Category: Current Affairs
The new hole in Guatemala
One story is here. Hat tip goes to Chris Masse.
How to answer questions about your sexual orientation
As an aside, I cannot refrain from relating another anecdote, which is told of Gore Vidal. In a TV interview he was asked: "Was your first sexual experience with a man or with a woman?" To which he replied: "I was too polite to ask."
That is from Žižek citing Dolar, p.121. It's a shame that Kagan does not have the liberty to answer in the same manner.
Serendipity in Istanbul
I am walking along the main shopping street, seeing many Turks but actually thinking it would be nice to read more on Edwin Chadwick, when I stumble across a bookstore with a largish section of Augustus M. Kelley reprints, no Chadwick but they do have the everyone-should-now-reread-it Herbert Feis, Europe the World's Banker, 1870-1914, and I stumble upon the section on Greece and the International Finance Commission of 1898.
A bit of Googling yields the following (JSTOR):
The I.F.C. was set up in 1898 as a result of Greece's disastrous defeat in the 1897 Greco-Turkish War. The powers involved in its creation were Great Britain, France, Germany, Austria, and Italy. The purpose of the commission was to control the collection and employment of the revenues assigned to…[various foreign loans, mostly to the aforementioned powers]…on which the country had defaulted in 1893, as a result of the slump in the currants trade.
The Greeks ended up raising the money through state monopolies on their customs ports, kerosene, salt, matches, playing cards, emery and cigarette paper, plus taxes on tobacco and stamp duties.
At $40, I pass on the book and I will see the story reenacted in any case.
The 1964 Civil Rights Act in the 21st Century
Rand Paul's remarks about the 1964 Civil Rights Act brought forth lots of talk about libertarians and lunch counters but almost no discussion of how the Civil Rights Act actually works in the twenty-first century. Yesterday provided a nice reminder.
I won't comment on Lewis v. City of Chicago directly because it was decided on technical matters (the Supreme Court ruled that black firefighters in Chicago did not miss a deadline to argue that a test disproportionately hurt their chances of employment). The underlying facts, however, are of interest not because they are especially unusual but because they are common. From Fire Law:
The case, Lewis v. Chicago, involved alleged discrimination against African American applicants for the Chicago Fire Department who took a test in 1995.
The department set a passing score of 64 on the exam. Applicants who scored at least 64 but below 89 were informed that they passed the test, but would probably not be hired given the number of candidates who scored 89 or above. [26,000 applied and there were only a few hundred jobs, AT] Applicants scoring 89 and above were classified as “well qualified”.
The majority of “well-qualified” applicants were white. Only 11 percent were black…
The trial court sided with the black applicants, and ordered the city to hire 132 randomly selected African American applicants who scored above 64. The court also ordered the city to divide backpay owed among the rest of the black applicants.
White, Asian and Hispanic applicants who also scored above 64 but below the 89 standard were not offered employment or backpay.
Perhaps you are wondering about the tests? You would be hard pressed to find any obvious racial bias. I haven't found the Chicago test online but you can find similar tests from New York (also the subject of lawsuits) here. Here is a sample questions from New York.
Nowadays the Chicago fire department simply gives everyone an easy test and then they hire randomly.
How will Greece get off the dole?
My NYT column is here, here is an excerpt:
Consider the World Bank’s Doing Business index, which ranks countries according to the quality of their regulatory environment for commerce. The index places Greece at No. 109, just behind Egypt, Ethiopia and Lebanon. For the category of “high-income countries,” the Greek ranking is next to last, ahead of only Equatorial Guinea, which has oil wealth.
Greece has a malfunctioning fiscal system in which the shadow economy is estimated to be roughly 20 to 30 percent of the reported economy and tax evasion may run at $30 billion a year. Simply collecting taxes that are legally due would help bring Greece’s books into balance, yet even this simple remedy does not appear imminent.
As the World Bank index suggests, government funds are often spent hindering production rather than supporting it. This gives one clue as to why the numbers make Greece appear richer than it really is. Public expenditures are valued at cost when measuring gross domestic product, yet arguably the quality of Greek public services, per dollar spent, is less than that of many wealthy countries. Nonetheless Greece plunged ahead and joined the euro zone in 2001, with some unfortunate consequences.
A few scattered points which did not make it into the column:
1. Count the economic collapse of Greece as an intellectual victory for Douglass North and his brand of "institutions matter" economics.
2. I don't see any reason why a narrower Eurozone has to collapse.
3. Greece with a default and a floating exchange rate could do OK (though not spectacularly well). The real question is how to get from here to there.
4. I don't have any problem suggesting that Greece needed, and still needs, to collect more tax revenue. Yet many writers on "the left" will bend over backward to avoid uttering these simple words: "The Greek government spent too much money." It's true, the Greek government spent too much money. Be worried if you are reading a writer who does not admit (much less emphasize) that upfront.
5. In addition to greater wealth, here are some reasons why California is not like Greece:
The United States has rich and poor regions, but the 50 states are forced to run balanced budgets, and there is greater mobility within the nation, based on a shared language and culture. Major national policies, like President Obama‘s health care plan, are not judged primarily in terms of which states win and lose; in fact the largely opposed “red states” get a lot of the benefits through higher Medicaid subsidies.
Addendum: Arnold Kling comments.
More Evidence for the Slartibartfarst Principle
Earlier I wrote that due to the Slartibartfarst principle,
…the evidence for intelligent design ought to be readily available in the graffiti of DNA. "Slartibartfast was here," or perhaps "3.14159265," or given what we know of economics, "All rights reserved, MegaCorp. Call for a free estimate."
The fact that, as of yet, we don't see this kind of signature in the data is evidence against intelligent design.
With yesterday's announcement we have a bit more evidence favoring the premise of my argument.
To distinguish their synthetic genome from the naturally occurring version, the researchers encoded a series of watermarks into the sequence. They began by developing a code for writing the English alphabet, as well as punctuation and numbers, into the language of DNA–a decoding key is included in the sequence itself. Then they wrote in their names, a few quotations, and the address for a website people can visit if they successfully crack the code.
Life as advertisement, this is the wave of the future!
Slightly scary stories about the leverage of European banks
Felix Salmon and I were on the radio a few days ago and we agreed (I think) on the need for as-simple-as-possible stronger limits on bank leverage. I browsed the web to see how this struggle was going and ran across the following, from March:
A planned cap on bank leverage would not make the sector safer, said a German banking lobby on Friday, adding heavyweight support to a growing campaign.
This is scary for at least two reasons. First, it may be difficult to implement a leverage restriction in the United States, as supposedly this would be happening through an international agreement, namely Basel III. This is a major (the major?) problem with the current banking bill. There is then this:
France does not want a fixed numerical cap, preferring to give national regulators discretion in supervising leverage.
Deutsche Bank (DBKGn.DE), a member of the BDB, says a ratio is simplistic, while Sweden wants a carve-out for its banks.
And this:
The BDB said a study from the WHU Otto Beisheim School of Management concluded a ratio would likely force banks to scale back on lending and threaten recovery.
Might I go out on a limb and suggest that some of these European banks are…excessively leveraged? In theory the Basel III reforms will adjust the leverage restrictions for the risk of bank assets. It's been the case for a long time that many German banks have higher measured degrees of leverage. But are they more leveraged, all things considered? If they're worried about Basel III, maybe the answer is yes.
Gattaca University
From the NYTimes, Berkeley will give its students genetic tests.
…this year’s incoming freshmen at the University of California, Berkeley, will get something quite different: a cotton swab on which they can, if they choose, send in a DNA sample.
The university said it would analyze the samples, from inside students’ cheeks, for three genes that help regulate the ability to metabolize alcohol, lactose and folates.
Those genes were chosen not because they indicate serious health risks but because students with certain genetic markers may be able to lead healthier lives by drinking less, avoiding dairy products or eating more leafy green vegetables.
Don't be surprised if this is soon canceled.
Adam Wheeler’s resume
You'll find it here. He's the fraud who lied his way into Harvard. Here is the description of his "book" (supposedly) under review at Harvard University Press:
The Mapping of an Ideological Demesne
– Under review with Harvard University Press 2008-2009
The massive proliferation, from the fifteenth through the seventeenth century, of technologies for measuring, projecting, and organizing geographical and social space produced in the European cultural imaginary an intense and widespread interest in visualizing this world and alternative worlds. As the new century and the Stuart era developed, poets and dramatists mediated this transformation in the form of spatial tropes and models of the nation. I examine the geographical tropes by which Tudor and Stuart writers created poetic landscapes as a mode of engagement with the structures of power, kingship, property, and the market. Accordingly, each of the texts that I examine betrays an awareness of writing as a spatial activity and space as a scripted category. The critical topographies that these writers created are maps of ideology, figural territories within which social conflict and political antagonism are put into play.
I've read worse. How you react to that description is a Rorschach test of sorts, especially if you are not thinking it is fraudulent. Here is a TNR post on Wheeler. Here is a Princeton University Press post about Wheeler and the book he claimed to have under contract with them, to be co-authored with Marc Shell, a very well-read scholar.
Why are none of the sources reporting how well he actually did at Harvard and elsewhere? Isn't that an interesting question? How much would the world differ if Harvard reserved a fifth of its entering class for those individuals who showed the most talent for fraud? I don't mean that question in a cynical light, it is one genuine way of trying to think about how education adds value to labor market outcomes.
Draw the rational Bayesian inference here
Germany’s BaFin financial-services regulator said it will temporarily ban naked short selling and naked credit-default swaps of euro-government bonds starting at midnight. The ban also includes naked short selling of 10 banks and insurers.
I thank a loyal MR reader for the pointer, my apologies I have misplaced the email and I don't know your name.
Oil Spills, Tort Law and Libertarianism
Here is Paul Krugman's Nth reason why libertarianism doesn't work:
Thinking about BP and the Gulf: in this old interview,
Milton Friedman says that there’s no need for product safety
regulation, because corporations know that if they do harm they’ll be
sued.Interviewer: So tort law takes care of a lot of this ..
Friedman: Absolutely, absolutely.
Meanwhile, in the real world:
In the wake of last month’s catastrophic Gulf Coast oil
spill, Sen. Lisa Murkowski blocked a bill that would have raised the
maximum liability for oil companies after a spill from a paltry $75
million to $10 billion. The Republican lawmaker said the bill,
introduced by Sen. Robert Menendez (D-NJ), would have unfairly hurt
smaller oil companies by raising the costs of oil production. The
legislation is “not where we need to be right now” she said.And don’t say that we just need better politicians. If
libertarianism requires incorruptible politicians to work, it’s not
serious.
In other words, libertarianism can't work because government sucks. I am tempted to comment further on this creative line of reasoning but that is unnecessary since Paul has misunderstood the facts of the matter.
The Oil Pollution Act of 1990 (OPA), which is the law that caps liability for economic damages at $75 million, does not override state law or common law remedies in tort (click on the link and search for common law or see here). Thus, Milton Friedman's preferred remedy for corporate negligence, tort law, continues to operate and there is no doubt that BPs potential liability under common law alone would be in the billions of dollars.
Thus, Paul now has only (N-1) reasons why libertarianism doesn't work.
Moreover, Paul has actually been too unkind to government, a defect it falls upon me (!) to correct. The point of the OPA was not to limit tort law but to supplement it.
Tort law, as traditionally understood, could only be used to recover damages to people and property rather than force firms to pay cleanup costs per se. Thus, in the OPA as I read it–and take the details with a grain of salt since I'm not a lawyer–there is no limit on cleanup costs. Moreover, the OPA makes the offender strictly liable for cleanup costs which means that if these costs are proven the offender must pay them regardless (there are a few defenses, such as an act of war, but they are unlikely to apply). The offender is also strictly liable for up to $75 million in economic damages above and beyond cleanup costs. Thus the $75 million is simply a cap on the strictly liable damages, the damages that if proven BP has to pay regardless. But there is no limit, even under the OPA, on economic damages in the event that BP failed to follow regulations or is otherwise shown to be negligent (same as under common law).
Sentences to ponder
Turkey can afford to keep tax rates unchanged “for the foreseeable future” while other European governments struggle to repair the damage done by the financial crisis, Ali Babacan, economy minister, said on Wednesday.
His comments reflect Turkey’s pride in weathering last year’s turmoil without bailing out any banks or seeking help from the International Monetary Fund. In contrast with much of the European Union it aspires to join, Turkey won recent upgrades to ratings of its sovereign debt after setting medium term fiscal targets it is likely to beat in 2010.
They're also not planning on raising the VAT and the debt-gdp ratio is about 45 percent, an enviable level for many EU nations. For a while now I've thought that Turkey should refuse membership in the EU, on the off chance that it ever were offered to them. Here is the full article.
Buried scary ledes
The [ECB] bank reversed itself on buying bonds amid signs that the debt crisis was spreading to the banking system.
“The situation was already starting to get worse on Thursday afternoon and throughout Friday of the week before last,” Mr. Trichet said. “A number of markets were no longer functioning correctly. It looked somewhat like the situation in mid-September 2008 after the Lehman Brothers’ bankruptcy.”
I suppose…I am glad they have not screamed that from the rooftops. The full story is here.
Update: The scary lede has been removed altogether from any NYT story.
Very good sentences
“Finance ministers in the eurozone might argue that they acted to save the euro, but in reality they acted to save national bond markets – and the euro is the fall guy,” says Steve Barrow at Standard Bank.
There is more of interest here.
Thoughts on the British election
1. It's amazing how quickly they form a new government. We could learn something from this.
2. Spending cuts will be necessary. (I am curious: what is the U.S. "progressive" take on this question. Is it admitted that spending cuts are necessary?)
3. Tax increases will be necessary. (Do U.S. commentators on the right admit this?)
4. Britain should avoid proportional representation. Classic parliamentary systems are good at making big changes in a hurry, when the major party knows which changes are needed, and that is Britain's current position. It's no accident that Thatcher and Roger Douglas — both of whom operated under extreme Westminster systems – were two of the major reformers in the late 20th century. PR gives too much power to minority parties in the ex post electoral bargain and it works best when there is extreme consensus at the social level, combined with the need to bring certain co-optable minorities into that consensus. Is that the way to think about UK politics today? I don't see it. Does any objective observer jump for joy when a "first past the post" election yields a hung Parliament and requires a coalition, as it does now? No, so why institutionalize this need with PR?
5. Do paragraphs like this make you feel better?: "William Hague, the new foreign secretary, said the coalition would be built on the personal chemistry of Mr Cameron and Mr Clegg, and said that Mr Clegg would not get a veto on government decisions. He told the BBC: “Their ability to resolve this situation bodes very well for all our ability to work together in government.”" They shouldn't.