Monday, March 31, 2008

The Ethno-history of Finance

Robert Teitelman at TheDeal.Com offers a tantalizing study of the ethnic and social history of New York banking (link):

Let me offer a minor historical quibble about a New York Times Sunday business story on Bear Stearns Cos. In an attempt to give Bear some company in the outer boroughs, the Times describes Lehman Brothers Inc. as another "scrappy" firm, in contrast to those white-shoe types at, say, Morgan Stanley. Well, that's a big boo-boo.

Lehman was for much of its history pretty white shoe, run by top-drawer investment bankers from Bobbie Lehman, whose brother Herbert Lehman was a banker there and later governor of New York, to Pete Peterson. Lehman and Kuhn, Loeb & Co., which merged in 1977, in fact, were the "Jewish" analogue (German-Jewish, in fact, as recounted in Stephen Birmingham's "Our Crowd") to the old J.P. Morgan & Co., with powerful client lists and relationships. Only in the '80s, with the rise of a powerful trading franchise under Lewis Glucksman did Lehman begin to effectively diversify beyond traditional investment banking. The resulting archetypical clash between banking and trading, famously chronicled in Ken Auletta's "Greed and Glory on Wall Street," sent bankers like Peterson and Steve Schwarzman into exile, eventually to form Blackstone Group LP and provoked the disastrous merger of Lehman with American Express Co.

These cultural stories are always tricky. Arguably, the vaunted Goldman, Sachs & Co. was, historically, scrappier and more outer borough (meaning Eastern European Jewish by pedigree) than Kuhn Loeb or Lehman. But all these firms did business with each other, and there are exceptions to every cultural stereotype, which is the reason they're stereotypes.

Good stuff all around, but one of the most interesting points is the reference to Stephen Birmingham’s Our Crowd—still hanging in there at #167,000 at Amazon (link) (or 430,438, or some other number, depending on which edition you pick). I don’t know when it was first published but I know I read it (with great pleasure and profit) about 1965. There’s been a good bit of high-quality financial history published since then (I’m talking to you, Ron Chernow and you, Naill Ferguson), and in a way it is surprising that Birmingham has not been superseded. I guess I’d better go give it another try.

Assignment for Somebody: I’d also like to know more about the history of accountancy. I’ve heard, and often said, that American accountants are offshoots of European firms who established a presence here to supervise the importation of European capital. I suspect this is at best an exaggeration and perhaps, not true at all.

GPS: Whoops, You Just Missed It!

I rented my first GPS I think five years ago this week, at Cleveland Hopkins Airport, on a trip out to Geauga County. Cost me $7-$8 bucks per day. I had trouble figuring out how to use it and started kicking myself for playing with such an expensive toy. But at last I uncovered its secret and I must say—the little gadget paid for itself in the first 20 minutes or so as I threaded my way through dark, rainy streets from the airport out to the expressway. From then on—well, northeast Ohio is flat and most of the roads of are straight so I could have found my way pretty much with my eyes closed.

Still, I was glad I’d done it, and just as glad next spring when I found that Mrs. B’s new Camry would come with a GPS built in.

But in fact, we almost never use it: like most drivers, most of our driving is on familiar routes, where we know the pattern better than the device. We do tend to pick up the option on vacation renters, though. I guess our main use is finding restaurants: I believe I wrote a piece a few months back about how I used a GPS to find a restaurant in Fresno. And I remember we used one to find the cheapest milkshake in Racine WI.

So on the one hand, we don’t need one all that bad. Meanwhile, it seems that the GPS is migrating elsewhere (link). I mean, I haven’t started Googling on my cellphone yet, but I know I will soon—and when I get there, I gather Google maps will be there waiting for me.

So goodbye, GPS—we barely had a chance to get to know you.

H/T: Kedrosky.

Sunday, March 30, 2008

Enjoy Your Day...

Police arrest anti-war protester, 80, at mall

March 30, 2008

An 80-year-old church deacon was removed from the Smith Haven Mall yesterday in a wheelchair and arrested by police for refusing to remove a T-shirt protesting the Iraq War. ...

Link. H/T: Froomkin.


I could swear I just heard the lady on the BBC refer to the great French novel:
The Research de Tom Purdue

Remembering Robert Fagles

Robert Fagles always makes me think of one of those guys who live in caves, feeding on roasted bat, until they come forth blinking and bewildered into the blaze of the TV lights.

Okay, a weird image for so gentle and civilized a man. But grant me this: Fagles translated Homer and then Virgil--how could he possibly have expected to become a kind of celebrity with sales (as the NY Times reports) in the millions? Not George Clooney, exactly, but who would have guessed?’

I met Fagles exactly once—at a reading/signing of his then-new translation of Homer’s Odyssey, at Barnes & Nobel on 17th Street in Manhattan, the one on top of Union Square. Fagles was almost cookie-cutter perfection as what you would want an old-fashioned professor to be: kindly, cordial, unassuming. He read his own translation with warmth and affection for the text, but with a kind of intimacy that made you feel that you and he were tackling Homer together. I got to ask him one question—did he think that “Homer” was one author, or two? Well, I am a kind of a romantic, he said—I still like to think there was only one. Did he hedge here? For myself I tend to think there were two, but it wasn’t about me, now was it? And in any event, Fagles in his response was as relaxed and gracious as he could be.

Fagles’ Homer translations were not the most distinctive of his generation (I’ve never read the Virgil). For the Odyssey, you still can’t beat the somewhat offbeat weirdness of the Walter Sherwing prose translation for Oxford Classics. For the Iliad, no straight translation quite matches Christopher Logue’s various efforts at homage. And Fagles was not—but maybe this is a compliment—the best student trot; for faithfulness to the text, one still looks to Richmond Lattimore (for a more general comparison, there is still the wonderful Penguin reader, Homer in English (G. Steiner, ed. 1996), with dozens of samples from many translators).

What Fagles did have was a style of a piece with his character; graceful, tactful, tasteful, unassuming. He may not have made Homer distinctively Homeric, but he made him hospitable and accessible. A generation of readers is in his debt.

Like the generations of leaves, the lives of mortal men.
Now the wind scatters the old leaves across the earth,
now the living timber bursts the new bud
and spring comes round again. And so with men:
as one generation comes to life, another dies away.

Iliad, Book 6, lines 171-5 of the Robert Fagles translation (Penguin Classics 1990). Robert Fagles died March 26, 2008, aged 74.

Saturday, March 29, 2008

Reading Note: René Leys

Reading notes--René Leys: I took a flyer on René Leys because I wanted to fill in a piece of the puzzle over Imperial China and its encounter with the West; also because of a warm recommendation from Ian Buruma, who did not just fall off the turnip truck. In the end, I guess I’d have to concede that it was worth the effort, but I’d have to say also that it is one of the most irritating books I’ve read since I don’t know when.

The pitch-line is easily stated: bewildered westerner tries to fathom the mysteries of the Imperial City. His prism is the equally unfathomable René. The author (Victor Segalen) summarizes:

A young Belgian, son of a Belgian grocer (but of a pure-French mother—his insistence on this point is absolute) arrives in China before the age of puberty. He learns a language, known to be a difficult one. He finds his way into the Palace, known to be hermetically sealed. He becomes the chief of a secret organization, the friend of the Regent, the lover of the Dowager, and the only European adviser to the Empire of the “Son of Heaven” in the most critical moment of its entire existence since the first enthronement. (186)

“On the other hand,” Segalen continues, “his gifts:”

A peculiar aptitude for learning any language composed of imitated sounds, and for taking up any idea that is thrust upon or suggested to him … A fervency, an impulsiveness, a certain adolescent beauty, an obvious attractiveness to—and attraction for—women… (id.)

The reader will recognize that there is enough here for a ripping yarn, and Segalen shows good basic skills at manipulating narrative (though heaven knows how he would function without the exclamation point). The reader will also surmise that we are the emotional level of, shall we say, an X-rated episode of TinTin or Little Orphan Annie.

Buruma in his introduction makes a persuasive case for the book as a cultural artifact. Segalen was born in 1878; he spent time in China beginning in 1909 (the book is set in 1911, not incidentally overlapping the outbreak of the “accidental revolution” that brought an end to the Qing dynasty). He also spent time in Tahiti—an experience which, Buruma declares, “made him aware of the destruction of indigenous cultures by European colonialism.” (viii) Buruma says that Segalen was categorized as a colonial writer, like Pierre Loti. … What made Segalan different,” he continues,

Was his attempt to express the point of view of the colonized. He loathed the effect of missionaries and colonial administrators on non-Western cultures. He hated anything that flattened diversity. (viii)

I’d say that’s a fair cop: it appears true that he tries to retain the “otherness” of the other, and not just to project himself the way Loti would. But the whole point of the book is that Segalen doesn’t know very much about the Imperial City (in particular—nor, for aught it appears, about China in general). So what we are left with is a different sort of projection, but a projection nonetheless—how else would you treat the work of a writer who would imagine that the Imperial police could fall into the hands of an 18-year-old Belgian grocer’s son?

Fn: Fairness requires me to add that J. A. Cunningham, in a separate translator’s introduction, declares that Leys is no less than a fictional account of a real person—one Maurice Roy, whom Segalen is said to have known and employed as a tutor. I’ve got no basis for doubting that there was a Maurice Roy, or that Segalen knew him and (thought he) understood him. But Segalen’s imagined narrator himself cautions that he is an untrustworthy source; I am inclined to take him at his work.

Quotations from: Victor Segalen, René Leys (NYRB ed. 2003).

The Sound of Two Geezers Barking

Here’s my old pal Ivan, taking time away from his Alabama feedlot, to fulminate about the subprime meltdown:

why are homeowners are at risk of foreclosure? because they borrowed more than they can repay? because they took out a series of home equity loans and blew the money on his-and-hers SUVs, 50-inch flat-screen TVs, and vacations? sure, the home loan industry and all the financial connivers connected to it lead thousands across the line into never never (being able to pay) land. but is the Fed supposed to bail out all of these homebuyers with american tax dollars?

These poor people are losing their homes because of 'plummeting home values.' we're told. No one is at fault - act of God, no one could have foreseen - got to prevent a Depression. that's BS. they're losing their homes because they signed papers for over priced ticky tacks either knowing they wouldnt be able to pay the debt in a few months, or they were duped into thinking they could pay, and they could use the equity for the gas guzzlers they wanted for the driveway.

McCain is right about this, and Obama and Clinton and Bush and Barney Frank and the NYT are wrong. So when Bush decides to adopt a Dem policy, does he get out of Iraq? No. Reduce greenhouse emissions? Guess again. He picks the single most misguided, idiotic, destructive proposal that any Democratic politician supports, and does that. Typical Bush, he's a loser.

Alright, down, boy, back to your cage. But the fact is, I agree with Ivan: much as it pains me to say it, McCain is right this time, and the Dems are wrong. But look who’s talking here: two of the most yellow-dog Democrats you could ever hope to find, total bitter enders. Does it say anything that two old yellow-dog Dems think McCain is right? Or is this just geezerhood talking?

Friday, March 28, 2008

You Go, Girl!

When all else fails, quote the London Review of Books Personal Ads:
Getting laid through isn't as easy as the adverts make it out to be. I'm hoping for better pickings from this column. Woman, 87, Box no. 06/06.

...20 March 2008, p. 51. Just to help things along a little: box number replies should be sent to Box no. xx/xx, London Review of Books, 28 Little Russell Street, London, WC1A, 2HN.

I think you might want to hurry.

I Was Hoping for 'Junior High School'

But this will have to do for now:

blog readability test

Live and Still Wriggling from the Met!

The estimable Alex (The Rest is Noise) Ross links to his own New Yorker piece about a non-fiasco at the Met--as he succinctly puts it, Tristan and two Isoldes (link). And as Ross so insightfully observes, this kind of screwup is not a bug, it's a design feature:

Any true fan who claims to attend opera solely in the hope of encountering sublime displays of vocal and dramatic mastery is putting you on. Certainly, operagoers cherish those rare occasions when all variables intersect to create the appearance of perfection; but they hold just as dearly to the memory of those unmagical nights when it all falls spectacularly apart. The gladiatorial aspect of opera is as old as opera itself. No other art form is so exquisitely contrived to create fiasco.

Yeh, we know how that is. Mrs. B still enjoys regaling newbies about the night we saw the third-string Carmen with her leg in a cast, wiggling her little fanny through the Habanera while kneeling on a table--and how she used plates for castanets, and how they shattered midway--and how Escamillo powers through the door, only to have the wall fall down around him. But it sets me to worrying: I've waxed ecstatic already over the virtues of the new HD transmissions--a new world of opera, all seen from the comfort of your own gummy seat at the Palookaville multiplex (link). Will we be seeing any more of this? How live is "live," anyway? Note that the blooper reel is not enough. Somehow or other, we want the raw, unadulterated accident. Ross again:

As [new General Manager Peter] Gelb’s Met lays greater emphasis on marketing stars, it shouldn’t forget the primitive thrill of the unexpected, which causes the most devoted fans to return night after night.

Quite right, too. And Palookaville wants its disasters, just like everyone else.

More on Judges' Pay

Honest, folks, I am really not opposed to Federal Judges getting a pay hike (cf. link)—I just believe that this issue (like most issues?) is more complicated than it looks at first glance. Anyway, several points.

First: I said the other day that the judge earns “about four times” the average family income. I think I exaggerated. From a well-documented Wiki, I learn that the median family income for 2006 was $48,201 (link). So, only 3.4 times.

But it occurred to me to wonder: how does this number compare with past times? I went back to 1967, when I was finishing law school and flirting with the idea of a clerkship (I didn’t do it). The Federal judge $30,000 a year then, which looked astronomic to me (I figured if I ever hit $10,000 a year, I would be in tall cotton). Fiddling around with a CPI inflator/deflator, I came up with the notion that the Federal judges’ annual income was close to five times median family income in 1967.

So, advantage judges. They clearly have slipped behind. But there remains the nagging question of pensions and benefits. I feel I never know as much as I want to about how they compute these “medians”—when do they include fringes, and for how much? But my guess is that just in general, more fringes were “off the books” in 1967 than they are today, which would suggest that in general, the typical family is doing less well than the numbers would suggest. So, judges might be doing a bit better than the numbers suggest.

As to fringes, there is in particular, that matter of the judge’s lifetime paycheck. On close scrutiny, this too turns out to be complicated. Apparently federal judges are like the Pope—they don’t really “retire.” Judges (unlike the Pope?) take “senior status” which usually means a stripped-down workload, but at full pay.

It’s hard to know just how to evaluate this. I know quite a number of judges just never go senior—pretty good evidence against the efficacy of prayer, considering what a lot of lawyers must be saying about them under their breaths. For a lot of others, working (say) three months a year must seem just ideal (I’ve got a deal pretty much like that, and I love it—and come to think of it, I have reason to suspect that their spouses like it, too).

But for example purposes—suppose a judge goes on the bench at 50 and “goes senior” at 65, with an expected lifespan of 20 more years. How much would you have to add to the judge’s pay during each of those 15 years to fund a full salary for an additional 20? Plug in a (n arbitrarily chosen) 3.5 percent interest rate and you get the sum of $121,680—that’s a 73 percent topoff above his base salary (local mileage may vary). I doubt that many private pensions do that well.

There is one more glaring inconsistency in my data: I am comparing judge’s personal income with median family income. In 1967, that was probably nonproblematic—I suspect the chances that the judge’s wife (sic) in those days held a job outside the home are pretty small (the shame of it!). These days, I suspect that most judges' spouses (sic) do work—and that a good many of them are high-priced professionals with incomes three-four-five times the income of the judge (the rule of The Millionaire Next Door—every household needs one entrepreneur and one good government paycheck). So a true family-family comparison might show a much wider gap.

Still, we come back to the stark fact that the Federal judge these days makes about the same as a beginning associate at a fancy firm. But I wonder how the judge does compared to the median income for lawyers?—and how that comparison works, matching today against 1967? I know that when I came out of law school, a lot of lawyers were not doing very well. And even today—forget about Wachtell, Lipton, et al., I know from experience that an awful lot of lawyers are practicing law in their terrycloth bathrobes at the kitchen counter. That might explain why, even in this attenuated market, even as the occasional judge leaves the bench to be, say, a law school dean—still, the list of highly promising aspirants remains quite long. It’s a little like the shirt-making factory: why expect to earn more than minimum wage when there is a whole row of fungible replacements in plastic chairs out in the hall, just waiting to take your place?

Well, There Goes the Artificial Hip

On the other hand, maybe they can help me get rid of the shrapnel I've been carrying since Guadalcanal:

A woman was forced by the Transportation Security Administration to remove her nipple rings before she was allowed to board a flight, an attorney said on Thursday. "The woman was given a pair of pliers in order to remove the rings in her nipples," said Los Angeles attorney Gloria Allred. "The rings had been in her nipples for many years

.From Boing Boing (link). I suppose that any crack about the surgical removal of Gloria Allred would be just mean.

Thursday, March 27, 2008

Cuba Libre

My friend Ignoto says that if he wins the lottery, his prize will be two weeks in Havana before Castro. I assume he is channeling Talleyrand, who did or not say that "Only those who lived before the revolution knew how sweet life could be." (link).

Ignoto can get a reality check from Havana Nocturne: How the Mob Owned Cuba, then Lost it to the Revolution (link) (in England The Havana Mob (link)). As summarized by David Margolick, it’s an account of an unlikely dream team: Meyer Lansky, the Polish-born American gangster, an Cuba’s own prince of kleptocrats, Fulgenco Batista (link).

At least as refracted through Margolick, English appears to have provided one more powerful illustration of a point we had all learned from The Sopranos, or Goodfellas, or Casino or Donny Brasco –the mob is a business, and not always a very good one, at that. The unlikely protagonist of the story is Lansky, supposed financial wizard and business visionary who worked, inter alia, to keep the game reasonably honest (so the high rollers would come). One loser may be Lansky’s unfriendly co-venturer, Santo Trafficante, who got to watch as Senator Jack Kennedy disported himself with three prostitiutes, then kicked himself (Trafficante) for not catching the show on saleable film.

Margolick reports that Batista’s “winnings amounted to as much as $15 million a year”—in all, some $300 million. But if Lansky was so smart, how come he came away with substantially nothing, even leaving a cash stake of $17 million behind? Look for his estate to claim reparations after Castro finally exits.

Wednesday, March 26, 2008

Victor Chooses a Companion

Checking in from Moody's Internet Gallery in Mendocino CA (highly recommended)--

Victor Segalen, on his quest to comprehend the Imperial City, undertakes to select a companion for the evening:

At random I asked, “the big girl there?”

“If you like,” René Leys conceded, adding carelessly, “She’s the policewoman I was telling you about—‘Jade of the Five Colors.’”

I felt like going back on my choice. Love à la police was something I found disturbing to contemplate. I should be searched, stripped, and dturned thoroughly inside out. I should be denounced, charged and implicated in wanton and hideous crimes, when the very most I had in mind was an assault—against payment—upon the lady’s decency!

—Victor Segalen, René Leys, 56-7 (NYRB Paperback ed. 2003)

Tuesday, March 25, 2008

Off to the Coast

We're off to Albion on the California North Coast to lie around for a couple of days and watch the waves. I'll have a laptop in my pack but I probably won't open it up. Back Thurs night.

Scalia Index Proves it:
Federal Judges Happy With Pay

I see that Justice Scalia believes that the rate at which innocent people are convicted of felonies is 0.027 percent (link). He arrives at this number through dividing the number of overturned murder and rape convictions by the number of all convictions. By the same logic, I can compute an index of dissatisfied Federal judges: I divide the number who have left the bench against the number of all lawyers. I come up with a dissastisfaction rate of 10 to the minus 0.03447 +/- three billion, which looks like “pretty happy” to me.

[Responding to critics: yes, not all lawyers are not Federal judges. But there is no indication that non-lawyer judges would be dissatisfied if they were Federal judges, so I might as well shovel them into the denominator. Note also that all my numbers are plucked out of the air. Scalia’s are not, but might as well be.]

Monday, March 24, 2008

Note on Federal Judge's Pay

I have some cronies who care about the pay of Federal judges and who are dismayed that the Federal judge now gets about the same pay as the first-year associate in a hubba hubba first tier firm. And worse: the Judicial Center has hoiked up some data to show how far judges have fallen relative to ordinary folks, and to other federal employees, and even (gasp!) to law school professors and deans (link).

Re junior associates, the data does indeed raise some eyebrows, but I'm not sure which way it cuts: are judges wretchedly underpaid, or is it the associates who are scandalously overpaid? The issue is a little like tax policy: nobody ever demands that we achieve equity by having their own taxes raised. Aside from thqat--just in general, I suspect there isn't a Federal judge in the nation who works as hard as a first-year associate--or who has as much to be ashamed of.

As to ordinary folks--the fact of a relative slide is, indeed, remarkable, but here, too, it may be useful to offer some perspective. One, $165,200 still looks pretty good to most folks. Top it off with perks and benefits (including a dream retirement), and it's probably worth about twice that. Moreover quite a few judges don't get near the bench until they've had a chance to pad out their private retirement plans. And even ignoring that possibility--recall that $165,200 is still about four times the national average family income. Inability to live on a sum like that (lifetime guaranteed) betrays a curious lack of vision.

Years ago when I was in law practice (and judical salaries were relatively better), my mentor was scandalized when he found out the judge had to close court for the day so he could go home on the last bus. "The bus!" my mentor fulminated. "It's an embarrassment that the judge has to take the bus!" Mrs. Buce was not impressed. "I wonder," she said, "if maybe the judge should be required to take the bus."

Later we learned that he was taking the bus because his car was in the shop. It was a Jaguar. Figures.

Reading Notes:
Good Capitalism, Bad Capitalism

For a while I had trouble trying to figure out who is the target audience for William Baumol, et al. Good Capitalism, Bad Capitalism (2007). It’s not really technical enough for a serious economist. Yet it lacks the marketing hubba hubba you’ve been conditioned to expect in this sort of book.

But I think I’ve got it: this is the study guide to The Economist weekly. It’s the background/framework you need to understand the magazine’s economic agenda.

This characterization is at least a half-baked compliment. As I’ve said elsewhere, I like reading The Economist, if less than I did a few years ago. The catch is that pegging the book as a study guide is a reminder that it is a sort of a catechism for a certain kind of establishment wisdom. And any such complex of received wisdom is bound to look a little silly, oh, say, five minutes after it is uttered.

Baumol et al. predicate their analysis on a linchpin of mainstream economics: the “Red Queen” paradox, in which we run faster and faster to stay in the same place.* It was never so well expressed (though without the tag) as by Albert O. Hirschman, in his account of “the basic paradox” in “the model of perfect competition:”

[S]ociety as a whole produces a comfortable and perhaps steadily increasing surplus, but every individual firm considered in isolation is barely getting by, so that a single false step will be its undoing. … [Such a view yields] a syndrome,, namely, to man’s fundamentally ambivalent attitude toward his ability to produce a surplus: he likes surplus but is fearful of paying its price. While unwilling to give up progress he hankers after the simple rigid constraints on behavior that governed him when he, like all other creatures, was totally absorbed by the need to satisfy his most basic drives. Who knows but that this hankering is at the root of the paradise myth!**

[The authors note the paradox with tantalizing indirection, recognizing that competition only makes sense where it does not work, i.e., where somebody succeeds in creating or capturing some economic rents (51).]

By “entrepreneurship,” the authors denote, broadly, new and productive ideas: ex nihilo invention, new combinations of familiar stuff, new ways of packaging and delivery. They distinguish what they call mere “replicative entrepreneurship,” which, I think, is just a fancy name for “self-employed.”

In keeping with what you might expect from an economist, their model is almost entirely instrumental: entrepreneurship is good because it works. This is convincing enough when cabined on its own ground, but it does permit them to sidestep a lot of issues which they might dismiss as (merely?) “moral.”

For example, when an inventor argues for the prevention of “invention,” he may argue that invention is good for the world. He is far more likely to argue that his profit in his invention ought to be protected because it is right, dad-rat it, and the other arguments can go hang. This opens up a whole raft of responsive questions. For another example, if protection is a matter of right, then why not protect IP rights forever—something that is accorded to no patent or copyright (though it may work for trademark or pure trade secrets). For another, are all “inventions” really alike? As the authors acknowledge, Henry Ford didn’t invent the automobile, nor Bill Gates the computer operating system: their contribution, if any, was in marketing and distribution which often looks suspiciously like ripping off the original inventor as much as it may look like a creative innovation. Third, how to sort out the “rights” (if such they are) of competing inventors—recognizing, as is now commonly understood, that simultaneous discovery is probably more the rule than the exception, and that the guy who gets credit for a new invention may very likely be (as George Stigler suggested) the last guy to invent it, not the first.

It is also not entirely clear how to characterize a whole range of economic innovations that seem to owe far more to chance than to anything like entrepreneurship. The “call center” which has done so much to bring riches to India, can hardly be called a “novel idea”—if, indeed, it can be called an “idea” at all. If it is the product of “entrepreneurship” at all, it is a second-generation product: the grandchild of reduced communication costs (which are themselves sired by “invention” out of deregulation). So also the primacy of microwave (production) in Korea, bicycles in Taiwan, tee-shirts in Bangla Desh, soccer balls in Pakistan. These may function like inventions, but they are much better understood as happy accidents.

It’s worth emphasizing that the authors, in their Economist mode, are very far from exposing themselves as hairy-chested libertarians. They like liberty: they want to lower trade barriers, costs of hiring and firing, costs of registering property, and other such items on the free-market menu. But they’re positively hospitable to protection against downside risks: soft bankruptcy laws, safety-net health insurance, etc. And while they seem to oppose high taxes on low and middle-income workers (who may be sources of entrepreneurship) they don’t seem to lose so much sleep over taxes on the rich (where, presumably, entrepreneurship is less likely to be found).

None of this is terribly radical, nor even terribly implausible. But that may be precisely the problem. Their case is so well laid out and so persuasive that you can’t help but suspect how five years from now we will look back on this sort of argument and say: my God, how could we have missed (X)—X being whatever central insight, invisible to us now, that we will come in time to embrace.


*They cite Elias L. Kahlil, “The Red Queen Paradox: A Proper Name for a Popular Game,” Journal of Instiutional and Theoretical Economics 153 no. 2 (June, 1967) 411-15.

**A. O. Hirschman, Exit, Voice and Loyalty 9 (1970)

Quote of the Day

"We never tortured anybody," he said. "Sometimes we beat them during the first hours of capture."


More Easter Speculation

The folks at Reality-Based Community are showing an odd ignorance of--or indifference to--certain religious traditions these days: see, e.g., link. Now this (link):

Easter doubts

While we’re on the subject, Garrison Keillor came up with this curious Eastertide reflection :

I don't doubt God's existence - there He is - but I doubt His interest in us right now and I haven't the faintest idea what He wants from me.
With Pascal and St. Thomas, I reckon it’s exactly the other way round.

Sounds to me like Pastor Keillor is preaching a text familiar to the first church of Epicurianism -- God created us all right, but now his mind is on other matters.

One is reminded also of the Leffian Corollary, after my late friend Arthur Leff: It's one thing to think that God is holding you by a thread over the fiery abyss; it's another to think he's forgotten that he's got you there.

Sunday, March 23, 2008

Lester's Guerilla Forest

Mr. and Mrs. Buce undertook an Easter afternoon stroll through Palookaville’s capacious public park. We ran into our friend Lester. “Have you ever seen my redwood grove?” he asked. No, we hadn’t. “Well, let me show you the redwood grove.”

A word of background. Everyone’s himself of course, and Lester is no other. He’s about our age. He’s been single for 40 years or more. He makes the most amazing Christmas tree ornaments you ever saw. And he is the world’s greatest handyman, who has saved our bacon more times than I like to count.

But the trees: there’s a small grove of mature redwoods near the creek edge in the Palookaville park—not natural; we figure someone must have planted them back the 1930s. Apparently about 15 years ago, Lester decided they needed attention, and (more important) augmentation. So he started planting redwoods. Some he brought back from over by the Pacific Coast, where he spends part of his life. Some he scrounged from customers. A few he dug up along the highway right-of-way just east of town. In all there are—I forget, I think more than 50.

He refers to them all by number “Here’s number 37…” etc. (it’s a mercy he doesn’t have names: that would be creepy). He remarks on how they are growing, which ones thrive and which ones appear to have problems. He talks about his biggest adversaries—vandals who rip them up for no good reason, and thieves who nip them off for Christmas trees (plus the occasional gopher). “But they make terrible Christmas trees,” he explains. “Once they are cut, they droop.”

Just about every day when he is in town, Lester drives his old VW van to a shady spot under the expressway and pulls out two three-gallon plastic buckets. With these, he carries water to his plantation. Hoses wouldn’t make any sense and drip-lines are a non-starter. So it is stoop labor. It’s back-breaking work—three hours at a stretch. The tradeoff is that Lester at 70-plus must be as lean as he was at 19, and must have just as much energy.

It scarcely bears mentioning that all this was done without authorization from anybody—guerilla forestry. In time, of course, the park maintenance crews began to surmise that something was up, and in more time they have come to accept him (tacitly?) as an approved variation to the General Plan—proving, once again, that an ounce of apology is worth a pound of permission. Just lately, they put in a new picnic bench at the edge of the road up by the highway. It is secured to a concrete slab. Set into the slab is a brass plaque bearing the inscription “Lester’s Children.” “One of my customers did that,” Lester explains, “so now I am more or less legal.”

Lester does not read George Orwell (but he is a great fan of Mark Twain). Pity: I think he would enjoy Orwell’s remarks in defense of his own record as a planter of bushes and trees.

Even an apple tree is liable to live for about a hundred years, so that the Cox I planted in 1936 may still be bearing fruit well into the twenty-first century. An oak or a beech may live for hundreds of years and be a pleasure to thousands or tens of thousands of people before it is finally sawn up into timber. I am not suggesting that one can discharge all one’s obligations towards society by means of a private re-afforestation scheme. Still, it might not be a bad idea, every time you commit an antisocial act, to make a note of it in your diary, and then, at the appropriate season, put an acorn into the ground.

And, if even one in twenty of them came to maturity, you might do quite a lot of harm in your lifetime and still … end up a public benefactor after all.

—George Orwell, “A Good Word for the Vicar of Bray,” in
The Collected Essays, Journalism and Letters of George Orwell Volume 4:
In Front of Your Nose 1945-50
, 181-4, 184 (Penguin Paperback 1970).
[See also “As I Please,” Volume 1, id., 104]

What’s A Nice Girl Like You Doing
In an Anthology Like This?

Edith Wharton? Who would have expected to find Edith Wharton in an anthology of erotic verse? Yet here she is on pp 19-21 of The Best American Erotic Poems, edited by David Lehman, just out (2008) from Scribner Poetry. The poem is called Terminus and it’s a short story, really, worthy of the author of, say, Roman Spring. A note says that she wrote it “after a ‘secret night’ of intense lovemaking with Morton Fullerton, the American-born correspondent of the London Times, whom the unhappily married novelist had met two years earlier and with whom she had fallen hopelessly in love.” (278) “The couple,” we are told, “spent the night of June 4 [1909] in Suite 92 of the Charing Cross Hotel in London." I shouldn’t quote the whole thing—go buy the book—but here is the beginning:

Wonderful was the long secret night you gave me, my Love,
Palm to palm, breast to breast in the gloom.
Flushing with magical shadows the common-place room of the inn,
With its dull impersonal furniture, kindled a mystic flame
In the heart of the swinging mirror …

And note something remarkable about the verse: it’s dactylic hexameter, the verse of Homer and Virgil, usually reserved for limericks in English (“A tutor who tootled the flute…”) although Longfellow put it to good use in Evangeline. Lehman recalls that “In her journal, Wharton, then forty-six, wrote, ‘I have drunk the wine of life at last. I have known the thing best worth knowing.’”

Here's What's Happenin' All Over ...

From SacredCowTipper, via OilDrum, a site that monitors energy shortages worldwide. Cool word cloud, featuring and , which has nothing (at least nothing direct) to do with North American Free Trade.

Saturday, March 22, 2008

Tastes Like Chicken Art Gum Eraser

H/T Bashman:

MONTPELIER, Vt.—Savory it isn't: It's made of whole wheat bread, non-dairy cheese, raw carrots, spinach, seedless raisins, beans, vegetable oil, tomato paste, powdered milk and dehydrated potato flakes.

To prison officials, it's a complete meal. To inmates, it's a food so awful, they'd rather go hungry than eat it.

Now, in the latest legal battle over the prison cafeteria standard known as Nutraloaf, the Vermont Supreme Court is being asked to decide whether it's punishment or merely behavior modification. ...

Recall Monty Python:

--Well there's rat cake ... rat sorbet... rat pudding... or strawberry tart. --Strawberry tart?!
--Well it's got some rat in it.
--How much?
--Three, rather a lot really.
--Well, I'll have a slice without so much rat in it.


Michael O’Hare has a cute post up (link) on one of my favorite questions: if we do get (must be?) resurrected, what shape will we be in? Does the blind guy get to bring his guide dog? Picking up on a Washington Post piece, he says he is “astonished to learn” that the doctrine is enjoying a, well, I guess you could say a resurrection.

It may be back, but I didn’t know that it had been away. Here’s Thomas Aquinas:

"Man will rise again without any defect of human nature, because just as God founded human nature without defect, thus will He restore it without defect. Now human nature is deficient in a twofold manner: in one way because not yet obtained its ultimate perfection; and in a second way, because it has already receded from its ultimate perfection. Human nature is deficient in the first way in children, and in the second way in the aged. And therefore in each of these, human nature will be brought back by the resurrection to the state of ultimate perfection, which is in the state of youth, toward which the movement of growth is terminated, and from which the movement of degeneration begins."

Lots more where that came from, i.e., here (link). Just reporting, folks, don’t shoot the messenger.

Most Useful Book?

MetaFiler has a cute thread going (link) on the question “what is the most useful book you own?” Only one vote so far for The Bible, one for The Torah, same for Gravity’s Rainbow, none for the Complete Shakespeare. Lots of cookbooks, mostly Joy of Cooking (eeuw), but a couple of votes for stuff from Cook’s Illustrated (ah, much better). One for Handbook of Poisoning, a medical text. One for Kenkyusha’s New Japanese-English Dictionary (5th ed.), one for Peter Kennedy’s A Guide to Econometrics, one for A Uniform System of Citation (18th ed.).

So it takes all kinds. But I go with the guy who stretched the definition somewhat and declared the most useful book he owned to be Wikipedia. Copy that, I go there 20 times a day.

W/O Comment

Their Sex Life

A.R. Ammons

One failure on
Top of another

...found at

Friday, March 21, 2008

Russell Baker Has Condi's Number

Russell Baker has the goods on Condeleeza Rice as National Security Adviser:

She had come to the job as, in some sense, a pal who understood the young president, and while president’s pal ought to be an important job in every White House, confusing it with national security adviser is a certain route to trouble. One job calls for improving the president’s day; the other calls for spoiling by confronting him with news he would rather not hear, exposing him to ideas he would rather not think about, and presenting him with decisions he would rather not make.

—Russell Baker, Condi and the Boys, New York Review of Books,
April 3, 2008, Pp 9-11, 10

Bonus extra: I did not know that Madeleine Albright’s father had been one of Condi’s many mentors.

This Lady is a Public Menace

Well, she was Scots, no wait Irish, no wait Geordie, no wait...

Night Thoughts at the Beginning of Spring

Here it is coming on Spring of an election year and I am remembering my (late) (former) mother-in-law and the campaign of ’68. Bear with me…

She was having a bad year: she was sick, probably sicker than we knew, and just generally not having a good time. She did pay attention to the Presidential race. She didn’t like any of ‘em.

Oh, ho, I thought. That is what happened when you are old and lose your vim.

Flash forward to 2008. I’m a good deal older now than she was then (she died in ’69). Also a good deal healthier, and that’s a mercy. And as to the Presidential race, I …

I what? Well, actually, I cannot say I don’t like any of them. In a way, I like all of them. John McCain is indeed your loveable crotchety uncle. Barack is wonderful. For Hillary—okay, I guess “like” is too strong a word but I do respect and on the whole admirer her: she’s a wonky overachiever and her heart is in the right place.

But may I take you into my confidence, dears? Truth is, no one of them is really fit to be president. McCain? Yikes. For all his curmudgeonly charm, he’d be a lunatic decision maker. Hillary? Let’s face it, she never has learned the lessons of the health care debacle, and she’d probably screw it up the same way again. Barack? Well. I guess I said enough a couple of days back (link).

Mrs. Buce dismisses my cartwauling, with the observation that we’ve often—usually—endured mediocre presidents or worse, and have pretty much gotten away with it. There’s some truth to the general point but I do not find it consoling. I know that every candidate (in every race) wants us to believe that we stand “at a crisis,” but this time I’d say we really do stand at a crisis, in which we need all the craft and sagacity we can get. And we get this? This?

[Truth is, I’d give two seconds’ thought to a Bloomberg/Hagel ticket. Fortunately, it is not on offer—and the chances that we, in this environment, elect a Wall Street zillionare are pretty near to zero.]

And my mind wanders back to ’68. Recall the state of play that year: Nixon. Humphrey. Wallace. You knew who you wanted to vote against in that race, but it wasn’t quite clear who you wanted to vote for. I suspect my mother-in-law didn’t vote at all.

I’ll vote for somebody, and I’ll say a prayer that I got it right and that s/he’ll get it right. But oy, I wish I had another choice.

Fn.: Looks like I said all this before.

Thursday, March 20, 2008

Children Serving Life Without Parole

Land of the Free, Redux:

Dozens of Children in US Face Life in U.S. Prisons


The U.S. Supreme Court abolished the death penalty for minors in 2005 but 19 states permit "life-means-life" sentences for those under 18, according to a study by the Equal Justice Initiative

In all, 2,225 people are sentenced to die in U.S. prisons for crimes they committed as minors and 73 of them were aged 13 and 14 at the time of the crime, according to the group, which is based in Montgomery, Alabama.

Elsewhere in the world, life sentences with no chance of parole are rare for underage offenders. Human Rights Watch estimates that only 12 people outside the United States face such sentences.

…Not all those serving life-means-life sentences for crimes committed as minors are convicted killers.

Antonio Nunez was convicted of multiple counts of attempted murder and also aggravated kidnapping and sentenced to life without parole for his role in a kidnap, police chase and shootout in April, 2001, in which nobody was injured.

Nunez, aged 14 at the time of the crime, grew up in a part of Los Angeles where gang activity was common. In 2000, he was wounded and his brother killed in a gang-related shooting.

Second Day of Spring Quiz

Who is speaking, and about what, and about whom?

Miss xxx has written a hideous undelightful constricted novel—what does Thackeray say to it. It is one of the most utterly disagreeable books I ever read—and having seen her makes it more so. She is so entirely—what Margaret Fuller was partially—a fire without ailment—one of the most distressing barren sights one can witness. Religion or devotion or whatever it is to be called may be impossible for such people now; but they have at any rate not found a substitute for it and it was better for the world when they comforted themselves with it.

Hint: it’s not this woman:

[Miss yyy] by her picture must be a Gorgon—I can quite believe all you tell me of her—a strong Dissenter-religious middle-class person—she will never go far, I think.

For the subject of the first diatribe, look here; for the second look here. Thought the [first] novel rather good myself. The writer is this guy, writing to this guy.

…in a letter of 21 March 1855, quoted in Robert Brittain, ed., The Booklover’s Almanac (HarperPerennial ed. 1991)

Stop Reading This Right Now

If you don't have Glenn Greenwald on your A-list, stop reading this right now and go here. For a taste, here's Glenn on all those "Liberal Hawks" who are telling Slate what they got wrong:

[N]ot a single one of them appears to have learned the real lesson worth learning from the whole disaster: The U.S. should not -- and has no right to -- invade, bomb and occupy other nations that haven't attacked or even threatened to attack us. None of them say: "Wars that aren't directly in response to an actual or imminent attack shouldn't be commenced because doing so leads to the deaths of hundreds of thousands or millions of human beings for no justifiable reason." Not even the most regretful war advocate seems to have reached that conclusion.

As long as the root premises of our endless war-fighting remain firmly in place, there will be many more Iraqs, "justified" by similar or only marginally different objectives. We need to invade to remove a Bad Government, or stop a civil religious or ethnic war, or prevent mistreatment by other ruling factions of their citizens, etc. etc. -- as though we possess the ability and are blessed with sufficiently magnanimous, selfless political leaders to accomplish any of those lofty goals with military invasions of other countries.

Nothing to add, your honor.

Bad News for Borders

Ooh, I’d been waiting for this: Borders Book Stores is facing a cash crunch and may put itself up for sale (link). As a compulsive patron of bookstore coffee shops, with or without WiFi, I’ve had a feeling that business has not been so hot. Some of them do okay—the one next to the University campus in Palookaville is always packed, and not only with Asian students doing their Organic Chem homework. But there are others where you could fire a cannon down the aisle and never hurt a soul except the restocking clerk. Maybe the ticket is to hunker down in the campus locations and let the other ones go.
Fn: Looks like Barnes & Noble is doing even worse. That's bad too, but Borders is, or has been, a cooler place to hang out in.

The Roots of "Revolution"

Where did the word “revolution” come from? My friend Ignoto has been watching John Adams on HBO ; I bluffed an answer and muffed it. But now, turn the mike over to (the late) Martin Malia:

[T]hough the word “revolution is a venerable one, the concept is thoroughly modern … In late antiquity the substantive revolution was formed from the Latin verb revolvere, meaning to roll back or to return to a point of origin. In this sense it was employed to designate circular or repetitive movements in nature, as in the waxing and waning of the moon. Saint Augustine was probably the first to use it in a figurative sense to mean the idea of bodily reincarnation or the repetition of providential patterns in historical time. For centuries … it was of a piece with other backward-looking pre-modern views of change, such as reformation and restoratio in religion, and renascita or rebirth, in arts and letters. For, until the end of the seventeenth century, [Europeans] steadfastly believed that they were reviving the heritage of a golden age in the past, and that all their new departures were in fact restorations.

The most notable example of the pre-modern use of evolution” is given by astronomy, as in Copernicus’ “revolutionary” treatise of 1543, De Revolutionibus Orbium Caelestium. It is from this source that the term was first imported into political discourse,on the occasion of the “restoration” of Charles II in 1660, and in more durable fashion to designate the English “Glorious Revolution” of 1688, a term which at the time meant a return to the realm’s “ancient constitution,” allegedly violated by the king. Then, in the eighteenth century, the political use of “revolution” came increasingly to describe any sudden or abrupt change in government, though without any normative connotation. … In the course of the paired convulsions of 1776 and 1789, revolution, once signifying return, now came to denote overturn and a radical new departure. The Americans began their rebellion by calling it a revolution in the old sense of restoration of their historic liberties as Englishmen. But they ended it as an independent republic …

—Martin Malia, History’s Locomtotives:
Revolutions and the Making of the Modern World
289-90 (Yale UP 2006)

Malia says he is “recall[ing] a well-known story.” Not down my corridor he’s not.

Laptop False Alarm!

Ah, laptop false alarm. Turns out I had a screw loose and I'll thank you to cool it with the wise remarks; anyway, it has been said before.

But drat, this cuts down on my reasons to get a new laptop.

Wednesday, March 19, 2008


Got the dreaded hard drive error on my laptop. Using the office computer right now, but it's dreary in here all alone. I'm outta here, no blogging until problem fixed (or until I get to my backup laptop, 90 mis away).

Here's Dancin' Sam Again

Sam Zell sings us and dances us through the current economic uproar (together with a catalog of great Sam oldies) (link).

The Adlai Factor

Bay Buchanan said “I think he was a class act” (link). Charles Murray thought it “just plain flat out brilliant” (link). David Gergen (on CNN) says “He’s one of the rare leaders who speaks to us as adults.”

Well, I hope. But a little voice in me hears “speaks to us as adults” and mutters “Adlai Stevenson.” And I answer “uh oh.”

Stevenson was the first political candidate of my political “maturity,” such as it was. We loved him for his civility, his aplomb, and most of all for the cultivated good taste of his talk. We tried to restrain ourselves, but when he fell to Eisenhower—twice—we knew that he’d been done in by a bunch of vulgarians.

Fifty years on, I know better. Stevenson was a charmer—we’ve never had a better, never ever. But charm is no more than part of the story. His appeal was never very broad; he was the first of a series of chardonnay candidates, in a tradition that carried us through to John Kerry. More fatal, we can see now that he never really had the grit for the presidency. The best of them need at least a little slice of wily and mean.

Is Barack Obama Adlai Stevenson? Well no. Stevenson’s patrician charm has little in common with Obama’s kumbaya. Obama reaches more people, more directly, but he still doesn’t reach everybody. And the more urgent question persists: is he gritty, wiley and mean; does he have the temperament, not just to get along, but to be an effective president? I don’t think we know that yet. And there may be only one way to find out.

Afterthought: On the other hand, remember what Walter Lippman said about FDR: “a pleasant man who, without any important qualifications for the office, would very much like to be president.” Here’s hoping.

Afterthought to afterthought: Santayana said that those who forget history are condemned to repeat it. I think he may have had it backwards. It was those who remember history who keep trying to do it again and again.

Tuesday, March 18, 2008

Oddest Title Sweepstakes

Catherine McKinnon’s Are Women Human? And Other International Dialogues (link) has been nominated at for recognition as the oddest boot title of the year. It is up against, inter alia, Cheese Probems Solved by PLH McSweeney (link), but here is something odd: per Amazon, customers who bought Cheese Problems Solved also bought four books by Catherine MacKinnon (and a fifth, by Dorothy L.Sayer, called Are Women Human?)--yet remarkably, nobody who buys MacKinnon seems to buy McSweeney.

Both contestants seems to be losing out to If You Want Closer in Your Relationship, Start with Your Legs, by Big Boom (link). Ms. Boom’s book has A 2 ½ star Amazon rating on 29 Amazon reviews. Ms. MacKinnon has a five-star rating on two. McSweeney is unrated.

Anything You'd Like to Share?

Wichita bureau observes that this would be a great day for the press conference, i.e., nobody would notice. After all:

Oh That Right

The Wichita bureau (who seems to have spent the morning listening to the oral arguments) links me to Nina Totenberg on the Supreme Court's Second Amendment case (link). I assume this is one right that this Court will leave secure: it makes me remember Bill Murray in Ghostbusters with his non-field-tested backpack nuke. And of Tuscany, where apparently you can trespass on another man's land only if you are carrying a gun (some kind of hunter thing). I wonder what are the odds that the Roberts Court will make gun possession compulsory? And come to think of it, when they step through the curtains for oral argument, how many of them are packin' heat?

For extra credit, readers are invited to select the appropriate weapon for each of the justices. Dibs on Scalia for the sledgehammer.

Is Bear Stearns Solvent?

Re a (possible, hypothetical, fanciful) bankruptcy for Bear Stearns—I’ve been part of some offline chat on the question whether Bear Stearns was “solvent.” Of course, insolvency is not a threshold requirement for bankruptcy, but let that pass. Was/is Bear Stearns “solvent”? Do its assets exceed its liabilities?

Take a look at the balance sheet from November 30 (link) (which, as someone has said, is very likely the last ever). That shows equity of $12 billion against liabilities of $384 billion—for those keeping score at home, a debt/equity ratio of 32. I can’t find a figure for market cap back then, but a chicken-scratch derivation from current numbers suggests it might have been around $20 billion.

But now? I suppose one measure of solvency might be that JPM was willing to lay out $270 mill for the equity (of course that’s after a $30 bill put from the taxpayers). If liabilities now are the same as they were then, that makes a D/E ratio of ah, er, huff, puff, 1,422.

But there’s another way of approaching the matter. If you could market-cap all the BS debt today and top it off with $270 mill, I suspect you still wouldn’t have a number as high as the debt on its face. So insolvent. So why an equity stake? Try this: it’s by now common parlance among finance types to treat the equity on a leveraged balance sheet as a call option on the assets. I suspect that what we have here is a deep out-of-the-money call—the flicker of hope that something, somehow, from somewhere, just might turn up. Keep it up, folks, the cavalry is coming! Or maybe not.

Update: As I write (1052 am pst March 18) Yahoo is quoting Bear at 6.88. That would capitalize at over $900 mill. Evidently somebody out there thinks the option is worth picking up.

Dems and Reps: Current State of Play

Charlie Cook seems right on the button:

In short, the good news for McCain is that he has successfully pulled his party together and competes very well among independents. My guess is thathe has a good chance of replicating the number of votes won by President Bush in 2004, on both a national and state-by-state level. The $64,000 question is whether the greater enthusiasm levels that we are seeing among Democrats this yearwill give either Obama or Clinton vote totals that run substantially higher than John Kerry received in 2004.

From the email newsletter; see link. I also heard a bit of Ed Rollins last night, I believe saying that McCain isn't winning but that the Dems are beating themselves. Right again, I'd say.

Monday, March 17, 2008

Notes on Dani Rodrik

Notes on Dani Rodrik’s One Economics, Many Recipes (2007) (I'm always late getting to the party).

One thing to like about Dani Rodrik: his modesty. Of course, as a development economist, he has a lot to be modest about. It is hard to think of a profession that has been more crashingly, resoundingly, repeatedly, publicly wrong over 50-60 years in the advice it has offered (cf. this guy, passim, ad nauseam).

In fairness, Rodrik isn’t personally responsible for many, if any, of the excesses and illusions of his trade. Rather, he shows signs of having learned from them.. Indeed his point of departure would be the “Washington Consensus” the summum bonum of development wisdom, or as Rodrik presents it, the “Augmented Washington Consensus”—the mantra of first principles that are presumed to underlie attempt at economic development.

What keeps Rodrik’s list from being just another anodyne position paper is that he actually tries to measure the effectiveness of the consensus in action. And surprise: it doesn’t work very well. Consider the “Asian Tigers”—Korea, Taiwain, Thailand, even China itself. Every one of them has achieved growth under terms that the Consensus would deem impossible. Or South America: hardly any place in the word has worked harder to stand by first principles. Its reward: stagnation. Even Africa has taken impressive steps to clean up its act with little or nothing to show for it.

Rodrik doesn’t present himself as a radical here. By his own avowal,his tastes are quite orthdox. Rather his point is that agendas like the “Consensus,” are too abstract, too formalized, too immune for the texture of experience.

The strategy has the virtue of putting Rodrik into the small and honorable company of those who understand the first principle of market ideology: that a market is an artifact, created, nurtured and sometimes distorted and destroyed by those who live in it. So just as there are many recipes, there are many markets, and some can do their jobs in ways that academics can scarcely have anticipated.

Rodrik is great at the telling counter-example, suggesting how abstract principles may go awry. He’s got plausible and interesting stories about how some places (China, Korea, Taiwan) work well in spite of the rules and how some (Brazil) work well in spite even of themselves.

He is, perhaps inevitably, less elegant at prescription. He operates on the principle that most of life is learning-by-doing, and that entrepreneurship, by definition, is discovery of stuff that you didn’t know in advance. This is probably true enough in itself, but it leaves the reader with the suspicion that you’ll need managers as clever and self-critical as Rodrik himself (plus a huge dollop of luck) to make it work.

By fortuity, just a few hours after I finished Rodrik, I read Greg Mankiw’s complaint that “mere Muggles” (link) don’t get free trade. Rodrik, as it happens, offers a ready-made response: free trade is not an end in itelf; it is an instrument. Free trade may help to bring economic growth but there are economies that have grown without it (that woud be us, among others) and those that have not grown with it. Institutions are richer than theory, and economics is richer than doctrine (cf. Rodrik's own blog, with a useful comment thread (link)).

Brad DeLong says that Rodrik is “the finest political economist of [DeLong’s] generation” (link). That’s a bold claim. It might be true, but I don’t need to endorse it to say this is about the best single book on development that I’ve read for a very long time.

It's Worse than you Think

Everyody is buzzing this morning about JP Morgan getting Bear Stearns for $270 million, or $2 a share. But it is not $2 a share. It is $2 a share less the value of that $30 billion Federal guarantee. What's the guarantee worth? Ah, who knows? That's a function of the loss on the guaranteed deals. If they are all worthless, the guarantee is worth $30 billion. If they are only 10 percent worthless, Morgan is getting Bear for free, with a $30 million boot.

So chalk up one for the first great winner of the second Bush recession: when the going gets tough, give some tax money to JP Morgan.

Sunday, March 16, 2008

Why Didn't the Feds Just Buy Bear Stearns?

Okay, so the Bear Stearns deal is done. JP Morgan puts up $270 (or maybe $236) million in stock--a price which Yves Smith notes is about one quarter the value of Bear's headquarters building (link). The Feds go on the hook for $30 billion as a "special lending facility," heh heh, i.e., a “non-recourse facility to manage up to $30B +/- of illiquid assets, largely mortgage-related” (link). JP Morgan gets the equity in Bear Stearns. The Feds get--ah, let me get back to you on that

The magic word, again, is "nonrecourse," meaning that if the stuff is worthless, the Fed share is, well, $30B +/1. Query, with numbers like that, why didn't the Feds just go the whole way and buy it outright?

More Bear Facts: Kedrosky offers up a Power Point term sheet (link). The term sheet says that Bear Stearns shareholders will get 0.05473 Morgan shares for each Bear Stearns share. Per Yahoo, Morgan last traded at $36.54. So that translates into a value of just a hair under $2 for each Bear share. For a share that traded within the year at $159.36, that pencils out to a top-to-bottom tumble of 98.75 percent.

I see that James E. Cayne who was CEO of Bear Stearns until January, reported holdings of 5,612,922 shares as of last December 21. Using the high-low prices reported above, that would suggest that the value of his holdings has fallen from $894,475,250 to $11,224,914. That’s a kick in the stomach; but of course, even $11 million would be enough to keep most of us in Cheese Whiz through the summer.

But Cayne apparently won’t have to rely on a paltry $11 million. Forbes reported in 2006 that Cayne took $132.14 million in compensation over five years; an average of $27.27 million a year (link). In 2005, Forbes ranked Cayne as the 387th richest person in America (link).

A news report say that Cayne’s leadership of Bear was “called into question” by the collapse of a couple of Bear-managed hedge funds (link).

Critics of the company said Cayne spent too much time away from the office last year playing golf and bridge as the problems unfolded.

Cayne is the same executive who refused to let Bear Stearns provide support as part of a Federal Reserve-led plan to rescue Long-Term Capital Management in 1998. His reticence was said to deeply anger some of his fellow Wall Street CEOs, and the episode came up every time Bear was reported to be in trouble in recent months.

Afterthought: On sober reflection, I think I’d write this morning’s Bear Stearns post (link) a little differently, although the general drift would be the same. It’s probably not really a going concern v. liquidation issue; I suspect the going concern value and the liquidation value are pretty near the same. But there remains the question of who will maximize the value of the creditor stake after the equity is wiped out. That’s a perfectly appropriate role for an outside stakeholder, be it trustee, or receive, or whatever.

Who's Representing Whom Here?

Bertrand de Jouvenal somewhere quotes what he says is an old French adage:

There is more difference between two Socialists, one of whom is a deputy and the other of whom is not, than there is between two deputies, one of whom is a Socialist and the other of whom is not.

Uh, let me think. Okay, click, right, I got it. Now this:

WASHINGTON — House Speaker Nancy Pelosi has endorsed three Miami congressional candidates after two House Democrats from South Florida refused to because of their friendships with the Republican incumbents.

In letters, Pelosi and four other top House Democrats congratulate each of the challengers for a "strong start'' and say they look forward to helping each "become our newest Democratic partner for change in Washington.''

The letters came after Reps. Debbie Wasserman Schultz and Kendrick Meek said they wouldn't actively campaign for their fellow Democrats because of they didn't want to risk their personal and professional ties to Republican Reps. Lincoln and Mario Diaz-Balart and Ileana Ros-Lehtinen.

Well, bully for Pelosi. And as for the rest of the crowd--well, strictly speaking, I know exactly zilch about politics in south Florida. Maybe the three Republicans deserve to be reelected; maybe I would even vote for them. But on the face of things, isn't this pretty clear evidence for the proposition that Congress has more interest in preserving itself in office than it does in small-d accountability?

And wasn't it Mark Twain who said that the United States has no permanent criminal class--except Congress?

Super Savings on Sony Laptops

Amazon just sent me a thoughtful note saying I might like to enjoy the super savings on Sony laptops. Among them: a Sony VAIO VGN-NR185E/S), marked down from $899.99 to $899.84.

Thanks, I think I can contain my impulsiveness on this one.

The Name "Murray" Always Cracks Me Up...


Gretchen Morgenson Doesn't Tell Me What I Want to Know

I see that Gretchen Morgenson has joined the anti-bailout chorus, motivated not least by her animosity against Bear Stearns per se, and the way they have run their business (link). She calls it "this decade's version of Drexel Burnham Lambert," which I suspect may be a libel on Drexel Burnham (but then, you can't libel the dead).

There's a great deal of merit in which she says but she still misses a distinction which I, as a simple, barefoot, country bankruptcy lawyer, would want to pursue. That is: the difference between saving the enterprise and saving the equity. For example (or see it here):

Anyway, the points are (a) the business is underwater, insolvent, upside down--there is nothing for equity either way; but (b) the business is worth more as a going concern than it is in liquidation. So the creditors have a stake in seeing to it that the going concern value is preserved, even if equity is wiped out. That's why God created bankruptcy trustees. That's what banking regulators are supposed to do in banking cases; insurance regulators in insurance cases and receivers/stakeholders in any number of special situations where there is some value to be preserved.

Seems to me there is plenty of room for "bailout" intervention insofar as it means preserving the going concern value. But this sort of thing need have nothing to do with paying off the buffoons who created the problem. Gretchen is a grownup; she ought to understand this. I'd like to know what she thinks of it.

Yglesias on The Economist

Seems like everybody and his Aunt Maude is jumping on The Economist magazine (pardon, newspaper) this weekend. I feel no strong impulse to join the affray, not least because Matt Yglesias has said it well enough (link).

Saturday, March 15, 2008

Light in August: Faulkner's Best

Mr. and Mrs. Buce just finished a readaloud of Faulkner’s Light in August, and I suspect it’s probably his best. Kind of a shame, then, that it took me 40 years since my first Faulkner to get around to it. And I have to admit that, much as I admire it, still it didn’t knock me flat the way it would have back in the 60s. But that’s life: a lot of other things don’t knock me over any more, either. And hey, it is probably a good idea to save some of the good stuff for dessert.

I think you can divide Faulkner novels (and stories) into those that try to make a point and those that just try to make themselves. That’s why my favorite remains The Hamlet, which has no pretension beyond being comic, sympathetic and comprehensive—not as rich in detail as, say Middlemarch or Hundred Years of Solitude, but almost their match in conveying a sense of place. Absalom is the other end of the continuum, the most freighted with Meaning. It’s fine overall and wonderful in parts, but it never quite wriggles out from under its freightload.

Light in August carries almost as much freight (it has a protagonist whose initials are “J.C.”), but it bears the load more lightly, woven more convincingly into the thread of the story. And while it is only incidentally comic, it has many of the virtues of The Hamlet—a comprehensive and multidimensional portrait of a place and a people unique in time. Faulkner also brings off, more smoothly and convincingly than in Absalom, that sense of history that lies like an incubus on the backs of the living. Joe Christmas has a past; so does Gail Hightower; so did Joanna Burden before Joe murdered her and so, by indirection, we can infer does the whole community.

Light in August does bear (what Faulkner novel does not?) some of the peculiarly Faulknerian overwriting that could win a prize as parody on itself. Yet here (as with Dreiser and maybe Balzac) there is a mystery: the writing is so convincingly bad you almost wouldn’t have it any other way. And anyway, there isn’t very much of it.

I (rather, "we") reread Absalom, and Sound and the Fury and The Hamlet just a couple of years back. Newly invigorated, I think it would be a good idea to go back and reread some more.

N.b.: As I guess I wrote before, still for a Faulkner newbie, I wouldn’t recommend any of these. If you must do a novel, do Sartoris or The Unvaquished—rich, forceful storytelling, a lot of good background on the larger saga, and no heavy symbolism. But best of all is still Malcolm Cowley’s Viking Portable Faulkner, convincing in its own right and irrefultable proof that Faulkner wrote not a bunch of novels but one big novel of which (most of) the others are a part.