Monthly Archives: June 2009

Econ Readings of the Day

1. George Akerlof and his seminal paper The Market for Lemons: Quality Uncertainty and the Market Mechanism, first published in the Quarterly Journal of Economics back in Aug. 1970. to my knowledge this is the article that first put him on the map and attracted the attention of the Nobel Committee.

2. Bryan Caplan thinks Ben Bernanke should be fired. I would like more warrants presented than just he that he failed; I am inclined to a much more charitable perspective that says Bernanke did the best he could given the structure of the political economy and that Caplan seems to discount the information assymetry between him and Bernanke, given that Bernanke probably gets to see extremely sensitive information on a time sensitive basis that Caplan doesn’t.

3.

Nabokov on Time

I was writing about Harold Bloom’s “Genius: A Mosaic of One Hundred Exemplary Creative Minds“, specifically first about Virginia Woolf, and then about Octavio Paz. There is a really good excerpt from Paz’s Conjunctions and Disjunctions on page 538, and wonderfully enough, it is Paz the poet-prophet speaking about time…and then I thought that I should drop everything and post possibly my favorite lines from Nabokov on the same topic. I’m posting them because I have grown to be terribly appreciative of Nabokov; I don’t think that there’s another English-language author who quite captures the scope of his vision or has the gift of his language, which is at times is exuberant, inquisitive, self-absorbed in a universal sort of way, and intimidatingly diverse.  There is this subtle (and sometimes not so subtle) lyric eroticism that tinges almost every sentence.

To give you my measurement of the scope of his language and the breadth of his knowledge, my family is very literary. My parents both have multiple graduate degrees, and the family reads what I can only describe as an insane, breakneck pace. My brother dissected Webster’s 3rd New International Dictionary to win the National Spelling Bee; my vocabulary, while not as extensive as his, is formidable. It is rare in reading that I require recourse to a dictionary (and that holds true even for most of my academic reading. But when I read Nabokov, alone amongst all authors I read, I need to have ready access to a dictionary, and sometimes for more than one language, for he is a master of language, reckless and improbably fluid with words.

Below the fold, here is part of Ada or Ardor: A Family Chronicle, book 4 (non-gated): Continue reading

Econ Line of the Day

From today’s NYT story, Derivatives Tug of War Takes Shape by Floyd Norris:

Even when derivatives do allow financial risks to be transferred, that is not always a good thing. John Kay, a leading Scottish economist, noted recently that he used to teach — along with most other economics professors — that derivatives allowed risks to be transferred to those better able to bear them.

But, he added, experience had shown that to be wrong. Now, he said, he teaches that derivatives allow risk to be shifted from those who understand it a little to those who do not understand it at all. That is not a bad description of how the risks of bad mortgage loans were transferred from those who made the loans to those who bought troubled collateralized debt obligations.

Very well put.

The Law and Economics of the World Cup

If you didn’t see the world’s top-ranked soccer team, Spain, lose yesterday’s semifinals game of the Confederations Cup 2-0 to no. 14, the United States, you missed out. It was definitely a close match, with the Americans mounting brilliant counterattacks to counter a typically dominant Spanish side. The key to victory here  was a motivated and energetic American defense that caught the right breaks to shut the Spanish out. Despite earlier tournament losses to Brazil and Italy, this victory establishes the US as a contender in next year’s World Cup in South Africa.

But there’s more. I was particularly reminded of a 2002 paper by Mark West (U. Michigan Law) called ‘The Legal Determinants of World Cup Success‘ (non-gated through SSRN). Here is the abstract:

The “law matters” theory advanced in a series of empirical works by Rafael La Porta, Florencio Lopez-de-Silanes, Andrei Shleifer, and Robert Vishny (“LLSV”), has become a centerpiece of recent corporate law debate. Using LLSV methodology, this Article examines the relation between legal protections and soccer success, using as the dependent variable the number of points each country has in the FIFA/Coca-Cola World Rankings. The statistically significant findings reported herein may or may not have implications of momentous import for various aspects of the human experience.

For those looking for further (and more serious) background, here is the article, ‘Law and Finance‘, published in the 1998 Journal of Political Economy and co-authored by Rafael La Porta (Harvard), Florencio Lopez-de-Silanes (Harvard), Andrei Shleifer (Harvard), and Robert W. Vishny (U. Chicago).

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Hiking the Appalachian Trail

The Republican Party isn’t doing so well; after a electoral defeat in the 2008 cycle that in many ways was a repudiation of Bush-era politics, the party finds itself intellectually bankrupt and massively unpopular. Indeed, the most legitimate faction remaining within the GOP is those who identify strictly as fiscal conservative/libertarian, though I fault them for generally not presenting meaningful intellectual opposition to the Administration or to the Democratic party in general.

I’ve argued for years that part of why the GOP is intellectually bankrupt is because of its strident effort to merge multiple, mutually exclusive ideologies under the umbrella of one cohesive narrative. Most specifically, and most relevant to this post and recent events, is the incompatibility of the narratives of the American Religious Right, which argues for a deep level of  government control and leadership in individual lives with the aim of creating a moral, ‘Christian’ nation, and the narratives of classical liberalism and libertarianism, which generally advocate for an extremely limited governmental role as an arbiter of last resort and a provider of public goods like national defense.

Where the GOP ran into trouble is where they made the narrative of religious purity and morality part of their party advocacy. So they actively went after bans on same-sex marriages, abortion, vaccines to prevent sexually transmitted diseases, amongst others, without providing meaningful empirical justifications. The narratives they chose for ther ideas were couched in the language of values, unity, and binary distinctions, without allowing for nuance. Bans on same sex marriages particularly were justified by theoretical objections over the sanctity of marriage (as if government, and government alone, could uphold this concept of a sacred marriage). Such arguments never gained much traction for me; we grew up in a world where some 50% of marriages end in divorce and relational violence is a real problem. The suggestion that most marriages are conducted in a ‘sacred’ or a ‘holy’ manner is quite laughable to me.

Which brings me to South Carolininan Governor Sanford, who resigned his position as head of the Republican Governors Association yesterday after admitting to an extra-marital relationship with an Argentinian woman. His resignation means that the Republicans have one fewer serious presidential candidate to front in the next election cycle; another serious contender, Senator Ensign (R-NV) just admitted to an affair with a campaign worker and resigned from his leadership position as head of the Republican Policy Committee.  The Governor of Louisiana, Bobby Jindal, who the Republicans presumably thought would provide an intellectual, inspirational point to rally conservatives and counter Barack Obama’s traction with the nation’s non-white voters, had a disastrous appearance on national televison. Which leaves us with Governor Sarah Palin (R-AL) whose jovial ignorance has made her a laughinstock across the nation, even as she feuds with the father of her daughter’s out-of-wedlock child. I don’t know Governor Sanford’s politics that well (I have read that he isn’t a big social conservative) but he is the governor of one of the nation’s most conservative states. Anecdotal example: When I think ‘South Carolina’, I immediately think ‘Christian Exodus‘, a movement of ultra-conservative Christians moving to South Carolina with the goal of gaining a majority stake in democratic policymaking. The wiki is here.

There is a common thread here. The GOP invested a great amount of its image in an essentially unsustainable promise of moral leadership, a promise that is undermined every time a major social conservative is caught with their pants down. But it presents a real problem. In trying to build a national coalition, the GOP embraced too many incompatible narratives and is rendered politically impotent as a result. The downside, as I mentioned earlier, is that they end up failing to present the kind of opposition that renders democracy powerful; the Democratic coalition gets to push through legislative change using economic arguments that really need to be challenged.

My recommendation for GOP party strategists? Dump the social agenda. Because it allows the everyday failings of your leaders to undermine your message and cultivates an anti-intellectual environment, marginalizing key thinkers and discouraging diversity of thought. Those concepts are at the center of any effective political movement. I’m not the only person making these arguments; here is Nobel Laureate Gary Becker (U Chicago) making a more nuanced version of the argument.

EDIT: I incorrectly noted that Sanford resigned as governor; this hasn’t happened yet, though he did resign as head of the Republican Governors Association.

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A List for Today

1. I am currently reading, among others, Harold Bloom’s ‘Genius: A Mosaic of One Hundred Exemplary Creative Minds‘. I am finding it to be an extremely erudite and accessible compendium of great minds, from Shakespeare to Tolstoy and beyond. There are some excellent excerpts that I’ll share in a later post.

2. Candidate for line of the day: “… of the kind of pre-linguistic jouissance that could launch a thousand Julia Kristeva dissertations.” From a discussion on Pitchfork.

3. My friend Eric and I are tentatively going to a blind beer tasting Sunday at 3 at Sycamore Restaurant here in Columbia. The theme is stouts.

4. Brad Delong on Paul Krugman on Greg Mankiw, here. Money line: “To me, the thing to note about the economists–the Mankiws, the Lucases, the Beckers, the Barros, and all the rest–who have pledged allegiance to the Republican Party this year is how much they hagve stopped thinking like economists.”

Bram Van Velde on Painting

Painting is an eye, a blinded eye that continues to see, and sees what blinds it.

All the paintings I have made, I was compelled to make. You must never force yourself. They make you and you have no say in it.

Yes, I abandoned everything. Painting required it. It was all or nothing.

Painting is being alive. Through my painting. I beat back this world that stops us living and where we are in constant danger of being destroyed.

I paint the impossibility of painting.

In this world that destroys me, the only thing I can do is to live my weakness. That weakness is my only strength.

No country, no family, no ties. I didn’t exist anymore. I just had to press on.

All these exhibitions…. People put out their hands to you, and when you try to take them, there’s nobody there.

I do not see this world. But my hands are tied, and that’s why it frightens me.

Dead days are more numerous than live ones.

An artist’s life is all very fine and moving. But only in retrospect. In books.

I am on the side of weakness.

The artist has no role. He is absent.

Most people’s lives are governed by will-power. An artist is someone who has no will.

Painting doesn’t interest me.

What I paint is beyond painting.

I am powerless, helpless. Each time, it’s a leap in the dark. A deliberate encounter with the unknown.

When I look to try and see where seeing is no longer possible, where visibility is gone.

When I look back at a recent painting, I can hardly bear the suffering in it.

I never try to know.

Everything I’ve painted is the revelation of a truth. And therefore inexhaustible.

I never know where I’m going.

The hardest thing is to work blind.

In the normal way, nothing is possible. But the artist creates possibilities where almost none exist.

It’s because artists are defenceless that they have such power.

Yes, he agrees, he is tending to lose all individuality.

Painting lives only through the slide towards the unknown in oneself.

My pictures are also an annihilation.

I am a watered down being.

I am a walker. When I’m not working, I have to walk. I walk so I can go on working.

Van Gogh? … He was a beacon. Not like me. I just feel my way in the dark. But I am good at feeling my way.

What is so wonderful is that all that [painting, an oeuvre, the role of the artist …] is so pointless and yet so necessary.

[On Picasso] Admittedly he was exceptionally creative and inventive. But he was a stranger to doubt [….]

Painting has to struggle to beat back this world, which cannot but assassinate the invisible.

The painter is also blind, but he needs to see.

Discouragement is an integral part of the adventure.

I am a man without a tongue.

The amazing thing is that, by keeping low, I have been able to go my own way.

Always this poverty… But I never rebelled against it. I have always known that that was my place. And anyway, I had my work.

Even failure isn’t something you can seek.

[…] I never really liked French painting. It’s often too disciplined, too elegant. It is not genuine enough. It’s as of art has got the upper hand.

I did what I did in order to be able to breathe. There is no merit in that.

When life appears, it is the unknown. But to be able to welcome the unknown, you have to be unencumbered.

So many painters and writers never stop producing, because they are afraid of not-doing.

You have to let non-working do its work.

I am held prisoner by my eyes.

HT: Spurious. From Juliet, Conversations with Samuel Beckett and Bram Van Velde.

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Following Up: More Shame from the Bush Legacy

I’m working on a post about commodity-backed monetary standards, but in the interim, here is an article from ABCNews about the former Guantanamo prisoner at the center of Boumediene vs. Bush. The article details his narrative of 7 years of torture while at Guantanamo, with no evidence to warrant his detention nor the brutal treatment he apparently received at the hands of the US military and intelligence services. I am astounded that former President Bush and his administration continue to reiterate what are now obviously lies about the ‘necessary things’ they did in the name of the people they served (us) and more astounded that there are still people who continue to believe these narratives of fear, hate, and intolerance. Boumediene’s narrative is a powerful argument against the politics of fear and for an informed citizenry that is willing to demand transparency and accountability from government.

Link here.

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