Asymmetrical Information

From the desk of Mindles H. Dreck:

Going Wobbly

Here are Part I and Part II of a three part series entitled "Going Wobbly":

As we consider the state of the market and whether it exaggerates or understates the underlying fundamental risk, bear this question in mind: What role have investors played in today's perceived financial market risk?

I have it on good authority part III will be published shortly.

From the desk of Jane Galt:

Reader Question of the Day

Did I eat turkey for Thanksgiving, ask Brad L. from Detroit and Jen R. from Atlanta?

Why, yes I did.

It's not just that I lack the moral fortitude to suggest not having turkey to a family full of farmers. Frankly, I've seen what vegetarians eat for Thanksgiving, and what most of them cook -- I'd rather eat their hemp shoes. Not content to have a nice big dish of holiday mushroom ravioli or lentil loaf, vegetarians seem curiously afflicted with a desire to conform to the season. Curious, I mean, given how this desire is punctuated with screaming fights with their relatives about having "that beautiful living creature you MURDERED on my table!"

But, we must have something that captures the spirit of Thanksgiving. Not a turkey, you understand, because we love all the little birdies, and want them to be able to run free in the wild, instead of being cruelly slaughtered for our tables.

[Do not try to tell a vegan that since turkeys can't feed themselves or reproduce unassisted, it's likely to be a very short stint in the wild, because their native habitat is not the woods, but the farmyard, and their natural niche is being raised for slaughter. Those hemp shoes pack a surprising wallop.]

No, we can't have turkey. But we want something, y'know, turkey-ish. So they award the place of honor on their Thanksgiving to some form of special-for-Thanksgiving ersatz meat.

Now, meat substitutes can be delicious, provided they are drowned in chili sauce or teriyaki, and surrounded by vegetables, so you don't notice the excessively chewy texture or total absence of flavor. But getting a tofurkey or that wheat gluten stuff the name of which I can never remember which is just as well since the mere thought of it makes me ill, and sticking it in the middle of your table sans accompaniment just so you can pretend it's like having a turkey except that the soybeans can reproduce unassisted. . . well, as I said, why not just cut up the artisanal Guatamalan tablecloth into bite sized squares and let us eat something that has a little texture?

I am a vegetarian, but I'm not, y'know, doctrinaire. We had an eighteen pounder stuffed chock full of delicious apple, sausage, and dried cranberry stuffing, drowned with turkey-dripping-and-apple-cider gravy.

I ate myself sick.

From the desk of Jane Galt:

Department of Seemingly Really Good Ideas

Just goes to show you why theory is never quite the same as practice.

From the desk of Jane Galt:

Bravo

Just found Andrew Sullivan's Thanksgiving meditation on America. Marvelous.

From the desk of Jane Galt:

Holy Toledo, Batman

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From the desk of Jane Galt:

Question of the Day

Why did so many sites take such pleasure in saying "the Thanksgiving story is a myth" and instead relaying the worst dark side of the pilgrim tales?

[Full disclosure: I am descended from John and Priscilla Alden, and probably some other Pilgrims. Not that I can imagine why that would matter, since I am also probably descended from some of the natives they displaced.]

I mean, yes, there is a strong element of mythology to the pilgrim story. There are very strong elements of mythology to any story any group tells about itself. Believe me, I know -- I just watched Reds last night. How come people who get quite hysterical telling you that the apologists for Stalin were all right, really, because they meant well can't cut the Pilgrims a little slack for being creatures of the 17th century instead of the 21st? It's not, after all, as if they infected the Indians with smallpox whom they displaced; those folks were gone before they got there. It's not that there isn't a dark side to the Pilgrim story, mind you, but it certainly isn't the whole story. Those folks had the balls to get in a tiny little ship and sail into the unknown, build a community several thousand miles from the nearest folks who spoke their language, survived the death of half their colony in the first year, and made something of it. Unless you could build a colony in an unknown country with just some abandoned fields, the contents of one ship, and Squanto, it behooves you to pay that accomplishment some respect.

I don't mind, per se, those who publicize the little known aspects of the pilgrim story. What sets my teeth on edge is the relentless focus on the negative, which is just as false as the fairy tale we tell five year olds. The Pilgrims were not lying, murdering scum; they were people persecuted for their religion who came to the New World in search of a place where they could practice their religion and keep their culture. Just like, say, the Jews. They did not always behave well. But their early treatment of the indians was, while not exemplary, not all that bad either. It helps if you stop thinking of the Indians as the Eco-Demi-Gods of the commercials, and think of them instead as actual real live people, who were busy having lives, clashing with each other, and periodically exterminating other tribes, long before the Pilgrims got here. What the Pilgrims did was not sacrelige; it was the same kind of opportunistic expansion into the territory of another group that has characterized the whole of human history, including the history of the Indians. We have, I hope, evolved morally and politically since then. Such a thing wouldn't happen today. But of course, the reason it wouldn't happen today is that those Pilgrims came over here and founded a colony that eventually showed the world that there was a better way.

Publishing such thoughts on Thanksgiving seems rather childish, the sulking teenager at the dinner table who can't wait to tell everyone what's wrong with the pole lamps and the overstuffed sofa and the deep freezer out in the garage. It's not just that they don't want to enjoy the holiday; none of us can because it's not authentic. You know, the right does not, by and large, spend labor day pissing all over the Hollywood Ten and all the other heroic myths of the left. For one day, could you be polite and let everyone else enjoy their turkey?

From the desk of Mindles H. Dreck:

Happy Thanksgiving

Among the many blessings I enjoy is living in a society that has
largely recognized the unproductive and authoritarian nature of collectivist systems. In that vein, I suggest you read Caroline
Baum's column on an important Thanksgiving lesson we should have learned in school. (Here's a similar column from Jeff Jacoby)

For other things they didn't teach you in school, read about Squanto and the European disease vector.

Thanks for visiting, and all my best to you and your loved ones.

From the desk of Jane Galt:

Happy Thanksgiving

At this time of year, I like to cast around and pick up something I feel thankful for to bear in mind while I'm rolling pie crus and basting turkey.

Today, it's my dog.

I haven't blogged about it because I have an engineer's superstitious fear of predicting a good outcome for any operation, but we're out of the danger zone now.

My dog almost died this year.

He had a slipped disk. We didn't know what it was, of course; all we knew was that every time he got up he gave a scream of agony that broke your heart every time you heard it. Unfortunately, the vet we had thought it was his elbow dysplasia, so we screwed around for three months treating that. Towards the end, we realized that if we didn't treat it soon, we were going to have to put him down. He had no life; couldn't go to the park or run or even enjoy sitting with his family because of his constant pain. It had to end one way or the other.

The first time the vet brought it up I started sobbing and didn't stop for six hours.

We tried a last ditch effort: massive doses of steroids. The transformation was miraculous. So miraculous that we decided to take him to another vet, since the swift effect of steroids seemed to indicate a neurological problem rather than a joint problem, but his vet, an orthopedist, seemed disinclined to treat. Our new vet had us up to Westchester for an MRI the next day. The MRI confirmed it -- he had a massive disk rupture below his spinal column, almost on his tail.

The doctor told us surgery had a 95% chance of total success. We gladly forked over the massive sums they wanted to perform it and agreed to leave him overnight so he could have surgery the following morning. We visited him for a little while, and he seemed fine -- still couldn't get up, but he's a sweet dog and he seemed to bear us no ill will for handing him over to strangers.

Two days later, we were allowed to visit again. He was on morphine, and not himself -- unresponsive to stimuli, and seemingly in pain. He had a T shaved into his back for his incision, which seemed large and ominous with those black stitches everywhere. We fed him his dinner and left, with a little hope -- but not too much, because when you've suffered with your dog for three months and come to the end, it feels dangerous to hope.

Well, he came home the next day, and he's been getting better ever since. It's been like a miracle -- he runs, prances, rolls on his back, just like he used to. No pain at all. Lately he's taken to climbing back on the sofas, and we're so glad to see him moving again that even laundering slipcovers is a joy.

No, really. If you have a pet you know what I mean. The mute suffering of an animal is probably the worst thing on earth next to the suffering of a child, because they don't understand, and they wait, so patiently, for you to make it all better. And if the love of an animal is not human love, it is perfect nonetheless.

So I am very, very thankful that Finnegan has more years to run and play and drool on the furniture. And I offer, for your maudlin Thanksgiving pleasure, the following tribute to that noble creature, The Dog:

Tribute to a dog

It is claimed that this is a speech George Vest, a lawyer, made defending a client in 1870, when a man's foxhound named Drum was shot. Drum's owner sued the man who shot Drum. Although there was no evidence, after Senator Vest finished speaking, the jury was in tears. They fined the man $500, even though the maximum fine was $150.

"Gentlemen of the Jury," The best friend a man has in this world may turn against him and become his enemy. His son or daughter that he has reared with loving care may prove ungrateful. Those who are nearest and dearest to us, those whom we trust with our happiness and our good name, may become traitors to their faith. The money that a man has, he may lose. It flies away from him, perhaps when he needs it most. A man's reputation may be sacrificed in a moment of ill-considered action. The people who are prone to fall on their knees to do us honor when success is with us, may be the first to throw the stone of malice when failure settles its cloud upon our heads. The one absolutely unselfish friend that a man can have in this selfish world, the one that never deserts him and the one that never proves ungrateful or treacherous is his dog."

"Gentlemen of the Jury," A man's dog stands by him in prosperity and in poverty, in health and in sickness. He will sleep on the cold ground, where the wintry winds blow and the snow drives fiercely, if only he may be near his master's side. He will kiss the hand that has no food to offer, he will lick the wounds and sores that come in encounters with the roughness of the world. He guards the sleep of his pauper master as if he were a prince. When all other friends desert, he remains. When riches take wings and reputation falls to pieces, he is as constant in his love as the sun in its journey through the heavens. If fortune drives the master forth, an outcast in the world, friendless and homeless, the faithful dog asks no higher privilege than that of accompanying him to guard against danger, to fight against his enemies, and when the last scene of all comes, and death takes the master in its embrace and his body is laid away in the cold ground, no matter if all other friends pursue their way, there by his graveside will the noble dog be found, his head between his paws, his eyes sad but open in alert watchfulness, faithful and true even to death."

From the desk of Jane Galt:

Wedding Bells are Ringing

I've known about this for a little while, but held silent per the wishes of the parties involved. Now apparently the secred is out, so I shall help to spread the happy news:

Sasha Castel and Andrew Ian Dodge are getting married!

That's right, two of the blogosphere's finest are tying the knot. They met and fell in love entirely through their blogs, and now they're making it official. While I believe that Chris Kanis of Spoons Experience qualifies as the first blog-inspired engagement, this one is probably the first of two bloggers who met through blogging. Head over and give the happy couple your best wishes.

From the desk of Jane Galt:

Crunchy Conservatives

I saw this post on crunchy conservatives and had to laugh. Is there such a thing, or has Rod Dreher just discovered that the lifestyle choices of young urban professionals transcend politics?

I don't know the answer. If there is such a phenomenon, I guess I'm part of it. I'm a vegetarian. I keep an enormous dog fed on a raw food diet rather than dog food. I cook most of the food I eat from vegetables hand chosen at the local farmer's market or produce stand, including making my own applesauce, and participating in the annual family canning fest. I have been known to bake my own bread. My idea of a great vacation involves skiing, hiking, or white water rafting, not lolling on the beach. Yet, I think the Sierra Club would have me on their blacklist, if they had such a thing.

I think that to the extent there is a separate crunchy conservative movement, it is this: the conservatives are not self righteous. I am a vegetarian, but I don't prosletyze. (Well, a little. It is healthy and delicious.) I don't think it's wrong to go to Aruba for your vacations, only that it is not to my taste. I do not think you will find among the crunchy conservatives the kind of aggressively self-righteous environmentalist who thinks there oughta be a law making the entire world be a vegetarian. Just as, to be fair, you probably won't find all that many Christians on the left who think the entire nation should embrace their religion.

But the reason I had to laugh is that when my friends from business school discovered this site, more than one of them expressed sheer amazement at my location on the political spectrum. "I thought you were the compleat hippie," said one, expressing a common sentiment. Having spent most of my life on the Upper West Side, where my politics, when known, are reviled as the worst sort of troglodyte oppression, it was quite a shock to find that outside of my hothouse environment, I come across as the girl with the knee-high leather moccasins and the tie-dyed shirtwaist.

From the desk of Jane Galt:

Long on Rhetoric, Short on Sense

Now, I am not under the impression that all feminists, or even professors of Women's Studies, believe this sort of nonsense. But I've spent enough time around the movement to know that the majority don't challenge the people saying it, which is almost as bad.

WIE: Which brings us to another question I wanted to ask you. Sally Miller Gearhart, in her article, “The Future—If There is One—Is Female,” writes: “At least three further requirements supplement the strategies of environmentalists if we were to create and preserve a less violent world. 1) Every culture must begin to affirm the female future. 2) Species responsibility must be returned to women in every culture. 3) The proportion of men must be reduced to and maintained at approximately ten percent of the human race.” What do you think about this statement?

MD: I think it’s not a bad idea at all. If life is to survive on this planet, there must be a decontamination of the Earth. I think this will be accompanied by an evolutionary process that will result in a drastic reduction of the population of males. People are afraid to say that kind of stuff anymore.

(VIA Instapundit)

Leaving aside the question of how, exactly, we would go about limiting the population of males to 10% without infanticide or other practices rightly denounced when they are applied to women by barbaric cultures, how exactly is this "species responsibility"? If these women spent less time on the Utne Reader, and more time actually studying the environment they claim they wish to protect, they'd know that what they're proposing is to reduce species diversity by 80% -- hardly a recipe for a healthy species. One could forgive such idiocy if it were not that the same people advocating such "solutions" are wild about diversity when it comes to endangered species, or for that matter, endangered ethnic groups.

I'm also aware that the reason they say things like that is that no one pays attention to them. But if you're going to propose genocide with the offhand arrogance of a high school essayist, you can't really complain that no one takes you seriously.

From the desk of Jane Galt:

We have met the enemy and he is us

Robert Shapiro explains why we'll never get the Jane Galt Tax Plan. Sigh.

From the desk of Jane Galt:

WWJD Redux

I've been somewhat bemused by the vehement reaction to the What Would Jesus Drive campaign by some on the right. Now, I'm not an evangelical Christian, but it seems pretty fair to say that Jesus, if he were here, would probably oppose contributing to global warming in order to gain a trivial benefit for yourself -- because, say, you feel more manly driving a Ford Expedition than a Toyota Corolla. The authors of the campaign that I saw didn't say you couldn't drive an SUV and be a good Christian -- they just said that as Christians, you should think about how much car you really need, and not drive one bigger than you have to have. That seems pretty reasonable to me.

On the other hand, in this excellent post Sasha Volokh points out that while in general it's a good idea to refrain from criticizing private activist movements as harshly as we criticize those who are agitating for government intervention, there are times when such campaigns are counterproductive -- that is, they work to the detriment of what we assume to be their founders' goals. He also points out, however, that you'd better be damned sure what those goals are before launching an attack on such grounds.

On a side note, if the Volokh Conspiracy doesn't stop making the rest of us look bad, I think a secondary boycott may be called for.

From the desk of Jane Galt:

Censorship, Chilling Effect, or just Freedom of Association?

Goodness! The blogosphere is up in arms about Rittenhouse Review's attempted secondary blogroll boycott of LGF -- or rather, Steven Den Beste's critique of same.

The heart of RR's argument:

I can no longer in good conscience include on the Rittenhouse Review’s blogroll any weblog that has provided a permanent blogroll link of its own to the site known as “Little Green Footballs” or “LGF.”

It is with great regret and considerable lament that I have adopted this position -- or been forced to adopt this position -- as I am normally a passionate advocate of an author’s right to choose his associates and to establish and maintain her own chosen associations.

However, it has become painfully clear, to the extent it wasn’t already, that the hosts of LGF, while preciously coy about their own political persuasions, all too willingly and not without satisfaction have allowed their site to become a vile cesspool of racism, bigotry, prejudice, ignorance, and hate.

The heart of Den Beste's argument:

In essence, you have no obligation to associate with people like that. You have no obligation to in any way help them spread their opinions. But you should not attempt to actively suppress them, to actively work to try to prevent them from expressing their point of view. In part that means you should not attempt to use the power of government to persecute them, but it also means you should not attempt to coerce others to join you, except through the power of argument on the basis of the issues. Where you cross the line is when you do anything which works to prevent others from making up their own minds.

Translated into modern terms and choosing an example, it would go like this: if you hate the Nazis, you should not link to their web site. If you find others who do link to the Nazis, you can send them mail and try to convince them that the Nazis are despicable and that the link should be removed on that basis. But when you go beyond that, and try to use means not related to the issues (e.g. threatening a boycott of the person's business) then you've crossed the line. You've ceased to try to deal with the issues, and moved into attempts to suppress information to prevent others from even being exposed to the issues. That's where disapproval ends and censorship begins.

Mill differentiates between not helping others find opinions of which you disapprove (which he thinks is acceptable) and actively working to prevent them from accessing those opinions (which he condemns).

RR is completely justified in not linking to LGF. RR is completely justified in attempting to convince others that LGF is not worth linking to. But with this step, RR is moving beyond that to attempt to use a level of direct coercion which I don't consider acceptable.

Den Beste also makes fun of Rittenhouse Review's template, which I think detracts from his main argument, but which is also sending RR's defenders into irrational paroxysms of rage. I'm not going to address that issue, because frankly I haven't any high moral ground to stand on in the matter of template design, or for that matter, cluttering posts with distracting side comments.

But what about freedom of expression? what about standards of decency. Most importantly, it seems, what about meeeeeee?

First, no one is arguing that Rittenhouse Review hasn't the right to stage such a boycott. They're arguing about whether RR ought to stage such a boycott. RR's defenders are trying to force their opponents to apply the very stringent standards of argument that we use to determine what absolute rights we believe people have, such as life, liberty, pursuit of happiness, etc. This is silly. No one is arguing, I think, that what Rittenhouse Review is doing is beyond the pale, only that it's a bad idea -- and argument which requires much looser standards of proof.

So, is it a bad idea? On the one hand, freedom of association is precious, and although some people would disagree with me, I think the forceful expression of revulsion against ideas we find repulsive is an important part of the marketplace of ideas; it keeps polite people from turning over the public square to loud wingnuts who think child pornography should be a civil right and certain ethnic groups are natural slaves, or whatever current vileness passes for thought among the dark places of the intellectual world.

For example, I do not subscribe to any newspaper that carries Ted Rall cartoons. I am sufficiently appalled by his callous and juvenile treatment of the WTC widows that I decline to have even a tiny fraction of my custom go to support his continuing imprecations. Am I limiting the marketplace of ideas? In one sense, yes. In another sense, I am contributing to it, by expressing in the most effective way my disapproval of the particular ideas Ted Rall represents. Or rather, of the way he chose to represent them. I think there are arguments to be made about the relative compensation of WTC families and other disaster victims, of the media treatment of the subject, and other sensitive issues surrounding 9/11. I just don't think that the way to discuss these issues is to make nasty jokes about the families. So one can argue that by enforcing the social norm of confining arguments to ideas rather than personalities, I am in some way enhancing rather than taking away from the public discourse. In my own exceedingly tiny way, I mean.

So leaving aside grand, sweeping questions of cosmic right or wrong: does Rittenhouse Review's action add to, or detract from, the free interplay of ideas? To some extent, obviously, that depends on whether or not you agree with LGF. But one of the hallmarks of liberal thought is the recognition that it is extremely dangerous to decree which subjects are arguable and which are sacred totems that may not bequestioned. To the extent that Rittenhouse Review's action is based on content rather than tone -- and given the tenor of the blogroll, I find it hard to make a cogent argument that Rittenhouse Review's objection is primarily to the tone of the LGF commenters -- it is detrimental to the liberal interaction of ideas.

Moreover, it seems that Rittenhouse Review is not merely trying to express their disapproval of LGF. The intent, however unlikely to be successful, seems to be to prevent anyone from reading the ideas on LGF. As Den Beste points out in his essay, the nature of web traffic is that for a site to get significant traffic, much of it must be pushed there via links from other sites; thus, an attempt to get a website delinked is in essence an attempt to prevent the expression of the ideas on the site.

This is not the best way to ensure the triumph of the truth. Certainly, Rittenhouse Review has no obligation to send its readers anywhere it believes that the writing is offensive or the ideas are wrong. For example, I do not have a permalink to Rittenhosue Review. Trying to ban those ideas, however, by keeping everyone from linking to the site, does not advance the search for truth. Ideas which are shoved off into a ghetto populated only by the like-minded do not die; they fester. If Rittenhouse Review believes that LGF's ideas are wrong, a better strategy would be to bring the ideas into the light and expose their untruth, rather than trying to keep the Faithful from ever encountering them.

It is not fair, of course, to say that such cocooning is endemic only to the right or the left. But a propos of nothing in particular, I note that the much-excoriated right-wing of the Blogosphere, supposedly the civil-rights-hating heirs of John Ashcroft, have responded in classical liberal fashion -- not by attempting to ban Rittenhouse Review, but by vigorously opposing the actions of which it disapproves.

From the desk of Mindles H. Dreck:

Thoughts for the "New Plutocracy" Crowd

Instapundit points out an article about Tyler Cowen. Here's an interesting excerpt from one of his papers:

The net effects of the United States Social Security System are complex, and I do not count them as part of the welfare state in this paper. In any case most of the redistribution is across generations rather than to the poor per se. Earlier generations (the current elderly) get the best deal and subsequent generations receive increasingly inferior deals, given the pay-as-you-go feature of the system (e.g., the very first generation received benefits but did not pay a comparable tax burden). More generally, returns are tied to what individuals put into the system. Many aspects of Social Security are regressive, given that the payroll tax stops at $76,200, the poor start working earlier (thus increasing their contribution) and tend to die sooner, thus lowering their payout.

Many of the largest and most expensive government programs benefit the rich or the middle class, rather than the poor. Christopher Jencks estimates that in 1980 only one-fifth of all social welfare spending was explicitly aimed at the poor. Subsidies to higher and lower education do most for the upper middle class. The real value of public goods is greater in wealthy communities, even relative to local tax expenditures. Many health care subsidies benefit the elderly, who tend to be wealthier than the national average. Our tax system is only weakly progressive, all things considered, and many kinds of taxes, such as sales taxes, have a regressive impact. Milk price supports, most tariffs, and corporate welfare are but a few of the many regressive policies enacted by the American government.

So that was the situation in 1980...

From the desk of Mindles H. Dreck:

A Strip of Anna Kournikova's Fabric

Squash was my sport. It's a clean-cut preppy one with no money and little glamour. College and pro squash players go on to run hedge funds and opine on healthcare and politics. It's an anachronism in today's world (until you've seen Fives, that is).

Perhaps that is about to change. The 18th ranked woman player in the U.K., one Vicky Botwright, has stirred up quite a buzz by taking the court in a thong! After gaining the requisite notoriety, she even auctioned the thong off in Hong Kong.

Somebody tell Tony Pierce.

Incidentally, last night I watched an episode of CSI that my Tivo had spooled up for me. It was preceded by a slew of warnings about "brief nudity". Added bonus! Good Tivo! I settled in to watch TV cheap-thrill history in the making.

It was a corpse. Dead boobs. What the hell? Based on this and the unedited Schindler's List I'd say the evolving TV nudity code is "we'll show skin if the character is murdered...or about to be." The mind reels. If I was the sort of person to lament cultural sickness, I'd...well, I'd be lamenting right now.

I'll stick with squash and the quite healthy Ms. "Bodright".

From the desk of Jane Galt:

The Jane Galt Tax Plan

Fritz Schrank asks how we should simplify taxes. Well, here's the Jane Galt version, guaranteed to please no one but its author:

1) Get rid of all our poverty programs, except those aimed at the disabled, and temporary unemployment assistance, and institute the negative income tax. That is to say, the system should be continuously progressive, from a steep negative rate of up to 100% on very low earners, gradually declining until it zeroes out around $28,000 a year, and then rising gradually until it maxes out around 35% on the top brackets.

2) Eliminate FICA and pay for Social Security and Medicare out of general revenue. It's time to stop pretending it's a pension system, when there are no assets in the "trust fund"

3) Eliminate the corporate income tax

4) Eliminate the special treatment for capital gains. All income should be taxed at the same level, regardless of its source.

5) Eliminate all deductions. Period, end of statement. No mortgate, student, child, etc. All causes are equally worthy in the eyes of the person who possesses the deduction; it is a waste of our time as a nation to sit around arguing about who deserves what.

6) Just say no to the Value Added Tax. In theory, it's a good tax. In practice, because it is extremely hard to tell what proportion of the price of anything represents the tax, it removes the good and natural pressure upon tax rates.

7) Get rid of the estate tax, and tax the capital gains on whatever is sold.

So why these particular features?

Well, the negative income tax does two things: encourages work by removing the disincentives created by potential loss of benefits; and means that the entire country, poorest to richest, faces a marginal tax increase if they want more spending: the poor have to give back some of their rebate, while the rich have to pay higher rates. For many on the left, that may of course be a bug, not a feature, as it forces the electorate to think much harder about whether or not they want new spending.

The arguments between conservatives and liberals often go like this:

C: The rich pay all the taxes
L: That's not true -- what about FICA?

Both have points. But the central issue that the conservatives are trying to get at is that the majority of the electorate does not face a marginal tax increase when they agitate for new spending. FICA may indeed be regressive, but its rates are unaffected by the level of spending in government. So a majority is prone to agitate for higher taxes, because they will not be paying those taxes.

I don't think it's a healthy situation for the electorate when a large majority is voting for spending that costs them nothing. To the minds of someone who pays no income tax, there's no cost/benefit analysis to be made; they're getting stuff for free. Even something of trivial benefit to them is thus better than not raising taxes. So we end up spending money on a lot of crap, because most of the voters don't care -- it's not their money.

On the other hand, liberals have a point about fairness. It isn't fair to say that some guy who brings home $20K should pay the same quarter of his income as Warren Buffett. The decrease in Joe Schmoe's standard of living represented by that 25% is much greater than the decrease in Warren Buffett's SOL from taking a quarter of his loot.

A negative income tax increases fairness, removes perverse incentives from the current benefit system, and makes sure that everyone has to think about whether they really want that new spending they're voting for -- enough to give up some of their cash.

Killing FICA increases fairness while removing some of the obstacles to reform by eliminating the fiction of an insurance program.

Eliminating the corporate income tax while equalizing treatment between capital gains does a number of things. It mitigates the current bias towards (tax deductible) debt financing. It ends all the ridiculous distortionary crap that corporations do to get around taxes. It ends the bias towards retained earnings that helped produce such interesting results in the stock market. It takes away a large chunk of the ability of the rich to avoid taxes by deferring their income in capital gains. It ends the tax preference for stock options that helped make the start of the new millenium so lively. Under this plan, income is income is income, no matter where it comes from. Thus we can stop the multi-billion dollar industry in shifting income from tax-disadvantaged to tax-advantaged forms.

If you just end the corporate tax without changing capital gains, you keep much of the distortion and shelter for the rich. If you eliminate special capital gains treatment without eliminating the corporate tax, you bias the economy away from investment, because now income is taxed at a high level twice -- once when its made by the company, and a second time when its distributed to the company's owners. This way, we tax it once, when it hits a real person.

We eliminate deductions for two reasons. First of all, they're distortionary. If it makes economic sense for adults to go to school, they will go to school. Giving a tax credit for it just encourages marginal activity that wouldn't pay for itself without a subsidy. Try thinking of it not as a tax credit, but as you giving someone else money to follow their dream of learning Old Church Slavonic, and you see what I mean.

Second of all, deductions are the way that the rich make sure that they pay a lot less taxes than the upper middle class. There is a reason that Barbra Streisand thinks that income taxes should be raised; she isn't going to pay much more tax. Most of her money is in assets, earning more money. It's the guy who owns the gas station down the street who's going to get it in the teeth. If we want to tax the rich, let's tax them, not give umpteen zillion deductions so they have the same marginal rate as your average bike messenger.

That's fine, I hear you say, but why all the deductions? Why not just the bad ones?

Because, as we've found since Reagan's simplification, there's no such thing as just one deduction. If you want the mortgage tax credit, you're going to need to give someone else the land-use abatement, and then there's the guy with his Urban Empowerment Zone Qualified Small Business, and next thing you know, we haven't gotten anywhere. The only way to get a clean code is to get rid of all of them. This won't be fun for many people. Housing prices will drop, for starters. On the other hand, so will tax rates. And come on -- why should an apartment renter be paying more taxes so you can frolic in the greenery?

Why get rid of the estate tax? Because the revenues raised are trivial, and people spend an enormous amount of time and money structuring their estates to get around them. Again, a disproportionate share of the tax is paid not by the super rich, but by the poor schmucks with one or two big assets they can't structure to get around the tax. On the other hand, when it's sold the inheritors should pay all the capital gains -- if you get rid of the estate tax, you should get rid of the stepped-up basis as well.

So that's Jane's plan. As you can see, it would be efficient, fair, and has absolutely no chance of ever getting passed unless they make me Dictator for the Decade.

Sigh. I could solve so many problems, if only people would let me tell them what to do. But no, they insist on mucking it up by deciding for themselves.

From the desk of Jane Galt:

It's About Time

Here's something you won't hear from other New Yorkers: subway fares are going up, and that's a good thing.

In 1910, when most of the system had been completed, the subway fare was 5 cents -- 1/20th of an average day's wage.

Even the minimum wage workers in New York don't pull any $30 a day. And minimum wage workers are a trivial segment of New York's labor force.

In 1910, the system covered its operating expenses, and even made enough to cover capital costs, with a little profit thrown in.

Now it doesn't cover expenses, certainly doesn't cover capital costs, and profit? Who dat?

It's overused, because its price is artificially below market. It's overcrowded, and its services are underappreciated.

A bus fare ought to cost $4.00 just to cover its operating expenses. That doesn't include negative externalities like traffic, pollution, and noise, nor does it cover the cost of buying the bus, maintaining the Metropolitan Transit Authority, or other physical plant -- just gas, maintenance, and driver wages. Yet the fare has stayed $1.50 for ten years, while the trains and buses overcrowd, and the transportation system on the East Side, which is strained to the breaking point, cannot afford expansions which would ease traffic levels.

25 or 50 cents -- the proposed raises -- are a drop in the bucket.

But what about the poor, you say? If the poor really can't afford to ride the trains, we should raise their income until they can, not subsidize every pinot-noir-guzzling investment banker and corporate lawyer along with them. But let's be real. We're talking about a trivial expense alongside the average $8-10 cost of lunch in a New York City deli. People aren't complaining because they can't afford to ride the subway at $2.00; they're complaining because they don't want to pay. Liking to get things for less than the cost of providing them is hardly unique, but neither is fulfilling those wishes some sort of civic duty.

It's time for New Yorkers to pay their way.

From the desk of Jane Galt:

Hmmm

Interesting question.

From the desk of Jane Galt:

That or Which?

It seems that there are people in the world who do not understand when one uses "that" and when one uses "which".

But you knew that. Over the years, the editorial staff of Asymmetrical Information have observed that there is a large class of people who seem to believe that "which" is simply the formal locution, used to dress up important documents. This is incorrect. There is a time for using "that" and a time for using "which, a time for "like" and a time for "as", a time for the subjunctive and a time for the conditional. . .

But those are other rants.

Those of you who know and love Jane in her incarnations as Chicago MBA or Former Technology Consultant may be unaware that she has several other past lives. In one of them she was a Penn English Major. And no, that does not mean she is going to regale you with naughty stories, though of course, being a Penn English Major, she could if she so chose.

She will, however, explain to you now the difference between that and which: that denotes a restrictive clause, and which denotes an unrestrictive clause.

But what does this mean? I hear you cry.

Well, we use "that" when we want to restrict our subject to some smaller subset, by using the descriptive phrase that follows that. Hence:

Please pick up the clothes that you dropped off at the dry cleaners yesterday.

I don't just want you to pick up any old clothes; I want you to pick up the ones you dropped off yesterday. No other clothes will do. Hence, I use the restrictive "that" to tell you exactly what clothes I want you to pick up.

Compare this with the correct unrestrictive usage of "which":

When I was a junior in college I drove a lime-green 1977 chevy, which I bought with the pittance I earned in my summer job with Greenpeace.

The clause following "which" doesn't tell us information we have to have in order to know which car it is. Even if we don't know that you spent your summer haranguing people to wear hemp shoes, we would still know exactly what car we're talking about: your car, the unfortunately colored American gas-guzzler that leaks oil and parallel parks about as well as the Love Boat. The information provided by our descriptive clause is interesting, but not necessary for us to identify its subject.

Notes:

Often, "that" is dropped in spoken, and increasingly, in written English. That's perfectly fine. Nonetheless, in order to tell which one you should use, try sticking the "that" back in and seeing if it makes sense.

"Which" and "That" both do duty elsewhere, as you can see from the above sentence. The distinction under discussion applies only to their use in clauses.

In spoken English, "Which" is freely substituted for "That", even though it shouldn't be. This is why seeing what "sounds right" is no substitute for learning proper usage, and why you should take that English teacher you had in eighth grade who told you that the important thing was to express yourself, and express your displeasure by shaking her violently until her brain starts working again.

Next question?

From the desk of Jane Galt:

Decentralization of Information and the American Ideal

You know what I love about having a blog? I love the fact that I can return to the same subject over and over and hammer it into the ground until y'all are begging me to stop. Like that's going to work. Ha! If you've got something to say, say it with cash. Tip jar's over on the right. If you want something out of me, you pile gold before me until I smile.

Anyhow, as I was saying, I've been thinking more about open v. closed security. Generally, you can find me voting with the libertarians, but on this one, I'm of two minds.

On the one hand, a decentralized, open information system works better at processing information for the optimal answer. A large part of why communism failed was that no one did any work, of course; but another large part is that the economic system did a very poor job at finding out what people needed and how badly they needed it. So instead of basing their decisions on what people needed, the guys in charge of production based their decisions on what they thought people needed. If you have parents you know this is not the same thing. No matter how well-meant the decision-makers, the result is decidedly sub-optimal.

So on the one hand, releasing potential security holes to the entire population and allowing the giant processor that is the hearts and minds of the American public is an order of magnitude more likely to produce an innovative way to plug your hole than is asking a small team of experts to come up with the solution.

But on the other hand, some security holes don't have fixes; or at least, many of the cures are worse than the disease. Let's say that we didn't have these nifty heat scanners for cargo containers. That would be a major security hole. However, the likely solutions -- open every container, go back to non-container shipping, or shut down shipping -- would likely cause more damage and lost lives than a terrorist attack, as they would cripple our economy.

At that point, releasing the information doesn't enhance your security; it gives the terrorists ideas, without producing new solutions.

The problem is, there's no way of telling in advance which problems have solutions that just haven't been discovered yet, and which are insoluble. They're all insoluble to your little team of experts.

So you have to make a tradeoff between finding solutions and not giving terrorists ideas. And you tend to err on the side of security. This is not unreasonable; after all, if you have the experts on your team, you've already got the people most likely to generate solutions. Even though sheer weight of numbers means that the American public would be even more likely to do so, the curve is not smooth; there are diminishing returns to telling more people, while the heightened security risk is real.

At this point, the hard core open source/open society types tend to say that of course the terrorists will have thought of anything you can. Now, that's just silly. First of all, a lot of the holes in security are visible only to people in highly specialized professions: pilots, engineers, scientists. There aren't a lot of those in terrorist groups, because they have, y'know, jobs.

And second of all, that giant processing system works the other way. There are a lot more of us than there are of the terrorists, and consequently, we're going to generate a lot more high-quality ideas for bringing the nation to its knees. Mathematically, some of those ideas are going to lack solutions, cost-efficient or otherwise. After all, we've been working on the problem of finding a really good low-calorie dessert for fifty years, and what have we got? Snackwells.

There's a certain element of "to the person with a hammer, everything looks like a nail". Sure, open source does a great job of patching Apache. But Apache still gets hacked. And let's get a little perspective here: software security is not the same thing as personal security. When I wrote a post criticizing medical residency programs for having residents work 48 hour shifts, old friends emailed to point out that I used to do "mission critical" work on shifts that lasted up to, one momorable weekend, 65 hours. Okay, guys, we're getting a little exaggerated idea of our own importance. I worked on a box of bolts. If it went down, the companies I worked for lost a lot of money. But at the end of the day, all of the little bankers got up from their desks and went home to their families. Equating the two is sheer hubris.

Urging people to publish their ideas on security weaknesses with the intent of pressuring the government to do something about the security holes has the flavor of an open source suicide pact. If you don't have a ready solution, all you're doing is giving someone else an idea they may not have had. And not just terrorists, either. There are, I regret to say, homegrown American lunatics of the non-terrorist variety who might like to take up some of your ideas for their very own.

There is a reason that the government is biased towards secrecy. Often, it probably goes too far, and that's why we need the libertarians and the ACLU and the open source afficionadoes pressuring it to give us more information. But the level of distrust where you think its safer to publish, in mass media, all your thoughts on how to attack America than to trust the government. . . well, I think you've been spending a little too much time reading your own literature.

From the desk of Jane Galt:

Who are You?

"What Type Of Retro Gal Are You?" - Results:

You are the Girl Next Door. You're the sweet one. The quiet one. The one that he doesn't realize he's got until you're gone.

What Type Of Retro Gal Are You?
brought to you by Quizilla

From the desk of Jane Galt:

Silence is Golden. . . Maybe

Steven Den Beste says we should keep our mouth shut about potential security holes. Aziz Poonwalla says au contraire, we should talk about them to pressure the government or businesses involved can fix the problem, or that we would want them to. I think there's a balance between the two.

Consider the topic that started this off: agricultural security. This chap has been loudly declaring the many ways our food supply could be breached by bioterrorism.

Now, it's not like the government has been ignoring the matter. But of course it's possible the government has been paying insufficient attention, and it's necessary to call the public's notice to the matter in order to put the heat on.

However.

It's also possible the government is adequately weighing risk v. reward, and what he's done is to call the terrorists attention to previously un-thought of ways to attack us.

For example, foot and mouth disease. It's a horrible illness, spreads like wildfire. Probably the terrorists had considered it, but what if they hadn't? Did you see what happened in England? Even an extraordinarily robust government response -- immediate slaughter of any animal within striking distance of an infected one -- left the disease spreading hither and thither. We have early detection and slaughter programs in place just like England -- any vet that sees it notifies the government, which sends in the troops.

What else can we do? Nothing, really.

Oh, I suppose we could strip search and swab every person who comes into the country, empty all their luggage and test it for biopathegens -- if we wanted to essentially halt international travel, and/or divert 10% of GDP to airport security and customs.

Or we could put into place programs which would lockdown any place where something like foot-and-mouth was discovered, placing it under martial law and ordering anyone who tries to travel out of quarantine to be shot on sight, that being how the disease seems to have spread so far in the recent English outbreak.

Or I suppose we could institute security screening for all agricultural workers, people who drive near farms, people who work at feed suppliers and stores, and associated possible industries where foot and mouth might be introduced.

We could put police patrols on high alert near the billions of acres of farmland in this country.

We could do those things. But it would be cheaper and easier to convince the whole nation to go vegetarian.

Given that we are not going to step up our security appreciably, or convert the nation to the extraordinarily sensible (and economical!) vegetarian diet, announcing that foot and mouth would be devastating is not improving matters. It's probably not disimproving them, but some of his other suggestions were less obvious, and offered no easier solutions.

If there is a feasible security response which might be made to plug the risk factor you've identified, then opening your mouth probably helps. But in many cases, it doesn't. The parallel to Microsoft is apt in this sense: there is a tradeoff between having features we like at a low cost, and having a higher security risk. If it isn't feasible to pay the cost or forego the feature, than a citizen's duty is to advise the government of any new information, and otherwise keep their mouth shut.

From the desk of Jane Galt:

Just Say No To Christmas Puppies

Outstanding post by SKBubba on why you shouldn't get a puppy at Christmas. Oh, it's cute, all right. And actually, if it's just you and a spouse, I think it's probably fine, provided you're homebodies. But if you have children, it's verboten. When little Sally's tired and cranky from all the Christmas excitement and has to be put up for a nap at the same time little Rover needs to relieve himself, what are you going to do?

When little Joe eats a Christmas ornament and has to go to the hospital, who's staying home with the puppy?

Who's going to take time to housetrain the little scamp with all the relatives coming over for dinner?

When you're exhausted from kids, family, presents, and cleaning, are you really going to feel like taking Rover out for the walk he needs?

Puppies take a huge amount of attention. They're worth it. But when you're zipping madly around over the holidays is not the time. Besides, there will be a bumper crop of Christmas puppies in the shelter come January, where you can pick up a purebred puppy on the cheap.

Other good advice:

Don't buy from pet stores -- they get their puppies from puppy mills. What happens in puppy mills I wouldn't wish on my worst enemy. There is a special circle in hell reserved for people who abuse animals, and puppy mill owners will have the center ring.

Don't buy from a backyard breeder. We did, although we were referred by a pedigreed breeder, so his line's all right, but she kept the puppies crated too much, which led to a lot of trouble housebreaking.

If you're in a city, be prepared -- it's a pain in the ass hauling little Rover out the four or more times a day necessary for city housebreaking. Also, in crowded cities like New York, they can't go out on the street for several months, so you have to paper train, then housebreak -- and by three months, they're very resistant to going on the street when they've got a nice, clean, private house upstairs.

If you're in an apartment, think very large or very small dogs. The very large dogs are basically mobile couches -- an hour a day does Finnegan more than nicely, and will also suit your Great Dane, English Mastiff, or a host of other large dogs. Small dogs get all their excercise in your apartment. Medium dogs, however -- say, Springer Spaniel and up -- are generally hunting dogs. They need much more excercise than the majority get to be happy -- several hours a day, at a minimum. If your lab or golden retriever is sorta depressed, that's why. Bullmastiffs are also affectionate, loyal, sociable, protective. . . downright perfect, when you come to think of it.

And with that, I have to go walk the lovable beast.

From the desk of Jane Galt:

Why Equity Research is Biased

From John C. Bogle, former head of Vanguard, in the WSJ (subscription required:

The incentive for the brokerages is to sell a product. If investors don't buy stocks, those of outstanding issues and IPOs alike, brokerage firms won't have much in the way of revenues. So the balance is one-sided in favor of buys. What is more, much -- perhaps too much -- research is based on interviews with company officials, so it takes some courage to risk their ire and recommend sales. Further, every single one of a firm's clients can act on a buy recommendation, but only clients holding the particular stock can act on a sell recommendation. There is no obvious way around these roadblocks.

But the money quote is this one:

The near-universal consensus among research providers and users alike is that if Street research could be purchased only with hard (i.e., real) dollars, [rather than being paid for out of commissions,] the amount spent on it would plummet. Yet it does not necessarily follow that all research lacks intrinsic value. While the value of an original, comprehensive, and insightful research study becomes zero at the moment it becomes available to all market participants, the value of the same study by the research department of a single institution remains as long as the information remains proprietary.

In other words, research that is freely available to everyone is worthless. Yet SEC rules mandate that information must be made available to all customers, or none. The tendency is naturally, then, for research to abdicate its role in providing information, and take up a new role juicing banking and brokerage businesses. It is not merely that brokerage and banking are more lucrative; it is that no one would pay enough to obtain information everyone else has to cover the cost of providing the information. Research has to support other businesses, or die.

From the desk of Jane Galt:

It's Not Us -- It's the Foreigners!

Consider these paragraphs from a WSJ editorial on Japan's banking crisis, which is worsening to the point where it looks like they may actually do something about it. Unfortunately, it has been worsening, and looking like they may actually do something about it, for ten years, so I wouldn't get too excited. The Japanese have proven extremely adept at staggering along without major change.

But I was speaking of the editorial:

Naturally, ordinary Japanese are going to ask who's to blame, and Japan's vested interests have already managed to deflect attention onto a scapegoat: the Americans. The declines in stock prices are the result of foreigners selling Japan short, this thinking goes. Reformers must be in the employ of vulture capitalists who want to wreck Japan Inc. so they can pick over its bones.

It's not a sophisticated story, but it bears thinking about. Two months ago the State Department quietly convened some Japan experts to look for signs that the country might repeat the history of the 1930s, when militarists exploited unemployment and thwarted national pride to take over the government. The U.S. academics didn't see much indication of that happening today.

What I found remarkable in these statements was not the possibility that Japan was going to revert to the 1930's (although the fear is not as odd as it seems. . . Japan's economic crisis seems so like our own in the Great Depression in many ways, that it's hard to look at the country without thinking of the 1930's) What struck me was how like they are to the responses of developing countries during the 1998 fiscal crisis, when it was those madcap foreigners, determined to destroy the stalwart people of [Malaysia/Thailand/Etc] who were the source of the problem, rather than hog-wild spending and a speculative boom. It seems a little odd for a developed, highly educated country like Japan to be making statements that sound as if they've joined the same club.

From the desk of Jane Galt:

JFK In the Dock

Meanwhile, conservatives are jumping on the fact that JFK was taking. . . well, rather more painkillers and mood-altering drugs than you would normally want in the guy with the authority to launch a nuclear war. I think they're probably getting a little overexcited, although it did produce this editorial on the politics of secrecy. After all, Winston Churchill was a controlled drunk who apparently suffered from pretty major depression, and yet England's still there. On the one hand, I don't think we want to exact lower standards from the president than we would from, say, our doctor. On the other hand I think we expect inhuman levels of perfection from our doctors, and our presidents. Where are we going to find all these demi-gods, sound of mind and body, reasoned of judgement, strong of character, kind of will, who never, ever make the least little mistake?

From the desk of Jane Galt:

WWJD

Thank y'all for bearing with me. . . for the past few days, I've felt like the pulp that's left clinging to the side of the glass after you drink a glass of homestyle orange juice.

Question of the day: why are people making a big deal about this What Would Jesus Drive campaign? (For those who haven't seen it, the answer is apparently "Not an SUV") I mean, I can't fault the people who are poking fun:

One theory is that Jesus would tool around in an old Plymouth because "the Bible says God drove Adam and Eve out of the Garden of Eden in a Fury." But in Psalm 83, the Almighty clearly owns a Pontiac and a Geo. The passage urges the Lord to "pursue your enemies with your Tempest and terrify them with your Storm." Perhaps God favors Dodge pickup trucks, because Moses' followers are warned not to go up a mountain "until the Ram's horn sounds a long blast." Some scholars insist that Jesus drove a Honda but didn't like to talk about it. As proof, they cite a verse in St. John's gospel where Christ tells the crowd. "For I did not speak of my own Accord..." Meanwhile, Moses rode an old British motorcycle, as evidenced by a Bible passage declaring that "the roar of Moses' Triumph is heard in the hills." Joshua drove a Triumph sports car with a hole in its muffler: "Joshua's Triumph was heard throughout the land." And, following the Master's lead, the Apostles car pooled in a Honda... "The Apostles were in one Accord."

Tee-hee! But I've actually seen commentators, left and right, arguing that they oughtn't to be advocating it. Even one poor host on Fox News trying to get the minister sponsoring the thing to admit that there was nothing supporting his campaign in the bible. His scriptural precedents seemed quite reasonable to me; imposing avoidable and dangerous negative externalities upon your neighbor certainly violates the spirit, if not the letter, of the Gospels. The left-leaning interrogators, on the other hand, seemed pleased by the message but outraged that the people sending it were otherwise evangelical Christians, as if to love nature you have to support ripping off your clothes and gamboling through the woods like a young Greek god.

Sigh. Nice to be back to slow news days, isn't it?

From the desk of Mindles H. Dreck:

Don't Give up The Quote

My wife wished me to post this article about Senator Byrd's opposition to the Homeland Security Bill:

"This mon-stros-ity," Mr. Byrd has been calling the bill, repeatedly lifting its 484 pages above his head with trembling hands and flinging them down on his desk with the fury of Moses smashing the tablets. Mr. Byrd used to be known less for his distaste of federal bureaucracy than for his love of federal aid %u2014 he once vowed to be West Virginia's "billion-dollar industry," while his critics crowned him the "prince of pork." But now he is riffing against big government.

"Osama bin Laden is still alive and plotting more attacks while we play bureaucratic shuffleboard," Mr. Byrd told the Senate. "With a battle plan like the Bush administration is proposing, instead of crossing the Delaware River to capture the Hessian soldiers on Christmas Day, George Washington would have stayed on his side of the river and built a bureaucracy." Mr. Byrd imagined Nathan Hale declaring, "I have but one life to lose for my bureaucracy," and Commodore Oliver Perry hoisting a flag on his ship with the rallying cry, "Don't give up the bureaucracy!"

My reaction: "it would be less of a bureaucracy with civil service employment rules?"

The wife's reaction: It was James Lawrence who uttered those famous words, which Perry carried on the flag of his ship - a ship named after lawrence. A common mistake.

Interestingly for Byrd and the Homeland Security debate, Perry is actually famous for saying "we have met the enemy and they are ours", later appropriated with alteration in Pogo.

So there.

From the desk of Mindles H. Dreck:

BELIEVE IT OR NOT this

BELIEVE IT OR NOT this animal's name is fluffy.

I saw people buying juveniles of this breed at the reptile show last weekend. I doubt many of them knew what they were getting in to.

From the desk of Jane Galt:

Those Bigoted Rockettes

. . . putting a Nativity segment in their Christmas Spectacular.

From the Fort Worth Star-Telegram:

. . . to lure spectators of all faiths (and nonfaiths) with the promise of an entertaining holiday revue, and then to ambush them with Christian theology, is dated and borderline offensive, especially at a time when understanding of other cultures and beliefs is more important than ever.

The show's creators are wrong to assume that Jews, Muslims and other non-Christians don't have the same right to holiday fluff that Christians do.

After all, the last thing that belongs in a Christmas show is some dumb story about Jesus's birth.

From the desk of Jane Galt:

Apologies

I've got horrible flu and can barely sit up. Hopefully I'll be back posting tomorrow.

From the desk of Jane Galt:

Archaeologists Looking For Evidence at Roswell

Tee-hee! Archaeologists looked for evidence of UFO's at Roswell in September for a Sci-Fi channel special.

In related news, I'm going to spend the next three days eating pop rocks and drinking coke to see whether I really do explode.

From the desk of Jane Galt:

Low Hanging Fruit

Many people don't realize that much of the environmental "low hanging fruit" - the changes that make big differences in pollution with little differences in lifestyle -- have already been plucked. As population continues to grow, and people expect a rising standard of living, it's going to get harder and harder to keep reducing the footprint we leave on the earth. Fritz Schrank has one example: in Washington DC, vehicle pollution is presenting the politically impossible choices of intrusive mandated lifestyle change or no more transportation projects.

From the desk of Jane Galt:

Pipe Dreams

I love the Atlantic's feature where they put old articles from the magazine on line. Today I found this treasure, by Igor Sikorsky, written in 1942. In it he predicts that helicopters will be the transportation wave of the future, like Jetson cars.

he time is 1955; the place a lovely meadow surrounded by deep woods on a hilltop overlooking a beautiful lake in the Catskill Mountains 120 miles from New York. It is quarter past eight in the morning, and you are about to commute to your office in the city. Yet there is no paved highway nearer than fifteen miles, and it is fifty to a railroad station.

Now you hear a low hum, and over the horizon appears a flying machine. You press the button of a box near by and a radio signal flashes to the machine. The aircraft, looking oddly like a horizontal electric fan, drones toward you. When the pilot is directly overhead, all forward movement of the machine ceases and it descends vertically until the cabin door is within a foot of the ground.

On the machine's gray side is painted Helicopter Express to New York. As you make ready to enter, the direct-lift machine does not touch the ground; it poises motionless under its whirling rotor blades like a gigantic hummingbird. The door opens and you step inside; you nod a greeting to the co-pilot who takes your commutation ticket, you wave to those of the other fifteen passengers you know. The door closes and the helicopter immediately ascends vertically to 1000 feet. Now it darts ahead, quickly attaining a forward speed of 140 miles an hour.

The co-pilot says conversationally, "How do you like your new home? Good, eh? Popular spot here. So many people have moved into these mountains that we've had to put on an extra bus to carry them."

Fifty minutes later the helicopter bus hovers over a midtown New York building, descends slowly to alight on a roof space some sixty yards square. You go into the building, take the elevator to the street below, and walk half a block to your office. Not quite an hour has elapsed since you drank your morning coffee in your home. Des this sound like a fantasy imagined by Jules Verne? If so, I can assure you, as a practical aeronautical engineer, that such a trip is neither fantastic nor impractical. Any of us who are alive ten years after this Second World War is won will see and use hundreds of short-run helicopter bus services. We shall see hundreds of thousands of privately owned direct-lift machines carrying Americans about their business and their pleasures.

In forecasting this aviation development I am not drawing upon any imagination, nor am I depending upon the future invention of a direct-lift machine. A practical helicopter that can do everything I have just described is at this instant within a hundred yards of me. Less than an hour ago this craft was hovering motionless ten feet off the ground while a man climbed to the cabin by a rope ladder. With a pointed stick on the nose of our helicopter, it was possible to spear a wooden ring twelve inches in diameter fastened to a pole only four feet from the ground. The helicopter could be backed, turned, and stopped motionless in the air right in front of a man who plucked the ring off the helicopter's nose. In April 1941, the VS-300, piloted by its designer, exceeded the record of endurance for this type of craft by remaining in the air for one hour, thirty-two minutes. The novelty of this record flight was that the ship hovered during the entire period over one spot less than half an acre in area. Since that time considerable further progress has been achieved with this project.

So here's the question for my readers, who tend to be smarter and more knowlegeable than I am: why didn't it happen?

From the desk of Jane Galt:

The Question is How Much

Mark Byron points out that except for the hard core economic libertarians, most of us do favor some social spending: the question is how much. Though I would part with him on some of his favored programs: I think parents shouldn't get a tax deduction, student loans should be abolished, and Medicare should be means-tested.

From the desk of Jane Galt:

The Augusta National

So what do I think about the flap over Martha Burk and the Augusta National?

Let's recap:

Martha Burk is trying to shame the Augusta National into going co-ed.

Kathryn Lopez of the Corner quoted a Martha Burk article advocating the forced sterilization of men, using a Norplant-like implant that doesn't seem to exist.

InstaPundit quoted her.

CalPundit says it's a lie, the article's a spoof.

InstaPundit says, the point is, a white male conservative wouldn't have been allowed to write such a "spoof" without criticism.

Brad DeLong weighs in.

Now, I know the burning question in most of your minds is: what does Jane Galt think? So I rushed to my keyboard to tell you.

First of all, I think the feminist movement's focus on, and attitude about, reproduction is to its detriment. There are two sides to the abortion debate. But feminists act as if those two sides are "Pro Choice" and "Hates Women". The fact that some people prefer the right of a fetus to get born to the woman's right not to have to bear a child is not proof that they hate women; it's proof that they're weighing two sets of conflicting rights differently from you. If you continue to imagine the debate in terms of juvenile evil enemies, you will lose. It is why the pro-choice side is losing ground now outside its strongholds on the coasts.

Reproduction is not fair. It is not going to be fair. Nature designed it that way. Writing articles trying to transmute the unique problems of being female onto males is not going to work, because the relationship is asymmetrical. There are no easy metaphors for the extremely complex and emotional issues that surround reproduction, and I wish the feminist movement would stop looking for some.

Second, don't think I'm letting you guys off, here. A lot of you act like big fat jerks. Just because evolution designed you to act that way doesn't mean you shouldn't let civilization overcome those instincts. Nature also designed you to sleep in the woods and die at twenty, and if you can't be civilized, I suggest you oblige. If, for example, I hear a male adopt the pro-life side, he'd better be willing to step up and shoulder his responsibilities with a ring.

Third, there is a double standard operating here on both sides. Many conservatives who would tolerate people advocating Norplant for welfare mothers are mocking up some outrage about this. On the other side, leftists who would be hopping up and down in rage should, say, Newt Gingrich advocate such a thing, seem to think it's just fine. Hypocrisy doesn't sell to anyone except fellow travelers, guys.

I really, really hate double standards for women. It's not 1960 any more. No, I don't think women are all the way there. But we're getting there. It's time to stop arguing that men have to treat us like equals, except when it would be to our benefit to be treated unequally, when they have to oblige. That's adolescent. If we want to get accepted as full grownups, we have to adhere to the same standards. Sure, we're going to suffer a little. But we'll suffer more if we demand to be stuck in a separate class with special needs, because then we aren't equals -- we're a protected class that can be unprotected when the powers-that-be change their minds.

On the same note, arguing that only women have the right of free association, but men must sacrifice theirs in the name of equality, is not advancing the cause of equality.

I know that some of our friends on the left believe that they are doing this for the cause of women's equality. But friend, turning women into just another special interest group claiming as much as possible at the expense of the other side, is not helping us. Please stop. Or at least, please stop saying you're doing it because you care about advancing the cause of women.

Fourth, and most importantly, if integrating the Augusta National is a major item on the feminist agenda, then stick a fork in the movement: it's done. We've achieved our goals and should disband. CBS or no CBS, the club has 300 members. We're talking about a trivial wrong done to a handful of supperrich women who could afford to, or be asked to, join the Augusta National. If this is the most important cause Martha Burk can find, it's time to acknowlege that feminism has done its work and turn to something more pressing, like the plight of Russian orphans or Rwandan refugees.

From the desk of Jane Galt:

Cranky Professor has moved!

Everyone's favorite Cranky Professor has relocated to a snazzy new site at www.crankyprofessor.com! Get out the bundt cakes and the ambrosia and drop by to say welcome to his new home.

From the desk of Mindles H. Dreck:

So Lonesome in the Saddle Since My Horse Died

Hello? Where did everybody go? Hello?

I have come close to hanging up my keyboard, since I just haven't been burning with the kind of indignation I had when I started (10/1/01), and I can't maintain the sleep-deprived pace I once kept.

Yet I don't know where to keep the "annotated bookmarks" I get from keeping a blog. I can't tell you how many times I've been able to dig up old commentary, or pull up my own thoughts laid out in a semi-structured way.

If the FBI is correct, all my old pals will be back.

From the desk of Jane Galt:

The Military in Science Fiction

Eric Raymond has a great post on the ethics of the military in science fiction. If you like that sort of thing. Me, I do.

From the desk of Mindles H. Dreck:

D.A.R.E. to be Timid

I am happy to discuss drug and sex-related issues with my oldest son (11). He enjoys a scientific approach to both topics (what happens; why; at what risk), and I like arming him with facts and my own perspective.* What I find difficult is explaining adult hang-ups and silly uber-sensitivity. For instance, the notion that to ridicule something is to somehow condone it or that laughter is somehow an endorsement.

My son is in fifth grade and is therefore subjected to the "D.A.R.E." drug awareness program. I don't know much about the program, frankly, but I know it's controversial in my hometown. On the other hand, how could a drug (or sex)-education not be controversial?

Apparently the kids were asked to do some role play. My son and two classmates were assigned a vignette in which one boy tries to convince another to take drugs. As an inducement, the influencer points to another boy who is already high - played by Dreck Jr. - to point out what a good time he is having. On cue, my son (as he describes it) staggered a little and fell down. The class found this amusing, but not hilarious.

The instructor let him have it. He is forbidden from participating in future role plays and he was disciplined for being "inappropriate". Dreck Jr. is a very sensitive soul. Tears come to his eyes just in the retelling. Subject to verification of my son's version of events, this instructor/police officer may receive a Real-Time Fisking^TM.

In the meantime, I have to explain to my son that some adults think that to ridicule is to "make light." I also tell him that perhaps the instructor is just worried about having to defend the goings on in class to some other satire-challenged parent, teacher or education bureaucrat. My boy doesn't understand why adults have such a....stick up their arses and I can't explain it beyond helping him understand that it's reality nonetheless.

It seems that the fear of giving offense when discussing such subjects causes something akin to the committee effect - normally sensible people become consensus-seeking pabulum-spewing morons.

Ridicule is sometimes an optimal tool in argument. Ask any blogger. And one of the problems with intoxication is you look stupid and fall down. As we New Yorkers like to say, "You got a problem with that?"

*Of course, like any kid his age, he would prefer to discuss video games and cartoons, as Steven Den Beste found out.

From the desk of Jane Galt:

Hope Scholarships for Everyone

Dwight Meredith proposes a National Hope Scholarship program, modeled after Georgia's but funded by repealing the cuts in the estate tax:

We propose a Federal Hope Scholarship Program modeled after the Georgia Hope Scholarship. Any child who maintains a B average in high school and gains admission to an accredited university would receive a scholarship equal to 100% of the tuition at his or her state university as long as the student maintained good grades in college.

We propose to pay for that program by repealing the portion of the Bush tax cut that benefits the top 1% of income earners (as well as repealing the elimination of the Estate Tax). We frankly have not done the work to accurately calculate the cost of such a program. We suspect that there are 5,000,000 to 7,000,000 college students with B averages. The tuition at the University of Georgia is roughly $3,500.00 per year. If those numbers are accurate (and the number of students is only a guess) then the yearly cost of the program would be $17.5 billion to $21 billion per year, less the savings from eliminating duplicative programs.

The Bush tax cut was more than $1.3 trillion dollars over ten years. The top one percent received approximately 40% of that amount. Repealing that tax cut would generate about $500 billion over the ten-year period. At $17-21 billion per year, the National Hope Scholarship program would be affordable. . .

Ok, so what is wrong with that proposal?

Well, since you asked. . .

The first problem is that its cost assumptions are naive. They're using what's known as a static-line model, which is fancy economic speak for saying that it assumes that if you change one variable in a model, everything else will stay the same. But this is not true. If you make it free to go to college, more people are going to go to college.

On the one hand, it assumes that the supply of kids with B averages in high school/college won't increase, which is unlikely. If a B- kid has a choice between losing his scholarship and pulling up his average, he'll probably pull up his average. This isn't necessarily a bad thing, of course.

More disturbingly, it would probably cause colleges to inflate grades. Remember, 80% of colleges in the United States are non-selective, meaning they admit 2/3 or more of the people who apply. Especially at those colleges, but really at any public college, you're going to see tremendous pressure on teachers to inflate grades to keep the money flowing. You've seen this already with college athletes, many of whom don't belong in college, and don't do the work to stay there, but are passed along because the financial incentives are there for the college to do so. I suspect that granting a full ride to everyone who has a B average would mean that effectively, almost no one would ever get less than a B. It's common to refer to this as grade inflation, but what it really is is grade compression: all the grades are forced into a narrow band between B and A.

Compressing the grades people get into an ever-narrower band isn't good for the students, who lose feedback on how they're doing and incentive to excel, and it isn't good for their prospective employers, who lose valuable information about the students.

The same would be even more true of high schools, one imagines, if they could earn their kids a free ride for four years merely by assuring that they got a B average.

Which brings up the question of where you're going to put all those extra students, and who will teach them.

Will you force kids to go to school in their own state, or will you let them attend any state institution? Out-of-state tuition at top schools can run into the $20-25K range.

Also, in-state tuition may be $3,500 per year in Georgia, but that's not what it costs to educate a student. Increasing the supply of students will increase the cost by much more than in-state tuition. That's an unfunded mandate, which the Feds are not allowed to issue -- which means you'll have to find money not just for tuition, but for covering all the (currently subsidized) costs of the extra students you've put into the system.

You'll also be segregating the middle class students at state colleges from the rich at private colleges much more than you do now, since currently private schools offer competitive financial aid packages, but couldn't compete against a 100% free ride, as I think you'll find Georgia has discovered.

But the most important question is: would the program be effective? Programs to make sure that everyone goes to college mean well, but I feel that proponents usually aren't examining the link between what they're trying to achieve, and the means they're proposing to achieve it.

What are we trying to achieve by sending everyone to college? I assume that most of us want to better their economic opportunity.

Here's the problem: most college doesn't train people in economically useful skills. Oh, we'd probably all be better off if we sent more kids to engineering programs or medical school, but that's not what these programs propose to do: they propose to give kids a free ride for 4 years no matter what they study. And I think it's safe to say that most of our future engineers and medical students are already going to college. I think what we're talking about is more English and Art History majors and such.

I was an English major, which was an enriching experience. I enjoyed the subject greatly. But the only economically useful skill I learned was typing 80 wpm. Oh, later my writing skills came in handy, since I was in a technical field where very few people can write. But for the majority of English majors, it's safe to say that their ability to deconstruct a sonnet has not proven to be renumerative. Ditto almost any humanities course for almost any student. Even economics students are usually being rewarded more for their conformity and willingness to tolerate boredom than their ability to draw pretty supply curves.

I have no doubt that someone is, even now, mentally composing the email telling me how enriching humanities courses are. Indeed they are. But I misdoubt that anyone's fellow citizens wants to toss them upwards of $25,000 to go get enriched. Your fellow citizens want to see you support yourself and contribute something to the common weal; that's the rational behind giving you money for college. Or they want to give everyone middle class opportunities. Mental enrichment is something we expect people to pay for out of their own pocket.

But people who want to send everyone to college to ensure they have middle class opportunities have cause and effect reversed. College does not provide one the tools to make a living. For most people it is what economists call a signalling mechanism: something not intrinsically valuable, but only as a signal that the applicant has something else employers value. Which is to say, employers do not value your college degree because they value what you learned; they value it because it shows that you have sufficiently internalized middle class values to get through four years at school, whether through being born into the middle class, or having sufficient gumption to get yourself through college.

But sending everyone to college will not avail them all of the benefits of the signalling mechanism; rather, it will render the signalling mechanism useless. You're not going to magically transform every extra person you send to college into someone who earns college wages; college is the gatekeeper to a limited number of such jobs, not a producers of said jobs. While normally I am skeptical of people who claim that there is a limited number of good jobs to go around, and therefore we need to redistribute them so that no class gets to hog more than their fair share, in this case I am hard pressed to explain how sending someone to study Medieval Philosophy or Lesser Poets of the 19th Century is going to magically produce a high paying job for them. The areas where jobs are going begging are the areas we don't expect to get a lot of extra students, such as engineering. I have no doubt that there are, somewhere on the American continent, some potentially gifted engineers with the requisite math preparation who are not attending college because they can't afford it. But I can't imagine there are many.

Now, perhaps we would be fine with embarking on this program if by destroying the gatekeeper it served to level the opportunity between the children of the poor, the middle class, and the rich. After all, this is America; we want people to get what they deserve, not what their parents bequeathed them. But is that really how it would work? Since the fact of the college diploma will mean less, and grade compression is likely to remove the other valuable signal that a college education can provide, won't employers be more likely to look only at children from relatively privileged backgrounds? For one thing, employers are likely to rely more heavily on referrals from people they know, which is to say, from privileged parents finding opportunities for their privileged kids. And for another, privileged kids are more likely to have internships and such to signal that they are capable of the work that employers want them to perform. If you're a poor kid who had to work at the Stop and Shop for rent, you may be hard-working, but an accounting firm has no way of knowing whether you can build a balance sheet -- and since we've taken your degree and grades out of the equation, no way of finding out.

I also suspect that middle class families will set up alternate signalling mechanisms which serve to ensure that their children maintain the pipeline to success. Indeed, I would argue that it has already happened to some degree, as student loans have democratized the college degree and worn off some of its cachet. I grew up in a very privileged milieu: the New York City private school system. A positively astonishing number of my high school classmates, something like 2/3, are possessed of master's or professional degrees, or doctorates, and not because my classmates were noticeably smarter or harder working than the population at large.

As more people got college degrees, the pipeline to very high paying jobs, such as white-shoe law firms and investment banks, has come to rely on gilt-edged degrees from both an Ivy, or Ivy-Equivalent undergrad, and a top professional school. For example, the top tier investment banks recruit almost exclusively at 5-10 business schools, most of whose graduates come from privileged backgrounds, and virtually all of whom attended elite undergraduate programs. More interestingly, as the value of the college degree as a signalling mechanism has declined, business schools have come to require more work experience from applicants -- from no years in the 60's, to 5+ years today -- in order to better differentiate those likely to succeed. Business school itself is an enormous signalling mechanism, as most people's coursework bears little resemblance to what they do in their careers. But the mere fact that you survived an arduous application process and two years of school gives employers greater confidence in hiring you.

In short, while you can confer upon everyone a college degree, you cannot thereby confer upon them what the college degree currently gives those who hold it: a ticket to a higher paying job. You can only force companies to seek alternative signalling mechanisms, ones which I argue would have more to do with class and "people like us" than the current ones do, and segregate the children of the rich in private schools with the children of the poor and middle class funneled into the less prestigious, because less exclusive, state system. Not, I think, a recipe for a more equal society.

From the desk of Jane Galt:

Free Market Solutions for Corporate Fraud

No, really, I think this might work:

This principal-agent conflict has existed since New Deal-era securities laws first required "independent" audits of public companies. As long as an accounting firm was reasonably competent, it had every incentive to go easy on its clients—even if the public would benefit from more vigilance. Toughness would just encourage the client to replace the auditor with a more pliable firm. The conflict became truly intractable in recent decades, as the tax code grew more complex and accounting firms built massive consulting arms. With audit fees shrinking to a sliver of overall revenues, accountants had even less incentive to ride herd on their clients.

In theory, an auditor's concern for its own reputation should deter it from signing off on cooked books. But the experience of Arthur Andersen, which presided over a series of accounting debacles before Enron without major client defections, shows that deterrence doesn't happen in practice. Either companies were too lazy to change accountants, or they were simply oblivious to Andersen's failures, or they may have wanted the lax treatment for themselves.

. . .

But there is a way to use the power of the marketplace—which until now has conspired against good auditing and accounting—to bring corporations to heel. We should require publicly held companies to purchase accounting insurance. Joshua Ronen, a professor of accounting at New York University, floated this idea in a March New York Times op-ed. It makes even more sense today.

Of course, the problem with this is the problem with every regulation that has existed since the beginning of time: how are the companies going to get around it? It's always wise to try to imagine how if you were a company, you would try to turn a regulation to your own advantage.

In this case, I can think of two:

1) Hollow out your insurance coverage so that it appears you have a lot of insurance, but you actually don't. This is what doctors in high-malpractice states are doing now.

2) Get congress to fiddle the laws so that many items are excluded

I'm sure there are more. Nonetheless, this sort of regulation is probably easier to implement as a broad principle, and let the market work out the details, than is the kind of micro-managing regulation many are advocating.

Of course, there's a third problem: how much would such insurance cost? After all, insurance companies are just like casinos in one regard: the percentage is always to the house. Requiring broad new insurance coverage will not be free. Nonetheless, it may be better than the alternatives.

From the desk of Mindles H. Dreck:

The Masters' Nanny

We'll have to call this one the "Roseanne Roseannadanna" award. Here's Selena Roberts in a hysterically idiotic column entitled "Augusta's Chairman Lives in a Time Warp."

It must be comforting to live inside a vintage Sylvania, cozy in a black-and-white world where June Cleaver is your ideal woman. "Now, there's a lady," you say. "Not only is the gal one hot biscuit baker, she worships the wingtips Ward walks on."

Comforting, yes, but sexually frustrating. Getting it on with an old cathode ray tube is difficult, to say nothing of the problems caused by static electricity. Who is this sitcom deviant, and when did he say that?

It's beyond you, isn't it, Hootie? You can't understand why women don't just keep cookin' and stop stewin' over Augusta National's male-only membership. As you told the news media this week, providing yet another scary glimpse into your unenlightened mind, race and gender discrimination are on two different levels.
"Isn't it enough that we've put an end to the fried chicken jokes?" you think to yourself.

Funny, I've read the whole article as well as the interview, and the closest thing I can find is "For men of all backgrounds to seek a place and time for camaraderie with other men is as constitutionally and morally proper as it is for women to seek the same with women." I suppose, to Ms. Roberts tortured ears, that's a lot like telling women they should stay in the kitchen and deserves falsely attributing a remark made in tasteless jest by Fuzzy Zoeller to Johnson. Remind me to take such liberties when I attribute some unsaid thoughts to her.

After months of pondering the fuss from femmes, of viewing Martha Burk as no more than a nosy neighbor from the Gladys Kravitz mold, you've chosen to bury your head in a fairway bunker. "I'm as right as a slice," you say.
It's understandable that you feel so superior, what with the shoulders you can lean on. Andy Rooney, for one. He has been in hot water with the ladies, too. "Ever wonder why women have to butt in on a man's pleasures," Rooney tells you. "Can't they stay off the football sidelines? I hate women on the sideline, and I hate childproof caps, too. Can't figure either of 'em out."

Where's the evidence Johnson and Rooney are buds, or even approve of each other? I think Roberts is riding the coattails of Barbra Streisand, myself. "I'm as PC as Kumbaya," she says to herself.....

It's a bonus that the two of you have the loving support from the ratings desperados at CBS. Rooney is a caveman? What's new? No sponsors at the Masters? Big deal.

Well, actually, it is a big deal. It says that the club would rather forego massive amounts of revenue than be told what to do by busybodies like yourself.

What's better than commercial-free Jim Nantz? What's cooler than watching Tiger Woods clean his cleats between shots?

Pretty damn cool, especially with the added chuckle that comes from knowing that the aforementioned neanderthals are essentially subsidizing it to give you and Ms. Burk a sharp stick in the eye.

Life is good, right, Hootie? It must be a relief that your chief executive members — many of whom would swallow a pocketful of tees for a leather chair in your bridge room — have backbones made of grits. Even some of the titans who have voiced their resistance to you may be only shouting for show.

Apparently you can't believe in a right to free association in order to have a backbone made of something other than a southern breakfast specialty. Is there a bit of redneck-baiting in this column?

Take Lloyd Ward, chief executive of the United States Olympic Committee, for example. He picked up his Augusta membership when he was the head honcho of Maytag, in charge of baiting women into buying high-tech washing machines capable of removing everything from ketchup splotches to lipstick stains.
"Poor Lloyd," you say. "The man never figured he'd be workin' with a woman president at the U.S. Olympic Committee. Tough break."

At this point the bug placed in Augusta's changing room went on the fritz, and the rest of the conversation is drowned in static.

You realize Ward had to talk big about working within the club to make change. You realized it so much that you didn't budge from your stance this week. As for Ward, he had no comment yesterday.
And that's the way you like it. Silence. Besides, you know Ward needs Augusta more than a platform because he is a corporate vagabond who deeply understands the power of Magnolia Lane in the business world.
That is the real issue, Hootie. You aren't running a poker hall filled with cigar smoke, folding chairs and guys called Bubba (although a name like Hootie puts you close).

No, he's running a private golf club filled with cigar smoke, mahogany chairs and guys named Warren, Bill, Sandy, Ken and Peter. Oh, and pimento cheese sandwiches (yuck).

Augusta is the 19th hole for corporate synergy.

It's "Punditry Lite" - Sounds great, less meaning!

On the board of Coca-Cola, Sam Nunn and Warren Buffett sit side by side, able to mull the perils of Amen Corner and discuss how the market is more unpredictable than (he-he-he) a woman's mood ring (back slap, back slap).

Sounds like a deal going down to me. "Hey Sam, how many sports editorialists does it take to screw in a lightbulb?"
"Three, one to write the nasty editorial about light bulb makers, another to write the thin companion "news" column and a third to yell at the janitor" (back slap, back slap).

On the boards of J. P. Morgan Chase, General Motors and Belo, Ward is among the industry bigwigs as a fellow Augusta member. Surely, they'll come to his rescue if he leaves the U.S.O.C. by free will or by force.

Right, the Augusta National Rescue Team. Just because there's no evidence doesn't mean it doesn't exist. Roberts doesn't realize that business tycoons drop fallen colleagues like hot potatoes. Only presidential interns with a hot story parachute into cushy private sector jobs.

Meanwhile, women of corporate America can continue to crack their craniums on the glass ceiling without the same networking privileges. In C.E.O. land, the need to impress with excess is a business tool. Augusta is a nice hammer to have when the appearance of power can make or break a deal between men.

Roberts likes to say Johnson "doesn't get it", when in fact she's the one who doesn't. Members of Augusta are already at the top. It's not a means to the top, its an end; a symptom of success not an avenue.

Hootie, you believe you've found a way to reduce the female threat to this male domain in your clubhouse: keep urinals in and tampon dispensers out.

If you don't have a point, lame bathroom humour is worth a try.

"We're a private organization, missy," you say.
There is a flaw in that logic, though. For one week a year, you prey on the generous nature of patrons who buy every last shirt, hat and sock with a Masters logo on it. In total, you pull in about $20 million when you open the gates to the commoners.

So, if it's true that your yearly dues for the 300 members do not exceed $50,000, then that's (carry the one, bring down the zeroes) a $15 million take.
That means Augusta receives more dough from the public than from its own gilded members. The people, as much as any fat cat, help pay for your course renovations, along with the new shower heads. You're one sly dog, Hootie.

The fact that people voluntarily pay to attend the Masters (incidentally, the tickets are very cheap, way below what the market will bear - the scalpers are the ones that mark them up) and buy their merchandise does not make Augusta a public organization, or even a for-profit corporation (See Johnson's remarks:"Over the past five years, the Masters has contributed over $15.5 million to charity, $3.3 million in 2002 alone."). I suppose if enough people bought Selena Roberts brand merchandise we'd have a say in whom Ms. Roberts dates?

By the way, does Ms. Roberts spew the same bile at the heads of the Colony and Cosmopolitan Clubs in New York, or the Daughters of The American Revolution? All of these organizations collect revenues from the public in the form of rooms and ticket sales. How about the Girl Scouts? The Shriners?

"Leave the math to the menfolk," you say.

"Missy", "Leave it to the Menfolk". Johnson said none of this. You did, and making it up just makes you look like an ass.

But you can't account for courage. You've said you won't back down at the point of a bayonet, but what about the point of an ink pen?
It may seem unfathomable to you, but there may be a progressive fella mixing with your Cognac crowd, a brave guy who might surprise you with a penned resignation. The man would be celebrated, cheered and kissed all over.

He would also be quickly replaced. Would the kisses be worth it? By the way, is Ms. Roberts volunteering? Would that make her a public organization? How would Winston Churchill reply to that statement?

Listen, you old coot. (Sorry if you loathe that description.) You cannot win this fight. Eventually, the code of silence will snap. Going against your 1950's idealism wouldn't make the member who stands up a very retro male, but there are also perks to those daring to pop their heads into 2002. Beware, Hootie. You never know when enlightenment will set in. Remember, June also knew how to push Ward's buttons. Sincerely, a failed biscuit baker.

Roberts has stumbled on the whole point of Johnson's public statements - Augusta is one of the most private and willful organizations in the world. They had Gary McCord removed from CBS coverage of the Masters for comparing the manicuring of the greens to a "Bikini Wax". They inflict that insipid music on the viewing public throughout the entire four days of television coverage despite howls of protest. Here are Johnson's real words:

Q. You have already eliminated your sponsors for next year. Is there any chance that there won't be a Masters next year? A. ``None. There will always be a Masters.'' [....asked about potential picketers] Q. But you'll try to proceed as normal? A. ``No, we won't try. We WILL proceed. And will succeed.'' Q. It has been speculated that there could be an economic impact on Augusta because of this controversy. A. ``I think that's an absurd assumption.''

Augusta National will never do anything because a non-member tells them to. They have plenty of money to make their point and tell everyone to pound sand. In fact, they have a thousand times more money than necessary to ride this out. If anything, Roberts and Burk are postponing the election of the first female member by having their little nanny snit because it's clear that Augusta's privacy matters more than even the position of the tournament in the majors.

There's more fiction and false character assassination in this column than a Joan Collins novel. Johnson and his clubmates are free to do as they choose, whether the community finds it repulsive or not, and even if it involves a peculiar preference for companionship. Roberts is free to be a failed editorial writer biscuit baker, and I am free to point out that her diatribe is infantile, illogical, mostly fictional, and just generally hysterical. None of us, however, is entitled to be the nanny, or put words in someone else's mouth in a major newspaper (strange - even eyebrows are getting the nonsensical attribution treatment lately in the Times). I object to all preachy busybodies, including young coots like Roberts.

By the way, most people think Roberts is all wet. For more background on the folks pursuing this case, here's a "spoof" column on forced male sterilization by the integrate-Augusta leader Martha Burk.

From the desk of Jane Galt:

We be bad. . . not

This is why I love Elizabeth Spiers. She knows her numbers. Yet she brings a refreshing dose of reality to the high-priced primate zoo that is the investment banking industry:

Let's put things into perspective. These guys are bad-asses. They speak several languages, can run for days carrying heavy loads without sleep, freefall out of planes, blow things up, chase terrorists, and can probably build small vacation houses out of toothpicks, a few alkaline batteries, and dental floss. You, by comparison, punch numbers into spreadsheets. On a really exciting day you get to use an aggressive discount rate. You are not a bad-ass.

. . .

But perhaps I'm being unfair. The junior analysts can't help it. The culture reinforces the arrogance. Bulge bracket banks spend all day abusing their junior analysts then reward them with gargantuan paychecks, dinners at chic restaurants, car services, and a variety of other desirable perqs. This allows the junior analyst to less-painfully weather the abuse from his superiors by affording him the luxury of being equally condescending and abusive to less well-paid peers.

I'm not kidding about the primate part. During my summer at Merrill Lynch, I was repeatedly struck by how closely an investment banking group resembles the chimp tribes you see in documentaries. The hierarchy is rigidly delineated, with the elder bankers strutting around, hurling abuse at anyone who seems to challenge their will to power, while the young ones simultaneously seek to appease and overthrow them. You haven't had a good belly laugh until you've watched a 30 year-old man in a Brooks Brothers suit walk quietly up behind his MD while the alpha male is, say, standing at the Bloomberg terminal. The deliberately subservient posture. . . head bowed, shoulders hunched inward, knees slightly bent to make them look smaller. . . combined with the position behind and to the right, the utter silence and stillness maintained until the alpha male deigns to turn and acknowlege the young primate's presence . . . Jane Goodall didn't need to go all the way to Africa to watch apes thump their chests.

Perhaps because the hierarchy has brought them so close to their primate roots, the young investment banking males seem to believe that they are engaged in an activity very akin to combat survival, except, you know, catered. And I can't help but feel that most Navy SEALS don't spend all that much time waiting for the next guy in the chain of command to decide whether they can use an 11 point font for their flow-charts. Nonetheless, from the way they talk, you would think that they spent their days storming enemy bunkers barehanded. One banker I used to observe liked to hurl useless make-work at his analysts with the phrase "incoming", to which he had trained them to respond "Lock and Load, commander!" Now, I know a few combat military types. Not one of them has ever, to my knowlege, thrown anything at anyone shouting "incoming", probably because the people they work with are trained to respond to that not with silly movie phrases, but grenades.

When you think about it, it's hard to blame the guy who told you to buy Enron, when he's delusional enough to buy his own BS.

From the desk of Jane Galt:

Welcome, Tech Central Station Readers

To what is, apparently, one of the primary homes of Sweetwater economics on the Web.

I'm not quite the uber-free marketer some Chicago folks are; for a true "markets are efficient" advocate, head over to the excellent Zimran Ahmed, who has studied at the feet of such Chicago luminaries as Kevin Murphy and Eugene Fama. My position on free markets might be aptly summed up as "Markets fail. . . and government intervention fails worse." But you can see for yourself by poking through the archives.

I've been maligned on one point: I studied the works of Kahneman and Tversky in business school, and I think they represent some important insights about human behavior. Where I think they fall short is what Arnold Kling points out: we haven't yet found a way to scale their findings up into a useful predictive model. Until we do, we're going to have to assume in large ways that human beings are rational actors in the economic marketplace. Why? Because to an economist, there's only one way (or at least, a very limited number of ways), that people can act rationally; ultimately we assume that they are doing their best to maximize value as they perceive it. Contrariwise, there are an unlimited number of ways to act irrationally, which makes it hard to build a predictive model around it.

When you're engaging in economic activity -- say, buying a car -- it's easy to assume that you will act rationally. For an economist, this means you maximize your utility, which is fancy econospeak for the value you get out of an object, by choosing the combination of price and features that suits you best. It's very hard, on the other hand, to assume that you won't act rationally. Will you pay too much? Get too few features? Sit down on the tarmac and shove chopsticks up your nose? The possibilities are limitless. Economists know that people don't always rationally maximize value. . . but unless we know exactly how they go astray, we have to continue to assume they're rational. The resulting models are imperfect -- but better than throwing up their hands and giving up.

What Kahneman and Smith tried to do was to set up controlled experiments to reveal the way in which people act irrationally. The problem is that it is very hard to take those experiments out of the lab, and translate them into the way people behave in real life. Just one example: how well people maximize value is tied to the magnitude of the activity involved; you spend more time trying to get a great price on a car than on toothpicks. In a lab test, where the amounts are trivial and the environment feels like playtime, people may behave very differently from the way they do when they're shopping, working, or do all the other stuff we call economic activity. So while their work is important, it is perhaps not quite useful yet.

But the same thing can be said of babies and butterflies. We still love them anyway.

Update Darn that John Irons, summing up my views better than I did:

I think that there is likely to be a nice synthesis between the two views - one that models people as "rational" in the sense that they optimize something. It's the "something" that is the trick; and behavioral and experimental economics are trying to work that out.

From the desk of Jane Galt:

Do Not Be Alarmed

Do not check your screen. Yes, this is the same old Live From the WTC goodness, but wrapped in a gorgeous new package!

I've left the World Trade Center, so it seemed silly to keep calling my blog Live from The WTC. And I've been accepted into the Foreign Service, provisionally until I pass a background check (any friends who are reading this should start compiling a list of my good qualities now to give the nice FBI agents), so I am no longer allowed to post on anything regarding US foreign policy. And I'm tired of waiting for Blogger. The upshot is, I've moved the site to Moveable Type, deleted any entries regarding US policy, and upgraded my look when I changed my name. I hope you'll continue to patronize me anyway.

Everything has come over, except, regrettably, my comments. If you need to access an old comment, shoot me an email, and I'll try to get you the text.

Otherwise, sit back, relax, and . . . why, enjoy the show.

Update: For those who asked, this does not mean that I won't be talking about economic policy. It just means I'm not going to comment on US foreign policy, or what heads of state are doing. So before my interlocutors email me to ask why I'm not criticizing someone they think deserves it, ask yourself if this might be why.

From the desk of Mindles H. Dreck:

UNINTENDED CONSEQUENCES

I have little sympathy for the brokerage industry. Nonetheless, I find it interesting that efforts for reform inspired by imprudent internet-inspired speculation and fraudulent accounting by large companies are focused primarily on restructuring the brokerage industry. I'm surprised that most analysts fail to consider the following:

• There has been a truly massive increase in regulation of the brokerage industry over the last 15 years, roughly tripling the compliance burden of being a broker or money manager. Most of it focused on areas that would seem to be relevant to the industry's shortcomings in the bubble.
• Not only did this huge increase in regulation not prevent Enron and the sale of hyper-inflated dotcoms to hapless investors, it very well may have reinforced the trend and suckered many more investors into it.

Yes folks, regulation (self and official) played a role in both the bubble and the crappy value delivered by the brokerage industry in the 1990s. I kid you not. It's a travesty. Allow me to provide a breezy history of some of the changes in brokerage regulation over the last two decades.

There was a time when a stock broker made recommendations based on his/her own judgement. Brokers were free to use or not use their firm's research, and even to conduct their own. Most brokers bought blue chip stocks and relatively risk-free bonds for their clients. Some learned to manage against the market and generated outstanding results for their clients, garnering recommendations and developing hard-earned trust from their clients. Others churned and burned, shrinking accounts through excessive trading, or just made crappy recommendations that sounded exciting. In other words, client results were widely distributed, but clients, quite rightly, associated those results with individuals, not necessarily the firms in which they were employed.

On the institutional side of the business, commissions were fixed by regulation (prior to May 1, 1975). Given commission sizes relative to the actual (falling) cost of executing a trade, institutional customers demanded additional value from their brokers. Brokers achieved that two ways:

1) "soft dollar" and brokerage recapture: brokers will pay for a variety of the market data and analysis systems used by their large customers, subject to minimum brokerage volume amounts. Through today, there are a variety of mechanisms by which institutional customers can recapture the excess profits brokers would otherwise earn through the large commissions they generate.

2) Research: Given that prices were the same everywhere, brokers competed on the basis of information provided. In exchange for a certain amount of volume, institutions were given greater access to "sell-side" analysts. Sell-side analysts were paid primarily on their ability to get institutions to funnel commissions to their employers.

Institutions never really looked at sell-side recommendations. It was the analysts ability to provide fresh company information that made their commissions worthwhile. Institutions (pension funds, money managers, mutual funds, banks, insurance companies) have a fiduciary duty to their investors and generally do their own research or hire a discretionary manager. So the numbers and the industry color were useful, the ratings were ignored.

Sell-side analysts had little or nothing to do with the retail investor. That was the broker's territory. You could say this was the still the dominant state of the industry in the 1970s and even early 1980s.

Naturally, many individuals, and a few firms, were egregiously dishonest and sloppy, and the industry's regulatory structure adapted in an attempt to rid society of the lower end of the distribution. Regulation intensity increased in the following areas:

1. Suitability - the idea that recommendations should be appropriate to the investor. Brokers are required to collect voluminous information on investors and their risk profiles, and branch managers were made to supervise the suitability of recommendations to clients
2. Research and recommendations: firms were encouraged to centralize "buy list" type policies and maintain files and due diligence on recommendations. The stock-picker broker was discouraged, and brokers were increasingly required to sell product that had been "vetted" by a centralized research organization.
3. Elimination of insider advantage best represented by Regulation FD ("Fair Disclosure") mandating that anything companies told analysts had to be advertised to the entire investor community.
4. Training and testing for securities registration: The Series 7 (and 3, 7,8, 24 etc.) came to focus less on the mechanics of financial instruments and more on suitability, content of marketing materials and customer interaction and conflicts of interest.
5. Use of soft dollars exclusively for the benefit of clients.

Notice that items 1 and 2 above are focused entirely on developing practices designed to prevent brokers from foisting speculative or poorly-researched securities on investors interested in preservation of principal. The documentation and supervision of these policies includes:

• both compliance and sales supervision must monitor every piece of hardcopy and electronic correspondence, and maintain records of doing so;
• representatives must attend continuing education classes, both in firm and through NASD testing;
• all personnel servicing clients must be registered;
• detailed histories of registered reps and all customer complaints must be maintained separately by compliance
• detailed "customer information documents" must be maintained centrally and updated on every client, documenting risk appetite, source of funds, identification and reference checks on customers, etc. (this develops even further after the Patriot Act this year).
• branch managers and compliance must monitor accounts for excessive trading patterns and suitability - the regulatory standard evolving to the point of requiring software to perform these screens for large institutions.
• detailed policies must be developed and documented in public filings on soft-dollar and related conflicts of interest;
• supervision of all employee trading, including restricting employees from trading stocks on which the firm may have insider information, a recent research opinion, a substantial position, etc. "Control Persons" are subject to even tighter restraints which may force them to unwind any trades if the firm makes a related trade or recommendation within up to 7 days before or up to 30 days after the employee trades. Compliance must maintain detailed records of employee trading centrally.

Glancing over the above incomplete list gives you an idea of why brokerage firms have increased the staffing of their compliance departments by a factor of at least three over the last ten years, and have created massive budgets for transaction tracking and correspondence filtering software.

Let's focus for a moment on the suitability and research requirements. Essentially, what this has meant to brokers is that they are no longer free agents when it comes to recommendations in their accounts. Anything eligible for recommendation to a client must be researched and, more important to regulators, documented in various files with manager approvals, data reports and all that great "file stuff". This tends to be a legalistic requirement, sort of like the "file" you have to build on someone you are going to terminate for cause.

So the brokerage industry sees this regulatory trend and thinks "hmm, where are we going to get this handy file stuff? Oh, wait a minute, we have a sell-side research department! We can "leverage" that to create this centralized retail brokerage policy that never existed before." Just in time, too, as the sell-side analysts are becoming irrelevant to institutions because of Reg FD. Most of them are making money by leveraging their industry expertise to pitch large M&A assignments (which often involves convincing big companies that more spreadsheets and industry data will magically make an ill-considered but bonus-padding acquisition a future bonanza for shareholders).

Of course, brokers continue to want to recommend whatever they want plus, more importantly, whatever their clients' want. Seriously, over my career I have literally heard otherwise rational-seeming people say, basically, "my client wants a portfolio with the following stocks in the following proportions, and they want it to outperform and never produce a negative return." The role the advisor plays in such a scenario, other than sprinkling the magic fairy dust that makes the pre-ordained portfolio perform like Berkshire Hathaway in its early years, is unclear. When these requests come, they express either the preferences of the broker or the client, not any centralized research or policy.

In fact, it gets worse than that, because brokers can make a lot more money selling mutual funds and wrap accounts, so they rarely recommend stocks at all. Clients did come in noticing the performance of Qualcomm and Amazon and Priceline (in 1999-2000 for instance) wanting to buy those stocks. The analyst better have a buyable position. Between the need for a broad buy list for the retail brokers, and the desire to flatter potential M&A clients, it is no small wonder that sell-side analysts were generous with their ratings.

The worst part remains, however. Markets work best when information is decentralized and decision-making is likewise decentralized. The Invisible Hand requires many nerves to function. To the extent that brokers were now making recommendations off of eight or nine centralized buy lists rather than exercising thousands of independent judgements, the herding instinct is emphasized as opposed to mitigated. Brokers exaggerated the bubble by selling homogeneous opinions buttressed by mindless file-building. The regulatory trends above re-centralized decision-making. Worse, the current proposal for reform creates a central "independent" research bureau for all the major brokers to use! (UPDATE: thankfully, Spitzer and the industry appear to be backing off this idea).

Despite the failure of this incredible regulatory buildup to materially slow the flow of complaints about brokers and conflicts of interest, the only solution we can come up with is to keep adding to the pile. Don't even think about asking the buyer to bear some responsibility for their decisions! Regulatory agencies resemble public schools in this regard. No matter how much they fail, the solution is always more of the same with a bigger budget.

I don't mind so much that we try a new regulatory approach, but how about taking a critical eye and an axe to what's come before? Unlikely, I'm afraid, because reducing regulation provides ample risk and no reward to the regulators themselves.

From the desk of Mindles H. Dreck:

Phar-Phetched Physiognomy

"What does Colin Powell say when you tell him this?" The diplomat then did an imitation of Mr. Powell raising his eyebrows as if to say, " `You know what I believe, and you know I can't do anything about it with the crazies in this administration.' "

So let me get this straight: This is Thomas Friedman interpreting a gesture made by an unnamed "European Diplomat" imitating The Times' hero Colin Powell. Remind me not to challenge Friedman and his well-placed pals to a friendly game of charades.

The other day I was talking to an "Editor at the Times." I asked him about how William Safire felt about the columnists keeping him company on the Op-Ed page. He seemed to imitate Safire taking a deep breath as if to say "you know Dowd's gone batty and Krugman is a tabloid economist at best, but what can I do with nuts like Howell Raines running the show?"

Later in the day I lunched with a "Congressional Aide" who knows Pat Moynihan well. I asked him what Pat thought about the Democratic Party's prospects. He did what I thought was an imitation of Moynihan falling to the ground and grasping his throat, as if to say "There are some smart Democrats, but the party has its head so completely up the arses of the tort bar and other members of the cult of victimology there's little hope."

Then I realized he was choking on a piece of tortilla chip and performed the Heimlich Maneuver. Still, it was a pretty convincing Moynihan.

Over dinner I interviewed a "Palestinian Diplomat." I asked him what Chairman Arafat really felt about all these suicide bombings. He did an imitation of the Chairman giving a big thumbs up as if to say "Hey, how else can I keep all these bozos from figuring out who's responsible for the majority of their suffering and stringing me up by the toes?"

Politicians and diplomats are such wonderful mimics!

From the desk of Jane Galt:

Fed up with doomsayers predicting

Fed up with doomsayers predicting terrorist disaster or imminent theocratic assault by the Republicans? Try this one on for size: it looks like the earth's magnetic field is weakening in prelude to a reversal of polarity.

From the desk of Jane Galt:

Ever tried to look up

Ever tried to look up the Yahoo Weblogs category? I did, just for giggles. The results are . . . ahem. . . somewhat incomplete.

From the desk of Jane Galt:

Titter. Snort. Can someone start

Titter. Snort. Can someone start a fund to buy these guys some more tinfoil for their hats?

From the desk of Jane Galt:

Tee-hee: Bottom 50 Urban Legends:

Tee-hee: Bottom 50 Urban Legends:

If you eat Pop Rocks, then drink a whole can of Coke, you'll start belching napalm!

American cheese is made from real Americans

This woman bought a dog in Mexico, and they told her it was a Chihuahua, but when she brought it home, she discovered that in reality it was a wire-haired fox terrier!

After the pet rock fad of the 1970s, thousands of New York mothers flushed the unwanted pets down the toilet and they made their way to the sewers and just kind of sat there, at the bottom, slowly eroding.

I bumped into the optometrist of the wife of an old neighbor of mine and he said that she said that she overheard her local deli owner talking about how people really shouldn't watch football this Sunday. I'm just saying better safe than sorry, right?

If there's an emergency on Death Row - like no electricity or something - some states have pits of hungry tigers as backup.

And best of all:

This buddy of mine who works in San Francisco - he knows this guy who worked for a DotCom company that wrote a business plan, broke even, cut costs, and is on the road to profitability!

From the desk of Jane Galt:

If you want to write

If you want to write an article calling the President a liar, it behooves you to avoid weasel tricks like this:

George W. Bush does not lie about sex, I suppose--merely about war and peace. Most particularly he has consistently lied about Iraq's nuclear capabilities as well as its missile-delivery capabilities. Take a look at Milbank's gingerly worded page-one October 22 Post story if you doubt me. To cite just two particularly egregious examples, Bush tried to frighten Americans by claiming that Iraq possesses a fleet of unmanned aircraft that could be used "for missions targeting the United States." Previously he insisted that a report by the International Atomic Energy Agency revealed the Iraqis to be "six months away from developing a weapon." Both of these statements are false, but they are working. Nearly three-quarters of Americans surveyed think that Saddam is currently helping Al Qaeda; 71 percent think it is likely he was personally involved in the 9/11 attacks.

Let's deconstruct that, shall we?

Premise:
Bush told Americans that Iraq was close to getting a nuclear weapon, and had a fleet of unmanned aircraft.

Conclusion:
Therefore, Americans believe that Saddaam is helping Al Qaeda and was personally involved in the 9/11 attacks

Assumption:
The American public are drooling idiots who have difficulty understanding the English language in oral or written form, which is why they draw a conclusion from Bush's statement that is, on its face, completely unrelated to the content of the statement

or

The readers of the Nation are drooling idiots who have difficulty understanding the English language in oral or written form, which is why they draw a conclusion from Bush's statement that is, on its face, completely unrelated to the content of the statement. . . which is also why they enjoy reading articles like this one.

Please note that I make no comment on what Bush said, or its veracity. Only Eric Alterman's, which is sadly lacking.

From the desk of Jane Galt:

Ouch! The Japanese Financial Services

Ouch! The Japanese Financial Services Agency just reported that it believes Japan's bad loans are understate by $109 billion.

At the same time, the agency said that the banks have insufficient reserves to cover even the bad loans they're reporting.

On the up side, their mobile phones are much cooler than ours.

From the desk of Jane Galt:

Question of the Day My

Question of the Day
My favorite thing about this site is that I get to ask my readers to answer questions for me that they know more about than I do.

So here's my question today, for the scientists and engineers out there: assume that we do, in fact, convert to renewable energy sources -- solar and wind.

Are the weather effects of sucking all that energy out of the climate system better or worse than the weather effects of burning fossil fuels?

From the desk of Mindles H. Dreck:

A Superb Plutocracy Rebuttal in the Blogosphere

I have often praised John Weidner (and his invisible "Truth Squad") for his well-argued comebacks to the partisan hysteria of Paul Krugman. Weidner et. al. have outdone themselves with a lengthy rebuttal to Paul Krugman's "For Richer". This is definitely worth a read -

First, the pretext for writing it was the study cited above by P & S [Piketty and Saez, upon whose work Krugman claims to have based his article] purporting to buttress Krugman's case that we are backsliding into inequality. As we have noted before, when Krugman cites research it's a good idea to actually read the citation. It usually turns out that he either misstates or distorts his sources to promote his political agenda. Indeed, in is the case, he does both.

Let’s begin with the "return of the Great Gatsby" and Krugman's hysterical claim that people in the top 1/10th of 1 percent of income share ("plutocrats" as he calls them) are almost back to their 1913 share levels. This is patently false. We invite readers to look a Figure XII (page 46) of the linked P & S study where they the will see that the top share, despite recent increases, is just over half of the 1913 level. Furthermore, as P & S point out, the character of the people in this top tier has changed. The Gatsby types were coupon clippers or "rentiers" as P & S calls them. They spent most of their days planning the evenings' social events. By contrast, the current top tier are what P & S call the "working rich." These are people who go to their offices everyday, put in long hours and, in most cases, did not inherit their wealth. Of course, a few of them break the law occasionally and must be punished, but, in general, the working rich are a more sympathetic bunch than the idle rich of the early 20th century. Indeed they are testaments to the upward mobility in American society.

Weidner refers to Krugman as a "'glass half empty' kind of guy." I like to think of him as a "glass is only as empty as I say it is" kind of guy, myself.

Could someone send this to all the letter writers cheering Krugman for finally revealing what they already "knew"?

From the desk of Jane Galt:

Good article from the Boston

Good article from the Boston Herald on why the Democrats lost Massachusetts. I think it has wider application to the party across the nation.

The Democratic Party is indeed a big tent, so large it seems to include virtually every politician in the state. But what does it stand for? Outgoing Senate President Thomas Birmingham and House Speaker Thomas Finneran are almost opposites on a wide range of issues. Yet each calls himself a Democrat. Aside from a desire for power, is there any common bond?

Perhaps there is none. And perhaps that was the real flaw in O'Brien's campaign. She was standard-bearer for a party that is spread too thin, a party that too much defines itself as an amalgamation of interest groups rather than by some coherent political philosophy. Unlike, say, Jill Stein, O'Brien had no overarching cause with which to capture the public imagination.

And so, with nothing uniquely substantive to say, O'Brien ended up running a campaign based on style. On Election Day, as it turned out, she just wasn't in fashion.

From the desk of Jane Galt:

Looks like we've got a

Looks like we've got a couple of cases of bubonic plague here in New York.

Eeek! The sky is falling! The terrorists are coming! Run for the hills!

No, the editorial board will not be retreating to the Secret Live From The WTC bunker. The editorial board is much more worried about the unexplained outbreak of Leptirosis in Riverside Park, which threatens The Official Live From The WTC Canine Companion.

The people with the bubonic plague are a couple. They're from New Mexico. Where bubonic plague is found in the local rodent population. So probably, they didn't get it here.

Also, while the plague did a nasty job on Europe in the Middle Ages, we lack the conditions that made it so deadly. Houses filled with straw and the rats that live on it. The hygeine of your typical college druggie frat. Medical treatment that centered around wearing garlic and accusing Jews of poisoning the wells. If it's caught early, bubonic plague is highly treatable. While I don't doubt that Al Qaeda would like to bioengineer some supergerm that would resist antibiotics and only spare the faithful, who would be protected by miraculous intervention from Allah, I doubt they have the resources in their caves.

From the desk of Jane Galt:

Walk me through the logic

Walk me through the logic here: you just got routed in an election in which voters specifically expressed a desire to hand control of the Senate over to the other party. The main factor in your defeat seems to have been the opposing party's overwhelmingly popular president. So the problem, say Democratic pundits, is that the party didn't "stand up to the president", and need to either

a) Move to the left
b) Go negative on the president

I'm afraid I'm not following the logical leap from

1) The voters dissed us because they like the President

to

2) We must therefore vigorously oppose the President by any means necessary.

Can someone fill me in?

From the desk of Jane Galt:

John Ellis has a roundup

John Ellis has a roundup of last night's events you should all read.

From the desk of Jane Galt:

An issue to watch: Greg

An issue to watch:

Greg Ip on page one of the WSJ: "Total debt, excluding the federal government, now equals 158% of gross national product. The last time debt rose to that level was in the late 1920s. Indeed, both the 1920s and 1990s saw a surge in new forms of debt-financed consumption -- installment plans in the 1920s, 'cash out' mortgage refinancings in the 1990s. But the fact that consumer debt has doubled since the 1950s to 90% of personal income isn't of great concern to Fed officials. They attribute it to a more sophisticated financial industry that has made credit easier to get, and to the rise in home ownership which means many people have substituted mortgage payments for rent." Another factoid: "In the 1950s, car prices rose about 0.5 percentage points a year faster than inflation, says Sean McAlinden, chief economist at the Center for Automotive Research in Ann Arbor, Mich. Car makers' productivity was rising rapidly, and sales were advancing 3% to 4% a year. In today's dollars, manufacturers earned about $1,500 per vehicle. Today productivity is growing more slowly, the world is awash in idle auto factories and a strong dollar is holding down the price of imported vehicles. As a result, Mr. McAlinden says, new car prices have fallen 0.2% a year since 1996 and profits per vehicle are down to about $400."

(Via Henry Copeland)

From the desk of Jane Galt:

I'm also hearing that the

I'm also hearing that the Democrat would have won if htey hadn't lost Wellstone. In one sense, I think that's true -- I think the rally cost them the Senate. But in the sense that they mean it, which is that Wellstone would have won, I think that's wishful thinking. Wellstone was the Democratic senator in the worst shape, and he was targeted accordingly. Republicans took every Senate seat, except SD, that was even remotely feasible. Wellstone's death helped, rather than hurt, the Dems, until that rally. So while I think they were in worse shape after the rally, this was not an act of God that cost them the race. It was the mean-spirited behavior at the rally.

From the desk of Jane Galt:

One of the exciting things

One of the exciting things about this is that there is a -- slim -- chance that we'll get tax simplification.

Peace, my little pinko chickadees. I don't mean lowering taxes on the rich. I just mean getting rid of the 8 zillion deductions we all take, lowering rates a little to compensate for the loss of deductions, and thus hopefully goosing the economy.

Now, lots of people argue whether or not raising taxes hurts or helps growth. Though intuitively, it seems obvious that lower taxes would translate directly into higher growth, the empirical evidence for this is thin on the ground.

But almost all economists would agree that a simpler tax code is a great thing for the economy. We spend over $300 billion in this country on tax compliance -- the cost of accountants and tax lawyers making sure our taxes are in order. That doesn't count the budget for the IRS, the courts, and the economic losses we take when companies and individuals divert resources into tax-favored activities.

The problem is, of course, that if they try to do it, the lobbyists will descend on Washington like a plague of locusts. Of course, in theory, we're all in favor of a simpler tax code -- but not at the expense of my deduction. Every single one of them will be fighting tooth and nail to prevent any deduction, no matter how minor, distortionary, and overall useless, from being cut. Unfortunately, while they're talking about making the reform revenue neutral -- meaning that it will neither raise nor lower taxes -- and keeping the current progressive structure, that doesn't mean that everyone will be exactly as well off as they were before. People without deductions, like (full disclosure) me, will be better off. People who take a lot of deductions will lose out.

The only way we can fight for this is by getting energized about it. I know, I know -- it sounds kind of like trying to get energized about proposed changes in the labeling standards for marshmallow fluff. But this is important. In economic terms, it's free money for the country -- we get to grow the economy, without costing ourselves, as a nation, any tax revenue. Even if it means you pay a couple hundred more every year, in the long run you'll be better off. And you'll have sent a powerful message about politicians using the tax code to buy off favored consituencies. So write your congressman. Tell any lobbying groups to lay off. Let the process run.

Come on, guys -- let's do it for America!

From the desk of Jane Galt:

Terry McCauliffe is not learning

Terry McCauliffe is not learning his lesson. He's just gone on TV to proclaim that this was all about the Bush family. I know his job is to raise money among the faithful, but the vendetta is not winning the party any points outside the party.

From the desk of Jane Galt:

I'm watching Mondale's concession speech.

I'm watching Mondale's concession speech. It's dignified and sweet, and does him credit.

I think Mondale is doing a good thing -- closing off the possibility of lawsuits. The country doesn't need any more Floridas. I hope that we see like considerations in South Dakota.

From the desk of Jane Galt:

Thoughts on the Election --

Thoughts on the Election

-- The Democrats fell into the same error as the Republicans in the late Clinton years -- they focused all their energy on assaulting a president whose popularity was an unbreachable fortress. The Democrats could have done fine attacking Bush domestically -- but refusing to pass judges they thought might be pro-life, when over 50% of the country is against abortion except in cases of rape, incest, or life of the mother, hurt their image. And the dithering about the war was handled about as badly as it could have been. While they debated what to do about Iraq, they lost valuable time they could have spent on domestic issues. That would be okay if their debate had been fruitful. But really, all they were debating was what they could do to steal the President's momentum on Iraq. And the answer was, "Not much."

-- As Kaus says, the "It's just a symptom of the 50/50 nation" spin is ludicrous. Republicans took every race they were expected to, staged several upsets, and exit polling indicates that many of the voters were motivated by handing the Senate to the president's party. Apparently the only way to lose as a Republican in a close race was to divorce your wife of 29 years and marry your younger aide, in a southern state. The Dems can't really count on all the GOP candidates doing this.

-- That doesn't mean it's a mandate to go hog wild. And everyone who's been telling me they're going to pillage the land and sow it with salt should relax. The Senate is still too close to ram the Republican party's unvarnished platform through, since they don't have enough votes to overcome a filibuster. We'll get some judges, is all, and about time.

-- Democrats who are saying things like "This is a victory for the Taliban wing of the Republican Party" should take a minute to think. That would make your guy the Guy Who Was So Awful He Couldn't Win Against The American Equivalent of Osama Bin Laden.

-- The memorial service for Paul Wellstone was a disaster. I took a lot of heat just for saying that it probably wasn't going to play well -- partisans responded "Who the hell are you to tell the family how to grieve?" Well, no one, unless they put it on TV and invite me to watch it. And it looks like it cost them Minnesota, which means no hope for a save by Lincoln Chafee. It's your party . . . so was it worth it?

-- I think I was right that the Republican base was energized by New Jersey and Minnesota, while the Democratic base was apathetic. I think the rally, and the New Jersey substitution, may have cost more than they gained. Republicans were mad as hell. Democrats stayed home.

-- Going after Jeb Bush because of who his brother was was a waste of time and money, and didn't exactly improve the image of the party.

-- I don't think this represents a long term trend. This is about 2002, not the new millenium.

From the desk of Jane Galt:

I think I was right

I think I was right about the Republican turnout -- we're seeing some stunning Republican upsets, while the Democrats are only picking up seats we expected. I think it's better than 50% that the Republicans will take the house. All eyes will be on two things: lawsuits, and Lincoln Chafee.

From the desk of Jane Galt:

Oh, jolly. Looks like WorldCom

Oh, jolly. Looks like WorldCom was cheating more than they told us. The SEC just amended the complaint to reflect a longer history of fraud, and an additional $1.8 billion in deceptive charges.

From the desk of Jane Galt:

I know of course that

I know of course that I should not laugh at such things. But this VodkaPundit quote is too funny:

. . . in Colorado, the nastiest local race I’ve seen is the one for District 11 of the State Senate.

“Duty and honor are important to us, but they aren’t to Ed Jones.”

So begins an attack ad by Jones’ opponent, Tony Marino.

Jones counters that Marino declared Chapter 11 rather than pay his credit card bills.

Marino says Jones is abusing the memory of his dead wife.

Jones claims Marino represents “Denver money” (a high crime here in El Paso County) and “labor union control” (ditto).

This is what we have to listen to during Seinfeld commercial breaks if we want some TV noise behind us while I grill steaks and Melissa frenches some fries.

The cheap attack routine got old in a hurry. And at long last, it’s all over but the shouting. Oh, and the lawsuits.

It makes me laugh because it sounds like a parody of our attack ads.

"George Pataki is a liar, a cheat, and a fraud."

"Tom Golisano says George Pataki is a liar, a cheat and a fraud. But that's a fraudulent, cheating lie. And Tom Golisano is only telling it so he can get into office and enact his secret plan to throw senior citizens on the street to starve."

"Tom Golisano loves senior citizens. But that lying, cheating fraud George Pataki is saying he wants to throw them on the street. That's because George Pataki, and his BIg Democrat Bedfellow Carl McCall, don't want you to elect Tom Golisano. They know that if Tom Golisano gets elected, they won't be able to grind senior citizens into mulch and sell them to their Friends In Big Agribusiness."

"Tom Golisano kills puppies."

"Carl McCall eats children for breakfast -- and he doesn't even use ketchup."

"George Pataki told the Manchester Union-Leader that if he gets elected, he'll use his office to sell our planet to aliens from the planet Kordor, so they can enslave humanity, kill our puppies, and eat our children on toast -- without ketchup."

On second thought, I don't know whether to laugh or to cry.

From the desk of Jane Galt:

Meanwhile, stupidist sentence award goes

Meanwhile, stupidist sentence award goes to Tapped, yesterday, defending against charges of election fraud in South Dakota:

It doesn't surprised us that a Republican thinks registering people to vote is a dirty trick. But it does surprise us that Last completely ignored the last week's worth of coverage on this little non-scandal. "Lots" of dead Native Americans? Try 15 -- a number that includes deceased and underage voters -- in a total of 25 counties, according to this recent story in the Argus Leader. The South Dakota election is close, but it ain't that close, buddy. And while state and federal authorities are investigating, as they should be, Republican attorney general Mark Barnett has been busy smothering the notion that there's any widespread fraud. Why? Because no actually fraudulent voting has occurred, the number of fraudulent registrants is insignificant and the conspiracy so far appears to be limited to a single independent contractor. So much for that one. No wonder Last didn't link to any of the coverage.

It's absolutely true that no fraudulent voting had occurred when this was written. . . but since no voting had occurred, that's not much of a feat, now is it?

From the desk of Jane Galt:

So the Republicans are claiming

So the Republicans are claiming fraud, while the Democrats are claiming fraud and voter intimidation:

YOU WANT DIRTY TRICKS? VOILA! What made Jonathan Last's article -- which we commented on yesterday -- so breathtakingly dishonest wasn't just the way he fudged his examples, but the way he ignored the far greater evidence of Republican (or, at any rate, pro-Republican) dirty tricks in this election. We've already noted how South Dakota television reporters close to Republican John Thune tried to gin up a mostly bogus voter-fraud scandal, which was followed by the GOP sending voters a misleading flier saying that "Tim Johnson and the Democrats are hiding the truth about voter fraud" and conducting sleazy push-polls. But there's more. So much more.

Counterspin Central has a good roundup of stories on Florida, where the the national GOP has dumped millions of soft dollars via a process designed to turn it into "hard" money, which the Center for Public Integrity's Chuck Lewis describes as "money laundering." But wait! In a last-minute bid to dampen Bill McBride's turnout, Jeb Bush hasn't been averse to a little race-baiting, telling crowds that Al Sharpton and Jesse Jackson are in town campaigning for McBride. According to some early reports, voting machines in some areas will only register a vote for Bush (granted, this could easily be a computer glitch . . . but a very convenient one). Finally, Bush's government not only didn't provide enough machines for everyone to vote -- it recently refused to extent voting hours to make sure all votes are counted.

In Baltimore, somebody has been putting out fliers in black neighborhoods saying that election day is tomorrow, instead of today, and that people with unpaid parking tickets can't vote, which is a lie.

In Texas, two poll watchers from Republican John Cornyn's campaign were ejected from polling places after making racist remarks to some voters, aggressively confronting one elderly voter and otherwise talking to and harassing voters, none of which is permitted.

In New Hampshire, the GOP has put out gay-baiting phone calls to voters.

In Tennessee, the GOP is engaging in voter intimidation on a level not seen since Jim Crow. The Justice Department has confirmed to local election officials that GOP poll-watchers have been instruced "to object when voters who registered under the motor-voter act show up to cast their ballots."

Tapped would love to know how high up these decisions get made. Perhaps this is just decentralized thuggery, with everybody on the same playbook. Republican campaigns don't need to be told to try and suppress the Democratic vote. But when the dust settles, this may go down as a throwback campaign -- the year Republicans, sensing the country moving away from them, decided to try and suppress votes rather than win them.

Well, these decisions don't get made, because:

1) That's not race baiting -- substitute Hilary Clinton for Jesse Jackson, and you'd get the crowd in just as much of an uproar. Isn't the idea that we may never, ever refer to blacks as real people, but only in the terms usually reserved for saints or sports heroes, a litttle, well, racist?

2) The television stations are now reporting that the reported Bush error was a hoax. There is, however, a reported failure to register Republican votes in several precincts that has not yet been debunked, although I expect it will be.

3) The failure to provide adequate voting machines in whichever counties don't have them is the responsibility of the Democratic canvassing boards, not the governor.

4) I dont' think either party's name exactly shines on the gay-baiting issue this election cycle, but anyway, that's neither fraud nor intimidation, but nasty election tactics that have been exploited by both parties.

5) That leaves us with one flier in Baltimore, which is execrable, but hardly rises to the level of organized thuggery. And the GOP instructed to challenge first time motor voters. But isn't that a logical group to challenge, since it represents a large group of people who are unlikely to show up at the polls, and therefore open to having their vote stolen?

I know the left wing half of the Blogosphere is going to take this as evidence that We Wuz Robbed. But honestly, if you follow elections at all, this stuff is petty, well within reasonable tactics -- or it's demonstrably false, like the Republican "roadblocks" in Florida in 2000. Meanwhile, the right is alleging fraud with equally thin evidence. Could we have a moratorium on hysterical charges that the other side is Evil! Evil! Evil! until we actually hear some, umm, proof?

From the desk of Jane Galt:

All right, my predictions, which

All right, my predictions, which have about the same predictive value as throwing darts at the front page of today's Times:

AR: Pryor (D)
MN: Coleman (R)
SC: Graham (R)
CO: Strickland (D)
MO: Talent (R)
SD: Thune (R)
GA: Cleland (D)
TN: Alexander (R)
IA: Harkin (D)
TX: Cornyn (R)
LA: Landrieu (D)
NC: Dole (R)
NJ: Lautenberg (D)
NH: Shaheen (D)

I'm not so good at the math, but I think this means a one seat pickup for the Republicans. And I still think there's a good shot Chafee will then switch, throwing it back to the Dems. But we shall see.

I think Republicans are going to pick up a few seats in the house, because the base is mad. And I think the Dems are going to pick up a couple governorships, although not as many as we thought, again because the Republican base is mad. All in all, fascinating watching.

From the desk of Jane Galt:

Perspective is Everything Found this

Perspective is Everything
Found this item on the excellent MedPundit:

Shakedown: Members of of the Washington, D.C. area's largest health insurance company won't be able to use the Children's Hospital without paying a steeper price. The hospital balked at the company's efforts to squeeze them further:

"CareFirst started off the negotiation asking for a 12 percent decrease in rates," said Jody M. Burdell, a Children's vice president. "We asked for a 20 percent increase. CareFirst really needs to pay rates that are comparable to other managed care companies' rates."

The insurance company denies this account, but there's no reason to suspect the hospital of lying and every reason to expect the insurance company to try to save face in an effort to avoid losing subscribers. Carefirst made $92.4 million last year.

Sounds like a clear cut case of rapacious health care companies heartlessly trying to squeeze the hospitals for the benefit of their greedy shareholders, doesn't it? But then you look at the numbers. They've got about $2.5 billion in assets, and around $6 billion in annual revenue. That outrageous $92.4 million profit represents a profit margin of 1.5% annually, and a return on assets of about 3.6%. These are supermarket-chain type numbers -- a business renowned for its razor-thin margins and brutal competition, not to mention regular spates of bankruptcy. Not for its avaricious investors and plutocratic managers getting rich off the back of hard-working customers.

In other words, maybe the reason they're putting price pressure on their suppliers is that if they don't, they'll go out of business. Sidney Smith understandably sees the hospital's side -- but there are generally two sides to a story. Just goes to show how two people can look at the same situation and see entirely different things.

From the desk of Mindles H. Dreck:

But What is the Plan?

Best of the Web and "Juan Non-Volokh" [archives screwed, scroll to 11/3, "things that make you go hmmm"] are both right that the NYTimes is spinning its poll results. Particularly, the Times neglects to point out that more people think the Republicans have a "clear plan for the country".

However, that could easily be because the reflexive Democrats polled believe that the Republicans have a "clear plan" to....sell control fo the country to the highest bidder, steal from the poor and provoke World War III in order to benefit the oil and defense lobbies. Chances are the reflexive Republicans prefer to think of Democrats as clueless.

Democrats and Republicans alike appear to credit Republicans with better planning (which is odd, given the supposed stupidity of their leader), but Democrats think Republicans are evil. The poll is meaningless.

My conclusions above are based on sophisticated polling methods time-tested by pundits in big media. In other words I asked a bunch of my friends.

From the desk of Jane Galt:

InstaPundit indicates that turnout may

InstaPundit indicates that turnout may be unusually high. Which of course begs the question: Republican, Democrat, or both?

Well, I think the Democrats, who've historically done a lot better on soft money, are probably running a hell of a get-out the vote effort. And I think there's a big segment still nursing the wounds of Florida.

Problem is, I think the segment still nursing those wounds is also the segment that would vote if Mickey Mouse were the Democratic candidate. In other words, I don't doubt there's real passion, but I'm not sure it's actually going to appreciably up their vote.

On the other hand, based strictly on anectdotal evidence, the people voting against the Democrats are motivated as hell. Between Torricelli/Lautenberg, the war, and the Wellstone rally, people I know who generally only vote if they happen to stumble into their polling place while looking for a bathroom are making sure they get up early to register their disapproval of the Democratic Party. Which is shocking, because I'm living in DNC central. But perhaps I'm just noticing those because they're so out of the ordinary, and there's nothing really going on.

Tomorrow's going to be an interesting evening.

From the desk of Jane Galt:

Guys: can we get off

Guys: can we get off the culture wars and onto something the nation cares about. Come on!

From the desk of Jane Galt:

Mark Kleiman says that Broward

Mark Kleiman says that Broward voters are being effectively disenfranchised by the inadequate number of too-slow voting machines. I think he's exaggerating about the impact -- he estimates that 37% of voters could get through the system at the average speeds being clocked during early voting, which isn't really that far off from the average turnout in a midterm election. And we don't necessarily know that early voters are going at the same speed that election-day voters will -- they may be voting early because they're sick or something. But still, it seems like a big problem.

Feeling the way I do about voter fraud, I have to say I'm against substituting paper ballots, not because paper ballots are never acceptable, but because the fact is that they are susceptible to fraud, and because I find it unlikely that Broward could, at this late date, establish sufficient safeguards to maintain integrity of the system.

On the other hand, extended voting hours seem like a no-brainer. Although, to be fair I think you'd have to extend them all over the state. Which wouldn't necessarily help the Dems, overall. And it isn't fair to lay this all on Jeb Bush. He should allow the extended voting hours. But he didn't screw up Broward County's voting machines; the (heavily Democratic) Broward County commission did that themselves.

From the desk of Jane Galt:

I like the guy Jesse

I like the guy Jesse Ventura has picked to temporarily succeed Wellstone:

"I'm the first former car wash operator to be a U.S. senator," Barkley joked at a state Capitol press conference. He described his politics as "a little Wellstone, a little Rudy Boschwitz."

Barkley ran as an independent for the Senate in 1994 and 1996. He earned the then-Reform Party major status by his showing in the 1996 race. The Reform Party has since changed to the Independence Party.

Barkely said his first order of business would be to educate himself on spending bills awaiting Senate action.

"I have a lot of homework to do," he said.

Lacking either Democratic or Republican credentials, Barkley was asked with whom he would caucus in Washington.

"I'll do what I can do to help the people in the state of Minnesota," he responded. "I'll caucus by myself in a bathroom, if I have to."

From the desk of Jane Galt:

I follow the Microsoft case

I follow the Microsoft case with interest, of course, given my twin interests in economics and technology. So I descended on this Scott Rosenberg article on the settlement like a ton of bricks:

However, when it comes to the heart of the problem -- the way Microsoft chose to weave Internet Explorer code into the guts of Windows in a manner that served no conceivable user benefit but that helped Microsoft elbow Netscape out of the market -- the settlement as tweaked by Kollar-Kotelly simply wimps out. "The evidence does not indicate that the removal of software code is beneficial from an economic perspective. The Court also finds that the forced removal of software code from the Windows operating system will disrupt the industry, harming both ISVs [Independent Software Vendors] and consumers."

The argument here seems to be: Let's not tamper with the innards of Windows, because who knows what might happen then? It's not an unreasonable question -- except that, by refusing to dig into the code, Kollar-Kotelly ensures that the remedies provided by the settlement will be cosmetic. And as long as Microsoft remains the untrammeled master of the Windows code, it can still find ways to trip up potential competitors without ever having to resort to anything so crude as threats to "cut off their air supply" or demands that desktop icons be removed.

Kollar-Kotelly's decision is persuasive at the level of detail; it is in sum that it fails to support its conclusion that the proposed settlement is indeed "in the public interest" -- a certification that's required by an obscure law known as the Tunney Act.

What I think this means is, even though there's a high risk that we'll screw up the company/software that formed an important part of the economic boom of the nineties, and even though we don't know how we'd actually execute this tinkering, and even though the judges who are expected to rule on the matter are in no way qualified to decide what is or is not necessary in operating system software -- despite all this, we should do it anyway.

And why should we do this? Because Microsoft is mean.

Don't get me wrong; I share the non-unreasonable fear that without some restraint, in five years we'll all be renting air from Bill Gates. But let's look at the economic benefit we're supposed to be providing to consumers by breaking the company up. Remember them? They're the reason we have antitrust law -- not to protect engineers, marketing guys, or salespeople who work at a Microsoft competitors; not to make Mac afficionadoes feel better about themselves; not to provide journalists who make in the low five figures the satisfaction of seeing a big, rich company taken down. To protect consumers from companies who use their market power to force them to pay high prices for crap.

Oh, I know. You think Microsoft software is high-priced crap. But let's look at the immediate benefit consumers would derive from having Microsoft hamstrung by Justice.

Well, in the flowering of competition that comes after their main competitor has been hogtied and forbidden to compete by the Justice department, I think that all you antitrust types can agree that Macs aren't going to get any cheaper, nor will Unix boxes get any easier to use. Those being the primary barrier to the adoption of those platforms today.

[Thank you to all those who are even now mentally composing their angry notes. Yes, my little Linux geek, I know that you find unix heart-breakingly easy to install. But I work in technology, and I've worked with the major Linux boxes, so spare me the melodrama about how it's every bit as easy and fully supported as a Microsoft box. I could get seriously hurt laughing that hard. Yes, for a reasonably adept computer user, the switch to Unix isn't that hard. But the problem with Unix people is that due to their work environment, they seem totally unaware of the larger base of consumers who cannot be described as "reasonably adept", and cannot function without those dreadful little wizards, smiley faced cartoon characters, and extensive, idiot-friendly computer help lines provided by Wintel firms.

And you, my darling Mac hound, I am well aware that your Mac is a bargain with all its video software and neato music features and the smooth, white expanse of the outer case melding seamlessly into the hip new colors on the front. . . but for the millions of consumers who don't edit their own movies or collect 8 zillion tunes on their I-Pod, all that software you consider indispensable is useless dross for which you're asking them to pay a hefty fee. I know you love your Mac. But you have to accept the fact that not everyone else wants all the features you use. And they want features you don't use, like software titles and power for a cheaper price. The ability to accept that other people have differing opinions on lifestyle questions is one of the things that makes America great. So give peace a chance.]

There might be some benefit to consumers of Mac and Unix boxes. Microsoft's development will be essentially stopped for at least a couple of years while the court decides what they're allowed to do. As anyone who's worked in software development can tell you, this is going to screw up Microsoft's software six ways from Sunday, leading to even longer delays. In the interim, some companies might be forced to start developing for other platforms, although Mac fans, don't hold your breath for them to port corporate applications onto OSX.

So net benefit: consumers of Mac and Unix boxes probably get some more software. Offset by the fact that probably more people are going to have to buy computers that are more expensive, and in the case of Unix, harder to use. We might also, while Microsoft is in its straightjacket, see a flowering of entrepreneurial spirit producing hithertofore undreamed of software products for the consumer market. Of course, we also might not. Since the benefit is fairly tenuous, we need to weigh it against the cost.

Network Effects save companies money There are advantages to having everyone on the same platform. It reduces costs for software development, training, home/work interaction, support, and makes their hardware and other software cheaper. Getting rid of the monopoly gets rid of the network effects, which will have some drag on the economy. This is particularly a propos in the case of a natural monopoly, where forcing companies to amortize fixed development costs over a lower number of sales for each OS means that the price of both operating system and other software will probably rise.

Microsoft has a lot of shareholders Kill the company, and you kill their portfolios. But we're not going to kill the company, you say? Come on. If you're having this argument with me, odds are better than even that you're some kind of a tech person. So let's take your current project. Pretend you have a little company that produces, as it's main product, whatever it is you're working on. Now imagine that the government steps in and tells you that you're going to have to change it. They'll appoint a special master to tell you what you can and can't do. You have to explain everything to the special master, wait for him to digest it and come up with a plan, and then explain to him why his plan is idiotic. Then he has to make a new plan. This isn't his only job, you know. You wait, not allowed to write a single line of code while the review process is on. A year or two down the road, he comes back and tells you what you can and can't do -- and then you have to rip apart your project and start over with the totally new specifications. Think your company would still be in business long enough to get a new product to market?

Risk is not good for the economy Getting Justice intimately involved in the operation of Microsoft raises risk in two ways. It increases the uncertainty about the future of the software/hardware market, which means companies will likely slow investment. Since falling investment is one of the primary causes of the current recession, this is a major concern. Punishing Microsoft also has a chilling effect on companies, which may fear that aggressive pursuit of market share will gain them not profits, but punishment. This is likely to deter investment and entrepreneurship, though it's hard to quantify whether this effect will be small or large. However, in our current liability environment, anything that increases the legal risk in the market has to go down in the "loss" category. Especially since the lesson that would go out from a successful drastic remedy is that competitors that lose in the market can try to win on appeal. Please don't argue that Microsoft is somehow special -- whether or not it is uniquely mean, it is not unreasonable to think that both the winners and the losers will draw this conclusion from the lawsuit, given how prominently Microsoft's competitors featured in the anti-trust suit.

Consumers like Wintel I know you don't like Wintel, because you're a hard-core afficionado. But the great mass of consumers like their Windows PC, even though it isn't as powerful as Unix, or as nifty as the Mac. They like the combination of price and features that the platform offers them. Stalling development at Microsoft for four years isn't going to make them happier, especially since

The verdict will make the main alternatives less attractive, not more. By which I mean that absent competition from Microsoft, Mac and Unix providers are less likely to improve their offerings, especially on key metrics like price and user-friendliness. Sun has no consumer marketing apparatus to speak of, and is unlikely to develop one in time, much less a software package that can be maintained by granny in Dubuque. Linux suffers from the fatal problem of all open-source, which is that no one wants to spend two years building a little animated dog to tell Grandma how to install her printer. Meanwhile, Mac's main issues -- price and power -- are unlikely to improve, first because absent Microsoft, there is no price pressure, and second of all, because there are development cycle limitations on how fast Mac will be able to put out a comparably-powered machine even if it wants to. I know I'm going to get argument on this, but c'mon -- when has getting the government to kill the main competition ever improved anyone's product?

Innovation will stall both because of increased risk, and because Microsoft won't be able to do much of anything while Justice hammers out a remedy.

So look at the modest benefits, and compare them to the major costs. I repeat that you are not allowed to consider benefits to owners of companies that might be created or get more market share, because that's not what the law is designed to do; it's supposed to protect consumers, not corporations or even their employees.

Seems to me that the benefits are all out of proportion to the costs.

Rosenberg's argument is essentially "Yes, but if we look at the costs, we can't do anything about the scourge of Microsoft!"

Mmm-hmmm. And they think free-marketers are dogmatic?

You can get rid of the pain of a stubbed toe by amputating the toe. Or you can wait for the pain to go away. The one has the benefit of "doing something about the problem", with the drawback of being, y'know, catastrophic. The other one is boring, but ultimately less painful.

As a relatively pro-market force, I get a lot of email from regulatory fans, triumphantly pointing out some place where the market has produced some result other than the one we would have gotten in an ideal world full of sweetness and light. They then wait, smirking, I imagine, for my worldview to crumble as I realize that the markets are not, after all, perfect. I think they are disappointed when I respond with the adult equivalent of "Duh. You thought we lived in an ideal world full of sweetness and light?"

Sensible proponents of the free market do not believe that markets produce the ideal result -- only that it is more likely to do so than the entity that continues to bring us the National Strategic Helium Reserve.

So why can't proponents of regulation seem to realize the same thing -- that there is not some ideal combination of regulation that will ensure that nothing bad ever happens, anywhere? I recall with fondness a discussion I had with one of my lefty readers that started with his desire to really regulate those energy companies so that California couldn't happen again, and then, as I walked him through the issues of regulatory capture and conflict of interest inherent in asking a civil service guy making 70K to watch an industry making thousands of times that amount, his tunnel vision led him into an interesting place. With each proposed solution, as I pointed out the practical difficulties that would prevent his regulatory scheme from working the way he wanted, he began proposing more and more extreme solutions to overcome the practical difficulties, until he was left with two proposals:

1) Enact the reforms he wanted even though he agreed they wouldn't work, in the hopes that at some point down the road the voters would notice and do something about it. The problem being that this is an equally strong argument for not enacting the regulation, in hopes that at some point down the road, the voters would enact the perfect scheme he desired.

2) Rip out the entire civil-service system of California so you can pay regulators enough to avoid conflicts of interest A proposal breathtaking in both its utter impracticality, and blythe disregard for cost. It would be cheaper to give everyone in California their own generator than to go through the legislative and administrative battles necessary to enact this sort of reform.

When your automatic assumption is that there is some regulation, somewhere, which can produce a perfect result, you get so focused on your goal that you begin to make ludicrous suggestions for how the rest of us should drop everything and get to work on the problem you've identified.

So don't get mad when the rest of us ignore you in favor of getting on with our lives.

From the desk of Jane Galt:

Gay bashing for everyone! Guys,

Gay bashing for everyone! Guys, could we maybe talk about some issues that the candidates are actually going to be dealing with, rather than what may or may not happen in their private lives? Just a thought.

From the desk of Jane Galt:

Derek Lowe, who runs a

Derek Lowe, who runs a consistently outstanding blog on organic chemistry and pharma-related topics, has a fascinating piece on the much-anticipated brave new world of genetic testing for pharmaceutical effectiveness, which, it is hoped, will make it possible to prescribe for patients only the drugs which will work for them. Rather than trying six different drugs for cancer, depression, or obesity, doctors will be able to diagnose exactly what's going on on the genetic level, and prescribe accordingly.

Derek makes a really good point: this means that the target market for each drug will be smaller, and hence that the price will have to go up to recoup its costs.

He leaves it there, but I think there's an implication that this will increase drug costs and thus offer incentive for price controls. Not necessarily, however.

First of all, not all drugs are long-term use. For short-term use drugs, such testing can dramatically decrease their costs. A patient who wastes time and money trying six different forms of chemotherapy will be able to try one instead -- the one that's going to work. That's a big savings not just in drug costs, but in the associated health care.

Second of all, a lot of patients are stuck on multiple therapies just to be safe. Take a typical asthma sufferer. They're on steroids, multiple bronchiodilators, Singulair, and gosh knows what else. Genetic testing could help us diagnose who needs what much more effectively. The same goes for high blood pressure, diabetes, and any number of other long-term conditions. Moreover, by improving outcomes and experience with the drug, such targeting may well increase demand. So the good news is good news, until proven otherwise.

From the desk of Mindles H. Dreck:

Wealth Redistribution - The Easy Way

The vast majority of the political spectrum believes that it is appropriate for the government to relieve the suffering of citizens at the lowest end of the income distribution. Even those who feel it is not truly an appropriate function of government can often be convinced that having government perform that function may reduce the costs to society as a whole. In addition, most believe, as I do, that continuous, sustainable improvement in the living conditions and opportunities of all is the noblest of all purposes. Where I part company with so many of my friends and correspondents is how best to achieve such growth.

It is an entirely different and tenuous argument that an aim of government should be to deprive those at the high end of the economic distribution of their wealth. That this in and of itself is a net plus for society, or that it is simply morally right to disallow extreme wealth, is highly problematic. As Arnold Kling points out, this is basically the path Krugman is taking with his recent anti-plutocracy columns.

Similarly, I find it odd that most limousine socialists, upon the very sight of rich people getting wealthier, assume that this has happened at the expense of the poor. Zero sum reasoning that is - "you have a dollar because I don't", or vice versa. Strangely, people who have money are often more susceptible to this argument. This is guilt, perhaps, or stems from the relative wealth reference in Prospect Theory (I digress, but where would this post be without a reference to a Nobel Prize winner?).

One argument against redistribution for the sake of reducing wealth boils down to simple axiomatic beliefs: The individual has a sacrosanct right to his property (like life and liberty) and government cannot deprive him of it in order to re-engineer society in some bureaucrat's vision. Property must be exchanged for value, and not by force. These happen to be my beliefs, but there is little point in arguing this because people tend to place a particular subjective value on the right to property that cannot be argued productively.

There are, however, several arguments against purposeful redistribution that suggest it would be harmful to the greater public good.

The first is that free market economies require clear and stable rules supporting private ownership of property and clear control over one's assets' disposition in order for the economy to be productive with its capital. This can only be suggested by observed correlation, but the work of economists like Hernando de Soto has made a compelling case for property rights. Adding one's own subjective qualifiers as to what constitutes "too much" property is merely a soft way to dilute those rights. Those who point at Sweden need to consider how much more extreme Sweden's concentration of wealth is at the high end - i.e. two families and a handful of pension funds controlling most of the private sector and the government representing nearly half of the economy. Incidentally, this is true of many quasi-socialist economies - wealth is in fact concentrated in...well...the "Eurotrash" and/or a few government bureaucrats.

Another argument is that the opportunity to amass wealth increases behavioral incentives for productive economic activity. This is both true and largely undisputed. The argument becomes a lot more contentious at the margins, however. How much of a disincentive is a particular marginal tax rate or transaction cost? While generally agreeing that lower taxation is an economic stimulus on the margin, economists argue derisively with each other about whether different forms and quantities of tax reductions can be more or less of a stimulus, whether any resulting budget/debt impact will offset or even overwhelm the tax stimulus, and whether today's marginal tax rates provide much opportunity for increased incentives. Nonetheless, if we are talking about confiscating wealth for social purposes, we have to quantify the benefit to society in order to justify the marginal cost, however small or large.

Personally, I'm disgusted at the ease with which statists can actually rationalize their insufferable sense of moral superiority by advocating taking private property. Just the other night I heard one on NPR talking about raising taxes to balance the budget (and rolling out the hoary and unproven deficit-interest rate argument!). It was as if the current spending side of the budget was written and delivered with the Ten Commandments. I have the same problem with the abortion argument. I am pro choice myself, but I'm appalled at the way pro-choice activists deny that an abortion, all else being equal, is a HORRIBLE thing. We can only try to justify it using utilitarian arguments balancing the rights of the mother and the future well-being of mother, child and society against the destruction of an unborn child. But I digress again...(and invite hateful mail).

It has been suggested, with little evidence, that these very few wealthy control politics, and the benefit of better immediate wealth distribution is effectively to re-democratize. Can we prove that, for instance, Bill Gates is controlling the political process? Does Larry Ellison control the legislative or executive branch? Do the massive perpetual foundations set up by the Rockefellers, Fords, Guggenheims etc. "control" government?

The latter is much more likely.* It seems that these family foundations are much more active in government. The first generation filthy rich are too busy buying ski-in ski-out Vail mansions with attached helipads. Since these dynastic foundations are, in large part, a creation of the supposedly wealth redistributing estate tax, what does that say about the wealth concentration argument?

Absent government-imposed distortions, a fool and his money are soon parted. I say let the rich give it all to their kids. It'll be back in the economy in no time. Anti-plutocrats' ends, as well as those of us with a more laissez-faire bent, will both be served.

* Actually, one might argue it is getting to the point where unions, corporations and associations such as the trial lawyers exert a disproportionate influence on government. I'm not sure how that observation relates to the plutocracy argument and tax rates on individuals. Unions and associations pay no taxes, and corporations of size are all in the same tax bracket.