Thursday, January 31, 2008

Or Is He Just Trying to Scare the Rest of Us Away?

I see that Forbes ranks New York as the fourth most miserable city in the United States (link). For a short time in the 90s, I had an office (at Cardozo Law School) in NYC from which I could across the street and down into Steve Forbes’ office (made for cool classroom hypos when I taught insider trading). On my evening strolls, I would often admire his two-zillion foot yacht up at the Chelsea Pier.

Would Forbes' presence in the Big Apple count as an amelioration of NYC’s lowly status, or does it aggravate? A bug, or a feature?

They’re right about Stockton and Modesto, though…

They Hate Us for our Freedom

You knew this already, but here is a good summary:

According to a 2005 report … the United States—with five percent of the world’s population—houses 25 percent of the world’s inmates. Our incarceration rate (714 per 100,000 residents) is almost 40 percent greater than those of our nearest competitors (the Bahamas, Belarus, and Russia). Other industrial countries, even those with significant crime problems of their own, are much less punitive: our incarceration rate is 6.2 times that of Canada, 7.8 times that of France, and 12.3 times that of Japan. We have a corrections sector that employs more Americans than the combined work forces of General Motors, Ford and Wal-Mart, the three largest corporate emp[loyers in the country, and we are spending some $200 billion annually on law enforcement and correction at all levels of government, a fourefold increase (in constant dollars) over the past quarter century. . . .

Source: that’s Glen Loury, here, as quoted in Timothy Taylor, Recommendations for Further Reading, 21 Journal of Economic Perspectives No. 4, 229, 230 (Fall 2007). Couple that with Jon Markman’s estimate that the share of our work force in the, ahem, “security industry” is 25 percent. Wonder how to analyze this in terms of the fact that the U.S. also accounts for 48 percent of all world military spending

Outsourced: On Obama, Huckabee, etc.

The Wichita bureau does my thinking for me this morning:

Obama remains too green. Dowd makes the point that he really didn’t see the Clinton high-low block coming. He’s too thin skinned. If we need an official visionary, he’s our guy. If we need a tough decision maker with the right connections, it’s Hillary. She brings her own biases and pent up grudges but she ain’t thin skinned. Brittle perhaps.

And if Bill doesn’t really love her, he sure can fake the anger. Pick on my wife, you $%&!. Where’s my horsewhip. Or better still, cane him on the street. (Old Washington custom, caning.)

Yes, that gets it nicely. A defining moment for me was when he snubbed Hillary at the State of the Union. What do you think this is buddy, a junior prom? You'll need to deal with that woman when she is majority leader in the Senate.

Wichita also weighs in on my current fascination, the Huckster:

I think that McCain would make a serious if not fatal error in picking Huckabee as VP. I might be able to vote for McCain if the spare were acceptable; Huckabee is not. He represents a minority in the Republican party and the machine in Washington would eat him. Or simply let him loose on some of his silly issues (evolution, the poor) and make the decisions some where else. He alone of the field does not seem to have the connections to put together a team of experts to run the government.

Well put again. I guess what continues to fascinate me about Huckabee is that genuine likeability, coupled with gobsmacking ignorance. He charms the birds off a tree and the next time you look, he's talking about adding lanes to I-95. Ironic that it leaves me rooting for the one Republican for whom I have the most personal contempt--the one whose hair doesn't move in a high wind, but who has sufficient lack of prnciple that he might actually run a half-way decent government.

Wednesday, January 30, 2008

Greg Mankiw Will Take his Ball and Bat and Go Home

I was going to write on this, but BlueMatter just did it about 10 times as well as I would have (link).

Republicans Pull Their Shades Down;
Democrats Don't, But Should

Eric Rauchway has a fascinating piece up at TNR where he argues that the Republicans are the party hounded by “the inability to govern” (while the Dems tend to govern too much) (link, and HT Mark Thoma). Let’s stipulate that this little foray is unlikely to be greeted with universal acclaim, but let me suggest one particular (among many?) ways in which it is surprising or original.

That is: ever since Lincoln, the Republicans have been able to sell themselves as the “respectable party,” the “real America,” casting the Democrats more or less as outliers. I’m sure this has something to do with the party’s anti-slavery roots (boy, those were the days…) and in particular, the Democrat’s laboring under the taint of complicity with the old south.

But it has long outlasted all that. Even today, Republicans seem to believe—and seem successful at persuading others—that the presidency really belongs to them and any Democratic president is at best a chair-warmer and at worst, a usurper.

I do not think that the presidency belongs to them, although I do think the Democrats tend to overgovern, and quite often, at that. But here is a spin: as a whole, Democrats tend to be better at wonkiness and the boring part of day-to-day operation. Stuff like this is bound to be irritating, particularly to people who find themselves governed.

In this perspective, the interesting thing is not that Democrats win some, but that they win at all. But the task of governing does have to be done, and every so often, you haul in the Democrats to clean up the mess.

One giveaway: consider how often deep-red states wind up with Democratic governors, even as they are spilling libertarian rhetoric (and sending Republicans to Congress). A more extreme example would be the “sewer socialist” mayors who survive with widespread popularity because they make the firetrucks run on time. Bernie Sanders, longtime Mayor of Burlington and now a senator from Vermont, is a dramatic example. Overseas, I don’t know about lately, but in Italy for a long time, Communist Bologna was by general assent the best-governed city, and not radical in any interesting sense.

Language Notes

I don't suppose it is good for me to learn phrases like this (link):

Dude, spark up a fatty, and chill out.

As linguistic innovation, I suspect this ranks somewhere near "fo' shizzle mah nizzle" (link).

Long Live Securitization

Yves Smith reports that "sercuritization is dead" (link). Boy, I hope not. Or more precisely: if Blaming "securitization" for the recent mess is like blaming "options" for the various meltdowns in the 90s--or like blaming airplanes for air crashes. Yes, it happened on their watch, but securitizations don't kill people, people k-- but you've heard that one before.

I can see at least two aspects of the current mess that came out of the securitization model but neither one, I think, is part of the essence. One: loan brokers with money-in-front compensation. Not only did the brokers have no incentive to police the loan apps, they had a powerful incentive not to police them, so they could take the money and run. Same problem caused the looniest of the deals in the M&A boom of the late 80s, early 90s. The Wichita bureau says it also explains a good deal of the farm credit meltdown in the midwest in the 80s. And neither of these was particularly linked to securitization.

The other was the "who owns the problem?" problem. Or rather, the problem that nobody owns the problem. The important difference in the old days was not so much the way the loan was made, but what happened to it afterwards. The loan officer signed off on the loan. If it went sour he still had to face his colleagues and his boss. Sometimes he had to clean up his own mess, which was probably not such a hot idea because he had too much emotional investment. Sometimes you sent it off to "special procedures" tucked away on the 12th floor of the Acme building in a seedy neighborhood on the other side of town. But either way, someone had the responsibility of picking up the pieces.

But this model has been evolving away for a long while. Oldtimers will remember Penn Square, the canary in the mineshaft of 1980 bank failures--the one that almost brought down Chicago's Continental Bank (here's a refresher). Best way I could tell at the time, it seemed like the managers at Continental had taken some 28-year-old MBA into the vault with a shovel and instructed her to empty it out by closing time (maybe I embroider a bit, but that's a side issue). One assumes that this particular loan officer had long since been bonused and promoted before anything particularly fecal ever came close to the fan. If I am anywhere near right, then this is a problem, but not a problem of securitization; it is a problem involving failure of management and internal control.

By the way while I am at it, will everyone please stop talking about the mortgage meltdown as a "black swan event?" A "black swan" is not just something big and unpleasant; it is something unexpected in the sense of being unquantifiable (link). Anybody who paid the least bit of attention to mortgage markets over the last few years saw this one coming a long time ago.

Forget the Candles,
Where the Hell are the Reporters?

Afghanistan's oldest man had 200 grandsons


What Makes Me Nervous Is...

I really like Mike Huckabee. Stuff like this does nothing to dampen my

(my what? Enthusiasm? No. Affection? Oh, be nice. Admiration? Too austere. But he is quite a guy, don't you think?)

Tuesday, January 29, 2008

Mortgage Debt and the "Decency Tax"

A couple of days ago I wrote about “the bankruptcy planning problem”—how you can take advantage of bankruptcy, but you can’t plan for it (link). Here’s a new wrinkle on the same theme that is just too cool to ignore.

Here’s the deal: you bought your nice California home for (say) a million. You’ve paid a couple of years on the mortgage but you barely scratched the surface of the balance due. You decide you made a mistake. You walk away. The lender sells the house for $800,000. Question, can he come after you for the shortfall?

The short answer is “no.” California operates under an “anti-deficiency” rule, which says that the lender can look to the house to pay his debt, but not the owner (for a longer answer, see infra). The practical effect is that the California home purchase contains an “implied put option” that allows the buyer to dump the property back on the seller (or the lender) when the value goes down.

This has been the rule since—I don’t know when, but it was well established when I came to California in 1969. I assume it goes back to the Depression.

And that’s the key: since the bottom of the Depression the value of California real estate has gone (not quite) straight up, and the lack of a deficiency claim has just never been a big deal.

Until now. Apparently now, for the first time ever, debtors in battalions are walking away from their real estate debt. And grownups who ought to know better are getting huffy about it.

A good place to start is with the (normally quite sane and sensible) Calculated Risk (link). In a long and unusually convoluted post, he* undertakes to show that real estate loans “are not, actually, options contracts.” But then he goes on to show how the industry prices them exactly that way (he isn’t addressing himself specifically to California but I don’t think his analysis would be materially different if he were). And then he discusses what he calls “the ruthless borrower:” he says:

“Ruthless” isn’t really intended to be a casual insult; it is in fact the term we use to describe borrowers who can pay their debts but choose not to, because there is a greater financial return to that borrower in defaulting as opposed to not defaulting.

…or, he might have said, somebody who chooses to operate within the limits of the contract instead of paying the lender more than he is due. Then in a dynamite aside, he adds:

(There are always people who have no trouble with ruthlessness; they often get the CEO job. Most of us have at least moderately strong inhibitions about ruthless behavior.)

Bingo. I take this as a concession that the industry survives on the predicate that the borrowers are more honest and honorable than the lenders.

In a somewhat more muted town, here’s Housingwire, for example (link), and Market Movers (link) rolling their eyes over a new “business” that must be regarded as the logical conclusion of this sequence—a firm that (for money) will tell you just how to do it. I concede, it is hard for me to see just what kind of “advice” these “consultants” can offer that would justify the fees they take—but I suspect that is not what is causing the eye-rolling in polite company.

I admit that I did not grow up in a world where people walked freely away from their debts. What really frosts me, I guess, is that these lenders had a whole lifetime to plan for this—and (more important) I’m sure to a moral certainty that they’ve priced it into their models. No, more precisely: what they’ve priced is the expectation that customers would not, in the end, exercise their legal rights here; that they would not, in the end, act like CEOs. Call it a “decency tax”—perhaps one of the most regressive our economy has on offer.

Tedious Footnote on California Mortgage Law: There are really two rules involved here. One rule bars deficiency judgments for the money you borrowed to buy your home. The other concerns the procedure the creditor uses to liquidate his claim. The creditor has two choices: he can go through a full-scale judicial foreclosure, or he can opt for a stripped-down private sale. If he opts for private sale, he can’t go after a deficiency. Through most of my active life here, creditors rarely went the foreclosure route: it was almost always too expensive, and the payoff was too small. If the market continues off the cliff, we might well see more judicial foreclosures with deficiency claims. And note that the “homeowner protection” rule doesn’t apply to refis. So a debtor with a funny-money loan, faced with a creditor willing to sweat out a foreclosure, might well find himself faced with a deficiency judgment after all.

And let’s not even think about taxes…

[Protective Boilerplate: This is not legal advice. It is blogchat, which is different.]

Update, January 2008: "She." The author was Tanta, of whose identity I was not then aware. Tanta was, of course, a superb analyst/commentator, whose absence leaves a gaping hole. But I still think I was right on this one.

John McCain and the O Word

Ask Google Blogs about "John McCain" and "too old," you get 2,837 hits. Even excluding "Chuck Norris," you still get 1,833. So they're talking about it: if I do the arithmetic right, McCain would be 72 next January 20, and 80 at the end of a second term, the oldest president ever.

The current record-holder, Ronald Reagan, took office just a month shy of his 70th birthday., As McCain's age-mate, I am in a good position to remember the runup to the Reagan presidency in 1980. Did people say that Reagan was too old? My recollection is--yeah, but they didn't talk about it nearly as much as they are talking about it with McCain.

What's the difference? I don't think it's a mere two-plus years, 72 to (almost) 70. I think it is, first, that McCain seems old--not "dessicated and enfeebled" old, but "ornery old coot" old. And the showpiece of his resumé is his time in the prison camp. The Vietnam War says "ancient history" to most voters. The prison camp says "brutalization," which is not consonant with "Morning in America."

And that is the flip side. Reagan's signature--what made his enemies so crazy--was his sunny insouciance. Free-associate McCain, you get torture and abuse. Free-associate Ronald Reagan, you get Jane Wyman and Bonzo.

I'm not delighted with the prospect of a McCain presidency, but it's not the age thing--if anything, I suspect he may be more suited to the job after 20 years in the Senate than he would have been as a callow young buck. It's his crankiness that gets me, along with the appearance of being generally ill-informed (even though I suspect he is less ill informed now than he was then). And I really think he means it when he says we should stay in Iraq for 100 years. But here is one consolation: at least neither he nor I will be around to see the end of that one.

Monday, January 28, 2008

Department of Huh?

Kids get a 300,000-Euro bonus and his girlfriend dumps him (link)? Inflation in Paris is worse than I thought.

Update: This just in. I like it better than "I'm with stupid."

Ed Glaeser Does the Best He Can
To Say Something Nice About John McCain

There’s one of the oddest presidential endorsements you can imagine over at the New York Sun, in a grumpy editorial by Harvard Economics Professor Edward Glaeser (link--HT Mankiw). Glaeser comes out for McCain—or I guess he does--under the headline “The Case for McCain,” which might just as well might be matched by others called “The Case for McKinley,” or “The Case for McDuck.” So far as I can tell, the only good things he can figure out to say about McCain are (a) the polls say he can beat Hillary; and (b) Tom Delay doesn’t like him.

True as far as it goes, I guess, but he also says:

The most important tasks of the next president lie in foreign affairs. Since that is not my area of expertise, I don't know whether Mr. McCain or Mr. Giuliani or Mr. Romney would be the best president.

Whoa, Sasquatch, don’t go overboard now, big guy. This is an endorsement, remember, (or maybe it isn’t). In fairness, Glaeser the economist does weigh in on his own special subject:

The [Republican] party must once again make the case that its economic policies offer the brightest future for middle income Americans.

Which is a lot more than just true enough. But it doesn’t inspire confidence that McCain himself says that economics is not his strong suit, and drives the port home by showcasing the support he gets from Mr. Supply-Side, Jack Kemp. I don’t know about Glaeser himself, but I know that the number of mainstream economists who regard supply side as anything other than dope-smoking is small enough to fit into the downstairs broom closet, with space left over for the editorial board of the National Review.

Glaeser also makes space for—indeed he opens with—a swipe at Democrats:

The party of Jimmy Carter will nominate a candidate for the world's most important executive position without significant executive experience.

He actually has a point about Clinton and Obama—a point which might gain more force if he didn’t throw in a snide remark about one president who actually did have significant executive experience and proved, if nothing else, that executive experience is hardly the defining factor.

Anyway, having swiped at the Democrats for not having executive experience, Glaeser moves on to endorse the one GOP candidate who has substantially none. But hold the message here: when you want change, you pick the oldest guy in the room, the one with longest service in politics, and the one with closest ties to Washington. And don’t worry about that foreign policy thing.

And One Porta Potty

Headline of the day, from CNN

Snow slams China; half million stranded at train station

Insert FEMA joke here. Thanks to John, safe in the Kansas banana belt.

Tentpegs of the World, Unite!

One of the recurring puzzles of bankruptcy scholarship is what you might call "the bankruptcy planning problem." That is: you may be able to discharge your debts in bankruptcy, but you can't "plan for it"--you can't take bankruptcy into account as part of your general calculations of risk.

Yet what rational person, going below decks on a submarine, would not note the location of the escape hatch? Certainly no one with an MBA: any first-year finance book will teach you about "the right to abandon"--you value it as a "put option," just like any other financial resource.

Okay, I know, I know--this sounds wrong, somehow. Surely there are larger principles involved.

Indeed I think there are: I think the question implies an issuue that runs through the whole fabric of society--call it "the problem of loyalty." The great Oliver Wendell Holmes, Jr., said that there is no obligation to keep a promise; we are obliged only either to keep the promise or to pay damages. I admit I found that rather unsettling when I first encountered it in law school, and it may go a long way to explain why Holmes is always thought of as something of a radical for his time.

I grant there must be some things that are purely matters of calculation. If I'm driving to work and hear that there is a traffic tie-up on Mangrove Avenue, I don't think anybody would think less of me for ducking over to the Esplanade. Yet what if I said: "Dear, I promise to love, honor and cherish until a better option comes along"--? Granted that quite a good many people do just exactly that, still we want them to pretend that they are doing otherwise, even if they are pretending only to themselves.

A particularly dicey case is taxes. I knew a man in my father's generation who said that in matters of taxation, he always tried to err on the side of overpayment because he was so grateful for the opportunity to live in a civilized society. Is there anyone who takes that view of their tax obligations today? Anyone? Anyone?

And perhaps the most pointed obligation is military service. We've all seen people who were happy to take the king's shilling in time of peace, but who go clawing for the door now that there is a risk of getting shot at. I know exactly one person--she was an Army nurse--who got out after Gulf One because she didn't want to go another war and figured it wasn't fair to stay in good times unless she was willing to stick around in bad. I suppose some people would regard her conduct as admirable: I suspect a good many others would write it off as sentimental claptrap.

Where was I? Oh yes--bankruptcy. And the quote of the day, from Paul Kedrosky (link):

I get irritated at the line of argument that says the world was a better place when consumers let burdensome loans wreck their families, and drive them personally into the ground like over-sized tent pegs. Enough.

Yes, people used to be much more nervous about defaulting. But so what? If a loan no longer meets your requirements, or if it's crushing you financially, or if your circumstances have changed, there is no need to go leaping off bridges about it. The world has changed and the consequences of loan defaults & loan renegotiations are no longer need be as dire as they once were. People who pretend otherwise are selling something -- usually an over-rosy picture of an imaginary past.

It's about time individuals caught up with countries and companies. Both have always had more flexibility with respect to loan defaults/renegotiation than individuals have.

Kedrovsky goes on to say: "I'm not suggesting that loan commitments should be as fickle as, say, high school relationships ..." Excuse me, but isn't he saying exactly that? Or if not, can he think of one good reason why he should not? Can he points to any principle that tells me value bankruptcy as a put option, the Tax Code as a personal challenge, and the marriage contract as a promise to love honor and hang around till something better shows up?

Sunday, January 27, 2008

Human Capital Formation

Southwest flight attendant, at the end of a long and overall-pretty-clever inflight routine from San Diego to Sacramento this afternoon:

And now I'll tell you what my parents told me when I turned 18--take your stuff and get out.


Whups! mMy friend Cappy calls my attention to the fact that we took our stuff and got out just in time:

Southwest Airlines flight skids off taxiway in Washington

(01-27) 18:47 PST Spokane, Wash. (AP) --

A Southwest Airlines plane with 118 passengers on board skidded off a snow-covered taxiway Sunday afternoon after safely landing at Spokane International Airport, the airline said.

No one was injured, but flights didn't resume for more than three hours.

The pilot of Southwest Flight 485, which took off from Portland, Ore. after making stops in San Diego and Sacramento, was slowly taxiing to the gate when the front wheels of the plane slid off the taxiway around 1:40 p.m., said Brandy King, a spokeswoman for the Dallas-based carrier.

Milestone, or Pebble

I see have now passed 2,000 profile hits. For perspective, Fake Steve Jobs has 240,431. Maybe I should reposition myself as Fake Fake Steve Jobs.

Somebody Explain This One to Me

Somebody explain this one to me:

Amnesty International: Important despite the wasteful diversion of some of its energies and resources in campaigns against the arms trade and for economic, social and cultural rights

Is it:
  • A droll bit of leg-pulling?
  • An unfortune omission of essential commas?
  • The whole truth?
From Maverecon. He also says

The Church of England: Not perfect - too few gay female bishops, for instance - but pretty good

Which seems straightforward enough.

Friday, January 25, 2008

Off to Tannhäuser

Off to San Diego to see relatives and to see Tannhäuser. I admit it: I'm not a big Wagner fan, though I am a big opera fan, merely not regarding Wagner as opera. I did see a weird and wonderful Tristan a couple of years back in an old castle in Finland (are there any new castles in Finland?). So I'm willing to give it a try, but mostly I vote with those who say a Wagner opera is one where you go at six o'clock and sit for three hours and look at your watch and it is six twenty. Ka voom.

Don't feel like lugging the laptop through AP security, though, so this site probably stays dark until Sun night or Mon morning.

Me on Tyler and Dave on Jonah

I haven’t read Jonah Goldberg’s Liberal Fascism so I won’t presume to review it, but I have read Tyler Cowen’s helpful commentary so I do feel entitled to review that. AAT, Tyler says some of Jonah’s points are:

The oft neglected but obviously true: For instance Mussolini really was a precursor of the New Deal and he was initially regarded with fondness by many on the American left. This sort of claim is the core of the book and it does stand up after you take all the criticisms into account. I am pleased to see it upend traditional "feel good" narratives of politics.

My first thought was—wait a minute, whoa, I learned that at night school in 1960. Who says it is “oft neglected”? What “feel good” narrative?

But then I reflected—the same mail cycle brought a missive from my friend Dave in which he said (growled):

Fascism essentially means direction of government to suit independent private profit-directed corporate entities (that is, not under government management though possibly given government direction) and in return the corporate entities allied with the 'national enterprise'. When Government exists primarily for Business and Business for Government, that is fascistic, even if not with all the militarized panoply of traditional fascism.

Well, I guess this is a fairly standard stuff, but for my money, insufficiently nuanced. I lobbed the ball back at Dave with a quote from Robert Paxton’s Anatomy of Fascism:

Fascism may be defined as a form of political behavior marked by obsessive preoccupation with community decline, humiliation, or victimhood and by compensatory cults of unity, energy, and purity, in which a mass-based party of committed nationalist militants, working in uneasy but effective collaboration with trditional elites, abandons democratic liberties and pursues with redemptive violence and without ethical or legal restraint goals of internal cleansing and external expansion."

—Robert Paxton, Anatomy of Fascism 218 (2004)

And David fired back:

Are we sure only one guy wrote that? It has the look of a committee job.

Ha! He may not be so far wrong. The Paxton book is, I take it, the summum bonum of 30-odd years in the university seminar room, so inevitably it lacks the fervor of the sloganeer.

But maybe that is one more problem with fascism: it is slippery stuff and is too easy coarsened and vulgarized—as if it weren’t coarsened and vulgarized to begin with.

Oh, and thanks to Tyler for linking to this one, which I just added to my Amazon wish list.

Parting Shot: but at the moment, I’d still say that know-nothing populism is still more a feature of the right than of the left.

Thursday, January 24, 2008

Too Wonderful for Words

I can't begin to embellish on the truth here (link). Go ahead, click through, you'll thank me. HT: Kottke, who is on a roll today.

Now You Tell Us (Rudy Giuliani Edition)

Hot news, folks—25 New York prosecutors say that Rudy Giuliani is a liar is a manipulator, an exaggerater, and a self-promoter (link):

Ex-Prosecutors ‘Challenge Giuliani’s Assessment’

A group of 25 former prosecutors from the New York area — most of them veterans of the United States attorney’s office in Manhattan — have issued a public letter assailing Rudolph W. Giuliani’s record as the head of the office, from 1983 to 1989. The former mayor’s campaign dismissed the letter as criticism from lawyers who now have a vested interest in criminal defense.

The letter asserts that Mr. Giuliani, who is now seeking the Republican Party’s nomination for president, improperly used the office to promote himself, leaked information to reporters and exaggerated his accomplishments, and that such behavior “casts doubt, generally, on Giuliani’s credibility and judgment.”

The criticism is consistent with an Op-Ed article published in The Times last month by John S. Martin Jr., who preceded Mr. Giuliani as the United States attorney in Manhattan and later served as a federal judge. In the article, Judge Martin questioned Mr. Giuliani’s assertion that he “turned around” the office during his nearly six-year tenure.

That’s fine and it’s hardly a surprise, except—why now? That hideous gurgling sound you her from Florida is Rudy sliding into the quicksand, or being digested by an alligator. His campaign is dead and just waiting to lie down. I guess you can say that in the end this letter isn’t very important anyway, but where was it six months ago when it might have been, well, important?

Passable Cook, Opposable Thumbs…

…but not so sure about the dying part:

A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone, solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly. Specialization is for insects.

Source: Heinlein, via Kottke.

Ronald Syme, and HBO's Rome

Having caught a bit of HBO’s Rome (on DVD), I hauled out my old copy of The Roman Revolution by Sir Ronald Syme. First published in 1939, it’s apparently still in print, which is no small achievement for an academic history of any density, not to say one whose footnotes are mostly in Latin. Even aside from the footnotes, it’s not an easy read—not, at any rate for a reader unblessed by a classical education: Syme pretty much presumes you know the outlines of the story already, and he is not going to insult your intelligence by retailing the supermarket-tabloid stuff. Also, perhaps inevitably for an academic history of this date, Syme taken a fair amount of abuse from later scholarship—the canonical response is Erich Gruen, The Last Generation of the Roman Republic (1974).

Yet that is the odd thing about some historical writing: people still read Tacitus and Gibbon on Rome, without entertaining any illusion that they speak the last word on their subject. Indeed, if they capture any zeitgeist, it is that of their own time, not of their subject’s.

I don’t suppose Syme is a Tacitus (or even a Gibbon) but I think he deserves a place at the table. His style is compact, aphoristic—Tacitean. And his general pessimism about the fortunes of free institutions is bound to find an audience in the current market.

Executive summary of Syme: the Roman Republic was corrupt and in decay; a revolution was inevitable and in a sense, even necessary. Executive summary of Gruen: not so, the Republic was durable, and could have endured. It’s a cop-out to say that there is “probably truth on both sides,” but history is a complex business, so the chances are that there is truth on both sides—or at least enough truth in Syme to help sustain his appeal. Some fragments:

On “the assassins”—Brutus, Cassius and company:

They stood, not merely for the traditions and institutions of the Free State, but very precisely for the dignity and the interests of their own order. Liberty and the laws are high-sounding words. They will often be rendered, on a cool estimate, as privilege and vested interest.

—Ronald Syme, The Roman Revolution 59 (Oxford U Paperback 1960)

On the young Octavian, later Augustus:

Exuberant ambition mated with political maturity is not enough to explain the ascension of Octvianus A sceptic about all else, Caesar the Dictator had faith in hs own star. The fortune of Caesar survived his fall. On no rational forecast of events would his adopted son have succeeded in playing off the Republican cause against the Caesarian leaders, survived the War of Perusia and lived to prevail over Antonius in the end.

—Id,., 114

On the legend of Actium, as a public relations triumph:

Of the ability of Cleopatra there is no doubt: her importance in history, apart from literature, is another matter. … Created belief turned the scale of of history. The policy and ambitions of Antonius or of Cleopatra were not the true cause of the War of Actium; they were a pretext in the strife for power, the magnificent lie upon which was built the supremacy of Caesar’s heir and the resurgent nation of Italy. Yet, for all that, the contest soon assumed the august and solemn form of a war of ideas and a war between East and West. Antonius and Cleopatra seem merely pawns in the game of destiny. The weapon forged to destroy Antonius changed the shape of the whole world.

—Id,., 274-5

A footnote: HBO’s Rome in the end tracks Syme rather well. Syme doesn’t give you the horndoggery or the torture porn, but for the general political structure, somebody on the writing team must have had a copy of Syme near at hand.

We Need Men of His Calibre

Calculated Risk is running a neat little contest-lette to pick the worst ideas for an economic stimulus package (link). There are 195 comments so far. “Straw Buyer” suggests “A five million dollar tax on bicycle tires to be used for private jet subsidies.”

The giacutter solution: Money cannons. Like the type used to launch clowns across circus tents.

Set up these money cannons at the tallest point of each municipality in the US and stuff in $100s and $20s. The amount of stimulus limited only by 1) the size of the cannon and 2) the denomination of bills.

Fire said cannons at a designated time of the day and voila........instant stimulus!

No, wait, this is a competition for worst ideas. …

Wednesday, January 23, 2008

America: the Footnote (Cool Charts)

Cool charts show how recently the United States was a footnote to world economic life (link).

I'm Not Sayin' These Two are Related But...

I found them together on de.lic.ious this morning:

What to do if you're laid off


Clean like a maid.

Wilder and a Darker Mirror

The other day I wrote that I’d been reading Little House on the Prairie. I might have added that after hours, I’ve been refracting it through a darker mirror. The darker mirror would be DzhanSoul, the dystopian novella by Andrei Platonov who just might be the greatest Russian writer of the communist era.

In Little House, Laura and her family venture forth onto the American frontier. In Soul, Nazar Chagataev ventures back to Central Asia, where he was born. Laura’s frontier is full of hazards and challenges, but a sense of civility and good order prevails. Chagataev’s is not so reassuring. He finds himself on the edge the Aral Sea—an area we know today as the center of one of the worst environmental calamities in human history. Apparently trouble is nothing new:

Looking out of the hut’s entrance, they could see the shadow of evening running towards the pit of Sary-Kamysh, the location in ancient times of the hell of the whole world. Chagataev had heard this tale in his childhood but only now did he understand is full meaning. In far-off Khorosan beyond the Koper-Dag mountains, among gardens and ploughed fields, lived the pure god of happiness, fruit and women—Ormuzd, protector agriculture and of human reproduction, love of peace in Iran. But to the north of Iran, beyond the mountains, lay empty sand: they stretched out in the direction of the middle of the night, where there was nothing but sparse, feeble grass—and even this grass was torn up by the wind and driven to the black places of Turan where the soul of man aches without respite. From there, unwilling to submit to despair and a hungry death, benighted people would flee to Iran. They broke into the hearts of the gardens, into the women’s quarters, into the ancient cities, and hurried to eat, to feast their eyes and forget themselves before they were cut down and any survivors were chased back into the depth of the sands. Then they would hide away where the desert comes to an end, in the empty hollow of Sary-Kamysh, languishing there until need and the memory of the translucent gardens of Iran made them rise up again.

—Andrey Platonov, Soul 32-3 (NYRB Paper back 2008)

I was going to say “you don’t get any darker than that,” but in fact you do: Chagataev travels with the people in this land where he was born and comes to understand them as people who have lost their identity and cohesion and their will to live.

Of course the true comparison to Prairie is not in the pioneers; it is in the Indians who are being driven out and broken by the pioneers’ advance. In fact, Wilder treats the Indians with respect and some understanding. But it isn’t their story she is telling. Platonov, by contrast, is telling the story of the vanquished, and it has rarely been so well told.

Monday, January 21, 2008

On Privatizing West Point, etc.

I have been wondering—do libertarians favor the privatization of West Point? It sounded like a silly idea to me when I first thought of it, but if all we are doing is training people for their real careers at Blackwater, It seems to me that it is worth considering.

One difficulty is that it would limit education to the rich, and we know the rich aren’t really interested in getting shot at. But I think I may have thought up a way around that. The thing is, the military may have become too workmanlike and bureaucratic—too much like, say, accounting.

The point that libertarians may miss here is that men aren’t really motivated all that much by wealth per se. They’re much more concerned with status. They’ll take a job like, say, drug runner, even though it pays less than MacDonald’s because it is so much more cool than McDonald’s. This trait seems to be hard-wired. Anthropologists say that in primitive societies, men would go hunting even though it yielded less food than hoeing the beans, because hoeing the beans was the iron age version of McDonalds. No matter that it cost you more energy than it yielded; think how nifty it would be to tell the chicks you took down a wooly mammoth.

And think of status relationships in ancient societies. In Greece, you wanted to be a hipparch; in Rome, an equestrian. In each case, note the root “horse.” In each case, you were a special kind of guy guy if you could had enough money to fit out your own battle horse. People clawed each other's face off for the opportunity. A status game.

It might be starting already. My friend Scott tells me he knows a guy who claims title to the world’s largest privately-owned collection of surplus Army tanks. Just today, I saw that Hummer is already advertising that you ought to buy one of their urban attack vehicles so you can help rescue people next time there is a hurricane. With your own time. And risk and money. A status thing again. Like I say, wiring.

Ought to be even easier with airplanes. What if the young George Bush, instead of being forced into a plane owned by the state of Texas (or Alabama) had had to show up with his own equipment--with, I assume, his own name festooned on the side (and, I suppose, his own crew, chosen from out of his posse) You wouldn’t have been able to pry him out of the cockpit. And just think how different our history might have been. No, on second thought, don’t. Bad idea. Sorry.

Be Still My Soul

GOK why but it occurred to me this morning that I could collar one of those dozen or so Russian spams and run it through Google translator. Turns out to be an ad for training in telemarketing: acquaint you with the peculiarities of telephone sales and negotiations. Teach the methods and techniques telemarketing. All of this takes place in the unforgettable warm, friendly, while working environment that will allow you to hold most profitably this time, having received the necessary knowledge, skills, positive emotions.

All this for 5,000 Rubles, which figures to be about $200. Telemarketing training by Russian spammers in an "unforgettable warm, friendly, while working environment." Be still my soul.

Update: My friend Margaret takes it up a notch:


Carpe Diem showcases a WSJ story on "the largest-ever subscription in the history of global capital markets" (link):
Reliance Power Ltd.'s 117 billion rupee ($2.98 billion) initial public offering has been set at 450 rupees a share, company Chairman Anil Ambani said.

India's largest capital raising closed to record subscriptions as investors submitted bids valued at more than 7.5 trillion rupees. Demand for the issue, which was open for subscriptions between Jan. 15 and Jan. 18, exceeded supply by 72.9 times.

"This is the largest-ever subscription in the history of global capital markets. It received applications from more than five million retail participants," Mr. Ambani said.

Carpe offers no comment, but isn't this precisely the sort of looniness that cries out "bubble"? (Message brought to you by a guy who thought Google was overpriced at 300.--ed)

Sunday, January 20, 2008


In New Mexico, for example, 30 percent of young black men, aged 20-35, are in prison (or, less commonly, in a secure mental institution).



This sounds so much like a piece of not-so-hot scripting, you have to wonder (link)...

Drama queen, looking at watch: I hope you're happy. We missed our train.
Stressed mother: Okay, okay... Let's just look at the board and see when the next train into Stamford it.
Drama queen: Mo-ooom...
Stressed mother: Listen, Bethany, I can't help it if the cab driver couldn't speak English and took us to the wrong place.
Drama queen: I think we both know that we're late because you're a fatass and had to stop at Starbucks.
Stressed mother: Bethany, enough.
Drama queen: Mom, I am a child model. I make more money than you do, and I could probably figure out the damn train if you'd let me.
Stressed mother: Enough.
Drama queen: If we don't get back to Vermont by nine o'clock tonight, I'm never speaking to you again.

--Grand Central

Headline: That Might Be Best

Appreciation: Little House on the Prairie

You’d never guess it to talk to her, but Mrs.B grew up in a household without children’s books. Because there are few things I like to do better than to read books to children, we have undertaken to remedy this sad deficiency: right now, we are doing a readaloud of Little House on the Prairie by Laura Ingalls Wilder.

I read it first I suppose 40 years ago when my own kids were coming on to the right age (come to think of it, Prairie wasn’t part of my own childhood, either). I liked it then, and I must say it holds up remarkably well today. You probably know the general outline: it is Laura’s account of her own childhood in “pioneer days” in the late 19th Century. Apparently there has long been an issue over authorship: Laura’s daughter, Rose Wilder Lane, lived by her pen (and emerged, in time, as a high-visibility libertarian ideologue). Evidently there is controversy over how much of the book is Laura’s and how much belongs to Rose.

I can’t comment intelligently on the particulars, but I have to say this much: in detail, this cannot be the work of a first-time author. Writing novels is a craft, just like building rocking chairs is a craft, and you wouldn’t expect to get either one right without practice. So somebody polished and sanded and morticed the joints.

But no matter: both in objective detail and in emotional nuance, the book bespeaks first-hand experience. Nobody could have packaged it so well without a core of authenticity.

The framework is that of a classic children’s story: Laura has adventures, but she knows she is well loved and that things will work out well in the end. The perspective is that of an adult, remembering his childhood self. Marcel Pagnol, introducing My Father’s Glory, explains the style:

In these Recollections, it is not myself of whom I speak, but of the child that I am no longer. It is a small person whom I knew, and who is rooted in the air of the times …

So, secure and reassuring: but on closer scrutiny, it is a pretty hair-raising tale. We have wolves, malaria, prairie fire and the real threat of Indian massacre. And the adult reader has to wonder at the wisdom of cheerful, ingenious Pa, who hauls these four females out into the middle of nowhere, and dismisses near-calamity by observing that “all’s well that ends well!” All’s well indeed, and Pa and Ma show formidable resourcefulness in meeting their challenges, but you’d Pa might have been better advised to leave this kind of challenge to bachelors like his neighbor, Mr. Edwards (indeed, I recall that in later books of the series, Laura comes to see her father with a maturing vision, and comes to understand that there is something problematic about living as near to the edge as they do).

They say that the cowboy story is the American epic. Maybe, but you could make a case for the pioneer tale. Adults have Willa Cather, and My Ántonia; for the rest of us, there is Laura Ingalls Wilder.

Country Music Update

Somebody--could it be that language guy from Stanford on NPR?--did a nice essay a few years back on the linguistic subtleties of country music songs, as in "When Your Phone Rings and Nobody's There, It Will be Me" (and cf. this). The Car Guys on NPR introduced a new crop this morning (although I'm not sure they all sounded quite that new). I do like:

Someday When You Swing that Skillet, My Face Won't Be There.

Saturday, January 19, 2008

Quinion on "Cad" (With a Footnote on "Bounder")

Michael Quinion, in his splendid weekly newsletter, honors the passing of a popular author, and offers a disquisition on one of my favorite words--"cad" (link):

A man who behaves dishonourably, especially towards a woman. ... "Cad" is the classic British contemptuous epithet of the nineteenth century. It appears, as one example, in Jerome K. Jerome's Passing of the Third Floor Back: "That you and your wife lead a cat and dog existence is a disgrace to both of you. At least you might have the decency to try and hide it from the world - not make a jest of your shame to every passing stranger. You are a cad, sir, a cad!"

Its history is as weird as one might like. The word started life as "cadet", either a military trainee or a member of a younger branch of a family. That developed into "caddie", now solely a golfer's bag carrier, but in the eighteenth century any lad or man who hung about in the hope of getting casual employment as an errand-boy, messenger or odd-job man. Both "cadet" and "caddie" were shortened to "cad". ... The shift seems to have happened at the university of Oxford. Lads from the town who hung about colleges in the hope of casual work of the caddie type were called cads by the undergraduates. It became a contemptuous way to describe townsmen and by about 1840 it had achieved its full flowering as a term for a man whose behaviour
was unacceptable.

This is wonderful, and it prompts me to return to a question that has bugged me before: can one be a “cad” today? Yes, I know that men continue to behave badly. But isn”t caddishness a form of misbehavior that arises only as part of a particular social context?

An answer to me would be: words change their meanings. A man can still be a “cad” even if the term carries a different resonance than it might have carried for Jerome K. Jerome (I wonder when, where and how often (if ever) Carrie Bradshaw refers to anyone as a “cad”). Cf., “snob,” which once meant (if I remember right) an underling in a great house, and only later came to mean one who lords it over others.

I have another assignment for Michael: “bounder,” as in “you, sir, are a cad and a bounder.” Just exactly how is a “bounder” different from a “cad,” so as to require separate naming?

Fn.: Revised 20 Jan, 2008.

I Can't Make Up My Mind on Our Mutual Friend

“Have you read Our Mutual Friend?

Well, I had read a bunch of Dickens novels. Always a little ambivalent about Dickens. Had to admire the invention and the drive, but gagged on the sentiment. And the plots are shambolic. Like Trollope better. And Thackeray (Thackeray? Yes, Thackeray.). Anyway...


“Oh, you must read Our Mutual Friend!.

Actually, I could believe it. I knew that OMF was Dickens’ last completed novel, and I had a vague sense that it was thought to be his most mature or complex—I had heard it called his Tempest. So we tackled it in the Mr. and Mrs. Buce home read-aloud club. An ambitious undertaking, I must say; it took is all the way through India and back—in all, a bit over two months.

In the end, I still can’t make up my mind. Or: I guess in the end, it is a little hard to see just how one could come off calling it the best Dickens; I certainly liked Little Dorritt better. I can’t quite get my head around Bleak House, but on the whole I would say that one is better, too. And maybe Great Expectations. And David Copperfield. And Pickwick.

Which seems to leave OMF fairly far back in the pack. It’s easy to specify reasons. Of course no one reads Dickens for the plot, but the plot of this one appears even more ramshackled than most. There was never, so far as I can grasp, any remotely plausible motivation for the protagonist’s having acted as he did. Another principal character makes a sudden, sharp, unmotivated, shift in personality—and then a few chapters later, another sudden, sharp, shift back. There’s some galumphing satire of the high life that tries for comedy and ends up with arch. There is a thread on which Dickens tries to make his peace with Jewish readers by seeking to paint a “sympathetic” Jewish character, and ends up with a Rube Goldberg creation who has no plausible humanity at all.

And yet, and yet. … And yet we kept reading, and enthusiastically. Somehow, in all this farrago, Dickens’ imagination keeps saving the day. He does indeed present a couple of characters so arresting that their names have passed into the language: Boffin, the golden dustman, and Podsnap, the avatar of Podsnappery—arresting, although I have to say, not quite as memorable as I might have expected, given their afterlife.

And there are others, less part of the common culture, but if anything more satisfying. That would include Silas Wegg, the villainous keeper of the dustheap; Mr. Venus, the taxidermist, who agrees as a condition of marriage not to stuff any more female humans; and perhaps most of all Jenny Wren, the “doll’s dressmaker,” one of the strangest and funniest grotesques in all of literature.

And there is more than just character. I’d have to concede that Dickens here does as well as he has ever done in painting “big-picture” London—all classes of society, from the mudlarks scrounging in the riverbed, up through to the grasping social climbers on the edge of riches and power. And the River: Dickens has never done better with his beloved Thames, as the visceral center of this teeming multitude.

He’s got a good premise here, too, in “dust”—aka garbage, detritus, merde, not all that different from money which, one way or another, everyone seems to seek.

A good premise, but in the end, it doesn’t quite work. Sometimes it just gets lost in the teeming multitude. More tellingly, it comes to seem labored and overdone. For here we are back to a central truth about Dickens: he really doesn’t how the world works. He wants to believe he does, and I suppose he thinks he does. But the nearer he gets to the nuts and bolts of ordinary life, the further he descends into mawkish platitude.

So, at the end of the day, a mixed grade. The center doesn’t hold. But the edges—ah, they are often quite wonderful. At 800 pages, if he keeps you turning, and turning, and always coming back for more, why he must have been doing something right. And we did, and he did.

Stuffee Redux?

Kudos to Naked Capitalism for showcasing a story that deserves all the play it can get (link): a lawsuit against Merrill Lynch, alleging that they sold securities to (to the City of Springfield, MA) without adequately disclosing the risk—in the argot of the trade, to a “stuffee.”

Excuse me for askin’, but could it be that that the stuffing of shaky securities is not just an anomaly at Merrill, but rather part of the firm’s grand business plan? Seems like just a heartbeat ago that Merrill was up to its eyebrows in what remains the galaxy’s largest-ever municipal bankruptcy—the debacle in Orange County, California, triggered in large part by the fact that the incompetent in the county treasurer’s office allowed his portfolio to be cargoed and swamped by any bit of leftover diddley-poo at the Merrill supersalesman chose to unload (link)?

Here’s news, folks: your banker is not your friend, any more than your used-car dealer, or your neighborhood crack pusher. In this respect (though not necessarily in all others), your banker is no different from the pump-and-dump bucket shop: the salesman gets paid only if he moves product, and the end of the trail is you.

¡Viva Esteban Colberto!

More proof that Steve Colbert is the funniest man on TV here.* But a wonky aside--how, exactly, did they make this bit? You don't see Dobbs and Colbert in the same screen together, so my first thought was they did Dobbs first and Colbert later. But Dobbs does seem to be responding to Colbert's questions and laughing at Colbert's jokes (or is he just bewildered?). Second guess: Steve and Lou did the interview in English, and then they brought in Esteban to redub the Steve segments later.

And how many takes did it take to make Steven into Esteban? Did they ring in his old high school Spanish teacher? Did she work for scale?

*And that Dobbs is the biggest gasbag.

Brad and Daniel's Excellent Adventure

Brad Setzer and Daniel Gross follow the money, and it takes them a long way from home. First, Setzer (link):

In 2007:

China’s government added $430b to its foreign exchange reserves.

Russia’s government added $150b to its foreign exchange reserves.

China’s state banks likely – this is the only point here where there is some real doubt – added around $150b to their foreign portfolio, or would have, had China not made it harder to borrow from abroad and thus forced them to pay down some of their external debt. The state banks' dollar purchases reduced the central bank’s need to intervene in the market (apparently the exchange rate risk remains with the government). The central bank basically told the state banks to hold more of their required reserves in dollars.

Brazil’s government added a bit over $90b to its reserves. Brazil’s Treasury holdings are up close to $70b for through November, in another kind of reverse bailout.

India's government added a bit under $90b to its reserves, almost none of which seems to have been invested in US Treasuries.

The China Investment Corporation likely had about $17b to invest abroad – as the majority of the funds it raised in 2007 were used to buy the central banks’ stake in the state banks and to recapitalize China Development Bank. It will get something like $105b early in 2008. Maybe $45b to $50b of that is already committed to the recapitalize the domestic banking system, leaving up to $60b more to invest abroad. But the CIC is still the smallest official investor among the BRICs.

Sum it up and the BRICs added just a bit under $800b ($760b) to their formal foreign exchange reserves (the total would top $800b if I counted China, Russia and India’s valuation gains) even without counting the Chinese banks. Counting the state banks and the CIC, the total is more like $900b. I was conservative back in July.

Goldman started dreaming of the BRICs well before energy traders started dreaming about $100 a barrel oil. The Gulf can hardly be left out of the discussion today.

The Saudi Monetary Agency’s foreign assets likely increased by $75b in 2007 -- they were up over $60b through November (Table 8a, in Saudi riyal). Saudi pension funds added another $5b.

The Gulf's other central banks likely added close to $50b to their reserves – though we are still waiting for data from the Emirates for the second half of the year.

The big existing Gulf investment funds – the Abu Dhabi Investment Authority (which, incidentally is likely to be bit smaller than the $875b to $1 trillion total that is commonly cited; see Mohsin Khan’s statements in the FT), the Kuwait Investment Authority, the Qatar Investment Authority and the confusing jumble of Dubai investment funds (some belonging to Dubai, run by Sheik Mohamed, and some belong to Sheik Mohamed, ruler of Dubai) – likely added around $100b to their assets. The $100b total doesn’t count any additional funds that they borrowed to finance some of their more aggressive strategies, or the capital gains on their existing holdings. $100b is what the funds got from their countries surplus oil revenues and the interest on their existing holdings.

Meanwhile, Daniel Gross finds trouble at the other end of the pipe—the filthy rich aren’t spending their money here, either (link):

The latest investment trends similarly lead me to think you may not be acting in the national interest. America's private-equity firms are plowing cash into India, China, and Latin America, and private bankers are urging clients to drop the home bias. (Don't think condos in Palm Beach and ski chalets in Aspen; think beachfront property in Thailand and ski resorts in the Alps.) A Spectrem Group survey of people with more than $500,000 to invest found that 31 percent are putting more capital to work internationally than in the past. "The rich are investing a larger share of their capital overseas," says Richistan author Robert Frank.

Just when the economy has started to take on water—and we don't know if we've just sprung a leak or we've hit an iceberg—you are racing for the lifeboats. Please, don't abandon us. Ski at Sugarbush instead of Gstaad. Invest in P.F. Chang's China Bistro instead of China. It might not be as rewarding, financially or psychologically. But your country needs you now, more than ever. And after all we've done for you, it's the least you can do.

Update: Thank heavens for those overseas markets (link)!

Update II: Guess it goes both ways (link).

Friday, January 18, 2008

Pew's One-Dimensional Ideology Scale

Fascinating chart from the Pew Center (via Yglesias) on voter perceptions of the candidates:

There's so much one could do with this. Yes, I know it is "linear," but that is the way voters think--how else to evaluate a warmonger who likes dresses? How else explain Huckabee and Bush, at opposite poles on the likeability scale, huddled together on the same datapoint?

I'm particularly impressed by the demonstration that Republicans see Hillary as far more liberal than Democrats do. I assume it is a triumph of talk radio and talking-head TV, and pretty much a flat contradiction to Bruce Bartlett's argument that Bill Clinton was a much more fiscally responsible president than George Bush is (link; cf. link). But you can match it with the datum that they see Mitt Romney as pretty conservative: as I've said too many times, I think he is far too insincere for that, and that he will abandon his conservative allies when convenience dictates just as much as he will the liberal.

Yglesias says it is "it's interesting that all voters seem to classify the contenders almost entirely on the basis of cultural matters. " True in part, although I suppose if the voters went the whole way with that, they'd have Rudi at the far left end. And voters have a maddening way of crossing category lines: recall that McCain, perhaps the most hawkish of Republicans (but they are all hawkish)--McCain does best among Republicans most disaffected with the war.

Thursday, January 17, 2008

The Gang that Couldn't Shoot Straight,
In a Circular Firing Squad

I had missed this wonderful yarn about Goldman Sachs, which I now pick up from Michael Lewis, via Alea. Apparently Goldman is a big winner in the mortgage meltdown; they were betting against the mortgage biz, when everybody else was still in favor. Except.

Except what? Except they weren't really. Except that part of the firm was going one way and part going the other: one part was betting against the mortgage biz, while others were betting in favor.

This is means, in effect, that while one hand was putting dollars into the hands of GS investors, another hand was taking them out again. This is so goofy that it cries out for an abstruse explanation. But I'll cut with Occam's Razor: my guess is that individual trader/investors were concerned with their own trading strategies--and the compensation that flowed therefrom--and they really didn't give a rat's patootie whether the firm made money or not.

Fortune Cookie Watch

You may remember Chan is Missing (1982) (link) a watchable little film about Chinese-Americans in San Francisco. Wiki says:

It is known to be one of the first major American film productions in which Chinese Americans are portrayed in a realistic fashion, using many non-actors, in contrast with other films in which Chinese and Chinese Americans are portrayed in predictable and limited roles based on stereotypes.

Fine so far, except the co-star is Marc Hayashi, and if that name is Chinese, I will eat my cheap foreign-made shirt. Apparently the director assumes (apparently correctly) that his earnest audience wouldn’t know the difference between Chinese and Japanese.

Evidently it is a durable tradition. Chinese fortune cookies apparently come from Japan (link). And how, exactly, did they pick up their Chinese identity? Try this:

Ms. Nakamachi is still unsure how exactly fortune cookies made the jump to Chinese restaurants. But during the 1920s and 1930s, many Japanese immigrants in California owned chop suey restaurants, which served Americanized Chinese cuisine.

Wednesday, January 16, 2008

In Which I Flog Some Product

Buce groupies will know that my other avatar is as a teacher and sometimes practitioner of bankruptcy law. In this role, I am the co-author, inter alia, of Chapter 11-101: The Nuts and Bolts of Chapter 11 Practice: a primer. When I say "co-author," I mean "arm candy." The driving force behind this project is my friend and former student, Jonathan P. Friedland, a partner in SchiffHardin LLP in Chicago, together with the able and energetic participation of Michael J. Bernstein (Arnold & Porter, Washington) and George Kuney (U of Tennessee, Knoxville). It's meant to be a hands-on desk book for Chapter 11 lawyers.

This blog drifts pretty far away from issues of bankruptcy most of the time, but Friedland doesn't see this as a reason why I can't flog the book here, and neither do I, so consider it flogged: it's an exemplary product, if I do say so myself, and I'm proud to be associated with it. Buy it here.

should not be confused with Bankruptcy in Practice, which Mike Bernstein and I have now shepherded through four editions. It's a narrative account more than a practice handook, designed, as we say, for the young business lawyer who forgot to take a course in bankruptcy in law school. Buy it here. Enjoy, and if they ever make a Chapter 11 movie, we ought to be able to celebrate.

Codger Watch: Why McCain Gets a Bye on "Hazy"

Yglesias is perplexed as to why McClain gets away with bloody murder on fact-check beat, while Mitt Romney other candidates get (at least sometimes) called to account. As McCain's age-mate (he is actually younger than I by a few months) I think I can offer an insight: he's a codger. I didn't say a "loveable" codger because the very idea is an oxymoron. But we (you) do tend to be a bit more forgiving of codgers than we do of ordinary responsible adults. Of course, we wouldn't actually want to elect a guy like that President. Oh, wait...

Michigan GOP Exit Data

Shorter CNN: McCain leads among old guys who throw a rake at you when you walk across their lawn (link).

Wolf and Mankiw on What To Do Now

Martin Wolf, one of the doyens of free-market orthodoxy, says it is time for public regulation of bankers' pay (link):

No industry has a comparable talent for privatising gains and socialising losses. Participants in no other industry get as self-righteously angry when public officials – particularly, central bankers – fail to come at once to their rescue when they get into (well-deserved) trouble.

Yet they are right to expect rescue. They know that as long as they make the same mistakes together – as “sound bankers” do – the official sector must ride to the rescue. Bankers are able to take the economy and so the voting public hostage. Governments have no choice but to respond.

Nor is it all that difficult to understand the incentives at work. …

It is the nature of limited liability businesses to create conflicts of interest – between management and shareholders, between management and other employees, between the business and customers and between the business and regulators. Yet the conflicts of interest created by large financial institutions are far harder to manage than in any other industry.

That is so for three fundamental reasons: first, these are virtually the only businesses able to devastate entire economies; second, in no other industry is uncertainty so pervasive; and, finally, in no other industry is it as hard for outsiders to judge the quality of decision-making, at least in the short run. This industry is, in consequence, exceptional in the extent of both regulation and subsidisation. Yet this combination can hardly be deemed a success. The present crisis in the world’s most sophisticated financial system demonstrates that.

I now fear that the combination of the fragility of the financial system with the huge rewards it generates for insiders will destroy something even more important – the political legitimacy of the market economy itself – across the globe. So it is time to start thinking radical thoughts about how to fix the problems.

Up to now the main official effort has been to combine support with regulation: capital ratios, risk-management systems and so forth. I myself argued for higher capital requirements. Yet there are obvious difficulties with all these efforts: it is child’s play for brilliant and motivated insiders to game such regulation for their benefit.

So what are the alternatives? Many market liberals would prefer to leave the financial sector to the rigours of the free market. Alas, the evidence of history is clear: we, the public, are unable to live with the consequences. . . .

No, the only way to deal with this challenge is to address the incentives head on and, … the central conflict is between the employees (above all, management) and everybody else. By paying huge bonuses on the basis of short-term performance in a system in which negative bonuses are impossible, banks create gigantic incentives to disguise risk-taking as value-creation.

We would be better off with Jupiter’s 12-year “year”, since it takes about that long to know how profitable strategies have been. The point is that a year is an astronomical, not an economic, phenomenon (as it once was, when harvests were decisive). So we must ensure that a substantial part of pay is better aligned to the realities of the business: that is, is made in restricted stock redeemable over a run of years (ideally, as many as 10).

Yet individual institutions cannot change their systems of remuneration on their own, without losing talented staff to the competition. So regulators may have to step in. The idea of such official intervention is horrible, but the alternative of endlessly repeated crises is even worse.

The big points here are, first, we cannot pretend that the way the financial system behaves is not a matter of public interest – just look at what is happening in the US and UK today; and, second, if the problem is to be fixed, incentives for decision-makers have to be better aligned with the outcomes.

Meanwhile, Harvard’s most popular economics professor says we’d better be chary about proposals to give more food stamps to the poor. Might not be doing them a favor says Greg Mankiw (link):

Marty Feldstein may well be right that those on food stamps have a higher-than-average marginal propensity to consume. Nonetheless, I wonder if we really want to target such cyclical measures on the poorest members of society. That is, for any mean level of food stamps, wouldn't the poor be better off with a constant stream of benefits than with a benefit that fluctuates over the business cycle? Using food stamps as a cyclical tool seems to risk destabilizing some families' food consumption in an attempt to stabilize the overall business cycle.

If we are going to use fiscal policy to smooth out the business cycle on a regular basis, then we should think harder about improving the economy's automatic stabilizers. For example, imagine we enacted an investment tax credit, the size of which was a function of the unemployment rate. Firms would have an incentive to time their investment projects toward those periods when the economy was weakest and most needed a shot in the arm.

I can more easily imagine, when the economy starts to overheat, telling corporations that their investment credit has shrunk or disappeared than telling poor families that their food budget has been cut.

So far as I can tell, Mankiw has not weighed in on the question whether the president of Countrywide Financial, the poster-child of irresponsible mortgage lending, should receive a $84 million payday (link).

Tuesday, January 15, 2008

Platonov on Fire (and a Back Story)

When Andrei Platonov gives you a location, he gives you the sight and feel and smell:

Ivanov put out his pipe with a thumb that was inured to the smoldering heat. … He smelt strongly of tobacco and dry toast, with a hint of wine—pure substances that come from fire or else can give birth to fire. It was as if Ivanov fed solely on tobacco, rusks, beer and wine.

—Andrei Platonov, “The Return,” in Soul 281-308, 283 (NYRB 2007)

There seems to be a quaint backstory to this new selection from Platonov’s work. NYRB published an earlier collection, The Fierce and Beautiful World, just a few years back (or “republished;” it appears to be a reissue of a set first issued in 1970). This new collection does not expand upon the earlier offering; the new supplants the old, and the old, says the publisher, will be withdrawn.

The new comes with a helpful introduction by Robert Chandler, who also translates some of the material (and a pompous, overblown afterword by John Berger). I do remember reading some complaints on the earlier version at the time. For example, here is an Amazon review of the earlier version (link):

Platonov is the finest Russian prose-writer of the last century, but this republication of a volume first published around 1970 is a disappointment. Firstly, the translation is mediocre; secondly, the short novel "Dzhan", the longest and greatest work in this volume, was translated from a heavily censored Soviet text. Many of the most striking, most unusual or most subversive passages of the original have been cut out.

Author of the review: one Robert Chandler.