Category: Current Affairs

Mexican drug cartel marketing strategies

Rodriquez said the local mafia – La Familia de Michoacan – blocked all street sales in the city a few years ago. The cartel said it was protecting the people from a scourge. Mexican law enforcement agents confirm that La Familia ordered a halt in local use, though they say it was a cynical ploy, a bit of propaganda.

"Now if you use it, they'll kill you," Rodriguez said. "Now it is just for the foreigners."

The longer article is here.

On a scale of one to ten, how much of an outrage is this?

Every now and then, it is worth posing that question.  I don't mean to prejudge the answer:

The state, needing some of Lerner's land in Tysons to build a Metro station and tracks there, took it by eminent domain and paid the developer about $24 million for the property two years ago. Construction is underway on the new station, slated for the corner of Chain Bridge Road and Tysons Boulevard.

But that price – set just a few months before real estate values went into a freefall – almost immediately appeared to the cash-strapped state to be too high. The discrepancy led the transportation department and the hard-bargaining developer into a court battle over what the property was worth at the time it was taken, in November 2008.

Earlier this month, a Fairfax County jury agreed with the state that it had overpaid for the property, saying that one Lerner parcel was worth only $19.3 million, less than the $22.8 million Lerner was originally paid. It ruled that a much smaller parcel was worth just $313,000, not the $1.5 million that was originally paid.

Fairfax County Circuit Court Judge David S. Schell confirmed the decision Nov. 19, ordering that the Lerners pay the state $5.1 million for the excess and interest.

The full story is here.

A simple theory of WikiLeaks

Recall Timur Kuran's theory of preference falsification: many people follow the herd rather than revealing their true views, and this is most common in autocracies.  In those cases, public opinion may suddenly flip.  WikiLeaks, by making some truths common knowledge, has its biggest effects on autocracies, even if the leaks are from the United States.

Two possible results of the recent revelations could be that the Sunni Arab autocracies will have to cozy up more to Iran (their citizenries don't hate Iran so much, and so they might filp against their own leaders) or that China abandons North Korea altogether.  In the former the government has to match the public opinion and in the latter case perhaps the public opinion can flip against North Korea and confirm a trend already underway in the government.

What about democracies?  The most likely result (though not from this recent batch) is to encourage war-mongering attitudes against potential enemies, due to perceived slights.  Such feelings are usually produced collectively, and subject to sharp triggers, following the revelation of knowledge or pseudo-knowledge.  Remember the Zimmermann telegram?

Here are comments from Douthat and Wilkinson.

The culture that is Washington

As the Washington region begins an important effort to fix Metro's outdated, unwieldy governing apparatus, here's a way to appreciate the scale of the challenge: The task requires eight separate governmental bodies representing 12 distinct political jurisdictions to agree to rearrange how they oversee a ninth body, the transit system itself.

…If that's not daunting enough, consider that the biggest changes would require four entities – Maryland, Virginia, the District and Congress – to agree unanimously on identical wording to change the 44-year-old regional compact that created Metro.

The story is here.  

Observations about Rio

I'm no expert on Rio, but I have visited the city twice, have taken a favela tour, been in a police vs. drug gang shoot out (not as a shooter), and read quite a few books about the place, so here are my observations on the latest events:

1. The authorities will not win until they have a superior ability to supply local public goods in the favelas.  That is a ways away.  (The broader lesson is you should not take in more immigrants than you can supply local public goods for, and that is why fully open borders is not a good idea in every setting.)

2. On a day-to-day basis, the police are outmatched in terms of weaponry and also will to win.  The military cannot remain deployed forever and a tank cannot rule a neighborhood.  I am skeptical about current victory claims, which from my comfortable perch in Fairfax I suspect are temporary at best.

3. Sometimes the Rio police push out the drug gangs, but the alternative is paramilitary groups which then run the drug trade.  (Those groups, by the way, employ a lot of former policemen.)  A police victory is not always the solution.  Here are the different types of police in Brazil.

4. The Brazilian state has extended its governance, throughout the country, much less than you might think.  The current battles are, among other things, an exercise in nation-state building, which historically has not come easily to most regions.  Furthermore relying on the military for a (partial) victory is in the longer run a double-edged sword, especially in a nation with a history of military coups and military rule.

5. For a different and now shocking look at Rio (the hills are mostly empty), watch the stunning 1959 film Black Orpheus.  Very good trailer here.

6. One of my favorite non-fiction books is Nancy Scheper-Hughes, Death Without Weeping: The Violence of Everyday Life in Brazil, highly recommended.

7. The Brazilians are now building high-speed rail between Rio and Sao Paulo.

China subsidy of the day

China’s property bubble has a new casualty: the corpses of Shanghai. In spite of stacking bodies seven or eight deep in graves, the squeeze on space in the city of 20m people has prompted the government to support burials at sea, part of a “green funeral” movement that is challenging deep traditions of filial piety.

Sea burials are rising 10 per cent a year after an increase in municipal subsidies to Rmb400 ($60) per funeral, according to an official with Feisi Sea Burial Company in Shanghai’s “funeral street”, Xibaoxing Road.

Here is more.

der andere Schuh

NYTimes: Despite Germany’s economic growth, its banks are among Europe’s weakest. Moody’s, the ratings agency, ranks the average health of German banks below those of most other Western European countries as well as nations like Brazil, Jordan and Mexico.

In its annual financial stability report, the Bundesbank warned that German banks had increased their dependence on short-term financing, a profitable but risky practice…

The war of politics and finance

There is talk of upping the euro bailout fund:

European Central Bank council member Axel Weber said governments can increase the size of the European Union-led bailout fund if necessary to restore confidence in the euro.

“Seven hundred and fifty billion should be enough to assure the markets,” Weber said at the German embassy in Paris late yesterday. “If not, it will have to be increased.”

The Spanish approach the same issues with another tone:

Spain has warned financial traders betting against its debt that they will lose money, in a defiant challenge to the markets which are driving Madrid’s cost of borrowing sharply higher.

José Luis Rodríguez Zapatero, Spanish prime minister, on Friday ruled out any rescue package for the country even as the premiums demanded by investors to hold Spanish sovereign debt over that of Germany’s rose to euro-era highs.

You can find more detail at ElPais.com; most significantly it is a much bigger headline in the FT than in the Spanish paper. 

In a nutshell, we’re watching the most pitched, highest-stakes, most determined battle between politics and finance which has been staged. I am expecting finance to win. It’s not just about PIGS and the future of the eurozone, it’s settling a very general question about the relative power of politics and finance.  Either way, it is an event of momentous importance.

Headlines to ponder

UK maintains growth momentum

German business confidence soars

Those are two of the countries which have done the most to commit to subsequent decreases in government spending.  It would be wrong, wrong, wrong to causally attribute their growth to those spending decreases.  Still, fairly firm expectations of spending decreases don't exactly seem to be driving them under, and we do know that AD stimulation is all about credible expectations, not just the current flow of spending…

Podcast with Tyler Cowen and Jerry Brito

Some time ago I asked MR readers to request podcast questions.  The 30-minute podcast consists of Jerry Brito picking out some questions from that list and interviewing me.  You can find it here.  Jerry sums it up:

Cowen discusses why people will be appalled that we ever questioned intrusive searches by TSA, what should have been done to minimize unemployment and other harm from the financial crisis, how the “famous American formula” for good government is broken, what might force us to sit around opening cans of dog food with our teeth, and which global sites should be connected by Stargate portals to create the most value. He also asks, “Why read books?”, speculates about the value of his blog, addresses price discrimination of chicken McNuggets, talks about a modern day Athens in Asia with good food, suggests that internet comments are a relatively harmless form of stupidity, and opines about the best thing that government does.

Further thoughts on the TSA debates

The biggest flying/airport outrages are a lack of markets in allocating scarce resources, and the resulting unacceptable airport and flight delay problems in places such as JFK and LaGuardia.  Next come airlines which ruthlessly screw you over, repeatedly, and lie to you and mistreat you.  I do understand the trade-off and prefer the lower prices and fewer quality assurances; still, you can object to their behavior at the margin — it's often unethical.  Let's get worked up over these problems first.    

I view good scans as, in the long run, a substitute for patdowns.  One option is to have very very good scans, nude "photos," fewer patdowns, and to have Americans shift to a more European attitude on nude bodies.  There's even an available status attitude where you don't mind or notice the scans, much as the King allowed himself to be dressed and handled by commoners.  That's the intelligent argument for the current shift in policy.  Maybe the enhanced scans simply aren't useful or maybe Americans can't or won't shift their norms.  Those would be reasons not to do it (and I am not pronouncing a definitive opinion here) but it's simply not, in principle, that objectionable of a policy.  There's a locked-in structure which prevents a competitive test of safety levels and so all alternatives are coercive in some manner, including the difficulty any airline would face in attempting an even more restrictive set of security procedures.

It's worth asking how intrusive a search markets would provide, but keep in mind there are significant negative externalities from exploding airplanes and also there are government bailouts which limit the downside.  Furthermore companies do not always care enough about "extreme negative skewness," as we have learned in financial markets and thus there is a case for regulating a tougher security standard.

Hovering in the background is the reality that a few successful downings will kill many people and furthermore probably wipe out the insurance market and thus lead to nationalization of the airlines.  It's not clear what the freedom-enhancing path looks like and there is no default setting of market accountability.  It's "elephant interventions" all the way down. 

It's worth comparing the current American response to earlier British crises (IRA troubles, and eventual CCTV) or for that matter Israeli responses to Palestinian suicide bombings.  In these kinds of situations something has to give — usually by public demand for better outcomes more than a state usurpation of power.    

I would not say that "we are now at war with the terrorists" but our situation has some war-like elements.  Any persistent war has required major social changes, if only temporary ones, in how the body is viewed and handled.  If we are so unwilling to even consider these changes in body viewing norms, I wonder how we will respond when scarier events happen, as they likely will.  

The funny thing is this: when Americans insist on total liberty against external molestation, it motivates both good responses and bad ones.  It supports a libertarian desire for freedom against government abuse, but the same sentiments generate a lot of anti-liberal policies when it comes to immigration, foreign policy, torture, rendition, attitudes toward Muslims, executive power, and most generally treatment of "others."  An insistence on zero molestation, zero risk, isn't as pro-liberty as it appears in the isolated context of pat-downs.  It leads us to impose a lot of costs on others, usually without thinking much about their rights.

The issue reminds me of the taxation and spending debates; many Americans want low taxes and high government spending, forever.  For airline security, at times we want to treat it as a matter of mere law enforcement, to be handled by others, and one which should not inconvenience our daily lives or infringe on our rights.  At the same time, so many Americans view airline security as a vital matter of foreign policy and indeed as part of a war.  We own and promote this view and yet we are outraged when asked to behave as one might be expected to in a theater of war.  

The main danger to liberty here is not the TSA but rather a set of American attitudes which, at the same time, take our current "war" both far too seriously and also not nearly seriously enough.

Overall, I'd like to see less posturing in these debates and more Thucydides.