On Privatizing West Point, etc.

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

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

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

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

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

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

Be Still My Soul

GOK why but it occurred to me this morning that I could collar one of those dozen or so Russian spams and run it through Google translator. Turns out to be an ad for training in telemarketing:

...to acquaint you with the peculiarities of telephone sales and negotiations. Teach the methods and techniques telemarketing. All of this takes place in the unforgettable warm, friendly, while working environment that will allow you to hold most profitably this time, having received the necessary knowledge, skills, positive emotions.

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

Update: My friend Margaret takes it up a notch:

Overpriced?

Carpe Diem showcases a WSJ story on "the largest-ever subscription in the history of global capital markets" (link):

Reliance Power Ltd.'s 117 billion rupee ($2.98 billion) initial public offering has been set at 450 rupees a share, company Chairman Anil Ambani said.

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

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

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

Factoid

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

Link.

Really?

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

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

--Grand Central

Headline: That Might Be Best

Appreciation: Little House on the Prairie

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

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

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

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

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

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

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

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

Country Music Update

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

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

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

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

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

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

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

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

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

Fn.: Revised 20 Jan, 2008.

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

“Have you read Our Mutual Friend?”

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

“No.”

“Oh, you must read Our Mutual Friend!.”

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

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

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

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

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

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

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

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

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

Stuffee Redux?

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

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

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

¡Viva Esteban Colberto!

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

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

*And that Dobbs is the biggest gasbag.

Brad and Daniel's Excellent Adventure

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

In 2007:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Pew's One-Dimensional Ideology Scale

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


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

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

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

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

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

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

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

Fortune Cookie Watch

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

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

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

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

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

In Which I Flog Some Product

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

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

11-101 should not be confused with Bankruptcy in Practice, which Mike Bernstein and I have now shepherded through four editions. It's a narrative account more than a practice handook, designed, as we say, for the young business lawyer who forgot to take a course in bankruptcy in law school. Buy it here. Enjoy, and if they ever make a Chapter 11 movie, we ought to be able to celebrate.

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

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

Michigan GOP Exit Data

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

Wolf and Mankiw on What To Do Now

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Platonov on Fire (and a Back Story)

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

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

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

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

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

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

Author of the review: one Robert Chandler.