Asymmetrical Information

From the desk of Mindles H. Dreck:

Constitutional Conflictedness

[UPDATE: Follow-up to comments here]

As usual, commenters are all over me in my objections to Maureen Dowd's attack on Scalia. Unfortunately, I've stirred the soup with a material factual error in my assumptions about the case. What now? I'm going to make things worse for myself.

I find that discussions of court rulings on abortion and sodomy laws are overheated with personal attacks and moral characterization of legal interpretations. These are difficult discussions to have at the dinner table. In the heat of the discussion lines often begin to blur between:

• What the constitution or jurisprudence actually says;
• What I'd like it to say;
• What someone else would like it to say;
• What ought not to be a law (in my opinion), but is constitutional;
• What is not constitutional, and therefore also ought not to be a law;
• What ought to be a law, but not necessarily a constitutional right;

Abortion

In the case of abortion, for instance, I think that it ought to be legal to terminate before the end of the first trimester (this is based on where it seems sentient life may begin, a question not easily or definitively answered). All things being equal, I don't like abortion, but it seems to me it can be justified on utilitarian logic.

On the other hand, I don't think the constitution enumerates that right. I'm not sure the constitution has a "right to privacy". I remember being reasonably convinced that Griswold vs. Connecticut was a bad decision for that reason, even though I couldn't be more in favor of birth control.

In sum, I would like to see choice (and birth control) be protected but I don't want "rights to" to be created by the court. If we're going to strengthen privacy's presence in the constitution, we should do it by constitutional amendment.

Why? Why shouldn't the court create "rights to"?

I'm more of a believer in "freedom from" than "rights to". My beliefs, as many of you will have guessed, run towards the 'fist/face' definition of rights. Furthermore, I think rights reside in individuals, not groups. Once you start using the constitution to entitle either individuals or groups to things it seems whatever you are promising might have to be obtained at the expense of another's property or liberty. Unelected justices should not have the power to make these choices on their own. I concede that this is a "slippery slope" argument, but, to acknowledge Justice Frankfurter and Eugene Volokh, we have empowered the court to make both the 'sound decision' now and the 'sound distinction' later. One of those should belong to another branch of government.

Gay Marriage

Personally, I don't understand why gay marriage should be discouraged or prohibited. If adults want to seriously commit to each other I honestly don't understand why the state should have anything at all to say about it.

There's an added dimension, however. This would not be an issue if the state had not gone ahead and conferred particular benefits on straight marriage. So the legality of gay marriage isn't about making personal vows to one another, which we are free to do, but about conferring the special legal status of spouse on gay couples.

So, I wonder if we shouldn't just stop favoring heterosexual marriage with special spouse status. Second choice: anyone can designate one individual to receive government's spousal privileges. Either way, I don't think a personal commitment to another is the province of the state. Once again, I don't think the Constitution addressed this or supports my position. And I worry about establishing another "right to", even if it achieves the laudable aim of eliminating the unequal treatment of partners based on sexual orientation.

[UPDATE: Hey, Michael Kinsley agrees with me on Marriage (hat tip Catallarchy). As does Sasha Volokh. And Arthur Silber, and Stephen Green and David Boaz.]

Sodomy laws
This is simpler. I think what consenting adults do in the privacy of their own home, if it does not somehow infringe upon the liberty of others, should reside entirely outside the state's purview. I don't think someone has a "right to" a sexual act, I think they have personal freedom of much greater scope to exercise as long as it does not interfere with another's liberty.

Once again, the Constitution and legal precedent do not appear to offer sufficient documentation for my position. It appears the framers may have allowed for "moral" legislation.

Finally
I'm open to plenty of discussion on this, particularly as it illuminates the legal points here. However, I can't abide overheated confusion of "ought to be a right" and "is a right" or personal demonization based on reasoning about what is in the law. Actually, I have little patience for demonization even in an "ought" argument on abortion. I am not totally comfortable in my own feelings, thanks to having kids with a miscarriage on the way. It's an issue on which both sides feel uncomfortable for me.

Well then. There's much more to say, but that ought to be enough to provoke outrage from several locations on the political spectrum.

From the desk of Mindles H. Dreck:

O.K., I'll Play

(see here for inspiration)

"The Philosophical Cowboy, marooned on Blogger, sends the following:

From the desk of Mindles H. Dreck:

Internet use; 'Clickophobes'

Here's an interesting study from the Pew Center. It contends that 'net usage is no longer growing and attempts to categorize those who don't use the internet. The study highlights the usual race and income-based differences, but one group tends to be of more than adequate means but avoid the 'net as a matter of principle. These are the "Net Evaders":

Net Evaders – 20% of non-users. These are non-users who live in households that have Internet connections and in which other family members go online from home. There is evidence that at least some of them have established work-arounds with Internet-using members of their household that allow them to “send” and “receive” email and do Web searches without actually logging on. Others proudly avoid the Internet on principled grounds, while others give different reasons, among them lack of time or interest.

I've run into a few people who "proudly avoid the internet", and never quite understand them. Then again, I'm the sort of person who starts tapping his foot uncontrollably anywhere near someone deleting emails (or formatting cells in a spreadsheet) one-by-one with their mouse.

Net evaders tend to be older, but not uniformly so.

I'm not sure this is a perfect parallel to 'net evaders' , but I've seen a similar phenomenon in my company. There are otherwise exemplary employees, willing to do whatever is required by their employer except use software. I call them "clickophobes", because they tend to goggle at the screen when forced, too scared to push a mouse button and see what happens. Even if a piece of software is designed to realize a policy or regulatory requirement, if it is not immediately user-friendly, clickophobes will just refuse to use it. They certainly wouldn't refuse to sign a memo or attend a meeting, or grind through some horrendous paper form, but for some reason it is still OK to declare even a mission-critical package too hard, without attending a training session or cracking a manual. "Can someone just print it out for me?" is the lonesome call of the clickophobe.

Another few years and I suspect most employers will consider this a critical professional shortcoming.

From the desk of Mindles H. Dreck:

"Paid to be a Baby Curmudgeon"

She said it herself.

It's been a long time since I bothered to react to a Maureen Dowd column. Today she attacks Justice Scalia:

He's so Old School, he's Old Testament, misty over the era when military institutes did not have to accept women, when elite schools did not have to make special efforts with blacks, when a gay couple in their own bedroom could be clapped in irons, when women were packed off to Our Lady of Perpetual Abstinence Home for Unwed Mothers.

He relishes eternal principles, like helping a son of the establishment dispense with the messiness of a presidential vote count. (His wife met him at the door after Bush v. Gore with a chilled martini.)

He's an American archetype, or Archie type. Full of blustery rants against modernity and nostalgia for "the way Glenn Miller played, songs that made the hit parade . . . girls were girls and men were men." Antonin Scalia is Archie Bunker in a high-backed chair. Like Archie, Nino is the last one to realize that his intolerance is risibly out-of-date.

Honestly, how could his wife meet him at the door with a drink? The horror.

Here's an odd assertion she makes along the way:

The court issued a bracing 6-to-3 decision declaring it illegitimate to punish people for who they are, and Justice Scalia fulminated in a last gasp of the old Pat Buchanan/Bill Bennett homophobic conservatism.

I yield to no one in my scorn for anti-sodomy laws. But "illegitimate to punish people for who they are" is an interesting way to interpret the decision. I thought we punish or don't punish people for acts. Did we punish Jeffrey Dahmer for "who he is"?

At any rate, the column is sad, nasty and unworthy of a major newspaper, regardless of the object of her ire. Unfortunately this is nothing new with the 'baby curmudgeon'.

UPDATE: When I wrote this I did not appreciate that the Texas Sodomy laws outlaws certain sexual acts "with someone of the same sex". I think that's a basis for Dowd's "punishing people for who they are" comment. Having now read Scalia's decision and parts of the others, it is interesting that the majority opinion didn't emphasize this equal protection argument but rather privacy under due process.

Scalia's argument is that moral legislation is neither unconstitutional nor unprecedented. He's certainly right on the latter and I'm sure any of the legal bloggers could argue me into a corner on the former. My opinion, of course, is that we oughtn't to legislate morality. But I've often found that the constitution fails to back up my philosophy. The difference between what I think ought to be in the constitution and what actually is in it often makes these types of discussions frustrating and makes me feel that character assassination of the justices, like Dowd's column, are inappropriate. I'll have more thoughts for another post.

From the desk of Jane Galt:

Department of Awful Statistics

Here's one I've found, while trying to track down a claim I consider to be statistically ludicrous: that making abortions legal has not, in fact, increased the number of abortions.

This is a pro-choice one:

"Furthermore, apparently one out of every three illegal operations had serious enough consequences to require a stay in hospital: in 1960, forty-two percent of all emergency admissions into hospitals were due to illegal abortions." H. Morgentaler, Abortion and Contraception (1982) pp. 110-11.

Let's think about that.

42% of all emergency hospital admissions are from botched illegal abortions.

Assume that one in three abortions is botched badly enough to require medical admission --- a pretty major assumption, since even the head of planned parenthood estimated, in 1960, that 90% of all abortions were being performed by physicians.

Let's look at lifetime numbers -- how many people are admitted for what over their lifetimes -- for people alive in 1960, since census effects in any year would otherwise have to be controlled for.

On average, it's safe to assume that most of us will require emergency admission to the hospital at least once in our lifetime. We will be in a car accident, have a heart attack, get cancer, or have some other problem that puts us in the emergency room. But assume that in 1960, only half the population required such admission for a non-abortion related cause.

Those people would make up, then, approximately 60% of hospital admissions.

The total number of people in the US in 1960 was 175m. So the lifetime hospital admissions for non-abortion causes would be .5 x 175m, or 87.5m

If .6x = 87.5m, then .4x = 58.3m.

The population of women in 1960 was 90m. In other words, for this to be true, just about 2/3 of all women alive in 1960 would have had, at some point in their lives, an abortion botched badly enough to require hospital admissions. That includes nuns, spinster aunts, and women who got married at sixteen. And in order to get a figure that high, you'd have every woman in the country getting an average of two abortions.

What is the general result of a badly botched abortion? Sterilization. Which means that a lot of women would have to pick up the load for their sisters who were unable to conceive in order to have their second abortion.

Even if you relax my assumptions about lifetime emergency hospital admissions quite a lot, this figure is ludicrous.

Some further checks:

Was teh number of fertile women admitted to the hospital outside the maternity ward really that much higher than the number of non-fertile women and men, as we'd expect if this fact were true?

With half again as many people, we have 4,000 abortions a day now. If every single abortion required emergency admission, that would still allow only 3,000 people in the entire country to be admitted to the hospital on an emergency basis, unless you posit that women were having substantially more abortions back when it was legal and hard to find. If you posit any sort of reasonable fraction of abortions requiring hospital admission, you'll quickly see that this works only if no one else in the country is allowed to wreck their car or get cancer.

Yet it's approvingly cited by someone who never tried to do the math on a factsheet about abortion. Now I don't want to use any of their data, because God knows where they got it. Just further proof that factoids don't help in the long run.

From the desk of Jane Galt:

Cui bono?

For those who, like me, don't follow abortion politics, here's an interesting thing: Norma McCorvey, the original plaintiff in Roe, has filed a Rule 60 motion to set aside the verdict on the grounds that we now know more about abortion than we did before.

It doesn't seem likely to go anywhere, but this caught my eye:

"The Roe v. Wade decision deprived women of protection from dangerous abortions and exposed them to a much greater risk of being pressured into unwanted abortions. Studies, he says, indicate between 30 and 60 percent of abortions result from the pregnant woman submitting to pressure from her male partner, parents, physicians or others. Parker will present affidavits from more than 1,000 women who testify having an abortion has had devastating emotional, physical and psychological effects. This is 1,000 times more evidence than presented in the original case, he says. Also, new scientific evidence indicates abortion is associated with more physical and psychological complications for women than were known about in 1973. In contrast, there have been no scientific studies measuring any significant benefits abortion has produced in women's lives."

On the one hand, I hate, hate, hate when alleged feminists claim that women are unable to, say, make a decision about having sex: i.e. caving into verbal pressure from a man to have sex is the same thing as being raped. This item falls into that category.

As social policy, however, it raises an interesting question. Does the legality of abortion significantly increase the ability of men to pressure women into having abortions that they do not, themselves, desire? While I certainly wouldn't want to make a law saying, for example, that women are unable to resist pressure from men and must therefore be protected, it is a legitimate scope of inquiry to question whether a law or a court ruling furthers the goal it was intended to serve. In this case, to ask whether legal abortion provides greater benefit to the women who don't want to bear children, or to the men who are thus able to pressure women who do want to have a child into aborting it.

Of course, there were men who pressured women to abort before it was legal. I don't know whose interest legal abortion primarily furthers, but it's interesting to contemplate that it might not, on net, be women's. The availability of abortion has certainly, I think, significantly eroded the support that women who want to keep their babies can expect from men in the event of an unwanted pregnancy; if she's "choosing" to have it, his obligation is lessened. I think that Roe has undoubtedly had some effects that worked to the detriment of women; I'd be interested to hear what my readers think. Not on the issue of whether abortion is right or wrong; that's a value judgement that isn't going to be solved today. Simply the empirical question of whether women are better or worse off with abortion legal. And I'm more than happy to entertain the interesting side discussion of whether the outcomes may vary by race or class: have professional women expanded their freedom to pursue exciting careers, at the price of eroding the ability of working class women to count on support from their boyfriends?

I fly back to the US tomorrow, so I may not be back in the discussion until tomorrow evening. But please carry on without me.

Have a nice weekend, everyone!

From the desk of Jane Galt:

Department of random finds

I came across this while looking for something quite different. Anyone who's worried about growing income inequality in the US (Kevin, I'm looking at you) should read this paper from the invaluable National Bureau of Economic Research. The gist: while income inequality may have increased since the halcyon days of the 1960's, consumption inequality hasn't really increased. Since I think most of us are more worried about people getting enough stuff, than about who has more numbers on their tax return, this is a major paper.

From the desk of Jane Galt:

Memorandum

To: Democrats
From: Jane
Subject: Republicans

If you're going to get mad when I suggest that y'all aren't always quite rational on the subject of the Bush administration, don't write columns on how Republicans are plotting The End of Democracy as We Know It.

Update On another look through an odd item catches my eye: Krugman cites the Republican "drive to privatize Medicare". But the only thing the Republicans have, so far, tried to make private is the prescription drug benefit. . . which is private right now! That's not privatisation, and one hopes that Krugman knows it. But of course, "the drive to keep prescription drug coverage private" doesn't sound nearly so scary! [What's going on, Jane -- are you channeling Kaus? -- ed. Yes I am, and frankly it's a little frightening. But it's a Kaus kind of story.]

From the desk of Jane Galt:

Drug Deal

I wanted to write something scathing about the prescription drug bill we're about to get, but Anne Applebaum beat me to the punch.

From the desk of Mindles H. Dreck:

Can't compete

The Volokh Conspiracy folks are so good, they're already blogging on Friday.

(If for some reason this changes, there are posts dated June 27th, 2003 and June 26th, 2003 on the linked page).

From the desk of Jane Galt:

64-bit is here!

Steve Jobs has finally announced what we've all been waiting for -- Apple is switching off the Motorola platform to a new 64-bit chip from IBM. It's been obvious for quite a while that this was coming, and now that he's ready to go live, it looks like he may have pulled yet another rabbit out of his hat.

Or maybe not. For all the talk of doubling the speed of your PC, there aren't any 64-bit applications out there yet, and won't be for a while. This is a big problem, because it's very possible that your 32-bit apps will actually run slower on the new machines, as they'll undoubtedly be running in some sort of compatibility mode. The transition to 32-bit from 16-bit was considerably eased by the fact that in both Macs and PC's, the old systems were so slow that even in compatibility mode, the new machine with the 32-bit system was generally an improvement. Computers now are pretty darn fast already.

There's also the problem that Apple seems to be pricing their machines to lose money. They're competitive with PC's, almost, which is nice. But Apple's cost structure doesn't make it profitable to compete with PC's on price. With a big new pile of R&D costs on top of their current operating flows, and a hefty price tag to support the bugs that are inevitable in such a major switch, this is a pretty big gamble for Apple. But Jobs has gambled -- and won -- before, so I wouldn't put my bets down either way just yet.

From the desk of Jane Galt:

He said what?

Mr. Gephardt, what part of "unconstitutional" did you not understand?

From the desk of Jane Galt:

How a news story is created

For non-journalists, Dave Barry explains the process:

First, the REPORTER gathers information by interviewing PEOPLE and trying to write down what they say, getting approximately 35 percent of it right. The REPORTER then writes a STORY, which goes to an EDITOR, who bitterly resents the REPORTER because the REPORTER gets to go outside sometimes, whereas the EDITOR is stuck in the building eating NEWSPAPER CAFETERIA ''FOOD'' that was originally developed by construction-industry researchers as a substitute for PLYWOOD.

The EDITOR, following journalism tradition, decides that the REPORTER has put the real point of the story in the 14th paragraph, which the EDITOR then attempts to move using the ''cut and paste command,'' which results in the story disappearing into ANOTHER DIMENSION, partly because the EDITOR, like most journalists, has the mechanical aptitude of a RUTABAGA, but also because the NEW COMPUTER SYSTEM has a few ''bugs'' as a result of being installed by a low-bid VENDOR whose information-technology experience consists of servicing WHACK-A-MOLE GAMES.

So the REPORTER and the EDITOR, who now hate each other even more than they already did, hastily slap a story together from memory, then turn it over to a GRAPHIC DESIGN PERSON who cannot actually read but is a wizard on the APPLE MACINTOSH, and who will cut any remaining accurate sentences out of the story to make room on the page for a colorful, ''reader-friendly'' CHART, which was actually supposed to illustrate a story in an entirely different SECTION.

Yes, it's a lot of work, but we do it night after night, with story after story, all so that when you, the reader, go out to your front yard to get your newspaper, it's not there. Check your roof, OK?

From the desk of Mindles H. Dreck:

Hiatus

Tonight I celebrate my 16th wedding anniversary (it was actually Friday, but child-related events took her away). Need I say...no blogging?

From the desk of Jane Galt:

Kevin Drum asks an interesting question:

could South Vietnam have beaten the North if we had continued to support them after 1975? (Not with ground troops, that is, but with air support and supplies.) Tacitus thinks so, and blames Democrats of the era for cutting off support, while my reading has convinced me that we were simply throwing good money after bad and the cutoff was justified. Nothing short of nuclear war would have allowed the South the beat the North, and we were simply facing reality when we finally ended our support of a corrupt and hopelessly inept South Vietnamese regime that had no chance of winning. Better late than never.

However, I'm no expert on Vietnam-era military history, so perhaps I need to read up on this. Aside from Rambo-esque "they wouldn't let us win" rhetoric, this is really the first time I've heard a serious argument that the South could have won, either with or without us. Interesting topic.

UPDATE: On a broader level, this discussion gets to a more fundamental question: why did communism fail? Was it because of our consistent military opposition (as in Vietnam, for example), or was it because communism was a lousy economic system and would have failed regardless of all the proxy wars we fought?

Some of both, surely, but I suspect more of the latter. Anti-communists in the U.S., I sometimes think, don't really show the courage of their convictions when they insist that the Soviet Union fell only because Reagan pushed so hard on them militarily. That betrays a confidence in communism as a political and economic system that I really don't share.

Based on my extremely limited reading, I agree with Kevin that communism would probably have fallen anyway. It seems to me that after the initial frenzy of Stalinist/Maoist mad energy, which involved the (I think) historically unique idea of building capital plant out of a low-accumulated capital society simply by murdering whatever number of people were required (25,000 were killed building a single large steel facility in the USSR), communist regimes were simply accidents waiting to happen. The soviet union was saved by repeated miracles that propped them up financially just enough to keep going; I'd argue that it was the failure of another miracle to materialize in the 80's, as had happened in the 40's, 50's, 60's, and 70's, that put the Soviet Union out of business, not Uncle Ronnie's military spending.

But does it therefore follow, as my triumphant liberal friends have proclaimed, that we should not have opposed the Soviet Union militarily? I think not. For one thing, while military spending didn't cause the downfall of Soviet Communism, it probably hastened the demise. And for another, if we hadn't opposed the Soviets, and later the Chinese, I think it's a safe bet that a lot more of the world would have fallen under communist domination. Communism, in its major forms, became wrapped up with the strident nationalist impulses of two very large countries. And for the people so dominated, things were very much more awful than they had previously been (even in Cuba, which probably got the best deal in the Soviet bloc due to its proximity to us.)

If we hadn't actively sought to contain communism, the Russians would certainly have rolled through much more of Western Europe. Southeast Asia would be a solid wall of quasi-communist hellholes, with South Korea participating in all the unbearable awfulness that's going on right now in the North. The rest of Asia might have fallen too. If 30 years of Soviet occupation could do what it did to Hungary, one hates to imagine what it might have achieved in Bangladesh.

Our military opposition increased the cost of acquiring new countries for their empire until it was too high for a communist economy to bear. And considering just how bad communism was for the countries where Russia and China succeeded, I'd say that that alone is worth the price we paid.

From the desk of Mindles H. Dreck:

Everything That Can be Known is Already Known...

Matt Welch writes about Moneyball:

It's about baseball -- specifically, about how such teams as the Oakland A's and Toronto Blue Jays finally recognized and exploited a decades-old grassroots revolution in statistical analysis -- but you do not need be a baseball fan to thrill to the potential analogies it has for the world at large....

...What lessons can we learn from this tale? That the pursuit of better information will eventually unearth discrepancies and irrationalities, even in a field as seemingly well-studied as baseball. That the gatekeepers of information and judgment will instinctively and defensively protect their turf, rather than question their own legitimacy. That intelligence and passion can still win in the end, especially if they take advantage of the networking power of the Web.

The most obvious application for these lessons is in other sports, especially under-measured ones like professional basketball (already, several people have attempted to become "the Bill James of the NBA"). But any industry addicted to its own traditions, conventional in its hiring practices, and hostile to outsider analysis, is vulnerable. Especially if it attracts the attention of fanatical observers who publish their own Web sites.

Moneyball is the Story of A's manager Billy Beane, who mines the fertile yet well-studied data of baseball to produce a winning team on a tight budget. This book has been sitting on my nightstand since shortly after I heard this interview on Fresh Air and I will be reading it with my book group shortly.

As a market professional, with close colleagues engaged in the seemingly futile search to find an informational advantage in some of the most researched markets in the world, this book seems inspirational. But how might a financial professional capture the amateur energy unleashed in the collaboration that led to the A's stunning success?

By the late 1980s, members of the James-organized "Project Scoresheet" (now called Retrosheet) were attending nearly every professional game, writing down minute details of each play, and sharing it in a centralized database. People started proposing new theories and formulas, engaging in brutal but collegial peer review, and buying enough James books to make him a perennial best-seller.

"All these exquisitely trained, brilliantly successful scientists and mathematicians," Lewis writes, "were working for love, not money."

Yet the profit motive played a crucial role as well. Soon after James burst on the scene, Lewis points out, "two changes were about to occur that would make his questions not only more answerable but also more valuable. First came radical advances in computer technology: This dramatically reduced the cost of compiling and analyzing vast amounts of baseball data. Then came the boom in baseball players' salaries: This dramatically raised the benefits of having such knowledge."

But organized baseball couldn't be bothered with it. Almost every single decision-maker in a traditional baseball franchise, from general manager down to the lowliest talent scout, clung to the same comfortable prejudices and conventional wisdom that the Jameseans were now ridiculing.

The Old Guard wanted beautiful athletes; the New Guard preferred fat guys who could hit and draw walks. Baseball men loved to bunt and steal; the outsiders called such "little ball" a way to lose runs. General managers were forever drafting high school players; desktop dynamos said college men were far better prospects. Year after year, millions of dollars were being thrown at first basemen who hit home runs and relief pitchers who threw hard; the computer nerds argued the minor leagues were filled with similar players available at a fraction of the cost.

Hmm. That's a puzzle, as it seems a) that any informational advantage gained would be quickly transacted away and b) the ever-tightening regulations governing circulation of stock research would stifle an open-source style effort. Consider, for example, another Michael Lewis story - that of 15 year-old Jonathan Lebed:

Richard was Richard Walker, the S.E.C.'s director of enforcement. He entered with a smile, but mislaid it before he even sat down. His mind went from a standing start to deeply distressed inside of 10 seconds. "This kid was making predictions about the prices of stocks," he said testily. "He had no basis for making these predictions." Before I could tell him that sounds a lot like what happens every day on Wall Street, he said, "And don't tell me that's standard practice on Wall Street," so I didn't. But it is. It is still O.K. for the analysts to lowball their estimates of corporate earnings and plug the stocks of the companies they take public so that they remain in the good graces of those companies. The S.E.C. would protest that the analysts don't actually own the stocks they plug, but that is a distinction without a difference: they profit mightily and directly from its rise.

"Jonathan Lebed was seeking to manipulate the market," said Walker.

But that only begs the question. If Wall Street analysts and fund managers and corporate C.E.O.'s who appear on CNBC and CNNfn to plug stocks are not guilty of seeking to manipulate the market, what on earth does it mean to manipulate the market?

"It's when you promote a stock for the purpose of artificially raising its price."

But when a Wall Street analyst can send the price of a stock of a company that is losing billions of dollars up 50 points in a day, what does it mean to "artificially raise" the price of a stock? The law sounded perfectly circular. Actually, this point had been well made in a recent article in Business Crimes Bulletin by a pair of securities law experts, Lawrence S. Bader and Daniel B. Kosove. "The casebooks are filled with opinions that describe manipulation as causing an 'artificial' price," the experts wrote. "Unfortunately, the casebooks are short on opinions defining the word 'artificial' in this context. . . . By using the word 'artificial,' the courts have avoided coming to grips with the problem of defining 'manipulation'; they have simply substituted one undefined term for another."

Walker recited, "The price of a stock is artificially raised when subjected to something other than ordinary market forces."

But what are "ordinary market forces"?

An ordinary market force, it turned out, is one that does not cause the stock to rise artificially. In short, an ordinary market force is whatever the S.E.C. says it is, or what it can persuade the courts it is. And the S.E.C. does not view teenagers' broadcasting their opinions as "an ordinary market force." It can't. If it did, it would be compelled to face the deep complexity of the modern market -- and all of the strange new creatures who have become, with the help of the Internet, ordinary market forces. When the Internet collided with the stock market, Jonathan Lebed became a market force. Adolescence became a market force.

"[T]he gatekeepers of information and judgment will instinctively and defensively protect their turf, rather than question their own legitimacy."

From the desk of Jane Galt:

The Weird logic of internet cafes

I have paid £1 for 46 minutes of access. Hence I will use every one of those 46 minutes, even though I'd like to get to the British Museum.

We will spend the rest of the day meditating on the tragedy of MBA's who fail to come to grips with the idea of sunk costs.

From the desk of Jane Galt:

Public Service Announcement

From rainy London. I'm picking up my email on the web this week and next, which has reminded me of all the mass mailing lists I'm on. Which reminded me to point out for all the thoughtful, thoughful people who have put me on their mass mailing lists -- it's really a waste of your bandwith. You've gone straight into my junk mailbox.

Don't get me wrong -- I love reader mail. And I'm happy to get people sending me posts to look at in which they think I'd be interested. But the folks who are sending me six or eight notes a day were clogging my email box, and I've set up filters to keep them out.

Just wanted to let you know, especially as I'm sure I'm not the only blogger who knows how to use the junk mail feature. Spam is no more beloved because it concerns what you believe to be an important political point.

We now return to our regularly scheduled programming -- which in my case, means I'm off to the British Museum. Have a lovely Sunday, everyone.

From the desk of Mindles H. Dreck:

Required Reading for Discussion of Pensions and Demographics

I've referred to this research report on global aging by Maureen Culhane quite a few times over the course of my blogging career, but it hasn't been consistently available on-line. It is available now, and I recommend it to anyone - especially the folks arguing about Social Security in recent AI comment threads. Download it before it disappears again.

From the desk of Mindles H. Dreck:

Blogroll Saturation

I'm adding Peaktalk to the blogroll for being one of the better looking sites around and writing about Dutch political economy. I've also recently added Econopundit.

The blogroll is too big. When Jane buys me that drink we will figure out what to do about that. I like having the whole list there for reading, but I realize it diminishes the value of each link to have 'em all there. I'll have to dig into some Milonic javascript (licensed of course) and find a way to sort and filter them without losing the full list.

From the desk of Mindles H. Dreck:

Regional/Sectoral Unemployment

Jonah Goldberg puts this letter on The Corner:

Jonah:

Is anyone else getting suspicious? I work in the high tech area as an engineer. I socialize with many "working class" people. I attend a church that has a majority of its members working in non-professional fields. Nobody is unemployed and as a matter of fact, nobody can find enough people to fill the available slots where they work.

At my place of employment, our best and least best engineers are leaving for fantastic offers at Lockheed Martin, Raytheon, Grumman, etc. At our church, the tradespeople have more work than they can possibly accomplish. My family had to search for over a year to find a builder to execute a renovation at our house. The lead guy on our framing crew said that a few years ago he only hired people with experience. Now, he'll take anyone who is a hard worker. Every fast food place, convenience store, gas station or whatever that I frequent has a "now hiring" sign posted every which way one looks. Something just doesn't add up.

I wonder if you would take one of your columns and analyze the "high" unemployment rate that the Left has latched onto as the only chink in George Bush's armor. I'm suspicious that extended benefits and other government perks haven't caused some folks to just kick back and stop working. I don't have the answer, but as an engineer, when facts just don't go together logically, I get suspicious.

Let's not see vast conspiracies around every corner. The companies cited in this letter are defense contractors, whose business has naturally picked up in the last few years. Other sectors, such as finance (ahem) are shedding jobs the way Elizabeth Taylor shed husbands.

I've argued before that is this actually a growing strength of the U.S. economy. We see greater volatility within sectors but less across the economy as a whole:

From the desk of Jane Galt:

My co-blogger below has a very interesting post on the future solvency of Social Security. He points to an article arguing that calculations have not been taking into account the value of taxing the various tax-free retirement savings vehicles, and that if you take that money into account, SS is solvent.

Kinda-sorta.

Most people, when they refer to the insolvency of social security, are really thinking of social-security/Medicare: what you allegedly pay for with your FICA taxes. And the new tax revenue isn't going to cover both deficits, especially not with the generous new prescription drug coverage your congress is getting ready to enact.

But even more than that, I think that the whole question of public-private is looked at the wrong way.

The central question of pensions is not whether the government or the private sector provides them. It's how many workers have to support people who are out of the labor force. Pensions are not a problem because we resent old people, or because the government is going to go bankrupt; they are a problem because when you shrink the labor force, unless you raise either capital inputs or productivity, GDP goes down.

When the baby boomers retire, they will have the effect of shrinking the labor force by quite a lot. They will also swell the number of people out of the labor force with whom said labor force needs to share its GDP. This accelerates a process that has been going on for quite some time, as senior citizens live longer. I'm told that when social security was enacted, the life expectancy of someone who retired at 65 was -- 65. Now it's in the mid-eighties.

This is somewhat mitigated by the fact that people have fewer children these days. But not much mitigated, as birth rates in the US are relatively steady, and children need to be supported for ever-longer periods before they are ready to enter the workforce, as college and graduate degrees become more common. We've also seen a dramatic increase in other non-workforce participants as disability and welfare have swelled. Women have joined the workforce, to be sure. But that effect is already built into our standard-of-living expectations now -- boomer women worked.

So the central problem is that we will shrink the workforce at the same time that we increase the number of people out of the workforce. This is a problem whether those out of the labor force are drawing their money through dividends and interest payments, cash transfers from friends and relatives, or a check from the government. The amount that each person can consume will have to fall regardless, because there are more mouths to feed from a shrinking pie. We can alter where the pain falls, by cutting benefits so that retirees suffer, or raising taxes so that workers and their dependants feel the hurt. But there is no magic formulat that will increase the amount we have to distribute -- not privatisation or anything else.

Our only hope to prevent living standards from falling is to increase labor productivity so that each worker can produce much more. Sure, he'll have to support more people, at which he may chafe -- but at least he'll be able to see his life getting better as he does.

The argument for privatisation is thus not that it somehow overcomes the problem of a shrinking ratio of workers-to-retirees. The argument for privatisation is that it increases productivity. Private savings go to companies that make productive investments which have a high enough return to justify deferring consumption and assuming investment risk. Public savings go to -- the Robert H. Byrd memorial parking lot (formerly known as the state of West Virginia.)

Does that mean that private savings accounts will produce enough of a productivity increase to allow us to sustain our standard of living when the boomers start to retire? I don' t know. But I'm pretty sure it has better odds of doing so than giving the money to 535 politicians who have almost none of them ever held a real job.

From the desk of Jane Galt:

Buy American!

There is quite a fraught discussion in some circles about whether we Americans should vote with our wallets on the recent French diplomatic efforts to prevent us from invading Iraq. Should we boycott French products? Should we plan to travel elsewhere?

Why yes, of course we should.

Not necessarily because we hate France. Even French-loving, war-hating, Bush-bashing Europhiles will, if they're smart, be looking for more ways to buy American this summer. Why? Because, my little chickadees, the exchange rate is dreadful. If you will read the post immediately below this one, you will understand that the American dollar is in the middle of that long awaited decline of which my co-blogger speaks.

That means that everything you buy from France, or in France, is much, much more expensive. About 35% more expensive than it was last summer. And though we may long to support our British allies, the pound has similarly appreciated against the dollar. Trust me. The last time I was in London, it took $1.65 to buy £1. Now it takes within a hair's breadth of $2.00. Jane is on an involuntary diet caused by the contraction in her stomach whenever she contemplates paying $12 for a stale sandwich.

Why is this happening? Because, my little chickadees, fewer people want to hold dollars. Specifically, fewer people want to buy things from us, which reduces the demand for dollars, and causes the price of the dollar in terms of other currencies to fall in much the same way that mad-cow disease causes a drop in the price of beef. Thus, the currency declines, which eventually compensates for this problem by making us want to buy fewer things from abroad, bringing our trade and capital accounts once more into alignment.

Meanwhile, you're the bloke with sticker shock who's helping the process along by whining and/or swearing every time you're asked to fork out more of your hard earned money for each imported item. Being a rational economic actor isn't all fun and games, you know.

So you don't have to be particularly patriotic to join me in my new Buy American campaign. Just thrifty.

From the desk of Mindles H. Dreck:

Games With National Accounts

There have been a number of lengthy posts in the blogosphere over the last few months that attempt to prove one or the other point of view about the effects of taxation and fiscal policy by graphically presenting national accounts data. Many of them have made elementary errors (some that surprised me, given the source) that I have wanted to describe, but for time or lack of esprit de blog combativeness, I haven't. Also, I suppose it's good to see people yanking out the data and making what they can from it as opposed to thinking you need some kind of macro-econ license before driving the information superhighway to bea/bls.gov.

However, you might look at this rant to see many of these mistakes in one convenient place. (as the title of the blog suggests, the author usually comments on other topics).

So here's a start on a checklist:

1. Don't forget to use REAL growth figures so you don't wind up touting the inflationary Carter years as the sine qua non of economic growth. That one always makes me laugh.
   
2. When comparing GDP across time, don't forget that real GDP is bounded by workforce growth and productivity growth and is therefore difficult to compare across periods where workforce growth varied dramatically. Consider how this rule, in combination with the first, might change your conclusions , or at least challenge your confirmation bias. I've seen several assertions about growth or productivity droughts that just aren't born out under proper measurement.
   
3. When presenting dollars or price levels, or anything that compounds over time, use a logarithmic scale. Otherwise, the same percentage change looks larger in the more recent part of the time series (the graph linked immediately above violates that rule, I'm afraid).*
   
4. Don't equate a change in revenues/expenditures as a percent of GDP with a decrease in absolute revenues/expenditures For those of you trying to disprove supply-siders, Laffer doesn't fall that easily. See Nordhaus for better arguments.
   
5. Don't claim that giving money to the government stimulates the economy and yet, in the same breath, say letting rich people keep their money doesn't.
   
6. For your surviving data series, please don't forget that correlation isn't causation. I ran a correlation the other day on individual income taxes as a % of GDP vs. Real GDP growth since 1941. It's negative 22%. Does that prove supply-siders right? Of course not. Apply the same statistical caveats to the data you are mining.
   
7. Understand the more subtle implications of national accounts, and test your forecasts against them. The first thing you learn in Macro is that national output is the sum of private sector output, government and net exports (Y=C+I+G+X). This isn't a theory, its an accounting identity, how one computes GDP. It follows that the private sector (business and individual) surplus or deficit, plus government's deficit or surplus, plus net imported investment, all expressed as a percentage of GDP must equal zero. Up through 2000, the private sector ran enormous deficits - about triple the long-term average at -6% of GDP. Both business and consumers were dissavers. Government ran a surplus and we certainly imported foreign capital, so these two parts of the identity were positive. Businesses have made a sharp retrenchment, and consumers have followed suit, although much more slowly (thank goodness for that). One of the following two things HAD to accompany this: the government goes into deficit, and/or the FX situation reverses by way of massive dollar depreciation or a complete reversal in trade.

   I was surprised at how many people thought after 2000, the private sector could re-save and the budget could stay balanced (with the right President, of course). This could only have happened if the trade deficit disappeared simultaneously. The fact of the matter is that the near term government deficit was practically a given when the private sector deficit bubble of the '90s burst. Trying to resist it would have created a depression. For a good primer on the implications of the national accounts identities, particularly the lesser-of-two-evils deterioration in the fiscal balance in the post '90s environment, see Wynne Godley's 2001 analysis. He and Woody Brock have been pointing this out since 1999.
   

I'm sure there's more, and I'm sure you'll feel free to stick it, and me, in the comments.
_____
*Actually, Robert Shiller violated scale principals big time in Irrational Exuberance, even as he set new standards for the proper use of inflation-adjusted data. See figure 1.1 in the linked spreadsheet for a potpourri of double-axis deception. He needlessly compresses the right scale and fails to use logarithmic scaling. I would argue the ratio of the left to right scale should be the long-term average P/E of about 15. The top of the right scale would be about 120. Go ahead, you can do it yourself. Doesn't look as extreme, does it? His point, however, survives.

From the desk of Jane Galt:

Why was the site down, Mommy?

Those of you who noticed that the site went down last night, let me explain: I am an idiot.

I wasn't checking my hotmail account, and thus did not notice the past due notice from Cornerhost. This caused Cornerhost to shut me off. The situation has been rectified thanks to the timely intervention of my co-blogger, whom I owe a drink when I return from London, where I am presently ensconced.

Blogging has been light on my side (although my co-blogger, thankfully, is making up for it) because the only place I can blog is from work, which is where I shouldn't be blogging. However, look for some exciting entries this weekend on hot topics like corporations and transaction costs, poverty remediation and inequality, and English hotels.

From the desk of Mindles H. Dreck:

Found: $12 Trillion

Michael Boskin has calculated that the deferred taxes that will be paid on the boomers' retirement will be worth $12 Trillion in revenue (link requires WSJ subscription), and that Social Security doomsayers of all stripes have been seriously undercounting this future revenue source:

THE SOCIAL-SECURITY TIME BOMB could very well prove to be a dud. The doom and gloom red-ink budgetary forecasts of recent years have overlooked some astoundingly good news for the government: pensions, IRAs and other tax-deferred accounts should generate some $12 trillion in taxes by 2040. This mind-boggling pot-of-gold is larger, at a minimum, than the sum of the 75-year actuarial deficits in either Social Security or Medicare, according to Stanford economist Michael Boskin , who has written a pioneering paper on the subject for the National Bureau of Economic Research. We could end up with enough to offset both shortfalls, he says.

The $12 trillion is based on a conservative, base-line forecast. Boskin also entertains scenarios in which the number is as low as $9 trillion and a high as $19 trillion. His point is that this contingent asset, which isn't on the government's books, will be very large. Only an economic disaster, like 10 consecutive years of down stock markets, would torpedo his rosy projection.

The cash could offset a major portion of the national debt through 2050, the paper says. Boskin , however, isn't trying to challenge the need for serious reform of Social Security, in particular, or government spending in general. The Republican scholar believes improvements in the government's operations are needed to free up money for more productive uses.

Boskin , who declined to comment on his work, expects to publish the paper in about two weeks. He has given private readings to White House, Treasury and Federal Reserve Board officials. In fact, the President's Office of Management and Budget and a former Treasury official directed us to Boskin's research.

Well, Barron's may think it is all hush-hush, but I just googled a 131-page NBER working paper made available in January. So much for the tenacious financial journos.

This paper builds a simple model of the various (positive and negative) revenue effects of deferred taxes and, together with data from numerous sources, develops estimates of the deferred taxes already accrued and likely to accrue in the future under alternative assumptions about impacts on personal saving, budgetary responses to changes in revenues, capital formation effects of changes in national saving, contribution rates, rates of return on assets, inflation, age of withdrawal, discount rates, tax rates, management fees, etc. Generally conservative assumptions imply that 1) the deferred tax vehicles have already recouped foregone revenue and interest costs; 2) the deferred taxes already accrued in tax-deferred saving vehicles amounted to about $3 trillion at the start of 2003, about equal to the privately held national debt; 3) the real present value of the net budgetary impact of future deferred taxes is likely to amount to an additional five to ten trillion dollars, more than the actuarial deficit in Social Security and Medicare; 4) withdrawals from tax-deferred accounts will increase so dramatically relative to wages and salaries in coming decades that, cet. par., government forecasts of projected deficits are seriously overstated; 5) the deferred taxes add a major new element with a strong interest in lower tax rates, at least on their withdrawals, to the future political economy of budget policy.

There are so many ways I can think of to manipulate this number I'm going to remain skeptical until I've digested this. It would be extraordinary if the rest of the world has been working with such seriously flawed assumptions.

There is one very interesting implication regarding the President's savings account plan (one aspect of his fiscal program I rather like):

An awareness of this hoard of legally owed tax money is beginning to circulate on Wall Street because of a Bush administration proposal to phase out six tax-deferred retirement and savings accounts and replace them with two accounts similar to Roth IRAs. Under this plan -- proposed in the President's budget and now being promoted by the Treasury -- there would be no tax deduction for deposits to the accounts, but money would accumulate tax-free and withdrawals would be tax-free.

The Bush plan would allow conversion of existing tax-deferred accounts into the new accounts, accelerating the collection of future taxes. Pamela F. Olson, Treasury's assistant secretary of tax policy, says that although more taxes would flow into Uncle Sam's coffers up front, the long-term effect would be a "wash." Boskin doesn't estimate the effect on deferred taxes of the Bush proposal, which he favors, other than to say that it would "shift the timing of tax collections toward the present."

So if Boskin is right, passage of the President's savings plan this year would kick off a rapid improvement in the government's balance sheet.

From the desk of Mindles H. Dreck:

Only the choir can come in for this sermon

Stumbled on this page looking for an old friend:

This site is a collection of the built cultural heritage of humankind. Here, you will find international architecture from past to present. Cultural awareness is the very basis for an understanding of the content of this site. Support for unjustified aggression against others rules out any such consciousness.

Please decide:

Yes, I believe in mankind and agree with this. | This opinion is old european bullshit!

Needless to say, the second option does not take you into the site. No looking at their precious architecture website unless you affirm your political correctness!

Well, no problem, I condemn the 'unjustified aggression' of the former Iraqi regime and the current leadership of North Korea and Iran against their own people. In we go.

Sanctimonious dorks.

From the desk of Mindles H. Dreck:

The Waiting is the Hardest Part

This morning on the news I heard part of an interview with a New York State Thruway official about the construction on the Tappan Zee Bridge Tolls (link takes approximately one geological epoch to load). renovations will close down three of the toll booths during the summer, when daily traffic is lower. Not to worry, he says, "there won't be more delays, there may be the perception of increased delays, but there won't be more delays."

Well, that's a relief. In fact, this insight opens up whole new project opportunities. If we could just rid ourselves of the perception of traffic, people wouldn't mind actual traffic so much....

UPDATE: I'm astonished no one has made a crack about the perception of WMDs.

From the desk of Jane Galt:

Theology neology

I'm looking at the history of Canada for work and I came across this description of the early natives:

The first inhabitants of the province were part of an Archaic Indian culture that inhabited eastern North America between about 8000 - 3500 B.P. The Archaic Indians first arrived in southern Labrador from the Maritime provinces and the north shore of the St. Lawrence. These people had a strong relationship with the sea and depended heavily on its resources, hence the name "Maritime" Archaic Indians. They eventually inhabited the entire Labrador coast reaching northernmost Labrador about 5000 B.P. One burial site at L'Anse-Amour dates back approximately 7500 years, making it the oldest known burial mound in North America. By about 4000 years B.P. they also occupied much of the coast of the Island of Newfoundland. Over thirty years of archaeological study offers a picture of a people with an evolved spiritual and material culture. Stone spear and knife blades, bone toggling harpoons, and marine animal effigies suggest a people fully adapted to the sea. Although no direct evidence exists, it is very likely that the Maritime Archaic Indians had sturdy watercraft. Also not preserved are the products of hideworking such as clothing, tents, and sinew lines for tools, all vital to their survival. The care taken with burials and the nature of grave goods during this period suggest a strong reverence for the individual in both life and death as well as a clear sense of the individual's relationship with nature. Maritime Archaic occupation of Labrador gave way to that of the Intermediate Indians whose sites are dated between 3500 to 2500 B.P. blockquote>
What struck me is that I always see the exact same description of the "highly developed" spiritual life of paleo- and neo-lithic tribes, even though, of course, we have very little idea whether they had a highly developed theology or simply preferred to sit around on Sundays playing mumblety-peg. Can anyone come up with the reference tribe against which these ones are presumably being compared -- the slackwitted, materialistic tribe that shows evidence of a poorly developed spiritual life and the aesthetic sensibilities of your average strip mall designer?

Posted by Jane Galt at 7:05 PM | Comments (55) | TrackBack

From the desk of Jane Galt:

Whoa, Tony!

I confess I was shocked at Tony Blair's sudden announcement that he was abolishing the office of Lord Chancellor, which is, outside of the monarchy, the oldest office in Britain. Iain Murray isn't just shocked -- he's hopping mad.

From the desk of Jane Galt:

Request

I am soliciting recommendations for a good, complete history of Canada. Voting will be open for 24-48 hours.

From the desk of Mindles H. Dreck:

"Good Old Fashioned Reporting"

There are are several well-known forms of compelling non-fiction narrative. For example: the noble protagonist struggling against the forces of evil; the faceless machine grinding the little people under its boot heel; the clash of two titanic egos; the young forward-looking innovator resisting the establishment; the tycoon done in by his own greed. If you can cast a story in one of these classic molds it will be a more compelling read.

One of the first things they teach you in "media training" is that every reporter who calls you for comment, especially if you are not the first interview, has already begun to form such a narrative around their subject. For instance, the evil insurance companies are making up for their bad investment ideas by overcharging doctors, or the tort bar is responsible for all the problems in our legal system. The narrative lense helps arrange the facts in a much more digestible fashion. After all, if the article read like a lab report, who would read it? Media trainers help you identify the reporter's narrative, reject the assumptions that are unfriendly to your position and change the interview subject from the "gotchas" if you happen to be in the way of the reporter's chosen underdog. Media training gives you an extremely cynical view of journalism (and yourself).

Unfortunately, In my limited experience, the media trainers have been 100% on the mark. I have been interviewed or asked for comment a dozen or so times by journalists of various stripes and found they all had their storyline mapped out prior to asking me any questions. They are looking for a villain, someone struggling against the odds, somebody being ground up in the gears of a huge bureaucracy or someone who is heading for a fall.

I keep hearing this phrase "good old-fashoned reporting", mostly in the triumphant crowing over the resignations at the New York Times. If 'GOFR' means not making up stuff, I'm all for it. Unfortunately, many critics of the Times are conflating this notion of journalistic execution with the chimera of total journalistic objectivity. Total objectivity makes for neither good copy nor efficient story production and therefore barely exists.

From the desk of Jane Galt:

Half-full glasses

Amid all the turmoil in the world, it's easy to forget that things really are getting better all the time.

From the desk of Jane Galt:

Fraud Patrol

From Yahoo News:

BOSTON - A college freshman created a fake airline that offered bargain-priced tickets on flights between Honolulu and Los Angeles, authorities said Thursday.

Luke Thompson, of Yardley, Pa., incorporated Mainline Airways in Pennsylvania, established a business address in the Boston suburb of Wellesley and set up an elaborate Web site, according to Massachusetts Attorney General Thomas Reilly.

Thompson, who attends Babson College in Wellesley, offered fares as low as $89 one way between Los Angeles and Honolulu, Reilly said. Flights were to begin July 3, but Mainline had neither planes, crews nor the required permits and approvals as recently as a few weeks ago.

From the desk of Jane Galt:

Prozac Patrol

From today's Wall Street Journal:

HE SURE CAN DISH IT OUT: Talk about the waiter from hell. When Darlene Keller asked server Jonathan Voeltner to substitute veggies for potatoes with her steak, the Sizzler waiter didn't take it well. According to the Los Angeles Times, after following the Kellers to their Corona, Calif., home, Mr. Voeltner and two accomplices used eggs, syrup, sugar, toilet paper and instant mashed potato flakes to trash the place. Mr. Keller called the cops, and his wife immediately recognized the culprit. "Oh my God!" she told police. "It's the waiter from Sizzler."

From the desk of Jane Galt:

Thomas Friedman shows just why those with expertise in one area shouldn't weigh in on another. This is what he has to say about tax cuts:

Whenever Mr. Bush says, "It's not the government's money, it's your money," Democrats should point out that what he is really saying is, "It's not the government's services, it's your services" — and thanks to the Bush tax cuts, soon you'll be paying for many of them yourself.

Considering his encyclopedic knowlege of the Middle East, it's hard to accept that Mr. Friedman is so naive as to believe that if the government pays for something, it's somehow free -- though of course that delusion is common among Manhattan's liberal Democrats. The rest of the country does not seem to share the belief that it is possible to get rich by picking your own pockets.

Of course, many Democrats want to make some people rich by picking other peoples' pockets -- but that hasn't sold well at the polls, surprisingly. So now they're looking for a new angle of attack. Political prediction: "You don't want to buy things yourself -- you want to give the government money to buy them for you!" is not going to emerge as the winning strategy.

From the desk of Jane Galt:

Andrew Sullivan offers this to an American gay couple who moved to Holland to get married:

Congrats, Gary and Stefan. You're among the first foreign married couples not to be recognized in the United States.

But this is not true. Anyone with more than one wife (or who is a second or third or fourth wife) has not had their marriage recognized in the United States since. . . well, as far as I know, since the Mormons got uppity and wanted their own state. In fact, we not only don't recognize the marriages; we don't allow anyone to immigrate who has been part of such a marriage. I'd say Gary and Stefan aren't even in the first million couples to have their marriage go unrecognized by Uncle Sam.

From the desk of Jane Galt:

What did in Howell Raines?

Many conservative bloggers have been triumphant, and a number of Times afficionadoes have been sulking. That seems to be the dominant story line, which you can see elaborated in glorious detail by Mickey Kaus. What seems to me a much more interesting question, however, is not getting asked: not "did the Blogosphere do him in?", but why Howell Raines was pushed out.

After all, the paper is still profitable. I see no evidence that any of the sins for which Raines and Boyd were fired had any impact on the paper's market appeal (although I can be heard arguing, of an evening, that many of the sins for which he wasn't fired, like a dull-as-ditchwater editorial page and flood-the-zone coverage of silly pet projects such as the Augusta National's outrageous discrimination against oppressed multi-millionairesses, did hurt the paper's long term growth prospects). And the things he did which were detrimental to shareholder value are largely the things which will continue to be done under Pinch Sulzberger, unless his family restrains him, because that's what Pinch wants in a managing editor.

So why did they fire him?

Because the newsroom hated him? It didn't seem to be impacting the organization's ability to put out a paper, and lost productivity, after all, is when you're supposed to start sacking managers, not when you hear the buzz around the water cooler.

Because he embarassed the paper? To whom? I'd be willing to put money down that not one Times reader in fifty even knows the name of Jayson Blair, and vanishingly few care about his transgressions. It's easy to forget, for those immersed in blogging, that for most of America, and even for most of the readership of the Times, this registered only through a momentary glance at a back page story they found far too boring to read.

So the consumer doesn't care. The market isn't reacting. Yet Raines was fired anyway. As far as I can see, his only real firing offense was embarrassing Pinch in front of other journalists, most of whom don't buy papers. And maybe making affirmative action look bad.

Of course, embarassing the boss has long been a sacking offense. But as any consultant will tell you, when episodes like that happen, the organization would usually do better to sack the boss.

From the desk of Jane Galt:

Survey Says -- Who Cares?

Via Outside the Beltway, a silly poll from Fox News on how, if he ran today, Bill Clinton would lose to George Bush.

Which is just a launching point for something else I wanted to talk about: why surveys are bad, and getting worse.

Surveys are bad because people lie. And the more important/interesting the subject, the more they lie. Imagine you did a survey: would you hide Jews in your basement if you lived in Nazi Germany? You'd probably get a "yes" response 90+ percent of the time. Yet if you transported all the people you surveyed to Nazi Germany, where they would actually have the opportunity to dedicate an unknown number of years to hiding a dangerous person in their basement, feeding and clothing them, emptying their chamberpots, and putting their entire family in danger from the kind of people who roll up to your door in the middle of the night and carry away even your smallest children to a location where their fingernails may be pulled out, their eyes gouged and their bones broken without disturbing the neighbors, you would find that your "yes" response dropped to a tiny fraction of 1%. The 90% yes response is what we call stated preference, and it doesn't correlate very well with revealed preference, which is what we call what people actually do, rather than what they say they would do.

Sometimes people lie just for the hell of it. Come on, you know you've done it at least once.

Sometimes people lie because they're afraid of getting caught. Like how when we had to fill out surveys on our sexual activity in high school, miraculously, no one was having sex, even though they'd caught two people doing just that in the Senior Lounge the week before.

Sometimes they lie to make themselves look better, which is why in other schools, the number of boys who say they're having sex is improbably higher than the number of girls who do.

Sometimes they just don't know. But they want to please the pollster, so they act certain. I was the subject of a health survey that asked any number of questions about how often I'd done various things over the past five years. Five years! And the guy wanted precise answers. Quick -- exactly how many times a month to you drink more than two drinks?

Yet pollsters often remove the "don't know" answer in order to give their surveys a false patina of precision.

Sometimes they make things up just to get the pollster off the phone. I've claimed to be a member of all sorts of wacky political movements in order to forestall political polls.

Which is another reason polls suck -- fewer and fewer people are consenting to take them. Everyone who hangs up screws up the sample a little more, because the decision to hang up is not evenly distributed throughout demographic groups. For example, Republicans are over-weighted in households phoned by surveys, but under-weighted in the number of people who choose to answer the questions. Phone surveys tend to skew more and more towards the old, the unemployed, the single -- people who have nothing better to do than answer questions about how many drinks they took in the last month.

Surveys also suck because they ask people to make decisions based on a tiny speck of information. For example, if you ask people if they support "a government program to accomplish X", they tend to answer "yes", unless "X" is "murdering kittens" or something similar. However, if you tell them how much the program will cost, the "yes" response apparently drops by more than half. And if you tell them that there is a possibility that the program might not work, those "yes" responses drop still further.

And that's pollsters who are trying to do honest questions. A lot of pollsters aren't -- they're trying to generate a survey that shows wide public support for some program they're supporting. So they ask questions like "Would you prefer a program to provide after-school programs for lower and middle-income children, or would you prefer to take those children out, tie them in a sack, and throw them into the pond to drown horribly?" This gets reported as "100% support for after school programs".

And don't get me started on what happens to the survey responses after they hit the media. There isn't enough bile in all the world to express how I feel about the factoid industry.

To sum up: you should never expect any more useful data from surveys than you got from the ones on Family Feud.

From the desk of Jane Galt:

Further apologies

No sooner did I return from vacation than I was laid low with horrific stomach flu -- I've been barely able to get out of bed for the last week. Plus I start my new job tomorrow, and I have to get ready.

Meanwhile, I was reading Kevin Drum's blog, and this post on globalization:

In an interesting post about globalization and capital mobility — in which I guess I come out as a 4-day-a-week globalist — John Quiggin says this:

Even more, I'm struck by the failure of the world's most sophisticated financial markets in their basic task, that of allocating funds for investment. Governments have wasted a lot of money on silly projects, but the dissipation of a trillion dollars in the space of a couple of years on valueless dotcoms and redundant optical fibre is a record that is not going to be matched any time soon. And as far as rent-seeking goes, the amount creamed off in this process by people whose contribution was entirely negative gives the Mobutus and Saddams of this world a fair run for their money.

Now, I really do believe that free markets are generally the most efficient allocators of economic resources (and I imagine that John does too), but his point is one that I've also marveled at, and not just because of the dotcom boom. As near as I can tell, international financial institutions are, in reality, just about worst judgers of risk imaginable, whose only real rule seems to be, "If everyone else is lending, then so should we, and if no one else is lending, then we shouldn't either."

This is a good example, I think, of a place where moderate government intervention is well justified. Things like fixed exchange rates or dollarization don't seem to work, but unfettered capital movements all too often result in a boom/bust cycle that seems wholly unnecessary. Something in the middle, that allows markets to work but prevents them from nearly destroying entire countries seems eminently reasonable.

Now, I do think that the government does some financial things well, like control the money supply. Well . . . actually, that's not true. In general, governments are very bad controllers of the money supply, which is why most of the world is constantly in the middle of horrific inflation or some other currency crisis. So I think our government controls the money supply well. Except that it didn't do this very well in the pre-Volcker era. So I think the government can do a good job controlling the money supply, but usually doesn't. Which really sums up my objection to most liberal ideas: in theory, the government could do many things well, if it would just stop acting like a government, only it so rarely does.

I'd rather dispute Quiggin's assertion on a couple of grounds: first of all, we only have a speculative boom like the late nineties once every sixty years or so, while the government grinds away at wasting money year in and year out; and second of all, I'm not sure that if you looked worldwide, you wouldn't have found enough government boondoggles to keep competitive. This was, after all, the decade when Japan spent over 100% of its GDP on redundant construction projects and similarly ineffective stimulus, and the IMF/World Bank/UN juggernaut was throwing an awful lot of money into useless development projects, etc.

The problem with demanding that the government do something when markets fail is this: where are you going to find the voters to elect the government that will fix teh markets? Why, from the same people who are going crazy in the markets. What could we have done to end the bubble? Assuming that there was a legislative solution, it was guaranteed not to be enacted, because the voters would have blamed the politicians for the ensuing crash.

Similarly, yes, there is probably a theoretically efficient imposition of currency controls. But the countries that need them generally aren't run by teams of economists with unlimited fiat power, which is what you would need to make it work. It seems to have worked in Malaysia -- once. Maybe not so well when five years from now Malaysia has trouble getting capital. Or smart financial engineers build mechanisms designed to skirt currency controls into their instruments. Or a dozen other things I can't imagine until they happen. Financial markets are dynamic systems, and easy-to-apply nostrums are unlikely to work over the long run, because the system will always try to circumvent them, and the system will probably win one way or another. Yet the kind of technocratic lever-pullers who can continually fine tune the system are

a) Unlikely to get into power
b) Unlikely to be able to maintain power while working against the short term interests of powerful interest groups.
c) Not immune to the siren call of pop theory
d) Given the current state of macroeconomic theory, as likely to get it wrong as to get it right, even in otherwise perfect conditions.

There's also the problem, beautifully documented in William Easterly's The Elusive Quest for Growth, of the bad incentives built into government. Short term currency controls could work to mitigate crises. The problem is that for many governments, currency controls are an attractive means of taxing people they don't like, educated people with money and foreign connections. They can also offer lucrative opportunities for corrupt bureaucrats who can circumvent the controls. Thus, "short term" controls mutate into long term drags on economic growth, the way the "emergency" World War II price controls live on in New York City's rent control scheme. Even if you've got your technocratic, altruistic lever-pullers designing temporary controls, they may have a hard time repealing them after a class of people has grown up with an intense, possibly violent, interest in maintaining them.

As an aside, I'd like to point out that while Argentina certainly had currency problems, it was the government's inability to control its spending that precipitated the crisis, not the currency peg. Argentina was in a moderately bad multi-year recession because of Brazil's beggar-thy-neighbor devaluation. But governments shouldn't borrow so much money that they are unable to meet their financial obligations if they have a moderately bad multi-year recession, since such events are hardly unheard of. It was the huge debt, and the deficits, that made creditors reluctant to renew their outstanding loans, forcing Argentina to both default and devalue. Currency pegs have problems, certainly, but blaming all Argentina's economic and fiscal woes on its currency, rather than the massive supply-side problems introduced by government regulatory action, cronyism, and state ownership of industrial assets; and the profligate, uncontrollable government spending; is like blaming the Great Depression on Herbert Hoover's tailor.

And my word -- if Kevin thinks banks are bad at allocating capital (as indeed they often are), he should check the loan records of government institutions like the SBA, the IMF, or the World Bank. Talk about bad loan portfolios! (And don't try to tell me that this is because they have different goals. There is a negative correlation between development loans, and development.)

In general, the more the state intervenes in an economy, the worse that economy performs. Statists argue that this is irrelevant because the market produces some spectacular failures. Indeed it does. But arguing that we should fix it by turning to the State is like arguing that, because modern cancer therapy often fails, we should put a witch doctor in charge of treatment instead of an oncologist.

From the desk of Jane Galt:

Tee hee!

This may have been circulating in the email aether forever, but it's the first time I've seen it:

1. The Wall Street Journal is read by the people who run the country.

2. The Washington Post is read by people who think they run the country.

3. The New York Times is read by people who think they should run the country.

4. USA Today is read by people who think they ought to run the country but don't really understand the Washington Post. They do, however, like their statistics shown in pie charts.

5. The Los Angeles Times is read by people who wouldn't mind running the country, if they could spare the time, and if they didn't have to leave LA to do it.

6. The Boston Globe is read by people whose parents used to run the country and they did a far superior job of it, thank you very much.

7. The New York Daily News is read by people who aren't too sure who's running the country, and don't really care as long as they can get a seat on the train.

8. The New York Post is read by people who don't care who's running the country, as long as they do something really scandalous, preferably while intoxicated.

9. The San Francisco Chronicle is read by people who aren't sure there is a country or that anyone is running it; but whoever it is, they oppose all that they stand for. There are occasional exceptions: if the leaders are handicapped minority feminist atheist dwarves, who also happen to be illegal aliens from ANY country or galaxy as long as they are Democrats.

10. The Miami Herald is read by people who are running another country but need the baseball scores.

11. The National Enquirer is read by people trapped in line at the grocery store.

From the desk of Mindles H. Dreck:

A Corker

Nice timing:

H. Res. 195
In the House of Representatives, U.S.,
June 2, 2003.

......Resolved, That the House of Representatives congratulates and commends Sammy Sosa of the Chicago Cubs for his amazing accomplishment and thanks him for tearing down barriers for Latinos around the world, for being a role model and an inspiration, and for letting us dream as big as our hearts will allow.

From the desk of Mindles H. Dreck:

The Coming Out Party

This piece on 'closet' Republicans has been making its way around the blogosphere. The author, Willy Stern, is a college buddy of mine's older brother.

I corresponded with Willy today* to point out that as a fellow New Yorker, I had never actually met a Republican until College. That is, as long as you don't count shaking hands with Roy Goodman. When my college roommate introduced me to his father and described him, more or less, as a prominent local Republican (in Portland, Oregon), I honestly felt as if I'd been introduced to a Martian. Then the aforementioned Dad announced, as if to put the frightened Northeastern college students at ease, "don't get me wrong, I favor abortion until age 6." Who says Republicans are mean? Dashed considerate I'd say.

This Stranger in a Strange Land feeling among the elephants remains because I consider myself not a Republican per se but a Liberal, using the true meaning of the word prior to its semantic highjacking by a top secret cabal of neo-statists who were all influenced, at one time or another, by John Rawls. Someone ought to look into that. I see a big spread across the pages of the National section with a family tree &c....

At any rate, Willy tells me email has been running 2:1 against his article. Show him some love, if you are so inclined.

* After his brother (an occasional reader of this site) attempted to test my 'outness' by describing me as 'usually Right Wing' and affirming the prominence of my proboscis.

Incidentally, it's generally romanized as Sake, not Saki.

From the desk of Mindles H. Dreck:

Inert(?) from the WTC

UPDATE: I noticed some reasonable skepticism in the comments below, so I went back to the source. The person who sent this attended the lecture and is a member of the New York Microscopic Society. In fact, he put on a safety suit and extracted one of the store fronts (to be preserved in a museum collection) from Ground Zero in the weeks after September 11. At this point I'm satisfied that he's both legitimate and quite annoyed with yours truly.
___

Apparently some bloke did a particle analysis on dust from the World Trade Center site. The stuff that was blowing around for a few months. The results were presented last week at the Museum of Natural History and here are one observer's notes (exactly as emailed to me):

Microscopic analysis of WTC dust by Nicholas Petraco, BS, MS, DABC, FAAFS, FNYMS at The New York Microscopic Society lecture held at AMNH 28 May 2003

45.1% Fiberglass, rock wool (insulation, fireproofing)
31.8% Plaster (gypsum), concrete products (calcium sulfate, selenite, muscodite)
7.1% Charred wood and debris
2.1% Paper fibers
2.1% Mica flakes
2.0% Ceiling tiles (fiberglass component)
2.0% Synthetic fibers
1.4% Glass fragments
1.3% Human remains
1.4% Natural fibers
trace asbestos (it became illegal to use during the construction of the WTC)

Other trace elements: aluminum, paint pigments, blood, hair, glass wool with resin, and prescription drugs were found.

NOTES:
Particles found were 1-4 micrometers in size. (In general, particles that are 5-8 microns are irritants, and those that are 104 microns are small enough to be airborne and ingested into the lungs.)

Fiberglass particles are smaller than asbestos and lodge deeper into lungs creating more serious long-term health hazards than asbestos like white lung disease which will become more evident 5, 10, 20 years from 11 Sep 2001.

White lung disease. Outstanding.

From the desk of Jane Galt:

Department of Redundant Link-Praise

Absolutely outstanding piece by Arnold Kling on our tendency to attribute economic performance to whoever happens to be occupying the White House. He neatly skewers an assertion I've seen over and over from Democratic-type commentators:

During the Clinton administration, the projected Budget surplus improved by over one trillion dollars. However, most of this change came as a surprise to the administration. A reasonably non-partisan analysis by Douglas W. Elmendorf, Jeffrey B. Liebman, and David W. Wilcox shows that less than 20 percent of the revision to the Budget outlook came from economic policy. (See figure 4 in the paper).

In fact, it appears from Table 2 of the paper that by the latter part of the Clinton administration the policy contribution had turned adverse - in the absence of the policy changes made during those years, the surplus would have been higher. A cynic might say that throughout most of the 1990's fiscal restraint was adhered to only because policymakers under-estimated the growth of the economy and tax revenues. Our representatives in Congress likely would have spent the surplus sooner had they known it was coming.

According to the economic attribution error, all of the movement toward surplus in the 1990's would be credited to the actions of President Clinton and Congress during that time. However, the best reading of the data would seem to indicate that at least 80 percent of the change reflected a context in which revenues grew faster than forecast.

The tendency of government is to spend the bejeesus out of whatever it thinks it can get away with. This is itself a reasonably non-partisan impulse; Democrats like more spending than Republicans, but Republicans are pretty free with the pork barrel. The idea that Bob Rubin got down in there with Greenspan and The Boss and decided to drive the 90's boom by trimming the deficit is not only economically impossible (deficits aren't good for the economy, but if they had that much power we'd have spent the eighties living in our cars); it is flatly contradicted by what the administration officials said at the time. They didn't project surpluses until Clinton was safely past election time, and they were flabbergasted when they appeared, bigger than projected and way ahead of schedule. If congress or the President had known those record surpluses were coming, it's a sure bet that they would never have arrived.

He also takes on The Cult of Greenspan, to excellent effect. Go read it now.

From the desk of Mindles H. Dreck:

Debt Limbo

Just how low are interest rates?