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Monday, August 29, 2011

Envy, taxation, and the hissing of the geese

by John MacBeath Watkins

There's a word followers of Ayn Rand throw around a lot: Envy. And of course, Rand is big among libertarians. Guess who Ron Paul named his son after?

Envy is a sin they attribute to anyone who thinks, for example, that inherited wealth should be taxed. The assumption here is that people think taxes should be levied on wealth because wealth should be reduced, and further that the only possible reason they think wealth should be reduced is because they don't have it and are envious.

Psychologists figure that sometimes, a thing and its opposite are identical. The man who worries about the lust of others has trouble with his own lust. The libertarians who worry about the envy of others, do they have trouble with their own envy?

It's possible there are people who want wealth taxed away because of envy. On the other hand, they could advocate the same policy for purely pragmatic reasons: We can tax people who have a lot of money, or people who don't have a lot of money; wwdtd? (That is, what would deep throat do. Follow the money!) It is quite simply a fact that people who have more money can pay more tax.

After all, one of the reasons the Ancien Régime of France fell was that it had one of the worst systems of taxation ever devised by man. The Dutch were condemned for allowing tax farming in their colonies, but the French allowed it in their own country. Most public offices were for sale (including tax collector) and nobles were exempt from most taxes, so peasants, artisans and small businessmen not yet wealthy enough to purchase a better position paid the taxes. Justice was for sale as well, judges demanding payment by both parties to hear a case, so justice was out of reach for peasants.

In a way, it's as if someone tried to build a government on libertarian principles. Want taxes collected? Sell the right to collect them to a contractor, he'll be more efficient! Want cases heard? Get the people who need a judge to pay for one!

A century before the French Revolution,  Jean Baptiste Colbert said that “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing” Unfortunately, the Ancien Régime cared about your hissing only if you were rich.

But in a democratic country, you have to care about the hissing of the voters. The idea is to avoid a recurrence of anything like the storming of the Bastille by having taxes fall most heavily on those who will suffer least by paying them.

This offends Rand-influenced libertarians. What's mine should be mine, they say, because I earned it. Strangely, they also think what's left to me in the will should be mine, even though I didn't earn it. If great differences in wealth are tolerable and even just because those who hold wealth earned it, wouldn't inherited wealth undermine this system?

From Page 387 of Atlas Shrugged:

"Only the man who does not need it, is fit to inherit wealth—the man who would make his own fortune no matter where he started. If an heir is equal to his money, it serves him; if not, it destroys him. But you look on and you cry that money corrupted him. Did it? Or did he corrupt his money? Do not envy a worthless heir; his wealth is not yours and you would have done no better with it. Do not think that it should have been distributed among you; loading the world with fifty parasites instead of one, would not bring back the dead virtue which was the fortune..."
 The assumption Rand's character, Hank Rearden, makes is that those who think inherited wealth should be taxed are not only consumed with envy, had they taxed it the result would be that it would be distributed among "parasites." Yet the taxed money could have been used for a purpose Rand, and her libertarian followers, would find legitimate; protecting the country from invasion and protecting property from theft.

But the notion that envy is the root of any wish to tax inherited wealth is tied in with the libertarian notion of justice, just as much as the Marxist notion that such wealth should be seized entirely is rooted in a different notion of justice.

Where is there room for Colbert's pragmatism? Do only liberals care about the hissing of the geese?

Friday, August 26, 2011

Corporations are people too! Have you not seen them in the pews of your church?

by John MacBeath Watkins

Corporations are people too!

That's why we have battered corporation shelters.

Do you even know the unemployment rate among corporations?

Tragically, suicide hotline volunteers are not trained to talk down a corporation that's been dumped by a lover.

Because of the current recession, more and more corporations are losing their health insurance and skimping on heart medicine.

Paparazzi have been hounding Hollywood corporations, leading 20th Century Fox to punch out several of them.

Anheuser Busch Companies Inc. has switched to white wine, hoping to shed that beer gut.

News Corp., facing criminal charges for hacking phones, claims the people whose phones it hacked really love it and no one can stand between them.

Now that the Wall Street Journal is running photographs, can pictures of once-attractive corporations' cellulite at the beach be far behind?

Corporations are now allowed to contribute money for political purposes, but their rights are still not what they should be. That's why corporate suffrage advocates chained themselves to the White House fence until police dragged them away. Microsoft is refusing to post bail.

(The inspiration for this post. Actually, what Romney says is far less disturbing than the Citizens United ruling.)

Thursday, August 25, 2011

Hey, baby, ain't I good to you?: How about this --- a diamond five times the size of the earth

by John MacBeath Watkins

This Just In: "A team of astronomers dotted across the globe have discovered an unusual planet circling an old, dead star about 4,000 light years away that appears to be a gigantic, solid diamond."
Josh Marshall, over at TPM, perhaps the greatest blog ever, adds this.

Late Update: @mseyfang dubs inhabitants "Blingons."
Okay, I've seen How to Marry a Millionaire. I've seen Diamonds are a Girl's Best Friend. I've heard the phrase, a diamond as big as the Ritz.  But a diamond five times the size of a planet?

Hey, baby, ain't I good to you.

Tuesday, August 23, 2011

She lept as light as laughter

by John MacBeath Watkins

In the forest, in the twilight
I met a young and graceful doe
who paused, and looked, did not take flight
until I doffed my hat and said hello.
She lept as light as laughter
through the brambles by the trail
and I stood there, gazing after
as my light began to fail.

(The public domain art is by Edwin Henry Landseer. Surprisingly hard to get a 19th century picture of a doe, because the artists of that era were obsessed with depicting deer with a nice rack, like Edwin Landseer's Monarch of the Glen.)

Presidential reading list

by John Watkins

This is too cool: A list of the books President Obama has read since 2008.

Yes, I know you it's hard to read. That's why I posted the link. I count seven books about presidents and several about history, but he's got a few novels on the pile. The vacation list is heavier on the novels:

Which has got the National Review in a tizzy, because apparently he's supposed to be reading conservative books (suggestions from Tevi Troy include Liberal Fascism by Jonah Goldberg) on his vacation. 'Cause, you know, President Bush II was all about reading What's the Matter with Kansas and Lies & the Lying Liars Who Tell Them.

Psychopaths score high on test of morals

by John MacBeath Watkins

A study by David Bartels and David Pizarro of Columbia University and Cornell University finds that the commonly used tool for evaluating the morals of the subjects of psychological experiments shows psychopaths to be better at moral judgments than non-psychopaths, putting into question the usefulness of this standard psychiatric tool.

This is a fascinating result, and I suspect it sheds light on how people lacking certain normal human capabilities try to adapt to society.

The tool in question is to pose moral dilemmas to subjects and gauge their response based on the idea that the proper response is a utilitarian one -- the solution that produces the greatest good for the greatest number. From the abstract:

"Participants who indicated greater endorsement of utilitarian solutions had higher scores on measures of Psychopathy, machiavellianism, and life meaninglessness. These results question the widely-used methods by which lay moral judgments are evaluated, as these approaches lead to the counterintuitive conclusion that those individuals who are least prone to moral errors also possess a set of psychological characteristics that many would consider prototypically immoral."

Psychopaths lack the ability to form normal human attachments and lack normal empathy, yet they are able to appear normal. How do they do that?

Well, one way to do that would be to try and logically work out how they are supposed to act. People with normal attachments and normal empathy can make their way in the world based on how their behavior feels. People who lack certain normal feelings can't do that.

There's a tendency to think of psychopaths are sort of evil super villains, and certainly they are  over-represented in our prisons and corporate board rooms. But the inability to form normal attachments and feel empathy will, of course, lead one to score high on "life meaninglessness," as Bartels and Pizarro have noted.

Far from being a super power, psychopathy is a mental disability. People who lack empathy and are not able to appear normal are generally thought to belong somewhere on the autistic spectrum of mental disabilities. Being manipulative -- Bartels and Pizarro use the term "Machiavellianism" to describe it -- is how they appear normal. Pretending to have normal feelings that they don't possess may strike the rest of us as dishonest, and this pretense can't be relied upon, because they might drop the pretense when they decide they no longer need it, but the pretense is their survival strategy.

There are other aspects of disability to being a psychopath (there's a pretty good paper on it here that you don't have to pay to see.) There is a temporal element, as noted by R.D. Hare in  the 1970s. Psychopaths tend to have short time horizons, and an immediate reward means more to them than a distant punishment. Distant rewards are also less attractive to them, so the rewards of actually progressing in therapy don't really appeal. Here's Hare's checklist for identifying psychopaths:

(a) Glibness / superficial charm
(b) Grandiose sense of self-worth
(c) Need for stimulation / proneness to boredom
(d) Pathological lying
(e) Cunning / manipulative
(f) Lack of remorse or guilt
(g) Shallow affect
(h) Callous / lack of empathy
(i) Parasitic lifestyle
(j) Poor behavioral controls
(k) Promiscuous sexual behavior
(l) Early behavioral problems
(m) Lack of realistic, long-term goals
(n) Impulsivity
(o) Irresponsibility
(p) Failure to accept responsibility for own actions
(q) Many short-term marital relationships
(r) Juvenile delinquency
(s) Revocation of conditional release (parole violations)
(t) Criminal versatility

In short, as Bartels and Pizarro have pointed out, not what most of us regard as moral. In fact, much more like one of Jim Thompson's protagonists (after reading This World, then the Fireworks, you might want to take a bath. Unless you're a psychopath, that is.)

There have been attempts to treat psychopathy. Whoever tried group therapy was clearly not thinking, because what psychopaths take away from group is a deeper knowledge of the weaknesses of others in the group. And given the list above, clinical staff can't be blamed for disliking this lot. The high scores they get on psychology's usual measure of morals is an example of how they frustrate psychologists, by coldly analyzing the test and coming up with the "right" answer more often than those who consult their moral compass. They will also lie about their therapeutic progress and manipulate the clinical staff and other patients.

But if they are good at figuring out utilitarian puzzles, won't they learn from prison that they must apply the calculus to their own actions? Not necessarily. The short time horizons of the psychopath don't mesh well with justice that grinds slow, but grinds exceedingly fine.

Saturday, August 20, 2011

Top 100 Sci-Fi/Fantasy books list

by John MacBeath Watkins

National Public Radio has published its list of the top 100 fantasy/sci fi books. Here you go:

I was happy to see my favorite Terry Pratchett novel, Small Gods, on the list as #57, but find it odd that the only other Pratchett on the list is Going Postal. Pratchett fans generally agree that Mort is the best of his books.

And The Silmarillion made the list and The Hobbit didn't? Is this a universe we really want to live in? What about The Demolished Man, doesn't Alfred Bester get a look in?

The Xanth novels? Really? I read one and was not tempted to read the rest. Did Xanth really beat out Narnia? Why, because there are more of them? And Terry Brooks' Sword of Shinola Shannara series is certainly popular, but is it for the ages?. Well, maybe, if Xanth makes the list.

I'm always happy to see some genre-hopping. A number of books, such as the Outlander series by Gabaldon and 1984 and Animal Farm don't get shelved in with the Sci-Fi/Fantasy section, but made the list. Still, is Animal Farm really science fiction?

But mostly, the list is pretty good, and I'm sure it will guide people to more great books. I think Lord of the Rings deserves the top spot. It's the only fantasy book from the 20th century that I'm pretty sure will be read a century from now. It also spawned so many imitators that fantasy now sells more books than science fiction. Like The Time Machine, it opened up a new literary form. That to you, Kevin Drum. Patrick Callahan's post about this list on The League of Ordinary Gentlemen is excellent, by the way.

Tuesday, August 16, 2011

Dr. Doom to the Dark Tower Came

by John MacBeath Watkins

Viktor Mikhailovich Vasnetsov, The Knight at the Crossroads, 1882.

Here's one for those of you not yet depressed, from the International Business Times:

"Economist Nouriel "Dr. Doom" Roubini, the New York University professor who four years ago accurately predicted the global financial crisis, said one of economist Karl Marx's critiques of capitalism is playing itself out in the current global financial crisis.

"Marx, among other theories, argued that capitalism had an internal contradiction that would cyclically lead to crises, and that, at minimum, would place pressure on the economic system.

"Companies, Roubini said, are motivated to minimize costs, to save and stockpile cash, but this leads to less money in the hands of employees, which means they have less money to spend and flow back to companies.

"Now, in current financial crisis, consumers, in addition to having less money to spend due to the above, are also motivated to minimize costs, to save and stockpile cash, magnifying the effect of less money flowing back to companies.

"'Karl Marx had it right,' Roubini said in an interview with 'At some point capitalism can self-destroy itself. That's because you can not keep on shifting income from labor to capital without having an excess capacity and a lack of aggregate demand. We thought that markets work. They are not working. What's individually a self-destructive process.'"
Those of you who managed not to sleep through Econ 101 will recall what Roubini is talking about as the paradox of thrift. In a balance-sheet recession, everyone needs to deleverage, so everyone saves more and spends less -- but in the economy as a whole, savings have to equal spending, so the fall in spending causes savings to fall because nobody's making any money to put in their savings account, and they are spending only what they're forced to spend -- which, after they loose their jobs because of the fall in spending, means they end up with less savings.

It's a well-understood phenomenon which we saw in the Long Depression, the Great Depression, and the current Long Recession. One of the results of such a fall in economic activity is that people see all they've worked for evaporate, see no opportunities for themselves, and get fed bleedin' well up.

This produces social unrest. In the Long Depression and the Great Depression, it also was exacerbated by monetary contraction, which produced deflation. Deflation transfers wealth from debtors to creditors, because the principle they owe becomes worth more while their wages decline (see Spain, right now, where the situation is made worse by the fact that after the bank forecloses and takes your house there, you still owe the bank loan on the house.) And the Long Depression, though it officially ended after six years, was followed by a weak economy that kept falling into short periods of negative growth until World War I.

In the three instances under discussion, inequity was already growing in part because of globalization and technological change that, while producing growth, increased the leverage capital had over labor. I find it interesting and informative that in the late 19th century, as  in the current day, we had people trying to explain to us that the inequity in economic outcomes was not injustice, then with social Darwinism, now with something like Objectivism. I consider both of these examples of the "just world" fallacy. As I've noted before, Robert Browning poetically explored this fallacy in Childe Roland to the Dark Tower Came, when the hero spoke of seeing a blind, gaunt horse:

Seldom went such grotesqueness with such woe;
I never saw a brute I hated so;
He must be wicked to deserve such pain.

Such justifications might make you feel better if you're doing pretty well, but if you are one of those who "must be wicked to deserve such pain," they are unlikely to be convincing.

So you get rebellions against the established order. Anarchists shoot archdukes, Italian Marxists become Fascists and take power, a would-be artist aims his fury at Jews and comes to power in a German state where democracy stands paralyzed by factional enmity. We can hope not to see this again, but Roubini connects the unrest in the Arab world and the riots in Britain to the frustrations produced by poor economies.

This is why it's such a shame we've managed to forget the lessons learned from the Depression. People become restive under a regime that can't produce results, and look to others who promise results. Radicals on both left and right are empowered, and gain adherents. Britain's riots will end, but the unrest inside the rioters will remain, and unless some means can be found to make the economy work better, we can expect political movements to take root in this soil.

Most of those who promise solutions won't have them, but will be opportunists exploiting the unrest. President Roosevelt was unusual in that he did have some people around him with really good ideas. John Maynard Keynes, by the way, wasn't one of them. Roosevelt met him, but didn't take his advice until the coming war forced him to. He did, however, do something quite important in the area of money: Executive Order 6102.

It didn't actually take us off the gold standard, but it radically devalued the dollar against gold. It also made it illegal to hoard gold. France stuck with the gold standard long after most other industrialized countries had given up on it, and we can see the results here:

The result for France was disastrous, as we discussed in this post. While France continued to experience deflation, those countries that abandoned gold or devalued radically against it recovered in the order in which they did so. The burst of inflation produced by devaluing against gold helped the economy recover, and moves to support farm prices and labor unions helped eliminate deflation as well.

The modern narrative on the right, however, is that Roosevelt prolonged the depression by acting as he did. Apparently he should have followed the policies France followed. See chart above.

Of course, Executive Order 6102 was high-handed. It required people to turn in their gold at a price of $20.67 per once, and then set a new price at which dollars could be redeemed by foreign governments of $35 an ounce. That's a 70 percent inflation in the price of gold overnight. Roosevelt considered "price chiselers" to be part of the problem he was dealing with.

Now, Kenneth Rogoff is suggesting that what we need to put an end to what he calls the Second Great Contraction is inflation:

"In my December 2008 column, I argued that the only practical way to shorten the coming period of painful deleveraging and slow growth would be a sustained burst of moderate inflation, say, 4-6% for several years. Of course, inflation is an unfair and arbitrary transfer of income from savers to debtors. But, at the end of the day, such a transfer is the most direct approach to faster recovery. Eventually, it will take place one way or another, anyway, as Europe is painfully learning."

Of course, the non-arbitrary solution is to transfer wealth from savers to debtors by requiring that savers take a haircut on loans that cannot be repaid in full. I'm not convinced that such a process would be less arbitrary than inflation.

The problem is, how do we produce the inflation that might help us? I've been debating conservatives for three years now who kept telling me that the policies of the Fed, and the stimulus bill signed by President Obama, would lead to out-of-control inflation. It hasn't happened. A barrel of oil is worth less now in nominal dollars than it was when Obama took office. Commodities go up, they go down, but on balance, we don't have much inflation. Wage inflation would help households deleverage, but we won't see that until the unemployment rate drops. In the meantime, we have dissenters at the Fed who still think the real enemy is inflation, and the European Central Bank seems intent on fighting non-existent inflation.

Where is the Executive Order 6102 for Obama to sign? What tools, indeed, have we to end this crisis?

But Dr. Doom is right, we need to find a solution before people start shooting archdukes.

Saturday, August 13, 2011

Politics and saloons: America Walks into a Bar, plus how we became fat, sober and sartorially splendid

by John MacBeath Watkins

Since I've broached the topic of alcohol and education, perhaps I should mention, there are some pretty good books on the subject.

There's an interview up on with Christine Sismondo, who's written a book with the engaging title, America Walks into a Bar, in which she argues for the importance of the local dive as a place where conversations get started and politics is often the topic. "The American Revolution, Whisky Rebellion and Stonewall riots all came out of bars. Plus, I’ve worked in a neighborhood bar, so its function as a community center became clear to me," she says.

Which is exactly why I don't understand why so many bars have music so loud you can't have a conversation. Maybe it's the Anit-Saloon League finally getting their way. Because they were not about eliminating alcohol, they were about eliminating certain kinds of gathering places. From the Smithsonian interview:

What’s an event that could only have happened in a bar?
New York’s Stonewall riots in 1969. They didn’t come out of nowhere as people often think. Since bars were the only places where gay people could congregate, everyone got to know each other. During the McCarthy era the police regularly shut the bars down, denying gays of their fundamental right to associate. When they’d had enough and it came time to organize, the networks were already in place through the bars.

Well, yeah, I guess a local dive could be a social networking site.

There was a racial element as well. Clarence Darrow noted that "not every Anti-Saloon Leaguer is a Ku Klux Klanner, but every Ku Klux Klanner is an Anti-Saloon Leaguer."

And of course, working men only had Sunday off, and immigrant workers had only one gathering place available to them -- saloons. So, if you were an industrialist who didn't want his employees organizing, or a political incumbent who wanted to keep your lot in power and stifle any nascent immigrant political machine in its crib, the logical thing was to close saloons on Sunday.

When I was a kid in Maine, we went to a church with records that went back to colonial times. My mother discovered that the biggest item in the church budget back then was rum. It made people convivial, and the water safer to drink, if you mixed rum and water. The temperance movement didn't stand a chance until clean water became available.

An earlier book, The Alcoholic Republic, by W.J. Rorabaugh, points out that for much of our early history, water was not conveniently available or safe to drink. Few people had water piped into their homes, and frontiesmen prefered to build on the hills rather than on fertile bottom land, while the water table was easier to reach on lower ground, so the wells they dug tended to be downhill from the house. Abe Lincoln had to haul buckets of water up the hill as a boy, and in the winter, water often had to be thawed. People who lived on the Mississippi had to let their water settle before they could drink it, and people living downstream form very many neighbors found that whiskey was less lethal than water.

Ben Franklin opined that if God had meant for man to drink water, He would not have given man an elbow capable of raising a wine glass. Of course, he was a rich man; wine cost as much as $1 a gallon, about four times the cost of a gallon of whiskey in Franklin's day. Milk was available to many, but before pasturization, it might be as unhealthful as drinking water; Lincoln's mother died of "milk sickness." Tea was expensive, in part because of tax, and an unpatriotic drink that came from British colonies on British ships (Rorabaugh notes that there was no Boston coffee party.) Cider was the working man's drink if he wasn't tippling distilled spirits. Sometimes it was made stronger by leaving it outside until the surface froze, and pulling off the ice.

Most apples were grown for cider, and most cider was fermented so that it would keep. A family might drink a barrel full of cider a week, starting with a tankard at breakfast. And of course, cider was one of the targets of Temperance, and with prohibition, the orchards had to switch to eating apples. But apples had aquired such an unsavory reputation from their association with drink, that the apple industry had to start an ad campaign telling people apples were not unhealthy. The sales motto, "an apple a day keeps the doctor away," became so pervasive most people don't even connect it with an advertising campaign any more, unless they've read Michael Pollan's The Botany of Desire.

New York didn't have much potable water until 1842, when an aqueduct started bringing clear, cold water from a river 40 miles away. Temperance zealots became advocates of public drinking fountains, and the substitution of water for alcohol.

Economics payed a major role. In 1825, a day's wages would buy you two gallons of whiskey or 8 lb. of sugar or 5% of the cost of a year's clothing. By 1970, a day's wages would buy a gallon of whiskey, 42 lb. of sugar, or 25% of the cost of a year's clothing. Predictably, modern people are, compared to our ancestors, on average fat, sober, and sartorially splendid.

Thursday, August 11, 2011

All this education, and I'm still not a drunk

by John MacBeath Watkins

According to the Bureau of Labor Statistics, I'm clearly not spending my share on alcohol:

Of course, they are talking dollar value, not actual alcohol consumed. It may be that the more education you have, the more likely you are to be a wine snob.

Can't be communion wine, that's free, although it is a fact that people with more education are more likely to attend church. Could be the kind of education they get, because fundamentalists tend to place more restrictions on the education of their children -- homeschooling them so that they will not be exposed to certain ideas taught in school, avoiding sending them to secular colleges. Probably not letting them choose a party school, too.

It does seem likely it's related to income, which also correlates with education, which also correlates with drinking craft beer instead of animal beer.

Love and Mammon: The search for something by which human values can be judged

 by John MacBeath Watkins

From the Vashon Loop, an article on the non-monetary part of the economy:

Which brings me to a point I've made before: The math tends to obscure it, but economics is the study of values. That's why it was invented by a moral philosopher, Adam Smith.

The market is only one form of the expression of values, and it's such an abstract one that most people don't really understand what money is. They reify it, that is, try to take it from the abstract to the real and regard it as something more solid than it is. People who yearn for the gold standard want money to be something that exists outside human values, something by which human values can be judged.

Here's my take on the reification of monetary value:

Those who reify money want it to be a sort of value that exists independent of human consciousness, a part of nature to which mankind must accommodate  itself. In essence, they want Mammon.

Biblical scholars among you will recall that the Bible uses the word mammon, which in latin means wealth, as if it were personified:

"No one can serve two masters, for either he will hate the one and love the other; or else he will be devoted to one and despise the other. You can not serve both God and Mammon."
—Matthew 6:19-21,24
 In medieval Christianity, Mammon was sometimes personified as one of the seven princes of Hell. An earlier personification of wealth would be the worship of the golden calf, both gold and cattle being expressions of wealth in the ancient Middle East.

In the earlier post I linked to, I characterized money as an expression of value we might think of as "favors owed." If you own a lot of dollars, you're owed a lot of favors. That's an expression of how people value you; in terms of the structure of language, a signifier that communicates the meaning that you are valued.

It's pretty easy to move from the fact that people often use money to express their values to viewing money as value, rather than an expression of value. And because money is useful only for expressing monetary value, the next step after you've mistaken money as the source of value rather than an expression of it, is to regard monetary value as the only true form of value, and the market as the only true arbiter of value.

This is the flaw in the Libertarian project, to consider only the market as a legitimate arbiter of value. It's a handy one, and a great way to distinguish between useful work and work that is not useful, or ugly fashion from delightful fashion, but human society is more complex than just markets, and there are other ways of expressing our values. Voting, for example, is an expression of our values, and certainly a better way of expressing how we value leadership in the political sphere than buying candidates. In fact, we are constantly at war between these two ways of expressing value, and concerned with the contamination of politics with money.

A society that valued banking highly and children not at all would become extinct. Children were an economic asset when my father was born (his father never got a tractor until the boys went off to war, because the boys meant there was enough labor on the farm to plow with horses, and besides, Amos Watkins loved his horses.)

By the time I was born, my parents didn't expect me to be an economic asset. They had children because they wanted children, because it was an expression of their humanity, and I suppose on some level because the continuation of humanity is worthwhile even if it costs you money. My father's chores had helped keep my grandfather's farm solvent; mine were expected to build my character and teach me how to work. The monetary value of washing the dishes, taking out the garbage, and shoveling snow off the walk (remember, this was in Maine) may have been minimal, but it was an expression of family values.

The curious thing is that people have this desire to worship Mammon or the golden calf, and it keeps happening, from the time of Moses to the time of Jude Wanninski. Wanninski compared family relationships to market relationships, but argued that money is a substitute for trust, and with adequate trust, money becomes redundant.

In one sense this is quite insightful, because it shows a deeper understanding of what money is than most people have. In another, it's appalling, because while family values are often expressed with money, most of the time money is not merely redundant, it's irrelevant. Love is simply better expressed with a hug than a cheque, and expressing some things with money would express entirely the wrong kind of value. How much money expresses "you complete me," or "whatever you've done, you can tell me?" Certainly we value our loved ones, and cherish or forgive them in expression of those values. Much if not most of the things we value cannot be expressed with money.

Yet Mammon remains attractive, because humanity is messy, and the abstract form of value that is money seems less so. To have an outside force that judges our value would mean the messy business of dealing with human emotions could be replaced with simple, solid ledgers. Of course, religion saw this as a threat because they wanted God to judge you, and that was the major source of power for his earthly representatives. But Mammon worship doesn't just threaten religion, it also threatens to cheapen the rest of our values. For example, trust is an expression of value, and most of us give it sparingly. Can you express it with a substitute for trust?

Edited to add:

While it's true that money talks, it is not only incoherent in the areas we've discussed, it falsifies values in some areas. The reason we object to the influence of money in politics and justice is that it counterfeits the values that are supposed to be expressed in these forums. It is legitimate to say, I am owed many favors, and my dollars will redeem them in the form of a nice car; that is a recognized commercial value. It is not legitimate to say, I am owed many favors, and my dollars will redeem them in allowing me to kill my rival without punishment; murder may be a commercial venture, but it is not supposed to be a commercial value. And the values expressed in justice may have a monetary component, but they also transcend the values expressed in money.

Wednesday, August 10, 2011

The castrated ram that led us into war: Watchdogs, lapdogs, bellwethers, and the wrong disaster

by John MacBeath Watkins

I've just been writing about a buried lede in a New York Times story, and I think I buried the lede.

Well into the post titled When debt is sovereign and ledes are buried I wrote this, about the Times running a story about the disastrous day on the stock market instead of the remarkable fact that bonds had gone up instead of down following the Standard & Poor downgrade:

This is emblematic of  the press coverage of the entire debt debate -- don't worry about the substance of the matter, print something that perks up the hind brain. I understand the motivation, but it amounts to writing the "dog bites man" story when the evidence points to a much better, "man bites dog" story. But of course, the New York Times is a bellwether, not a watchdog. From Wikipedia: "The term is derived from the Middle English bellewether and refers to the practice of placing a bell around the neck of a castrated ram (a wether) leading his flock of sheep.[1][2] The movements of the flock could be noted by hearing the bell before the flock was in sight."

Aaaah. I've at last found a simile for the "castrated ram" that helped lead us into Iraq. But back to the matter at hand.
Yet to a great extent, the behavior of the American press is the matter at hand. Bloggers constantly complain that the common wisdom seems to be that to be taken seriously, you need to have been wrong about the right things at the right time -- to have believed the Iraq war was justified until we'd been there long enough to be very, very sure that Saddam Hussien didn't have the "weapons of mass destruction" that the Bush administration claimed they did, for example (and that phrase was itself intended to conflate the fears of nuclear weapons with far greater possibility we would find stores of poison gas, so that they could sell the war on the basis that "the smoking gun could be a mushroom cloud" and claim they were right if they found weapons based on World War I technology.)

If you got your views from the New York Times or most of the other high-profile news organizations, you would have believed this. Yet there was good journalism being done. If you read the coverage in the Knight Ridder newspaper chain, you had a pretty good idea how unlikely it was that Hussein had nuclear weapons. My own father was telling me that Hussein was "like Hitler with nuclear weapons," a line that was not original with him. In fact, in the runup to the war I began to feel like I was taking part in a performance of the play Rhinoceros.

Of course, that Hitler simile made George H.W. Bush into a sort of Neville Chamberlain. My reply to my father was the Hussein would have been like Hitler only if Hitler had been kicked out of the Sudatenland, had most of his military hardware destroyed, and had the French and British flying over his territory shooting down any military aircraft that took off, while using his remaining military force to cling to power over a restive population, parts of which were in armed revolt.

But the bellwether press was more interested in cultivating its high-level sources than in challenging their statements. In political science, there is a thing called agency capture, where the people in an agency become too close to the business they are supposed to regulate and fail to do their job. The result is that what is supposed to be a watchdog agency becomes a lapdog agency, often because the regulators know they will make more money if they are nice enough to those they regulate to get hired by them.

The Minerals Management Service is an example of agency capture, its inadequacies so clearly demonstrated by the Deepwater Horizon blowout that it was renamed, the assumption being that it could not regain its credibility simply by getting it to do a better job.

The New York Times showed a similarly disastrous lapse of oversight in its coverage of the weapons of mass destruction story. I don't think this was caused by the same thing as agency capture. Judith Miller wasn't looking for a job with the White House or Defense Department. She was neither corrupt nor incompetent, but fell into a different trap. She wanted access. After all, she still hasn't disclosed the source that provided her with NSA signals intelligence about Al Qaeda, and she was part of a team of writers that won a Pulitzer Prize for reporting on Al Qaeda. She saw access as the key to her success as a journalist.

But the trap she fell into was to think that it was enough to tell people what her sources thought. When she was condemned for her coverage of the weapons of mass destruction controversy, she said (according to Wikipedia) "[M]y job isn't to assess the government's information and be an independent intelligence analyst myself. My job is to tell readers of the New York Times what the government thought about Iraq's arsenal."

Knight Ridder's reporters  took a different view. To quote Knight Ridder Washington Bureau Chief John Walcott, "It's an impulse, when you're told something, not simply to write it down and report it but to ask whether it's true. The whole truth. And that's an impulse that I think rightly covers everything everybody here does."

But this doesn't mean just challenging your sources, who might not like it and might not talk to you as much. It also means being skeptical of the conventional wisdom. It means challenging your readers' preconceptions. It means not being a bellwether. And a bellwether doesn't lead because it's smarter or braver, it leads because it is inclined to go where the flock wants to go.

It takes no courage to lead people where they want to go, and it doesn't require much in the way of brains. Quite a few of our politicians got unimpressive grades in college -- not just Dan Quayle and George W. Bush, but John Kerry and Al Gore as well. Brains aren't essential to getting elected, although they certainly can help with good policy choices. But brains are wasted on a bellwether, because being a bellwether is not about challenging the flock.

The Times was unwilling to do that on the weapons of mass destruction story, and it was unwilling to do that in the story about the consequences of the debt downgrade. People expected a disaster, so it gave them a disaster, even though it was the wrong disaster.

There are high rewards for such behavior. Fox News enjoys high ratings and is trusted by its viewers, even though much of what those viewers think they know is wrong. It has achieved this by telling them what they want to hear. The money is made by Fox. The cost is paid by the nation. Liberals like to think Fox (where Judith Miller now works) is alone in this. Sadly, it is not.

Monday, August 8, 2011

When debt is sovereign and ledes are burried

John MacBeath Watkins

One of the three main rating agencies has dropped the American sovereign debt rating, and the response of the markets has been to sell stocks and pile into American sovereign debt. By most readings, this means the Standard & Poor rating doesn't matter. I think that reading is wrong.

The rating change is a very political move, and the response has everything to do with politics. How do we know the rating change was political? Well, the original documentation S&P gave the White House supporting their downgrade contained a $2 trillion error, as the White House documents here.

 The White House pointed out the error, but S&P went with their original conclusion anyway. That's where things get interesting. As Ezra Klein points out:

"In the original version, they say that $900 billion would mean net public debt drops from an estimated 93 percent of GDP in 2021 to 87 percent of GDP. But in the second version of the report — the one they wrote after they discovered their $2 trillion mistake — they revised their estimate for America’s baseline debt path down to “74% of GDP by the end of 2011 to 79% in 2015 and 85% by 2021.” In other words, S&P’s technical correction improved our deficit outlook by more than letting the high-end tax cuts expire, which S&P had said would raise enough money to stabilize our rating. If the numbers mattered, then by S&P’s own logic, that should have changed their opinion of our finances."

Now, if you are getting the feeling that the folks at S&P are not the sharpest knives in the drawer, you're not alone. An anonymous poster on a blog with the interesting name Economics of Contempt asserts that:

"Look, I know these S&P guys. Not these particular guys — I don’t know John Chambers or David Beers personally. But I know the rating agencies intimately. Back when I was an in-house lawyer for an investment bank, I had extensive interactions with all three rating agencies. We needed to get a lot of deals rated, and I was almost always involved in that process in the deals I worked on. To say that S&P analysts aren’t the sharpest tools in the drawer is a massive understatement.

"Naturally, before meeting with a rating agency, we would plan out our arguments — you want to make sure you’re making your strongest arguments, that everyone is on the same page about the deal’s positive attributes, etc. With S&P, it got to the point where we were constantly saying, “that’s a good point, but is S&P smart enough to understand that argument?” I kid you not, that was a hard-constraint in our game-plan. With Moody’s and Fitch, we at least were able to assume that the analysts on our deals would have a minimum level of financial competence."
 I feel better about all those bonds we've bought based on S&P ratings already. I don't know why they set their hearts on lowering the rating for U.S. sovereign debt, but S&P seems to have made up their minds regardless of the numbers.

But the point is, the market reaction to the rating is bound to be an economic calculation based on the political consequences of the downgrade, because it certainly isn't a straightforward reaction to a belief the debt is less secure than we thought last week. As the New York Times noted in a deeply buried lede,

"Guy LeBas, chief fixed-income strategist for Janney Montgomery Scott, said higher prices for bonds were 'a testament to the fact that global investors view U.S. bonds as the safe-haven asset choice.'"
 That paragraph, by my count, is 15 graphs into a story that's supposed to be about the consequences of the downgrade, and it's the first reference to how bond prices were responding to the downgrade. Guys, I used to do this for a living, I've been a business editor, and if I were writing something about the consequences of a change in the rating of U.S. sovereign debt, I'd make damn sure there was something about how the market for said debt responded to the downgrade near the top of the story, not 15 graphs in.

This is emblematic of  the press coverage of the entire debt debate -- don't worry about the substance of the matter, print something that perks up the hind brain. I understand the motivation, but it amounts to writing the "dog bites man" story when the evidence points to a much better, "man bites dog" story. But of course, the New York Times is a bellwether, not a watchdog. From Wikipedia: "The term is derived from the Middle English bellewether and refers to the practice of placing a bell around the neck of a castrated ram (a wether) leading his flock of sheep.[1][2] The movements of the flock could be noted by hearing the bell before the flock was in sight."

Aaaah. I've at last found a simile for the "castrated ram" that helped lead us into Iraq. But back to the matter at hand.

The fact that stocks are down and bonds are up means the market thinks stocks are riskier than bonds. The market, that many-headed beast whose appetites tell us what the consensus wisdom (or momentary panic) affecting the populace is, thinks the consequences of the downgrade are that government will pay its debts, but will fail to stimulate the economy.

Failure to stimulate the economy will mean more companies will fail, and the rest will make less money and distribute smaller dividends and realized less equity gain. Money is flooding into sovereign debt. Part of this is because money held as cash isn't stuffed into mattresses, it goes into money market funds that seek secure, liquid investments without much regard for high returns -- that is, short-term borrowing by entities unlikely to default.

And it's flowing out of stocks, because the downgrade makes government less likely to do what it should be doing in the present circumstances, finding a way to get the country back to work.

Thursday, August 4, 2011

Southern ways, Republican ways

by John MacBeath Watkins

More on the Southernization of the Republican Party:

That chart is from  this post by Michael Lind about the extent to which the Tea Party is a Southern phenomenon. By the way, that 2% of the tea party caucus from the Northeast? That's one congressman from Maryland.

The Tea Party is somewhat amorphous, and it isn't easy to tie down where their members are from, but the Tea Party Caucus is not. As Lind points out, the areas where the Tea Party's strength is enough to elect congressmen who go on to join the Tea Party Caucus are either Southern, or areas where the dust-bowl diaspora caused Southern immigrants to settle.

Culture changes slowly. We hear a lot about property rights from the Tea Party, and we heard a lot about property in the declarations of secession issued by Southern states in 1861. Economically, the value of slaves held in this country in 1860 was about $4 billion. Prior to the Civil War, Southern Whites averaged about twice the income of their Northern brethren. It's easy to forget, now, that much of the complaint the South had was economic; racism only made the exploitation of slaves psychologically tolerable, it was economics that made slavery attractive to them.

This makes the South's resentment of the North all that much more understandable. Prior to the Civil War, the South was wealthy relative to the North. After the war, it was poor. This lost glory was entangled with race, but it was about wealth.

The charmingly-named Doctor Science at Obsidian Wings has a wonderful post about the different attitudes of Southern and Northern soldiers' attitudes to government during the Civil War, and the folkways behind those attitudes. You should read her whole post, but the thing that encapsulates the link between Southern folkways and the Republican Party as now constituted is this quote:

"The cultural descendents of the Anglican Cavaliers of Virginia believed, like the Puritans, in respect for hierarchy and authority, but their preferred government was aristocracy. Fischer quotes John Randolph of Roanoke, who said:
'I am an aristocrat. I love liberty; I hate equality.'"

I am descended, on my mother's side, from a long line of Quakers, on my father's from English, Scotch, and Danish farmers, fishermen, crofters and sailors. I have trouble wrapping my brain around how minds shaped by the Cavalier tradition in the South might work. The notion that you can have liberty without some measure of equality, at least equality before the law, is foreign to me, because a society governed by an aristocracy distributes power so unequally that liberty and justice must be only for some. But of course, that was part of the difference between the attitudes of Southern and Northern enlisted men in the Civil War. As Doctor Science points out:

"In any event, I think when Tea Partiers sneer at "government of the people, by the people and for the people", it's because that was *never* their culture or experience. The cultural forces that made the Confederacy are still there, and still count as common sense for many Americans."

Wednesday, August 3, 2011

How bad was it? It was so bad...

by John MacBeath Watkins

Via Nate Silver at FiveThirtyEight, here's a chart that will curl your hair:

As always, you should read Nate's post. Most charts don't really show how far below trend the economy is, or show clearly how the current recession stacks up against past ones.

As Matthew Yglesias has pointed out, this recession was much worse than our policy makers knew when they were devising the stimulus:

"Specifically, when Barack Obama took office in the first quarter of 2009, the BEA was saying that the economy contracted 0.5 percent in the third quarter of 2008 and 3.8 percent in the fourth quarter. In fact, we now know that it plunged 3.7 percent and 8.9 percent. This is a huge error. Imaging making the same error in the opposite direction. That would be the BEA describing a major economic boom as a serious recession. Instead they mistook a cataclysmic collapse for a mere serious recession. And this recession happened before Obama took office, meaning that he was faced with a much larger output gap than he realized. Consequently, he framed a policy response that was inappropriate to the actual severity of the situation."

The buzz on healthy bees

by John MacBeath Watkins

The Great Bee Plague, AKA Colony Collapse Disorder, has puzzled scientists and apiarists alike, and spread worry about how crops will continue to get pollinated. Now comes an odd bit of news: Bees are healthier in cities, according to Prof Jane Memmott, a British ecologist.

No, not because they are allergic to pollen and need to get away from it, Memmott says:

“There’s a greater diversity and abundance, probably, of flowers in cities than there are in nature reserves and the countryside,” she told the BBC. “Also the flowering season is longer because gardeners love things that flower really early and flower really late so there is forage over a longer period of time. My gut feeling is it is a more reliable source of food.”

Louise Gray, ecology reporter for the London Telegraphreported more than a year ago about the fact that city bees were doing better than country bees, but her more recent story follows up on why.

Now Tim Lovett of the British Beekeepers Association wants people in cities to plant more bee-friendly plants.

From Ms. Gray's story:

“In the countryside you have monoculture," said Mr Lovett. "You may have a crop like oilseed rape that yields a lot of nectar and pollen but over a very short period and after that there is nothing for them and it returns to green concrete. So the bees in the city have a real advantage I think."

I think with a villain identified as having a name like "oilseed rape," we can all agree that Something Must be Done. And not just calling it Canola. Gardeners, are you listening? Those bees are humming your song.