding alternative universe of conservative media: The Washington Times, The Wall Street Journal editorial page, talk radio, Fox News Channel.

"Needless to say, these two media worlds are governed by radically different rules. Yes, there is a certain amount of liberal bias in the mainstream press. But on balance, the big national papers and broadcast networks take seriously the traditional journalistic strictures of fairness, accuracy, and independence of judgement.

Which we know because the editor of the Washington Monthly says so.

"The conservative press, by and large, does not labor under these constraints. It does not pretend to be in the business of presenting all sides fairly, but of promoting its side successfully. 'The conservative press is self-consciously conservative and self-consciously part of the team,' observes conservative strategist Grover Norquist of Americans for Tax Reform (who, like most conservatives I spoke with, doesn't buy the idea that Republicans fight more ruthlessly than Democrats). 'The liberal press is much larger, but at the same time it sees itself as the establishment press. So it's conflicted. Sometimes it thinks it needs to be critical of both sides, to be nonpartisan.'

"You see this all the time. The editorial pages of The Wall Street Journal and The Washington Times supported or kept silent about the Republican Senate's strategy of blocking votes on Clinton judicial nominees. Now these papers cry foul when Democrat senators try to do the same to Bush. The New York Times and Washington Post editorials, on the other hand, have been consistent in their condemnation.

Well, true, but this is cherry-picking your issues. The New York Times condemned the Bush budget during the election cycle but kept silent about the equally idiotic Gore budget. It went after Enron and fell silent on Global Crossing. It lauded Bellesiles in no fewer than nine articles, then went dark on the subject for more than a year when evidence came forward that he was making it all up. They fact-checked The Bell Curve, but not Arming America. And the news section of the WSJ doesn't have an editorial direction like that of the Times.

"But to the conservative press, intellectual consistency is for, well, intellectuals. What's more important is to stiffen the resolve of GOP lawmakers to fight the Manichaean battle against liberalism. If the mainstream papers want to undermine the will of Democrats with a lot of high-minded consistency, that's their business. Let 'em get medals for fair play. We'll get the federal judiciary.

Which is entirely different from the way that the New York Times went after welfare reform.

"The same dynamic plays out among TV pundits. Conservatives such as Robert Novak, Kate O'Beirne, and Jonah Goldberg are ideological warriors who attempt with every utterance to advance their cause. Their center-left counterparts, people such as Juan Williams, Margaret Carlson, and E.J. Dionne, simply don't have the same killer instinct. While their sympathies are obvious, liberal pundits are at heart political reporters, not polemicists, who seem far more at ease on journalistic neutral ground, analyzing the strengths and weaknesses of both sides, rather than in vigorously defending Democrats."

Umm. . . okay. Where's Eleanor Clift?

Overall, I find Howard Kurtz unconvincing. He selects examples which fit his theory -- where are the news pages and news programs in all of this, which is where conservatives claim the bias is most damaging? -- and ignores the ones that don't.

Which doesn't leave you with much doubt about where his sympathies lie, does it?

Update
Charlie Toft points out that most of what I criticized is straight quotes from the Washington Monthly article. I don't have any particular bone to pick with Howard Kurtz; either he's quoting the piece straight, in which case the Washington Monthly is the one I want to criticize for selective quotation; or he's quoting selectively, in which case I'm still mad at Howard Kurtz. Either way, I don't think much of the argument.

From the desk of Jane Galt:

Via Oliver Willis: very interesting

Via Oliver Willis: very interesting article on the former Clinton appointees who are running for office this cycle says that even Andrew Cuomo has thrown the Clinton connection overboard in preparing for the campaign. This does not bode well for his legacy. . .

From the desk of Jane Galt:

Blogfest NY! last night was

Blogfest NY! last night was so enjoyable that I find myself unable to express it in words. Check out More Than Zero and Sophismata for details and pictures, including my world famous "Cousin It" imitation. Meanwhile, I was introduced to some new blogs: Amy Langfield, Arrogant Rants, and Clay Waters. I also gleaned some interesting gossip about more famous bloggers than I am, which I won't repeat, partly because it wouldn't be nice and partly because now if any of them find this page, they can just wonder what the rest of us lesser lights know . . .

From the desk of Mindles H. Dreck:

Twenty Things I learned at the NYC blogfest:

Twenty Things I learned at the blogfest:

1) ex-boyfriend has some merits
2) non-profits are oppressive workplaces
3) ex-boyfriend's merits outweighed by negatives
4) graphics business downtown slow; work taken in-house by smarty-pants DIYers.
5) jewish prohibition on proselytizing a matter of Talmudic interpretation - probably.
6) bartenders should know what a Daiquiri is. Major NY emergency.
7) ex-boyfriend blinded by ideology; reads only Times
8) former home of Jewish religion was Baghdad
9) consumer reports putatively not funded by unclaimed class action awards - but needs research; money probably fungible
10) flash must be on to take reasonable pictures in dark bar
11) difficult to have conversation with Amy Langfield from other side of bar
12) ex-boyfriend actually evil freakazoid posing as human being
13) men like short shorts on Saturday
14) simultaneous binge-purge possible with happy hour chicken wings
15) ex-boyfriend needs personality transplant; might make good cat food
16) never promise picture of debating negligee for so little money
17) there is only one Barbie, the one on the dresser
18) Barbie a ventriloquist
19) Many Barbie rules, very complicated, thinking about rules too hard makes smell of burnt polystyrene
20) ex-boyfriend to be drawn and quartered to extract confession of value judgements masquerading as logic.

Oh, make that tweny-one:

21) Well-known west coast blogger actually former country singer; can yodel and croon.

From the desk of Mindles H. Dreck:

Most Loathsome "Teaser" Ever Written

And the winner is....Tina Rosenberg, for the lead-in to a piece about a business man who gasp has actually helped liberate a few Chinese prisoners.

In China, American business has always assumed that human rights and corporate profits are mutually exclusive. Does this have to be the case?

Would that include property rights? The right to the "pursuit of happiness" by being paid for a job? How would you like it, Tina & Editor, if I started a newspaper and ran the following teasers:

Among journalists, the truth has always been subordinated to petty envy and fictionalized morality tales. Does this have to be the case?

Writers for the New York Times Magazine have been known for putting babies on spikes. We take a hard look at their record of brutality.

Journalists for the major papers have always sympathized with known terrorists. There are occasional exceptions.

The consensus has always been that Tina Rosenberg and her editor don't have the brains of a mosquito between them. Is it possible we will need an electron microscope to find out how small their minds are?

Oh, yeah. There's no bias at the Times. I didn't think Goldberg's book was particularly good, but he might as well write Q.E.D. under this article and go home. Game over. Except the bias isn't so much left as anti-corporate.

From the desk of Mindles H. Dreck:

The NYC Blogfest..

..was a success. I was the last blogger standing. Alone, that is, on Greenwich street waiting for my ride while Raghu and Megan whooped their way uptown in a cab. Raghu needs to let me know if there were more extraordinary ex-boyfriend stories.

Follow this link for a rare and valuable picture of Megan McArdle. She is front and center among the revelers. Also visible are (basically L-R), Ken Goldstein, Raghu, Jay Zilber, Cousin ItMegan, Clay Waters, 2 non-blogging sympaticos, Amy Langfield, and Nick Marsala (in the snappy chapeau).

There were more - I also spoke with Diane E., and Patrick Nielsen Hayden.

Raghu, Nick, Megan and I scarfed down pasta and booze after the bloggy hour. Megan and I discovered that we have at least one strange thing in common - we both, in the deep past, raised money door-to-door for causes we may have..um..outgrown now. She for Penn PIRG and I for Greenpeace. We were both good at it. We reminisced about the commissions and incredibly, ironically hostile workplaces we endured working for these supposedly high-minded causes.

I'll fill out this post tomorrow. I'm beat.

From the desk of Jane Galt:

The Guardian says that 45%

The Guardian says that 45% of Americans believe that the Universe was created less than 100,000 years ago. Disturbing, says the Daily Dose, and I agree, but nonetheless the article's a hatchet job.

First of all, it offers the activism of Creationists trying to get evolution banned in the local schools as if these things had already happened, which they haven't and never will -- remember the Supreme Court? There are all sorts of wing-nuts trying to get all sorts of bizarre things done in the schools at a local level -- how come we only hear about the Creationists, instead of the guy who thinks that whites are satanic "Ice People"? or the one who wants the social studies class to do a full unit on cheesemaking?

Second of all, it says 40% of Catholics subscribe to the Creationist creed, which is unlikely -- Catholics who think the world was created a few thousand years more likely believe that the universe was created old than deny evolution, which is on the curriculum at all Catholic schools. You may not agree with the idea that God created the Universe already several billion years old, but there's no reason that you know of that this couldn't be true -- at least no reason that doesn't devolve to, "Well, if I were an omniscient, omipotent and omnipresent deity, I wouldn't. . . "

And third of all, it conflates Creationists with people who think that the world was created less than 100,000 years ago. Given that more than half of all Americans can't place dates within the correct half-century, I would like to know how many of those people are simply confused about the age of the universe, rather than subscribing to a literal chronological reading of the Old Testament.

Don't get me wrong -- I'm a big fan of evolution, and I in no way support teaching creationism in the schools. But I'm tired of the endless "Look! All those people out there in the sticks really are right wing nut jobs who couldn't tie their shoes if their Second Amendment Rights depended on it!" reporting.

From the desk of Mindles H. Dreck:

Thou Shalt Only Accept Funds From Successful Robber Barrons

Happy Fun Pundit gets serious, asking the most vexing question of the strained Enron/Campaign Finance connection:

Is it only bad to be influenced by companies that subsequently go bankrupt? If Enron turned out to be a great company, would it then be okay for them to influence government?

Indeed. Why is it that donations from a company that clearly and obviously failed to peddle influence with enduring success are the most problematic?

From the desk of Jane Galt:

You don't need to change

You don't need to change your links to www.janegalt.net just yet! Get ready. . . but I need to straighten out the FTP'ing of my archives before it's a go.

From the desk of Jane Galt:

Peggy Noonan offers a fair-minded

Peggy Noonan offers a fair-minded take on the Aaron Sorkin debacle. Her piece makes the point that conservatives shouldn't be outraged, since he's flying his true colors proudly . . . and indeed, the people most upset by this seem to be the people at the network, who are treating him like an 8-year old who accidentally blabbed a family secret.

But the best part of the piece is this:

A note on Aaron's art. If he screened out the propaganda on his own it would not only make it easier on a lot of us, it would put him that much closer to being a dramatist of the stature of a William Inge or Tennessee Williams or Paddy Chayevsky. With a first-rate artist you can often guess his politics. Walker Percy, who wrote about the secret brokenness and lostness of our selves, which is to say our souls, was probably in many ways a conservative. Tennessee Williams with his great tugging heart toward the outsider, the outrider, the one who doesn't fit, was probably a liberal. Eugene O'Neill, if he had lived 20 years longer, through the 1970s, would probably have completed the transit from socialist to right-wing nut.
Or so I imagine.

But I have to guess. Their work doesn't bludgeon me with the political views of the dramatist (or, in Percy's case, the novelist.) Their work stands, speaks and stays, untethered to passing political views and positions. Which is one reason they're great.

His show would be better if Aaron Sorkin tried to be great.

I confess I don't watch the show; one-sided political commentary doesn't make interesting TV for me. But I admit that I might find it compelling if it weren't such a polemic.

From the desk of Mindles H. Dreck:

MTZ as a firearm:

If you care about philosophy, Mill was at the top of my list. Here's another test:

Which Firearm are you? brought to you byStan Ryker

From Bill Quick ; Balloon Juice.

From the desk of Jane Galt:

Via James Rummel: a Harvard

Via James Rummel: a Harvard researcher has come out with a study that says that children die at higher rates in states with higher gun ownership. Certainly provocative, although as Rummel points out, this same researcher has given us such research gems as "smoking causes suicide" (the good doctor does admit, grudgingly, that the causal relationship might be reversed), and "binge drinking leads to gun ownership", so as Rummel says, the one piece of rock solid data we can glean from this study is that its author, Dr. Matthew Miller, doesn't like drinking, smoking, or guns.

Still, some of the evidence is facially convincing:

The study showed that the five states with the highest gun ownership levels had many more firearm-related deaths among children than the five states with the lowest levels of gun ownership.

The two groups of states had almost the same number of children, but in the high gun-ownership states there were 253 accidental firearm deaths compared to just 15 in the low gun-ownership states.

There were 153 firearm suicides in the high gun-ownership states compared to 22 in the low-ownership states and there were 298 firearm murders in the high gun-ownership states compared to 86 in the low-ownership states.

Meanwhile, the rates of non firearm-related suicides and murders in the two groups of states were much closer, leading Miller to conclude the increase in deaths was attributable to the higher number of firearm-related deaths.

Of course, any gun statistics for either side have to be taken with a shaker of salt, because the reporting problems are so difficult. For one thing, whether an incident gets reported as a murder, a suicide, or an accident varies tremendously from precinct to precinct; the best guess is that many gun "accidents" are actually homicides or suicides. So there's the possibility, for instance, that states with higher levels of gun ownership are less likely to give credence to the idea that "it just went off by accident" then are states with lower levels. I note that the article mentions only the levels of gun-related suicides or homicides; from the fact that it leaves out accidents, I infer that these are in fact higher (since similar or lower levels would have bolstered the argument). This seems to bolster the possibility of reporting error.

I also note a little oddity lower down in the article:

The difference remains even when the data is controlled for poverty, education and urbanization, the study found.

"Although no conclusions about cause and effect can be made, this study provides compelling evidence that states with high firearm availability are states with high childhood firearm death rates," Dr. Therese Richmond of the University of Pennsylvania's Firearm Injury Center wrote in an editorial.

The five states with the highest rates of gun ownership are Louisiana, Alabama, Mississippi, Arkansas and West Virginia. The five with the lowest are Hawaii, Massachusetts, Rhode Island, New Jersey and Delaware.

How on earth would you control for urbanization between five almost entirely rural states, and five states of which four are on the Northeast Corridor and one is a resort mecca? There is a point at which controlling your data reduces your sample size too far to produce good results; think of the study which showed that gun ownership caused suicide, in which "controlling" for location discarded 2/3 of the data points.

Which is not to say the study is wrong. Indeed, at the margin I would assume that higher rates of gun ownership increase accidents, just as does higher rates of car ownership. The question, of course, is whether or not the benefits of gun ownership offset the risks; John Lott and others say they do, but of course their data has the same kind of reporting problems. I will be interested to see what the inevitable critics make of the data.

But I'm not going to listen to anyone who wants to argue that guns change marginal behavior in owners, but not in criminals.

From the desk of Jane Galt:

Don't forget -- BlogFest NYC

Don't forget -- BlogFest NYC is tonight!