Appreciation: Cohen and DeLong on The Future

[It's 10:09 PM, and I like to go to bed early. I invoke the blogger's privilege of publishing a first draft.--Buce]
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Readers who want the core argument from The End of Influence by Stephen Cohen and Brad DeLong might consider this roadmap: read the first chapter; then skip to Chapter 6 (State-led Development) and read the first half; then Chapter 7. (Conclusion). That will give you the takeway points (or keep reading this review and pick up another version of the takeaway points below) (or see this helpful excerpt in FP).

Am I saying you shouldn't read the rest of the book? Hm. Well, if you do skip the rest, you'll miss out on a lot of cool factoids about the current macro environment--the kind of thing that makes you such a damn nuisance so loveable at parties. But if you follow DeLong's hugely successful weblog, you know a good deal of this stuff already. On the other hand, if you don't read the intervening chapters, you'll miss out on the frustration of trying to cope with an absorbing and instructive--but maddeningly ill-organized--presentation. The book, to be blunt, shows all the earmarks haste, as if the authors felt they just had to get an oar in at this juncture of the debate, rather than think through a more complete project.

Item: there's a lot of discussion here of "the neoliberal order" (aka neoliberal dream, neoliberal utopia, neoliberal program, neoliberal game, neoliberal age, neoliberal worldview)--all without any effort at precise definition, nor (this is more important) any effort to specify just why it is so central. Item: there's a useful introduction to "sovereign wealth funds" with little to connect the dots as to how they fit into the larger argument. Item, there's a discussion of dirigiste economic growth, provocative but entirely inconclusive (Can anybody do it? Can we do it? Have we done it? Will others do it? Should we try it? etc.).Item: there's an elegant menu of competing paths to development which seems on the face of things almost entirely irrelevant to the business at hand. Item: there's a swell tour d'horizon of foreign-exchange issues, instructive if you ignore the fact that it seems almost to contradict the main line of argument.

So, of course you'll read it. But you'd better be prepared to structure a lot of the argument yourself. Let me see if I can give a summary:

1. In the future, we won't be as powerful as we have been in the past; because
2. We won't be as rich;
3. Relatively [and also absolutely?], such that
4. In fact, nobody, will be able to dominate the way we have dominated since world war II. This will lead to
5. Wasteful, beggar-thy-neighbor strategic infighting.

This is a perfectly intelligible set of propositions, debatable of course (not least because we are predicting the future here), but still worth reflection. As to the first couple (not as powerful, not as rich), it happens that I believe them to be true. They are also at this point pretty familiar stuff ("that's all?" said Mrs. Buce with a dismissive snarl; she outsources macro policy to me and expects a higher-value-added return).

The last couple of pointts (infighting, beggar-they-neighbor--dare I call it mercantilism?)--are interesting and might be right, although I'd need a lot more by explicit argument to be persuaded. But this is where I could use lot more careful analysis.

Example: consider "the neoliberal (whatever)"--by which I take it they mean "the way we have lived for the last 40 years:" increasingly unfettered free markets. CD seem to be assuming that this "neoliberalism" has been discredited by the late uproar and will therefore vanish into the sunset. I'd need a lot more persuading. There is a lot of money and power that rides on the legitimacy of the market model, and these guys have no instinct to go away--hell, they don't even know they've been discredited.

Example: I am really not at all clear why they are telling me what they tell me about foreign exchange. They observe that lots of people, for a long time, have been forecasting s calamitous decline in the exchange value of the dollar. And yet it hasn't happened. There may be good reasons why it hasn't happened: we offer political stability; world lending is still dollar denominated; the lenders are locked in. Sure, fine, but what exactly does this have to do with their more general argument? Stated baldly (but this cannot be their point) it seems to suggest that we might not be losing our wealth and power and influence anywhere near as fast as might at first glance appear.

A final example: CD seem to be trying to tell us that sovereign wealth funds necessarily exercise "political" or perhaps "strategic" power instead of mere "economic" power, as we might expect from a neoliberal enterprise. The more I look at that one, the more skeptical I become. My present inclination is to surmise that the critical factor is "bigness," and that huge "private" corporations" might well start acting like (or in concert with) states; while "sovereign" funds might perfectly well find that money is more fun than politics.

Which brings me to a final, more general, point. That is: if there is an important flaw in their general argument, it may lie in their (implicit) assumption about the nature of states. They seem to presuppose a static model of statehood--the kind of thing we've come to take for granted since the Treaty of Westphalia. That would mean: a state that makes at least a pretense of commitment to "a common good," to the maintenance of public order, to the administration of justice. It would mean a state professing (however hypocritically or ineffectually) to the welfare of its people.

I think they may failing to consider just how transitory, perhaps accidental, this model might be--a lucky accident, like the very existence of life in the universe. We've lived so long (and in the US, so well) on that state model, that we forget how quickly and easily and completely it might pass away. There are already signs of states weakening everywhere--not just the basket cases like Somalia or Afghanistan, but in so many places where the ligaments of the (if you'll permit me) Enlightenment model may seem to be coming unglued.

This is a nightmarish scenario and I certainly hope I am just grotesquely wrong. If it does come to pass, what then? I don't even pretend to have a very clear idea, but whatever idea seems to boil down to two overlapping concepts: tribes, and cartels. As CD observe, we also have a half a dozen or so sovereign wealth funds that we find we must treat as players in their own right. CD seem to assume (although they don't quite say) that we should treat them as arms or allies of the stat. But what if they simply are the state? Or simply self-sustaining states-within-a-state, nesting in some vestigal state womb, but answering to no one but themselves (and each other)? What then, huh? I have no idea;it's an incomplete picture and thank heavens for that, because it isn't very pretty and I'm not in the mood for a nightmare. But I think I'd have to cope with it before I went public with any grand propositions about the future.

I don't think CD have considered this possibility (or perhaps they simply think it is too ridiculous even to consider). Yet I'd say it is one testimony to the power of this absorbing and provocative book that it generates the thought of such a bleak alternative.

Simenon on the Lives of the Poor

Most people don't usually read Georges Simenon's "Inspector Maigret" mysteries for pithy one-liners, but I put a tic by this one:

The poor are used not to express their hopelessness, because life, work, and the hourly, daily calls of life lie forever ahead of them.

That's from Maigret and the Hundred Gibbets,(1931; page 27 of the Penguin Paperback). This sounds right to me; if you are truly poor, or catching poverty out of the corner of your eye, you can't indulge the luxury of expressing your hopelessness; you soger on, or you spin free of the flywheel and make a colossal nuisance of yourself.

I tend to think this is a safe generalization, but at least it is a pretty good description of life in Maigret's world: heavily populated with the quietly desperate, too proud to make a nuisance of themselves but finding little solace in anything else.

Footnote: I pulled the Maigret out of the corner of an untended bookshelf when I couldn't sleep. They're the novelistic equivalent of comfort food for me: consoling, familiar, and in their own way, reassuring. Is this perverse, considering the melancholy tone? I think not. Walker Percy says that there may be novels about alienation, but there cannot be an alienated novel: the mere fact of connection is enough to make you whole.

Footnote to footnote: but I have to add that, structurally this seems to be one of the weakest of the Maigrets--a silly plot with more than a few touches of Agatha Christie. From the date I gather it must be one of the first and even if the plot is wrong, the tone is still right. Oddly enough, it receives nothing but five stars from the reviewers at Amazon. I wonder what I am missing?

Cute ...

... and maybe true:

[I]f we concede that traditional economists are historians with a math fetish, then behavioral economists are mathematicians with a psychology fetish.

Link, Kedrosky, who adds: Either way, I don’t feel any more comfortable handing them the keys to the financial kingdom.

This One's For D.G .Myers

D. G. Myers at the estimable Commonplace Blog (definitely worth an eyeball) has been (grumping over?) (marvelling at?) the recalcitrance of a student in his Philip Roth seminar. Myers clearly admires Roth; the student professes that he does not, although it is hard to tell just how he would know because there is little or no evidence that he ever read any. Myers is dismayed. He might take solace from the observation that he is not alone:

A disobedient youth is no longer in fear of his schoolmaster--the relation is rather one of indifference in which schoolmaster and pupil discuss how a good school should be run. To go to school no longer means being in fear of the master, or merely to learn, but rather implies being interested in the problem of education.

So Søren Kierkegaard in The Present Age, which might be the best thing he ever wrote (though I probably haven't read enough to judge). And while I am on a roll:

It is said that two English noblemen were once riding along a road when they met a man whose horse had run away with him and who, being in danger of falling off, shouted for help. One of the Englishmen turned to the other and said, 'a hundred guineas he falls off.' 'Taken,' said the other. With that they spurred their horses to a gallop and hurried on ahead to open the toll-gates and to prevent anything from getting in the way fo the runaway horse. In the same way, though without thaat heroic and millionaire-like spleen, our own reflective and sensible age is like a curious, critical and worldy-wise person who, at the most, has vitality enough to lay a wager.

Source: Harper Torchbook 1962 edition, pp 45 and 78. At 44 he adds: "the whole age becomes a committee."

Bookblog Note

Freddy, formerly at League of Ordinary Gentlemen, has set up shop (again) on his own account at L'Hôte. Pay im a call. You won't be sorry.

And Speaking of Dr. Doom....

Henry Kaufman in the previoius post happily bore the title of "Dr. Doom." But you want real doom: look here.

What's New? Iran Tunnels

The NYT headline says: Iran Shielding its Nuclear Efforts in a Maze of Tunnels (link). Mrs. B asks: and what part of this is actually "news?" We knew they had a nuclear effort. We knew it was underground, hard to hit. Is it the "maze" part--the idea that Chuck Norris might have a tough time taking them out? Or just that President Ahmadinejad looks so goofy in a hard hat?

Fun fact: Wiki offers a link to an Iranian presidential blog, but it doesn't seem to be alive just now.

Something Else I Didn't Know: Plurality

The Salt Lake Tribune keeps a reporter on the polygamy beat. With a blog called The Plural Life.

H/T, John.

Alfa-Betty Olsen Makes a Dog's Breakfast Tasty Meal...

...out of stuff she gets at Ikea (link). The Wichita bureau, with strong midwestern/Scandinavian roots, chimes in:

[For the holidays] we made Swedish meatballs (onion, pork and beef), lefse (bought at the store and like eating a paper napkin with butter), Jell-O (of course - that's salad in Minnesota), Swedish potato sausage (even the Greek won't eat it), Norwegian rice pudding, mashed potatoes made from real live potatoes, and corn. Corn has become a Swedish vegetable. At least in Minnesota. I'm sure my grandparents would have recognized most of those odd combinations of fish and potatoes (I note the absence of lefse - which Sue used to make on occasion when she couldn't find it - the stuff in the store tends to be tough; she has one recipe from an old Lutheran Church that starts with 'peel 100 lbs of potatoes') but the palate got cleaned up by the time that it got to my generation. There is one story about one cousin serving 'sil salad' - basically herring salad - as a main course and most of my mother's generation going on strike.

And as a kid, I endured the annual lutefisk dinner at church - where they served meatballs to the heathen of my generation - but it involved great quantities of drawn butter, lutefisk, meatballs, multiple courses of Jell-O in all colors imaginable (and with all sorts of canned fruit).

Actually, my own mother and I used to make Swedish pork (=bread) sausage together--one of the few things we did with complete amiability. But we drew the line at head cheese.

Appreciation: Kaufmann on the Late Uproar

In The Road to Financial Reform, Henry Kaufman (fka "Dr.Doom") considers the recent meltdown and serves up a heapin' platter o' "I told you so." He surveys a catalog of causes and isn't coy about reminding us he warned us about so much of this long ago. And just in case anybody thinks he is cooking the record, he documents his account with extensive reprinted excerpts from his own old speeches.

It's a bracing read, coming from a guy with such gravitas. He turns 83 this year. His memoir, On Money and Markets (2001) is an absorbing account of his long career on Wall Street, with insightful reflections in the his long career, and laced with more than a bit of baffled admiration at the changes he'd seen. Bracing, although not particularly new or pathbreaking: the market is more complicated than it used to be; there's way too much debt; we need better regulation and it needs to be global. Yes, we knew that, but it is interesting to hear it said by somebody whose memory extends back more or less to the invention of money.

Kaufman does pick up on a few points that don't seem to me to be current in the debate. One: he focuses on the shift in bank lending from fixed to floating rates. Nothing intrinsically awful here, but Kaufman rightly points out that it makes it infinitely harder to discipline bank behaviour by jerking the interest-rate leash. Two: he marvels over the still-new-to-him evolution in the definition of "liquidity." It used to be how much cash you had on hand; these days, it means cash plus borrowing power. Indeed, I think he is correct to argue that the very idea of "cash" has lost its salience in a world where you can buy a cup of coffee on your Visa card.

It's probably no surprise that Kaufman takes a dim view of securitization, although his particular approach is perhaps distinctive. He seems to dislike it partly because it is new, and this is actually a better argument than it might appear at first blush. I take it his point is tht we have been letting a lot ride on a mechanism with which we don't have much experience and which we don't understand very well. I should say that recent events have supported his judgment here.

Example: we've found that in a securitized world, where nobody really "owns the debt," then nobody really "owns the problem"--it becomes much harder to figure out just where and how we structure a workout. This is an issue which, I am happy to say, Underbelly, prompted by questions from Joel, was puzzling over nearly three years ago, although I can't say I gained anything by the experience except a bit of puzzled disease. A corollary point is that a lender who will securitie the debt is just not motivated enough to think about risk. Recall the old line about how the best fertilizer is the farmer's footsteps walking over the land (Lyndon Johnson, perhaps). This truism has gone grossly out of fashion in recent years, but read Kaufman and you will find some good prudential reasons for bringing it back.

Oddly, unless I was doing, Kaufman seems never to mention the one most attrractive feature of securitization: portfolioi diversification. I grant that "Diversifiction" is a mantra that can be misued like any other. I recognize that not even a diversified portfolio can protect you in a panic -- "when all the coefficients go to one," as they say. I emphatically acknowledge that much of what passed for "securitization" lately was the very opposite of diversification--recarving your portfolio into segmented risks. Yet diversification itself is a good idea and a sensible reform platform will make sure to preserve its virtues while getting rid of its problems.

In general, if Kaufman has a dominant theme, it is the idea that "there's too much debt." I can see an important core point here: one of the central facts about banking always and everywhere is that it is a huge mountain of debt resting on a little hillock of equity. Yet Kaufman doesn't seem to distinguish between bank debt and corporate debt. A lot of the debt stuff in the book dates back to the junk-bond LBO frenzy of the 80s and early 90s--the age of Michael Milken. Count me as one who believes that Milkin and his ilk probably did the market and the economy more good than harm. Yes, a lot of deals crashed and burned, but a lot did not, and a lot of people (Ted Turner, Craig McCaw) got access to capital they might never have seen otherwise. Oldtime bankers like Kaufman are extremely unlikely to have seen the virtues of that sort of thing.

I'll agree also that my argument may not be entirely dispositive. It may be, as the new agers like to say, that there's nothiing metaphysically different between debt and equity--just different kinds of contracts. Yet markets do tend to treat them differently. Miss a dividend on your stock and the share price may go into the tank. Miss a coupon and all hell may break loose. There seems to be a discontinuity here, and it may not be rational. Yet as Hegel would not say, even if irrational, it is still real.

Still, there's much to be said for sitting at the feat of the past master--of listening to the guy who has seen it all before (and who, not incidentally, seems still to hold a full bag of marbles). If he wants to indulge in "I told you so," I suspect we have to give him a bye.

Visa: Not Respnsible for Bunions or Flat Feet

I'm with Adam on this one: truly the weirdest ad I've seen since I can't remember when--unless you infer that they are pinpoint-targeted at Capitol Hill staffers (link).

"Own Goal" in the Bond Market

In The Meltdown Years, Wolfgang Munchau says:

There are stories when banks sold default insurance against their own default.

Munchau calls this "a logical absurdity," and he's got that one right. Consider

• For consideration given, we promise to pay you $10 million.

• For an additional $330,000, we promise that if we fail to pay you $10 million, we'll pay you $10 million.

Uh--right. With Munchau, I am sure there are "stories." And it does indeed sound like just exactly the sort of travellers tales that one of our brave venturers would bring home from the banking wars. But is it any more than that? Can anyone identify a confirmed sighting?

You will surmise that I am skeptical. True enough, but I can imagine this: much (most?) credit insurance was written in indexes--e.g., the Itraxx Index, which measures the performance of bonds of companies with good credit ratings. I can imagine that some banks wrote insurance on indexes of which their own bank issues were a part. That's a slightly different matter from what Munchau is proposing, although I grant it is not much less cray.

The Value of a Law Degree

A commentator at Above the Law writes:

I never thought I would see the day where a plumbing degree from Ashworth College (an online institution for the non-erudite) carries more value than a law degree. I recently paid my plumber $425.00 for 45 minutes of his time. Clearly, this handy chap makes more money than most working attorneys in this nation.

Two points: one, he heeds to get out more. The potential top income for a lawyer has been (and remains) quite high, compared to the population as a whole (if not compared to, e.g., investment bankers). But the mean is usually rather lower than the commentator seems to realize. Every year some law grads go off to be parole officers, high school teachers, whatever--some willingly, some because it is the best alternative on the table. And even now as we stand here, some lawyer is "practicing law" in a terry cloth robe at the kitchen table. Again, that may or may not be a bad thing, but it's not the kind of thing that deans and alumni offices like to hype, especially not when they are trying to reel 'em in for $40,000-a-year tuition.

Two, he needs to take the long view. The blip in time during which a law degree was a road to riches--that blip is about the same length as the blip during which a guy like Homer Simpson could support a wife and 2.3 kids in a nice home in the suburbs on a factory wage.

I think the inflection point was the moment I started law school--fall of 1963--when the dean who welcomed us offered congratulations because we were moving into (as he said) an underpeopled profession. He was right: law hitherto had just not been that dazzling a choice. You really had to want to be there.

Sepecificaly: lawywers often had to scrounge for work in the Depression. There was more work after World War II but also more lawyers. In the 60s, wo things changed all that. One, biglaw jacked up its compensation schedules for beginning associates, enriching the associates themseves and setting off a ripple that rolled through the market as a whole. Two, the Federal government started to fund legsl services for the poor.

[A third factor that drew a new wave of applicants to the law schools was the civil rights revolution in the South, which added an aura of prestige and respectability to law which it had perhaps never enjoyed before. This surely increased demand for places in law school, although it didn't affect compensation directly.]

One unhappy consequence was that for a generation now, we've had a lot of kids in law school with no special vocation to be there, but who were looking for the big bucks. Surely that motivation is gone, or at least severely constrained. The Pope has been neard to say tht he wouldn't mind a smaller and stronger church. Who knows, the current uproar may induce just such a revision in the practice of law.

For a much more fully informed discussion, go here.

Three things changed

British Tories Take a Dive for Brain-dead Populism

Given that they are almost certain to win the next election anyway, you'd think the British Tory party might at least flirt with a bit of decent public policy. But now: given they chance to do something right, they've opted instead to throw their hand in with the most mindless kind of economic populism. The culprit is (drum roll) the big grocery stores, who, blast them, insist on trying to lower prices.

It was from, ironically enough, John Kenneth Galbraith that I first learned what every good economist knows: that a big retailer is essentially a buying club with the clout to extract savings from suppliers which, in a competitive market, they can then pass on to customers. That's how Wal-Mart does it, and so, apparently, the big four British grocers (one owned by Wal-mart). The Tories have now promosed to put the squeeze on the biggies to prevent them from squeezing their suppliers.

And it appears they intend to go aobut it in the worst possible way. They'll take the big grocers to create a new regulatory framework (actually, this part is okay). But then they apparently intend to create (wait for it) an "ombudsman" to police supposed negotiating abuse.

Right, just what Britain needs: one more publicity-grabbing political hack ready to grab (state subsidied) television time to whine about the evils of grocer power. Although I have to admit--the "ombudsman" part is perhaps the tipoff that the Tories don't really mean it after all: what they seem to be designing is a system which will transfer a bit of wealth from the grocers to the political apparatus, but without the intention of ever actually doing much of anything except posturing before the camera.

Afterthought: Yes, I know--if you are a little supplier, you know it hurts like hell to be bullied. IHey, I've seen these guys down round the bankruptcy court. If you sleep under the umbrella of a gorilla, and the gorilla rolls over, you are going to get crushed. Back in the early 80s, when interest rates went through the roof, Sears called all its suppliers and said guess what: we're not going to pay in 30 days any more; expect more like 45. I saw first-hand the travail of a little furniture maker. In some ways, he was the model of enterprise: a first-class product, and a pretty good employer. But he just couldn't hack it on the new terms. And the sad truth is that's one thing our system does (or has done) pretty well: wash out marginal producers for the greater good of the public weal.

The only way I know to avoid that is to embrace some kind of state syndicalism. And I don't want to be excessively ideological here: it may be that some sort of syndicalist model can be msde to work. But it's certainly not what the Tories claim to embrace. If they want to go to the voters on a syndicalist platform, God bless them. But as long as they claim to be the party of free markets, they should take this nonsense and stuff it in their hat.

H/T for the pointer: the Kansas bureau. Thanks, John.

Christmas Gift: Glorious Morning

One of the grandkids presented me with a remarkable belated Christmas gift this weekend--a recitation from memory of Shakespeare's Sonnet 33, the one that begins "Full many a glorious morning...." (reprinted below). I assume it was done with a fair amount of maternal bullying, but he does have the gift of a pretty good memory so it can't have been an intolerable burden, and anyway, he has generally a good nature. Whatever: I couldn't have been more pleased. I've reached the age where I certainly don't need more stuff and I am delighted to be an occasion for the transmission of the culture. Besides, it is an old family tradition: I used to bully his mother into memorizing poems as gifts for my mother (who herself had a pretty good memory for verse). And so the past extends into the future.

I have to admit this is a sonnet with which I am not well acquainted: I guess I mentioned before that, though a big Shakespeare fan I am somewhat weak on the sonnets. On inspection, I see that it is actually rather tricky. That first line (see infra)--is it an adverb, as in "often?" No, on close scrutiny it turns out to be the direct object of "seen," as in "I have seen a morning." There are a couple of bracing disyllables: Full man /ya/ glor /yus/, etc. You get some touching echoes from elsewhere in Shakespeare. There's "rack," as in Prospero's "leave not rack behind"--turns out to mean (per Stephen Booth) "mass of scraggly, smoke-like, wind-driven clouds." Or "region cloud:" per Booth, "the clouds of that part of the sky where he is now"--recall Hamlet, "I should have fatted all the region kites/
With this slave's offal." And the couplet offers a matched set of feminine endings.

I'm also impressed with the insight that Shakespeare seems to have liked the dawn. Here is Horatio:

But, look, the morn, in russet mantle clad,
Walks o'er the dew of yon high eastward hill:
Break we our watch up.

And the great over-the-top exuberance of Romeo:

But, soft! What light through yonder window breaks?
It is the east, and Juliet is the sun!

With both, contrast the blunt simplicity of Duke Vincentio in Measure for Measure: "Come away; it is almost clear dawn." For my taste, though, none can match the shock value of a piece of unexpected poetry from an unexpected source: Don Pedro in Much Ado About Nothing:

Good morrow, masters: put your torches out.
The wolves have prey'd; and look, the gentle day,
Before the wheels of Phoebus, round about
Dapples the drowsy east with spots of grey.
Thanks to you all, and leave us: fare you well.

Anyway (with due appreciation to the recititator) here's the sonnet:

Full many a glorious morning have I seen
Flatter the mountain-tops with sovereign eye,
Kissing with golden face the meadows green,
Gilding pale streams with heavenly alchemy;
Anon permit the basest clouds to ride
With ugly rack on his celestial face,
And from the forlorn world his visage hide,
Stealing unseen to west with this disgrace:
Even so my sun one early morn did shine
With all triumphant splendor on my brow;
But out, alack! he was but one hour mine;
The region cloud hath mask'd him from me now.
Yet him for this my love no whit disdaineth;
Suns of the world may stain when heaven's sun staineth.

Source: "Booth" is Shakespeare's Sonnets, edited with analytical commentary by Stephen Booth (1977).

Does This Mean that Larry Summers Gets to be President of Harvard Again?

Link.

A-one and a-two etc.

Taxmom favors me with the loan of her valued Christmas gift: a copy of Bruce Marshall's The Accounting (1958), hitherto unknown to me, and surely one of the few "accounting" novels ever written. Perhaps the only real competitor is Accounting for Murder, by the inimitable Emma Lathen, of whom I have written before, although the Lathen novel (and its kin) take a somewhat broader-brush view of the business world and its attendant evils.

There are, I guess, a few successful business novels although I'm having trouble thinking of examples that I would really want to read again: people always mention The Man in the Grey Flannel Suit, which I have always studiously evaded. The late Arthur Hailey wrote a string of you-are-there novels about "the real world," as it is sometimes known. I read Wheels, about the auto industry and liked it well enough that I once assigned it to my commercial law students (they didn't see the point)--there are others, and I can't recall whether I ever read them or not. He also throws in the Godfather novels, greased with a happy face :-), but I'm not sure it is a joke. And speaking of the mob, if one were doing movies, I would surely put Casino near the head of the list.

There are, of course, a few reasonably successful novels about financial chicanery. The best that I know of is Christina Stead's House of All Nations (Amazon has a paperback on offer at $560.28) or perhaps Theodore Dreiser's Trilogy of Desire about the career of Charles Yerkes the mass transit guy. Or Trollope's The Way We Live Now--more keep coming to mind.

[My faithful readers, or reader, are/is saying--but aren't you forgetting Dickens? No, I am not forgetting Dickens; I am ignoring him. For all his maundering, Dickens seems to me to know next to nothing about the world of affairs, and to care even less.]

I suspect that I may be talking about nothing more than a special case of the more general rule that there aren't many good novels about work in any form--was it E. M. Forster who said that people in novels make love a lot more than people in real life, and work a lot less? People in discussions of this sort usually cite Life on the Mississipi, which is wonderful in its way, but not even a novel, and after that, where do you go next?

I've read a few of what to be "economics" novels that strike me as just dreadful (but cf. link). Taxmom and I would agree that accounting has its moments of excitement, although I admit it may be a challenge to get it down on the printed page. Still, there is promise in a beginning like this:

In 1933 the thirty-first of December fell on a Sunday, and so the cash count at theBank had to be done on the Saturday.

At half past nine that morning the auditors' senior London partner, Sir Eric Stugby-Wharton, F.C.A., walked into the offices of their Paris branch.

The only local partner at his desk was Morven, and his rough Scots voice could be heard bawling behind the closed door of his room "As usual, it's a pig's breakfast, Mr. Urquhart.

Sir Eric grinned with approval. The best way to train audit clerks was to shout at them. ...

Sir Eric Stugby-Wharton, you gotta love it...

Update: Joel is all over this one. He suggests Rise of Silas Lapham, about the Vermont merchant who discovers a paint mine. Good point. Also Moby Dick--but is this "business?" Or "work," a la Life on the Mississippi? Also Sinclair Lewis, but on this issue I'd put Babbitt and Main Street in a class with Dickens: I don't think Lewis knew much about business or business people except that he didn't like 'em. Joel also gives us a Google search with 28,700,000 hits, so I guess there is room for more research.

Update II Ignota says Balzac. Oh, dear me, yes, Balzac. They certainly are about scheming, hustling, positioning, etc. Oddly enough, I've probably read more novels by Bazlac than by any other author--testimony not so much of the degree in which I enjoy him as of the number he wrote. Of my exposure, I guess the one that comes closest to being a business novel per se is Histoire de la grandeur et de la décadence de César Birotteau--about the parfumier hornswoggled and bankrupted by an underling (and his own guileless incompetence).

Palindrome

today: 01/02/2010, as I am reminded by Sally whose birthday is today.

Update: I get my palindrome birthday European-style on 18/02/2081, and I certainly hope I am not around to enjoy it.

Off Again

To hang out with some grandkids. Back Sunday

Free Kindle OK!

Some people are all in a twist over the news that most of Kindle's top "sellers" are actually free--nine of the top 10, 64 of the top 100. But is this surprising? Seems to me it is just what you would expect. If a clerk leaves a bowl of free candy next to the check-out counter, it will be free before the clerk goes on her next break. The only difference with the Kindle is that the candy is probably more expensive--recall that the marginal cost on all these books is effectively zero. Granted that the sunk cost has to be something > zero, but I bet not much, and in any event, I bet Amazon ain't payin' it.

Anecdote as data: I scroll the free stuff from time to time, have added a few, have knocked a few off for space reasons (all free, what's the big deal?). I've also bought about 70 books over the year since I got it. I don't know how many I would have bought in paper but I know it is not 70, so Amazon has squeezed something out of me. I suspect that maybe none of my 70 is in Amazon's top 100, but I do suspect my dollars are just as green as anyone's else.

Afterthought: have you any idea how handy it is to have a Complete Shakespeare on your Kindle? Never at loss to complete a quotation. Or for solace in a dark moment. Not very well edited, but good enough, and hey, it's free.

Engineer Terrorists

John flags me to the Slate piece this morning, asking why (and whether) so many terrorists are engineers. The answer to "whether" is apparently "yes;" the anecdotes hold up to more formal scrutiny. The answer to "why" remains, necessarily more speculative, and Slate feels free to speculate away (they do cite evidence that engineers are "more conservative and religious" than other scientists, but this only begs the question).

I will add two cents. I'm not even remotely an engineer myself, but I went to law school with quite a few and a find myself teaching quite a few in the law school. In this (skewed?) sample, I see a lot of people who have worked hard to develop a skill and then find themselves faced with the prospect of spending their lives in not-very-interesting jobs with lots of cubicles and a fairly low salary ceiling--that, at least, is the sort of thing that drives them to law school. A corollary is that they often find themselves (as they see it) ruled by idiots--find themselves taking orders from people they see as stupider than they are. Think Dilbert.

They may well be right in this view. Think Dilbert again. Of course it is equally possible that these bosses have skills that the engineers don't have and which to the engineers are therefore invisible.

Afterthought: Ignoto tells me I need to elaborate on that point about engineers in law school. Fair enough. My experience is that the engineers often do well, but often not as well as they expected, or think they deserve. My first dean told me that this is because engineers are not good at what lawyers need to learn how to do, and that is to cope with ambiguity. Might be. Of course a question would be whether we do in fact teach law students to cope with ambiguity.

Anecdote as Data: the Hairdresser's Tale

The lady who does Mrs. B's hair is outraged at the health care mandate. She says she'll pay the tax. Narrowly speaking, she might be right: paying the tax probably will be cheaper for her than getting health care would be.

She's in some way typical of an definable demographic. She's about 30, single and unattached, no insurance (and apparently doesn't want it). She's perhaps unusual in that she seems to follow politics with a lot of care, and says she votes.

And as I say, she's angry. Yes, yes, I know, wonks can tell her from now until doomsday that comprehensive care doesn't work without mandates,. They can even try to tell her that it is "only fair" that the young and healthy get in the pool (though is it? Do we really need any more transfers of wealth from the young to the old?).

Obviously, her eyes glaze over. My guess is that there are an awful lot of people in her cohort with the same attitude. The Democrats had better hope that most of them (unlike the hairdresser) just don't bother vote.

Why It Is So Hard to Make Sense out of Housing: One Reason

One of he reasons it is so hard to make sense out of the housing bubble: "housing," so-called, is so many different issues. Consider:

• The campaign, so popular with Democrats and Republicans alike, to extend home ownership to non-owners.

• Houses as piggy banks, or ATM machines--the second mortgage equity access program.

• The slow and painful--and sometimes rapid and painful--decline of once-great cities.

• The campaign of looting, undertaken by organized marauders who succeeded in transferring loan proceeds to themselves by systematic fraud.

• The clueless and luckless "investors" from Nowheresville who stumped up hard cash hoping to share in the transformation of a former alligator farm into the Next Great Sunbelt metropolis.

Behind all these, we have:

• The revolution in finance, including the creation of new devices to "rationalize" (he he) the mortgage market.

• The tsunami of new capital, seeking protection against the dismal returns and the seemingly astronomic risks of Asian investing.

• The grey monster, still porrly defined and worse understood, that we choose, for lack of a better name, to characterize as "the bubble."

Bullet points inspired (although not supplied) by the best thing I've read on housing policy in years. That would be Alyssa Katz' Our Lot. The subtitle is "How Real Estate Came to Own Us," but that's way too facile for a presentation fo subtle and nuanced. Katz covers a daunting range of material: the early community action groups in the 70s; the invention of mortgate securitization in the 80s; the full-court press for expanded ownership in the 90s, and that unspeakable phase when everything when kablooie in the naughts. And she brings off the trick almost unheard of in this kind of semi-journalism: she couples a gift for personalized narrative with a commendable skill at sketching the technical background.

There is nothing here by way of an agenda for reform. And she presents it all with an air of hip detachment which suggests that she knows that life is bound to be like this under capitalism, and we can't expect much to change until the revolution or the next ice age. Yet the details of her own message deny the larger aroma: she makes it clear that the story is far too rich and nuanced for for detachment of any sort, hip or otherwise.

One more substantial drawback: she ends with a chapter, overlong and not nearly so well organized, on New York City, specifically the New York of rent control and condo conversions. As a topic in an overview of this sort, New York is certainly fair game. But the trouble is that she's too close to it: she's been burned by rent control and burned by the market, and she still doesn't have a good fix on exactly what went wrong and how.

But that's not much of a problem. It's the end of the book; you can skip it if you like. For the rest, as a means to get your mind around real estate issues, I can't think of a better place to start.

Obama and the Costs of Centrism

  "Come, let us reason together," said Lyndon Johnson (quoting, I believe, the prophet Isaiah). And so he did, although when Lyndon Johnson reasoned, you could usually hear the crushing of a few bones.

Barack Obama didn't use the Johnson phrase, but he did make it clear that he wanted to be the conciliatory President, the the centrist, the man willing to work with his worst enemy.

I suspect Obama himself is surprised and dismayed at how utterly he has failed in his campaign for centrist cooperation. I feel for him, but I for whatever it may be worth, I offer an insight. That is--obviously the Republicans have decided they have to destroy this guy, just as they tried so hard to destroy Bill Clinton. Since Obama doesn't seem to have a zipper problem, they have to look for something else.

Under this light, it is perhaps natural that they would plunge in for the kill so directly on what he seems to value most: his desire for a kind of post-partisanship. Perhaps this helps to show his weakness; perhaps it pulls the keystone out of a grand architecture. Or perhaps they are doing it because trying to destroy Democrats is just fun (I love the smoke of filibusters in the morning!).

But whatever the particular goal, perhaps a primary reason for the stonewall strategy ihe wants cooperation so much. It's an unprovable counterfactual, but could it be tht things might have gone better--even more collegially--if he had simply stuck his thumb in their eye?

[There might also be a larger strategical insight here, and if true, I hope it's not too late. Specifically, one thing you do as a good negotiator is to offer something you really don't care about very much as if you cared about it absolutely. Then you let your enemies wear themselves out fighting aginst something for which you really don't give a damn. I really don't think that was what Obama was doing with the collegiality ploy, but I kind of wish it had been.]

The Toothbrush Theorem and the Debt Bubble

I just spotted a finance application to a general principle. The principle itself is well enough known, although so far as I know, it does not have a name. So, call it "the toothbrush theorem." Allow me to explain.

Start with a particular example. In a Pat Barker novel (I forget which) there is a teen-ager who hates her stepfather. Every morning, she takes his toothbrush and runs it around the inside of the toilet bowl rim. I told this story to Mrs. Buce and she instantly responded: that guy must have the best immune system in the world.

Exactly so. The toothbrush theorem: disease, germs, viri, have a habit of building up resistance in odd or unexpected places.

Here's another example: I grew up in the era before polio. My mother lived in dread that I would get the disease. She did everything she could to protect me against it. In particular, she certainly wasn't going to let me swim in the river, which was not that far downstream from a sewer. In fact I did not get polio, but a friend of mine did, and was permanently paralyzed, and eventually killed himself.

All this was done with the best of intentions. But we know now that she had it backwards: in retrospect, we know that polio struck the middle class, those children with protection. The protected ones were those kids out cavorting downstream from the sewer.

And a third example. Go back to, say, the middle ages. Nobody--not even the king--was rich, but the masses lived in unspeakable privation. This was true everywhere, but it appears that the masses in Japan may have suffered even more than the Europeans. Why so? A plausible answer is that the Japanese were too clean. So they lived longer, and there were too many, fighting for too little. The Europeans, by contrast, rounded out their privation with squalor and filfth. So many died of disease. There was this much of a comfort: at least there werent' so many survivors to compete for the limited resources [recall in particular the horror of the Black Death in 1348: almost every student agrees that the masses who survived the great plague lived rather better after than they did before, because there were fewer of them.

So now the finance case. I'm reading Henry Kaufman's The Road to Financial Reformation. He is discussing the 1980s, a great golden age of debt: the growth of debt, he declares, exceeded the nominal growth of the gross national product. And did so without interruption: unlike almost any other boom time, there were no financial crises or panics. Granted, there was the great selloff of 1987, but in retrospect, this was a blip. There was not one of those fractures that induce large debt liquidations. So the very success of this golden age drove debt virtually out of control. The toothbrush theorem lives.

Another Quarter Heard From

Just a couple of days ago, I was venting my queasiness over the idea that Peggy Noonan has nice things to say about Barack Obama. Today it is Ross Douthat--the New York Times' new "Mr. Conservative," now that David Brooks has proved too unreliable and Bill Kristol too, well, Kristolline. Douthat's charitable view of the President is not quite as wholehearted as Noonan actually, but a lot kinder than what the President has been hearing from, well, almost anybody else.

I concede that Douthat's influence on any real voter is likely absolute zero (while Noonan's is only vanishingly small). But that may be part of the problem: all of Obama's striving for decency, for constructive dialog--they cost him almost all of his potential friends and gain him two of the most irrelevant people in the vote-counting universe.

I mean-- do we really want to take political guidance from some guy who thinks that masturbation is a vice?

I'm Still at Large

Get this, folks: it is illegal at all times to smoke inside a motor vehicle when a person younger than 18 is with you.

That's California law. You knew? I did not. And so it cost me a point on the written exam for my driver's license renewal. More than three wrong and I would have had to take it again. But I got only three wrong, so I scraped through this P/NP course with a P.

Of my two others wrongs, one was just sloppiness. I read "cell phone without a hands-free device" and I checked "never." Had I read more closely, I would have seen that another choice was "when making a call for emergency assistance," which is obviously righter.

And finally--where do you look when you are backing out of a parking space? The correct answer is "over your right shoulder." I rejected that. I also rejected "at your rearview mirror." Instead I checked "at your side mirrors," but it seems to me that you really want to do "all of the above," plus look "over your left shoulder," as available. Sadly, "all of the above," was not an option. So, a poorly formulated question; but I had seen it before on a practice quiz, so it was my own fault it didn't get it right.

Thanks to the magic of cataract surgery, I also squeaked through the eye test without glasses, but it occurred to me: in the age of contact lenses, isn't that a joke? For all he knew, I was wearing my contacts this morning (but I wasn't) and would never wear them again--until, perhaps, my next eye test.

It does seem to that this test has gotten harder over the years. No, I know what you're thinking, but I don't think it is just me: I downloaded the manual which seems a lot thicker than it used to be, and I took a lot of practice quizzes, with a lot of lot of picky rules (not all of which, apparently, I mastered).

And that stuff about driving with minors--sheesh, of course it is a dumb idea to smoke with kids in the car. It's a dumb idea to smoke ever. I quit a long time ago (come to think of it, 50 years ago next week. But a motor vehicle law? Oh, give me a break. Stuff like that degrades law enforcement, and degrades the law.

Chuck S. Is Not Impressed

Chuck S. commenting at Naked Capitalism, offers a metacritique of the Senate bill:

Top 10 Reasons to Kill Senate Health Care Bill

1. Forces you to pay up to 8% of your income to private insurance corporations — whether you want to or not.

2. If you refuse to buy the insurance, you’ll have to pay penalties of up to 2% of your annual income to the IRS.

3. Many will be forced to buy poor-quality insurance they can’t afford to use, with $11,900 in annual out-of-pocket expenses over and above their annual premiums.

4. Massive restriction on a woman’s right to choose, designed to trigger a challenge to Roe v. Wade in the Supreme Court.

5. Paid for by taxes on the middle class insurance plan you have right now through your employer, causing them to cut back benefits and increase co-pays.

6. Many of the taxes to pay for the bill start now, but most Americans won’t see any benefits — like an end to discrimination against those with preexisting conditions — until 2014 when the program begins.

7. Allows insurance companies to charge people who are older 300% more than others.

8. Grants monopolies to drug companies that will keep generic versions of expensive biotech drugs from ever coming to market.

9. No re-importation of prescription drugs, which would save consumers $100 billion over 10 years.

10. The cost of medical care will continue to rise, and insurance premiums for a family of four will rise an average of $1,000 a year — meaning in 10 years, your family’s insurance premium will be $10,000 more annually than it is right now.

Yves Smith, responding, thinks it's worse than that.

Econ v. Sociology: Good Question

Herb Gintis doesn't soft-pedal his criticism, but he still wants to bridge the gap between economics and sociology:

[Hans] Joas and [Jens] Beckert's treatment of action theory is a showcase in misunderstanding the rational actor model, but in a way which is shared by the overwhelming majority of sociologists. Joas and Beckert begin by characterizing the rational actor model as claiming that "actors' decisions can be understood from their motivation to optimize their utility." (p.269) Even the most elementary exposition of the model, by contrast, stresses that if individuals have consistent preferences, we can represent their behavior as maximization, but this is not their "motivation" any more than the fact that we can represent the motion of light waves by minimizing a Hamiltonian means that "light waves want to travel minimal paths." So, is simply absurd to think that economists believe it is rational to be "motivated to optimize." Joas and Beckert then assert that "the debate on action in sociology tends to focus primarily on rational choice theory on the one hand and on normative theories of action on the other... The competition between economics and sociology is largely founded on radically opposed action theories. The most influential sociological alternative to rational actor theory has been the normative model of action." (p. 270-271) Now, I do not want to deny that this is the case, but I do want to deny, categorically, that there is any conflict between rational action and normative action. There is nothing in the rational actor model that precludes normative elements in the actor's preference function. Nor is there anything in the normative model that precludes individuals from making welfare-improving trade-offs between normative principles (e.g., fairness, honesty, trustworthiness) and self-regarding concerns (material goods and services, leisure, prestige). Indeed, a raft of experiments in behavioral game theory exhibit the consonance of self-regarding interests, other-regarding interests, and character virtues in the preferences of rational agents. The failure of sociologists to understand this point is probably the chief reason core sociological theory has never had a chance to develop (economics has its own problems, of course, but that is a matter better discussed elsewhere).

Siegwart Lindenberg's contribution, "Social Rationality versus Rational Egoism," shows exactly how the economist's rational actor model can be enriched to serve sociological purposes without abandoning the analytical clarity and power of economic theory. I tend to stress that the rational actor model requires no more that preference consistency, and refer for support to the success of the model in game-theoretic models of animal behavior. Now, animals are hardly rational according to most meanings of the term "rational," but they do tend to satisfy preference consistency, and hence their strategic interactions can be cogently modeled as rational action---even if the creatures are pond scum or dung beetles. However, sociologists demand a richer concept of rationality, and Lindenberg offers an expanded concept of rationality, one that conserves yet goes beyond what economists care about. He argues of human individuals that (a) they are resourceful and goal-motivated; (b) they are constrained and confronted with scarcity of time, energy, and resources; (c) they form expectations and learn; (d) they differentially value distinct states of the world; (e) they are motivated to achieve; (f) in novel situations, they search for the proper frame for the event in their reservoir of know event types. (p. 636) Of course, these characteristics are plausible and in no way conflict with the rational actor model.

So, why then does the chasm between sociology and economics persist? Good question.

From Gintis' Amazon review of Jonathan H. Turner's Handbook of Sociological Theory (link).

Al Hunt on The Economic Team

Al Hunt at Bloomberg looks at the Obama economic team and sees some of the features of a gaggle of unherded cats. He might be right, although like Bruce Bartlett, I am willing to wait and see what the budget looks like next month. In any case, there is a useful background point here: presidents are judged, and rightly so, on their ability to orchestrate staff. And the more thoroughbreds, the more difficult the organization.

So Doris Kearns Goodwin never ceases to tell us about Lincoln and his (boy am I tired of this phrase) Team of Rivals. Goodwin's is not a bad point although I think it may be vastly overblown for promotional purposes, insofar as there really wasn't that much for most of the cabinet to do during the Civil War except to stay the hell out of the President's way. A more interesting example might be Herbert Asquith, Lord Asquith, prime minister of Great Britain from 1908 until he was shuffled aside in 1916. Asquith presided over a cabinet with talents like Winston Churchill and Lloyd George--and others of perhaps equal or greater ability, if not to prickly and self-possessed. Asquith himself sometimes seemed to do nothing at all--but that may be precisely the point, as his ability to command such a motley army may be the real testimony to his success.

A case that has long fascinated me is Dwight Eisenhower, who gets pretty good marks as a president, though he led a cabinet peopled by primitives like George M. Humphrey, Ezra Taft Benson and "Engine Charlie" Wilson, and the gasbag di tutti gasbags, John Foster Dulles. Surprisingly little blame for his underlings adheres to Eisenhower himself, except for the suggestion that it was they, not he, who were the real culprits. This smacks of "If only the Tsar knew!"--a deft achievement at fobbing blame off on others while keeping the credit for one's self.

Other cases are more complicated. Nobody was freer than Ronald Reagan at ceding control to his underlings, yet he seems to have done it in an organized manner. When his deputy was the ham-handed Don Regan, he found himself in trouble; with the deft James Baker, he rode high. Richard Nixon staked a lot on his relationship with Henry Kissinger--or was it the other way around? There's a certain amount of bleak amusement in the degree to which others, particularly Secretary of State William Rogers, found themselves frozen out in the process.

Churchill as an underling is one story; Churchill in power is quite another. Yes, he dominated the execution of the war--but he left virtually all of the running of the country to his cabinet-mates from the labour party, under Clement Atlee. And a splendid job of it they did, too, organized, cooperative and efficient, proving that they could govern well enough that they shunted Churchill aside in 1945 (somewhat the same way, perhaps, that Lloyd George shunted Asquith aside in 1916).

The most dispiriting modern example is perhaps (he keeps coming up) Jimmy Carter, who never seemed to be able to get control of the rivarly of his secretary of state, Cyrus Vance, and his national security adviser, Zbigniew Brzezinski. That's certainly not an example Obama wants to emulate.

From the Annals of Privatization: Bail

Here's a New York Times reporter who seems not to have spent much time hanging around the courthouse:

Bail, of course, is nominally the province of the government, but as with certain toll roads and various crucial functions of the military, it has lately seen a wave of privatization.

Link. I'll accept that as true, of course, if the writer will amend it to say:

Bail, of course, has been a private for-profit enterprise since day one.

If he still doubts it, he could look further down ion his own story, where he quotes the English Habeas Corpus Act of 1679:

A Magistrate shall discharge prisoners from their Imprisonment taking their Recognizance, with one or more Surety or Sureties, in any Sum according to the Magistrate’s discretion.

Own recognizance is what explains all those forlorn little neon signs in the shabby storefronts around the jasil, where you can get 24-hour service (with one or more Surety or Sureties) from the bail bondsman. If he still doubts it, he should spend the next six weeks handcuffed to Robert DeNiro, as did Charles Grodin in my favorite chase movie:

Here's a a good history of the bail issue in America, with appropriate background.

Appreciation: Two Quickies

Brief notes about two books about which I have not much to say, but which I enjoyed too much to ignore:

• William Faulkner, As I Lay Dying. A few weeks ago I said I had reread Thomas Hardy's Jude the Obscure and found it not as good as I remembered. Rereading Faulkner on the misbegotten Bundrens and their misguided quest to put Addie under the ground, I take it as much better than I remembered. A kind of a parlor trick, sure, but so dense and textured you find the characters leaping right off the page--not that you are always glad to see them. I'm left with only one question: is there a difference between a buzzard and a vulture?

• Mori Ogai, The Wild Goose. Per the introduction, Ogai was highly regarded in Meiji Japan, not least for this slender tale published first published serially in 1911-13 (sic, two years? But it is only 166 pages). It's a deft and delicate recitation of what could have been a much thicker novel--remarkable how much Ogai can convey by indirection and economy. Apparently in its own time it counted as a "recreation" of an earlier world, specifically the 1870s and 1880s. One oddity: the plot seems to echo Chekhov's Seagull almost beyond the play. Did Ogai (who was, I gather, well versed in European culture) know Chekhov? Did he know the play?
  

Afterthought: I guess the common theme here is that they are both short. I actually tend to prefer long novels over short ones: I love one of those you can just dive into and wallow around in --why I still stand by Middlemarch and Charterhouse of Parma and, yes, War and Peace. But the thing about both of these two is that they seem to create something like a whole world in a apan of just a few pages.

Oh, and as to buzzards and vultures: apparently the answer is yes, sort of.

Life Before Google: Community Activists in Chicago

Back when Barack Obama was still in middle school, community activists in Chicago were already at work trying to rev up the troops for housing reform. After a bit of modest local success, they decided to go national.

It wasn't long before West Side Coalition interns headed out to O'Hare International Airport, the one [place where they could find phone books for every big city in the country. They would look for listings that sounded like they could be for community organizations, and back at they office they called those groups, asking them to come to a big conference ...

Such was life before Google. That's Alyssa Katz in Our Lot, a history of thre modern mortgage revolution (a splendid book about which I intend to say more once I've finished it).

Update: Well, yes, I should have specified. The date appears to be 1975.

Obama: Says Who?

I have to admit it: I feel more than a little uncomfortable reading (seemingly) kind words about Barack Obama from--ready for it?--Peggy Noonan. Okay, I'm sure she'd be just as uncomfortable to find herself keeping company with me (well he-llo, pretty lady!). But although I still count myself an Obamaphile, I think I still find myself more at home with straightforward critics like Glenn Greenwald or Paul Krugman than I do with the lady who gave us "read my lips" and "a thousand points of light."

It's really not just stuffiness or snobbery. The truth is, I just keep looking for the catch, nervously watching my backside to make sure she doesn't put a knife in it. So needless to say I find myself reassured when I get to the end and find that what she really likes about Barack Obama is how much he reminds her of--ready for it?--Ronald Reagan:

I end with a story told to me by an old Reagan hand who, with another former Reagan administration official, was being given a private tour of the White House by Michelle Obama. This was last summer. Mrs. Obama led the two through the halls, and then they stopped by the Lincoln bedroom. They stood in the doorway, and then took a step inside, but went no deeper. Everything looked the same, but something was different. "We don't allow guests to stay in this room anymore," Mrs. Obama explained. She spoke of it as a place of reverence. They keep it apart, it's not for overnights.

Unspoken, but clearly understood by the Reagan hands, was: This is where he signed the Emancipation Proclamation. A true copy of it is here, on the desk. He signed it: "Abraham Lincoln." The Reagan hands were impressed and moved. It is fitting and right that the Lincoln bedroom be held apart. It always should have been. Good, they thought. Good.

Read that quickly and you'd think that it was Reagan who signed the Emancipation Proclamation. Obama in the same breath as the guy who presided over the Nicaraguan death squads. Oh dear, maybe Greenwald is onto something after all.

Hallelujah

To show that I have outgrown Jorgy Jorgenson, try this:

Traders v. Bankers

Naifs wh are still trying to get their mind round the idea of bank as a place where people frantically buy and sell stuff might do well to see if they can scare up a copy of Ken Auletta's Greed and Glory on Wall Street: The Fall of the House of Lehman (1986) in which he chronicles the titanic face-off between Pete Peterson --the "banker"--and Lew Glucksman--the "trader". Glucksman is the loud-mouthed dirt-under-the-fingernails fat boy who succeeds in facing down the urbane and polished Peterson because (a) he was tougher and meaner and scrappier than Peterson and (b) his trading operation made so damn much money.

The comparison isn't perfect. For all his apparent polish, Peterson's background was every bit as modest as Glucksman's--Peterson's father (born Petropolous) had been a dishwasher in the caboose of a freight train. As Auletta stresses, he wasn't a lot of things--wasn't an aristo, wasn't an old-line German Jew, wasn't married got a Mellon, wasn't a polo player. Heck, he wasn't even an investment banker, but he had made himself a bit of money, and had very much learned to hobnob with the high and mighty.

Glucksman (who died in 2006) fit more closely to type. But while Peterson made it his life work to annex himself to the establishment, Glucksman (in Auletta's apt metaphor) "had spent a lifetime accumulating resentments." Everything about the two men--personal style, the structure of their businesses, the indices of personal achievement--were bound to set them against one another.

Plenty has happened to Wall Street banking since 1986 and I suppose the telegraph message is "the traders won." But in winning, they didn't so much demolish as assimiltee their opposites: an investment banker might well say "we are all traders now," and he'd have the likes of Lew Glucksman to thank for it.

[Editor's note: Buce, this is too facile. In fact, the tension between "banking" and trading has been there since the dawn of time. Recall that the original Lehman brothers cut their teeth as traders--specifically in the cotton market. They became a "house of issue"--love that old Wall Street phrase--only after a generation of scratch and claw. Other Wall Street houses, too, show this same uneasy tension between trading and "issueing." Go back to the drawing board and try to find the larger theme.--Right, chief, I'm on it, but for the moment let's go with what I have.]

A Childhood Christmas Memory

The year I was 12, I picked up a touch of pneumonia. I was treated with the then-still -new sulfa drugs, and so it was no big deal. But I did have to stay in bed for about 10 days which made me cranky beyond belief. My mother was not impressed: her own father had died of the same disease in the pre-sulfa era, when she was 8, and she thought I ought damn well to count myself lucky.

But they did let me have some records to console me. Here was my favorite:

Why they didn't just crush a pillow over my head, I cannot imagine.
==
Followup: Wiki has an enlightening short history of sulfa drugs. Here's a remarkable account--nearly contemporaneous with my own experience--on the use of sulfa drugs on the farm. And here is a biography of the culprit.

Update: Google just informed me that this page is in Slovenian.

The Word for the Day Is...

Romzomcom

Better Book than I Expected...

I took a quick spin yesterday through Gregory Zuckerman's The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History yesterday. I figured it for a reporter's quickie and I assumed it didn't deserve much time (then why did you read it at all?--ed. Ah, there you have me!).

But--surprise! It is a reporter's quickie, but it has at least one special virtue that I hadn't anticipated. That is: for a yokel like me, it probably gave me a better insight into the hedge fund craziness than a lot of more ambitious projects. I mean--here we have one somewhat bewildered and more or less invisible guy (okay, so he was first in his class, so were a lot of people)--somebody on nobody's radar--who had the good luck or good fortune to trust his gut and in one day made $1.25 billion.

I suppose you might say it was a bit more than that. Fortune favors the prepared mind. He did have some good research support (specifically, a researcher also willing to trust his gut). But what kind of poise must it take to go back to your backers every day and say "trust me," and then double down, and double down? Nothing about this was inevitable. Yes, "people knew" that the bubble was going to burst someday. But a lot of people didn't get it at all. And even among those who did--hey the landscape is littered with the parched bones of shorts who went insolvent while the market was still stupid.

I won't go so far as to say that Paulson "deserved" the c.$4 billion that he carted home during that one momentous year--that's a proposition too ambitious for me--but I guess I mind him getting it less than I would mind a lot of other things. You might go so far as to say he came by it honestly. So, not a great book, but a pretty good one, well worth a few hours' time. If you want the executive summary, go here.

Now That is First Class...

My morning's NYTimes has more on the airline' continuing "monetize-the-bathrooms" campaign--i.e., the unending search to squeeze every last quarter out of the thwarted and buffeted airline customer. The topic of the morning is the super-frequent-flyer status:

Members at these levels, in addition to getting bragging rights, might be offered free access to airport clubs and automatic check-in, might get fees for extra bags waived, and might be allowed to go to the front of any line — and sit in the front of the cabin — even when other travelers paid more for their tickets.

Italics added. There is an important difference here. I really don't care a great deal if a 30,000-a-year flyer gets his baggage fees waived--I concede he's probably earned it, and anyway it is more or less invisible to me.

But if he gets to go to the front of the line--ah, now we are talking anger and frustration, if not resentment and rage. It's visible, and it catches me just when I am most sensitive--when I am standing still and wondering why the hell nothing is happening in front of me. If some guy I never saw before pops to the head of the queue, I am very likely to pop my cork.

But is not that the very point? What better way to induce the gratitude and loyalty of their most faithful customers than to give them a chance to demean and humiliate some little people? Mskes me remember Jonathan Winters on the meaning of first-class. In first class, he said, they ought to ring a little bell and you could go back and do anything you want to the folks in coach. Now that, my friends, is first class.

Caution: Codger Ranting

Do these posts have anything to do with each other? Yes, I think they do. First, DG Myers on an encounter with a student who got a B in Myer's Philip Roth seminar:

“I did not get any indication through out the semester that my performance in class was less than adiquit,” he wrote. (Since when is a B “less than adiquit”?) True enough, he had followed me into my office one day after class to complain that he disliked the class, disliked Roth, disliked me personally. He had intended to sign up for a different seminar, he said, and regretted his mistake. He disapproved of my teaching style: I firmly directed the conversation rather than letting the students lead the way; I took class time to enunciate my own views and did not scruple to correct a student’s approximations and blunders.

For the rest of the semester he publicly acted out his dislike. He repeatedly yawned in class, loudly and dramatically, dropping his head to the seminar table with a thud, as if to say, “This is sooo boring.” He dismissed Roth’s ideas, after a careful exposition of them on my part, as “stupid.” He would not explain further, when pressed. He laughed aloud when I momentarily lost the thread of the discussion.

Most importantly, he seemed to think that his role as a student was, on slim literary qualifications, to agitate for the opinion that Philip Roth is not a great writer, with little or nothing worth saying. Even if he had had the critical talents commensurate to it, the undertaking would have been beside the question.

[The reader is strongly encouraged to go to Myers' site and read the rest of his detailed account, together with an extensive account of his teaching approach. He concludes:]

In short, [the student] rejected the premise, not only of Roth’s nine Zuckerman novels, but of narrative fiction as such. If he had enrolled in a history seminar with a similar attitude (“I don’t take no stock in dead people,” he might have grumbled), or if he had told his chemistry professor that he disapproved of classifying substances and developing techniques for their transformation into other substances, how would he have fared? Would a B have even been a generous grade?

And now, Felix Salmon (tracking Harper's, on the folks who come to Omaha for the shareholder meeting at Berkshire Hathaway:

Among the pilgrims are RJ Meurer Jr, a senior vice president at Morgan Stanley who storms into Buffett’s barber with his entourage, telling the Brazilian man getting a shave that “You got to get out. We got this barbershop booked.” Or there’s Matt Kelley, a Chicago public-school teacher, who failed at trading in and out of a single Berkshire B share at the same time as conspiring to lose $200,000 of his $150,000 net worth trading on margin; he eventually maxed out his credit card to continue to make leveraged bets.

But Schwartz saves the worst for last, when he finds Talia Eisenberg, along with her father’s girlfriend, getting thrown out of an Omaha bar for being drunk. Talia is the daughter of Robert Eisenberg, who himself is the son of an early investor in Berkshire. With her unearned riches she has opened an art gallery on the Lower East Side; she also receives glowing press from NYC society blogs, complete with comments extolling “her generous heart”.

She’s not going to be happy about this:

“Do you even know who we are?” Talia asked. She thrust her hand into her purse. Out came a grip of shareholder credentials.

“I don’t care,” said the manager. “You’re getting out of this restaurant. Now.”

The women strutted out to a black Mercedes-Benz. As Talia drove, she enumerated a few of her present frustrations. She hated the tacky nowhereness of Omaha. She hated the gawking shareholders who think they own it for a weekend. Most of all, she hated Gorat’s for unjustly ejecting her from the premises. “They thought I was a whore because I’m good-looking and rich!” she exclaimed. “What can I do?”

“They never see the likes of us around Omaha,” replied Tanya.

“We have more shares than all those fuckers,” Talia said…

“Where were you at the cocktail events?” Talia asked me. “We were there with all the ballers. The real deal. You didn’t go to Borsheim’s, did you? That’s where all the suckers go, with one baby B share. The big parties are up at the houses.”

This is what happens to the millions of dollars that Buffett earns for his earliest and most loyal investors: they end up fueling the very snobbery and condescension that Buffett himself could never abide.

Talia’s young, and she was drunk (and she was driving drunk, to boot), but maybe it’s only the young and drunk shareholders who will ever come out and say — to a journalist, no less — what most of the people “up at the houses” are thinking.

I suppose the general message here is obvious enough: the world is going to hell, these young whipper snappers, they don't know what life is all about, there were giants in my day. You can find a more measured response from me in the comments to Myers.

Semi-Appreciation: This Time Is Different

No queestion but that Carmen Reinhart and Kenneth Rogoff have done themselves proud and made themselves the envy of finance scholars everywhere, putting together what must be the world's most extensive data set on financial crises. So no wonder they are getting rave reviews for their new book, This Time Is Different. Hard to imagine project better positioned to catch the attention of people who read about finance.

And yet I wonder if this is perhaps a book more purchased than read, more read than understood, more tslked about than really assimilated.

Or rather, two books. In the first 192 pages, we have a formidable tour d'horizon of the "Eight Centuries of Financial Folly," as promised by the cover, together with at least an attempt at analysis and summary. It bespeaks a massive amount of original research, together with an energetic effort to understand and assimilate the work of others, and we shouldn't be too distracted by the fact that it's more like six-and-a-half centuries than eight, more like two or three than six-and-a-half. It's an absorbing read, full of tables you can lose yourself in and cool graphs that I suspect are showing up on classroom projectors all over the world. There is also no end of provoking factoids: what is the only modern country to grow itself out of a debt crisis? (Swaziland); what country lost its sovereignty to debt just 80-odd years ago (Newfoundland--you'd forgotten?).

There are also some more interesting general takeaway points; eg: debt/GNP ratios are not the only, nor even the most important, source of sovereign default; "mature" countries may outgrow sovereign default but nobody outgrows banking/financial crises; and banking/financial crises seem to affect "developing" and "developed" countries with virtually equal frequency and severity.

There is also a good deal of meta-discussion of, e.g., how their work differs from others, and what sort of additional information they wish they had (the answer to that one: plenty). Indeed, this topic of "extra information" is one on which I might presume to venture a substantive criticism. They mention in passing that their understanding of inflation is hampered, inter alia, because they can't tell when and to what extent inflation was anticipated. Indeed; and this might be a more general point than they realize. To understand any kind of default, we really need to know whether and to what extent the lender anticipates the possibility that he will lose the value of his loan. If he does so anticipate, it may be that we shouldn't count a particular instance of nonpayment as a "loss" at all--but rather the playing-out of a budgeted contingency.

But let that be. The "second" book within these covers (94 pages) is an account of the current uproar--as R&R brand it, "the U.S. supbrime meltdown and the second great contraction." Material from this part of the book began to surface in the blogs about a year ago if my memory is right, and it got a lot of attention for its stark (and well-documented) message: based on what we (R&R) know, the "great contraction" will last a lot longer and cost a lot more than we have led ourselves to believe.

It's a sobering message and so far, events seem to be playing out pretty much as they predicted they might: the mess is costing a lot, and it looks like it will last long.

You can't argue with them for being right on this one, and you can't fault them for the special quality of rightness that comes through the swinging doors with its pistols loaded. Yet it is the very drama and focus of this "second book" that leads me to a suspicion--namely, that this is a rush operation, hurried out at the behest of their publisher to take advantage of current events. This would explain (a) the somewhat unpolished and incomplete character in the "first" book; and (b) the fatal timeliness of the second, which translates into the sad certainty that it is bound to be out of date in a matter of months or weeks.

I said two books. Actually, there is a third: nearly 100 pages of appendices amplifying just about every topic they have touched on earlier. This is bound to be a treasure trove of grest material, but its very presence adds to the suspicion that there is something undigested about the whole project.

Taking all in all, it is still a good book, based on what has to be recognized as a monument of good scholarship. But you salute the importance of the scholarship while recognizing that it's not as good a book as it might be.

The Top Ten Are...

Louisiana, Hawaii, Florida, Tennessee, Arizona, Mississippi, Montana, South Carolina, Alabama and Maine.

Top ten what? Look here.

I've Checked...

...and there is really nothing on this list that I want. Better check for vital signs.

On the Anti-Terror Frenzy

Wired has a great piece up about dumb ideas, Rube Goldberg devices, outright cons and such like in the anti-terror apparatus mania. It's taking my mind back to the golden age of the Soviet A-Bomb obsession, when schoolkids all learned how to hide under their desks, as if to prevent from--what, exactly?

And in particular, the fallout shelter. Your own backyard bunker, best when stocked with lots of dry candy bars and bottled water (and a shotgun to fend off the neighbors) to protect you against the little squigglies in nuclear dust.

My mother, by then a grand mother, would lament about going to live in a hole in the ground "where you would just linger a little longer." In time, she turned it into a marketing scheme "Grandma's Linger-Longer."

I wonder if there still are fallout shelters; probably so, now doubling as tool sheds. Here's how it went:

Medical Tourism

For all those horror stories of Canadians fleeing to the US for medical care, Joel serves up the horrific/happy tale of from John Freeman from Reno:

[Freeman]needed a coronary bypass. He had dropped his catastrophic insurance coverage because the $320 monthly premium was eroding his retirement savings and the $5,000 deductible left him with big bills.

Facing a $100,000-plus operation, he thought he had two choices: "submit or die."

A friend pointed him to a third: World Med Assist of Concord, which lined him up with a heart surgeon in Turkey. The all-inclusive cost: $18,000. He had the surgery last spring and "unreservedly" recommends the care.

U.S. doctors refused to give him a price. "They would almost be proud of it," Freeman said. "They would say, 'That's not my department, I do operations. I don't have any idea how much anything costs.' Even the nurse would get mad at me and say, 'You want me to connect you with the billing department?' "

But for Freeman, cost mattered. "For people who can't pay, somehow the government won't let them die. But if you're like me in that awkward middle, where you have a little money saved, they'll take it all."

There's more where that came from, including this schedule of estimated comparative costs:

Heart bypass: $8,500 in India; in the U.S., $144,000

Liver transplant: $75,000 in Latin America; in the U.S., up to $315,000

Dental implant: $1,000 in Costa Rica; in the U.S., $2,000-$10,000

Face-lift: $4,000 in Singapore; in the U.S., $15,000

Knee replacement: $10,650 in Mexico; in the U.S., $50,000

Not a Moment Too Soon...

Winter Solstice, 0947 PST.

Thanks, Scott (and assorted pagan deities).

Sandel with a Hole in the Middle

Still trying to master the kind of stuff a first-year law student might want to know (cf. link), I nosed into a Kindle copy of Michael Sandel's Morality. It's billed generally as an introduction to major doctrines and issues; I assume it is a rework of his first-semester teaching notes. On these terms, it is every bit as good as so many other reviewers have said it is, but I want to note an aspect which, so far as I know, others haven't showcases yet. That is: it is also an elegantly crafted piece of advocacy. But it's advocacy with a hole in the middle--a gap big enough to drive an a priori through, and enough seriously to impair the cogency of its own central point.

It's not that Sandel has ever been particularly coy about his views on competing approaches tohis topic. From the beginning of his career, he's made himself perhaps the most persuasive public advocate of a perspective of ethics that you could well (even if he does not) "communitarian." At Harvard, he has long occupied the chair of the guy is who is not John Rawls and not Robert Nozick. A bit like being the most important Beatle after John and Paul.

In this new offering, Sandel operates with deceptive ease, but at the top of his form. He begins with a couple of chapters of standard classroom hypos, as if to beguile his students into believing his topic is interesting. He then moves on to an account of classic utilitarianism which skewers the doctrine so suavely and thoroughly that you have cudgel your mind to remember why it counts as a doctrine at all.

He then moves on to libertarianism (that's Nozick, whom he treats respectfully) and then exposition of Kant. Taken at face value, this presentation of Kant may well be the centerpiece of the book. It's really about the best non-technical exposition of Kant's ethics I ever read (indeed, the next logical step along the same line might be Rawls' own undertaking in his Lectures on the History of Moral Philosophy 143-234 (2000)). But Sandel's cape work is exemplified through so many elegant flourishes, you may not notice how many banderillas he seems to have planted along the way.

After Kant there's a bit on Rawls which is respectable enough in itself, although I have never been able to shake the conviction that Rawls was put on earth to reassure Harvard students that they deserve their life of ease and privilege. Sandel moves thence to a discussion of "virtue ethics" by which he suggests that he means Aristostle, but don't kid yourself. Sandel understands perfectly well that Aristotle dates on us after 2300+ years, but he is a grand legitimatizer for the capstone of the analysis---the communitarian program.

In crude oversimplification, it goes something like this: this Kant fellow (with his sidekick, Rawls) is all well and good, but he operates on a model of humanity which is way too abstract, and ends up leading him to untenable positions. "I" am not an abstraction. "I" am a whole tangle of relationships, past and present, which together determine what I am: my mother's daughter, the apple of my father's eye, the Man who Knew Coolidge, the Man who Broke the Bank at Monte Carlo, whatever. My job in life is to try to retell these stories--to reweave the fabric, as it were into something coherent that I might call "integrity." My view of morals/ethics, by corollary, cannot be reduced to a formula. My views on these issues most be a product of my very human situatioin (Sandel doesn't cite Hegel here, but I think he is describing sittlikheit.

This is all wonderfully well done (albeit he draws heavily on Alisdair MacIntyre; if you want an expanded version of Sandel, you would go to M's After Virtue, or maybe all the way back to his Short History of Ethics). Indeed, I am profoundly in sympathl;y with this view and if I wanted to sell anybody on it, Sandel might well be the place where I would start.

The trouble is that, unless I was dozing, Sandel offers not a hint of advice on how we address the greatest difficulty of "virtue" ("communitarian") ethics--the question of how, after all, we define the good life. He's entirely right to say that Kant's dispassionate "reason" is weirdly inhuman when it says I should treat my own child an a Solami orphan as having equal claims on my responsibility and care. He's right to say that Robert E. Lee did something attractive when he puzzled his personal conflict between loyalty to the union and loyalty to the state. But he's equally right to recall the deal-killing endpoint with regard to Lee: slavery is wrong, and it took us four years and uncounted bloodshed to make the point.

Sandel is forgetting (or more likely, just ignoring) the central reason why "liberal" or "privatized" ethics came into being in the first place. Go back to the 17th Century and the end of the Thirty Years' War. Europe had gone through one of the bloodiest and most unsaatisfactory spasms in its long and bloody history. No wonder that any number of thinkers (start with John Locke, but there are others) wanted to stand up and say "okay, everybody just shut up, simmer down, and go home. I will keep out of your hair if you will keep out of mine."

That root difficulty--the difficulty getting consensus on the definition of the good life--is what has individualist liberalism so enduringly popular (Kant is only its most elegant exponent). Sandel is right that it ends with incoherence--was there every a philosophical doctrine that did not end with incoherence? But it may be that this incoherence protects us all against an even greater sacrifice. I'd love to see Sandel deal candidly with this topic. Might be a good subject for his next book.

Footnote: I see that the "most helpful critical review" of Macintyre's Short History of Ethics gets an Amazon customer vote of 0 for 2. Huh? But then the others get 0 for 7, 0 fo 11 and 0 for 13 (FWIW, it appears that all four negative may have been "written" by the same person).

Obsolete?

Silicon Valley Insider has a clever list of 21 things that became obsolete in the last decade, including a sometimes-interesting discussion of which of these are really obsolete (Is the land line gone? Chez Buce still has a land line, but why?)

One item I didn't notice on the list: the flash drive. I bought two the day before I discovered My Dropbox. Oh, and later Evernote.

And here's a candidate for shortest lifespan: installed dashboard GPS. Mrs. B got one on her new Toyota in 2004; we thought it was cool. Seems like two blinks of an eye and everybody had one on their pocket gadget.

[H/T: Carpe Diem.]

Update: Okay, so I open my Sunday paper this morning and there's a huge ad showcasing the dashboard GPS on the Cadillac Escalade. Does this mean I am behind the curve? Or they?