I don’t recommend getting your political analysis from musicals, and I certainly wouldn’t say that Prop 8: The Musical presents a cogent argument for or against gay marriage, but it is an amusing “Obamanation”:
(Hat tip to Yana.)
I don’t recommend getting your political analysis from musicals, and I certainly wouldn’t say that Prop 8: The Musical presents a cogent argument for or against gay marriage, but it is an amusing “Obamanation”:
(Hat tip to Yana.)
The worst is yet to come, Joe Nocera says, as he shares a letter from an anonymous banker weighing in on the coming credit card debacle:
As a banker, let me describe what we do wrong when we accept and review an application for a credit card. First, we don’t verify income. The first ‘C’ of credit: Capacity to repay, is completely ignored by the banks, just as it was in when they approved subprime mortgages. Then we ask for “household income” — as if other parties in the household could be held responsible for that debt. They cannot. And since we don’t ask for any proof of income, the customer can throw out any number they think will work for them. Then we ask if they rent or own and how much they pay. If their name is not on the mortgage, they can state zero. If they pay $1,000 in rent, they can say $500. (Years ago we asked for a copy of the lease to verify this number.) And finally, we don’t ask how much of a credit line the consumer is looking for. The banker can’t even put that amount into the system. There isn’t any place on the application for that information. We simply put unverified information into a mindless computer and the computer gets the person’s credit score and grants them the biggest line that score and income (ha!) qualifies for.I recently had a client apply for a credit card. She is a homemaker, with no personal income. The house she lives in is in her husband’s name. She would have asked for a $3,000 credit line, just to pay miscellaneous expenses and to establish some credit on her own. So the computer is told that her household income is $150,000; her mortgage/rent payment is zero. The fact is that her husband’s mortgage payment is $7,000 a month (which he got with a no income verification loan). She had a good credit score, but limited credit since she has only lived in this country for the last three years. The system gave her an approval for a $26,000 line of credit!
This has got to stop.
The recent terrorist attack in Mumbai — in which pairs of “buddies” with AK-47 assault rifles methodically mowed down bystanders — brings to mind the 1997 North Hollywood Shootout:
The bank robbers actually had multiple assault rifles in different calibers and body armor — although they had no grenades or other explosives.
The whole thing was quite reminiscent of Heat:
While asking, Should 'Bad' Financial Contracts Be Replaced with 'Blessed' Ones?, Steve Waldman makes an amusing aside about common stock:
No rational regulator concerned with substantive transparency would approve of common stock, if it were a novel investment vehicle. It guarantees no cashflows whatever, its “control rights” are so weak for most purchasers that representations thereof should be viewed as fraudulent. Empirically common stock behavior is very weakly coupled to the performance and health of the firms that stocks fund. The only instrument in wide use more substantatively opaque than common stock is fiat money.
L. Christopher Smith follows Scientology’s Money Trail:
Ever since the 1980s, when it faced a potentially lethal class-action lawsuit and intense scrutiny from the U.S. government, the group has reportedly spread its revenues — and its liability — among a vast array of independent trusts, corporations, and nonprofits. All are reportedly tightly controlled by David Miscavige, a second-generation Scientologist who has run the church since the 1986 death of its founder, science-fiction author L. Ron Hubbard. Tax filings from the early 1990s show that the church was earning about $300 million a year back then, but the paper trail disappears after that. The church won tax-exempt status in 1993 and is not required to file annual returns with the I.R.S., so it’s extremely difficult to tell just how much Scientology takes in during a given year.
Smith goes on to estimate revenues from various sources:
Bottom Line: $500–550 million.
After the Mumbai attacks, I read something odd that Sebastian D’Souza had said about the killers he’d seen and photographed: “They were firing from their hips. Very professional. Very cool.”
My first thought was, firing from the hip isn’t professional at all.
Richard Fernandez received this e-mail from a Marine officer on the Mumbai tactics, which looks at the whole thing in much more detail:
A photographer noted how “cool” and “professional” they looked as they sprayed from the hip. Shooting from the hip is not extremely professional, but this only is if one wants to take well-aimed shots. Perhaps shooting from the hip is very professional if one wants to spray in across a broad angle while maintaining a wider field of view than if behind the sights of your weapon. In other words, if facing no armed opposition, you have the luxury of spraying broadly, and the most dangerous thing to you is an armed threat that comes from outside your narrowed peripheral vision while using your iron sights.
Read the whole thing.
D’Souza also expressed his anger that the police did nothing to stop the terrorists:
“There were armed policemen hiding all around the station but none of them did anything,” he said. “At one point, I ran up to them and told them to use their weapons. I said, ‘Shoot them, they’re sitting ducks!’ but they just didn’t shoot back.”
My understanding is the most Indian police carry only bamboo sticks, or lathis, with a smaller fraction carrying handguns. I would be in no hurry to start shooting a pistol at a guy with an assault rifle.
Richard Fernandez has similar sympathies:
Most people will naturally flee from danger. Only time, training and conditioning — a form of brainwashing — can reliably forge bodies of men who will instinctively do the unnatural. Re-read the embedded journalist’s accounts of events in Iraq and note the descriptions of soldiers or Marines who deliberately move toward the sound of firing or as it was more quaintly put in the old days, “to march to the sound of the guns”. During the First World War thousands of men would rise out the trenches to walk into machine-gun fire. The ordinary crowd at a shopping mall simply can’t be expected to do that. Maybe the most important effect of the Second Amendment is that it it implants the germ of the idea that resistance is a viable option. It’s a germ which must be nurtured by a little training. The gun is an easy thing to find. It’s is the making of a shooter which is harder.
Cringely believes that the key to saving Detroit is getting car buyers to think like bicycle buyers and to buy something more like his airplane:
I didn’t build my DA-2A, but I am rebuilding it right now and know it intimately. My Davis is an all-aluminum two-seater with an 85-horsepower engine. The engine was built in 1946, the plane in 1982, and the whole thing cost under $4,000 at the time, though today I have more than that invested in the instrument panel alone. The plane weighs 625 lbs. empty, 1125 lbs. loaded, has a top speed of 140 miles per hour and can travel about 600 miles on its 24-gallon fuel tank.Why can’t I buy a car like that?
Imagine if we took the basic design parameters of my DA-2A and applied them to a modern automobile. The new design would have to carry two people and luggage, have an empty weight of no more than 625 lbs. and use an 85-horsepower engine. With a loaded weight of 1125 lbs., the car would have a power-to-weight ratio comparable to a Chevy Corvette and be just as quick — probably even faster than the airplane’s 140 mph. Driven only 20 percent over posted speed limits as God intended, the car would easily get 50+ miles per gallon.
Who wouldn’t want to buy one?
At the heart of manufacturing is the simple concept of buying raw materials in volume at a low price per pound and selling manufactured products at retail for a high price per pound. The eventual retail price per pound is determined by the marketplace and ideally it ought to be high enough for the manufacturer to make a profit. The very light weight of our DA-2A car analog suggests that it ought to be inexpensive to buy, but maybe all that means is we have to look beyond the car industry to bicycles.
Car buyers and bicycle buyers approach retail pricing from completely different directions. Car buyers, whether they think about it this way or not, traditionally try to buy cars that cost the least on a per-pound basis. Do some research on the Internet and you’ll see that luxury cars, whether we are talking about a Cadillac SUV or a big Mercedes sedan, tend to cost about $10 per pound; mid-range cars cost about $6 per pound; and economy cars cost about $4 per pound. Manufacturers prefer luxury cars because, given the same profit margins, they make vastly more gross profit on a fancy car than they do on an entry-level car. This pricing bias is part of what is working against Detroit right now.
Bicycles are different. Bicycle buyers, whether they are conscious of their behavior or not, try to pay the MOST per pound rather than the least. A lighter bike is always a better bike and a more expensive bike. Cheap bikes from Wal-Mart tend to cost about $2 per pound, nice bikes from a bike shop cost about $20 per pound, and top-of-the-line racing bikes cost about $200 per pound which, interestingly, is about the same per-pound cost as a top-of-the-line Ferrari or Aston-Martin.
So the trick to turning around the U.S. auto industry is to make car buyers adopt the values of bicycle buyers, which implies the willingness to pay $20 per pound of final product. The way to achieve that goal is by building cars that are both affordable at $20 per pound and EXCITING TO DRIVE.
Under this formula, the car version of my DA-2A would cost $12,500, making it broadly affordable. Yet with 6061 aluminum alloy selling in volume for around $1.60 per pound, there ought to be plenty of profit in there for the companies.
The early history of the board game Monopoly is far more interesting — and ideological — than I realized.
The game that went on to become Monopoly started out as The Landlord’s Game. The designer, Elizabeth Magie, patented the game board design in 1904, patented a revised edition in 1924, and sold the rights to Parker Brothers in 1935 for $500. This is after Parker Brothers started distributing Charles Darrow’s Monopoly.
But what inspired Magie to create The Landlord’s Game in the first place? Well, it turns out that Magie was a Georgist, and she created the game to demonstrate Henry George‘s left-libertarian belief that, while we each own what we create, everything found in nature, most importantly land, belongs equally to all humanity.
(Let’s ignore the Malthusian consequences of that for the moment.)
This belief, by the way, led Henry George to recommend a single tax on unimproved land value — a tax that makes sense for not-at-all-socialist reasons. The supply of land, after all, is extremely inelastic — they’re not making any more of it — so taxing it won’t reduce the quantity supplied; it’ll just reduce the “unearned income” or “rents” going to the property owner.
Indeed, a land value tax — which, unlike an ordinary property tax, ignores building and improvements — has been more or less implemented in Hong Kong and Singapore.
Oddly, such a direct tax is considered unconstitutional in the United Staes.
At any rate, I don’t think I learned the lesson Magie wanted me to learn from her game — until now.
Mencius Moldbug sees three kinds of voters — tribal, populist, and institutionalist.
Tribal voters vote on the basis of ethnic and familial identity:
In one very legitimate sense, they are the most rational voters around. A tribal voter is acting collectively to benefit his or her tribe. This group can be hereditary, adoptive, occupational, etc, as long as it feels some sort of collective cohesion or asabiya.In a civilized, stable democracy, only a minority of voters can be tribal. If you want to see a democracy with a tribal majority, I give you South Africa. As a minority, tribal voting blocs generally serve as vote banks for more dominant players. The tribal bloc or blocs become clients of whichever party is strong enough to buy their votes. This can be done as straight-out, lawless graft, or by steering various benefits — payments, loans, jobs, etc — to members and/or leaders of the tribe.
Populist voters genuinely believe in democracy:
When populists vote, they are trying to compel the government to act in accordance with their own beliefs, generally derived from a mixture of common sense, tradition and personal experience, of what is right for a government to do.Populists voters are people who genuinely believe in democracy. They believe that the way Washington works is that the people elect a President, who “runs the country.” I once had an email exchange with a very successful, and quite erudite, populist political blogger who did not understand that President Bush cannot fire a State Department employee, just because that employee is openly trying to sabotage White House initiatives.
This is an excellent example of the level of complete structural misconception that a populist voter can entertain when attempting to vote. If populists had any idea at all of how Washington actually works, they would not continue to participate in the increasingly farcical elections by which they repeatedly endorse it.
The fact of the matter is that Washington as it exists today, 21st-century Washington, is designed to resist populist politics in roughly the same way that a lighthouse is designed to resist waves. The entire thrust of 20th-century American government has been to separate public policy from politics, ie, to eliminate the menace of democracy. If you read about what American politics was a century ago, this program — originally the program of the Mugwumps, and then of various flavors of liberal and progressive, including of course the New Deal — is perfectly understandable.
The problem is basically solved. Populist resistance, a la Poujadisme, no longer exists in Washington’s test facilities in Western Europe, now governed largely by a central administration which has no discernible ties to any democratic election. At present, the primary distinction between the EU and the late Soviet Union is that the latter was much more Russian, thus exhibiting a mixture of incompetence and brutality that is hard to duplicate west of the Elbe. But give it a few years.
Populism still has a solid position in the American political system, but it is fading rapidly, as is the importance of politics. The Obama administration seems set to be an almost entirely ceremonial one — at least, the President-elect has displayed no strong evidence of any fixed opinions on any subject. Even the populism of the Bush administration is greatly overstated; a significant minority of the American foreign-policy establishment supported the invasion of Iraq, which was neither an explosion of jingoist fervor, nor the President’s personal whim, nor the conspiracy of some Texan “deep state.”
The basic advantage of populism is that, if the claimed virtues of democracy are anywhere, they are here. Common sense and plain thinking, in a reasonably intelligent brain, are remarkably immune to the ethereal delusions that so easily infect the brilliant and educated. However, common sense cannot exist without tradition. The best traditions of the American populist voter are steadily being eroded by an educational system that populists do not control, and his worst traditions are steadily being exacerbated by churches and talk-radio networks that populists do control.
The entire political structure of the American populist tradition is set up to select for ignorance and stupidity, and select against organization and cohesion. Thus it is simultaneously undesirable and ineffective, and even those of us who like myself sympathize with it to a considerable degree are often slightly relieved to see it lose, as it always does.
Even when populists win Presidential elections, they simply have no way to control Washington. Even with Congress and the Presidency, the White House has no real authority over the civil service, who outside the military are institutionalist by definition. The “Reagan Revolution” started out as a populist tsunami designed to smash the New Deal, and turned into nothing at all. Nixon’s “silent majority” met an even more inglorious fate. At most a few token populist policies can be advanced. Populists can of course disrupt the institutional bowels of the state, leading to a sort of policy constipation, but like the old House of Lords, their only real power is to delay.
Since populists have no idea of any of this, they participate enthusiastically in the sham. Sometimes they win a little, but in the end they always lose. And they are such gentlemen about it, too. Somehow no one has ever explained to Middle America that if you don’t know who the sucker at the table is, the sucker is you.
Institutionalists form the ruling class:
The institutionalist voter votes not because she believes government policies should be decided at the ballot box, but because she believes they shouldn’t.Rather, she believes that government policies should be determined by a set of official and quasiofficial agencies which have earned her trust permanently and completely, the way a good Catholic trusts the Vatican. Following the analogy, here at UR we refer to this meta-institution as the Cathedral. The Cathedral consists of the universities and the press. Its spire is the Ivy League and the New York Times, whose faculty and news desk respectively are endowed with an almost pure connection to the inner light — lesser institutions, of course, following their lead.
It is not that the institutionalist voter does not believe in democracy. She does believe in democracy. She believes passionately in democracy. But her democracy is very different from the democracy of her mortal enemy, the populist.
To the institutionalist, the way democracy works is that democracy depends on the educated voter. The voter is to be educated by institutionalists, of course, because institutionalists are right. Some level of ignorance and recalcitrance can be expected, and there will always be dissent, but through this cycle of education and election we are always advancing into the future. The reason we have elected officials is not so that they can manage the government, a task which must of course be left to the experts (who are institutionalists, of course). Rather, officials such as the President are essentially educational figures, participating in a public discourse in which the “bully pulpit” — an oddly revealing term — delivers further education. In turn, by electing a good President, the voters demonstrate the depth of their educated wisdom. Und so weiter.
Note the function of populist and tribal voters in the institutionalist’s mind. The populist electorate supplies the bogeyman. The fear of a populist takeover, which is theoretically always a possibility and has even happened once or twice in history (eg, Nazi Germany), can keep even the most jaded of institutionalist voters coming back to the polls. Even though it never seems to actually happen. Moreover, the populists are barraged by a flood of institutionalist messages more or less from birth to death. They are naturally resistant, but the programming wears them down over time.
Meanwhile, the tribals, who are votes for rent, will always support the institutionalist bloc (and may even make up a majority of their support, though at a certain level this becomes dangerous.) Their votes are guaranteed in exchange for permanent government programs, administered by institutionalists, that render them dependent on the Cathedral’s rule for their lives and livelihoods.
As for the institution itself — the Cathedral — it is, except in its majestic extent and intricacy, not unusual by any historical standard. The Cathedral is a selective aristocracy, which is more or less the way China was run for about 2500 years. It is also the way the Soviet Union was run, the way the Catholic Church was run, the way China today is run, and the way Nazi Germany probably would have been run if we still had a Nazi Germany to kick around. As in all these institutions, rank and place in it is in high demand, and those who rise to the top are men and women of no mean capacity.
However, there is just one little problem: the Cathedral is not responsible. At least, if it is responsible, we cannot detect any mechanism by which it is responsible.
Brad DeLong writes what Arnold Kling calls about as good a one-paragraph summary of macro that you will find:
In normal times, when one investor wants more liquidity or safety, another will be willing to take on duration and risk, and they will simply swap portfolios at current market prices. But in abnormal times, they cannot: The semiconductor fabs are long-run, durable, risky assets that cannot practically be liquidated. And so when the everybodies all decide that they want liquidity and safety — well, the economy cannot magically liquidate the fixed capital stock at a reasonable price. And to liquidate at falling prices creates mass unemployment.
Kling adds this:
A real business cycle is when those semiconductor fabs should not have been built in the first place. Some surprising event has made them a poor use of long-term capital. A Keynesian business cycle is when the fabs are still the best use of long-term capital, but there has been a mass increase in liquidity preference.The drop in housing construction is part of a real business cycle (at least in housing). The financial crisis looks like a mass increase in liquidity preference. However, it also looks to me like a real business cycle taking place in the financial sector — the financial sector became bloated, and the market is sending it a signal to contract. That is what makes me think that the consensus to focus on Keynesian remedies today may be wrong.
Researchers studying flags blowin’ in the wind found that they behave unlike rigid bodies in an interesting way:
Often it pays not to be leader of the pack — just ask a racing cyclist or a Formula One driver. Conserving energy by following the leader, a trick known as slipstreaming, can give a rider or driver that extra bit of juice to pull ahead at the very last moment. In the natural world, however, bodies are more likely to be flexible, like a fish’s, rather than rigid, like a car’s. In these systems, as a recent paper in Physical Review Letters reports, it is the leader that enjoys a significant dynamic advantage over the followers.
[...]
If one flag has a second downwind of it, that second breaks up the wake of the leader. This stops that wake being a single, coherent back-and-forth wave. As a result, the leading flag flies straighter. In a line of many flags, moreover, most experience this reduced drag in turn, making the whole group more aero- (or hydro-) dynamic.
Singaporean Pragmatism is not American Pragmatism. Bryan Caplan explains:
Singaporeans often speak of their policies’ “pragmatism.” But their version of pragmatism is very different from ours. In the U.S., pragmatism primarily means going along with public opinion and openness to political compromise. In Singapore, in contrast, pragmatism primarily means judging policies based on their actual consequences, not their popularity. “Pragmatism” is virtually a synonym for “utilitarianism.”Example: In the American sense of the term, congestion prices for roads would not be “pragmatic” because lots of people would object. In the Singaporean sense of the term, congestion pricing for roads is “pragmatic” because it sharply reduces rush hour traffic jams. Get it?
Go ahead and read Jeremiah Tucker’s version of Atlas Shrugged updated for the current financial crisis. A taste:
“I heard the thugs in Washington were trying to take your Rearden metal at the point of a gun,” she said. “Don’t let them, Hank. With your advanced alloy and my high-tech railroad, we’ll revitalize our country’s failing infrastructure and make big, virtuous profits.”“Oh, no, I got out of that suckers’ game. I now run my own hedge-fund firm, Rearden Capital Management.”
“What?”
He stood and adjusted his suit jacket so that his body didn’t betray his shameful weakness. He walked toward her and sat informally on the edge of her desk. “Why make a product when you can make dollars? Right this second, I’m earning millions in interest off money I don’t even have.”
He gestured to his floor-to-ceiling windows, a symbol of his productive ability and goodness.
“There’s a whole world out there of byzantine financial products just waiting to be invented, Dagny. Let the leeches run my factories into the ground! I hope they do! I’ve taken out more insurance on a single Rearden Steel bond than the entire company is even worth! When my old company finally tanks, I’ll make a cool $877 million.”
We rarely hear about America's Other Auto Industry, the one that is “gaining market share and adjusting amid the sales slump, without seeking a cent from the government”:
These are the 12 “foreign,” or so-called transplant, producers making cars across America’s South and Midwest. Toyota, BMW, Kia and others now make 54% of the cars Americans buy. The internationals also employ some 113,000 Americans, compared with 239,000 at U.S.-owned carmakers, and several times that number indirectly.The international car makers aren’t cheering for Detroit’s collapse. Their own production would be hit if such large suppliers as the automotive interior maker Lear were to go down with a GM or Chrysler. They fear, as well, a protectionist backlash. But by the same token, a government lifeline for Detroit punishes these other companies and their American employees for making better business decisions.
The root of this other industry’s success is no secret. In fact, Detroit has already adopted some of its efficiency and employment strategies, though not yet enough. To put it concisely, the transplants operate under conditions imposed by the free market. Detroit lives on Fantasy Island.
Consider labor costs. Take-home wages at the U.S. car makers average $28.42 an hour, according to the Center for Automotive Research. That’s on par with $26 at Toyota, $24 at Honda and $21 at Hyundai. But include benefits, and the picture changes. Hourly labor costs are $44.20 on average for the non-Detroit producers, in line with most manufacturing jobs, but are $73.21 for Detroit.
This $29 cost gap reflects the way Big Three management and unions have conspired to make themselves uncompetitive — increasingly so as their market share has collapsed (see the nearby chart). Over the decades the United Auto Workers won pension and health-care benefits far more generous than in almost any other American industry. As a result, for every UAW member working at a U.S. car maker today, three retirees collect benefits; at GM, the ratio is 4.6 to one.
Stuart Cohen says that the open-source business model is broken:
Open-source code is generally great code, not requiring much support. So open-source companies that rely on support and service alone are not long for this world. The traditional open-source business model that relies solely on support and service revenue streams is failing to meet the expectations of investors.