Recent college graduates arguing

More in the 'Road to Serfdom' Vein

2009-06-08T14:20:00.000-07:00

A good sample of conservative worry, and the values which ground it.

Behavioral taxation

2009-06-01T20:17:00.000-07:00

Awhile back Ross wrote that "efficient injustices will be harder to notice than inefficient ones" in reference to a New York Times article that documented how hikes in highway tolls meet less resistance from E-Z Pass drivers. I believe that the danger, as Ross sees it (I think), is that government could extract an unfairly high toll and the political opposition would be muted because no one would perceive it. Of course the danger is not in E-Z Pass which I think everyone, even conservatives, can agree is overall a good thing, but in opaque forms of taxation. The more complex the tax system is, the more difficult it is for citizens to perceive whether their overall tax burden is being raised or lowered. Just as credit card companies or banks insert all sorts of hidden fees that most users don't really perceive, the IRS could do the same thing.

I was reminded of Ross' post because of a recent blog entry on the Tax Policy Center blog titled: The Benefits of Opacity. The post cites the E-Z Pass research that Ross cited, but also some behavioral economics research which shows that people do not factor in sales tax in their purchasing decisions if the tax is not included in the sticker price of the item. However, as you might guess from the title, it comes to the opposite conclusion that Ross did. Taxes often create inefficiencies because they will distort the behavior of a rational economic actor. Fortunately, humans aren't rational economic actors, so if they do not understand how a tax works, or they do not bother to inform themselves about it, it will not distort their behavior as much. So a poorly understood tax is an efficient tax because it does not distort behavior. So it could be that the extraordinary complexity of our tax system is partially a good thing because most people do not understand it. By failing to understand it, people won't be as influenced by it, and it will be a smaller detriment to efficiency than standard economic theory would predict.

One problem with the TPC's analysis is that it doesn't explore the possibility that people think their marginal tax burden is higher than it actually is, and therefore inefficiently overreact to taxes. Joe the Plumber did not understand the difference between revenues and profits and so he thought that Obama's tax plan would raise his taxes if he bought a plumbing business with $250,000+ in revenues. He claimed that he was considering not investing in the plumbing business if Obama was elected. I wouldn't be surprised if there aren't many others like him.

Nonetheless, I think the TPC is correct about the overall trend and on the whole poorly understood taxes are probably more efficient. However, as I'm sure Ross will point out, efficient is not the same thing as just. Intentional tax complexity is no different than willfully tricking the citizenry into paying more in tax revenue, which raises some serious philosophical concerns. Also, even if the citizens do not completely perceive the taxes, they still effect the budget constraints of consumers. The additional tax revenue has to come from somewhere in the system, and if government tax revenue as a percentage of GDP goes up then ceteris paribus there will be fewer dollars spent in private commercial transactions.

A Black President

2009-05-28T17:54:00.001-07:00

The significance of a black president lies precisely in the fact that most people don't feel its significance. Thus I know it's an important sign in the history of this country, but I'm too young and too white and too West-Coastern to really get it. And it's because there are so many people like me that the sign is important, that it is not just a fluke. Lots of people voted for Obama, and many of those people did it because they didn't particularly care about his race; his election would not have the same significance if things had been otherwise, if it had in some way been forced on us (as with some of the black officeholders during Reconstruction). All that said, it is at this point more a sign than a cause of such sentiment; whether it will have causal force, and in which direction, depends on Obama himself.

Are student loans spurring a tuition bubble?

2009-05-03T22:48:00.000-07:00

The theory of federally subsidized student loans is that it allows more people to go to college. It probably does, but primarily it allows people to pay more for college and take on more student debt. Sound at all familiar? Housing and higher education are very different goods, but I think the price of both have been unreasonably inflated in recent years. And it cannot be a coincidence that people have had extraordinary levels of credit extended to them to purchase either a house or an education. Obviously the extension of credit for bubble-priced homes was ill-conceived, and I'm starting to wonder whether extending tens of thousands in loans to people in their late-teens or early twenties is also problematic.

The problem is that college tuitions at elite private schools just keep rising, no matter how ridiculous they become. At some very wealthy colleges, like Swarthmore, the high tuition functions more like a progressive tax system. The college charges a very high tuition, but only half the students (those who can afford to) actually pay it. Half the students in the school pay substantially less than the tuition, and the full tuition is more like a top tax bracket than actual price. However, at the many private schools that have high tuition but fewer resources for financial aid, the high tuition is more like a high price. Financial aid is available, but its resources are limited. Students who want to go to these private schools, but don't have the resources, typically borrow to pay for college, and the easy availability of loans for tuition makes it possible for these schools to charge the outrageously high tuitions that they do.

This leads me to wonder whether there is a bubble. The earnings premium for getting a college degree is substantial, and the increase in lifetime earnings and quality of life more than make up for the price of college on average, even at the most expensive colleges. But that's weighing an elite college against nothing, I wonder how it stacks up in a cost-benefit analysis against in-state tuition at a state school. My guess is that only the most elite and wealty private schools stack up well, and that the vast majority of private schools do not. But more importantly I wonder whether students, in the pursuit of a more prestigious degree, are taking on large debt burdens in order to overpay for their educations. Is it really worth $40,000 a year to get that private college education? Or are students overpaying for their education in order to get a degree with a certain prestige?

So, if there is a bubble in certain types of higher education, how could it plausibly crash? Well my guess is that what would happen is that some students would start to balk at being asked to take on tens of thousands of dollars of debt and attend communtiy colleges instead. This may start as a trickle, but as more and more strong students opt out of expensive elite colleges in favor of more affordable options, the signalling power of expensive colleges will wane. When that happens, the bubble will crash and some private colleges will find that there is no longer a market for their services at the prices they are charging. The other option is that the crash could come from the loan side. We could reach a point where both public and private lenders prefer to give loans for public college tuition rather than private just because it's more likely to be paid back. If the loans for expensive private education dry up, the demand for them will dry up also, and very fast. I'm tired, but later on I'll post about how this might effect academia.

A Serious Question

2009-04-13T09:47:00.000-07:00

Would you rather be Tiger Woods or Kenny Perry? And kids growing up today, which are they raised to admire?

Tax distribution

2009-04-07T21:36:00.000-07:00

The CBO just released their most recent data on distribution of tax burden. Above is a graph of what percentage each income quintile contributes to overall federal revenues (including income, social insurance and other taxes). So 5 represents the top 20% of households in terms of income and 1 represents the bottom 20%. One thing that stuck out at me is that the bottom 40% of households contribute less than 5% to federal revenue. That's partially because we have a somewhat progressive tax system, but mostly because the top 60% of households have way more money to be taxed. Still, people in the bottom 40% still pay considerable taxes as a share of their income (10.2% for the 2nd quintile), and paying those taxes requires some substantial marginal sacrifices for people in the bottom 40%. And yet, their contribution to the federal budget is just laughably small, it adds up to approximately $125 billion. That's about half of what we spend on interest on the federal debt, and less money than the federal government loses in revenue each year with the counter-productive tax exclusion for employer-based health coverage (~$160 billion). So here's a policy idea: get rid of the employer-based health insurance tax exclusion and offset the increase in tax burden by refunding all taxes (income, social insurance, other) paid by the bottom 40% of taxpayers. This might not be a good idea for reasons Ross has discussed way back in the day, but I still think it's worth considering.

Unquantifiables

2009-03-31T18:51:00.000-07:00

In the comments of my previous post, Ilya makes the excellent point that data is really the only way to understand reality in a comprehensive way. I won't try to summarize his points, if you're reading this, you might as well just read them (they're short). Another point I'd add to his points in support of quantitative analysis is that data is the most free of human bias. It is the least likely to be affected by selective memory, prejudice, excessive optimism, or any other common human failure. In any case, although I agree with most of what Ilya is saying, I do think it is worthwhile to acknowledge the drawbacks of quantitative analysis of human affairs. The most obvious is that human events actually have to be quantified. That is sometimes either difficult to do, or just plain silly. It's easy and sensible to quantify how many points Kobe Bryant scores in a season, it's harder to quantify how he impacts the offensive production of his teammates, and it's silly to try to quantify how he impacts team chemistry and morale. That's a rather clear cut example, but this type of thing pops up everywhere as quantitative analysis becomes more popular. It's easy and useful to measure how much a degree at Swarthmore will improve one's earning potential, it's pretty silly to try to measure how 4 years at swarthmore will improve one's ability to appreciate literature, philosophy, and other intellectual hobbies. I could go on, but the basic point is obvious. In many decision-making situations for both individuals and society, there are many different factors to consider. Some of those things are quantifiable, some of them are not. The tendency for both society and individuals is to make decisions based upon the quantifiable factors, and not to give due weight to those factors that cannot or should not (because people do try) be quantified. So people take jobs that pay more even if they will enjoy them substantially less, teams overpay for people like Allen Iverson who scores a lot of points but saps the offensive production and chemistry from his teammates, and schools are shaped by high-stakes testing which force them to produce quantitative results in their students potentially at the expense of non-quantifiable learning. The impact of these biased decision-making processes often aren't felt until the decisions are irreversible.

Quantitative analysis is an important tool and it always will be. But would it be such a bad thing if people's decision-making stopped being biased so heavily in favor of quantifiable factors? I'm generally a big advocate of numbers, and I instinctively trust them more than anecdotal narratives or unsubstantiated theories, but it's important to recognize our own biases.

Quant Failure

2009-03-23T21:15:00.000-07:00

Numbers are very good at summarizing reality in a way that we can quickly and easily comprehend. Therefore social scientists and people in general use them frequently to summarize circumstances to people unfamiliar with them all. We use them to summarize baseball players, investment performance, kids progress in schools etc.

Financial analysts recently used numbers to summarize the degree of risk involved with investments in mortgage backed securities and their derivative markets. They catastrophically failed to accurately summarize the risk involved. Many "quants" would probably say that the problem was not using numbers, but rather that the wrong numbers were being used. I don't completely understand it, and even if I did, it's beside the main point I want to make. My main point is this: I think one consequence of the financial failure will be that people no longer trust numbers as much to summarize human reality.

I'll offer an example that gave me the idea for this post. I was recently talking to a friend about newer corporate funded charter school networks like KIPP. These charter schools use very different approaches than traditional public schools and test scores show that they have been having some success. Unsurprisingly, these schools are EXTREMELY oriented towards test scores and quantifiable educational progress. From what my friend was telling me, they emphasize memorization and provide no outlets for creativity or self-regulation. The result is networks of charter schools that pump out students who do excellently in tests and within their system, but there is not much evidence of how well these charter school students will do in college or in the working world. My friend is concerned that these charter networks are extremely oriented making themselves look good on state tests, but in the long-run their students will prove ill-prepared for an economy that demands individual creativity for success.

At this point in the conversation the comparison to the financial collapse is inevitable. I don't know if it's an accurate comparison or not, but it's out there, waiting to be made whenever claims of success are founded upon numbers. It has seemed to me that for a very long time numbers and quantification have been ascendant, and maybe they still are. But my guess is that the financial collapse will check the rise of quantification as a means for understanding reality.

Abortion and Stare Decisis

2009-03-19T08:03:00.000-07:00

I often hear, and certainly agree, and am too lazy to support its claim as the majority opinion, that Roe v Wade is bad case law, that the decision was poorly made on constitutional grounds. Still, people say, it must be respected as precedent.

But why is there a common law respect for precedent? It is to avoid abrupt and radical changes, at least in that part of the law that is controlled by courts and not legislative assemblies (who can reverse their edicts as immediately and peremptorily as they like). And what would happen if Roe v. Wade were overturned? Immediately... nothing at all. Abortion would still be legal. The red and purple states would soon begin the process of curtailing it - not necessarily successfully, depending on how purple - and the bluer states might pass some broadly supported restrictions (on partial birth abortion, requiring parental consent, etc.), but the change would be only occasionally, in the reddest states, radical, never abrupt, and always legislative. The sort of principles that ground stare decisis just wouldn't apply; indeed, the decision itself, radical and abrupt as it was, springs from a disrespect for those principles: a respect for them would have left the issue to be settled in the state legislatures (which I believe even Ginsberg has argued would have been better, and for similar reasons).

Of course, there is a certain pride and respectability to the Supreme Court that would be lost by reversing the decision. Stare decisis allows the decisions of the court to maintain great socio-cultural weight, the sort of thing that makes it impossible for a current president to repeat Jackson's famous "John Marshall has made his decision; now let him enforce it," and that would be damaged by regular reversal of previous decisions. Still, some mistakes are major enough to warrant the damage in esteem caused by their single reversal; and, given that our present respect for the Court is far from moribund, Roe v. Wade reasonably qualifies at this moment as one.

Charles Murray Ignores the Numbers

2009-03-18T20:56:00.000-07:00

In the Charles Murray speech that Ross linked to, he casually asserts that the Obama budget is going to make the United States "like Europe." He approvingly quotes Krauthammer asserting that Obama is not a Chicagoan, Hawaiian, Kenyan, Muslim Terrorist, or an American, he's a Swede. He then proceeds to speak more generally on the desirable size of government and argues that we should not expand government and become European. One can only draw the conclusion that Charles Murray believes that the Obama budget represents a massive expansion of government.

If he's reading the likes of Krauthammer, I can understand why Murray would believe that, but the numbers tell a different story. In fiscal year 2008, the last year entirely controlled by the Bush Administration, the federal government spent 20.89% of GDP. In 2019, the last year of the proposed Obama budget, government spending would be 22.3% of GDP. That's an increase, but it's a stretch to call it putting us on a path towards a European size of government. According to the Heritage Foundation, Sweden's government spending comes to over 55% of GDP. England's is 44.6% of GDP, Germany's, is 45.4% of GDP. (Note: a true apples-to-apples comparison would factor in gov't spending at the state and municipal level, I think it's like 6-10% of GDP overall).

However, Murray's assertion is even sillier than it first appears. Look at the graph below. Except for a temporary increase from the stimulus, spending on defense and non-defense discretionary (infrastructure, education, all other appropriations) go down as a share of the economy. Interest goes up because we've accumulated a lot of debt, and entitlements go up because boomers will start retiring and medical costs keep rising. The Obama budget does nothing to increase the growth rate in entitlement programs (in fact he cuts Medicare spending by $300 billion). However, it does propose a decrease in both defense spending and other discretionary spending as a share of the economy. The only reason the budget increases as a share of the economy is interest incresing by 1% of GDP and entitlements increasing by over 2%. Those are budget realities that Obama inherited, they were not invented by his budget, and they do not represent a major philosophical shift towards European sized government.

A link

2009-03-17T10:44:00.000-07:00

Charles Murray's excellent recent lecture at AEI limns out much of the foundation of examined conservatism and is well worth a read. It's a sort of Road-to-Serfdom argument, but qualified into a more reasonable form. As with most such things, the diagnosis is better grounded than the prescription.

Education will flourish.

2009-03-09T12:11:00.000-07:00

Without a government department? Impossible.

Toilet reading

2009-03-02T17:08:00.001-08:00

I'm not on the toilet right now, although you'd never know it because my phone has wifi and allows me to blog anywhere (if you want, guess in the comments where I am, if you're right I'll give you a prize). But I've been thinking about the tradition many households have of putting magazines near the toilet. I think that is not ideal because I never have enough time to finish a magazine article and often end up sitting on the toilet far longer than necessary to finish an article or giving up on an article prematurely. Magazine articles are too long for toilet reading. But, blogs are the perfect toilet material. They are long enough and varied enough to be interesting and informative, but not so long that they cannot be read in a single sitting. Of course most people can't access the internet while on the toilet, but with wifi-enabled iPods and smartphones many now can. Hopefully we will enter a new age of toilet reading without old magazines all over the bathroom.

Problems behind the Health Care Problem

2009-02-20T07:55:00.000-08:00

The increase in the percentage of GDP spent on health care (cf. Tim's PGPF blog post) is only an economic problem if it fails to reflect the percentage of their resources that people want to spend on health. And surely that is partly the case with us; the incentive structure of the health care system is a mess and creates all sorts of distortions, and these distortions tend to oversubsidize certain areas of medicine and so inflate spending.

Still, I cannot help but wonder whether much of this increase reflects a simple desire to spend more on health. One sometimes hears the argument that health care costs are increasing because health care is worth it, but my point is more cranky and contrarian and altogether old-fashioned: the costs are increasing because people think it is worth it, and people are wrong. Indeed, and increasingly, people are wrong in the most serious way: they are irreligious. They are materialistic and adolescent and have a dim and fading conception of the well-lived life, matched, as it so naturally is, with an irrational fear of death. Could this help but be related? If life is physical and death is final, if we live to enjoy pleasure that is at root bodily and die into a sleep that is for all time dreamless, does it not make sense to spend a huge portion of our productivity on allaying the ills and delaying the end of these our waking hours? If the higher values have been placed on the same scale as the lower and all made into mental states, if the soul - which even the secular could take in a Stoic sort of sense that still guards some shadow of the dignity given it by the great religions - is put on par with the body, how could we fail to overvalue the physical at the expense of the spiritual? This is where secularism, even in refined and faintly Stoic form, fails us: for even Stoicism - to say nothing of an Epicureanism that founds a higher ethics in a baser metaphysics - was never broadly leavening, could never move beyond an elite and properly order the priorities of the mass of men without losing its flavor. Only religion has done that, and only religions whose ethics and metaphysics alike are high have done it well.

Why does it then surprise us, as we jettison the religion that did it best of all, that such things as physical health and physical life should consume us, and with us our pocketbooks?

Links

2009-02-17T15:07:00.000-08:00

1. Peterson Foundation blog comments on health reform

2. Interesting article in the Huffington Post on what viable business models are out there for the journalism profession.

Google Reader is Aggravating Blog Content Providers

2009-02-12T13:22:00.000-08:00

Awhile back I suggested that Google Reader is not sustainable because it's free and the subscriptions you can get on it are free and it is difficult to make money off providing content on it. One thing I've noticed that some bloggers are doing is only providing a teaser in the RSS feed and making you go to the blog website for the full post. Paul Krugman does it (although I'm guessing it's not him personally who made the decision to do that) and I think a fair number of profit motivated magazines are starting to do it. One blogger who recently started doing it is Marc Ambinder of the Atlantic Monthly. Just today he has switched back, but he offered a warning that suggests why he made the change in the first place:

Based on reader requests, the RSS feed of this site now includes the full text, rather than an excerpt and a link. But if y'all start to mess with my traffic, I reserve the right to change it back.

It seems pretty clear what's going on here. Ambinder's employer, The Atlantic Monthly, makes money when people visit the website to look at Ambinder's blog. They make nothing when people read Ambinder's posts on Google Reader. So, in order to drive up his traffic, they changed the RSS feed to get more readers off Google Reader and onto the Atlantic site. People are complaining about it because going to the website is a pain, but Ambinder is issuing a warning that he needs to draw site traffic to justify his salary. I wouldn't be surprised if this is just the first of many conflicts between professional bloggers and their readers.

Bipartisanship! What is it good for? Absolutely nothing! Huh!

2009-02-07T14:54:00.000-08:00

So a lot has been said, particularly by our President about the merits of "bipartisanship." I'm not sure exactly what the theory behind this is, probably something along the lines of: "everyone is capable of coming up with good ideas, and we should embrace any idea that works no matter what the source." In general that may be true (emphasis on MAY), but in the case of this stimulus bill wooing the republican support necessary to block a filibuster has resulted in a substantially worse bill. The House Bill was far from perfect, but what has been stripped from the bill are some of the most stimulative and productive spending provisions.

In this particular case the Democrats seem to lack the power to pass this stimulus bill without making the amendments that the centrists are demanding, but I think that this goes to show that including the other party just for the heck of it, doesn't make any sense. If the other party has good ideas, incorporate them, but I see no reason to incorporate bad ideas into an important bill for the sole end of including the other party. I think there is partially a political logic to it, but it's not very convincing. People will attribute whatever happens to the economy to the majority party, so Democrats should just try to pass the best bill possible.

Kennedy should resign

2009-02-06T14:57:00.001-08:00

According to Brian Beutler on yglesias' blog, ted Kennedy's poor health is making the democrats one vote further from achieving the 60 votes necessary to close off debate and vote on the stimulus. This makes it necessary for the senate democrats to woo one more republican which requires stripping the bill of some good provisions. I have an answer to this problem! Kennedy should resign and decal patrick should appoint his chief of staff as senator in short order. When Kennedy returns to health, the chief of staff can resign and Kennedy can be reappointed as senator.

Ryan Avent does the CBO dance

2009-02-05T08:01:00.000-08:00

So last night I predicted that both parties would begin picking out what they like from the CBO blog post last night. Sure enough, Ryan Avent guest-posting on Yglesias' blog urges Barack Obama to quote the CBO's analysis of the stimulus' short-term impact on jobs. That's exactly what I said democrats would do. Now we just have to wait for Republicans to pick out that the CBO says that the increase in gov't debt caused by the stimulus will harm the economy in the long-term while ignoring that the CBO also says that the investments in the stimulus bill will help the economy in the long-term.

Do the CBO Dance

2009-02-04T20:05:00.000-08:00

The Congressional Budget Office has been scoring various stimulus proposals, and acting as the closest thing there is to a referee to this whole process. Of course both parties always want to claim that the non-partisan CBO's newest report justifies their pre-conceived notions of what the stimulus bill should or shouldn't look like. Media Matters seems to be overwhelmed by the number of misleading citations of CBO reports.

Well the CBO came out with a new analysis of a revised senate version of the stimulus bill, and I can already anticipate how it will be spun by both parties. The CBO analysis essentially says three things:

1. The Stimulus does in fact stimulate in the short-run. In 2009 it will create between 1 million and 2.5 million more jobs than there would otherwise be, and in 2010 it will create between 1.3 and 3.9 million.

2. Government debt does matter. The increse in government debt crowds out private investment that could potentially stimulate the economy such that in the long-run the stimulus will reduce GDP.

3. Government investment does work. The long-run impact of increased government debt will be partially counteracted by the growth created by the investment spending contained in the stimulus bill. However, due to pressure to spend the money quickly, only 25% of the bill is investment spending, the rest is tax cuts or transfer payments (such as unemployment benefits) which have negligible long-term impact.

Ok so this is what's going to happen. Democrats will cherry-pick #1 in arguing for their bill. Republicans will respond with item #2, ignoring everything else. Democrats will respond with item #3 and say we need more investment spending in the bill. Republicans will turn around and argue that not enough money will be spent in the first two years (due to increased investment spending which spends out slower) so therefore #1 is no longer true. Around and around we will go, until CBO releases a new report.

New Republic hops on the Bandwagon

2009-02-04T09:09:00.000-08:00

They too, are intrigued by the Daschle glasses. Of course, we pointed out their singularity first.

Daschle withdraws

2009-02-03T13:32:00.000-08:00

Tom Daschle allegedly withdrew from his cabinet post for failing to pay $140,000 of taxes. However, I think his silly glasses are more of a disqualification.

Cultural Impact of Recession

2009-02-01T19:28:00.000-08:00

In an earlier post, I speculated that the recession might have a positive impact on some levels. In particular it might improve our ability to appreciate things in life that don't require spending money. Tyler Cowen has a great article in the NYT on that very issue, and more.

Good Ideas on Stimulus

2009-01-29T15:04:00.000-08:00

In her testimony to the House Budget Committee (pdf), Alice Rivlin, who had Orszag's job in the Clinton administration, made a couple suggestions to lawmakers that make a lot of sense to me:

1. Divide the stimulus bill into two bills. One bill should be a stimulus composed of temporary programs that can be spent immediately like unemployment benefits, funding to the states and local governments, and transfers to low and middle-income people. The second bill should not be considered a "stimulus" at all but rather investment, it should contain spending on education, infrastructure and other investments that promote future growth in our economy. We should pass the first bill immediately because time is of the essence, and we should take our time to make the second bill as strong as possible because we are spending a lot of money and limiting our options for future investments.

2. If we do stimulus in the form of tax cuts, we should strongly consider a payroll tax holiday. It can be turned on immediately, and if the recession ends and unemployment starts dropping, it can be ended just as quickly. It also has the advantage of being a much bigger burden for lower-income workers than the income tax is, so more tax relief would go to people more likely to spend it quickly.

The Huffington Post has no standards!

2009-01-16T12:45:00.000-08:00

Check out the garbage they publish.

Stimulus proposal that IMPROVES our long-term finances

2009-01-13T20:05:00.000-08:00

Alan Krueger writes in the NYT with the first really original stimulus idea I've heard in a long time. Pass a law implementing a consumption tax that will go into effect in two years. It would give people who are hoarding cash an incentive to spend it over the next two years, thus stimulating the economy. A consumption tax with a substantial rebate to make it progressive and compensate the poor could be an excellent addition to our tax system and it could definitely help out with our exploding debt problem. There are a couple problems I can think of though:

1) It would be unfair to people about to enter retirement, the dreaded boomers. These people's retirement savings are already 25% lower than the were a year ago, and now a new tax will make them effectively another 5% smaller just as they enter retirement.

2) There could be a credibility problem. It is impossible for Congress to actually commit to the tax in 2011. If the economy is still doing poorly at that point, it would be very tempting for Congress not to implement it in 2011. It might be hard to convince the market and consumers that the new tax will actually be implemented in two years.

3) If there is no credibility problem, it could still be bad. Businesses would be marginally more reluctant to make major investments if they anticipate a consumption tax. The flurry of consumption prior to the tax would not be taken by the business community that consumers will have sustained demand for their products. They will correctly interpret it as a response to the tax incentives and respond accordingly.

Recession: Let's relax (literally)

2009-01-10T08:49:00.000-08:00

So I recognize that recessions are terrible and can be very painful, but it is important to remember that before the recession our economy was far from perfect. A big problem was that the labor market was structured in such a way that Americans spent a whole lot of time working, and not as much time enjoying the company of their family or pursuing hobbies. That's sometimes necessary, or at least it may feel necessary. However, in many cases it isn't actually. There are probably many people in America who could benefit from a lifestyle change that involved working less, spending less and having more time to pursue whatever truly makes them happy. For a lot of people most of what makes them happy involves either spending money or working, that's ok, but I have a hard time believing that it's healthy. So when I hear about a major drop in consumer spending, or that employers are shortening their employees work-weeks to cut costs, I do worry about the economy, but I also wonder whether some people may get something out of their forced lifestyle changes.

The American Dream is Dead

2009-01-08T19:05:00.000-08:00

I don't know if anyone else saw this advertisement, but I just saw it while watching the college football championship.

I read the advertisement as saying this:
There is an upper-class in America that does very little work and makes lots of money, but you're not part of it. You can't become a part of it with hard work and merit, but you might have a chance at becoming rich if you buy lottery tickets.

I'd be really curious to talk to the advertising agency that thought this one up. I'm not saying it's dumb, or that it's a poor way to promote their product, I'm utterly unqualified to make that assessment. I'm curious because they must think the ad is something their target audience will connect with. I think if this advertisement really resonates with people then the American Dream is dead.

Obama and the Deficits

2009-01-07T21:50:00.000-08:00

This morning CBO came out with a new baseline that predicts a $1.2 trillion dollar deficit for fiscal year 2009. Weighing in at 8.3% of GDP, the FY09 deficit is by far the largest in recent history. Just look above (apologies for the lack of axis labels, my excel is screwy). This deficit doesn't compare to say 1943, but it is nonetheless way above the historical norm, and the scary thing is this: that's not including the stimulus (CBO Baseline projections only use current law). The stimulus is expected to add another $800 billion to the budget. It's a safe assumption that FY09's deficit will be literally off the chart above. So that's not good, but the economic consensus is that it's probably necessary to deal with an epic financial crisis that could lead to a second depression. That's fine as long as everyone in Washington realizes that this level of deficit spending is the equivalent of pulling an all-nighter to finish a paper. It may be necessary, but it's not a situation we want to find ourselves in in the future and it's not something we can do every night. Good thing Barack Obama is our next President.

Google reader

2009-01-06T22:45:00.001-08:00

Google reader is so awesome and has improved my life so much more than expensive things have. It is totally free, and I receive feeds written by very talented people, and those feeds are also free. How sustainable is this system? Google does not profit one bit from it. The people who provide content are paid by organizations like the atlantic monthly which earns zero revenue from rss feed subscriptions. There are some ads embedded within blog posts but they do not appear to earn much revenue. I think this is an example of a new Internet service providing for free a higher quality product than something people used to pay for. That's awesome, but will it ever undermine the quality of the content providers? Movies,music and journalism seem like the most likely candidate for a drop-off in quality. Just a thought.

Destroy the Meadowlands

2008-12-30T09:58:00.000-08:00

Boondoggle rightfully complains about the fate of the New England Patriots this year. It is ridiculous for a team which won only 50% of its games in a terrible division (ahem Chargers) to beat out a team that has won 68% of its games for a playoff spot. The likelihood of the Patriots misfortune is higher than it should be because we have too many divisions in each conference. If we decrease from 4 divisions per conference to 3 divisions per conference, it would be much less likely to happen. There would be an additional wild card berth and the likelihood of a single division having all bad teams would go down. I can already anticipate your objections, there are 16 teams in each conference, and you can't divide 16 by 3. Easy. Get rid of the Jets and the Giants and then we will have 15 teams in each conference and we can easily divide both by three. The NFL would be more fair, it would piss off a lot of Yankees fans, and we would be rid of the two most annoying franchises in the NFL. Win-win-win.

Keep smoking Barack!

2008-12-30T09:42:00.000-08:00

Article in the NYT about Obama's struggles to quit smoking. I personally think smoking is a nasty, stupid habit and whenever any of my friends express the slightest interest in quitting smoking, I try to support them as much as possible (not that it does any good). However, I'm not friends with Barack Obama and my primary concern is with his performance as president, not his long-term health. Reading the article made me very concerned about what might happen if he did try to quit:

Nicotine is strongly addictive for many people, and withdrawal can leave them irritable, restless, sleepless, depressed and struggling to concentrate. Some experts say it is harder to give up than cocaine or heroin.

I hope for his sake that he successfully quits after he leaves office, but for the country's sake, I hope he doesn't even try until 2017. We need him at his best, if that means he needs to smoke, then please, let him smoke.

Fifty places to productively spend federal money

2008-12-29T09:33:00.000-08:00

Krugman writes a great article called "Fifty Herbert Hoovers" on how state governments are exacerbating the recession by making big spending cuts and tax increases. Of course it's not within their control, many states have balanced budget amendments and even those that don't have much shorter lines of credit than the Federal Government. When the economy drops, revenues drop and in order to avoid massive deficits, state governments must either raise more revenue or spend less money (or both). This is fairly obvious. What I don't understand is all the consternation about whether the Federal Government has productive things to spend the stimulus money on. Just give the money to the states with a stipulation that they may not cut spending. That way states can use the federal money to replace all of their lost tax revenue and continue the services that are being cut. It may not be the most productive use of the money as an investment, but as fiscal stimulus, it can't be beat.

Update: Link to smarter and more articulate people who said a similar thing first.

It's easier to keep up with the Joneses in a recession

2008-12-27T11:47:00.001-08:00

Great op-ed in the NYT today that undermines one of the core assumptions of basic microeconomics. The core argument is that people care more about their relative income status amongst peers than the absolute value of their income. This makes a lot of intuitive sense, but I'm surprised by the extent of it. People don't mind being unemployed as much when their spouse is unemployed.

In any case, file this one away in a list of reasons why a recession is not the worst thing in the world, at least in the united states. Also it is somewhat relevant to previous discussions we have had about whether we should care about relative poverty.

Reformers need a little less Democracy

2008-12-25T21:20:00.000-08:00

Tom Daschle, Obama's new HHS secretary, argues in his book, "Critical", that as part of a democratic health reform proposal, we should form a "Federal Health Board" modeled on the Federal Reserve Board and the Base Realignment and Closure Commission. There are several rationales. One is that it will be useful to have a body of medical and public health experts to make technical decisions that Congress would be unable to make in an informed way. That makes a lot of sense to me. Another major rationale is that health reform that is really designed to curtail costs will involve a lot of very politically difficult decisions that Congress probably doesn't have the stomach for (just as Congress would never have had the stomach to wage Paul Volcker's war against inflation in the late 70's and early 80's and they never would have had the ability to debate closing down individual military bases). The idea is that Congress can pass a vague skeleton of health reform, create a Federal Health Board, with members who are appointed to ten year terms, and then delegate all of the politically difficult decisions to its Federal Health Board that will be more removed from the political process. Congress would have the power to dissolve the Federal Health Board at any time, or to overrule it, but just like the Federal Reserve they probably never would. Diving into a legislative dispute over some politically controversial health policy is unlikely to be an attractive prospect for legislators.

This second rationale for having a Federal Health Board is worth thinking about carefully. Essentially we need to move to a less democratic decision-making process in order to successfully achieve higher quality health policy. Of course this has precedent, which I referred to above, and there are other types of reformers who seek similar solutions. David Walker, wants to create a Fiscal Future Commission, that would be able to send a set of recommendations to Congress for an up-or-down vote, in the same way that the Base Closing Commission was. This is not as large a departure from democracy as the Federal Health Board could potentially be, but the idea is essentially the same: the congressional policy-crafting process produces poor results, so lets craft policy outside of the Congressional body.

I think all of these reform efforts are important and require good policymaking and are probably more likely to get it outside of the Congressional Committees. However, on one level, finding work-arounds to avoid the normal congressional decision-making process and replace it with a less democratic alternative makes me a little queasy.

Hey, aren't falling prices good?

2008-12-24T22:01:00.000-08:00

Dean Baker correctly points out that, for those people lucky enough to still have a job, real wages have gone up at a 14.8% annual rate in the last three months. Essentially prices are falling and nominal wages are sticky. If there is high inflation, it is easy for employers to lower real wages by giving raises that are below the rate of inflation, but when inflation is negative, it is very difficult for employers to lower wages accordingly. So as the housing price bubble collapses and desperate retailers give huge discounts, those who are lucky enough to have a secure job are actually experiencing a rise in income. Of course, many people are spending less anyways because now that their 401k and home have crashed in value, they feel poorer.

But they were never actually as rich as they thought in the first place. They just owned grossly overvalued assets. I know we are supposed to be worried about deflation, but I take this information about a 15% rise in real wages as hopeful sign. Maybe, just maybe, some people in recession proof jobs will start to realize that they have higher real incomes and will begin to buy things.

Powerful incentives and the havoc they wreak

2008-12-20T10:24:00.000-08:00

In our market economy, offering huge incentives based on performance is a commonly accepted practice. On the surface, this seems like a sensible thing to do, just based on common sense and basic economic theory. I don't enjoy cleaning my living space and I'm not very good at it, but if someone offered me $10 million to keep my apartment spotless every day for the next year, I'd probably do it, that's a powerful incentive.

So naturally, folks on Wall Street offer money managers enormous cash bonuses in every year that they manage to earn a large return for their investors. Paul Krugman and Paul Collier summarized why that was problematic in two recent columns. Krugman writes:

The pay system on Wall Street lavishly rewards the appearance of profit, even if that appearance later turns out to have been an illusion.

Essentially the problem is three things:
1) asset price bubbles, like the dot-com bubble or the housing bubble, last for several years
2) year-end Wall Street bonuses are based on performance for just that year.
3) once you give out compensation in the form of cash bonuses, it cannot be legally reclaimed by the shareholders whose company gave them out, even if those performance-based cash bonuses were based on an illusory "appearance of profit."

It's not difficult to see where those three things lead. Even if every money manager knows he is throwing money into an unsustainable asset bubble, it makes sense to throw clients' money into it if you think it will continue beyond the present year. When the market inevitably does crash, it's okay that your investors lose a lot of money because the money managers aren't on the hook for it, and they have 3 or 4 years of fat bonuses to fall back on. Even if one money manager decides to be prudent and not invest into demonstrably overvalued assets, other managers will, and the lone prudent money manager will look bad relative to the other money managers as long as the bubble lasts.

It's not strictly the size of the incentives that causes this problem, it is the short-term focus of the incentive structure. But it is inevitable that performance-based incentives reward the performers before all the ramifications of their actions have been borne out, and it's not difficult to argue that the size of the incentives exacerbate the problem. When a single year-end bonus for a top performer is literally more than enough money to support most people for the rest of their lives, the risky strategy becomes much more appealing. These bonuses have been so huge that even though a lot of executives have lost 75-80% of the value of their previous stock-based compensation, they are still extremely wealthy because of the tens of millions, if not hundreds of millions, of dollars they have received in cash bonuses over the last 6 years or so. If the incentives were smaller, people on Wall Street would feel serious pressure to maintain a good reputation and the trust of investors over a longer period of time.

But the basic point is this: extremely powerful incentives are a very powerful force, and it's difficult to anticipate in advance how they will distort behavior. The more powerful the incentives, the more difficult it is to structure them so that they actually result in the desired behavior. Paul Collier states it well:

These incentives corrode through two distinct routes. The most obvious is that they induce people to bust the rules everyone has previously taken for granted. The hope was that vast rewards would induce exceptionally brilliant performance, but by definition that is difficult. It is far easier to deliver the target performance by breaking the rules, so that is what managers did...Conventions only work as long as the incentives to break them are modest; the rest of us are, in the end, dependent on managers and politicians valuing the rewards of "good" performance less than their own self-respect. If incentives are large enough, greed triumphs over self-respect - not for everybody, but for those most susceptible.

It truly is shameful for a money manager to pursue an investment strategy that is designed to enrich oneself, but will inevitably cause massive losses for those who are entrusting him/her (usually him) with their money. Unfortunately, obscenely large compensation packages can overcome that sense of shame.

America's Last Great Strength

2008-12-13T14:30:00.001-08:00

The title is somewhat hyperbolic, but I really do think that one of the most important things that the U.S. Economy has going for it is the perception that, more than any other country, there is transparency and no "political risk" in the United States. That makes the United States the safest place to put your money right now. That is why in the midst of an economic crisis that originated in the United States and burned many foreign investers in the U.S., everyone is trying to put their money in U.S. Treasury bonds and the interest rate has been bid down to zero.

That is the real reason why the Madoff fraud and the Illinois governor are such terrible news. One undermines our reputation for transparency and the other, to a somewhat lesser degree, undermines the sense that our political institutions are strong. It is not something we can tangibly measure, but these types of news stories erode foreigners' confidence in us as a place to park their money. If we want foreigners to continue financing our deficit then we will need to continue to earn their confidence.

If you're going to sell a senate seat, get full value

2008-12-09T19:07:00.000-08:00

The Blagojevich story simply boggles the mind. Two things stick out to me:

1) He wanted to sell the seat for only $500,000? This is shocking. Maybe I'm wrong, but I think being a former governor without a criminal record can be extraordinarily lucrative, I think he stands to lose far more than $500,000 in future earnings. Not only that, it seems there is ample evidence that the demand is there to charge a much higher price.

2) Someone might say he probably never thought he would be caught, that seemed plausible to me, until I read that he was asked the day before about being under surveillance. It's not just shocking how corrupt he is, it's shocking how stupid he is.

It's not so bad for Obama

2008-12-08T21:13:00.001-08:00

I keep hearing the meme that it sucks for Obama that he is coming into the presidency during the worst economic crisis since the Great Depression. Maybe. I think Obama is arguably phenomenally lucky in that the consensus amongst mainstream economists appears to be that the Democrats HAVE to pass big spending bills and LOTS of them. How fortunate! Obama, had a mandate for "change," but now through no action of his own he now has an extra compelling argument to fully fund his campaign promises. Now he has free rein to subsidize alternative energy, fund universal health care reform and pass his proposed tax cuts.

Of course, there are dangers. For one, the economy could still be in distressingly bad shape in two or four years. Also recession and high unemployment can create all sorts of problems that would either not exist during better economic times. Finally, not everyone will agree on how to spend the stimulus, and spending it in a responsible return-maximizing way will be a tricky political act for Obama, despite the Democrats huge majority and his unquestioned leadership of the party.

A brief provocation to libertarians (and liberals?)

2008-11-16T13:30:00.000-08:00

Would it be too radical, would it push me beyond the bounds of American orthodoxy, to say that freedom as a political value is derivative of subsidiarity - that all that is worth guarding in the notion of freedom is contained in the idea of subsidiarity? And if it is too radical, is it in any way false? Isn't the freedom of the individual, which is today all we use 'freedom' to mean, simply the most basic level to which subsidiarity can devolve power, the most local 'association' to which higher orders must defer (so local that it is no longer an association)? And so wouldn't individual freedom then be given its scope by the same principle that orders all these levels one to another - namely, subsidiarity? Does it even make sense to speak of individual freedom in the social sphere as some sort of special metaphysical category, as if it trumps all else, including family?

And as a practical question, while it may sometimes be necessary to emphasize the scope of the individual's freedom as against the state, hasn't the last two hundred years seen an entirely new danger: the power of both growing at the expense all intermediate institutions, and of the centralized state using the cause of individual freedoms to subsume the local? Do we really need to emphasize individual freedom in our current situation? Shouldn't we worry rather about the underemphasis on all those local and usually voluntary associations - but even more the involuntary ones - that provide the channels through which the greater part of the good life is lived, that together make happiness not simply pursuable but present, that themselves are a surer rein on the state than any mere cultural emphasis on the individual? Just from a practical perspective regarding choice of language, wouldn't a shift away from 'freedom' and toward 'subsidiarity' be healthy?

Some entirely unreasonable reflections

2008-11-01T16:16:00.000-07:00

I'm slowly coming to terms with the consequences of a radical anti-consumerism (which I take to be one of the two pillars of Catholic conservatism, the other being the principle of subsidiarity). The basic idea is that the material barriers to human flourishing are negligible in our society. Even the very poor, who do in an immediate sense have such barriers, are ultimately stuck in their position only because of deeper cultural or spiritual problems. Which means that even they are best and perhaps only helped not by wealth transfers but by what might be called, in its older sense, education, or as we might now say, the inculcation of values, but which essentially amounts to civilizing: fostering personal accountability and a respect for oneself, for others (and not just the members of one's class or clan or nation), for work, for this country and the opportunities it provides, for family and school and church and the other cornerstones of civil society - in short, all those things that sustain our tradition of ordered liberty and elevate us above those in Africa who even now are tearing each other apart, occasionally with the machete and at all times with the gavel.

Given that the primary barriers to human flourishing in this society are spiritual, it follows that social justice programs should be evaluated primarily on their spiritual effects. Welfare should be looked at primarily in terms of what it does to the soul, to virtue, to that complex of attitudes already mentioned, because those are what its recipients need - they do not need more money. That is as blunt as I can put it: even the poor in this country have more than enough money to flourish as rational, social animals. They do not need cable or another TV or more video games. Easy for me to say? Perhaps - but is it false?

Given that the government isn't very good at effecting positive spiritual change, and given that the more remote and bureaucratic the administration of the program, the worse it is at doing these things, it follows that the federal government is a poor tool for addressing what major barriers to human flourishing remain in this country. One begins to see how this anti-consumerism is connected to subsidiarity, and why it takes on a profoundly conservative character.

But I call this anti-consumerist and not something positive like 'pro-virtue' for a reason: to emphasize how much it entails a rejection of the economic way we think about the health of our society. It means almost ceasing to care about consumer spending or industrial output or GDP growth or any such metrics. So what if the material progress in this country is reversed - with the exception of health care, how much of it is actually valuable? What real cost is there if people returned to only being able to afford five instead of five hundred channels? How much of the so-called progress in the last 50 years actually helps people live as full human persons? There is a certain unfortunate necessity to outstripping countries like China and Russia in many of these economic measures, if only to preserve a healthy international order; nonetheless, I cannot help but feel that an economic downturn like the present's - which hits the bad guys as hard as the good - doesn't actually have that much impact on human flourishing in America (putting to one side its effects in the third world), and may have none at all, and may even be positive. I do not pretend that such downturns in my own economic situation would at first be easy, but nor am I sure that they are in the long run bad (this is one of the many reasons I will be hard-pressed to find a wife), and the same is true in the life of my country, and indeed all wealthy countries.

I should say by way of conclusion that this is an incomplete way of looking at things. It needs to be complemented by a theory of work (and so production) of greater anthropological sophistication than the economic. And perhaps that complement will have more to say about - and more to condemn in - a recession. But this is a start, and as a foundation seems immeasurably more solid than how we proceed at present. So, consumer spending has fallen, and all act as if the urbs mundi is burning - but as for me, I will fiddle on.

Federal spending on public transportation

2008-11-01T13:45:00.000-07:00

Ross has a very good response in the comments to my post about public transportation. He says that he supports public transportation but does not see why the federal government should get involved in it. The ideal would be for local governments to take responsibility because it is a local issue and public transportation systems should be governed locally, and in fact I think most public transportation systems are funded and administered locally. Therefore, I think Ross implicitly argues, it is appropriate for David Brooks, in an article on federal investments in infrastructure, to omit any reference to public transportation.

That's a legitimate concern, and I do think the federal government should carefully consider what it gets involved in and what is better left to the states. However, I think there is a practical policy argument as to why the federal government should think about investing in public transportation anyways:

1) It's not actually a local concern. Increased use of public transportation reduces oil consumption and carbon emissions. It's arguably a global issue, and reducing oil consumption is a legitimate national goal, and reducing carbon emissions is a worthwhile as well (particularly if it can be tied in to us becoming a global leader on climate change).

2) Many local and state governments do not have the ability to initiate big spending projects in the midst of a recession because they cannot borrow as much or they have balanced budget provisions in their constitution. The federal government does have the ability to make these kinds of investments that not only lay the groundwork for sustained economic growth, but also are necessary to lift us out of recessions when consumer confidence is low.

3) The federal government can invest in public transportation while still allowing local government to administer the public transportation system. For instance, the federal government could offer matching funds to give to local governments that spend additional money building up their system. It seems plausible to me to have federal spending that is locally administered.

Then of course there are things like Amtrak which is the rail equivalent of interstates so it is clearly within the domain of the federal government and it really could be a much better system.

Public Transportation!

2008-10-31T18:57:00.000-07:00

I guess I agree with the spirit of David Brooks' recent column, but did he seriously just write an entire column about infrastructure investments without mentioning commuter rail or public transportation of any kind? I know that for geographic and population density reasons, in many parts of the country rail is not a viable option, and new roads would be useful. However, in many urban areas that public transportation systems are woefully bad/nonexistend, and I think given oil prices and climate change that commuter rail and other clean forms of transportation would be at least as prominent in the discussion of proposed infrastructure projects as new highways.

Buy and hold: Japanese edition

2008-10-27T15:16:00.000-07:00

If you put 100 yen into the Japanese stock market at its peak in 1989, and then held your money for 19 years, you would have approximately 19 yen today. That is scary. Even if you go back to 1984 when they began tracking the Nikkei index, it was higher then than it is today. That is just scary. Everyone says that the stock market always goes up in the long run. It all depends on how you define "the long run." In the case of Japan it is going to be pretty long before it surpasses the peak from 1989, and nineteen years seems like a long time to wait for one's 401k to recover. I'm willing to be convinced that there is some systemic reason why what has happened in Japan cannot possibly happen in the United States, but I can't think of any. Of course, one caveat is that Japan's currency has appreciated considerably relative to the dollar during this period of time, so it is not quite as catastrophic a fall as it might seem. Japan experienced a lot of deflation during the 1990s, and it may even be the case that the real value of 1984 Yen is higher than 2008 Yen, but even so these are terrible returns for a 20+ year time-horizon.

"Racists" for Obama

2008-10-27T08:00:00.000-07:00

Frank Rich makes a lot of sense in his recent column. In recent days, I have expressed a high level confidence in an Obama victory, and I have been frustrated by the nearly-universal response which is: I don't trust this country. People don't actually say this explicitly, but basically the presumption is that ignorant, country, white voters will never vote for Obama, and there are so many of them we should be nervous, no matter what the polls say. Maybe I'm exaggerating a bit, but I think a lot of people are missing a very basic point. To the extent that people are racist in the United States, my feeling is that they are racist in much more subtle ways than refusing to vote for a presidential candidate simply because he is black. My guess is that there are a lot of folks who carry negative stereotypes which they project on any black person they see for the first time. But that does not make them incapable of getting to know black people and believing what they see rather than their pre-existing stereotype. Obama has been in the limelight for two years now, he has carried himself well, and impressed people with his cool and professional demeanor. Although racism is impossible to rationalize, voters who carry negative stereotypes of blacks are not completely irrational and immune to evidence. They are capable of evaluating Obama and his policies and letting that carry more weight than their stereotypes of black men in general. It is still a struggle, and Obama does face difficulties other candidates don't face, but stereotypes and initial impressions are not carved in stone. I'll end this post with a great snippet from fivethirtyeight.com:

So a canvasser goes to a woman's door in Washington, Pennsylvania. Knocks. Woman answers. Knocker asks who she's planning to vote for. She isn't sure, has to ask her husband who she's voting for. Husband is off in another room watching some game. Canvasser hears him yell back, "We're votin' for the n***er!"

Woman turns back to canvasser, and says brightly and matter of factly: "We're voting for the n***er."

In this economy, racism is officially a luxury. How is John McCain going to win if he can't win those voters? John Murtha's "racist" western Pennsylvania district, where this story takes place, is some of the roughest turf in the nation. But Barack Obama is on the ground and making inroads due to unusually strong organizing leadership.

Sabermetric Health Care

2008-10-25T07:07:00.000-07:00

Newt Gingrich, John Kerry, and Billy Beane on health care. I don't know how significant the problem they identify is, but it doesn't sound difficult to fix.

Only so many good things can happen in one year

2008-10-20T06:56:00.000-07:00

Jonathan Cohn writes a good post at the Plank lamenting the Red Sox' loss to the upstart Rays. However, Cohn points out that there is a very thick silver lining to this cloud and it has to do with the proprietor of fivethirtyeight.com, Nate Silver. He stood out in the preseason by correctly predicting that the Rays would have a much better season and contend for the playoffs. Their AL championship gives me additional confidence in the predictions Nate Silver has made about the election at fivethirtyeight (93.1% chance of Obama victory). So at least there is something good in seeing the Rays success.

This reminds me of a conversation I had with the prescient Jesse Robbins in early October 2004. He said that he had a bad feeling that the Red Sox would win the World Series and that would take away luck from John Kerry who would then lose the election. At the time, I thought that was a crazy prediction, but it stuck in my head and it has been at the back of my mind this October. So I was happy to see both Chicago's teams lose badly in the first round of the playoffs, and if the Red Sox have to lose for good measure, well then so be it. As long as Obama actually does win.

Editorializing with choice of photograph

2008-10-17T09:13:00.000-07:00

Somehow I suspect there were some pictures of the McCains that looked better than this:

Joe the plumber: the backstory

2008-10-16T12:27:00.000-07:00

Apparently Joe the plumber is now the centerpiece of McCain's stump speeches. Given that McCain seems to want to further elevate the anecdote of JTP, it's worth checking out more about this man. The Caucus has some useful info. I was actually wrong on the details about JTP. He does not earn $250,000 a year, he wants to buy a small business that has $280,000 a year in revenue (not profits) but he currently makes much less than that. My main takeaways from the Caucus:

1. JTP is incorrect to believe that he will be taxed more by Obama's tax proposal (assuming he becomes the owner of this plumbing business). He will probably receive a tax cut depending on what other sources of income he has.

2. JTP owes over $1,000 of back taxes.

3. He does not have a plumbing license, nor has he ever belonged to the local plumbers union that he claims to belong to.

Audit Joe the plumber

2008-10-16T10:54:00.000-07:00

My friend, who has plumber connections because he is a non-elitist real american, tells me that it is highly probable that McCain's friend Joe the plumber is cheating on his taxes. Plumbers often offer discounts to clients who pay in cash to avoid reporting the income. So if I were Obama, I would have responded in the debate by saying that I'm suspicious of this Joe the plumber guy and as president I would have him audited.

Seriously though, McCain's Joe the plumber schtick was unbearably obnoxious. Essentially McCain is using a blue collar stereotype (he's named Joe, he's a plumber, he doesn't bother to say his last name because he's from a small town) to make it seem like Barack Obama is raising taxes on "everyday folks." But Joe the plumber makes $250,000 a year, people who make that much should pay higher taxes no matter how much they seem "regular." I know that McCain's point was about job creation and how aspiring small businessmen could create jobs if they only had more of an incentive to invest. But then he should just say that instead of bringing in this "Joe the plumber" rhetoric.

P.S. Joe the plumber sounds suspiciously all-American to me. I wonder if the McCain campaign weeded out other plumbers/aspiring small businessmen named Juan and Mustafa who also complained about Obama's tax policy.

McCain in the membrane

2008-10-15T08:34:00.000-07:00

McCain will do something totally crazy at tonight's debate. I have no interest in watching it except for this fact. At this point it seems extraordinarily unlikely that McCain wins this campaign if the dynamics of the race don't change. So just like he did after the succesful democratic convention when McCain picked Sarah Palin, I anticipate McCain will try do something completely nuts just because normal won't cut it any more. It's Hail Mary time.

China imposes conditionality on the U.S.

2008-10-13T12:07:00.000-07:00

This article (via Dani Rodrik) really tickles me somehow. The idea of China imposing conditions on the U.S. as part of their proposed bailout is interesting to think about because the U.S. (through the IMF and World Bank) does it to 3rd world countries all the time. But when I think about it being done to MY country, it really strikes me as having utter contempt for U.S. democracy. The author of this article, Arvind Subramanian, is not suggesting China offer these conditions because the Chinese have some insights into macroeconomics that have not yet reached our shores. He's suggesting these constraints because he thinks that our ability to govern ourselves with good economic policies is broken:

Conditionality as imposed by the World Bank and International Monetary Fund was underpinned by an ideology that favoured markets and globalisation. But there was also an assumption that either borrowing third world governments did not understand their benefits or the reformers there needed a “spoonful of sugar” to help overcome any internal opposition.

Of course, Arvind Subramanian is suggesting these conditions because he thinks they would be good ideas and he's a smart economist. And importantly, because he does not think the U.S. government is capable, on its own, of making these reforms with the current democratic (small d democratic) pressures on it. He may in fact be right. It could be that the only way we actually make the reforms we need to is if China imposes them on us.

Fair weather fandom

2008-10-13T10:36:00.000-07:00

In the world of sports fandom, there probably is no designation more insulting than "fair weather fan." It is a fairly self-explanatory concept, someone who only roots for a team when it is doing well, and just loses interest when the team is doing badly or not expected to do well. As a Boston fan, I have not had many opportunities recently to prove to the world that I am not a fair weather fan, except for the Bruins all of the Boston teams have done exceptionally well recently. However, the Bruins have historically been my favorite Boston team since hockey is the only major professional sport I have played in a competitive way and understand the intricacies of. Nonetheless, I have found that since their recent successes, I am more interested in and follow more closely the Red Sox and Patriots. Does this make me a "fair weather fan"? I guess so. Before I liked the Bruins more than the Red Sox and Patriots, and now, after 5 championships between the Red Sox and Patriots and years of futility for the Bruins, I like the Bruins less than the Red Sox and Patriots.

Yet I don't think it's as superficial as all that. One of the things I have truly come to admire about both organizations is the quality of their managament. It's hard to deny that the Patriots and Red Sox both have excellent management, even though the Red Sox benefit from having some extra money to throw around (although this is arguably also due to management's good work, the Red Sox have a lot of revenue because the team is run well as a business). Teams with good management also have down years (Oakland A's), but those types of "rebuilding seasons" tend to be less disheartening for a fan because of the promise that better years are ahead and the understanding that a losing record with a team full of young players is sometimes a prerequisite for a great season down the road. So it is easy to see why teams with good management keep their fans from year to year even in the neccessary "rebuilding years," and why those fans who only check-in during the good years should be scolded for their lack of true interest.

But to return to my own fair weather fandom, the Bruins in contrast with the Red Sox and Patriots have had terrible management over the years. They have consistently traded away my favorite players in exchange for garbage. The final straw was trading Joe Thornton, our #1 overall pick that we had been cultivating for years, and then having him win MVP on the San Jose Sharks. So my anger at the Bruins management has made it harder for me to like the team, especially when they are bad because when they are bad I don't think to myself "I can't wait until this rebuilding year pays off," rather I think, "The Bruins have made awful management decisions and this is their result." Even worse are owners who are too stingy to make a championship run. Rooting for a stingy club is like rooting for a team that isn't trying that hard to win, you shouldn't do it. The Bruins can't be accused of that any more because there is a fairly low salary cap now, but pre-lockout the Bruins were very stingy, especially considering they were a relatively high revenue team.

If the fact that I like teams whose management do a good job of putting together strings of succesful seasons makes me a fair weather fan, then I plead guilty. With players, if they aren't as talented as a rival team's players but they work hard to win, I can root for them. With management, if they are less competent than their rivals' management, I can still root for them, but it becomes harder.

West Philly loves Obama

2008-10-11T13:02:00.000-07:00

Just went to an Obama rally at 52nd and Locust in Philadelphia, on a block that would seem really "ghetto" and decayed if it were not jammed with thousands of excited people. I would not be at all surprised if in most states black turnout far outstrips its historical average (and white turnout) and Obama does better than the polls predict. People are VERY EXCITED. Parents were carrying their small children and struggling to get through blocks packed with people just to get close enough to physically see a tiny speck behind a podium that everyone knew was Barack Obama. A lot of people handed me their cameras and asked me to hold it up as high as I could and snap a picture, with the hope that even if they couldn't see Obama, they could get digital evidence that they were close. And this was the 4th event that Obama had done in Philadelphia TODAY.

The Debates

2008-10-10T20:10:00.000-07:00

I've seen maybe five minutes total of the debates so far, while I was waiting for my bread to turn to toast and my housemate watched in an adjoining room. In large part, this neglect is rooted in the cast of my delectations: I just don't much enjoy watching these things, as they are never elevating and are almost exclusively occasions for mistakes - much more often than for something even as trivially redeeming as a bon mot - which means the only thing to look forward to is a particularly damaging gaffe by the opposition, which is not, after all, something we should aspire to look forward to.

But to leave it at that would be too generous to the debates. For I increasingly suspect them not simply of being useless but of producing actual harm. In the first place, there is this appeal to the vices of partisanship, to the ill-will that mounts every election season and the concomitant entrenchment of either side, occasioned by the endless circuses and spectacles that prod you to root for your man and against his opponent. And really, that's all it has become: rooting. Which is ironic, when you figure that a debate, considered prima facie, should be an occasion for the two sides to reach out to one another, to find some common ground, and to clarify their differences in such a way as to lead, if not to reconciliation, at least to mutual respect. I did not watch the debates, but, even with the Republican not considered a moron and the Democrat not an elitist, I'm guessing both the debates themselves and the coverage they have received point to something more like a zero-sum game, to a contest in which the vast majority of viewers were hoping one side would eviscerate the other, than to anything like reasoned public discussion of political disagreements. The candidates were not, after all, talking to one another: they were talking to the undecided voter, for whom both parties want to draw sharp lines with their candidate on the right side.

Second, and more dangerous, the pompous fanfare of the debates inflates two illusions beyond even their already intumescent proportions: that the federal government matters so much, and that the federal government should matter so much. The first is the old problem of holding politicians responsible for the vagaries of things largely beyond their control, most notably the economy (though one could also and interestingly add the presence of WMDs in Iraq). Debates, and I assume this year's are no exception, play to precisely this misconception, instead of encouraging the sort of dispassionate assessment of a candidate's record that takes into account marginal impact, risk and probability, the information available at the time of the decision, and everything else.

The second is the illusion, a tease to the hunger of that ever-hungry giant, the federal government, that every issue is grist for the federal mill - whose appetite, like all disordered appetites, only grows the greater as it is fed (the difference between hunger and gluttony, it is said, is that hunger can be sated). Any and every shortcoming of American society, and any bad luck, and even many of the irresolvable imperfections of our common nature, are played up for pathos to elicit a demand that something be done - and lo, there is the federal government, in the person of its aspiring executive, to heal the wound! Old people get sick; old people die - but not this particular old woman; not on our watch!, we are to cry. If we had the right watchman, or even the right watchwords, not only would old people die, but so would the young, among them ones we could have saved; and not only would we fail to preserve young lives, but we would fail to eradicate any number of old abuses. Such is life. Against that would be the singular virtue of not creating new abuses; but abuses as-yet uncreated are as-yet unseen, and have not the rhetorical power to stir an audience or embarrass an opponent, which is precisely why debates prejudice us so dangerously against them. It would be better never to talk of our problems than to talk of them as if they were somebody else's to solve, or in such a way that somebody else must in all propriety offer a solution - especially when the somebody else is the state. And yet we do talk of them in that way, and we call it a debate. Better, then, that we didn't debate.

Green cards for foreclosed homes

2008-10-09T06:43:00.000-07:00

We have too many homes that are being foreclosed upon and not enough demand for them. How do we increase demand for them? Offer anyone from any country (presuming they aren't criminals) a green card in exchange for buying a foreclosed upon home. I bet there are tons of illegal immigrants currently living in the United States who would go for it, as well as tons of people outside the United States who would. I mean there are problems that would need to be worked out, like how can we be sure that these people buying the homes would actually live in them and not just consider them the price of getting a green card. If tons of wealthy foreigners were buying foreclosed homes and then abandoning them, things would still not be all that great.

Hey, are you gonna use that kidney?

2008-10-08T12:43:00.000-07:00

All joking aside, I think we should seriously consider giving people the ability to buy and sell organs. The argument is very simple, I think there will be more organs available when people have more of an incentive to relinquish one, more organs means more people receive organ transplants. I believe lives will be saved, and that weighs very heavily on how favorably I view the idea. The saving of lives, does not neccesarily make a policy a good idea, particularly when it requires imposing on individual rights, but I cannot identify any moral objection to organ-selling serious enough to outweigh the potential for saving lives.

The selling of organs will not substantially effect the availability of organs for people too poor to buy one in a potential organ market. We can make it legal to sell one's organs if the organ giver is alive, but illegal to sell them when one is about to die or dead. So organ donors (people who have agreed to give up their organs on their driver's license), which is how most people in the U.S. currently get their organs (other than friends and family I assume), would still be there.

Perhaps Ross can help here. Is there a Catholic perspective on this issue? I know the libertarian perspective, and I am essentially espousing it.

Times change

2008-10-07T21:43:00.000-07:00

I was recently startled by this quote from the Globe about the Red Sox:

When it turns to October, no one dominates like Boston

The psychology of Boston sports can change that quickly? You would think that a reputation for playoff futility that was built up over the course of 86 years would take more than 4 years to dispel. Of course, we all knew, or at least should have, that the whole "curse" was just an anomaly, unlikely but not unlikely enough for us to infer some supernatural force. But it doesn't strike me as totally absurd to say that the Francona/Epstein era Sox dominate in the postseason (although the Epstein era includes 2003), and that is what Fox sports argues here. Major quote:

It has become clear to all of baseball that when it comes to building a blueprint for playoff victories, there is nobody better than the Sox. "Right from the get-go, six years ago, we identified that as an area we might be able to get an edge," said Epstein regarding the team's approach to scouting for the playoffs. "It's an area where if you ignore it can burn you. And if you emphasize it, it can be a competitive advantage. We've changed personnel along the way, we changed format a little bit along the way and we've allocated our resources. I think as our players, manager and coaching staff have bought into the system, it has taken it to a whole new level."

Thank god, I don't live in Seattle.

McCain's HOME plan

2008-10-07T20:34:00.000-07:00

So I was little surprised to hear John McCain say in the debate that he wants to buy up individual mortgages. This is an idea I've had some interest in, so I was curious to see whether McCain has any specifics behind this idea on his website. And in fact he does! (just scroll down to where he has his "Home Plan"). He proposes to, as he said in the debate, buy up individual mortgages from sub-prime borrowers and give them new mortgages reflecting the current value of their home. I have to admit I'm a little surprised this hasn't gotten more coverage because he appears to be to the left of Obama on this. However, his plan is just badly designed as far as I can tell. Observe:

1) McCain's plan explains who is eligible:

Holders of a sub-prime mortgage taken after 2005 who live in their home (primary residence only); can prove creditworthiness at the time of the original loan...

Umm. One of the defining features of a sub-prime mortgage is that the loan recipient has poor credit. Not only that, poor credit is an estimate that an individual is less likely to pay off a loan. So McCain's eligibility requirement excludes the sub-prime mortgages most likely to be in default right now.

2) McCain's plan offers fairly strong incentives for people to default. He essentially offers to buy homes at 2005 prices and sell them back to the current homeowners at 2008 or 2009 prices:

every deserving American family or homeowner will be afforded the opportunity to trade a burdensome mortgage for a manageable loan that reflects their home's market value

And the fact that their is no incentive not to go into default or take advantage of John McCain's new program is particularly problematic because under his plan people are eligible if they:

demonstrate that they will be unable to continue to meet their mortgage obligations; and can meet the terms of a new 30 year fixed-rate mortgage on the existing home.

These "new 30 year fixed-rate mortgages" could be worth over $100,000 in savings to the home-owner and at the expense of the taxpayer. I'm guessing there will be a number of people who would work hard to make it seem as if they were "unable to continue to meet their mortgage obligations," but the really problematic thing is that there is no chance the taxpayers recover that money, it is simply a give-away. We buy at 2005 prices and immediately sell at 2008 prices, and this applies for anyone who can "demonstrate" that the 2005 price that they bought their house at is too expensive for them after all.

Personally, I think (b) and (c) from my plan would be much better and cheaper than McCain's. Not only that, I think McCain's plan would do less for the financial system as a whole, but this post is too long and it is too late. Another post.

Do we want a progressive bailout?

2008-10-04T15:12:00.001-07:00

A couple of initial reactions to Tim's post. His 'c)' is worrisome because the government doesn't have the infrastructure in place to do it, and, given the scale of the project, probably couldn't develop that infrastructure fast enough to meet market conditions. Also, I don't know that we want the government to get its fingers into this sort of thing; as Reagan said, "a government bureau is the nearest thing to eternal life we'll ever see on this earth." What with the power of public worker unions, and the insularity (ie protection from market conditions) of political decision-making, the government just isn't very good at doing quick, temporary fixes, which is all anyone wants this to be.

His 'b)', and indeed this Koppell/Goetzmann plan as a whole, makes me wonder why it need be the government who restructures these bad mortgages. The only real difference between their plan and the bailout, as far as I can tell (and my background here is only cursory), is that they would do through Freddie and Fannie what the bailout tries to do through Freddie and Fannie and various banks and insurance agencies: take on these rotten securities and restructure/sell off as possible. But why should we rely exclusively on F&F when there are private alternatives with presumably more flexibility in learning from their mistakes (eg by firing the people most responsible for the bubble and bringing in new people from the intelligent firms that have weathered this storm) and adapting to future conditions? Why should the government be tasked with evaluating and refinancing each individual mortgage instead of treating them as lump sums on the books of defaulting corporations? Heck, couldn't it just subsidize the takeover of these firms by those still standing (Wells Fargo, BoA, etc.), trusting them to deal with the details of refinancing? Or is there just not enough available capital to do that? - in which case couldn't you increase the subsidy?

In the end, I'm not sure how to play this because I don't really understand the problem. Above all, it's not clear to me - and maybe it's not clear to anyone - how much the government needs to address actual losses and how much it needs to just calm the market down. That is, if you take the value of all the houses that are threatened with defaulting on their mortgages (at reasonably projected, non-bubble and non-crash rates, whatever those are), and you add to that all the other assets of these bankrupt firms (which we get to use to help pay for their bad loans), and you set that against the amount of money paid out already in loans, which is bigger? If it's the first, that means the market is irrationally depressed and, with the help of a temporary infusion of govt capital (which the govt would profit off of), will get going again. If it's the second, even the best plan will end up costing the taxpayers. And either way, there are costs in terms of moral hazard and state involvement in the economy that present subtler and longer-term threats. Finally, and this may be the most significant gap in my understanding, I don't quite understand how letting these companies fail will screw up the rest of the economy. Is it because everything is happening all at once, which creates panic and therefore irrational activity? In which case, is the true role of government here simply to put these companies through slow-motion bankruptcy where the same people lose the same amount of money and in the same way, just on a different timetable? And what does that look like - is it essentially what the bailout plan is trying to do?

How to do a progressive bailout

2008-10-04T07:46:00.000-07:00

So, I'm undecided on whether we should actually have a bailout or not, but I am very frustrated with how we have decided to bailout the financial sector. Boondoggle has convinced me not to use the tired cliche of Wall Street vs. Main Street, but the basic idea of helping the financial sector directly or helping individual home-owners directly is the source of my concern. I recognize that we are all in this together and if the credit markets freeze up, we all go down. But we can either help the financial sector directly to save us from a deep recession, or we can help defaulting home-owners directly and save the financial sector indirectly. Both groups have been irresponsible, but one is a group of financial professionals who completely failed at their job due to a combination of recklessness and incompetence; another is a group of people who may not be that financially literate and were likely mislead by financial professionals. Leaving aside from implementation and efficiency, who would you rather help? So here's what I think we should do:

1) Announce that the government will guarantee any mortgage that goes into foreclosure. For homes that foreclose, the government takes over the responsibility of paying off the original mortgage and assume ownership of the house. The core of the problem is that housing prices have crashed, people are unable to sell their homes for as much as they owe in their mortgage, and when the houses go into foreclosure the full amount of the loan is not recovered. So banks holding on to their mortgage backed securities (M.B.S.) now realize that they are worth a whole lot less than they thought. But if every single mortgage is backed by the government, then every mortgage backed security is now worth full-value. The announcement will make the market instantly re-evaluate the value of the M.B.S. and therefore have more confidence in the solvency of the banks. All of the recent multi-billion dollar write-downs will be reversed. Those credit-default swaps, I honestly don't know much about or understand, but it seems to me that they just won't be problematic anymore because there just won't be anymore defaults on mortgages because anytime there are the government assumes responsibility. But don't take my word for it, here's Professors Koppell and Goetzmann of Yale School of Management in their op-ed from the Washington Post:

the sum being demanded from taxpayers [for the Paulson bailout] is almost certainly more than sufficient to pay off all currently delinquent mortgages. If the government did this, all the complex derivatives based on these mortgages would be as good as U.S. Treasuries. Their fair value would jump to 100 cents on the dollar, rescuing teetering financial institutions. The credit markets would be resuscitated overnight.

2) So now the government holds the deeds to a lot of homes. At this point we have several options:
a) Liquidate ASAP, auction them off
b) Restructure the mortgages at more generous terms, taxpayers probably take a big hit.
c) Try to rent them out at market value, and hope to allow as many former home-owners as possible to remain in their homes as tenants.

(a) strikes me as a terrible option. It destroys home values in the neighborhoods where houses are being foreclosed and leads to everyone who has been foreclosed upon losing their home.

(b) is what is suggested by Koppell and Goetzmann and apparently there is precedent as well as governmental infrastructure in place to implement it:

Implementation could follow the example of the Home Owners' Loan Corp., which in the 1930s issued new mortgages to a quarter of American homeowners. The government could offer to refinance all mortgages issued in the past five years with a fixed-rate, 30-year mortgage at 6 percent...If monthly payments are still too high, homeowners could reduce their indebtedness in exchange for a share of the future price appreciation of the house...All this could be done through the Federal Housing Administration, with the help of Fannie Mae and Freddie Mac, which have the infrastructure to implement this plan rapidly. An equity participation structure would prevent thousands of foreclosed homes from being dumped on a strained housing market

(c) Is a little kooky and unorthodox (not original to me though), but I'm undecided between it and (b). It feels a little fairer to people who took out more reasonable mortgages and responsibly paid them off, and it doesn't give people incentives to go into foreclosure intentionally [sidenote: everyone who takes advantage of (b) or (c) should have their credit rating wrecked]. But it still keeps people in their homes and prevents the terrible community decay that happens when there are abandoned homes in a neighborhood. It also seems to me at least, that with (c) the government is more likely to recover more of its losses because it can sell the home once the original owner stops renting it and housing prices get back into an equilibrium. There are drawbacks too of course, but that is true of every plan

This fulfills my obligation to say something conservative

2008-09-30T06:24:00.000-07:00

...about the financial crisis. I haven't been following it, but I found this free market piece interesting.

Priorities: quick response

2008-08-14T22:50:00.001-07:00

Wow Ross issues a strong challenge. A thorough response will require that requires more time than I am willing to give at 1:42 AM, but for now I'd like to offer a few immediate reactions.
1) I do agree with you that Obama's ag subsidies policies are worse than McCain's, but I don't think that that outweighs everything else that I agree with Obama on.
2) I think it worth evaluating MARGINAL impact. Obama will simply be perpetuating a system of subsidies that has been in place for a long time. McCain may fight the good fight as president, but I don't see ag subsidies spontaneously ending in a McCain presidency, despite his aggressive use of the veto. So if we are going to do a cost/benefit analysis of Obama versus the potential alternative, we have to weigh not the stated differences in policy preferences but the likely marginal difference in policy result.
3) Don't buy into the hype about ethanol subsidies. They are a very small contributing factor to the food crisis. They are not, as many journalists have claimed, a primary cause for the food crisis.
4) Seriously ag subsidies? Most of Obama's foreign and domestic agenda versus ag subsidies, which is more important? I get indignant about them, but I doubt their impact is nearly as large as the impact of differing approaches to Iraq.

Priorities

2008-08-13T11:43:00.000-07:00

Take all the wonderful things Obama will do for the poor in this country, and all the wonderful things he will do for Iraq and the American soldiers there, and all the wonderful things he will do for our image abroad, and all the other miscellaneous miracles he will perform (immediate racial reconciliation?), and set that against his support for agricultural subsidies and the havoc those wreak in the third world - and tell me, which is greater? Tell me, will Obama really be a net positive on the quality of life of the world? You want to say yes, average Obama voter, but is that true? And what grounds, besides your insubstantial hope, have you for believing it?

Politics for the Epistemologically Modest: Abortion

2008-08-11T11:04:00.000-07:00

By way of introduction, I should say that this epistemological modesty is an excuse for me to set out my views on a couple issues where I support McCain, and to do so in the least exposed way possible - that is, taking as little as I can for granted and with a sort of unarticulated prolepsis.

So: abortion. Here the argument is less from authority than from ignorance. How can you say that a human life has value and allow a practice that is destroying what may well be millions of people? Not that they definitely are people: they may be, and that is enough. If there is such a thing as human dignity, could any conveniences - avoiding several months of pregnancy, or the eugenic destruction of those predisposed to criminality (which 'benefit' is nebulous at best), or even the control of one's own body - possibly justify what may well be murder on a large scale? And if we take the silliest utilitarian view, if we deny human dignity and say that the value of a life is in the pleasure it yields, are we not still led to conclude that more pleasure and so more value is produced in the long run by forcing women to carry to term than by allowing them to abort? In short, is there any way to ground the claim that human life has value that will not, eventually, lead to protections for those who may well be and will soon be living humans - i.e. that will not, eventually, undercut the pro-choice position? Is there any way besides claiming that human life qua human life is worthless, and that we are only worthwhile to the extent that we are freely-willing, or rational, or language-using, or some other such Enlightenment nonsense that would shut out infants and the temporarily comatose and the retarded and the aged? Surely, as regards fetuses, what dreams they may have when shuffling onto this mortal coil must give us pause - pause enough to, like Hamlet, choose life.

Politics for the Epistemologically Modest: Iraq

2008-08-11T10:46:00.001-07:00

It seems to me that we now have the right generals in place, generals who appreciate not just the military but also the political side of this conflict, and that the best course is to let them do their job. And it seems to me that McCain will do that, will shield Petraeus from domestic political pressure, and Obama will not. That's not to say Obama is clearly wrong in his diagnosis of and prescription for the situation - he may well be right. The point is that I don't know the situation well enough to say, and that I don't have confidence that he knows it, or that his base knows it, as much as I have confidence that Petraeus and his team do. In other words, I think the only sensible approach to Iraq policy for the average voter is an argument from authority, and in this case, the Democrats are giving far less weight to the true authority - our current generals - than are the Republicans. Now obviously generals have their biases, often including an over-reluctance to cut the cord on an operation, but I do not think that the biases of these particular generals are more pronounced than those of the public at large; nor, more particularly, than those of Obama's base; nor, finally, than those of Obama himself. And indeed, though I do not know how Obama is currently selling his Iraq plan, there was a time when it was being billed as not simply 'cut our losses' but also as 'forcing Iraqis to take charge' and so 'better for Iraq' - which is to say, there was a time some few months ago when the Democrats were arguing not simply that the generals didn't know when to cut the cord on the operation but also that they didn't know how best to manage that operation. And that is just the sort of arrogation of undue authority that merits being called arrogance. Indeed, even if you are sympathetic to Obama's biases, indeed even if you agree with them, this may be one situation where you have to recognize your own ignorance and defer to someone who disagrees with both you and your political Messiah, but who is in a better position to know what will be successful going forward. The epistemologically modest voter, which is the only sensible kind of voter one can be in the case of Iraq, even if he be a Democrat, defers to a sounder authority than either his own judgment or his party's vote-concerned candidate, and in this case the authority is clear: not McCain, but those McCain would follow.

Election Season

2008-08-05T14:55:00.000-07:00

It is interesting that the ones who most wrap themselves up in the day-to-day politicking of politics are those whose votes are already settled, which is to say those with least reason to do so. How many of CNN's viewers are tuning in to decide their vote? Is it even a significant minority? The others are presumably watching because they enjoy the frivolity of the hustings, but that suggests that cable news isn't about news at all, or at least no more than are ESPN and E!: it is, to the majority of its viewers, about entertainment, and about keeping up to date on their particular entertainment stars. The fact that the star is Obama and not Pujols or Clooney only means they take themselves more seriously. Fox News has been criticized for dumbing down cable news, and perhaps that's true - but perhaps it's also what people are looking for; perhaps Fox has a better idea of what cable news represents to its viewers than do CNN et al.

But I rib cable news on conjecture: I have not been watching, or indeed following the race in any form. I am fasting this election season. No, one fasts by giving up something good: I am detoxing myself. I could not tell you, nor could I have told you anytime since Hillary disappeared, which candidate is ahead in the polls. I don't know what significant speeches either candidate has delivered. I couldn't even tell you if they've made major policy proposals since both became presumptive nominees. I could guess at, but don't know, who's being talked about for VP. And you know what? I feel great. I know it's an election of immense historical interest; I know that because of one candidate's character and the other's political commitments, it was shaping up to be particularly honorably run; I know it may even yield moments that we will recount to our grandkids; I don't care: I still feel great. I'll raise my grandkids on hagiography - real hagiography, not the sychophantic political sort. My vote will go to McCain in November - he could have been on the other end of the torture in Hanoi and I'd still vote for him - and I'm sure I'll do little or nothing for his campaign (due to my character, not his); what does the rest of it matter to me, really?

(Just to be clear, I write this as a sort of apology for my lack of posts, an apology in both senses of the word, and as a way to steel myself for the next three weeks of idle hands and uninterrupted TV access while I'm on break. And, of course, to defend Fox News, which is the best.)

Sports stadiums

2008-08-01T12:07:00.000-07:00

In light of the whole Sonics debacle, how about a federal requirement that sports teams have to pay for their own arenas? They could certainly afford it, with perhaps some cuts in players' salaries, and I don't understand the logic of letting a monopolized industry play cities off against one another to drive up subsidies for their operation. This seems like precisely the sort of regulation of interstate commerce for which the federal government is designed - indeed, it is because sports leagues are inter-state that teams have so much leverage to demand subsidies.

Of course this happens in more than just sports. Boeing moved its headquarters from Seattle to Chicago several years ago because of tax incentives. But Boeing's move was slightly different: Seattle surely lost some revenue and some (few) jobs, but it did not lose access to the good Boeing provides. Airplanes still fly to Seattle, both because Boeing's services aren't localized in the way a sports team's are and because, even if they were, Boeing has competitors that would move into the market. That is not the case with the Sonics or with any sports team; they can hold a city hostage in a way that a normal corporation cannot. Which means that this whole mess has given us a truly exotic specimen: a situation crying out for federal intervention.

Some uninformed musings on history and philosophy

2008-07-17T21:32:00.000-07:00

So I understand that there is this "great man theory" of history summarized by a famous quote by Thomas Carlyle: "The history of the world is but the biography of great men." My basic understanding of this theory that I managed to gather from a single Wikipedia search is very simple: historic change is mostly caused by great individual actors. My basic understanding of the common critique is that social context is critically important and it shapes historic actors and the social confines in which they can work. Therefore social context whether it is cultural, political, economic, demographic or whatever else is ultimately the major instigator of historical change. This theory makes a lot more sense to me and apparently is much more in fashion than the "great man theory" which seems to have peaked in popularity in the 19th century. However there is one aspect of great man theory that is highly appealing relative to historical theories emphasizing historical context. That is that the "great man theory" celebrates the power of free will and the actions of individuals independent of social pressures, whereas historical theories that emphasize social context seem to fit in with a deterministic viewpoint that denies free will even exists. My guess is that I've bungled both the history and the philosophy here but Ross will presumably straighten me out in the comments if he gets any time away from his schoolwork.

Using scarce resources for architecture

2008-07-06T06:19:00.000-07:00

Ezra Klein quotes from "The Architecture of Happiness" by Alain de Botton:

Endowed with a power as unreliable as it often is inexpressible, architecture will always compete poorly with utilitarian demands for humanity's resources. How hard it is to make a case for tearing down and rebuilding a serviceable but mean street. How awkward to have to defend, in the face of more tangible needs, the benefits of realigning a crooked lamppost or replacing an ill-matched window frame. Beautiful architecture has none of the unambiguous advantages of a vaccine or a bowl of rice.

In general I'm an advocate of tangible needs getting priority over intangible ones, but I instinctively disagree with this quote. I don't have any social science research to back up this claim, but I think tearing down and rebuilding a serviceable but mean street is not simply an aesthetic improvement. It sends a signal to visitors and passersby that the community values keeping the community nice. It discourages people from abusing the communal space.

This justification for devoting resources to renovation and well-designed buildings is still pretty mushy and intangible, and it probably is still less beneficial than assuring that everyone in a community meets their nutritional needs. But architecture is still pretty crucial. Aside from food, shelter is the most basic human need, and many new buildings will have to be built in the future. Architecture is not simply the tearing down of serviceable buildings to build prettier buildings in its place. It is often building new buildings to serve new needs. Or improving existing buildings so that it serves its purposes better.

Finally, the quote talks about humanity's resources as if they are entirely controlled by some communal entity trying to decide what is their best use for serving its society's members. But as a matter of fact, many human resources are in private hands, and there will undoubtedly be private individuals who enjoy well-designed buildings and have the resources to finance them.

Microfinance for profit, one more point

2008-07-01T06:12:00.000-07:00

I just have one more point to follow up on my previous post on for-profit microfinance banks. This may be kind of trivial and obvious but I think it is worth stating explicitly. I think we can infer that when a for-profit bank expands tenfold while offering interest rates of 70%, that it is seeking out and finding loan recipients who do not have access to non-profit microfinance banks that offer loans on better terms. Put another way, a for-profit microfinance bank only works when there aren't non-profit microfinance banks competing with it and offering better terms. For folks like Mr. Yunus who are uncomfortable with the for-profit banks, the best response is to expand non-profit banks so that they serve the areas that are currently only served by for-profit banks. Once for-profit banks face competition from non-profits (or a lower margin for-profit bank) they will have to offer better terms or seek out more rural poor who lack access to any microfinance bank profit or non-profit.

Brazilian Ethanol

2008-06-30T13:48:00.000-07:00

Believe it or not, I stongly agree with John McCain on this issue and disagree with Barack Obama. The tariff on sugar-based ethanol from Brazil has actually been something that has bothered me for a long time. It is wrong on so many levels. It cuts off our access to a cheaper and more environmentally friendly alternative to oil. It is pushed by the U.S. corn lobby because it implicitly subsidizes the production of the more costly and less environmentally friendly corn-based ethanol produced in the Midwest. It hurts the economy of a much poorer economy (Brazil). There are so many ways things would be better if it didn't exist. Barack Obama has been a consistent supporter of the tariff in his time in the senate, as one would expect of a Midwestern senator with close ties to the ethanol industry. McCain, has proposed getting rid of the tariff altogether, which is consistent with his record of opposing subsidies for inefficient corn-ethanol.

Obviously, I'm still going to vote for Barack Obama, but this type of thing is irritating and wears down my enthusiasm for an Obama presidency. It'll be great, but no matter what the size of the democratic victory this fall, I maintain that the largest obstacle to enacting a truly progressive agenda won't be filibustering Republican senators, but rather Democratic lobbyists representing special interests.

Penalty kicks are so stupid

2008-06-23T20:13:00.000-07:00

I hate that soccer matches in international tournaments like Euro 2008 or World Cup 2006 are often decided by penalty kicks. It is not a good measure of which team is truly better at soccer (and by soccer I am referring to the game in which two sides each have eleven men on the field) because the obvious retort to my assertion is that penalty kick shootouts are soccer, and that objection would be accurate because it is a part of the game in international play. But I don't think it should be part of the game at all. I think we can all agree that the core of soccer, the game that kids enjoy playing and adults enjoy watching professionally is eleven-a-side. Kids don't play pick up games of shootout very often. Being able to convert a penalty kick into a goal, or save a penalty kick, are skills that are relevant in soccer but they are just one skill among many that soccer players have to master to play at a high level. Observing penalty kicks is not a very good demonstration of a team's skill.

These are all fairly common criticisms I've made of penalty kicks, and I imagine many people in the soccer world agree with me. What I think is not adequately considered is the effect that shootouts have on gameplay prior to the end of overtime. As I referred in another post, NHL rule changes about how games end have effected the incentives for hockey teams and reduced scoring and aggresive play at the end of regulation. I believe that shootouts can have the same bad effect. Consider a team that is good enough to advance to the elimination rounds but relative to the other teams is below average on offense and average on defense. If shootouts were replaced with golden goal, then the logical thing for a weak offensive team to do would be to focus on practicing and improving its offense, because it will need to score goals to win games. However, with shootouts in place this team might instead choose to emphasize improving its defensive play and it's penalty shooting ability in practice. All the below average team would have to do would be to play stingy defense and only use 1 striker and hope for a 0-0 tie through regulation. Then once it got to penalty kicks any team would have a reasonably good chance of victory against the world's best. Clearly most teams won't adopt that strategy, but on the margin, shootouts encourage this type of strategy, especially when one team is heavily favored over another team. Underdogs have strong incentives to try and get to penalty kicks, whereas in Golden Goal there would be no advantage in that. I'm not sure whether there are any quantitative studies out there trying to measure this, there might not be good enough data available to study it like there was in the NHL. But I'd be curious.

Gmail advertising

2008-06-22T20:53:00.000-07:00

Dear Google,
I know you are out there reading everything that is written on the internet, so let me give you some advice to advance your goal of taking over the world one step at a time. Fix your algorithm for serving ads on Gmail! In particular, aggregate all of the information in my email account and feed that into the algorithm. I was recently reading an email message from a friend that used the german phrase "viel glueck!" (Good luck) in the subject line, and five ads in German were served to that email, even though as Gmail should know from every single other email I have written in my account, I speak english and am not comfortable communicating in any other language. Another friend sent me an email with nothing but a link to a website outlining a proposal for new metro lines in D.C. and a subject line that said: "This would be so sweet." This is one of the ads that was served that I think fairly represents the nature of all five of them:

SweetSpot Labs®

Luxury care intended for your sweetest spot.
www.SweetSpotlabs.com

So because my friend writes that the link she sent me would be "sweet" you seem to think I would interested in Sweetspot labs. Naturally, I am citing two emails which were very short and so gmail had very little information to use from that email to figure out which advertisements should be served to me. But why does Gmail only use the text from the email I am reading to figure out what ads to serve to me? You have the text of thousands of emails I have written, surely you can come up with something better than 5 advertisements in German for someone who has never written a single email with more than two german words put together? Really Google, you can do better than that.
Sincerely, -Tim

News stories that make me sympathize with socially conservative view points

2008-06-19T11:48:00.000-07:00

Ok when you see a news story like this you know that something is wrong with some of the messages teenagers are getting about the need to think through the implications of getting pregnant. That's just nuts.

Sneaky ways of cutting benefits

2008-06-09T16:59:00.000-07:00

Consumption taxes have transition issues, especially because moving from income to consumption taxes has the effect of heavily taxing the generation that is retiring when the switch occurs. All their money was taxed when earned as income, and then it all gets taxed again when they spend it (plus the capital gains taxes on its appreciation). Which is usually a damned dirty thing to do, but right now positively recommends itself.

That's because we're going bankrupt, and the baby boomers are the ones bankrupting us. All the plausible solutions to our fiscal crisis require that somebody receive less, but nobody seems to think it's realistic to try to include the boomers in that 'somebody' because they are too influential a voting block. But really, why shouldn't they suffer some of the necessary cuts along with everyone else? We may not be able to do it directly, but there's more than one way to skin that cat: you can cut a generation's benefits by cutting their benefits, or you can cut them by raising their taxes. Which would look something like a phase down of actual benefits in 20-30 years, for the post-boomer generations, and implementing a consumption tax within the next 5-10 years. (If desired, these can be framed to preserve roughly the same progressivity.) That kills two birds with one stone: we move at least partly to a consumption tax (more efficient, encourages conservation/reuse, helps the trade deficit), and we begin to solve the looming fiscal crisis.

The gender split in the democratic party

2008-06-05T10:42:00.000-07:00

Fact #1:
Most of the friends and co-workers I talk to about politics are men and my demographic profile (young, educated, urban, mostly but not all white).

Fact #2:
Most of the people I talk to about politics support Obama. Consequently most of the conversations tend to not only be pro-Obama but have to varying degrees anti-Hillary or anti-Bill&Hillary tones.

Fact #3:
Of the people I know who supported/support Clinton, most are women. Most are skeptical of Obama, some resent the unreserved enthusiasm that many of their male peers have for Obama, and some strongly dislike the widespread anti-Clinton sentiment.

I suspect that although these are just personal anecdotes, they are pattern of much larger national trends for people my age.

This brings up several interesting questions for me:

1. Why is it that most of the people I talk to about politics are men?

2. Are there parrallel groups of pro-Hillary women who mostly discuss politics with each other but not people like me?

3. In the male-dominated pro-Obama discussions that I frequently participate in, there is often an unspoken assumption that many women support Hillary purely because she is a woman and that this explains the gender split between Hillary and Obama supporters. In the hypothesized female dominated pro-Clinton discussions is there a widespread assumption that many men/the media are sexist and fail to appreciate Hillary's merits as a candidate because she is a woman and that explains the gender split? If so who is right, or are both right, or are both wrong?

I don't know why most of the people I talk to about politics are men, it could have many explanations including that most of my friends are men. I think that more of my male friends are interested in talking about politics than my female friends, but on the other hand it could be my female friends don't enjoy talking to men about politics but they are interested in talking about politics. Women could feel the pro-Obama/anti-Clinton sentiment amongst groups of men discussing politics is aggressive and unpleasent to disagree with.

Also, I want to be clear, I do frequently talk politics with women, and most women I'm friends with are pro-Obama (although there could very well be bias in that statistic, those are who are pro-Clinton may be less likely to reveal their preference). It's just of the pro-Hillary people I know, most are women.

If there truly are parrellel groups of men and women who discuss politics in single-sex groups, it seems likely that there are major gaps in the way men and women perceive the race. On the other hand, causation could easily run the other way. It is plausible that men and women, due to different experiences in society, perceive the candidates and the race in very different ways. Therefore when politics is discussed in mixed company it can be frustrating for all involved, particularly whoever is in the minority.

What to do with your EITC check?

2008-06-04T21:10:00.000-07:00

One of the most memorable lines from David Shipler's excellent book The working poor was a daughter saying to her mother "Mommy, it's expensive to be poor." Meaning that if a person lacks any sort of wealth or credit, it's impossible to buy things that will save money in the long-run or give access to better jobs. Megan McArdle decribes this phenomenon:

poor people without savings are often forced into higher-cost alternatives than middle-class people. If you don't have the deposit and first and last month's rent for an apartment, you end up in a residential hotel that costs more but will let you pay by the week. If you only have a small refrigerator, it's hard to be thrifty by buying in bulk

On a related note. The Earned Income Tax Credit (EITC), a major anti-poverty program that I support expanding, distributes most of its money through a once-a-year lump sum payment to recipients. This could be either good or bad. On the one hand, the money is not given on a continuous basis which would be desirable for people who have continuous and immediate needs (like the working poor) or are not very good with money (like some of the poor). On the other hand, it essentially forces people to save so that they will get a big payment at the end of the year that might give them enough money all at once to invest in something like a refrigerator to save money on food, or a car to give them access to suburban jobs. On a third hand that is related to the first hand, it forces people to save which is paternalistic might offend Ross's libertarian instincts. But enough with my uninformed speculation what are the facts? Mark Thoma at Economist's View has some answers from some empirical research.

1) There is an option to do an Advance EITC that basically incorporates the refund into weekly paychecks. Yet most recipients do not use this option.

2) Key quote:

Our primary finding is that recipient household spending in response to EITC payments is concentrated in vehicle purchases and transportation spending. Given the crucial link between transportation and access to jobs, we believe this finding is consistent with the EITC’s goals.

So in other words, most people appear to have an implicit preference for being forced to save via EITC or at the very least haven't been affected enough to care one way or the other. And many recipients use the result of their forced savings (the end of the year check) to invest in something that will allow for greater access to jobs. Although it's unfortunate that their finding is something like cars which could be investment but could also be frivolous consumption depending on the circumstance of the EITC recipient.

Microfinance for profit

2008-05-31T09:26:00.000-07:00

A couple things are interesting about this piece.

1) It shows that charities have identified a profit-making opportunity before the market has. This is interesting. Non-profits figured out how to make group-lending work, a sustainable way to give credit to the poor who lack credit histories and collateral, and for-profits will now use those innovations to make a profit.

2) The following quote brings out a few more interesting things:

"Another critic, Chuck Waterfield of Microfin, a provider of software to microfinance institutions, accuses Compartamos of “monopolistic exploitation of the poor”... Compartamos concedes that its rates may seem high—though it reckons they are closer to 70%—but says they are set to allow the bank to grow quickly to meet vast untapped demand in Mexico. Its borrowers have risen in number from 60,000 to around 900,000 in the past eight years."

Despite the distrust that many people in the non-profit sector have for mixing the profit motive with advancing social goals, it can be an extremely effective way to expand one's impact by reaching more people. For profit microfinance banks are capable of raising more capital quicker than non-profit banks are and so they can provide loans to more people. Of course, the loans which they give out are at less favorable terms than what a charity would offer, but if Compartamos is succesful it will attract competition which will ultimately lead to more credit access for Mexico's rural poor.

A Warning

2008-05-26T12:01:00.000-07:00

Bush came to office promising to change the partisan culture of Washington and with a record of working across party lines in Texas, and his conservative base was forced to live with NCLB, the prescription drug bill, McCain-Feingold, and one veto his whole first term. The war's unpopularity deep-sixed his hope of appearing non-partisan, and Bush all of a sudden turned back into something resembling a conservative (of which this latest veto, of the farm bill, is more proof). Obama supporters have been warned.

Toward stewardship

2008-05-22T18:19:00.000-07:00

In a recent comment on one of Tim's posts, I advocated thinking with the inter-generational model of stewardship rather than the intra-generational model of envy - i.e. getting joy out of the success of your fellow citizens because it reflects well on your society rather than cursing those who have more than you - though I conceded it might be hard to popularize. But perhaps we aren't so far away from that kind of thinking, even with so many soapboxes occupied by the John Edwardses of the world. As a case in point, I challenge you to look at this list without feeling some pride for this country.

Self-Government

2008-05-21T23:47:00.000-07:00

The most obvious of the justifications I gave in my post about Examined Living for prioritizing the good life over good politics was that our everyday lives just matter more to us. And the more I think about it, the more I realize just how far removed are our overarching political systems, even under representative governments - and how useless is most of the time spent thinking about them. (I made a similar criticism about political campaigns here.) I have, effectively, no control over the outcome of the political process. Political outcomes affect my life, but they do so as independent variables, intrusions to be accommodated or worked around but that can't really be changed. Politics is so removed from my control that it could almost be fake. It's like a giant game with the media as dungeon master, telling me from time to time that "polls say Americans cozying up to socialism; pay 50% more taxes at year's end," and I've just got to make do. The scale of these changes is so vast, and the changes themselves are so marginal (i.e. on the margin, a shift from 55-45 to 45-55), that I barely see them on the ground, in those around me. They say we have self government, but I am not governing myself: I am being governed by the American people, and that's a force as impersonal as any tyrant (though more stable). What I'm trying to get at here is that a great deal of the benefit of democracy, of cooperating on a personal level with the members of your community to solve your problems as a community, just doesn't exist in the centralized state we have now. That strange combination of self-reliance and fraternity that participatory government produces, that this country had when 3 million people filled 13 colonies, that was part and parcel of what the Founders meant by democracy, has been lost to us. Imagine a society in which the majority of communal decisions were actually taken by your community, a community you personally identified with and played a role in. How crazy would that be?

Market economies are predicated on the idea that even dumb people are better at solving their own immediate problems (in economics, this is usually some form of scarcity) than smart people are at solving the problems of those far away. And yet, politically, we seem to have decided on the exact opposite, and indeed to have chosen the worst of both worlds: my community's immediate problems are increasingly left to be solved by a dumb national electorate. I have a certain faith in the wisdom of the average voter, based as it is in tradition, but such wisdom with its practical spirit is less valuable than sheer technocratic intelligence with its organizing energy for issues far removed and little cared about - and technocratic intelligence is not something the voters possess in large quantities. It's as if we decided to both remove the decision-makers as far as possible and choose for the job those who would worst handle this separation.

Of course, the claim is that my community's problems are affecting the whole country, and so are the whole country's concern. Which is true, on one level - and why stop there? They are affecting the whole world. But here the important distinction is between affecting others directly and affecting them mediately, through changes in oneself. My dropping out of school affects those around me, but it's an effect mediated through changes in myself: they are affected because I am different, because my conversation is less stimulating and my employment prospects are dimmer and whatever else. Whereas if I were to punch someone in the face, that would be a direct effect, unmediated by changes in myself. Generally, we have the right to affect others in this mediate sense, including doing harm to them, but we don't have the right to do so directly. The same principle operates at a community level: my problems become your concern - i.e. you can play more than an advisory role in helping solve them - not when they affect you mediately but when they affect you directly. If, in an extreme example, my state decides it doesn't want roads of more than two lanes, that will probably hurt the commerce in neighboring states because it will hurt the commerce in my state. But that's a mediated effect. If, however, we are thinking about building a bunch of factories that pollute the air and water of neighboring states, those states would be directly affected and would deserve a say in the decision.

The problem with centralization of power in this country is that the vast majority of decisions arrogated away from local communities in the name of state- or nation-wide effects are really producing effects of this mediated kind. Sure, traffic congestion in Seattle affects the circulation of goods throughout the Pacific Northwest; still, that's Seattle's business. The people of Spokane, let alone those of Boston, shouldn't be responsible for buying that city a light rail, anymore than Seattlites should be responsible for building tunnels in those cities. Of course, if Seattle offered to subsidize a highway through Spokane because of the benefits it would produce for them, that'd be fine: but the decision-making, and the taxing authority necessary to implement the decisions, would remain at the local level, not in Olympia or, what's even more absurd, Washington DC.

We've gotten used to thinking of government as a distant, bureaucratic machine - but in real self-government, nothing should be further from the truth. And, even given the degree of inter-connectedness in the modern world, there's nothing inherent in the kinds of problems we face that requires they all be solved by some central authority. Sure, small communities are interdependent, just as individuals are interdependent. But it should still be up to those communities how they want to organize themselves (within certain limits, like those provided by a strict reading the of the 14th amendment - e.g. no slavery), and up to their neighbors how they want to respond to that, just as it is with individuals. Ours is a system that trusts individuals to govern their own lives, even knowing that they will make significant mistakes; why do we not then trust them to govern their own communities? Why must everything be outsourced to Washington?

Perplexingly poor policy from Obama

2008-05-20T12:48:00.000-07:00

David Brooks, unfortunately, has basically got it right. There just is no excuse for Obama silently voting for the farm bill without making a big stink about the waste of farm subsidies. He is the presumptive nominee for an ascendant democratic party. The media is his mouthpiece. His opponent (McCain, not Clinton) has already voiced his opposition to farm subsidies giving Obama the political cover to take a stand as well. I don't know that much about this issue and haven't followed it that closely. I understand there seems to be some debate over whether farmers earning over $900,000 should get subsidies. I've seen some people say that this bill includes some provisions that makes it better than previous farm bills, but it doesn't even matter. As Brooks pointed out, this bill has been attacked by the Wall Street Journal and the New York Times editorial board. This bill is bad no matter what your political affiliation is as long you are not a farmer.

I would like to understand more the specific political pressures that is making Obama and 80 other senators so wrong on this issue, but Obama in particular. I am skeptical that money is playing a big role. Obama has gotten donations from 1.5 million people and created an historic fundraising machine that is not reliant on anything other than his ability to make inspiring speeches and send appealing fundraising emails. I understand that there are some swing states in play, particularly Iowa, where some people have a lot to gain from the farm bill. But really are there that many farmers in these states? And are they really that on top of the issues. I know agribusiness is very aware of the poliltical positions of the candidates and makes donations accordingly, but do people you meet on the strreet in Des Moines have a precise enough knowledge about how the farm bill affects their economy to vote based upon it? For the Mancur Olson thesis that Brooks alludes to to work in this case, there needs to be a bloc of voters that vote on this particular issue not just business interests that fundraise on a particular issue. Obama has raised (and will raise) so much money he doesn't need agribusiness' money. I don't get it. What are you doing Barack?

A new party... a third party...

2008-05-19T21:15:00.001-07:00

You sometimes hear people wax romantic about multi-party systems and correspondingly melancholic about the Democrat/Republican domination we have now. An observation of actual multi-party systems in operation, as in some European states, makes one wonder whether there are actually any advantages to it, but the party system has become an easy scapegoat for problems whose causes probably lie elsewhere, and I suppose that criticizing it is a simple way to establish your bona fides as one elevated above factionalism - never mind that there are some things worth being factional about. Anyway, as far as I can tell, the biggest difference between America and Europe is in the labels: what we call parties, they call coalitions, and what they call parties are more like factions or interest groups in our system. Which means that changing to a multi-party system in this country would be largely semantic: the new parties would form coalitions, and those coalitions would look a lot like Democrats on one side and Republicans on the other. The one real difference is that this would make it easier for particular interests to desert and join the opposition; but, as I have neither thought this through nor looked at the record, that may have as many disadvantages as advantages.

Nonetheless, it is mildly interesting to consider how we could move that way should we want to. And I think this idea of parties-as-coalitions holds the key. If there were interest in forming an Evangelical Party, say, the way to do it would not be as a stand-alone alternative to Republicans, but as a sort of subsidiary of the GOP: a group that would caucus with them but that would guard enough autonomy and discipline within its own ranks to have its desertion taken seriously and so give its leaders more negotiating power (evangelicals are already pretty block-ish because they come pre-organized, in churches, but you could do the same thing with groups whose borders are fuzzier, like greens, or non-interventionist conservatives). The Evangelicals could not of course run their own presidential candidate - that would be suicide - but they could perhaps select for themselves a candidate to run in the Republican primary, a candidate who I suppose would have to resign from the Evangelicals and sign up as a Republican (a la Ron Paul and the Libertarians). But thus you'd have an Evangelical block that would vote with the Democrats on, say, environmental and social justice issues (evangelicals are often as woolly-headed about poverty as liberals), but with the Republicans on everything else. Or something. Actually, I have no idea how this would work out, and conceivably the major effect would be to prevent subsidiary groups like evangelicals from being receptive to central party tenets: for instance, I think there are a fair number of evangelicals who are sympathetic to small government from the get-go because they are in the same party as small government types, and that sympathy would be diluted in this system. Your opponent's coalition would be similarly macerated, of course. But I really can't say; all I will say is that this seems to be a more realistic way of establishing multiple parties than the third-rail attempts we've seen up 'til now.

Abandoned Buildings

2008-05-16T11:38:00.000-07:00

I just find abandoned buildings incomprehensible.

My roommates and I don't live in a great location but it's decent, very close to metro and also near enough to areas that are considered great locations. We pay substantial amounts of money to live in our house as do many others in our neighborhood. What I don't get is the many buildings around us, particularly closed up storefronts that have simply been empty for months and months. Somebody must own them. And yet they do not use them. A small investment in fixing them up a bit would allow them to rent out for substantial sums of money. Maybe no one can think of a good store to put there, but I know there is a market to live in this neighborhood and if these buildings were re-done as residential units there would be demand. So maybe the present owners don't have the resources to fix these places up a bit, or the know-how. But SOMEBODY does. And that somebody, like a real estate developer, should know a bargain when he sees it. If the owner of a building isn't using or renting a property, it can't take that much to buy it off him/her. So what the hell is going on? I have no idea but I can come up with theories.

1) The owner has failed to pay taxes and therefore the D.C. government has taken possession of the property. For some reason there are bureaucratic hang-ups preventing D.C. from auctioning the properties off to someone who might have a use for it. Or D.C. has plans to develop the property itself but hasn't.

2) There is some hidden legal problem with the property I don't know about. Maybe a regulation that requires major structural changes to it before it can be legally inhabited. Or maybe they can't be used for residential purposes and the prospects for a successful business in the location are dim.

3) It is much more expensive than I realize to fix up the property, or the market for properties in D.C. is much weaker than I thought. Or there just isn't much liquidity, there aren't enough people actively looking to acquire and develop properties for commercial purposes.

Two of these explanations blame the government for the problem, and only one blames the free market. My guess is they both have a role to play. Any other possible reasons that abandoned buildings exist?

Subsidy Madness

2008-05-16T11:02:00.000-07:00

There have been many articles and blog posts which I will link to later, basically arguing that irresponsible subsidization of ethanol is responsible for many people around the world starving in the current food crisis. The argument as I understand it can be summarized as being: subsidies make it more profitable to produce ethanol, so farmers switch to producing corn for ethanol and away from other foods for human consumption. I have no desire to defend subsidization of corn-based ethanol production, because I think it is in the same category as the gas-tax holiday in terms of economic boneheadedness. But the argument being made against these ethanol subsidies is all wrong. The problem is not that the subsidies make us produce too little food for consumption, the problem is that it makes us produce too much ethanol and spend too much money producing it. We also subsidize the production of many foods and so despite the ethanol subsidies we probably produce too much food as well. In fact, you don't hear as much about it now, but a few years ago farm subsidies in general were a popular thing to be indignant. The argument went like this:

1) we are flooding the world market with food because we overproduce in the United States
2) The excess produced by the United States drives down prices worldwide and hurts farmers in the 3rd World who are not being subsidized by anybody.
3) Farmers are often the poorest people in the poorest countries.
4) Yes we can use some of the excess food for food aid to distribute to starving people, but it would be better if we used the money to buy food for food aid from local farmers and propped up the local economy in places where hunger and deprivation occur frequently.

But now we have a global food crisis and we need all the food we can get. So now U.S. farm policy is being criticized because not enough food is being produced rather than too much. But the criticism is unfair. I think much larger factors are at play here driving the food crisis, and U.S. ethanol subsidies are small potatoes (although it is easier to fix than say a sudden spike in demand caused by millions of indians and chinese entering the middle class). That doesn't mean of course, that ethanol subsidies aren't a terrible idea that should stop immediately, just that this criticism of them is misplaced. On a related note, we should not all of a sudden support farm subsidies and increasing domestic food production just because there is a food crisis. We should instead use that money to help farmers in poorer countries that could potentially have large comparative advantage in agriculture if they only had the money to pay for critical inputs (tractors, fertilizers, high-quality seeds).

In summary we should end ethanol subsidies AND food subsidies. The world would be a better place if the U.S. produced less ethanol AND less food in the long-run. Of course in the short-run we should take food wherever we can get it. People are starving.

Examined Living

2008-05-15T15:14:00.001-07:00

It is one of our peculiar characteristics as an age, or a nation, or perhaps just a class, that we would rather examine how to vote than how to live. Political examination has replaced or at least outlived self examination. We have become more reflective as citizens than as men, are more comfortable analyzing, criticizing, trying to improve grand, impersonal systems - economic, social, political - than our own lives. This is due not least to our education, especially that purchased at elite schools, aiming as it does not for lives well-lived but for global leadership or helping humanity or some other such castle in the sky. And the castle is in the sky not because it's an unrealistic or unworthy goal but because its foundation - what it means to live well, and what it takes to get there - has never been built up. Let us have castles in the sky, but perched on mountains; what we do not want are castles undergirded by sky. The student is to lead others to good living without having reflected on the good life, with his own experience of living well limited to its material component - and that purchased by his parents - and whatever custom and good grace survive the university's corrosion of all things traditional. But these things matter not to the school: its metric for success is always how many organizations the alums head up or how many trips to Africa they've made and never how many divorces they go through. Virtue is always justice writ as large as possible, and never frugality, or wisdom, or that intimate sort of justice wrapped up in everyday relationships. Charity always means helping mankind and never your neighbor.

Of course, man cannot escape his nature, and Western man cannot escape his Judeo-Christian culture, no matter how well-educated, so we all self-examine to a certain degree, and we all have a little charity to spare for our neighbor. But there is very little sustained reflection, very rarely the habit of mind that pushes and keeps on pushing, and more than pushes, critically analyzes, scrutinizes one's own behavior as a man the way we scrutinize Bush's behavior as president; the habit that constantly brings one back to the question: will this really make me happy? Is this really how I want to live my life? Is this really what I believe about the world and my place in it? And is acting as I am really a reflection of those beliefs? But we have lost the conception that serious intellectual inquiry could even pursue such things: Socrates is studied as a political philosopher or epistemologist, and Plutarch as a mere chronicler! In point of fact, these things are the very heart of truth, which is the object of all inquiry: truth in that total sense that Thomas Merton describes: in things, their reality; in our minds, conformity of our knowledge with the thing known; in our speech, conformity of our words to what we think; and in our conduct, conformity of our acts to what we are supposed to be.

This all sounds vaguely religious, and to the degree that religion means believing in some set of principles or values on which one can base one's life, I suppose it is. There needs to be a 'good' for there to be a good life. So it may require what could be called a religion of values, establishing simply that right and wrong exist. But that is a pretty thin religion, and one that most atheists would have a hard time not living by. Certainly anyone who has pretensions to grand political examination, who condemns distributions of goods and nations states and whole civilizations (as for instance the Western), has implicitly accepted a religion of values already - it supplies the ground of his criticism, from which he reasons that such and such is bad and, if it were different, might be good. Granting that, my plea is simply for approaching things the right way round, for applying ourselves first to those questions that touch us more immediately and whose answers provide both a better starting-point and a clearer vision for addressing what is grand and overarching. Know how to live well before helping others to that life: as Jesus rather harshly says, "You hypocrite, first take the log out of your own eye, and then you will see clearly to take the speck out of your brother's eye."

The danger is that we marinate so long in system-thinking that it begins to flavor our approach to everyday behavior. So for instance we get so used to placing value on our freedom over and against the state that we begin to think of freedom - in its political, "don't tell me how to live my life" form - as a primary value in all our relationships: family, marriage, church, even friendship. Never mind that part of the raison d'etre of those relationships is precisely to limit freedom, in this political sense of the word: we need people telling us how to live our lives, and calling us out if we're acting like a jerk or an idiot. Of course, I don't much want the state's input there, not least because its input has a way of evolving into a mandate, but I surely need somebody's. But instead people talk of my 'freedom'; or, the reverse of the coin, their tolerance of people like me. Which tolerance is perfectly acceptable if I'm viewed as a member of society: society and its structures have to be designed to tolerate and make allowance for the imperfection of its members. From an impersonal perspective, you have to accept that that's just the way man is. But you can't then go and apply that to your neighbor; you aren't then justified in ignoring the imperfections of those around you in the name of tolerance. Indeed, you sometimes even hear, in lunatic imitation of society's "That's just the way man is," the statement, "That's just the way I am." As in: "You know, you really shouldn't chase women like that - it's not good for you or them," (or "you shouldn't spend money like that," or "you shouldn't buy useless objects like that (even if you have the money);" and the response: "I know, but that's just the way I am." As if you are justified in not governing your passions because society has given up trying to govern them! Or as if you have no more control over or responsibility for yourself than you have for the faceless masses to whom you would legislate! Our constant consideration of systems treats personal habits as personal, and so not be messed with; and before long, we think them not even to be messed with by the person. Which is what happens in an age, or a nation, or perhaps just a class, that is no longer comfortable thinking about right and wrong or good and bad on a personal level, in one's own life, but will at most employ them when talking politics.

Obama in dialogue

2008-05-04T07:37:00.000-07:00

A question: If we're getting Obama the parishioner of Reverand Wright, the one who befriended him and sat in his pews for 20 years without, apparently, reconciling any of the differences between them, are we really to expect he will reconcile differences within this country? Are we really to expect that having him talk with foreign tyrants crazier even than Wright will produce any substantial results? That's the interesting thing about the Wright mess - assuming, as I am, that Obama doesn't agree with Wright: it reveals that Obama's idea of dialogue, and the unity it produces, apparently means coexistence, accepting difference as irreconcilable, coming finally to the point where you listen without apparently hearing, or hearing only those things you agree with. But that isn't unity; it's masked division.

Which is fine, you say. But the problem is that even masked division, if it is supposed to be more unifying for this country than whatever we have now, requires staking out a certain amount of common ground or some minimal reconciliation of opposing viewpoints. Put briefly, any move toward unity requires talking people like Reverend Wright down from the ledge, convincing them to change (change we can believe in!), not just listening to them. And it requires one do the same with, eg, certain prejudices of white working class voters - another group Obama may be in dialogue with but with whom he can't seem to communicate. Obama's basic problem is that he bases his unity on people's desire to be unified and not upon resolving the differences between them. And that means that the only people swept up in his great campaign are those who already believe in it, that he's only convincing those who don't need to be convinced. In the face of blue collar workers, or Reverand Wright, Obama seems more likely to get converted than to convert.

Not that I would worry about that if he is ever in dialogue with someone like Ahmadinejad, but I also don't see how, based on his track record and the apparently limitless heterodoxy he tolerates in his associates, his talks with someone like that would produce any sort of reconciliation to American interests on the foreigner's part. In such talks, I'm sure Obama would listen - for twenty years, if it helps his political career - but I'm almost as sure that he'd do nothing else (other than give them the undeserved status of having been listened to by the president of the US).

Here Obama is in good company. Much of modern liberalism is devoted to this idea of mere toleration, an "if we could only just listen" model of dialogue. And anything more than listening - as, for instance, challenging another's views - is a threat to such toleration and so dangerous. They would rather us be Freud in his examining room than Socrates in the marketplace - which, incidentally, means our interlocutor is degraded from fellow truth-seeker to patient-on-the-couch. We create a unified society through a public discourse that doesn't so much discuss or seek some common ground in our differences but that doesn't call attention to them, that consists of smiling and nodding and, above all, avoiding engagement with what separates us. You can almost hear the white upper class liberal simpering, as they perhaps have been doing in Chicago, "That's so interesting, Reverand Wright." Obama seems to be arguing that such was his attitude in the pews for the last 20 years. But that leads him smack into the problem with all such toleration: can you really take that kind of live-and-let-live attitude when dealing with intolerance?

Hedge Fund Managers

2008-05-03T09:08:00.000-07:00

Democrats have been using hedge fund managers as an example of the inequities of the tax system, and in particular the problem with having a lower capital gains than income tax. But in general, going after capital gains is just a double tax: invested money has either already been taxed, or, if in a retirement account, will be taxed when taken out, and to levy a tax on its appreciation is really just a way to tax it again (in a way that is progressive but also distortionary). The confusing bit here, if the Democrats are correct - never a reliable assumption - is that hedge fund fees are apparently only taxed at cap gains rates. But why would that be? Why wouldn't a manager's fee count as income for him, and so be taxed at income rates? And if that's not how things stand, doesn't it make more sense to switch to that rather than using the blunt instrument of capital gains tax rates?

An Alternative to Shut up and Sing

2008-04-27T05:48:00.000-07:00

The problem with celebrity endorsements is that they are basically irrational. The celebrity is using the authority of his public persona to get people to accept a position that he as a private person - with all the shortcomings of a private person, which more often than not have been edited out of the persona - has arrived at. It is thus not the implicit appeal to his own authority, contained in all endorsements, that is problematic or even particularly irrational - it is perfectly rational to sway with and be swayed by authority, and indeed almost everything we know and everything we believe has been taken on authority (of parents, friends, teachers, scientists, etc.) - but the fact that he is appealing to an authority that is not his, the authority of a persona that reflects him only through a glass and darkly.

Of course, this is only a problem if you think the endorsement is displacing some otherwise rational decision, that voters - even the voters who would listen to an endorsement - just might make an informed choice in selecting their candidate without celebrity intervention. In other words, that the demos is fit for -cracy. The conservative, with his trust of tradition and its expression in the native prejudices of the average man, basically does; it's not clear how those who don't - and here the liberal's technocratic bias suggests him as a candidate - can really support democratic institutions. Just think: twelve of those people could put you in prison for life! Or even, since they've passed a law allowing it, kill you! Perhaps such a dangerous system is necessary here, because the population wouldn't accept anything else, but should we really be wishing it upon others (as we in fact do, the brutality of the means being a separate issue)? I suspect that this tension between scorn for people and support for their rule runs deep in most endorsing celebrities: they go on believing that voters aren't actually making rational decisions, and so are to be pushed and prodded any way one can, without wondering whether those kind of decision-makers really should be choosing our policies and politicians.

Of course, even celebrity endorsers who believe in the voters' rationality don't think those voters will necessarily make the right decision - that's why they endorse. But ultimately that is beside the point: to mislead the voters into making the right decision at the expense of the decision-making process is basically undemocratic, whether that take place through misinformation or an appeal to a false authority. Such a move reflects a respect not for democracy but, at best, for the illusion thereof. And the (small 'd') democrat avoids such influence not least because she fears that, up against the amalgamated choices of each individual reflecting his traditional prejudices and particular interests, she just might be wrong.

Not that these individuals are perfect decision-makers: the very fact that they can be irrationally influenced by endorsements shows otherwise. But perhaps that is precisely where the celebrity can most help: if he were to endorse abstention, anyone dumb enough to take his advice would be sure not to cast a ballot.

What type of poverty should social security address?

2008-04-23T13:55:00.000-07:00

As I've alluded to in a previous post (see trade, inequality and poverty) I think there are two types of poverty. Relative poverty and absolute poverty. Absolute poverty is simply the deprivation of certain specific goods considered necessary to secure a healthy lifestyle (food, shelter, medical care, and a few other necessities). Relative poverty is the deprivation of goods that are practically ubiquitous to those in your immediate society. In 2050, the relative poverty will be very different, absolute poverty will be the same (assuming no major evolutionary changes in the human species).

This is important to think about in relation to social security policy. Social security benefits over time are tied to the median wage. The current projections that show an increasing social security deficit assume real growth in wages and benefits. But if we held benefits constant adjusted for inflation (in other words paid out in social security benefits amounts equivalent to what current retirees get) the social security shortfall would disappear. We would not allow today's workers to fall into anything resembling absolute poverty, but we would allow them to fall deeper and deeper into relative poverty.

It's hard to conceive of today's social security benefits as being relative poverty in 2050. Because in our society it's not. Of course this just reinforces the point that future generations will be so much richer with continuing real growh in GDP per capita. So we should tax those wealthy bastards in the future with deficit spending now.

Why superdelegates are a bad idea

2008-04-23T12:53:00.000-07:00

If I were in charge of the democratic party, I would want to hold a superdelegate primary tomorrow, make every superdelegate show up and vote for their candidate, and then we could be done with this primary race. However, that is impossible. There is no way to force these superdelegates to declare their preferences. You don't get to be a superdelegate unless you are a somewhat ambitious person, and you don't have to be that ambitions to recognize the opportunities for career advancement that being an undeclared superdelegate offers. It's unlikely that any of these people will ever again hold such a huge bargaining chip to use with two of the three people who could potentiall be the next president of the united states. And this is exactly the problem with the superdelegate system. The problem is not simply that it is making the contest go on forever, it is also the way in which it will ultimately be decided. Even though Obama has an insurmountable lead in pledged delegates, he still needs the remaining superdelegates to fall in line to secure the nomination. I think it's more likely than not that these remaining superdelegates start demanding favors behind doors in exchange for their votes. Imagine if instead of being funded by over a million small contributors, Obama's campaign were instead funded by some portion of 798 individuals (in a world without contribution limits). That would be unambiguously bad because it would change who he responds once elected president. We would much rather he owe his election to an anonymous mass of true believers rather than several hundred strategic actors.

Of course, many superdelegates are not strategic actors, and support one cadidate or another based on a belief that one will truly be a better democratic candidate. But many others are obviously strategic. In fact the Clinton camp was furious at Bill Richardson because he wasn't strategic. James Carville made the argument that because Richardson had received good appointments from the last Clinton administration, it was a betrayal for Richardson not to give clinton his endorsement. The accusation is premised on the idea that past and future presidential appointments are a more legitimate consideration for who a superdelegate should endorse than who that superdelegate thinks would be a better democratic candidate. Although I disagree with Carville about what superdelegates should do, I think he has fairly accurately described the behavior of a large portion of them.

Finally I think the media should pay much less attention to endorsements. Some of them are based on true beliefs, but many of them are based on career advancement strategy and are therefore meaningless as a guide for voters.

Decoupling Soc Sec taxes and spending

2008-04-18T14:36:00.000-07:00

One of the clever things about the Fair Tax proposal - and something that survives any of its other impracticalities - is the way it handles payroll taxes. Essentially, by rolling payroll and income taxes together, the FairTaxers can design a consumption tax that has close to the same progressivity as so-called 'taxes on income.' Thus a revenue- and distribution-neutral tax reform involving a consumption tax becomes slightly more plausible. Which in itself is nice, and recommends itself tactically, but which also carries with it a bigger benefit: it erases the distinction, which has always been a false one, between the social security fund and the rest of the budget. In other words, it does away with the whole idea that social security is some national retirement plan that you pay into over the years and draw upon when you retire, and it replaces it with the idea - which more closely reflects reality - that social security just means higher taxes to smooth the consumption habits of old people. Now, consumption smoothing may be an admirable goal, but if we can at least call it what it is, we'll have a better idea just how admirable, which is the first step toward sizing our spending on it appropriately.

Ice Floes and Eskimos

2008-04-18T14:35:00.001-07:00

So it's pretty well-established that the fed govt is not going to be able to keep its pension and health care promises over the next 50 years or so without both raising taxes a lot and cutting other spending a lot. The sooner we do these things, of course, and the sooner we alter the promises we make so that they are more fiscally realistic, the lighter the problem will be. But none of the campaigns has focused much on this problem, making any of the necessary, significant steps unlikely; and, frankly, democracy doesn't seem to be particularly good at encouraging the kind of foresight required here. So that sucks.

Unless, that is, you're a childless baby boomer who doesn't much care about the future of this country - in which case it's great, because you'll be getting out while the gettin's good. All that money we don't have will be going primarily to three programs: Social Security, Medicare, and Medicaid, and two of those three are for the elderly. So bully for you, especially if we can't sneak through some VAT-esque way of double taxing your retirement money.

But the natural question in all this, which you don't often hear phrased, is: why exactly are we, or will we be, spending so much on the elderly? How is it in the interest of the country to keep an eighty-year-old alive? Or to give her more pocket money? And if it's not in our interest, what is the moral obligation that justifies it? Surely we have to keep the promises we've kept to those retired now and retiring soon - we can't just stop paying social security to people who have planned their retirements around it - but why do we have to keep making that promise to succeeding generations? Couldn't we all place ourselves behind the veil of ignorance and agree that, to avoid this fiscal crisis, anyone who lives past 80 won't receive state medical support? And, with fair warning, won't receive government subsidies to keep them in the lifestyle to which they're accustomed? Given limited resources, why are we going to bankrupt ourselves on extending or cushioning the lives of the already long-lived instead of, say, spending on poor kids, or not bankrupting ourselves at all? Or, put more classically (read: sensibly), what is unjust about society allowing an 80 year old to die of an old person disease? Or supporting them at a living standard below what they've grown used to? Sure, neither of those may be nice things, and we may as individuals or churches or charities want to do what we can to help them, but how is it an injustice, and of the kind that requires state intervention?

If you're lucky enough to live past 80, isn't that reward enough? All spending on people over 80 effectively comes from people who have the misfortune of dying before that age. And since life is a good, we're essentially taking from the have-nots and giving to the haves. Where's the justice there?

A framework on trade, inequality, and poverty

2008-04-15T11:38:00.000-07:00

Tim's post starts into some ideas with consequences far beyond trade, which makes them that much more interesting. He wrote:

I think at this point I am more concerned with global inequality and the degree of absolute poverty found across the globe. However, I still have lingering doubts. Should I be more preoccupied with the levels of poverty I see around me and read about in D.C.? Is there a reason I should care more about the poor I share a society with rather than the poor I share my species with?

As I see it, it doesn't matter so much whether you 'care more about' one than the other but where the responsibility of the US government lies. Does the American state really have as its charge the maintenance of high(er) third world living standards? Is one of the functions of the state that it be a moral proxy - a proxy for the moral actions - of its citizens? If so, then let's splurge in Africa; but one immediately runs into philosophical problems with using the power of the sword to coerce taxes out of people so as to 'act morally' in their name.

But if that's not a responsibility of the state, where does that leave us with regard to our poor? Why help them, especially in cases where inequality is safely below society-threatening levels? The answer here usually appeals to some idea of justice: that the role of the state is to ensure that the society of which it is the steward is just, and that that justice includes some measure of equality. At which point the question about free trade agreements is no longer whether they are bad for the poor in this country - as if supporting them is somehow a violation of your moral obligation to the have-nots - but whether enacting them is unjust, in the sense that it is a failure of the state to foster the good society. This is an absolutely vital distinction, if only because, as liberals are wont to forget, your moral obligations to the poor extend much further than the provisions or provisioning of a just society. In other words, you owe them much more than a just society does, which means both that (a) your personal help for them should exceed simply providing them justice, and (b) the justice you seek to provide them shouldn't incorporate into itself all that you the individual owe them as fellow, worse-off human beings.

(This is not to completely dismiss poor foreigners. Our state is also an actor in a global order that should itself be just, that we as a global actor have a responsibility to help make just, and so it's perfectly reasonable to consider tariffs and subsidies as an injustice (and not simply a crappy policy) toward third world farmers. But I'd just as soon put that to one side for now, since it muddies the concepts a bit.)

The difficulty we get into is precisely what this justice is, and specifically whether the equality it demands is one of results - measured in wealth or utility or happiness or whatever - or simply of opportunity. If the latter, some equality of things like wealth will still be necessary, for after all starvation has a way of restricting a man's opportunities, but it will always and only remain a means to secure equal opportunity, and it will quickly be outweighed (and probably already has been in America) by other considerations of justice, like being allowed to distinguish oneself through merit, getting to keep the fruit of one's labor, etc. From an equality-of-opportunity position, there's nothing wrong with free trade so long as workers have opportunities for success elsewhere, which, depending on how mobile you think the American workforce is and how much dislocation you think free trade causes, means either that it's fine by itself or that it needs to be implemented gradually and/or supplemented with some sort of job retraining program. But basically the equal opportunity guy supports free trade and would much rather spend his time worrying about the education system.

As for the equality-of-results crowd, I have difficulty getting into their heads. I can accept that people need a basic level of wealth to lead dignified lives, but I can't get around the fact that the marginal dignity of income diminishes so rapidly beyond sustenance levels (and may even go negative rather quickly, but that's for another day) that, in affluent societies, the limiting factor on dignity is not income at all but culture or habits or, to use that old philosophers' word, virtue. What more can the just society do than provide the framework for dignified living? And hasn't everyone in our society been given the material conditions necessary to so live (though they may have squandered this gift)? If our society fails anywhere, it is in providing the non-material conditions for dignified lives, but that is a much more complicated problem, and one not much amenable to state solutions. At any rate, I don't see how you can provide a firm foundation for an equality-of-results position, like basing it on human dignity, that still allows it to be relevant to modern American domestic policy; either the position is well-founded and impractical, or it's practical and baseless. Which means it's rarely, if ever, a solid first principle in policy debates.

None of that is to support one side or the other of the free trade debate. But it is a start toward thinking about it more clearly.

trade, inequality, and poverty

2008-03-31T22:15:00.000-07:00

Trade is a topic on which I have some conflicting views. Economic theory (and evidence) clearly indicates that those who own capital (physical and human) benefit in the united states from trade. But it just as clearly indicates that those lacking in skills and who don't own capital are hurt by global competition. Supposedly the overall impact on efficiency is positive, but that assumes away the loss in efficiency from high transitional unemployment (that may last a long time). In the real world if we want to compensate the losers from trade, we need to raise redistributive taxes which have their own detrimental effect on efficiency. So in the real world, trade is a real mixed bag on the domestic front. On balance, I'm probably more convinced by the people who argue that recent trade agreements have been bad for the U.S. (or at least the portion of the U.S. income distribution that I care about). But both sides have compelling arguments and both sides have weaknesses in their argument.

But there is another side of trade, and that is the effect it has on our trading partners, particularly lower-income developing countries. No one in the mainstream political dialogue seems to really be interested because it doesn't effect the well-being of any voters. I think, although there are clearly some environmental and health concerns with many factories, on balance outsourcing is good for the countries that are being outsourced to. And it is also good for agricultural economies to have access to our market. If you consider the impact trade can have on some of the very poor in the 3rd world, it's total impact likely increases global equality, although it increases inequality within individual countries. And I believe that is what is happening, global inequality is decreasing, because of the millions rising out of extreme poverty in China and India (driven by export-led economic growth), but inequality within many countries such as the United States is increasing.

I think at this point I am more concerned with global inequality and the degree of absolute poverty found across the globe. However, I still have lingering doubts. Should I be more preoccupied with the levels of poverty I see around me and read about in D.C.? Is there a reason I should care more about the poor I share a society with rather than the poor I share my species with? And at what point is relative poverty more important than absolute poverty? Absolute poverty is just not very extreme in the U.S. compared to elsewhere in the world, even homeless people probably consume more than $1 PPP-adjusted per day (whereas that condition is common amongst the rural poor in the developing world). But I imagine very few people in the world suffer as much relative poverty as the homeless in Manhattan.

Agnostic vs. Athiest?

2008-03-20T06:26:00.000-07:00

A friend of mine asked me why I described myself as "agnostic" on the blog description rather than athiest, because I have often expressed skepticism about the existence of god. Here's why. There is no way to be sure that there is no god. There just is no way. In fact it's true that there is this puzzling fact that we all exist, and that there was a big bang that some might take as pretty strong evidence that there was some sort of "first mover" or God-like figure who created all this. So I'm agnostic. However, although I'm agnostic I do believe it is more likely than not that that there is no god. If I had to assign probability values it would be around P(god exists) = .15 and P(god doesn't exist) = .85. Somewhere around there. However, it is important to note that my using the lower case "g" in god is purposeful and not a typo. I estimate that P(God exists) =.000000001. That is to say, I estimate a 15% chance that there is a god of some kind. I estimate a close to 0% chance that that god is anything like the God described by any of the religions in the world. It just seems EXTREMELY unlikely that humans hanging out on Earth would be able to guess what God is like. Of course many major religions believe that they have had the nature of God revealed to them by prophets such as Muhammed. Again, I'm very skeptical. What did these people say that makes people so sure they have some way of knowing what God is like? So I'm agnostic with respect to the existence of some sort of god, but athiest with respect to the existence of God.

White Guilt?

2008-03-20T06:07:00.001-07:00

It's often said that Obama holds out the prospect of a post-racial America, and that (liberal) whites are drawn to him because he represents a sort of tacit forgiveness of the past, a past that white liberals still feel guilty about, and voting for him is a way of redeeming the sins of our fathers. Against that is the fact that he is popular with the young and in the west, both demographics that, one would think, feel less guilt about race. Being young, from the west, and conservative, I find it very difficult to get into the whole 'white guilt' mindset - it's hard for me to even imagine what it's like to see the world that way - and so I'm cautious about ascribing such things to others, especially in a way that actually moves votes. So, my question for liberals: does the whole white guilt thing strike you as a plausible motivating factor behind some of the support for Obama? It may not be why you are voting for him, and it may not always be conscious, but could you see it playing a vote-determining role among a significant portion of the liberal fyrd, whether with those sharing your ideological proclivities or just fellow travelers? Do you feel good about voting for a black man in a way that goes beyond a dispassionate assessment of the effect a black president would have on race relations in this country? Does it make you feel like a better person... maybe even just a little bit?

Who we bail out?

2008-03-18T06:46:00.000-07:00

I haven't read that much about this, but it seems to me that the Fed guaranteeing $30 billion of Bear Stearns' "most illiquid assets" (which I understand to be a euphemism for worthless) for JPMorgan seems like quite the give away. I understand that this is neccessary to ave the financial system from a domino effect, but it strikes me that if awhile ago the Fed had instead used $30 billion to back sub-prime mortgages, then a lot of people would have not gone into foreclosure, and a lot of banks like Bear Stearns' "most illiquid assets" would be more liquid. Of course there is moral hazard, no matter which way you do a bailout, but this is a bailout that would actually help out a lot of non-finance industry folks who simply didn't assess their own financial predicament well instead of professional financiers who took on excessive risk and should have known better.

Update: Robert Reich has the same basic idea. Except he knows what he's talking about and writes a less vague complaint.