Asymmetrical Information

From the desk of Piers:

Wag the Dog

Seeing on Chris Anderson's blog the other week that the Yale Law Journal had published a piece on "The Long Tail of Legal Scholarship", I wondered whether there were any long tails still left uncurried. A Nexis search drew a blank for "the long tail of politics", which sounded, you have to agree, a promising general area. So I have generated a first citation, and I claim this place in the long tail of long tails.

But now I need a few ideas to substantiate the coinage, and I am finding that bit heavier going.

A lot of the things that Chris A has to say about the supply side of the long tail should hold true for politics. The internet makes it easier and cheaper to get your message across to a large number of people on your own terms, which is a lot of what getting elected is about. So you'd expect the market to support a longer tail of limited-appeal politicians. But even if so, how do we, the voters, consume them? In a democracy, or at least a democracy with majority voting, we can only consume (if that is the right metaphor) the blockbuster politician who gets 51% or more of the vote. It might be a touch different in proportional-representation countries, but even there you are going to find a 10% or 5% threshold. Beyond that the tail goes dead.

Would it be enough to "consume" politicians in other ways -- for example, by listening to them and responding to them without actually electing them? Could they exist for our entertainment, rather than our governance?

From the desk of Jane Galt:

Hunting Hizbollah

Over at Volokh, David Bernstein reacts to the news that the New York Times covered Lebanese and Israeli deaths in rough proportion to their frequency:

[From the New York Times Ombudsman] . . . This focus on the death toll led me to review the number of Times pictures depicting corpses and coffins. There were about eight times as many photographs of Lebanese as of Israelis, a ratio roughly comparable to the overall one for deaths during the conflict. "We try to reflect what happens on the ground," said Susan Chira, the foreign editor. "We are extremely conscious of the death tolls. It would be unfair to truth to do otherwise."

Estimates of the relative physical damage weren't so readily available to Times editors as the conflict unfolded. But I'm comfortable with the editors' estimates that the relative physical destruction was even more disproportionate than the death tolls. The pictures in the paper reflected that. Eight times as many pictures of physical damage in Lebanon, compared with those of destruction in Israel, appeared on Page 1. The ratio for all such photographs used in the coverage shrank to three to one, but the pictures from Lebanon that ran inside the paper tended to be larger.

What an odd way to justify the "fairness" of media coverage! For one thing, it suggests that the Times' coverage of the Iraq war has been grossly unfair to the Iraqis, or, if you prefer, the Iraqi "resistance."

For that matter, consider the "unfairness" of the Times' coverage of 9/11 and the war in Afghanistan. We certainly got more pictures of "American suffering" because of 9/11 than of suffering in Afghanistan because of NATO military action.

Sure, the Times is an American paper, and thus gives the U.S. a "home field advantage," but that just raises the question of why Israel, a close American ally, fighting Hizbollah, a sworn American enemy, doesn't get at least a less extreme version of the same sort of advantage.

This strikes me as a pretty weak argument. The United States is not at war with Hizbollah. We run lots of pictures of American soldiers because they are American . . . of us, and acting in our name. Israeli soldiers are not, and posts like these just generate unwelcome fodder for the conspiracy theorists claiming that the neocons, and American supporters of Israel more generally, have confused Israel's interests with America's.

I am of two minds as to how much media outlets should try to support morale at home during a difficult war . . . (and I am interested in the broader theory, like "should we have done so in WWII, at least?", not a referendum on the current conflict). But it is simply not reasonable to say that the New York Times should hew its editorial policy to Israel's favoured storyline because they are allied with us. Britian is allied with us in a war we are actually fighting . . . i.e. one that our Congress voted to authorise on behalf of America's taxpayers . . . and I doubt our papers run nearly as many pictures of British soldiers fighting valiantly as they do of dead Iraqi civilians.

There is a broader question of "does this sort of coverage skew perceptions of the war incorrectly?", which is fair--indeed, necessary--to ask. But I think the answer, ultimately, is no. The fact is that most of the Lebanese who died were civilians, and most of the Israelis who died were not, and that a whole lot more Lebanese died at Israeli hands than vice versa. The proclamation that "we have no idea how many of those 'civilians' were Hezbollah" sounds ominous, but no reputable source that I am aware of avers that anything other than the vast majority of Lebanese killed were the civilian kind of civilians. Lowering the ratio of dead Lebanese civilians to dead Israeli soldiers from 7:1 to 6:1 would not be much of a propaganda victory for Israel. You may believe that this ratio was a tragic necessity borne of Hezbollah's infamous tactics . . . but the place to make that argument is in the editorial pages, not at the photo desk. The solution to difficult facts is to explain them, not surpress them.

Mr Bernstein is on firmer ground when he points out that the Times ran almost no pictures of Hizbollah, because Hizbollah tends to shoot people who take pictures of them. The IDF are effectively penalised for not shooting reporters, which is ludicrous. But while this is a big problem, I don't think it's reasonable to say that because they can't run photos of Hizbollah, the New York Times should therefore also forego printing photographs of dead Lebanese civilians. It should be (and for all I know, was) printed in the news pages, which ought to remind readers quite neatly that Hizbollah aren't exactly the good guys here.

From the desk of Jane Galt:

Process over outcomes

In another comment thread, I said:

. . . unlike in most trials, the fact that Lay and Skilling were indicted and convicted is not very convincing evidence of their guilt. I'm not taking issue with their guilt, only with the process by which belief in their guilt has been generated. I'm a process person. I think it's more important than any individual outcome.

To which a commenter replied:

When the process is more important than the result, the process is broken and obsolete, inherently unjust. That's the problem.

To which I offer the famous exchange from A Man for All Seasons:

William Roper: So, now you give the Devil the benefit of law!

Sir Thomas More: Yes! What would you do? Cut a great road through the law to get after the Devil?

William Roper: Yes, I'd cut down every law in England to do that!

Sir Thomas More: Oh? And when the last law was down, and the Devil turned 'round on you, where would you hide, Roper, the laws all being flat? This country is planted thick with laws, from coast to coast, Man's laws, not God's! And if you cut them down, and you're just the man to do it, do you really think you could stand upright in the winds that would blow then? Yes, I'd give the Devil benefit of law, for my own safety's sake!

The beauty of the classical liberal system is that it starts with the questions and gets the answers, not vice versa. There are heavy costs to this approach--injustices unremedied, suffering unrectified, virtues unrewarded. The only good thing you can say about such a system it is that it is ever so much better than doing things the other way 'round.

From the desk of Jane Galt:

This just in

Fastow gets six years, not ten:

Andrew Fastow, the mastermind behind financial schemes that doomed Enron Corp., was sentenced Tuesday to six years in prison by a judge who felt he deserved a more lenient term than the decade he had agreed to accept in a plea bargain.

Fastow, the former chief financial officer who cooperated with prosecutors in other cases related to Enron's 2001 implosion, had agreed to serve a maximum 10-year term when he pleaded guilty in 2004.

But the judge said he deserved a lighter sentence because Fastow has been persecuted after Enron's failure and because his family has suffered enough.

From the desk of Jane Galt:

Do it yourself

Why didn't we just sentence Ken Lay and Jeff Skilling to be tied down and raped by a couple of strapping bailiffs?

A number of people seem to think that this is what should happen to them. From Brad Delong's Enron post:

. . . yeah, most WC criminals get off easy. I want Andrew Fastow to serve a decade or two in some place where his new name is Audrey and he's somebody's girlfriend.

And from one of mine:

I would say with white colar crime, you lock them up in the deepest darkest dungeon living only among the sodomites, so that the next would be white-colar criminal would think twice. You want to steal $20 mil from the 401Ks of 1000 future retiries? You risk being bent over for the rest of your life for a pack of smokes. In that, the lock up is 0% protection from physical danger, 100% deterrance, and 0% justice, as I can't think of an adequate punishment that is just for these guys.

One of my commenters responded:

Seriously--rape is an appropriate punishment for understating volatility in commodities markets?

I think that prison rape is one of the most appalling moral failings of our society, and I've said so before. Not that it happens at all . . . there is a real problem with prison design, which is that if you let the prisoners socialise, they will terrorise each other, and if you don't, they go crazy. But that we basically don't bother trying to stop it, and worse, that it is in fact the most prominently deterrant feature of our prison terms.

I know I'm harping here. But I feel this very deeply. I do not believe the state is morally allowed to do that which individuals are not morally allowed to do; I do not believe that prison sentences should have "off label" uses; and I think that if you are willing for the state to impose a sentence in your name, you should be willing to carry it out. I am not willing to execute a prisoner, or to rape one. Therefore, I don't authorise the state to do things for me. Nor do I want those tasks delegated to some fiendish thug in order to give myself plausible moral deniability.

If you do think that rape is an appropriate punishment for securities law violations, then you should say so. You should pressure your representatives to write these penalties into law. And when volunteers are needed to carry out the sentence, you should be willing to put your name in the hat.

And how, how, my heart cries, can people who profess to be shocked and disgusted by the Bush administration's endorsement of waterboarding suspected terrorists, suddenly enamoured of rape and crippling beatings when the victims are disgraced CEO's?

From the desk of Jane Galt:

It's not all bad news, you know

Bryan Caplan says economists are too pessimistic. [Insert mandatory joke about economists predicting "9 of the last 5 recessions" here.] But Brad Delong's found at least one silver lining on the gathering clouds:

Just after New York Fed President Tim Geithner gives a speech about systemic risk and hedge funds, Amaranth blows up following a trading strategy that either had no method at all to it or was a failed attempt to corner next spring's natural gas market.

Yet there is not a sign of disturbance to the markets. Amaranth's investors have lost what is now said to be $6 billion. Some other people have the $6 billion--if they can, in turn, unwind their positions. But the system cruises on with no worries about liquidity or solvency and no changes in risk premiums.

Reassuring, I think.

All together now!

"Just what makes that little old Ant
Thing he'll move that rubber tree plant?
Anyone knows an ant
Can't
Move a rubber-tree plant

But he's got HIIIIIIIIIIIIIIIIIGH hopes . . . "

From the desk of Jane Galt:

Why do we treat white collar criminals differently?

Add Enron to the list of topics in which a surprising number of people have a deep enough emotional investment that the mere mention of it brings commenters swarming out of the woodwork. Question whether it was possible for Skilling and Lay to get a fair trial, and you apparently can advocate abolishing jail terms in favour of the public whipping post without so much as an eyeblink from your readers.

Anyway, onto more issues raised by the Enron trial. A good question that was implied, but not really addressed, by Mr Delong's post is: should we treat white collar criminals from . . . er . . . blue collar criminals?

(Pause to imagine one of those 3-times-life-sized Soviet statues of a brawny-armed burglar, triumphantly raising his lockpicking tools to gleam in the bright new light of the dawning Proletarian future . . . his steady gaze fixed on that far--but growing ever nearer, Comrade!--horizon where the state will wither away and true Communism will arrive . . .

Excuse me, are you still here? Ah. Well. [Cough] As I was saying . . . )

The collapse of Enron, after all, cost its shareholders $70 billion. Even before we add in auxiliary losses to employees from foreclosures, ruined credit, and so forth, that's a lot more than some kid is ever going to get by robbing a liquor store. Why on earth would we send the kid to Supermax, and the CEO to a country club?

Well, a few that I can think of:

1) Blue collar criminals are often violent. Robbery at gunpoint is worse than fraud, because there is no risk that the victims of the fraud will be maimed or killed. And being maimed or killed is worse than losing everything you have. So we punish crimes in which physical violence, or the threat thereof, are employed much more harshly than those in which the weapon of choice is lies.

Now, I could advance an argument that white collar crime is actually worse because it undermines the trust between strangers needed to run a modern economy. Almost, I find this seductive. But not quite. No matter how you slice it, a society in which people routinely fear being violently attacked is worse than a society in which people routinely fear being defrauded.

The real question is whether non-violent "blue collar" crimes are punished much more harshly than white collar crimes. Are unarmed burglars, car thieves, grifters, and so forth generally given stiffer jail terms than, say Bernie Ebbers? My sense is that they are not, and that in fact the various executives in the dock over the last few years have been punished more harshly than non-violent criminals (except casualties of the War on Drugs)¹--as they should be, because they stole a lot more than your average non-violent criminal. But I could be wrong. Do any of my readers know?

2) White collar criminals--at least, high profile ones--are extremely unlikely to reoffend, if only because they will never again be given the opportunity to do so. Preventing crime through deterring criminals (not to mention keeping them off the streets) is not the only reason for jail terms, but it is one of the reasons. If 25% of a jail term is protecting society from dangerous criminals, 50% is deterrance, and 25% is justice, then the protective 25% should be knocked off the high-profile white collar criminal's jail sentence.

3) High-security prisons are expensive; they should be used only for prisoners who are dangerous. As I said in my previous post, as long as we maintain at least the fiction that the purpose of a prison term is incarceration--rather than, say, getting other prisoners to inflict the barbaric corporal punishment that we're too hypocritical to impose directly--then there is no reason to send a middle-aged, non-violent professional to anything other than a low security prison.

Really, except for getting other prisoners to beat the crap out of them, what exactly is it we want the State to do to these guys that it can't do in a minimum security jail? Take their tv time away? And as I said before, if we want the crap beaten out of Jeff Skilling, then we should be man enough to do it, not snicker about it behind our hands while some drug lord carries it out.

¹ I leave aside the execrable drug war, first, because I think it is illegitimate and ineffective, and therefore has no place in a debate about appropriate punishments; second, because almost everyone seems to be totally irrational on the subject; and third because many of our draconian drug laws are a reaction, however inept, to the violence of the drug trade.

From the desk of Jane Galt:

Guilty?

Apparently, the most interesting assertion of my previous post was that I find it conceivable that Skilling & Lay weren't guilty.

That wasn't the point of the post. I haven't followed the case closely; what I know is secondhand from people who have, which of course makes me hostage to their analysis. If you've followed the case, it should not be totally shocking that Skilling et al might possibly be innocent, because the one noticeable feature of the case is that no one seems to have the faintest clue of what was going on. Years after the collapse . . . hell, after the convictions . . . there are still multiple theories of the fraud floating around. When experts are this confused, and the case is this political, there's room for reasonable doubt. I think it entirely possible that a forensic historian twenty years from now, when the political fervour has died down, will resurrect the case and make a good argument that Skilling and Lay were probably innocent; even that this will come to be the dominant view of the Enron case. By contrast, I think it impossible that such a thing could happen regarding, say, WorldCom or Adelphia.

But the point I was trying to make is not that Skilling is innocent; I don't have any evidence that he is. Rather, my point was that of all the parties, Fastow seems to be the guiltiest; he not only participated in whatever shady accounting there was, but also looted the SPE's under his control for his own gain. Yet he got a much, much lighter sentence than the two other officers under indictment. That is troublesome for precisely the same reason that such practices are troublesome when DA's use them to rack up convictions against poorer and darker skinned defendants.

It would be nice if we lived in a world where DA's were altruistic creatures who thought of nothing but truth, justice, and the American way, but I'm an economics journalist. I believe in incentives. And prosecutors, who have careers, need high-profile convictions to sustain them.

I find it disturbing that there are so many theories of the case.

I find it disturbing that the main theory held by most people . . . that Skilling hid massive losses by fraud, which when unveiled brought the company down . . . seems to be contradicted by the indictment:

During 2000 and 2001, the profitability of Enron's wholesale energy trading business, primarily based in its Enron wholesale business unit, dramatically increased for reasons including rapidly rising energy prices in the western United States, especially in California. This sudden and large increase in trading profits, which exceeded $1 billion, if disclosed to the public, would have made it apparent that Enron Wholesale's revenues were closely tied to the market price for energy, and that Enron therefore was exposed to the risk of a decline in prices.

In other words, the first count of the indictment is that Skilling and Lay hid $1 billion in profits they should have reported. This is not what most people believe about the case.

I find it unlikely that the jury was in any way able to come to an informed decision about their guilt or innocence.

I find it unimaginable that the prosecutors could have declined to indict Skilling and Lay, even if they had doubts about their guilt. And being the rather cynical person that I am, I doubt they allowed themselves to develop any doubts about their guilt. (Nor do I have any confidence that I would have been able to withstand the kind of pressure they were under.)

In other words, it's not that I think they're innocent--it's that I find it impossible to have much faith in the process that found them guilty. Skilling and Lay were no more likely to be acquitted than a black man accused of raping a white woman in Alabama in 1940. And as such, I find it reasonable to inquire whether the one person who is indisputably guilty should have been given such a lenient sentence.

From the desk of Jane Galt:

There's no such thing as a stupid question . . .

Brad Delong tears into the White Collar Crime Prof Blog for asking the following questions about Enron:

* Is it fair for Fastow to receive this low a sentence all because he cooperated with the government? This is yet another case of the government providing an enormous benefit to someone who cooperates, while demanding a higher sentence for those who decide to go to trial. Selecting to use the constitutional right of a jury trial comes with the enormous risk of a significantly greater sentence if the jury returns a verdict of "guilty."

* Should the government have given the plea for cooperation to this person, or did they select the wrong person in using their discretion? The government discretion to provide a "deal" to whoever they decide they would like, often produces inequities. In this case one has to ask whether Fastow was more culpable than Jeff Skilling or the now deceased Ken Lay.

* Is putting Fastow in prison the correct way to punish a white collar offender? We did not fear Andrew Fastow while he was free pending his sentencing. The Houston Chronicle reports on his admirable deeds and recognition for being a good father. (see here). This is a no-win situation. As with so many white collar cases, the individual is not someone we fear once their ability to commit future white collar offenses is removed. The sentence is for retribution, and incorporating the victim statements at the hearing just emphasizes this point. But many will suffer by sending Andrew Fastow to prison, most notably his children. Is prison really the appropriate way to punish this individual, or should the sentence consider the unique characteristics and qualifications of the individual and punish the person with a sentence that will maximize those skills for the betterment of society?

Sez Mr Delong in response:

. . . some really stupid questions . . . Answer to 1a: No, it is not fair. Fastow deserves a higher sentence. But without the government's offer of leniency, Fastow's three equally guilty superiors would have escaped scot-free. That would have been a significantly greater miscarriage of justice than Fastow's too-lenient sentence.

Answer to 1b: The significantly greater verdict if the jury comes in "guilty" is highly likely to be fair. If you are in fact guilty--and nearly everybody found guilty is--then you have not only committed the crime, but you have perjured yourself and conspired to cover it up in the process of mounting your and your co-defendents' case. These aren't actions we wish to encourage, or reward. These are actions we wish to penalize.

If you are factually innocent, of course, the miscarriage of justice is created by the fact that there is evidence to convince every member of the jury that you are guilty beyond a reasonable doubt. In the case of rich guys with money, there are few such miscarriages--and this isn't one. I know of nobody not paid to do so who maintains that Fastow, Skilling, Lay, and company were factually innocent.

Answer to 2: If Ken Lay had wanted to become a witness for the government immediately after the collapse of Enron, the door was open. If Jeff Skilling had wanted to become a witness for the government immediately after the collapse of Enron, the door was open. The fact that they did not choose to walk through that door--while Fastow did--does not create an "inequity" about which Skilling or Lay have any standing to complain.

Answer to 3: The imprisonment of Andrew Fastow is for both retribution and deterrence. The fact that Fastow is not the only high Fortune 500 executive being sent to jail this year for similar crimes suggests that our mechanisms of deterrence have been inadequate to date.

The question of retribution is a harder one than WhiteCollarCrimeProfBlog admits. Yes, those harmed by Fastow's imprisonment are greatly harmed. Yes, the slight warm glow that the victims of Fastow's frauds get by knowing that he was sent to jail is small and feeble in each individual victim's case. But there were a huge number of victims. And small benefits to each of tens of thousands of victims--they add up.

. . .

If WhiteCollarCrimeDefenseBlog is trying to inform its readers about the Enron case and America's legal system, it is doing a very lousy job. On the other hand, it is doing a good job if it is auditioning for a place in the teams that defend high corporate excecutives accused of white-collar crimes.

Contra the title of this post, I do think there are stupid questions, like "Do you think I'm fat?" But I don't believe that the prof's interrogatories are among them.

For starters, the only solid evidence that Messrs Skilling and Lay were "just as guilty" as Mr Fastow comes from . . . Mr Fastow, who got a drastically reduced sentence for telling the prosecutors this. Mr Fastow is the fellow we know stole from the company; the conviction of the others is based largely on his testimony. I haven't followed the case all that closely, but last time I looked the "pump and dump" theory of Enronomics had been killed off evidence that Enron's balance sheet had no big income holes in it at the time of the collapse; in fact, as I understand it, the government's indictment accused them of improperly hiding profits. The government changed its theory after the investigation to assert (at least in the indictment, the last time I was really paying close attention) that Enron's crime had not been hiding the firm's shaky balance sheet, which was basically in fine fettle, but rather in misrepresenting the volatility of its earnings.

There is a small (but I believe growing) school of thought on Enron which argues that Enron was a fairly healthy business--done in not by deteriorating financials, papered over by accounting fraud, but rather by a collapse in trust in the market place, helped along by appallingly bad financial journalism, which basically caused a bank run. Since Enron was a trading operation, which requires liquidity to stay in business, profitability was irrelevant; they were killed by a credit crunch.

I don't assert that this is the case, mind you, though I find it at least plausible given my knowlege of the case. The real point is that the popular conception of what happened at Enron (a "pump and dump" by senior executives) is incorrect. As I understand it, Fastow profited much more from his criminality than anyone else; Skilling still held huge numbers of options when the firm plunged into bankruptcy. Certainly, Mr Fastow is the only higher-level executive against whom the government possessed a smoking gun. So this isn't a case of Fastow getting the ride on the lifeboat because he was the first conspirator to break, which is the general excuse for such plea bargains. In this case, the most obviously, incontravertibly guilty person in the case got a much, much lighter sentence because he testified against others whose guilt was more arguable--just as soon as it became clear that his own case was a certified no-hoper. This should give us pause.

If Mr Delong emails me, I will be quite happy to put him in touch with reputable and knowlegeable people, not paid to do so, who believe that Skilling and Lay, at the very least, may be innocent.

As for 1b, the odds that a jury of laypeople have correctly decided a complex securities case cannot be greater than random. I sincerely doubt that Mr Delong or I could master enough of the correct securities law, accounting procedure, and evidence in the case, to turn in a good verdict within the required timespan; I am quite positive that my mother, aunt, best friend, dry cleaner, and building superintendant--good and clever people all--could not.

The more deeply disturbing thought is this: regardless of what Fastow said, can anyone really imagine any scenario in which Skilling and Lay were not indicted and convicted? The prosecutors were under simply enormous political pressure: try to envision the prosecutor willing to go in front of the cameras and say: "You know, I'd really like to get the top executives, but the evidence just isn't there for a conviction. All I can do is indict this Fastow guy."

Once indicted, it seems obvious to me that Skilling and Lay were bound to be convicted simply because they were the public face of an enormous financial disaster--not because 12 solid citizens soberly acquired the equivalent of a Phd in financial accounting, and after carefully weighing the evidence, determined that these two gentlemen deserved to go to jail. This may be the correct outcome, but it had nothing to do with the process; it was predestined--written, as the Calvinists say, at the beginning of time. So why give Fastow a break on a case that was already a slam dunk? I find it troublingly possible that prosecutors needed Fastow's testimony not to convict his equally guilty bosses, but for window dressing: the minimum veil of decency that allowed us to pretend we were not basically witnessing a show trial.

Which leads me to Number 2: How does Mr Delong know that Messrs Skilling and Lay had the opportunity to turn state's evidence? Let me clearly state that I have no knowlege that they didn't get such a chance--but I find it quite plausible that those two were simply too high-profile to be offered a plea (or a realistic plea: "Testify and we'll take the death penalty off the table" doesn't count.)

As for number three, I agree with Mr Delong that deterrence and retribution are legitimate questions of justice--but I also think that jail is lousy, immoral, and highly inefficient way to achieve them.

Lousy because jail makes the criminals cost us money. Yes, courts cost money . . . but what costs money is the troublesome process of sorting the innocent from the guilty. We're spending money on the blameless, not the perpetrators. Once they're convicted, we know (as well as frail humans can) that they're guilty. Why should we spend money to punish them, when they could be making money, or hey, just entertainment, for the society they've wronged? Fastow's skills may not be much, but stick an ankle bracelet on him and set him to painting overpasses or something.

Inefficient because criminals are very bad discounters of time, or they wouldn't be criminals. Expensive, long prison terms aren't very effective deterrants. Optimal punishments are short, extremely harsh, and immediate.

Immoral because the great tragedy of human life is the finiteness of time; I'm not sure we ever have a right to take away someone else's pitifully few moments simply to punish them. Locking people up because they are a danger to others is a necessary evil; locking them up because we can't think of anything else to do with to them is not. Morally, I should think a public whipping post vastly preferable--and more effective--than a one-year jail term.

My readers, particularly my more sensitive liberal ones, are even now recoiling in horror at my barbaric suggestion. But we all know that in fact the real punishment offered by prison is that meted out by other prisoners--that for many or most people, a prison sentence is a long and barbaric series of beatings and rapes. We know that this is true; we do almost nothing to prevent it; and we send people there anyway. Indeed, this is the aspect of prison--not the incarceration away from families, friends, and good takeout--with which cops threaten suspects. I should think a clean, quick beating from a government official would be more to anyone's taste--except the of course the animals who rule the prison dominance hierarchy.

Tucking criminals off in prison simply allows us to pretend to ourselves that we are doing something not-so-bad, when what we really intend is full-blown evil¹. If jail really were merely a dull spell of menial service jobs and mediocre food, I suspect many Americans would think it wholly inadequate to the demands of justice².

Now, in the case of Fastow, perhaps the imprisonment really is the punishment. For him, the highest cost of prison may be his inability to play tennis at the club, or vacation in Biaritz, or go to the beach of a Sunday afternoon. But surely we could deprive him of most of those things simply by taking all his money. (Haven't we already?) The rest could be neatly disposed of at neglible cost to the taxpayer by, say, ordering him to wear a t-shirt saying "I'm Andrew Fastow, the guy who made Enron collapse" every time he leaves the house, and drive only in cars emblazoned with same, which I suspect would rather destroy his enjoyment of public places. Plus then we could make him work, and take everything he earns over a bare minimum to give to, say, the defunct Enron 401(k) scheme.

No, the questions aren't stupid. It's the answers that are tough.

¹ This is why I think, to the horror of all my friends, that executions should be televised. I'm against the death penalty--but if the citizens of America are willing to empower the state to put people to death, then they should be willing to watch same, since they are morally no different from the man who throws the switch. We recoil because we are too squeamish to watch such things . . . but how can a moral person be unwilling to watch that which they are eager to do?

² Nor do I think citizens of other countries are any better, before someone attacks me; human beings have all sorts of tawdry impulses.

From the desk of Jane Galt:

Department of Economic Illiteracy: Special Victim's Unit

This is possibly the most economically illiterate television programme ever. I know what you are thinking. In a world with The West Wing in it, can there really be another candidate? Before I had seen this show, I too would have doubted. But no longer.

I am not calling it illiterate because it argues that we could run out of oil, and that this could cause enormous dislocations in the rich world. If Matthew Simmons is right and OPEC are all overstating their reserves by 100% or so, we're in big trouble unless we get some technological breakthroughs. Mind you, I don't think it particularly likely that he is right. But if I weren't willing to suspend disbelief in order to explore an interesting "What if?", I would never read science fiction, or politicians' campaign promises.

Anyway, the problem is not that the show posits a serious shortage of oil. It's that while the producers seem to have gone to elaborate lengths to find out how oil exploration and engines work, they somehow didn't realize that there are experts on oil markets, the auto industry, and so forth, and that it might be wise to talk to them before writing their script.

In their dark future, oil is in very short supply, and getting shorter every year. The show focuses on a family--a daughter who is trying to hit a big new oil strike, and a father who is trying to preserve his oil-drenched lifestyle in the face of shortage.

And what form does that shortage take? It's exactly like 1979 . . . long lines, gas stealing, gas stations running out without notice. Terrible rationing.

What doesn't happen? The price doesn't increase much above $3.50 . . . which by 2016 will be about $2.70 in today's dollars, so apparently the first effect of this terrible shortage is that the price falls. People are queuing for hours, but apparently not one enterprising station manager thinks to raise the price. And since the price doesn't rise, people spend all their time trying to find stations with gas to sell, rather than looking for ways to cut down their usage.

Is this the result of some strange industry practice? Government action? You wouldn't know it from the script. Apparently, people in 2016 are very, very stupid.

Actually, the problem is that they assumed that a shortage would be just like the 1970s. Except, of course, that the 1970s were like the 1970s because of Nixon's wage and price controls, which meant that the price couldn't rise to adjust for lower supply. Note that after Katrina, shortages lasted a couple of days . . . and then prices rose, people cut back on labour day travel, and supply and demand came back into balance.

The other economic crime in the show is that the shortage happens all at once. In fact, of course, the supply problems would take years to develop, and would cause a long appreciation in price, accompanied by spikes and falls as supply shocks developed and were resolved by decreased demand. People would move closer to work, get smaller houses, by smaller cars, and so forth, as gas and oil became increasingly expensive . . . not just wake up one morning and find that there was no gas to power their SUV.

But it's not totally useless. I bet a bunch of economics grad students could turn the show into a great drinking game . . .

From the desk of Jane Galt:

Health care and living standards

On Winterspeak's excellent post about the CPI, commenter 99 says:

While we can all enjoy improvements in technology, there's at least one major trend that's unsettling: the decline in health insurance. It may well be that a higher percentage of the population is insured now than in 1973. But surely this percentage peaked sometime between now and then, and has since been in decline. I repeat, it has since been in decline. So, at least on the health insurance front -- and let's not kid ourselves: having health insurance can play a significant role in quality of life -- the trend is not what we'd expect in a country where living standards are improving.

. . . although undeniably there are benefits from technology, I think these benefits can be overplayed just as much as as it's possible to underweight them when determining the CPI. When most people think about living standards, they're thinking in terms of quality of life. And when it comes to quality of life, it's easy to underweight the psychological aspect of expectations. In short, not many people in 1973 missed cell phones or the internet, because they didn't know any better. Not many people truly grumbled about the shitty non-cable TV offerings, because they were too busy rejoicing over the color TV that still seemed fairly new and revolutionary (especially with the purchase of that pretty damn good 1972 Sony Trinitron). Lots of the latest technological advancement are neato and cool and fun, and they've undoubtedly enhanced our ability to do things. I'm skeptical, however, that they've really brought us much of that elusive quality known as happiness.

The internet has certainly brought me a lot of that elusive quality known as "happiness", since without this blog I would not have a bunch of really great new friends, and a fantastic job as an economics journalist. But I accept that not everyone has gotten such large benefits.

Nonetheless, I dispute that the technology improvements since 1973 haven't brought a lot of happiness. A few things that have become widespread since 1973 which have led to large and measurable improvements in quality of life:

1) air travel
2) air conditioning
3) healthcare technology
4) power wheelchairs/scooters
5) second cars
6) affordable long distance calling
7) flash frozen fish

That's just what I can come up with sitting on my sofa of a Sunday afternoon.

Now, let me zero in on #3. Because I think that health care is a major, major portion of why we spend so much time complaining about not being that much better off than we were in the 1970s. Contra "99", health insurance hasn't declined dramatically since 1973. Since 1987--the earliest year for which I could quickly lay my hands on census data--the number of uninsured Americans has skyrocketed from 12.9% to 15.9%. If we look only at native-born Americans, the numbers have been essentially unchanged since 1993 (again, the earliest census figures I could find). In 1993, 86.3% of native-born Americans had health insurance; in 2005 that figure was 86.6%. All of the increase in uninsured has come from immigrants . . . and I don't think they'd be better off getting their health care back in Guatamala.

Americans are paying more for their health insurance, but that's because they're getting more. New drugs, new procedures, fancier hospital services (my American friends think that British hospitals look like something out of the third world; my British friends think that American hospitals are ridiculously fancy, like hotels.) We're living longer and dying of things that are harder to treat. We're keeping disabled kids alive at monumental expense. We're helping infertile couples have babies, burn victims rebuild their ravaged faces, cancer patients eke out a few precious extra weeks with their families.

These things cost phenomenal amounts of money. And with the exception of fertility clinics, we all pay for them a little bit at a time through our taxes and health insurnace plans . . . so we don't associate the higher price tag with the magical new medical services.

Look at the following graph, which shows wages and salaries over the past five years:

This is approximately the story that Democratic economists have been telling about the Bush administration: Evil Mr Bush has been Cheating America's Workers! Wage growth is barely keeping up with inflation!

And yet look at the graph for total compensation, which is to say What Employees Cost Their Employers:

Employees have been getting raises of less than 3% for most of the reference period . . . and yet their employers have been paying them more than 3% for all of that period. How can this be?

Let me explain:

Employees have been consuming their wage increases as higher health benefits and bigger pension contributions.

The problem is that this doesn't feel like a wage increase, or an increase in consumption. It feels like having to make the old Nissan do for another couple of years. And when you finally get that balloon angioplasty you've been paying for all these years, you won't connect it to your lower wages; you'll thank the doctor, not the HR benefits committee. Likewise, no one thinks "The ridiculous increases in the stockmarket in the late 1990's allowed my employer to pay me more than they should have, because the required pension contributions fell"; they view the wage increases of the 1990's as their due, and the resulting wage squeeze of the "aughts" as the result of management incompetence.

So I will concur with Democratic economists to the extent that in many cases, Joe Average does not feel better off than he would be in 1970. But I disagree that this reflects reality. If Joe Average actually had to go back and live in 1973, he'd suddenly feel a lot worse off . . . even if we let him take his VCR and cell phone.

From the desk of Winterspeak:

More on the CPI bias

Jane has a nice post on the CPI bias. Even though Brad DeLong doesn't care how big the bias is, Jane cares because, obviously, she would need to be paid a great deal more to be sent back in time 30 years. In 2006, we have the Internet, cell phones, cheap air travel, healthcare etc. etc. all of which did not even *exist* in the 1970s.

And this, to me, is the area where the CPI overstates inflation most dramatically. When a good goes from being non-existent to existent, how do you capture the impact that has on inflation or consumer prices? Basically, prices have dropped from infinity (it's out of reach to even the most willing to pay consumer, even if he could offer the wealth of the entire world) to something that costs $50-$100 at BestBuy.

All of the things Jane mentioned that would prevent her from going back in time are things which came into existence quite recently. It's hard to take dour, left-wing academics seriously when the moan about how little things have improved for the common man while they pull links, citations, and documents from all over the planet electronically, and then post their thoughts to an audience of thousands, again all over the planet, without leaving their desks, with a technology that's cheap as chips today, and could not be found anywhere a decade ago. The truth is we live in an age of Wonders.

(Shameless plug -- I blogged on this earlier elsewhere, but CPI is so dull I did not want to drag down the more lively Asymmetrical Information with the post).

From the desk of Jane Galt:

Bias, bias everywhere!

Brad Delong writes about CPI bias here and here.

In case you are unfamiliar with CPI bias (and really, where have you been?), it refers to the idea that the Consumer Price Index (alias the CPI) overstates inflation. It is mostly believed that this happens because of the lag between the introduction of a new product to the market, and the time (generally years later) when this product is added to the CPI. So, for example, when cell phones were introduced, they were extremely expensive, and also would rip the pocket right out of your trousers. Now I get a Razr for $100 and a two-year contract. But since cell phones didn't hit the index until . . . well, whenever . . . they missed a lot of that price decrease.

Brad argues that the bias isn't that big, and even if it is, it doesn't matter:

Think about it. If there is 20% of CPI bias in the past 30 years, then median male real earnings have risen by 30% instead of the 10% in official statistics. But real national income per capita has risen by 125% rather than by 90%. A country that is so phenomenally more productive than the country of the mid-1970s should be able to do a much better job at providing an economic environment in which all Americans can have greatly improved income security, education for their children, and leisure time, as well as a much greater share in the rises in real material standards of living of which the rich have grabbed the lion's--no, much more than the lion's, the tyrannosaurus's--share.

I am more interested in making the poor and middle class better off than I am in making the income distribution more equal; I don't feel that Larry Ellison's harrier makes the modest new rug I bought in Turkey somehow less beautiful or enjoyable. There are several broad categories of goods that I would like to make sure that everyone has enough of, and which I would like to see improve for everyone at roughly the same rate: food, shelter, clothing, leisure, health, education, and autonomy.

But this is precisely why I have a hard time dismissing CPI bias. Though I was raised upper middle class, enough of my family are median wage earners for me to be very familiar with the lifestyle--and also what it was like in the 1970's. I think it's improved a lot more than 10%.

According to the Census bureau, median personal income for a man was $8,056 in 1973, which I think puts my nuclear family right near the center of the income distribution. This works out to roughly $28,893 worth of income in 2003. The figures say that in the intervening years, median personal income rose only $1,100, to $29,931--an increase of less than 4% in 30 years. Median household income has done a bit better, going from a little over $10,000 in 1973--or $37,700 worth of 2003 income--to $43,318 in 2003. (Hooray for women's lib!) That's an increase of $5,618, or almost 15%.

But let's say we could find someone who makes $29,931 today, and remembers the 1970's. Do you think that if you offered to send him back to 1973, with 4% more than the 1973 median income, he'd take you up on the deal? What if you doubled that, to 8%? What if you sent him back to 1973 making 15 or 20% more than the median wage, so that he could keep the wife at home and still enjoy a modern level of household income?

Personally, I wouldn't take the deal . . . and not just because I'd be the one stuck at home trying to make the Harvest Gold drapes match the new Avocado refrigerator. 1973 means no internet. No cell phones. No cheap air travel to exotic foreign climes. No computers. No blessed asthma drugs (see my co-blogger's memoir for just how much this means). Three television channels and nothing good on any of them. Expensive books. Air pollution. Shorter life expectancies. More crowded housing. About the only thing more available then were Manhattan apartments, and that was because the muggers were cramping everyone's style. Yes, we all wish we'd done like my parents and bought a co-op in 1973--but that's because we want to live in it now, not then.

I'm not sure you could pay me enough to go back to 1973, in fact. I think I'd rather be a journalist living now than a multi-millionaire living then. Probably other people would be willing to take that bargain . . . but you'd have to pay them a lot more than 10% of their salary, that's for sure.

From the desk of Jane Galt:

Ideally . . .

Aaron Haspel has a lovely piece on the ideal reader.

An ideal reader often writes about his author, but he is too near him, temperamentally, to play the judicious critic. He reads the author as the author would want to be read, not as others would want to read him.

At the end of the post he asks "Who is your ideal reader? For whom are you the ideal reader?"

These are good questions. I am not sure I have good answers. I suspect that my ideal reader is Tyler Cowen, though he might well dispute that. For whom am I an ideal reader? Possibly no one. I am shallow, eclectic, and too prone to my own flights of fancy to strike anyone serious as an ideal reader; but there are few popular authors that I love enough for them to love my reading of them. Perhaps I was only an ideal reader when I was a child, able to submerge myself wholly in passionate reverie with my authors. In which case I suspect that I was ideal for L.M. Montgomery, whose heroic and often laboured choice of romanticism over the bleak sadness that underlies her writing (and her life) sing to me still, though more softly than they once did.

From the desk of Jane Galt:

Bleg

I need to quickly lay my hands on an aerobed. But not just any aerobed. I want one of the aerobeds that has a memory foam insert, or a pillowtop.

Can my readers advise:

1) Is the pillowtop/memory foam option worth it? I will be the primary occupant of the bed, and my knees are in fine shape, so the raised option doesn't strike me as worth it. And due to the small size of my apartment, said air mattress has to be put away every day and only taken out at night, so foam mattress pads and so forth are not a good substitute.

2) Where in New York City (really, Manhattan) could such an item be purchased by tomorrow night?

From the desk of Jane Galt:

Time for a change?

Ken Rogoff has a must-read article on the IMF in this week's Newsweek. Here's what The Economist wrote a few days ago on the same subject.

From the desk of Jane Galt:

The spying has already started

Top item in my mailbox this morning: Stop harassing bill collectors!

I'm afraid to open it. I mean, how did they find out that I harass bill collectors?

From the desk of Piers:

So sue me

The unrest in Hungary, after the prime minister said that he and his cabinet lied about the economy for the past couple of years, makes me think again of an idea raised years ago in an Economist leader, that politicians should be given the option of making their campaign promises legally binding and actionable. A sort of opt-in, probably: if you wanted to make a promise that voters could sue you for flouting later, you would add a declaration to that effect. Would that be possible within existing law? What would it take to make it possible? I assume the desirability of it goes more or less without saying.

From the desk of Jane Galt:

It occurs to me, after an email exchange with a reader, that having voted for Bush, I should probably comment on torture, wiretapping, and so forth. The reason I have not commented is not that I approve of these things, but rather that I do not have much comparitive advantage in discussing them. I know nothing about the relevant law; have zero expertise in security, military affairs, or law enforcement; and am near totally ignorant about the technology involved. Believe it or not, I do try to restrain my commentary to things that I have thought rather a lot about, and I'm afraid my reaction to torture, warrantless wiretaps, and so forth, is a gut level "NOT IN MY COUNTRY", not a reasoned response. Nor do I know enough about pre-existing law to have any sort of intelligent idea about how material the deviations are; I have, in the past, gotten hysterical about things like "ROVING WIRETAPS" which turned out, upon examination, to be incredibly trivial.

Nonetheless, my thoughts

1) I'm not sure exactly what constitutes torture. Does humilitating someone by forcing them to be interrogated by a woman count? Not to my mind (sexist bastards). How about humiliating someone by making them wear a ridiculous costume? Stripping them naked? Urinating on them? Similarly, pinching someone is not torture. Nor is slapping them once in the back of the head. I suppose wiring them up to a 9-volt battery wouldn't be either (or I have a Geneva convention beef with my 3rd grade teacher)--but wiring them up to an electric generator, or jumping up and down on them in steel-toed boots, pretty clearly is. We forbid things that aren't torture so that "interrogation" doesn't shade into torture. Most of the stuff the Bush administration is describing isn't torture--but that doesn't mean I think it should be legal.

2) Unless they get a nuclear bomb, terrorism is not an existential threat to the United States. We should not be willing to employ the full panoply of civil liberties violations that we brought to bear on World War II to the current battle against terrorists. "The Constitution is Not a Suicide Pact" appeals to situations in which the United States might actually be undone by the threat--not merely to situations in which a relatively large number of people might be killed.

I am not appealing to the incredibly morally obtuse argument that "terrorism doesn't kill as many people as car crashes", nor am I saying that we should not respond vigorously to terror. But the solution to a terrorist threat is not to empower the state to terrorise its citizens. Even if the Bush administration is operating from only the holiest of motives, and will only use its powers against really extraordinarily evil characters, there is no guarantee that future administrations will be so benign.

3) Personally, I don't care if this government spies on me; my secret life is extraordinarily dull. Nor do I care if Walmart implants RFID tags in my shoes so that the police and all the big corporations will know EXACTLY WHAT BRAND OF SNEAKERS I WEAR every time I pass a precinct. But I can envision governments I wouldn't want to give the time of day to. For this reason, I do not want to give this government spying powers that I won't be able to take back if, say, a would-be Stalin gets elected.

4) I do not think it is even remotely likely, as my reader demanded, that Bush is trying to move this country towards dictatorship. As I wrote him, a dictatorship is a real thing, not a super-synonym for "governments that do things I don't like". I am so confident that Bush is not trying to move the country towards dictatorship that I offered to bet him $5,000 that the elections go off as scheduled.

He graciously declined on the grounds that Bush mightn't succeed even if he wanted to. If Bush is unlikely to succeed, I'm not sure how much it matters; I've no doubt that right now there are loads of people in the US plotting to become dictators of us all, including islamic terrorists, but I don't worry about them because I don't think they've got much of a shot.

But in fact, I don't think that Bush is trying to make himself into a dictator; I never attribute to sheer malice that which can be explained by some other human emotion. I used to think that Janet Reno was some sort of uniquely frightening figure, after her pioneering use of the military operation in the child-custody dispute. Now I realise that being attorney general presents you with a world of awfulness, which makes the occupant of the office believe that they need as much power as possible in order to fight the demons. It also makes you obsessively concerned with challenges to law and order.

In the current case, I think the Bush administration genuinely wants to fight terrorism, and thinks that this is the way to do it. That doesn't mean that I agree we should empower them thusly . . . we could undoubtedly fight terrorism by installing a full-blown police state, but I doubt that many of my readers would endorse doing so. There are worse things than terrorism.

5) While I stand foursquare against many of the administration's actions, the reaction of many of his opponents is over the top. I don't mean the libertarians, who I expect to get hysterical whenever the government attempts to make itself more powerful, or even effective (at law enforcement). I mean the ones who have suddenly discovered that expanding the power of the state is dangerous. What the Bush administration is trying to do is (IMHO) a terrible idea, but we're talking about giving the US government the kind of intrusive, totalitarian powers enjoyed by the government of France, not North Korea.

I also think that a lot of people, especially libertarians, have an exceptionally naive idea about civil liberties slippery slopes. If Bush manages to enact some bad legislation, that doesn't mean that we're one more step down the road to an inevitable dystopian hell; it means that we should repeal the law. As I wrote a long time back:

A few weeks ago, I was talking to a libertarian who was arguing that the Patriot Act was a one-way ticket to totalitarianism. We were violating fundamental rights that had been enshrined in the constitution for 200 years, and once we'd given them up, it was going to be a short step on the slippery slope to a police state. I share her fear of government intrusiveness. But this a markedly ahistorical view of the constitution and the liberties it allows us to enjoy, which is no more accurate for its extreme prevalence in libertarian circles. There is no primal state of liberty, created by the Constitution, from which we have slowly but inexorably been moving away. Liberties have been granted, and taken away, and granted again throughout the history of our country. Just off the top of my head: Lincoln's suspension of habeas corpus, the Palmer raids, the detention of the west coast Japanese in camps during World War II, the committment of anyone FDR or one of his minion's thought was especially dangerous to the war effort to St. Elizabeth's mental hospital during same, the McCarthy hearings--see this wonderful Richard Posner piece for a more elegant exegisis of the history of American liberties. The shape of liberty has changed over the 200 years of our existence, expanding in some places and contracting in others. There is no libertarian eden, located somewhere in the American past, from which we are now fallen, or falling.

In conclusion, if you think that the things the Bush administration is doing could, in the future, help less benign governments to seize horrifying power--well, I'll agree with you, but only if you also acknowlege that the same could be said for every president since Hoover, and that in fact FDR takes the gold prize for Doing Things That Could Be Used to Install a Dictator. Indeed, FDR is probably the closest thing this country ever came to having a dictator, and we can thank a lot of fast tap-dancing by the Supreme Court and the Senate for not getting us closer still. If FDR doesn't terrify you, then you will have a very stiff uphill battle explaining to me why Bush does.

I am against much of the Bush administration's recent War on Terror effort, and because I fear dictatorship. But this doesn't mean I think that Bush is intent on becoming an Evil Dictator, or even that he is evil. It means that I think even people with the best of motives can do very bad things inadvertently.

From the desk of Jane Galt:

Say it ain't so, Joe

Are we trapped on earth? But what about my Certified Captain Galaxy space helmet? It took me months to collect those box tops . . .

From the desk of Jane Galt:

Inside job

Professor Bainbridge writes about a rather clueless article on insider trading in the New York Times. I confess, I've never exactly understood the logic of our insider trading laws, which punish not only those who have a fiduciary obligation to the shareholders (such as managers and lawyers), but ordinary passers-by who manage to somehow glean a shred of information. The message seems to be that the only kind of investors we want are those taking a blind gamble on a company about which they know nothing more than 300 million other people.

From the desk of Jane Galt:

Follow up question on BMI

Is it just me, or does being very tall (like, oh, I don't know, a six-foot-two woman) make BMI a pretty unreliable guide of overweight?

As a weird aside, if I'm right, very tall people will tend to have abnormally low BMI's, which don't reflect their true weight . . . and since tall people tend to die sooner, will throw off the mortality figures for low-BMI people. These are the numbers that the fat acceptance groups are always arguing mean it's healthier to be overweight.

Just thinking out loud . . .

From the desk of Jane Galt:

Dang

I just saw the actual criteria for models in Spain--they need a BMI of at least 18.

My BMI hovers around 19, meaning that I just barely qualify to be a Spanish model. And I am not skinny.

Anyway, as a legal matter, I'm against the ban--and I'm surprised to find how stringent it is. But as a cultural matter, I think its a good idea, if fashion houses could be pressured to implement it voluntarily. Yes, clothes look better on skinny models, because there are no bulges to disturb the line . . . but what's the benefit of designing clothes that can only be worn by women on a steady diet of ex-lax and ipecac?

Whether or not models are, as their agents claim, naturally that thin (personally, all the models I ever knew had developed eating habits that would have struck an obsessive-compulsive as too demanding, but I've never met any supermodels or anything), the fact is that most women cannot be that thin without starving themselves to unhealthy levels. I have a naturally pretty small frame, and a relatively tame sweet tooth, and being tall tends to help you out on the BMI thing--but the only reason I graduated from high school weighing a little over 120 pounds is that I, like many of the other girls in my prep school class, starved myself in order to stay dangerously, disgustingly thin. I'm very lucky I didn't do myself some permanent damage. Thankfully, I grew out of this ridiculous behaviour by the end of my freshman year of college, and gained 20 pounds.

It is ludicrous to argue that the current teenage obsession with thinness is not influenced by the rail-thin women who dominate fashion magazines and media. All the beautiful women we ever saw were extremely thin, and so we naturally concluded that if you wanted to be beautiful, you obviously need to diet until you had a profile like a paper doll. I'm embarassed to admit that I was nearly thirty before I learned to stop equating thinness with happiness--and compared to many of the women I went to school with, I'm a hippie free spirit who pays no attention to her appearance.

Obviously, no matter how we assess beauty, teenage girls will still pine for unattainable perfection. But we could at least try to present role models who can be emulated without starving yourself or gettting skin cancer. Bring back the days of the stuffed bra and the ludicrously complicated hairdo, please.

Update Tiger Hawk asks whether cracking down on skinny models won't contribute to obesity.

It's possible that this is a classic example of class conflict. Perhaps the only way to encourage ordinary people to keep thin lies in sending a cultural message about heaviness that encourages some people to get too thin. I'd certainly bet that most people in America, no matter what they say about "being healthy", excercise mainly in the hope of being skinny. In that case, we have a class conflict in which banning skinny models benefits the upper-middle class families of the legislators, while hurting the poor, more of whom become obese. (This assumes that you believe that overweight is a major health risk, of course.)

On the other hand, perhaps if cultural images encouraged a level of slenderness that is attainable for many or most women, fewer would give up in despair . . .

From the desk of Jane Galt:

Perish the pushers

In The Science and Politics of DDT, John Quiggin writes:

And the substantive change in WHO guidance is much less dramatic than the rhetoric would suggest. WHO is now recommending the use of indoor residual spraying (IRS) not only in epidemic areas [as in the past] but also in areas with constant and high malaria transmission, including throughout Africa.

It’s far from clear that the change is backed up by a scientific analysis of the relative cost-effectiveness of the options. But, as with all the fads and fashions in areas like this, cost-effectiveness is not necessarily the most relevant criterion. The US appears willing to put in a substantial amount of extra money, and the US wants to push DDT. So, it’s probably better to please the donors, than make a stand on the science and risk losing the money.

No companies in the US currently manufacture DDT, and given its age, any patents must have expired long ago. The implication seems to be that we're pushing DDT just for the hell of it. I also infer that the US role as pesticide-pusher must be relatively recent, since the WHO was apparently not previously afraid of pissing us off. Can any of my readers comment?

From the desk of Jane Galt:

Robot cars . . .

I predict that in fifty years, our cars will drive themselves, at least on major highways. Programmes connected to GPS will automatically reroute us to avoid traffic, our cars will cooperate with the other cars on the road to keep moving at optimal speeds, and we'll be able to read a book while the car takes care of everything. (Presuming that I can still read at eighty). I further predict that this will be largely the emergent result of improving anti-collision and direction technologies, rather than some top-down government or corporate effort (though the final push may be from a company, startup or existing, that integrates all the other stuff into one system).

You should not ignore this prediction just because I have no idea how the inside of my car--or for that matter, the inside of my toaster--works.

From the desk of Jane Galt:

Take that, Mom!

My hatred of spinach is triumphantly vindicated.

From the desk of Winterspeak:

Purging the competent

This Slate article asks why automotive companies, in particular Ford, should offer big cash incentives to workers they want to fire.

Why would the manufacturer offer these incentives? If the workers don't take the buyouts, they'll still get paid. Under the union contract, if the company has to close a plant, anyone who worked there is eligible to keep getting wages under one of two programs.

The article ought to ask "what kind of automotive worker would choose to take the cash offer?" The answer, of course, is those whose opportunity costs are low, namely, those who can get cash from Ford and are confident that they can get a new, well paid job somewhere else. When I've seen similar programs rolled out elsewhere, we called this group "the competent".

Who should not take the offer and hang on to their current job? Why, those whose opportunity costs are high, namely those who could not find another employer based on the skill set they have now and the skill set they can reasonably develop over time, at their current wage. We used to call this group "the overpaid".

Before people start commenting on the trials and tribulations of a 50 year old metal worker who knows nothing beyond arc welding, I will add (having worked with a unionized workforce) that the ability to gain skills and be flexibile in your work are as important within a single workplace as it is on the open job market. Workplaces are dynamic. A lot of economic literature about unions talks about what impact their high wages have on corporate competitiveness, but in my experience the wages were not the issue, the problem was all the accursed work rules that basically made it impossible to alter any aspect of the business. I would also add that working within a union, and having to comply with union rules, does horrible things to your human capital as seniority rules decide what skills you can pick up, what new tasks you can try your hand at, and what opportunities you may have for the future.

The upshot is that Ford's move may remove extra workers, but the workers who leave will be the most productive, competent, and flexible.

From the desk of Jane Galt:

I'm a city dweller, so perhaps I don't understand these things, but I've always wondered why modular homes aren't more popular. They're slightly less customiseable, to be sure. . . but only slightly, and the tradeoff is that they're built to a consistent spec, with walls that are perfectly flat and corners that are actually square, at a lower cost in less than half the time of a custom site built house. The history of human economic progress is, after all, the history of mass production. This Popular Mechanics article sure makes them sound swell . . . so what am I missing, readers?

From the desk of Jane Galt:

This is a mistake

Daniel Gross links to an FT article indicating that MBA's are cutting their work requirements to capture younger applicants:

Top US business schools are recruiting younger, less experienced candidates in an effort to boost applications and head off competition for the best students from other graduate programmes such as law and public policy.

In an attempt to lure new students, leading business schools - including Harvard, Stanford, the University of Chicago and Wharton - have moved away from the unofficial admissions prerequisite of four years' work experience and instead have set their sights on recent college graduates and so-called "early career" professionals with only a couple years of work under their belt. . . .

One of the great pleasures of business school is that all of your classmates know how much more fun school is than working for a living. One side effect is, that, as an architect friend of mine observed at Harvard, "the business students seemed to have a lot of time to party." But it also leads to a different attitude about school among the students and the teachers. The students aren't there because they don't think they know how to cope in the real world; they're there to learn, meet people, and get a job. It reduces both the unproductive hypercompetition, and the aimlessness, that can plague other programs.

The other nice thing is that your classmates actually know a lot about what you're learning, which means your friends make very, very good study partners. In most programs, by definition, study groups consist of the blind leading the blind.

Plus, we need some programme for people who don't realize that they don't know what they want to do with their life until they're 26, And earlier admissions would have eliminated people like me, who screwed up in college and then got their act together later. That, I think we can all agree, would be a very bad thing indeed.

From the desk of Jane Galt:

Don't try so hard

I was just reading through a post about gay parenting studies at a liberal blog which shall remain unnamed. It shall remain unnamed not because I dislike the blog (obviously I read it), or because I'm horrified by the comments, but because if I name the blog this will come out as a critique of that blog, or liberal blogs, or blogs written by the non-Jane-Galt powere structure, or something. And I think that what I am about to talk about is a completely bipartisan, incredibly common thing, for which the blogger in question deserves no personal criticism.

Anyway, the blogger in question was writing about studies of gay adoption, critiquing the studies that critique the studies that purport to show that gay adoptions don't hurt children.

To be honest, I use an RSS reader, and I kind of blanked out after about 2 seconds, because the fact is, I already know that the blogger is going to find that the studies in favour of gay adoption are sound, and that anyone who says different is an idiot or a bigot who should be thwacked upside the head with a sensitivity stick. I can imagine no circumstances under which this blogger would write a post saying, "You know, I carefully considered the evidence, and I think that gays shouldn't be allowed to adopt." Gay adoption isn't really an issue I care about (I mean, I'm in favour of it, and I find it highly unlikely that gay parents make much of a difference one way or another, but I don't write about it, so I feel no need to become more deeply acquainted with the evidence than I already am. Only so many hours in the day, y'know.) So I stopped reading.

This is EMPHATICALLY not a post about how liberals are all deluded fools who Won't Look at the Evidnce, while Libertarians are in possession of The Truth^TM. This is a post about how much time we all seem to spend pretending that our views on things like homosexuality, property rights, abortion, income redistribution, stay-at-home mothers, environmental issues, and fast food can be Scientifically Proven Using the Latest Techniques! And how that erodes the trust of those we argue with.

A while ago, in response to my really, really long post about gay marriage, said "You know what? I don't give a [hoot] whether gay marriage does damage society. If our society can't be just without going under, then we don't deserve to survive." That's a good answer. And it's an honest answer. It doesn't pretend knowlege no one could have.

The problem with it is that it isn't an answer that undercuts your opponent. He is saying "I have made a value judgement." Value judgements are hard to argue with--is green a better colour than blue? Should we have justice or peace? Thus, we all seek to make our value preferences into facts, rather than opinions.

I think one of the biggest problems facing economists, and to some degree other social scientists, is the feeling that if you're just a little bit willing to fudge facts, you could do a great deal of good. If you'd torture the numbers just a little--not even torture, really, just waterboarding and a few stress positions--you could convince people to do what you know, deep in your heart, is the right thing. If you produce numbers showing that tax cuts increase tax revenue, or the minimum wage increases jobs, or GDP doubles for every 10% increase in the salaries of economists--why, you ccould do a whole world of good.

The subtler version of this is confirmation bias: to a libertarian analyst, papers showing that taxation causes people to stop working make perfect intuitive sense, while papers suggesting that stiff environmental legislation saves lives and money set off a pulse-racing, heart-pounding determination to discover just where the author went wrong. That liberal blogger to whom I referred earlier is a person of integrity and charm, and I have no doubt that they are trying to evaluate the data honestly--but I also have no doubt that they were heavily predisposed to believe the studies showing gay adoptions are good. I pause again to reiterate that this is not a vice more distributed on one side of the political spectrum or the other; it is a human vice, and no one struggles with it more mightily than I.

My humble suggestion is that it would do the blogosphere, and our blood pressure, a world of good if we didn't try so hard. I happen to think that extremely heavy progressive taxation has economic costs to those on the bottom of the income distribution that far outweigh its benefits. (Just to be clear, I do not think that taxation in the US currently fits this description; the problem with our tax code is that it's ludicrously complex, not that it's progressive.) It's nice that this is so. But I would be against very heavy taxation even if it made GDP grow, because I have a fundamental moral problem with compelling anyone to spend more of their time earning income for the state than they do for themselves. A willingness to state that firmly should give me some freedom to approach the study of tax policy without a burning need to make the numbers support my opinions.

There are many questions in economics which yield absolute answers (at least, they could): how interest rates work, whether asset markets are efficient, whether you should buy a lottery ticket*. There are some policies, such as hyperinflation and rent control, that pretty much all economists agree are a bad idea. But most of the questions that people want economics to answer cannot be resolved by building a better dataset, or improving our formula. Economics can give us tools to assess the effects of all sorts of policies, from legalising abortion to distributing free lunches. But it cannot tell us whether the costs outweigh the benefits. Nor can psychology, sociology, or what have you. It's riskier to argue the values than the numbers . . . but safer for all of us in the long run.

*No. Lottery tickets are a regressive tax on the innumerate.

From the desk of Jane Galt:

In which I refine Mankiw's Theorem of Harmonic Convergence

Greg Mankiw offers the following based on George Will's column on Wal-Mart:

Here's a theorem: Any time George Will and Jason Furman agree, they're right.

This is ground-breaking, but I must refine it a little further, to what I will call Galt's Theorem of Tri-Harmonic Convergence:

Any time George Will and Jason Furman agree with me, they're right.

And in the case of Wal-Mart, they're right.

From the desk of Jane Galt:

Department of awful statistics

Stuart Buck and I have an editorial on mangled media statistics in today's DC examiner.

Every year, scores of fledgling journalists pour out of liberal arts programs. Though many will need to pick through mountains of statistics in search of the truth, few have been taught the skills to do it.

They quickly become victims of advocacy groups pushing skewed statistics. Through ignorance, they may also start manufacturing their own flawed numbers. Since number-crunching beats (such as business and finance) are generally viewed as a tedious waystation en route to more interesting beats, few are enthusiastic about developing these skills. And their editors may not be in any position to help them.

From the desk of Jane Galt:

How sick am I?

I don't want to write reminiscences about Ground Zero or 9/11 right now, because then, as Laura says, it makes the story about me rather than about the 3,000 people who died that way. (Jim Henley put it much more pungently.) I have no urge to watch made-for-tv movies about the day of death, or Oliver Stone's fantasies, or very special television events on cable news channels. I'd much rather we'd commemorated 9/11 by trying to recapture some of the national spirit of brotherhood and solidarity that gripped America in those first days.

But yesterday someone asked me about something that is in the news, and that I am qualified to comment on: "WTC syndrome". As it happens, I did watch a television documentary on that the other night. Since I spent a year in a trailer in the middle of the site, failing to wear my respirator as directed¹, the commercials for those sorts of shows speak to me rather directly. They say "Want to find out if you're going to die horribly at an absurdly young age?"

(continued below the fold for those who are interested)

Michael Fumento says that WTC Syndrome doesn't exist. He's extremely critical of the WTC health project at Mount Sinai, where I periodically go to get my breathing checked and have an earnest 22-year-old ask me whether I have thoughts of suicide.

I wouldn't go as far as Mr Fumento, though I think that there is much merit to his criticisms. Medical studies (other than for pharmaceutical approvals) are notorious for their poor design and willingness to draw conclusions from insufficient data. The figures confidently thrown around about how many WTC rescue workers are now sick are a good example. Only about 1/4 of the workers from Ground Zero are participating in the programme. Those who feel sick are much more likely to be trekking up to 106th Street in Manhattan (where most of the workers do not live or work) to get tested. Yet the media has repeated figures from the programme as if it were a double-blind, controlled study.

Moreover, everyone seems to be ignoring the enormous financial incentive that the cops and firemen have to be sick. Thanks to the immense amounts of overtime they received during the first few months of the recovery effort, many of the police and firemen who worked on the site had the highest earnings in 2001 that they will ever have in their lifetimes. If they retired by 2004, those earnings would be factored into their "average salary" calculations. Both departments, as I understand it, saw a huge wave of retirements among eligible rescue workers; I would be shocked if the same factor wasn't driving at least some of the illness--since disability pensions are at least as generous as retirement ones (or so I'm told). I'm not saying they're shamming, mind you; if people can time their death to avoid the estate tax, I have no doubt that they can cough to collect a pension. There is very good evidence² that we could cut down on chronic back pain considerably by ending worker's compensation coverage for back injuries.

Another enormous problem is that whenever people are involved in an enormous event--the gulf war, the Indonesian tsunami, 9/11--they tend to attribute anything abnormal that happens to that event. Some people who lived in the area or worked on the site were going to get sick, even die, even if the terrorists hadn't managed to hijack those planes. But because it happened after the buildings came down, the natural instinct is to attribute the sickness to the collapse. I confess I am extremely suspicious of people who lived blocks and blocks away from the site, claiming that the dust the collapse left in their apartment made them sick. I'm an asthmatic who spent a year in a trailer right in the middle of the site; if it didn't make me sick, I doubt it made you sick in your Tribeca loft. Again, I'm not saying these people are shamming--only that they're committing gross attribution errors.

And I'm not sick. Because I'm asthmatic, I, unlike most of the recovery workers, actually knew what my lung function was before 9/11. All three areas of lung function are within a coupld of percentage points of what they were measured at before I worked at Ground Zero. I suspect this matters a lot. If you tell someone who has never had a spirometer before that they're only at 93% of normal lung function, I'm sure they freak the hell out and decide they're dying. But my bronchial function is only around 66% of normal, and my asthma is extremely mild. (My upper lung function is much better). And those people are probably much more likely to come back than the guy whose spirometer showed his lungs functioning at 106% of normal.

The media coverage of the "syndrome" makes it all worse. One of the deepest seated fears humans have is of being poisoned by something they can't see--that's why radiation is so much more terrifying than cars. Tell people that their time on the site infected them with invisible particles that are making everyone terribly ill, and every time you clear your throat, it becomes a symptom of your "disease". I have one of those doctors who tests everything, just because he can. After a "borderline equivocal" test for anti-nuclear antibodies (which signal autoimmune disease), I became convinced I had lupus, and was dying. Suddenly every time my foot fell asleep, it was neuropathy. Every twinge of pain in my chest was impending heart failure. If my wrist ached after a long session at the computer, I was convinced it was the first sign that the disease was attacking my joints. Needless to say, these symptoms, which would ordinarily have been forgotten as soon as they happened, were magnified in my mind into a nearly crippling disorder--until time revealed that there was no reason to believe I had lupus, and they suddenly receded back into transient manifestations of everyday life.

That said, I think that the site probably did make some people sick. There was a lot of crap floating around in the air--more than normal on a construction site, and much of it really bad stuff like finely pulverized asbestos. After a few months I developed two very strange symptoms. I broke out with a skin condition then diagnosed as rosacea, but which has since pretty much completely disappeared, which rosacea doesn't do. I also developed a weird twitching in my left pinky, which likewise slowly disappeared after I left the site. Coincidence? Very possibly. Or possibly not. I don't suppose I'll ever know (and doesn't that drive my inner scientist bonkers!). But I'm a lot more worried about asbestosis.than subtle poisoning from the air. Frankly, my attitude now is that I will be very unhappy if some dread disease does appear--and that I will not reduce that future unhappiness one iota by worrying about it now. So I don't. I suspect that at least some of the rescuers would feel better if they adopted that attitude.

¹Yes, I know--my class action against Osama Bin Laden just went right out the window. I expect that some years from now, we'll see lawsuits against someone, in which construction workers or police or firemen allege that they wore their masks all the time. This is a lie. No one wore the damn things, because it is not practical to work for sixteen hours a day, every day, in a gas mask.

²I mistakenly attributed this sentiment to Mark Kleiman at the beginning of the post, for which I apologise.

From the desk of Jane Galt:

A little pressed for time today . . . I'm off to Armonk in a minute, and probably won't be back until late tonight.

So, a little meditation on blog partisanship.

Recently, I seem to have inadvertently become The Economics-Blogger-In-Charge-of-Liberal-Baiting. This was not intentional, or even desired.

I designed the thought experiment about throwing acid in Cindy Crawford's face not because I was trying to get those in favour of redistribution to admit that they also want to disfigure supermodels. Rather, having spent more than a little time thinking about the supply of fairness in the universe, and our possible duty to increase it, I found that thought experiment genuinely useful in clarifying my views--not about redistribution, per se, but about a subset of redistribution which aims to increase the supply of fairness by punishing success (or, as many of my interlocutors seem to believe, luck.) Ultimately, I concluded that the existance of a status hierarchy is not a good reason for that kind of redistribution, precisely because I concluded that I wasn't actually interested in the same sort of redistribution when it involved assets other than wealth . . . even though those assets are, unlike wealth, 100% distributed by luck.

The reason I think that this is interesting is that humans often convince themselves that they are reasoning by logic from first principles, when in fact they are being guided by intuitions hammered into our brains by several million years of evolution. That doesn't mean that those intuitions are wrong, or inappropriate--as I wrote about abortion, people are being guided more by fuzzy emotional logic than the principles they think they're basing their positions on, and that's okay. But we need to recognize it.

People who say that they are being guided by the latest research on status hierarchies in judging redistributional programmes, in my opinion, are much more likely being guided by a lot of evolutionary and cultural baggage about wealth. We are evolutionarily designed to simultaneously desire status, and despise it in others; we are programmed to live in very small family groups where redistribution is both expected, and possible; and our amygdalas have a hard time grasping the idea that a big chief could earn his wealth, rather than stealing it from the group.

So I wasn't picking on Brad, or redistributionists; rather, I was trying to illuminate what I thought was an interesting question what are we really thinking. Not a question, it turns out, that anyone else is much interested in. But I still am.

From the desk of Jane Galt:

And now, for something completely different

A poem for your delectation: "I hear America Singing" by Walt Whitman

I HEAR America singing, the varied carols I hear;
Those of mechanics—each one singing his, as it should be, blithe and strong;
The carpenter singing his, as he measures his plank or beam,
The mason singing his, as he makes ready for work, or leaves off work;
The boatman singing what belongs to him in his boat—the deckhand singing on the steamboat deck;
The shoemaker singing as he sits on his bench—the hatter singing as he stands;
The wood-cutter’s song—the ploughboy’s, on his way in the morning, or at the noon intermission, or at sundown;
The delicious singing of the mother—or of the young wife at work—or of the girl sewing or washing—Each singing what belongs to her, and to none else;
The day what belongs to the day—At night, the party of young fellows, robust, friendly,
Singing, with open mouths, their strong melodious songs.

For more such, go here and scroll down to July 4th.

From the desk of Jane Galt:

Why is this a useful article?*

Mark Thoma seems to think that this is useful and informative:

"In the late 1930s and the early 1940s, a number of works were devoted to the analysis of economic policy in Germany under the rule of the National Socialist Party. One major work was Maxine Yaple Sweezy's (1941) The Structure of the Nazi Economy. Sweezy stated that industrialists supported Hitler's accession to power and his economic policies: "In return for business assistance, the Nazis hastened to give evidence of their good will by restoring to private capitalism a number of monopolies held or controlled by the state" (p. 27). This policy implied a large-scale program by which "the government transferred ownership to private hands" (p. 28). One of the main objectives for this policy was to stimulate the propensity to save, since a war economy required low levels of private consumption. High levels of savings were thought to depend on inequality of income, which would be increased by inequality of wealth. This, according to Sweezy (p. 28), "was thus secured by 'reprivatization' …. The practical significance of the transference of government enterprises into private hands was thus that the capitalist class continued to serve as a vessel for the accumulation of income. Profit-making and the return of property to private hands, moreover, have assisted the consolidation of Nazi party power." Sweezy (p. 30) again uses the concept when giving concrete examples of transference of government ownership to private hands: "The United Steel Trust is an outstanding example of 'reprivatization.'" This may be the first use of the term "reprivatization" in the academic literature in English, at least within the domain of the social sciences."

192-3: "The primary modern argument against privatization is that it only enriches and entrenches business and political elites, without benefiting consumers or taxpayers. The discussion here suggests a rich historical irony: these modern arguments against privatization are strikingly similar to the arguments made in favor of privatization in Germany in the 1930s. As Sweezy (1941) and Merlin (1943) explicitly point out, German privatization of the 1930s was intended to benefit the wealthiest sectors and enhance the economic position and political support of the elite. Of course, this historical connection does not prove that privatization is always a sound or an unsound policy, only that the effects of privatization may depend considerably on the political, social and economic contexts. German privatization in the 1930s differed from the privatization of Volkswagen in the 1950s, and both of these situations differ from, say, the British privatizations of the 1980s, the Russian privatizations of the 1990s, or the privatizations across Latin America over the last two decades."

The practice of attributing policies you do not like to the Nazis must stop. It is annoying when the right-wing defends gun rights by arguing (apparently incorrectly) that the first thing the Nazis did when they came to power was to enact stiff gun control laws. But at least this has some connection to the atrocious crimes of the Nazis: if this factoid were true, its proponents would be saying "guns in the hands of private citizens might help prevent genocide."

But I assume that the fellow who wrote this is not arguing that state ownership of factories prevents genocide. The primary problem with the Nazis is not that state policies benefitted a few rich factory owners (and anyway, the distributional effects of Nazi government were considerably more complicated than that); the problem is that they herded 11 million people into camps and gassed them. Articles like this one attract attention not because they are particularly interesting--who coined the term "privatisation" is a pretty trivial basis for an article in an economic journal--but because they allow people who don't like privatisation to say "Look! Nazis liked privatisation! Therefore, privatisation=bad!"

I am pretty sure that the Nazis were in favour of eating, sleeping, long walks on the beach, quality time with family and friends, and cute little furry puppy dogs. I don't intend to give up any of these things just because Hitler did them too. Call me a genocidal maniac, but I stand by my puppies.

* Tee-hee! Double entendre! "This" is a very useful article--in fact, I can't think of anything that could replace it. The article on privatisation and the Nazis, not so much.

From the desk of Jane Galt:

In Memoriam

As many of you know, this site was once titled "Live from the WTC". I worked at Ground Zero for a year, doing administrative stuff in a trailer on the site for one of the disaster recovery companies.

I don't have anything particularly profound to say. So the only link I'll post is to this, which I wrote six months after 9/11.

From the desk of Jane Galt:

From the desk of Jane Galt:

Don't just do something! Stand there!

Bryan Caplan diagnoses the logical fallacy in Rothbard's decision to ally himself with the radical left. It sweetly sums up a wide swathe of inadvisable human action:

Something must be done. This is something. Therefore, this must be done.

From the desk of Jane Galt:

Tyler Cowen writes that Afghanistan is going worse than Iraq.

Not on a "how many people were killed today" basis, but on a "which country has a better chance of climbing out of its current muck fifteen or twenty years from now" metric. And no, I don't intend that point as either a critique of invading Afghanistan, which I favored, or as a defense of our very badly botched policy in Iraq. It is a simple observation: we have never had good reason to believe that the occupation of Afghanistan was going well.

A little while ago, I read William Easterly's White Man's Burden, which is very, very, good. It is not, to be honest, quite as brilliant as The Elusive Quest for Growth, which everyone on the entire planet should read, like, RIGHT NOW--but if you are even vaguely interested in helping the poor of the world, you should pick it up the next time you're at the bookstore.

One of Easterly's points--one he has been making in papers as well as his book--is that places that are not cohesive countries don't tend to do well. "Nations" like Iraq and Afghanistan that were essentially cobbled together for the economic convenience of former colonial powers, or accident of empire, have to be held together by despotic power, or they fall apart--and hell, they'll probably fall apart anyway. They have an immensely difficult time generating the level of trust between people that supports economic development.

One of my early jobs as a journalist was writing brief histories of a number of different countries, including a lot of places I didn't know much about before I started researching them. I was extremely surprised to find out how often nation-building--even internal nation building--failed. A hero sweeps out of the west, unifies the tribes into a formidable empire . . . and the whole thing falls apart as soon as he dies, or his son dies, or a couple of hundred years have passed. And that it doesn't necessarily matter whether the nation-building is internal or external; Great Britain is largely a creation of the Romans and the Normans, not the locals. The main thing is that no matter who tries to do it, it usually falls apart.

As these things go, Afghanistan is even less of a country than Iraq. Forget ethnic, tribal, and clan warfare, of which it has a huge amount; they don't even speak the same language. Its terrain is hostile to development of anything but a lively opium trade. And given that, like, every army in the entire world has invade Afghanistan to secure either trade routes, or a supply line to invade somewhere more inviting, they're extremely clannish and suspicious of outsiders. This is not a good recipe for building either an economy, or a state.

As Tyler says, this is neither a criticism of the Afghan invasion, nor a defense of the Iraq war (both of which I supported.) It's more a meditation on the fact that history is long, while human attention spans are short. As far as history is concerned, this United States thing is a very temporary experiment that may not work out.

From the desk of Jane Galt:

Let them eat education

Greg Mankiw points to evidence that the returns to education aren't all that they're claimed to be:

Reviewing specific programs, Carneiro and Heckman find that preschool education is highly effective, although with more impact on noncognitive than cognitive abilities. Schools are much less productive, and returns are low to increased investments in K-12 education in the form of higher salaries, smaller classes, and so forth. They suggest that structural changes that increase school choice and competition should have higher returns, but are careful to note that returns to increased investment in schools are limited by what families contribute to the production process. They also conclude that added investments in job training and higher education have low rates of return, particularly for lower ability adolescents and adults.

I've long argued that most education--and especially most marginal education--in the United States does not add much value, but simply functions as a signalling mechanism to separate the employable wheat from the risky chaff. Spending more money on tertiary education thus simply contributes to the arms race and wastes valuable human capital by having nineteen year olds study poetry instead of learning skills in the workplace.

Nonetheless, I find this somewhat surprising. It makes me wonder why, as journalists like me are always writing, workers in other countries with lower wages are so much less productive than American workers, if K-12 education doesn't have much impact. Is it that American education has reached the ugly part of the cost-benefit curve, while Chinese schools still have a ways to go? Are Chinese/Indian/Guatamalan workers cognitively disadvantaged by earlier health and nutrition deficits? Or does the advantage lie in complementary infrastructure, such as roads and telephones?

From the desk of Jane Galt:

Why, oh why can't we have a better left-wing blogging corps?

I wish people wouldn't accuse me of misreading them by . . . misreading me.

Am I accusing Brad DeLong et al of wanting to throw acid in Cindy Crawford's face?

Obviously not. If I thought that they actually wanted to throw acid in Cindy Crawford's face, then the metaphor wouldn't work, would it? I'd be saying: "If you like pie, why don't you also like tarts?"

The point is, that if you are saying that we should tax wealth because much of the possessor's enjoyment stems from the fact that it is a positional good, why don't you also want to "tax" beauty? Because if you don't, that means that you don't really care that much about positionality--or that you think that beauty is in some way special, more sacred or worthy, than wealth.

If you are willing to reduce positionality, then you should be willing to reduce positionality wherever it rears its ugly head. If you don't want to throw acid in Cindy Crawford's face, make everyone wear a bag over their head. Otherwise . . . what's so special about money? Except that some of it might actually be earned rather than bestowed by accident of nature?

Sigh. I was really hoping I would get a better answer to that question than "that's ridiculous!" Apparently I'm the only person on the web who cares about non-monetary endowments.

From the desk of Jane Galt:

Department of Potentially Truly Appalling Statistics

(Note: all reporter-type legwork for this piece was done by the inimitable Stuart Buck, whom I hope never to find on my six . . . )

Poor, poor Nebraska. Did you know that in 2000, at the height of the Clinton boom, their median household income fell by over 8%? In fact, except for Hawaii, Rhode Island and Mississippi, which showed gains of 0.19%, 0.65%, and 1.1%, respectively, every single state in the union, and Washington DC besides, saw their median household income plummet in 2000 in a rather startling fashion.

Surprised? So was I. But that's the answer I get using the methodology that the reporters at the Detroit Free Press say they used to produce this map:

. . . which has been taking the left coast of the blogosphere by storm. (The right half, for some reason, has not found time to cover it. Perhaps they are busy hanging bunting for the midterm rallies.)

A little back story: I didn't see anything particularly surprising or horrifying about the lefty bloggers harping on this. Median household income has fallen slightly under Bush, and though I plan to explore why this isn't quite as dire as it seems, and also not really related to who the president is, over the next few days, it's perfectly honorable for them to make hay out of it.

But then Stuart Buck emailed me for a quick spot check:

Is the analysis accurate? I don't think so. I'm not sure, because I can't tell what figures they were looking at, but the official figures that I have found seem to be quite different. Here is the Census Bureau's webpage listing median household income by state, from 1984 to 2005 -- the very thing that the Detroit Free Press was supposedly measuring. What's more, if you scroll halfway down the page, there is a separate set of tables that gives state-by-state figures all in 2005 dollars. Let's take my home state of Arkansas. According to the Census Bureau's page, Arkansas' 1999 median household income -- in 2005 dollars -- was $34,770. Then in 2005, the median household income was $36,658. That's an increase of 5.4%, as opposed to the 7.2% decrease that the Detroit Free Press claims to have found. How about another state: Utah. In 1999 (again, in 2005 dollars): $53,943. In 2005: $54,813. That's a rise of 1.6%, not a decline of 10.5% as the Free Press claims. The nationwide median -- In 1999: $47,671. In 2005: $46,326. Adjusting for inflation, that is a 2.9% decrease, not the 6% decrease found by the Free Press. These figures are not necessarily comforting; a nationwide drop of 2.9% is nothing to sneeze at (although you'd have to know if the composition of households changed between 1999 and 2005). In any event, I'm not sure what the Detroit Free Press was looking at, or how they adjusted for inflation, but their graphic seems to overstate any drop in median household income.

I'm on holiday, and immersed in a somewhat idiosyncratic creative project, but I ran over to the Census Bureau for a quick look at the Current Population Survey, which is the standard tool I use for these sorts of analyses. Indeed, as Stuart found, the numbers don't match, and a closer look at the map made no sense: the drops were too big. American median income has dropped a little over the last six years, thanks to the popping of the technology bubble and a surge in non-wage compensation costs (read health care). But the gargantuan drops in almost every state were surely not being counterbalanced by tiny increases in Rhode Island, Montana, and DC. I jotted a quick note back to Stuart noting that the numbers didn't match up--and the weirdest thing is that the numbers for Michigan are actually bigger on the CPS, around 14% by my mental arithmetic. I figured that they were using some sort of statistical jujitsu, and moved on.

However, then Stuart emailed me to say that he received the following clarification from Marisol Bello, one of the journalists who worked on the map:

Hi Stuart,

The webpage you cite is for the Current Population Survey, which was released on the same day as the American Community Survey. We used data from the American Community Survey for 2005 because it had data for counties and cities with a population over 65,000. The Population Survey did not have data under the state level. Both surveys are different and are conducted differently, so you can’t compare the data in one to the data in the other. You can go to the American Community Survey for 2005 and download the information that way.

Hope that helps.

Ah ha, that explains it. Different sets of data collected using different methodologies often do produce divergent pictures of the economy: witness the arguments over whether the household or payroll surveys are better for measuring unemployment.

Except it doesn't explain it, because the map clearly states that it is comparing state employment figures from 1999 to 2005, and as far as I know, the American Community Survey, otherwise known as the ACS, only started publishing non-experimental data in 2000. What’s more, at least as I understand it, until 2003 all its data was based on 31 test sites, which wouldn’t allow you to generate state-level comparisons, as obviously this is less than one per state. In fact, it didn’t even include Michigan. The ACS is a tool that will be good for longitudinal comparisons sometime around 2010.

Furrowed brow. Doubts about my competence as an economic journalist, if the Freep can lay hands on data I can't find. Long break for a phone call to an old friend to distract me from an attack of imposter syndrome.

This morning I awoke to a clarification from the journalists, via Mr Buck (who seems to have irritated the good folks at the Freep): the 1999 figures were from the Census, which was taken in 2000 and covered income from 1999.

But this didn't seem right to me. The Census long form isn't the same as the ACS; when government agencies change their methodology, you often get sizeable discontinuities in the data. Look, for example, at what happened to Census income distribution figures between 1992 and 1993, when they changed their methodology for calculating the quintiles. Just how comparable are the ACS and the 2000 Census long form?

Not terrifically, at least by my jackleg calculations. I went to the 2000 Census (which tracked 1999 income) and compared it to the figures from the 2000 ACS state ranking table of median income. You can see my results in this spreadsheet. Even in nominal dollars, using this methodology, most states experienced a drop in median income in 2000. If I inflate the 1999 figures by the 3.36% inflation figure derived from the BLS's inflation calculator, all but three states saw median household income fall. If you look at the CPS page, by contrast, it alleges that median income for the United States as a whole rose by about $1,300, or roughly 3.2%, which is more in line with what most of us remember from those halcyon days (sigh). Indeed, as Stuart discovered, the Census itself noted this disparity.

Now, I've been the target of enough false accusations of statistical idiocy that I am leery of hurling same at my fellow journalists with too much vigour. Perhaps Victoria Turk, who is apparently the Freep's resident number cruncher, has some advanced statistical method for reconciling the two surveys. Perhaps there is some reason that one can compare the 2005 ACS to the 2000 longform census, but not the 2000 ACS; as I say, I usually stick with the CPS, which has a rather longer history, since my employer almost never wants to make longitudinal comparisons below the US state level. But as relayed to me via Stuart Buck, it looks to me as if the Freep did something very, very naughty: compared numbers from two different surveys, and then disappeared the disparity between the sources into "U.S. Census Bureau data analysis by VICTORIA TURK and MARISOL BELLO/Detroit Free Press". Nor does their stated reason for using the ACS--that it allows them to look at data below the state level--make much sense to me, since it disappears into one eminently fogettable line of the article: "None of the 28 counties and 21 municipalities for which data were reported showed a rise in median household income between 1999 and 2005, the estimates show."

It's not that I think that this is some huge scandal--after all, median household income did fall, though probably more on the order of 3% than the numbers they produced. It's just that I'm not entirely sure what's going on here, and it worries me. Either the Freep is very, very wrong, or I am. Luckily, wearing my blogger hat, I'm not afraid to risk being wrong in the interest of learning something.

Update no jujitsu; this is Victoria Turk's explanation:

I don’t think that there is an inconsistency between using the 2000 census and the 2005 American Community Survey for the comparison. I agree that there are some differences between the two; in an ideal world we would have exactly comparable data available for every geography for every year. Unfortunately, we live in a world where have to use the best estimates available to us.

That's true . . . but when I use two sources, I make a note of the fact, as well as which way the disparities seem to run. Or I use figures that are truly comparable, even if it means I can't make exactly the comparisons I want.

Given that there was huge divergence between the 1999 income figures from the Census, and the 2000 figures from the ACS--a rather obvious spot check--I personally would never have dared make such a comparison in print, even with footnotes. All their graph really tells us is that the new ACS produces lower estimates of median income than the Census long form. The ACS may well be more accurate. But it doesn't matter; you can't compare apples to oranges just because the apples are prettier.

From the desk of Jane Galt:

In which I fall through the looking glass

Chris Dillow responds to my earlier post pointing out that natural endowments are not, in fact, fairly distributed thusly:

I think we're at cross purposes here. My point was that nature follows a fair(ish) process. It doesn't, for example, give people great talent simply because they are born into a rich family - more often, the opposite, in my experience.

I was merely echoing a point that libertarians should accept - justice is an attribute of processes, not outcomes. If you draw low natural endowments, you've suffered bad luck, but no injustice.

As for whether natural endowments cluster, they don't do so often enough to worry my egalitarian instincts - correlations aren't that high. To adapt your analogy, the world's best tennis player, Roger Federer has a face like a bulldog licking piss off a nettle (as we say in England).

That said, there of course many people who are short, ugly and stupid - they become politicians.

I am genuinely surprised, not to say stonkered. I cannot in any way fathom how anyone could claim that beauty is more fairly distributed than wealth.

For one thing, beauty is at least somewhat correlated with wealth; poor mothers are much more likely to smoke and drink during their pregnancies, and their offspring are more likely to be obese and less likely to enjoy the benefits of orthodonture.

But beyond this, surely we can concede that at least some of the people who are wealthy deserve it, and none of them got their taxable earnings through robbing banks. A small fraction of them may have gotten their wealth in truly unsavoury ways, but surely that is not an argument for taxing all wealth, but an argument for more vigorous legal safeguards against their behaviour. Contra the belief I have encountered among my commenters, most rich people did not inherit most of their wealth, and most of their income comes from wages rather than capital. Some of my interlocutors seem to be working off an income distribution model they clipped out of the 1928 Catholic Worker.

No one on the other hand, has earned their beauty. (Though perhaps the women getting chemical peels down at Elizabeth Arden would disagree.) At the very worst, we can construct a moral universe in which wealth is entirely unearned, and therefore just as bad as beauty; I cannot fathom how we could say it is worse.

I find this all so strange because the inequality of birth endowments worries me, the heartless libertarian, but now they seem to be saying that it doesn't concern them at all. I mean, I have spent many an unhappy hour contemplating the possibility that the meritocracy, and women's liberation, and widespread wealth, is resulting in an increasing concentration of endowments at the top of the pyramid--and that such a system is self-legitimating, to the elite, in a way that the old aristocracy of birth never was. I assumed that everyone was concerned about these sort of non-monetary unfairnesses, but apparently many liberals are fine with unequal natural endowments, provided only that they are not sullied by pictures of Ben Franklin.

From the desk of Jane Galt:

But what about power demands Jim:

The idea that the rich rig the system in their favour might explain the apparent relationship between higher inequality and lower social mobility, and low mobility in turn justifies the perception that the rich got where they are more by being born and raised rich than by talent and hard work. Again, this is about justice, not envy.

The effect of inequality on institutions is behind the conclusion arrived at by none other than Tim’s favourite economist William Easterly that “Inequality Does Cause Underdevelopment“. And not only does inequality lower growth, it makes what growth there is less pro-poor, as the 2006 World Development Report showed:

the impact of (the same amount of) growth on poverty reduction is significantly greater when initial income inequality is lower. On average, for countries with low levels of income inequality, a 1 percentage point growth in mean incomes leads to about a 4 percentage-point reduction in the incidence of $1 per day poverty. That power falls to close to zero in countries with high income inequality. Policies that lead to greater equity thus lead to lower poverty—directly through expanding the opportunities of the poor and indirectly through higher levels of sustained development.

So, it’s not just envy - the poor (and indeed the middle-classes) have good reasons to want less inequality. Do these apply to the two phenomena Tim et al seem to think are logically equivalent, namely beauty and height?

Generally, no. Inequality in beauty or height don’t appear to corrode our political institutions and slow growth, and we don’t tend to begrudge the beautiful or tall these characteristics because they are more or less randomly distributed within a particular population in each new birth cohort. The main thing upsetting the randomness is in fact income inequality, because plain rich people often get to mate with beautiful non-rich people, which might eventually make beauty more a preserve of the rich. Likewise, one of the main sources of jealousy against the pretty or athletically freakish comes when they manage to gain incredibly riches for no other reason - again, this wouldn’t be so much of a problem if there was less income inequality.

But do beautiful people make life harder for the rest of us mingers by depriving us of potential mates? I suppose we’ve all been there, but fortunately beauty appears to be no more common in either sex, which means there is an equally large proportion of mingers of the opposite sex with helpfully lowered expectations who are therefore more likely to want to ming with you. Plus, I don’t know about you, but I quite like having beautiful people around - it improves the view.

And this is where I am brought up short by astonishment. Are we living in the same world? The one where beauty and height confer substantial income premia? The one where the taller candidate almost always wins presidential elections? You see any buck-toothed, acne-scarred, short, bald, morbidly obese senators with a club foot stumping around Capitol Hill? Suddenly, liberals seem to be the ones arguing that nature is an oasis of fairness that society shouldn't try to tamper with.

Stumbling and Mumbling piles on:

Jim's called it right. The anti-egalitarian attack on Brad De Long is just silly. There are two further points they are missing:

1. Justice is not a matter of preferences. Imagine a ruthless dictatorship which had brainwashed its subjects. No-one would then envy the Great Leader his wealth and power. But we would all agree that this society was unjust. Absence of envy, then, is no evidence of justice. Nor is envy evidence of injustice. I envy Martin Simpson's talent for playing the guitar. But there's no injustice at all here.

2. What troubles many of us egalitarians is the origin of inequalities, not merely their existence. And this is where Jane Galt's analogy with beauty collapses. No-one worries about inequalities of beauty (though in the UK we do offer free plastic surgery to the extremely ugly) because they arose from a fair process - nature. And nature rarely deals anyone a full house. Sure, Tim might be shorter and less pulchritudinous than me. But he more than compensates for it in extra charm. No problem.

However, we can't be sure that inequalities of wealth are so just. Some of them have arisen from historic thefts, rent-seeking, exploitation of monopolies, capturing the state and suchlike. When Greg Mankiw says:

Again, I am flabbergasted. Chris and I seem to have spent the last thirty years in two different universes. His is a sorty of Edwardian storybook where the Angel of Endowments flits gracefully from baby to baby, ensuring that the clever one who plays tennis well doesn't get to also be the swell dancer with the heart-stopping face.

In my universe, however, endowments cluster: the tall also tend to be smarter, better looking, and healthier, in part because being short, slow, ugly and unhealthy are all side effects of problems in early development, thought often to be related to unnoticed infections.

(In my universe, also, most of the rich people on, say, Forbes 400 got there because they built a successful company, not because they got a government monopoly over the toll road to Plymouth; a majority of them did not inherit their wealth; and bank-robbers are noticeably absent. This scales down, roughly to what I find in the affluent neighbourhood where I live. But that difference of opinion is not as unexpected as the believe that non-financial natural endowments are distributed fairly.)

From the desk of Jane Galt:

A representative sample of leftish comments on my envy post would go something like this:

"hahahahahahaha Jane Galt is a total retard! I don't even have to explain why she's such a retard, because obviously if she thinks that beauty is anything like wealth, she's a total [expletive deleted] retard! hahahahaha!!!"

"Wow. Jane Galt thinks that if I want to redistribute wealth, I also want to scar Cindy Crawford's face. No wonder libertarians are evil."

"Jane Galt is totally intellectually dishonest. She completely misrepresented Brad De Long's point in order to further her own selfish, horrible ends."

"Why can't we put libertarians in camps again?"

Let's see if we can't explain why these are not adequate, or even interesting, responses to what I wrote. Sadly, I'm willing to bet a fairly hefty sum of money that almost none of the lefty bloggers who linked to it originally will link to my attempts to rectify their misunderstanding. Because after all the point of blogging is not to have an interesting discussion; it is to make fun of people who don't agree with us, in the company of like-minded companions who will reinforce our conviction that other opinions are risible. But we'll know, won't we, dear reader. And the important thing, of course, is that we all agree . . .

Anyway, a lot of the defenses I saw of Brad DeLong could be paraphrased as "You misread Brad. Brad didn't say what you disagreed with; he was actually saying something incredibly stupid."

Here is roughly what I took Brad to be saying:

Human beings are primates. Primate tribes tend to be intensely driven by status competition. In America, a large component of that status competition centres around the accumulation of wealth, and the spending of that wealth in such ways as to demonstrate your riches (and taste) to other people. Because we are primates, that status seeking is, at least to some extent, a zero sum game; if we all had BMW's, they would cease to be a marker of status. Zero-sum games are ugly, not only from an economic perspective, but from a moral perspective; I can only enjoy higher status by making someone else worse off.

Much of the utility that rich people derive from being much wealthier than everyone else comes from the fact that everyone else is not that wealthy. Therefore, their enjoyment of their increasing wealth comes, in some sense, at the expense of the poor, even if the poor are not materially worse off.

Now, there are actually a number of problems with this, which some other bloggers have raised:

1) Much status comparison is localised. Rich people don't compare themselves to the folks in the housing project ten miles away; they compare themselves to their neighbours. The poor, likewise. All the upper middle class people I know, including ones who make no money, like journalists and academics, believe that the working and middle classes secretly envy us our high social status. All I can say is, having recently spent several years at a working class job, if this is true, then the working classes must be extraordinarily good at keeping secrets.

2) Much status comparison derives from the fact of the income distribution, not its breadth. Movies about rich people in the 1950s, such as "A Place in the Sun", show a smaller material variance, but the social divide between haves and have-nots is if anything larger than it is now. In this sense, it doesn't matter if the richest man in America has $4 billion or $4 million; we envy him for being the richest man in America, not for having a 20,000 square foot Playstation-cum-mansion.

3) People delude themselves (or to put it more charitably, improve their net psychic wealth) by creating alternate status hierarchies they can dominate. I have the most famous female-run economics blog. In order to make myself happy, I have managed to convince myself that this matters.

Nonetheless, I accept that there is a broad dominance hierarchy in our society, and that wealthy and powerful people are on top of it. I believe that 99.99% of people in the world are happier when they are higher on this dominance hierarchy, and unhappier when they are lower. I think that there is a cluster of unlovely emotions surrounding status seeking, which we might call envy and gloating. These emotions are sufficiently complicated that they may shade into more terrible ones, if unchecked, as well as those we recognize as noble, like aspiration. Mr Delong argues in a follow-up post that the emotion enjoyed by the rich is spite, and that this justifies taxing the bejeesus out of them.

I beg to differ, both on the diagnosis and the cure. Most rich people don't spend enough time thinking about the poor to maintain spite's emotional intensity and strong other-focus. The people they want to spite are Ted in the New York office and Susan from Pilates. I have never met any affluent people over the age of 20 who deliberately flaunt their wealth to, or make fun of, the poor to their face; that creature exists only in the movies.

Given that Mr Delong is at the apex of a group I once described as "one of the most radically inegalitarian societies to be seen since Louis XVI fled Versailles", I am surprised at his readiness to attribute such dreadful motives to the rich. I've had a taste of both academia and investment banking. The dominance hierarchy of banking is so strong that if you could get the bankers out of their pinstripes for an hour, you could have filmed your average pitch meeting for the Discovery Channel. Yet when it comes to hyper-obsession with invisibly fine status distinctions, no banker could hold a candle to the average academic--or journalist, for that matter.

I am quite positive that Mr Delong's enjoyment of his prestigious professorship is substantially augmented by its position high in the academic firmament, twinkling light years above adjunct professors at Missoula Central Community College. Would he describe that emotion as spite for those less fortunate than himself? For after all, the existence of a pyramid for them to be at the top of is what makes him and his colleagues successful academics, rather than cranks with an odd hobby of publishing monographs almost no one reads. Should we punish them for their spiteful indulgence? Or should we recognize that it is normal, even laudable, to desire success?

It is not that I admire the rich for their gloating, or disdain the poor for their envy. I think that both are distasteful, in exactly the same degree, because they are both exactly the same emotion: the rich gloat, and the poor long to be entitled to gloat. The fundamental desire--to Lord it over others--is exactly the same; it is not edified merely because the possessor is unsuccessful at it, any more than the attempted murderer is on a higher spiritual plane than the fellow who actually managed to complete the act.

This is not an argument against redistribution per se, as some of my readers erroneously assumed. I think that there are good reasons to redistribute income (or in some cases, at least reasons that I would be prepared to debate): preventing hunger, cold, and premature death; maximising the opportunities that children have to lead a rich and satisfying life; giving a helping hand to those who have been brought low by fate, or even their own earlier bad decisions. I was not arguing that disfiguring Cindy Crawford was in any way equivalent to these; it is not.

Rather, my metaphor was aimed at a specific kind of redistribution: that which is less interested in making the poor better off, than in making the rich worse off, so that they don't make the rest of us look bad. Or as Brad Delong said:

Surely public policy should weigh the spite-generated utility the rich gain from their conspicuous consumption as worth less than nothing?

And in that case, the wealth hierarchy is precisely equivalent to the beauty hierarchy, morally speaking: it is a zero sum game in which a lucky few feel better only when the others feel worse. So to my mind, anything that applies to the enjoyment of wealth by the lucky few applies equally well to the enjoyment of endowments like beauty, athleticism, and intelligence. I am unable to construct a moral argument for cutting down the tall poppies of the income distribution that doesn't apply equally well to conspicuous flaunting of one's pulchritude, physical prowess, or brains. Possibly better, in fact, because beauty and athletic ability don't generate the kind of massive positive externalities that the pursuit of wealth does--even when that wealth is spent on private jets and other positional goods. And there are a lot more wealthy people who started out poor than there are beautiful forty year olds who were horrid-looking at eighteen.

Moreover, even if I wanted to cut down the tall poppies, given that we are and shall remain primates for the foreseeable future, before I start removing wealth from the status competition, I'd like to know what criteria will replace it. I mean, it would be nice if we all started competing on the basis of philanthropy, gourmet cooking, and poetic ability . . . but I think it's rather more likely that political power, physical strength, beauty and style, ancestry, exclusivity of social circles, and mastery of the really gratuitously nasty putdown will become more common metrics.

But that said, I don't want to cut 'em down. I think status seeking, for all that I engage in it, is a depressing game made worthy only because it occasionally has worthwhile side effects. I also think that evolution has made it unfortunately inescapable. If you want money to help the less fortunate lead fuller, richer lives, we can talk. But if you want me to help you shrink the income distribution merely because you have an aesthetic objection to Larry Ellison's harrier, I'm afraid we'll never see eye to eye.

From the desk of Jane Galt:

Sock it to me

Wow. Lee Siegel got busted for sock puppetry. How do you spend this much time on the web and not know that sock puppetry is dangerous to your career?

I don't even understand why people bother--if your arguments are good, why not take credit for them. I actually did sock puppet once, long ago on this blog when it was Live from the WTC, but I wasn't defending myself; I was making fun of me. (I thought of a funny rejoinder to something I'd said which obviously wouldn't be that funny if I was saying it.) I don't remember what the post was, and the comments from that blog are long gone, but even at the time, I remember thinking that this was kind of stupid and juvenile. And I was a brand new blogger in my twenties, not an established media personality. Needless to say, after John Lott, I knew I'd never do that again. What on earth got into Siegel?

From the desk of Jane Galt:

Should we cut down the tall poppies to give the shorter ones more light?

Greg Mankiw muses on the politics of envy redistributing happiness:

Brad DeLong reveals his inner Veblen:

I'm enough of a touchy-feely sociology-lover to believe that a good chunk of the utility the rich derive from their conspicuous consumption is transferred to them from the poor.

This quotation goes to the heart of one reason left-leaning economists like Brad and right-leaning economists like me differ in their policy views.

I recall once hearing Larry Summers ask students a provocative question to spark discussion: If there were some policy that would make the rich poorer without affecting the income of anyone else, would you want the government to flip this switch?

Traditional economic policy analysis assumes the answer is no. After all, the policy intervention Summers described is a Pareto-deterioration. But the answer is less obvious if, as Brad suggests, people derive utility from comparisons with others. In this case, making the rich poorer raises others' welfare, even if their material standard of living is unchanged.

In Brad's world, a rich person conveys a type of negative externality, like pollution. High taxes on the rich can be seen as Pigovian. Economists like me complain that high tax rates on high earners discourage their hard work and entrepreneurship. The Veblenesque Pigovian economist replies, "Precisely!"

While I am much more sanguine than most libertarians about redistributing material wealth from the richer to the poorer (though by the standards of the rest of America, I am still a hard-hearted materialist lout), I cannot believe in this sort of redistribution--"cutting down the tall poppies", as I believe the Australians call it. Perhaps a little thought experiment will explain why.

Beauty, like wealth, is relative--it benefits its possessor only insofar as they are lovelier than the women, or handsomer than the men, around them. Presumably, if we disfigured all the good looking actors in Hollywood, and the models in New York, and . . . well, heck, let's slash the faces of everyone who's better looking than I am. I am younger and slimmer than the average American, and have good teeth, long thick hair, and all the other accoutrements of an upper-middle-class upbringing. So we know that this would bring happiness to far more Americans than it would distress. We dont have to turn them into quasimodo--just make them no more good looking than I am. Just think how happy America could be made if Cindy Crawford had saddlebags and a squint.

But wait! Americans could be made even happier if Cindy Crawford and her ilk had acid poured on their faces to turn them into a twisted mass of scars, and were inflated a hundred pounds or so apiece through gavage. Physical pain could be alleviated by judicious application of modern painkilling technology, providing a huge psychic boost to everyone else at only a mild psychic cost (at least according to Daniel Gilbert) to the pulchritudinous elites.

Of course, to judge from our mass-market journalism, Americans actively enjoy watching young, pretty people suffer. Why else to we spend so much time talking about celebrity divorces, Kirstie Alley's weight gain, and grisly murders of attractive young white girls? So perhaps we should let them suffer--in fact, we should probably film it, so that Americans could download every tear, moan, and horrified scream at their new appearance.

The nice thing about the last strategy is that it doesn't require government intervention--free lance beauty socialists could give the rest of America a big boost in net happiness with every jar of acid they toss.

All right, so we're not going to do this.

But why is this so much more horrifying than the idea of taking the fruits of people's labours--most of which were gotten fairly honesty, by dint of hard work and delayed gratification (even if those efforts got a big boost from education etc.) Is it that beauty is somehow more worthy than wealth? The pursuit of wealth has allowed the masses to escape, as Robert Fogel noted, "From hunger and premature death". The pursuit of beauty has brought us jogging . . . and Slim-fast and six-inch-heels and toupees and expensively educated surgeons who spend their days sucking fat out of their clients' thighs.

Or is it that the body is more sacred than the wallet? Do not most of today's wealthy make their money by presenting their body at work for many hours a day, and labouring with their minds, which are far more sacred to any rational person than their limbs or cheeks?

No, I think the reason that we recoil is that it is repulsive to make people suffer just because others enjoy it. And it is horifying to give free reign to our worst impulses through the power of the state. The quest for autonomy, the thirst for knowlege, the desire to live a cleaner, healthier, richer life, free of hunger and want . . . these are the sorts of values we want our government to express and empower. Envy is not.