Economy


Welcome to our first regular installment of “Fixed That For You!”.

A little known fact about the 12 Angry Men is that we have an internal e-mail list wherein we discuss potential stories, troll one another, and in general have a good time. One of the frequent memes that tends to crop up is the comment “Fixed That For You!” followed by an edited version of someone’s statement. These tend towards gross misrepresentation, and hilarity, so we’ve decided to share them with you, dear readers!

This week’s topic began as a debate on whether the government or private industry was better suited to serve the needs of the public.


Herein lies the problem. Government types, especially LIBERAL government types believe they are smarter than your average American, and that they know what is best for you better than you do. It’s a sick and arrogant version of the “white man’s burden”, and they don’t even seem to realize how condescending it is. When coupled with corrupt government officials out for their own pocketbook, it creates an absurd system. Promising the moon, charging for the sun, and pocketing so much that you only deliver next to nothing.
-Angry Midwesterner
 

Excellent rant. But let me fix that for you! Here’s the Subprime Crisis edition:

Herein lies the problem. CEO types, especially conservative CEO types believe they are smarter than your average American, and that they know what is best for you better than you do. It’s a sick and arrogant version of the “white man’s burden”, and they don’t even seem to realize how condescending it is. When coupled with corrupt CEOs out for their own pocketbook, it creates an absurd system. Promising the moon, charging for the sun, and pocketing so much that you only deliver next to nothing.
-Angry New Mexican
 

Now, now, let’s give Barney Frank and Chris Dodd their due, please.

Herein lies the problem. Congressmen, especially Democratic Congressmen believe they are smarter than your average American, and that they know what is best for you better than you do. It’s a sick and arrogant version of the “white man’s burden”, and they don’t even seem to realize how condescending it is. When coupled with corrupt Congressmen out for their own pocketbook, it creates an absurd system. Promising the moon, charging for the sun, and pocketing so much that you only deliver next to nothing.

There, fixed that for you.
-Angry Overeducated Catholic
 

Let’s give Barney Frank and schloads of Republicans their… *ahem*, “due”, please.

Herein lies the problem. Congressmen, especially Democratic Congressmen believe they are smarter than your average American, and that they know what is best for you better than you do. It’s a sick and arrogant version of the “gay man’s burden”, and they don’t even seem to realize how condescending it is. When coupled with corrupt Congressmen out for their own pocketbook, it creates an absurd system. Promising the moon, charging for the sun, and pocketing so much that you only deliver next to nothing.

There, fixed that for you.
-Angry Midwesterner
 

Amazon.com, the world’s most popular on-line retailer has unveiled a new subscription service known as “Amazon Prime”. For just $79 a year Amazon.com is offering free two day shipping on all of your orders (except those which Amazon deems ineligible for the service). Sounds like a pretty good idea right? Especially if you make a lot of Amazon.com purchases. I’m certainly behind businesses trying to find that new competitive edge it takes to stay on top. Ordinarily I would just see something like Amazon Prime as a nice piece of new business strategy. The one problem is now that Prime is out Amazon is blackmailing users into using it.

You see recently my wife and I put in an order to Amazon.com for a guide book we wanted for a trip to Europe. We’re leaving in three weeks, so we wanted to be sure we’d get it on time. The book was in stock and was eligible for Free Shipping, with a listed shipping time of 3-5 days. We purchased it and checked out with no problems, all very routine. Imagine our surprise that evening when we got an e-mail estimating the delivery date at three weeks. We decided to call Amazon to see what the issue was. Maybe the guide was out of stock and their system had been incorrect? No problem there we’d just select another one, so we dialed in prepared to switch our order. The explanation we got blew our minds.

Evidently in the Amazon terms of service they have the right to hold your items for later shipping, and the 3-5 days is just the time it takes from leaving the warehouse. We’d never had this kind of delay before so we were a bit surprised, was there a problem? No. Amazon is just trying to get folks to sign up for Amazon Prime (which we were offered an upgrade to, one month free trial). In fact if we upgraded today our book would ship immediately.

How sneaky and dishonest! All of my respect for Amazon.com has just been flushed down the drain. We bit the bullet and upgraded, not to prime, but two day delivery as we couldn’t chance it with the guide given our travel date, but we will be thinking long and hard before buying from Amazon.com again in their future. Their sneaky little game may have just cost them two customers.

-Angry Midwesterner


The White House today rebuffed pleas from California for cash. California, as anyone not living under a rock knows by now, carries an estimated $24 billion deficit and is in dire economic peril. Now they expect the rest of us to bear the penalty of their excess for them, and pay for the irresponsible behavior for which they reaped all of the rewards. Something must have hit Obama in the head this morning because for once he made the right choice.

He told those lazy, good for nothing, deadbeat, pot smoking, California Hippie Losers to bug off. Three cheers for Obama!

California has the largest GDP in the US, at over $1.8 trillion, one of the highest levels of taxation in the country, an annual tax revenue of over $114 billion, and one of the highest levels of tax revenue per capita. They have all the resources necessary to solve their own problems. The reason they cannot pay their bill is that, much like a bunch of trailer trash Wal-mart shoppers, they’ve lived beyond their means and run up a debt funding ridiculous programs, propositions, and other such folly to a point that no one in the damnable state even knows where or how the money is being spent. A full 50% of their yearly tax revenue is earmarked for propositions even before the budget is set, that’s more revenue than the total taxes brought in by 48 of the 50 states. And yet visit California and you’ll find a third world nightmare of poorly paved roads, one of the worst school systems in the nation (ranked 48th of 50), no public transportation worthy of the name, scant police coverage, and a wash of crime and poverty that stretches 800 miles from north to south.

California isn’t too big to fail. It’s too irresponsible, stupid, and mismanaged to succeed. Its practices, culture, and above all the arrogance of its people make it one of the largest threats to the American way of life in the world. So now California, we’re cutting you off and it’s time for you to reap what you have sown. Obama should strip your state of its sovereignty and readmit it as a federal territory.

-Angry Midwesterner


At noon on December 9th, Lt Dan Neubauer of Marine Corps Fighter Attack Training Squadron 101, a F/A-18D pilot, after a series of bad decisions all around, made a final bad decision to attempt to make the Miramar runway and crashed into a house killing three members of a family (Young Mi Yoon, who was in her mid-30s; her 2-month-old daughter, Rachel; and her mother, Suk Im Kim). The pilot, on a training mission off CVN-72, the aircraft carrier Abraham Lincoln, ejected after the left engine failed. He was flying on one engine after being forced to shut down the right engine due to an oil leak.

On September 10, 2003, in a session of the House Financial Services Committee, Representative Barney Frank (D. Mass.), in response to concerns about the GSEs Fannie Mae and Freddie Mac, said “I think we see entities that are fundamentally sound financially and withstand some of the disaster scenarios.” On September 25, 2003, in response to the request for additional regulation on Fannie and Freddie, Frank opined “I do think I do not want the same kind of focus on safety and soundness that we have in OCC [Office of the Comptroller of the Currency] and OTS [Office of Thrift Supervision]. I want to roll the dice a little bit more in this situation towards subsidized housing.” Rep. Maxine Waters (D., Calif.), speaking to Housing and Urban Development Secretary Mel Martinez said “Secretary Martinez, if it ain’t broke, why do you want to fix it? Have the GSEs [government-sponsored enterprises] ever missed their housing goals?” Senator Chris Dodd (D. Connecticut), Chairman of the Senate Banking Committee which regulates mortgage lending, has been linked to preferential mortgage terms as a friend of Countrywide CEO Angelo Mozilo.

Countrywide Financial has crashed due to management and regulatory failures. The entire mortgage banking system crashed as a result of bad loans securitized by FNMA and FHLMC. See Fit to Fail.


So we have two crashes. One of an F/A-18D killing a family of four, and one of the entire US financial system and world banking market. What do we observe in the aftermath?

The marines, in court, brought charges and discharged four member of the Corps. The commander of the squadron, its maintenance officer and two others have been relieved of duty. Nine other Marines have received other disciplinary action. The disciplinary action cites deferred maintenance, faulty aircraft-ground communications, and bad decisions. The F/A-18D was flying on a left engine which had been logged with a faulty fuel-low sensor indicator, and rather than perform maintenance flew 146 additional missions. When the right engine was shut down on an oil leak, the left engine ran out of fuel. Poor maintenance decisions contributed to the crash. The pilot was also criticized in the report for failing to use his emergency checklist. While the Lincoln’s controllers advised of a North Island landing, the squadron officers requested the pilot to make for Miramar, a decision which relied on unrealistic assumptions about the aircraft’s condition. Collectively, the duty officer, the operations officer and commanding officer exhibited poor judgment. For all the criticism of the US Military, the US Marine Corp owned up to its mistakes and took decisive corrective action.

The US Congress has yet to own up to its role in the crises and in fact now wants us to believe that it, and more regulatory agencies, are in fact, the solution. When are we going to see an equivalent acceptance of responsibility? My suggestions:

  1. Rep. Barney Frank, discharged from Congress for gross incompetence and dereliction of duty.
  2. Senator Chris Dodd, discharged from the Senate, for ethics violations, conduct unbecoming, and gross dereliction of duty.
  3. Rep. Maxine Waters, discharged from Congress for incompetence and gross dereliction of duty.
  4. Speaker Nancy Pelosi, discharged from Congress and banned from ever holding a public office, for incompetence and gross dereliction of duty.
  5. Rep. Henry Waxman, discharged for cowardice in the face of the enemy, dereliction of duty, insubordination, and conduct unbecoming.

Part of an arbitrarily continuing, i.e., when I feel like it, series on education….

One of my favorite books I read as a graduate student taking an economics class was 1970 title by the economist Albert O. Hirschman, Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States. This is a very nicely written book that examines two possible responses of consumers (broadly defined) to a perceived decline in products consumed (again, broadly defined). In a nutshell, the logic of exit says “Let’s blow this popsicle stand” while the logic of voice decries the fact that the popsicle stand in question that it is “all f$%@ed up!” Both mechanisms have their virtues. Over the last few decades, market-driven exit has been much favored over the politics-driven voice in American life, but as Hirschman notes, exit at best tells an organization that there is a problem—assuming they’re looking, and all too often too late—while voice has the potential of providing information for a solution.

I already noted that the Panic of 2008 may (hopefully) lead to a rebalancing of priorities of smart people who were tempted by big dinero working on Wall Street. A cover story in The Atlantic a few months back discusses the effect on cities. (Yes, I read The Atlantic heavily, in case you hadn’t figured that out by now.)

Well this one is about the kiddies, or, more particularly, their parents. Aspiring parents have, over the last few decades, decided to exit the public schools, either by sending Junior to a private school or moving to a different town (which amounts to sending Junior to a private school, where tuition is known as “property tax”). This has left behind the parents least willing or able to say “all f$%@ed up!” and do something about it. In fact the school example is one in Hirschman’s book. Hirschman was a bright guy to have thought of all this forty years ago when exit, aka “white flight,” was at its peak and the consequences were not yet clear (as they would be ten years later in places like New York). Obviously proposals such as charter schools and vouchers are designed to make exit easier for all, not just those wealthy enough to afford to move to the district with, e.g., New Trier, where cities feeding the district have per capita incomes on par with pre-crash Manhattan(!). Like Hirschman, I muse whether more exit is really the right way to go, but I’ll leave that debate to some other rant.

Last year, before the scope of the Panic of 2008 had, the perspicacious and always a bit acerbic writer Sandra Tsing Loh, a fortysomething mom in Los Angeles, contributed this little piece to The Atlantic about how she stopped paying attention to Jonathan “Savage Inequalities” Kozol and got down to work, when she realized she couldn’t afford to live in LA and send her kids to private school. (I’m still bitter I was forced to read Kozol as an undergrad. Whatever the merits of his case, the writing is the non-fiction equivalent of a Lifetime made-for-TV movie.)

Well recently I noticed this about parents in Manhattan in the New York Times. Maybe, just maybe, the Panic of 2008 will lead to a regeneration of the public schools, when caring, reasonably affluent, and ever so obnoxious parents like Loh—the kind unwilling to take no for an answer when their kids have to use decrepit materials and facilities, taught by staff lorded over all too often by ossified bureaucracies—make a return, where they will rapidly realize that the problems now faced by Avery, Brock and Caleb are pretty much the same as those DeShawn, Esmerelda, and Frankie have been facing for quite some time now, and then start exercising some voice. Because, let’s face it, you don’t care so much about things in the abstract as you do when you’re being confronted by it on a day to day basis and have a personal stake in it….

What is it about Science, Technology, Engineering and Mathematics that attracts the socially inept? I’m not just talking about the lack of hygiene issues some dorks have, the tendency of geeks not to bathe, or even the very disturbing lack of respect for personal space some open source weenies display. Specifically I’m talking about the inability of many dweebs, especially in technology, to understand when and where certain types of jokes or behaviours are appropriate. It has lately come to my attention that the cadre of foul smelling basement trolls, behind the (incredibly useful) open source plotting tool gnuplot, have decided it’s perfectly professional to throw up a pornographic picture on their tool’s manual. Sure it’s “just a line drawing”, but it’s the kind of line drawing that if you used as your background at work would get you sued for sexual harassment, and rightly so.

Evidently the nerds behind gnuplot don’t get out of their filth ridden cave very often, or if they do, rarely see beyond their bristly neck beards, because otherwise you’d think they would realize that this sort of objectification of women, *especially* in a field where women are under represented, and often intimidated by the chauvinistic exclusionism which pervades the field, is not cool in a professional context. I’ve talked to many people who are angry about this particular infantile prank, and the worst part is, it seems the folks at gnuplot have been asked several times to take down the image, or move it off of the professional portion of the site. A quick Google search turns up a lot of irate messages from people who have been trying to get the gnuplot folks to have shred of adult conscience with no avail.

I’d like to ask our readers to write to the gnuplot dev team (gnuplot-beta@lists.sourceforge.net), and ask them to move this image off of their tool’s site. It’s degrading to women, disrespectful to professionals in the field, and utterly unprofessional. I’ve sent my own message, and if I don’t see some change, will likely be reporting their behaviour to the IEEE and ACM, both of which have codes of conduct which prohibit this sort of behaviour in professional contexts.

Hopefully this is a very poor representation of the men in the field. I’d like to believe professionals in technology have grown up a bit, but displays like this one make me doubt the maturity of anyone who works with computers. Left unanswered, stunts like this reinforce the unfortunate opinion that behavior like this acceptable in a professional context. Its no secret that the field of CS is currently lacking in raw talent, there simply aren’t enough Computer Scientists at the present as evidenced by the current trend of outsourcing amongst top companies. The field needs more creativity, diversity, and skilled professionals. By behaving in a way that excludes women, the socially ept, and men with an adult sense of humor these bozos are pretty much ensuring CS won’t be recruiting the kinds of people it needs.

In a recent NY Times piece, noted imperial advisor Nicolas Kristof points out that the Emperor’s Advisers Have No Clothes:

The expert on experts is Philip Tetlock, a professor at the University of California, Berkeley. His 2005 book, “Expert Political Judgment,” is based on two decades of tracking some 82,000 predictions by 284 experts. The experts’ forecasts were tracked both on the subjects of their specialties and on subjects that they knew little about.

The result? The predictions of experts were, on average, only a tiny bit better than random guesses — the equivalent of a chimpanzee throwing darts at a board.

I salute Kristof for having the courage to declare that his profession (along with pretty much everyone else) has no clothes (or at least far fewer clothes than we think—perhaps a German speedo!) I have sometimes disagreed vehemently with Kristof over various issues, but I have to admire anyone who has the moral courage to turn the harsh light on his own profession, and even himself:

The marketplace of ideas for now doesn’t clear out bad pundits and bad ideas partly because there’s no accountability. We trumpet our successes and ignore failures — or else attempt to explain that the failure doesn’t count because the situation changed or that we were basically right but the timing was off.

For example, I boast about having warned in 2002 and 2003 that Iraq would be a violent mess after we invaded. But I tend to make excuses for my own incorrect forecast in early 2007 that the troop “surge” would fail.

As Kristof notes, the greatest problem is with extremely self-confident experts who are morally certain that they’re right:

Mr. Tetlock called experts such as these the “hedgehogs,” after a famous distinction by the late Sir Isaiah Berlin (my favorite philosopher) between hedgehogs and foxes. Hedgehogs tend to have a focused worldview, an ideological leaning, strong convictions; foxes are more cautious, more centrist, more likely to adjust their views, more pragmatic, more prone to self-doubt, more inclined to see complexity and nuance. And it turns out that while foxes don’t give great sound-bites, they are far more likely to get things right.

Perhaps the problem is that expertise grants enormous ability to describe details about the present state of things in a field or area. There’s no absolute logical requirement for that to translate into better prediction in that area, but we’re basically hard-wired to think that there is. Combine that with our hard-wired response to confidence and we’ll follow a knowledgeable hedgehog anywhere, even to Hell itself.

Contrast that with the ability of markets,in general, to outperform experts. The best example is the stock market, whose simple average generally outperforms 2/3 of managed mutual funds each year (an example from last year: http://www.winninginvesting.com/index_vs_managed_funds.htm and another: http://www.fool.com/investing/mutual-funds/2009/02/25/index-funds-are-hard-to-beat.aspx). Over time, the results are even more staggering, as very few mutual funds repeat winning performance from year to year. Experts simply cannot complete with the “wisdom” of the market as a whole.

An important thing to keep in mind, especially today as we’re urged to put more and more confidence in expert management of the financial sector by government regulators, expert allocation of money by government bureaucrats, and the most massive transfer of money from the private market-driven economy to government experts in recent history. It’s perhaps no coincidence that the government is relying upon the least-regulated part of the financial sector (which has been least affected by the recent woes) to bail out the most-regulated part:

Democrats like Barack Obama and Barney Frank, at least on the campaign trail or in sound bites, have portrayed the financial crisis as the product of deregulation. The solution, they say, is more regulation. In that vein Frank, one of the brainiest members of Congress, is proposing that the Federal Reserve become a regulator of systemic risk, with the power to regulate firms that because of their size or strategic position are of systemic importance.

My American Enterprise colleague Peter Wallison has argued powerfully that this is a bad idea. Neither the Federal Reserve or other regulators identified the systemic risk which caused this crisis. Neither did most financial institutions or investors. Systemic risk is hard to identify for the very reason that it is systemic.

If experts are as unreliable as Kristof argues, can expert risk assessment (which is what regulation is) be expected to outperform market-based risk assessment (which is what an unregulated market does)? Certainly not all the time, which is precisely the lesson that we should learn from the recent crisis originating in the heavily-regulated mortgage industry…and precisely the lesson our leaders seem determined not to learn.

(Hat tip to Angry New Mexican for the Kristof link and article!)

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