October 30, 2005
From the desk of Mindles H. Dreck:Dreck's Annuity
[UPDATED BELOW - 'WE GET (incremental, complex) RESULTS (back in February)']
I recommend almost all of the NY Times Magazine this week, but the article I spent the most time with was the cover story by Roger Lowenstein on the Pension Crisis. Lowenstein provides a convenient inventory of key hazards that can be generalized to all the components of our retirement systems:
- the moral hazards of government pension insurance combined with the tendency of providers to over-promise future benefits relative to current benefits
Given that pension promises do not come due for years, it is hardly surprising that corporate executives and state legislators have found it easier to pay off unions with benefits tomorrow rather than with wages today. Since the benefits were insured, union leaders did not much care if the obligations proved excessive.
- the problems associated with estimating future liabilities when a variety of assumptions about future events are plausible
Corporations have been gaming the system by using the highest rates allowable, which shrinks their reported liabilities, and thus their funding requirements. The P.B.G.C., when calculating the system's deficit, uses what is in effect a market rate; whatever it would cost to buy annuities for everyone covered in a pension plan is, it argues, the plan's true "liability." The difference between these measures can be extreme. Depending on whom you talk to, General Motors' mammoth pension fund is either fully funded or, as the P.B.G.C. maintains, it is $31 billion in the hole.
- the very human tendency for investors/pensioners to undervalue 'annuitization' or certainty of future income
pensions typically annuitize - that is, they convert a worker's retirement assets into an annual stipend. They impose a budget, based on actuarial probabilities. This might seem a trivial service (some pensioners might not even realize that it is a service). But if you asked a 65-year-old man who lacked a pension but did have, say, $100,000 in savings, how much he could live on, he likely would not have the vaguest idea. The answer is $654 a month: this is the annuity that $100,000 would purchase in the private market. It is the amount (after deducting the annuity provider's costs and profit) that the average person could live on so as to exhaust his savings at the very moment that he draws his final breath.
- the tendency to 'smooth out' times of poor fund performance in anticipation of better market results - combined with the tendency to take back excess gains or take 'funding holidays' when the market buoys pension values.
If the stocks and bonds in their pension funds take a hit (as happened to just about every fund recently), they don't have to fully report the impact. Nor do they have to ante up fresh funds to compensate for the loss for five years. A similar smoothing is permitted on the liability side. And though, in theory, Erisa discourages underfunding by requiring offenders to pay higher premiums, its various loopholes render the sanction toothless. Thanks to another loophole, companies that contribute more than the required amount get to skip future contributions even if they later become underfunded. These companies are awarded so-called "credit balances," which remain in place even if the actual balance is showing red.
- the tendency to make pension benefit increases a political or social engineering tool or, worse, raiding the funds themselves in pursuit of political goals or simple greed.
California is a good example of the political forces that have driven benefits higher. In the 90's, Gov. Gray Davis, a Democrat who was strongly supported by public-employee unions, pushed through numerous bills to increase benefits. One raised the pension of state troopers retiring at age 50 to 3 percent of final salary times the number of years served. (Previously, the formula was 2 percent at age 50, more if you were older.) Thus, a cop hired at age 20 could retire at 50, find another job and get a pension equal to 90 percent of his final salary...
....One of the biggest pension offenders is San Diego, where six members of the pension board, including the head of the local firefighters' union and two other union officials, have been charged with violating the state's conflict-of-interest code, a felony. What is interesting about San Diego is that, juicy details aside, its pension mess actually looks rather commonplace. The six board members are accused of making a deal to let City Hall underfund the pension system in return for agreeing to higher benefits - including special benefits for themselves. Explicitly or otherwise, this is what unions and legislators have been doing all over the country.
The administration's goal of an 'ownership society' deals effectively with many of these hazards, but it does hit a rock with #3 - given control over the 'lump sum' pension amount, many pensioners will run out of money, which will ultimately rebound on the work force. It strikes me that our current tax system provides a variety of incentives to set aside retirement money but is not structured well to address the lack of annuitization. The recent changes encouraging 'Roth'-style accounts allowing earnings on taxed principal to circumvent the tax system entirely are a step in the right direction, but perhaps a roth-style annuity is called for as well. Wouldn't we benefit from allowing workers to buy a certain amount of a retirement annuity (say $50/month, inflation-protected) every year with pre-tax dollars, and pledge to keep the proceeds of those annuities protected from income tax throughout the pensioner's life?
I may be wrong on some tax details here, but I believe presently such an annuity can be bought only with taxed dollars or a retirement account, and the annuity proceeds are 100% taxable after all taxed basis (purchase amount paid with post-tax dollars) has been returned to the investor. They have a slight and under-appreciated tax advantage. On the other hand, they are complex, and sold through the over-commissioned life insurance distribution network, both of which repel the average investor.
My point is that any outright guaranty or government-run system carries lowenstein's hazards, so an ownership society is probably necessary. However, the government can do much more with the incentive dollars it is spending now to promote annuitization and reduce the hazards of these policies.
A congressional measure introduced in mid-June aims to encourage the use of annuities by giving people a tax exemption on 25%, up to $5,000, of the income received from annuities purchased through qualified retirement savings plans. The bill, H.R. 2951, called the Lifetime Pension Annuity for You Act of 2005 and introduced by Rep. Earl Pomeroy, D-N.D., was referred to the House Ways and Means Committee. Another bill that offers a tax break for annuities, H.R. 819, now boasts 64 co-sponsors.
See also some typically poignant commentary from Winterspeak:
It probably has to do with social contracts, animism, and the special glow that money from some sources has but money from other sources lacks. I would also add that the last I checked, private savings is available to both the rich and the poor (although their savings rate may be very different) ...If almost half a trillion dollars is a little moral hazard, I'd hate to see what a lot of moral hazard looks like (although maybe Fannie Mae will show me).
On that first point about savings rates, he may be wrong. I found a fascinating NBER study 2-3 years ago that suggests marginal tendency to save is correlated with factors other than income. I sent it to Jane once but I'm still trying to fish it out. When will people stop calling me 'Jane'?
Here's the NBER study summary (I located my copy on my hard drive):
We show in this paper that at all levels of lifetime earnings there is an enormous dispersion in the accumulated wealth of families approaching retirement. It is not only households with low incomes that save little; a significant proportion of high income households also saves little. And, a substantial proportion of low income households save a great deal. We then consider the extent to which differences in household lifetime financial resources explain the wide dispersion in wealth, given lifetime earnings. We find that very little of this dispersion can be explained by chance differences in individual circumstances largely outside the control of individuals' that might limit the resources from which saving might plausibly be made. We also consider how much of the dispersion in wealth might be accounted for by different investment choices of savers some more risky, some less risky given lifetime earnings. We find that investment choice is not a major determinant of the dispersion in asset accumulation. It matters about as much as chance events that limit the available resources of households with the same lifetime earnings. We conclude that the bulk of the dispersion must be attributed to differences to in the amount that households choose to save.
Lowenstein even says something about the Bush administration that will leave liberals gasping for breath:
Enter the Bush administration: it has essentially declared the era of permissiveness over.
except for steel and autos, of course...
October 27, 2005
From the desk of Jane Galt:Media alert
I'm going to be on Radio Open Source tonight around 7:40. Tune in to hear me, Glenn Reynolds, Ariana Huffington, and others discuss conservative buyer's remorse over the Bush administration. Even more excitingly, this is being set up by occasional commenter and self-described "liberal weenie" Contributor B.
Update: Contributor B protests that he is not describing himself as a liberal weenie. Or rather, that while he did, in fact, describe himself as a liberal weenie over instant messenger not five minutes ago, this was subtle sarcasm. My argument is that if you've ever met me, you should know that "subtle" is not the appropriate approach, given that I am about as thick as a Wendy's frostie. If you've ever had a frostie--well, if you haven't, you should go out and get one right now, because along with a Biggie fries they make a meal that is both amazingly delicious, and lacks any nutritional content whatsoever. But that's not the point. The point is that if you have had the pleasure of slurping a frostie, you know that they are pretty damn thick. I mean, you could do permanent damage to your jaw muscles trying to suck one of those critters through a straw.
Anyway, the appropriate label, I am informed, is "angry ex-Republican". This strikes me as a more appropriate label for our quondam commenter, who is neither weenie-ish, nor particularly far to the left. Also, he is adorable, and enjoys travel, fine wine, and long walks on the beach.
Hmmmm. I seem to have gotten myself into a commentary quagmire, with no graceful way to exit this post. Hence I am opting for an abrupt and immediate withdrawal.
From the desk of Jane Galt:We will drive ever forward until all our children are above average!
Arnold Kling has some incisive thoughts about education:
Families try to buy houses in the best school districts they can afford, yet when all families spend more, the result is merely to bid up the prices of those houses. Half of all children will still attend bottom-half schools.. . . In the case of schools and house prices, I would make several remarks.
1. If we have vouchers and a market for schools, then the money that parents are willing to spend to get their children into better schools would be spent on schools, not houses. Assuming that this produces a supply response, the result would be some overall increase in education quality.
2. It could be that with markets and vouchers, the better schools would get more expensive and the poor would not be able to afford them. I call this a "segregation equilibrium," and I suspect that it explains some of what we observe in higher education today. Affluent parents want to send their children to "good schools," meaning schools that are attended primarily by other affluent children, which means that demand is a positive function of price.
3. If "segregation equilibrium" is a problem, then voucher programs should include a "luxury tax" on high-tuition schools, with the money used to boost vouchers for low-income families. In the worst case, if low-income parents continue to get priced out of the market for high-end schools, they at least can use their larger vouchers to procure better teachers and facilities for the schools that their children do attend.
From the desk of Jane Galt:Miers withdraws
Na na na na
Na na na na
Hey-ey-ey
Good-bye . . .
I feel bad that the woman's been humiliated. But even if you think she'll vote your way on Roe (whichever way that is), you should be awfully leery of having a woman with so little apparent interest in legal theory, and such dreadful writing skills, on the Supreme Court. Justices don't just vote "yes" or "no"; they write opinons. And what is said in those opinions often forms the precedent for other cases. Incompetent opinions will leave a legacy that lingers far beyond the next associate justice, and whatever high-profile case you think she can swing for you.
October 26, 2005
From the desk of Jane Galt:Good or bad?
Mark Kleiman says that the delay in issuing indictments is good news for those who are hoping that they will take the Bush administration out to the woodshed and deliver a sound thrashing.
Interestingly, I've been working on exactly the opposite theory: that the longer the delay, the more likely that the charges in the indictments will be for obstruction of justice, with no charge on the underlying crime--or even no indictment at all, with the Fitzgerald team revealed to the world to have been engaging in a lengthy and ultimately unsuccessful game of chicken with the witnesses it is interrogating (though I think this is pretty unlikely). To me, a delay like this would usually indicate that the prosecutor is trying to push this into the weekend news-cycle, where the non-explosive nature of the revelations will be mercifully buried. In general, if you've got something really juicy, you release it as early in the week as possible, so that it soaks up valuable evening news real-estate for several consecutive days.
But that's just the opinion of one journalist. I could be wrong. We'll know by Friday, won't we?
October 25, 2005
From the desk of Jane Galt:Someone in the White House . . .
. . . has waaaay too much time on his hands. Might I suggest sudoku?
From the desk of Jane Galt:Was Rosa Parks for real?
Apparently, some people are arguing that because Rosa Parks was cherry-picked as a test case by the NAACP, what she did wasn't worth talking about.
I mean, are you out of your mind? She could have had a marching band behind her and a faithful band of followers calling out encouragement, and what she did would still be a monument to human courage in the face of discrimination. If you don't think so, why don't you go to some totalitarian country that violently represses dissent by its citizens--which is what the pre-civil rights South was, for all intents and purposes, as far as blacks were concerned--and take a public stand against the government. I promise, me and the NAACP will back you all the way. You game?
From the desk of Jane Galt:Why core inflation?
So why, when economists look at inflation data, do they often strip out energy and food? You see this statistic (known as "core inflation") all the time in news reports about the inflation rate. This bemuses many readers, who feel that they have to pay for food and gas in exactly the same way as they have to pay for rent and television sets, and don't see why the two sets of numbers should be treated differently.
Well, the answer is that food and energy prices are very vulnerable to sudden supply shocks. If you have a bad harvest, or an unusually cold winter, the price of oil or food will suddenly spike. This is important for you to know, of course--unless you want to go bankrupt--but it doesn't tell central bankers much except that they should look into insulating the house next spring.
Central bankers don't need to know whether certain important goods are in short supply; they need to know whether they are printing enough, too much, or too little money to meet the public's demand for legal tender. (Actually, technically, they don't actually print money--in these days of e-commerce, most money is created through the banks, not the mint, but that's a different post). So they strip out volatile items in order to see whether the general price level is rising too fast.
Believe it or not, a lot of people think that a little bit of inflation is good. Inflation helps the economy deal with sticky wages and prices. We call wages and prices "sticky" when they appear to get "stuck" at their current level, rather than moving downward when demand for goods or labor drops.
People are very reluctant to accept pay cuts, even when the company is in pretty dire straits. Sticky wages cause problems in the labor market, because they keep the supply of labour in the market too high, and the demand for it too low, meaning that you get a lot of people out of work. It can take a long time for the market to adjust back to an equilibrium state where the number of people looking for work roughly meets the number of people employers want to hire.
Inflation eases the problem of sticky wages by eroding the real value of wages, while keeping the nominal value the same, thus avoiding the psychological hurdle of taking a pay cut. Too much inflation is very bad, but a few percentage points can lube the engine of commerce. It's sort of like cologne: just because one splash is bad, doesn't mean ten is better. Unfortunately, that's a lesson it took the world's central banks a long time to learn.
From the desk of Jane Galt:We shall not soon see her like again
Rosa Parks has died. Her courage, however, lives on.
From the desk of Jane Galt:Here's what I don't understand . . .
Slate says that Earthlink is building Philadelphia's much-touted new wireless network at no cost to the city. Yet it is expecting to charge only a fraction of what, say, T-Mobile charges me at Starbucks--just $20 a month for regular folks, $10 a month for low-income people. How is this affordable? Is T-Mobile ripping me off? Or is there some hidden subsidy I don't know about?
And while we're on the topic, what is up with this Ensign character introducing a bill to forbid cities to build wireless networks?
From the desk of Jane Galt:Bernanke for the Fed
What does it all mean, I hear you cry? The Economist sums it up.
From the desk of Jane Galt:Oooops
The oddly named Bawag, an Austrian bank, may have made the worst loan in the living memory of Western financiers. This was the bank that lent Refco's former CEO the money to repay the $430 million in debt he'd been hiding from investors and his board of directors. The collateral for this loan? Why, Mr Bennett's Refco stock, which is now worth about as much as the collection of used hankies that a friend of mine found in one of the drawers of his new apartment. Long or Short, which I highly recommend to everyone, is taking nominations for other worst loans of all time.
From the desk of Jane Galt:Mein gott!
Yesterday afternoon I mailed out the pound cakes that I promised my readers in exchange for a contribution of $100 or more to Katrina relief. They are moving via UPS ground to their destinations even as we speak. If you do not get your pound cake within a few days, please drop me a line to let me know, and I'll get busy tracking the package down.
On a more sobering note, do you have any idea how much it costs to get Mailboxes Etc. to pack and send a simple pound cake? A little more than $30 apiece. So when you get that pound cake, you'd better darn well enjoy it. Light some candles, pour yourself a fine dessert wine, put soft, romantic music on the stereo, and gaze soulfully out the window at the stars as you lift each moist, delicious bite to your mouth. Please. Do it for me.
October 21, 2005
From the desk of Jane Galt:Does anyone else think that our soldiers must have been wearing their bad idea jeans when they thought this up? First rule of a successful non-despotic occupation: don't do things that will result in all the clerics in teh land mounting their pulpits to denounce you.
From the desk of Jane Galt:Wage slaves
Brad De Long slams George Will for claiming that the lavish wages and benefits automakers receive are unsustainable, and then ignoring Japan and Germany, where he claims the bulk of the world's cars are manufactured.
But of course, while corporate headquarters are located in Germany, German car companies are relocating their factories to Eastern Europe as fast as their hot little feet can carry them. Wages are lower in Eastern Europe, and of course, those countries do not have the lavish health care systems funded by huge social security contributions. Japanese car companies, meanwhile, are relocating much of their production . . . to the American south, where their workers are not unionised.
This is a mixed, picture, of course; Japanese automakers are also locating to Canada, which has national health care. But to argue that Germany and Japan have somehow found a way around the problems of an aging industrial population is just wrong.
Update I should point out, as well, that Japan relies on an extraordinarily rigid regulatory regime to keep imports out of its markets, which is what allows its domestic auto business to support a pretty lavish pay regime. Obviously, if we blocked all auto imports, Detroit would also be in pretty good shape. American consumers would be stuck driving ugly, unreliable cars, but who the hell cares about them?
From the desk of Jane Galt:Meme check
Daniel Drezner points out that Lawrence Wilkerson's recent speech confirms two arguments I've been making: that the Bush foriegn policy decision making process is faulty, and that pretty much everyone with any expertise on the matter thought that Saddam had an active WMD programme. The "Bush lied" meme is wishful revisionism; the "Bush screwed up" meme is, IMHO, not.
October 20, 2005
From the desk of Jane Galt:Sic semper tyrannis
As long time readers of this site may know, I am opposed to the death penalty. (If there is sufficient demand, I will elaborate my reasons for this in a later post). Yet, with Saddam on trial, I am tempted to make an exception.
Question for readers who are also opposed to the death penalty: how do you feel about executing Saddam? What are your thoughts?
Note: I'm only interested in answers from people who are opposed to the death penalty, not because I do not respect opposing views, but because in the case of someone who already believes in the death penalty, "Hang him high!" is not a surprising answer. If you are in favour of the death penalty, but think that Saddam should not get it, please do chip in with your thoughts, but otherwise, please leave the thread to opponents of executions. If my readership contains any such.
From the desk of Jane Galt:Derailing Doha
The French, bless their farm-loving little hearts, seem to be doing their best to make sure that the Doha round of WTO talks doesn't go anywhere.
If Doha doesn't make progress on agricultural liberalisation, which is the biggest issue remaining on the free trade agenda, progress on trade could well halt in its tracks. It's been getting progressively harder to liberalise for quite some time, and it's hard to see where the impetus for another round of protection-busting would come from if this one fails.
(Memo to readers: please don't tell my farmer relatives that I told you about this. As far as they're concerned, I think milk price supports are, like, the best thing ever.)
October 19, 2005
From the desk of Jane Galt:Whether or not Harriet Miers is qualified to be on the Supreme Court, it's pretty clear she'll never find work that relies on writing talent.
From the desk of Jane Galt:Voter ID
A Georgia judge has just struck down the state's law requiring ID to vote.
One way to think about this is that there's an inevitable tradeoff between keeping people out of the polls who don't have the right to vote, and improperly excluding citizens, and that the state should err on the side of letting as many people as possible vote.
I don't think that really holds up to scrutiny, though. For every illegal voter you enfranchise, you disenfranchise a legal voter who voted the other way.
Another way to look at it is to say that it's simply a political choice: Democrats want as many voters as possible, Republicans as few, and that you should just root for your team.
I don't think that's right either, though. While I agree that any time we tighten voting requirements, we will inevitably exclude some people who should vote along with those who shouldn't, it doesn't follow that the ratio of legal to illegal voters is 1:1. Where the cost-benefit ratio of a measure is high (i.e. where we can exclude a lot of illegal voters at the cost of only a few legal voters), then I'd say it's obvious we should take that measure, because doing so will result in increasing the total effectiveness of legal votes. Remember, each illegal voter effectively disenfranchises a little one, so if we can reduce the illegal voters by a greater number than the legal voters, the net result will be positive.
This presumes, of course, that you think that the purpose of voting is to produce election results, and not to engage in some sort of elaborate political kabuki where everyone feels more empowered and connected by participating, regardless of the outcome. I am assuming that my readers do, in fact, feel that the purpose of an election is to elect people.
The question is, then, whether photo ID requirements are unduly onerous; will they disenfranchise many legal voters? Or, as Democrats argue, will they disproportionately disadvantage one class or political group?
Well, I don't think that the law should take cognizance of whether it has a disproportionate impact on one party; the last thing we want is election law that starts from the results and works backwards to the process. And I have to say that when I hear people waxing indignant about the effect on the poor, my general reaction is "c'mon, I didn't just fall off a turnip truck."
Yes, undoubtedly more of the people without ID's are poor. But most of the poor who lack IDs are illegal immigrants, who aren't (and IMHO shouldn't be) allowed to vote. The overall number of poor people in this day and age who cannot produce a photo identification is trivial. It is nearly impossible to function in this country without an ID, and the poor, who need valid ID to collect government benefits and gain employment, are no exception. Democrats are against photo ID's because illegal immigrants vote Democratic, and it is easier to impersonate someone else in large urban precincts than it is in the suburban and rural areas where there are more Republicans. They cannot reasonably be convinced that a substantial number of poor people who are of sound mind lack any form of identification--no, not even the elderly, most of whom needed IDs at one point, even if they are now housebound.
Is this kind of vote fraud widespread? Well, we'd find out if we put photo ID requirements in place, wouldn't we? Probably absentee ballot fraud is more widespread, which is an excellent reason that you should have to have a notarized application for absentee ballots, not an excellent reason that we should throw up our hands and declare that it's just too darn hard to prevent election fraud.
I'll go even further: I think that there should be a national voting card with a picture on it, and a national database, and in national elections the database should make sure that you only vote in one place. I can only imagine the screams of horror that will ensue at this suggestion.
Update Instapundit's take is pithier:
GEORGIA'S VOTER ID REQUIREMENT was struck down as discriminatory. That's to vote though. You still need one to buy beer. . . .
From the desk of Jane Galt:Observation
There seems to be a sea change in the methodology of comment spammers. Once there was a basic rule about comment spams: one comment, one product. Now I'm getting spams that advertise everything from Barely Legal Teenage Girls to antidepressants and home equity loans in one gigantic post. I must puzzle out what this means.
From the desk of Jane Galt:Off to War
If you haven't seen it, I highly recommend that everyone--for or against the Iraq War--see the Discovery Times documentary series "Off to War". The series follows Arkansas National Guardsmen and their families during their deployment to Iraq, and it's absolutely extraordinary. I'd say it's pretty clear that the filmmakers are against the war, and I suspect that they spiked a lot of pro-war comments from the soldiers and their wives in order to build an uncomplicated story arc about disillusionment that is, at best, only partially true.
Nonetheless, I highly recommend it. The stories of the soldiers and their families are deeply compelling. And no matter how adamantly you are in favour of the war, it behooves you to take a look at the sacrifices that our soldiers are making in order to prosecute it.
From the desk of Jane Galt:On political hindsight
Nick Gillespie and Veronique de Rugy have done up a pretty damning indictment of the Bush administration on spending restraint. Is it time for those who voted for him to jump ship? Certainly, with the Miers nomination, a lot of people seem to be getting tempted.
Am I suffering buyer's remorse? Yup. I'm reconsidering my support for both the Iraq war, and the Bush administration. Some of my interlocutors will no doubt say that this is meaningless now that it is too late to do anything about it. Others will say "better late than never".
I say this not because I think that democratization was not worth the cost of invasion, nor that it was impossible, but because I think we've muffed it badly. And I think that the combination of Republicans in the White House and Congress has resulted in a porkfest that is bad for the budget, and bad for the country.
So why won't I just come out and say that I regret having voted for Bush? Because I'm still not quiiiiite sure that Kerry would have been better for my purposes. And why won't I just come out and say that I was wrong about the war?
Well, in some ways, I will say that I was wrong about the war. The decision making process I used was flawed. I was absolutely, 100% positive that Saddam Hussein was trying to make chemical and nuclear weapons, because the way he was acting was the way I would have been acting if I had been a totalitarian dictator. Problem being that I am not a totalitarian dictator, and moreover, haven't the personality to become a totalitarian dictator, and hence had little idea how I would act if I had been the kind of person who makes it to the top of the totalitarian dictator job market. Assuming that I could analyze his behaviour in terms of mine was a major decision error.
Still, I might well have supported invasion anyway, simply because a) he was an awful totalitarian dictator and b) even if he didn't have nuclear weapons or plans to invade his neighbours now, there was no way we could trust him not to in the future. But support for invasion would have to be predicated on the conviction that we could put something better in Mr Hussein's place. So far, it seems to me, we have manifestly failed to do so. While I didn't believe that Iraqis would greet our soldiers with flowers, I made three huge errors here as well: I totally overlooked the national humiliation that Iraqis would feel at having us invade their country, however much they hated Hussein; I radically underestimated the degree to which sectarian pressures, foreign terrorists, and bitter members of the former regime would stimulate violence; and I assumed that we would go in with a) enough troops and b) a plan. None of these things seems to have been true. Oh, I could forgive the Bush administration for having a plan that didn't survive contact with the enemy, but they don't even seem to have had that. So these were big decision errors, and I own them.
So why am I still on the fence about Iraq? Why, because I'm hoping that something good will come out of all of this. It took us five years of bitter civil war, another five of reconstruction, and almost a century of segregation before we finally pulled together as a country. If we can do it, so, i hope, can Iraq. And if they do, then I, with perfect hindsight, will declare my decision justified. This is not a good guide to future decision-making, of course, but if those who were against the war can use hindsight to their advantage now, then I reserve the right to do so in the (probability unknown) event that an actual working democracy emerges out of all this.
October 18, 2005
From the desk of Jane Galt:Dahlia Lithwick on the Miers nomination:
So I am begging now. This is embarrassing. End it. Karl Rove: Either plant the 500 pounds of cocaine you keep for such occasions in Miers' car, or trot out some actress to play her bitter, gay ex-lover. You have the power to end this. So do whatever it is you do. But end the unnecessary pain and suffering now, before someone really gets hurt.
From the desk of Jane Galt:Zoning abuse
I've long argued, from my libertarian-ish perch, that using zoning and community boards to keep density down is an abusive use of government by the haves against the have-nots. Nathan Newman makes basically this argument from the left:
. . . while I understand the nostalgia for Brooklyn's low-rise housing and it is lovely for those who can continue to live there, the reality is that blocking higher density there condemns others to homelessness and the rest to increasingly long commutes. And while quaint neighborhoods are preserved in Brooklyn, it means more people will be driven out into the suburbs to create more strip malls, SUVs, environmental degradation, and Republicans.These are the facts of Brooklyn's Atlantic Yards proposal (facts taken from this report by project critic Pratt Institute CCED, who I have great respect for, along with a few other sources):
* At least 4500 units of housing, with up to 1500 additional ones to be built.
* 2250 of the units will be dedicated for low- and moderate- income families in an innovative agreement with the community group, ACORN.
* Where only 334 people have housing currently, at least 9810 people will have housing with the new development.
* 11,175 permanent office and retail jobs in the commercial space created.
* All construction and all future building maintenance will be with union labor.And the project sits on the third most important transit hub in New York City, where nine subway lines and the Long Island Railroad converge -- exactly the kind of spot where high density housing should be.
Which is why opposition to high density housing at this site is even more perverse. While there are many reasonable critiques of the plans for Atlantic Yards (the public financing, making sure street-level retail integrates into the community, and so on), it still remains that a pervasive critique is too much new housing, period. As sterling a progressive as Chris Owens, who is running for Congress in the district of his father Major Owens, argued in comments:
Yes, Brooklyn needs housing -- as does the rest of New York City. Yes, affordable housing is needed throughout the City. But, Nathan, the real answer to that problem is not simply building more units.Except it is. Every single fewer unit in Brooklyn, Manhattan or other easy commute into jobs in the City means more people forced out to long commutes on suburban trains or worse in cars. And it means more construction built with non-union, low-wage labor. And it means more people soaking up resources in suburban sprawl instead of using the nine subway lines that are right near the Atlantic Yards. Just this weekend, I was at a New Jersey suburban barbecue filled with refugees from Brooklyn who could no longer afford to raise their families there.
To look at development only from the immediate concerns of local residents-- whether Brooklyn or San Francisco or any other progressive area where urban density is fought in the name of "community" -- is to commit the worse sin of thinking only locally and ignoring global effects. If urban residents want to condemn suburbanites for their SUVs and day labor construction exploitation, they sure should be fighting like hell to create affordable urban housing alternatives built with decent wages.
As an aside, I am flabbergasted by that comment of Chris Owens (but not too flabbergasted, as I am familiar with the economic fancies of our local politicians). How does even the most left-wing politician believe that there is some way to improve the housing situation of the poor without, well, building more houses?
From the desk of Jane Galt:Good question
Daniel Gross asks this question about Refco:
. . . the company filed for bankruptcy last night.A question: the company's shares last traded in the pre-market on Thursday, Oct. 13, at $7.90. Was it fair and appropriate for the NYSE to halt trading in its shares, even as news continued to trouble out about the company's woes?
From the desk of Jane Galt:How humane
Orac has a long post on the history of euthanasia, pointing out that until the Nazi atrocities were revealed, a movement to kill the "feebleminded" seemed to be gathering steam in America. Only the association of such actions with the Holocaust stopped the trend in its tracks.
If it hadn't been for the Holocaust, we might very well now have an active program of disposing of disabled children, at least the ones that weren't aborted. And the moral force of peer pressure being what it is, I'm willing to bet that most of us would endorse it as humane and right. Makes you think, doesn't it?
October 15, 2005
October 14, 2005
From the desk of Jane Galt:Forged?
Juan Cole says the Zawahiri letter is probably a forgery. It struck me as a little tooo good, if you know what I mean, but that means approximately nothing, since I am not in the habit of reading letters written by fundamentalist muslims. Mr Cole, however, is, and his criticisms seem (to my completely ignorant eyes) pretty valid.
From the desk of Jane Galt:Lend me a million?
I have spoken to my boss about the possibility of obtaining $430 million dollars in loans from my company in order to pursue some personal projects, such as ownership of a small but well-situated island in the Caribbean. But apparently, only CEO's qualify for that sort of treatment. Sadly, he persisted in this argument even after I'd explained that I'd be more than happy to keep the transaction off hte books so that our investors wouldn't get all worried about it.
From the desk of Jane Galt:Huh?
Daniel Gross says it's ridiculous to tell the Chinese to start stimulating domestic demand:
Treasury Secretary John Snow, on his trip to China, urged his hosts to stop spending so much money and adapt U.S.-style consuming, spending, and borrowing habits. Yeah, that's exactly what we need: a billion more people in this world leveraging up homes they can't afford, to buy SUVs they can't afford to drive, to drive to the mall to buy merchandise they can't afford.U.S. exports may never be competitive in the Chinese market. But if Snow is successful at encouraging the Chinese to binge on credit, the already-robust U.S. bankrtupcy industry may find itself with a gigantic new market.
Last time I looked the Chinese savings rate was in the range of 50%. They're a loooooooooooooooong way from a credit binge, even if they had a banking sector robust and sophisticated enough to provide that kind of consumer credit expansion, which they most definitely don't.
Saying that China needs to generate domestic demand is not some kind of wacky Republican plot to ruin the world economy; it's the sober and considered opinion of economists at places like the World Bank and the IMF, who have been urging China to do this for quite some time. The reason is that the world, and especially Asia, have become dangerously dependant on the American consumer to soak up growing mountains of exports. When the American consumer retrenches, as now seems inevitable (but don't ask me when), the result is going to be a nasty economic shock in countries where consumer demand is too lacklustre to pick up some of the slack. Like, for example, China.
From the desk of Jane Galt:Public service announcement
Walker's whole wheat (wholemeal) shortbread is very, very bad. I say this as someone who likes both shortbread, and wholegrain products; in fact, I have just recently finished a delicious bowl of 100% pure shredded wheat. But there is something about the combination of chewy whole grains, on the one hand, and the buttery shortbread base, on the other, that is really repulsive, like eating oleo mixed with sand.
From the desk of Jane Galt:Thank god for this!
Before, I was just not running marathons because I am bone lazy and have approximately the stamina of a 90-year old terminal emphysema patient chasing a greyhound while smoking a pipe and carrying a fireman on her back.
But now Art DeVany gives me even more reasons not to become a marathoner.
From the desk of Jane Galt:Is the Bush administration laying the groundwork for Amtrak's demise?
Kinda sounds like it.
October 12, 2005
From the desk of Jane Galt:What did in Delphi?
Brad DeLong links Max Sawicky accusing Delphi of screwing over its retirees in order to enrich its managers and stockholders:
MaxSpeak, You Listen!: DECLARING WAR ON RETIREES: The public does not usually turn to the CEOs of bankrupt companies for wisdom, but Steve Miller, the CEO of Delphi, hopes to change this pattern. Mr. Miller warned that Delphi's bankruptcy is a foretaste of "inter-generational warfare" as the interests of the current generation of workers is pitted against the interests of retirees.
Since the punditry will no doubt applaud Mr. Miller's courage, let's get some facts on the table. Delphi did make generous commitments to earlier retirees. Of course it also paid substantial sums to shareholders in the form of dividends and also paid rich salaries to its top executives. In principle, Delphi's current workers could go to war against either Delphi shareholders or its higher paid managers to keep their current paychecks. They could require them to repay some of the dividends or fat salaries earned over the last two decades. But, Mr. Miller and his colleagues have set up institutional structures that leave the incomes of these groups beyond the reach of Delphi's workers.
In this way, Mr. Miller can tell the current generation of workers that the only place to get their paychecks is by taking back the benefits that retirees have already worked for. Were the benefits too generous? Believers in a free market don't ask such questions -- the benefits were part of a contract and would be honored by any honest libertarian. However, the law is structured so that many retiree benefits can be retaken (most importantly health care coverage) even as the past salaries of the executives that drove Delphi to bankruptcy remain beyond reach.
It is also important to note that much of the "inter-generational war" is attributable to the fact that the United States has by far the most inefficient health care system in the world. We pay more than twice as much per person for health care, yet rank last among rich countries in life expectancy. If the U.S. health care system were as efficient as the Japanese, Canadian, or even the French system, Delphi might not even be filing for bankruptcy. Unfortunately, the people who hold power in this country won't let health care reform be discussed. They would rather tell young workers to beat up on their parents and grandparents.At the corporate-structure level, the big problem is that retirees (like workers, stockholders, and bondholders) have claims on corporate cash flows. Workers' claims at a company like Delphi are secured by the fact that if they don't show up, nothing gets made and there are no cash flows: Delphi's jobs are very highly-skilled indeed, and replacing any significant chunk of the workforce with people off the street is not a realistic option. Stockholders' claims are secured by the fact that they vote for the executives of the company--and can throw out the executives if they don't like what the executives do. Bondholders' claims are secured by their ability to throw the company into bankruptcy if they are not satisfied and by bankruptcy judges' mandate to protect their interests.
Retirees have claims on cash flows but no institutional mechanisms to secure their power if things go south--save for the fact that the PBGC will step in and cover some of their pension costs.
This is a big problem.
That's one way of looking at it. Another way of looking at it is that unlike stockholders, management, and current employees, retirees have claims on the company that are unrelated to current income. They are guaranteed a certain amount of pension and pretty much unlimited health care regardless of the company's earnings.
Bondholders are also guaranteed a payout without regard to income. But obligations to bondholders, unlike those to retirees, are fixed: companies owe a certain amount for a certain period of time, and no more. Mandatory obligations that have no cap on amount or duration will, if they represent a significant portion of expenses, almost inevitably cause trouble for a company. This is particularly true in the case of health care expenses, which are only fluctuating one way: up. Given the duration of the obligation--many of the retirees are collecting on promises made more than half a century ago--it's hardly surprising that many companies are finding they are not in a position to pay out.
And claiming that the real problem is a lack of national health care is just silly. Whether or not you support single-payer, the fact is that most health care for the elderly is nationalised--and pretty much everyone, left, right and centre, acknowleges that Medicare's costs are rapidly spiralling out of control. Health care costs for the elderly are high because America "wastes" a huge amount of money giving them care that they wouldn't get in other countries. This doesn't necessarily show up in mortality statistics, but some of it--like heart surgery and hip replacements for people in their late seventies--would show up in morbidity statistics, if such things were collected. We could argue about whether things like extreme end-of-life measures are wasteful--but AFAIK Medicare has been no more successful at curbing such heroic interventions than private plans. The fact is, we're spending a lot of money on the elderly, and will spend even more in the future, because no one wants to tell granny that she can't have her 1% shot at living another six months.
And is that really such a bad thing? Are you willing to be the one to tell her to suck it up and die? If you're not, you shouldn't ask your doctors or health care administrators to do it either.
From the desk of Jane Galt:Kidnapped!
This isn't as dire as the headline makes it sound:
American, British journalists abducted in GazaMasked Palestinian gunmen kidnapped two foreign journalists, an American and a Briton, in the Gaza Strip on Wednesday in the latest sign of lawlessness in the coastal territory after Israel's pullout last month.
The two, both working for Knight Ridder newspapers, were seized by assailants who stopped their car near the town of Khan Younis and took them away at gunpoint, their Palestinian translator, Ziad Abu Mustafa, told Reuters.
Palestinian Interior Ministry spokesman Tawfiq Abu Khoussa said Palestinian security forces had mounted a search for them. There was no word on the motive for the kidnapping. The journalists' names were not immediately known.
A number of foreign journalist and aid workers have been abducted in the Gaza Strip in recent months by militants, mostly from President Mahmoud Abbas's Fatah group, pressing complaints about jobs and corruption in the Palestinian Authority.
All have been released unharmed, usually within hours.
As a journalist, I should probably be horrified. But somehow it strikes me as funny, and even hopeful, that these armed militants are abducting journalists for the sole purpose of making them listen while they bitch about the government.
October 10, 2005
From the desk of Mindles H. Dreck:Alive enough to pay license fees
Tigerhawk offers a game theoretical analysis of the RIM/NPT litigation.
There's an odd qualification in the article he cites (emphasis mine):
As part of that litigation, NTP, whose only assets are wireless e-mail related patents, had been granted an injunction banning the sale of BlackBerry devices in the United States and forcing Research in Motion to stop providing e-mail services to all American customers except government account holders.
As long as the Feds are busy thumbing away at their Crackberries, they won't be tempted to get involved, I guess.
October 09, 2005
From the desk of Jane Galt:Lawsuit culture
Is it the result of our lax regulatory system, or the decline of unionisation?
Color me skeptical. Tyler Cowen asks whether the Vioxx lawsuit is the best argument for the FDA. But the FDA, at least, is renowned for being tougher than its European counterparts; so how come we get the lawsuits and the Europeans don't?
Well . . . I'm going to go out on a limb here . . . would that be because they have really, really different legal systems?
We think of ourselves as "sharing" a legal tradition with Britain, but of course most of our "modern" laws--the ones that deal with corporations, bankruptcy, and so forth--were pretty much entirely established after we split. Perhaps more importantly, we're pretty much the only country whose basic laws about property, lawsuits, etc. were written in the nineteenth by officials for the benefit of the Great Unwashed, instead of the propertied elite.
As I discovered when I wrote about bankruptcy, this really, really matters. Comparing the American bankruptcy code to the various, grossly more restrictive European ones, it might seem reasonable to conclude that the American bankruptcy code is so lax because our social protections are so weak; thus we need easy bankruptcy to compensate for the slings and arrows of outrageous fortune. Indeed, several of the modern bankruptcy experts I consulted advanced exactly that theory. A bankruptcy historian set me straight. American bankruptcy is looser than European bankruptcy because in the 19th century, when the code was written, we had a large class of property owners with heavy debt and marginal incomes: the farmers and ranchers cultivating the land that had recently been opened in the west. They fought for easy bankruptcy against the "money interests" of the East coast, and thanks to the fact that each low-population state got the same two senators as New York and Massachussetts, they got it. Liberals who like to rant about the unfairness of the senatorial system, take note that it has worked to your benefit in the past.
Similarly, my understanding is that Americans have from the very beginning been more litigious than Europe--again, at least in part because we had a large number of small property owners who liked to sue each other over things like property lines. They were helped in this by the fact that the legal profession had no barriers to entry; you could become a lawyer by studying under the supervision of an experienced lawyer. This is how Abe Lincoln got his start.
The inevitable result was that our laws were written to benefit the su-er, not the su-ee; "loser pays" statutes are only one example. My understanding is that American judges are far more deferential to juries than their counterparts in other British common law countries, and on the continent, were laws are largely based on the Napoleonic code, judges are even more autocratic.
One peculiar feature of our laws is particularly important: most lawsuits were initiated under state law, not Federal. That gave legislatures particular incentive to give plaintiffs a free hand with lawsuits against corporations, because while the plaintiffs would certainly be local folks, the corporations often wouldn't.
There could be all sorts of legal differences I'm not familiar with. For example: do the regulatory regimes in Europe give corporations a presumption of innocence when their products are cleared? Ours doesn't. The fact that health care is paid for by the government in Europe undoubtedly has much to do with the lower incidence of lawsuits; even when doctors are independant contractors, the fact htat the government pays their fees gives lawmakers a pretty stark incentive to keep the cost of lawsuits down. I remember reading about someone in Britain who got the wrong limb amputated by the NHS and was rewarded with, IIRC, $30K for their trouble; what American could be fobbed off with so paltry a figure? Also, I think that the class action, which gives attorneys incentive to press claims which are too trivial to litigate individually, is unique to America. As, I believe, is the contingency fee, which certainly allows a lot of lawsuits that wouldn't otherwise be brought.
Perhaps this argument is true for a narrow class of employment lawsuits. But I just don't think it holds up over the entire spectrum of personal injury, malpractice, product liability, and other cases that are seen in the American legal system.
So why are lawsuits increasing? I'd plump for several factors: an increasing number of lawyers; the rise of class action lawsuits in the 1970's, which provided large trial firms war chests to elect legislators friendly to their cause; people using an increasing number of products whose innards are mysterious to them; better communications, which make it easier for people to realize they have an actionable case, and easier for lawyers to collect clients; a cultural shift which has convinced parents that if their baby drowns in a bucket, the bucket manufacturer is somehow at fault for failing to warn them that this could happen.
But the single biggest factor, I'd claim, is that we're getting richer. That means that we drive more miles and consume more goods, which of course increases the chances of one of our toys somehow going wrong. It also gives us more income out of which to pay for lawyers, and makes more companies a more attractive target for lawsuits. If lawsuits are the price we pay for getting richer, that's a bargain I'll take.
October 07, 2005
From the desk of Mindles H. Dreck:Friday afternoon complaining
Hey - I survived too, Glenn. First Nikon-centrism, now this? And I'm tall and leggy as well. But I'm also "bony and blotchy and covered with hair", which probably explains the oversight.
Speaking of my co-blogger and Scotsmen, I'm surprised Jane hasn't commented on this.
October 06, 2005
From the desk of Jane Galt:To ride or not to ride
Word comes that there is a credible threat of a plot to bomb New York's subways--just as I need to get to 23rd street from my 57th street office, and then back home to the upper West Side. Quick: mathematicians and engineers tell me what the odds are of being hit if I depart from a major hub, and one train passes through the station approximately every three minutes at rush hour?
From the desk of Jane Galt:Status v cash
Arnold Kling has a very good point:
Instead, I suspect that the most likely alternative to economic motivation is a worse motive: status-seeking. I believe that is more important to curb our lust for status than our lust for goods and services.The drive for economic gain helps the individual, and, as Adam Smith famously showed, helps others. Trade and economic growth are positive-sum games, in which there can be winners without losers. Moreover, when people seek economic gains, this is usually transparent. You usually understand when you and others you transact with are trying to improve your economic well-being.
Status, on the other hand, is typically a zero-sum game, in which one person's gain comes at the expense of others. Adding to the evils of status-seeking is that people often deceive themselves and others into believing that they are doing something for a higher motive when in fact they are seeking status.
From the desk of Jane Galt:Dan, I think you forgot something
I often enjoy Daniel Gross's writing for Slate and the New York Times. But this blog post ignores some rather pertinent information:
Bankruptcy filings are on the rise. Andrew Blackman reports in the Wall Street Journal:
Debt-laden consumers across the country are rushing to file for bankruptcy before a tougher bankruptcy law takes effect Oct. 17.
Filings jumped to a record 68,287 from Sept. 26 to Oct. 1 from the normal level of about 30,000, according to Lundquist Consulting Inc. of Burlingame, Calif., which compiles bankruptcy statistics from daily reports by U.S. bankruptcy courts. Filings have risen 14% so far this year from 2004, to more than 1.3 million.In personal bankruptcy, people who don't have many assets to begin with lose much of what little they have. So much for extending the ownership society.
Meanwhile, at the upper rung of the income ladder, ownership is increasing apace.
Most of that sudden spike in bankruptcy filings seems to be people moving their filings forward, not a radical increase in the underlying level of bankruptcy. It's been a couple of months since I looked at the data, but I've seen no evidence that the Bush administration has presided over any particular increase in bankruptcy other than a secular trend towards increasing bankruptcy that started long before Bush took office, and has much more to do with increasing consumer credit, working mothers, and declining personal savings rates than it does with the policies of this or any other administration.
October 05, 2005
From the desk of Jane Galt:Heee!
I just received a missive from some activist group I've never heard of, urging me to contact Congress and the White House to urge the appointment of a qualified "state or feral judge" to the Supreme Court. I like the idea . . . particularly the picture that is now forming in my mind of the new judge crouching under their desk with bared teeth as Justice Stevens and Breyer try to gently coax them out with a bit of raw meat taped to the end of a gavel. Or leaping across the room to savage the appellate lawyer offering a particularly specious argument. But how will we keep a feral judge from chewing up all the lovely woodwork?
From the desk of Jane Galt:Oh, what'll we do with a dead dictator?
Russia asks that question about Lenin's embalmed body.
For eight decades he has been lying in state on public display, a cadaver in a succession of dark suits, encased in a glass box beside a walkway in the basement of his granite mausoleum. Many who revere him say he is at peace, the leader in repose beneath the lights. Others think he just looks macabre.Time has been unkind to Lenin, whose remains here in Red Square are said to sprout occasional fungi [bleccchhhh!--ed], and whose ideology and party long ago fell to ruins. Now the inevitable question has returned. Should his body be moved?
From the desk of Jane Galt:Quote of the day
The head of a British business group on the negotiations between European trade commissioner Peter Mandelson and the chinese in the recent "Bra wars":
"One of them was an unaccountable, unelected politician from a sprawling bureaucracy who was promoting protectionism. And the other was Chinese."
Via The Corner.
From the desk of Jane Galt:Words to live by
Every so often, I randomly troll blogspot for new blogs. Today I came across this:
People often ask me, "Mister Juggles where should I invest?" or "How should I decide whether to buy Company X's stocks, bonds, options and exotic derivatives?" To that end, I have decided to create a list of investment rules that will allow readers to quickly qualify or rule out certain companies as potential investments. This process will continue over time as these rules come to mind.Rule #1: Avoid any company if the company's CEO responds to a legitimate question with profanity and/or personal attacks. This applies double if the profanity occurs during a quarterly conference call. Consider shorting the stock or buying out-of-the-money put options.
Rule #2: Avoid companies that engage in transactions wildly unrelated to their core business.
Check back for more later.
From the desk of Jane Galt:Bankruptcy boom
As predicted, bankruptcies are booming ahead of the new law taking effect on October 17th. It'll be interesting to see how much they fall after the law, and who decides not to file.
October 04, 2005
From the desk of Jane Galt:Nipsy Russell has died
Among the first black comics to make a name playing regular roles, instead of racist stereotypes, Mr Russell should go down in history as the author of these immortal lines:
The opposite of "pro" is "con"
This fact is clearly seen
If "Progress" means "move forward",
Then what does "Congress" mean?
From the desk of Jane Galt:The poor really are different
. . . notes William Raspberry:
I recalled what William Galston, a University of Maryland professor of public policy, once called his "favorite statistic": that finishing high school, reaching age 21 and getting married before having the first child dramatically reduces the odds that the child will experience poverty.So, I wondered, what does he make of the "Promises" findings?
"If I were a woman in a community like the one they describe, and the pool of men I was looking at involved dropouts with criminal records and abusive patterns, I wouldn't marry either. But that omits the prior question: Why would I allow such a man to impregnate me?"
In short, it isn't simply the decoupling of marriage from children, he said, but the decoupling of the decision to have a child from the rest of your life.
"I'm not surprised by the finding that these young women place a high value on marriage," Galston told me. "The poor do not differ from the rest of America in their aspirations. They want college, a profession, marriage, a house with a picket fence. What distinguishes them is some combination of opportunity and concrete steps from their current reality to their future dream. Basically, what these women have is a magical outlook on life."
Galston's "magical outlook" aptly describes a phenomenon I've long observed but never named. I've asked young men where they expect to be 10 years hence, and their earnest expectations include "nice job, nice wife, nice car, nice crib" -- though nothing they are doing or planning puts them on track to achieve those goals. They are less aspirations than hopes.
Or magic.
"The poor don't need their consciousness raised as to what a good life looks like," Galston says. "They may have a pretty good idea of what they want 'way down the road,' but they don't know what to do next .
That's why mentoring is so much more important than money.
From the desk of Jane Galt:If you have any fantasies about a pastoral past full of sunshine and sweet moments, unsullied by the grim industrial monuments of the current day, this should disabuse you:
From the Omaha Herald in 1877:
1. The best seat inside a stagecoach is the one next to the driver ... you will get less than half the bumps and jars than on any other seat. When any old "sly Elph," who traveled thousands of miles on coaches, offers through sympathy to exchange his back or middle seat with you, don't do it.2. Never ride in cold weather with tight boots or shoes, nor close-fitting gloves. Bathe your feet before starting in cold weather, and wear loose overshoes and gloves two or three sizes too large.
3. When the driver asks you to get off and walk, do it without grumbling. He will not request it unless absolutely necessary. If a team runs away, sit still and take your chances; if you jump, nine times out of ten you will be hurt.
4. In very cold weather, abstain entirely from liquor while on the road; a man will freeze twice as quick while under its influence.
5. Don't growl at food stations; stage companies generally provide the best they can get. Don't keep the stage waiting; many a virtuous man has lost his character by so doing.
6. Spit on the leeward side of the coach. If you have anything to take in a bottle, pass it around; a man who drinks by himself in such a case is lost to all human feeling. Provide stimulants before starting; ranch whisky is not always nectar. Don't smoke a strong pipe inside especially early in the morning.
7. Don't swear, nor lop over on your neighbor when sleeping. Don't ask how far it is to the next station until you get there.
8. Never attempt to fire a gun or pistol while on the road, it may frighten the team; and the careless handling and cocking of the weapon makes nervous people nervous. Don't discuss politics or religion, nor point out places on the road where horrible murders have been committed.
9. Don't linger too long at the pewter wash basin at the station. Don't grease your hair before starting or dust will stick there in sufficient quantities to make a respectable 'tater' patch. Tie a silk handkerchief around your neck to keep out dust and prevent sunburns. A little glycerin is good in case of chapped hands.
10. Don't imagine for a moment you are going on a pic-nic; expect annoyance, discomfort and some hardships. If you are disappointed, thank heaven.
From the desk of Jane Galt:Selection or training?
One of my professors once told me that the education in business school did very little to raise the earnings of its graduates; rather, business school selected people who were likely to have high earnings, and then took credit for their success. According to him, you could put the MBA class on a cruise ship for two years and get pretty much the same results.
I might argue that business school nonetheless raises it's graduates' earning powere (well. . . except mine, that is), if for no other reason than that it is a powerful signalling mechanism to the gatekeepers of high-income jobs. But I suspect that he's basically correct: business school works by selecting the successful, not training them.
Malcolm Gladwell points out that the same is true for the Ivy League, where I spent my formative academic years:
Harvard, Yale, and Princeton chose to adopt what might be called the “best graduates” approach to admissions. France’s École Normale Supérieure, Japan’s University of Tokyo, and most of the world’s other élite schools define their task as looking for the best students—that is, the applicants who will have the greatest academic success during their time in college. The Ivy League schools justified their emphasis on character and personality, however, by arguing that they were searching for the students who would have the greatest success after college. They were looking for leaders, and leadership, the officials of the Ivy League believed, was not a simple matter of academic brilliance. “Should our goal be to select a student body with the highest possible proportions of high-ranking students, or should it be to select, within a reasonably high range of academic ability, a student body with a certain variety of talents, qualities, attitudes, and backgrounds?” Wilbur Bender asked. To him, the answer was obvious. If you let in only the brilliant, then you produced bookworms and bench scientists: you ended up as socially irrelevant as the University of Chicago (an institution Harvard officials looked upon and shuddered). “Above a reasonably good level of mental ability, above that indicated by a 550-600 level of S.A.T. score,” Bender went on, “the only thing that matters in terms of future impact on, or contribution to, society is the degree of personal inner force an individual has.”It’s easy to find fault with the best-graduates approach. We tend to think that intellectual achievement is the fairest and highest standard of merit. The Ivy League process, quite apart from its dubious origins, seems subjective and opaque. Why should personality and athletic ability matter so much? The notion that “the ability to throw, kick, or hit a ball is a legitimate criterion in determining who should be admitted to our greatest research universities,” Karabel writes, is “a proposition that would be considered laughable in most of the world’s countries.” At the same time that Harvard was constructing its byzantine admissions system, Hunter College Elementary School, in New York, required simply that applicants take an exam, and if they scored in the top fifty they got in. It’s hard to imagine a more objective and transparent procedure.
But what did Hunter achieve with that best-students model? In the nineteen-eighties, a handful of educational researchers surveyed the students who attended the elementary school between 1948 and 1960. This was a group with an average I.Q. of 157—three and a half standard deviations above the mean—who had been given what, by any measure, was one of the finest classroom experiences in the world. As graduates, though, they weren’t nearly as distinguished as they were expected to be. “Although most of our study participants are successful and fairly content with their lives and accomplishments,” the authors conclude, “there are no superstars . . . and only one or two familiar names.” The researchers spend a great deal of time trying to figure out why Hunter graduates are so disappointing, and end up sounding very much like Wilbur Bender. Being a smart child isn’t a terribly good predictor of success in later life, they conclude. “Non-intellective” factors—like motivation and social skills—probably matter more. Perhaps, the study suggests, “after noting the sacrifices involved in trying for national or world-class leadership in a field, H.C.E.S. graduates decided that the intelligent thing to do was to choose relatively happy and successful lives.” It is a wonderful thing, of course, for a school to turn out lots of relatively happy and successful graduates. But Harvard didn’t want lots of relatively happy and successful graduates. It wanted superstars, and Bender and his colleagues recognized that if this is your goal a best-students model isn’t enough.
October 03, 2005
From the desk of Jane Galt:Oil shale?
Can we replace rapidly depleting oil reserves with oil shale? James Hamilton points out that there are a lot of problems with that idea.
From the desk of Jane Galt:Miers, huh?
Who the heck is this woman? We're unlikely to find out any time soon.
October 02, 2005
From the desk of Jane Galt:Does IQ matter?
Bryan Caplan thinks so:
Lots of people loathe IQ research. But even people who are open-minded about IQ often puckishly say "So what?" It doesn't really matter if the IQ is the main determinant of earnings, or economic growth, or anything else. All that matters is whether the marginal effect of policy on the variables we can change is worth its marginal cost. Thus, it doesn't really matter if IQ matters.But this response overlooks a basic point. If IQ matters, then analyses that ignore IQ will typically overstate the marginal effect of other variables.
. . .
Thus, IQ is highly policy-relevant after all. The left-wing ideologues who damn anyone who even thinks the letters "IQ" are actually on to something: IQ research does turn out to be a rationale for "right-wing" laissez-faire policies. The more IQ matters, the more likely it becomes that existing government policies are a waste of money - and that you would get a bigger payoff by doing less - or maybe nothing at all.
As far as I can tell, interventions to correct IQ are nearly prohibitively costly. Head Start is useless, and even expensive interventions like the Perry pre-school project produced results that are distinctly disappointing from a cognitive perspective: at a cost of roughly $23,000 per child per year, the project produced moderate increases in high school graduation and income, while lowering crime rates and modestly decreasing welfare dependancy. But while the results are worthwhile, and probably cost-effective enough to justify to even the most hard-hearted welfare opponent,my understanding is that the project did not turn poor kids into middle-class adults; it turned poor kids into more functional low-income adults. And $23,000 per kid is going to be a hard sell in today's budget environment.