From an interview with Tom Schaller of FiveThirtyEight:
“If there’s a silver lining, it’s that we conserved our resources. We spent half what the RGA spent,” said Daschle. “It was the right call because neither race would have been helped by more spending.” He said the DGA spent $4 million in VA to the RGA’s $5M, and about $3.5 million in New Jersey to the RGA’s $7 million.
You don’t hear politicos say that more campaign money would have been useless very often.
From The Virtues and Vices of Equilibrium and the Future of Financial Economics, Geanakoplos and Farmer 08, SSRN:
Equilibrium theory focuses on individual actions and individual choices. By contrast Marx emphasized class struggles, without asking whether each individual in a class would have the incentive to carry on the struggle. Similarly Keynesian macroeconomics often posited reduced form relationships, such as the positive correlation between unemployment and inflation (called the Phillips curve), without deriving them from individual actions. Equilibrium theory is an agent based approach which does not admit any variables except those that can be explained in terms of individual choices.
From A History of Fortification: From 3000 B.C. to A.D. 1700 by Sidney Toy, page 23:
The principles of attack and repulse by means of mines dug beneath the walls of fortresses had reached a high state of development by the end of the sixth century B.C. At the siege of Barca in Libya, about 510 B.C., the Persians excavated underground tunnels that reached to the walls. Among the Barcaeans there was a skilled worker in brass who took a brazen shield and, carrying it round within the wall, applied it here and there at places where he thought the workings might be. Where there were no mines the shield was silent, but at places near mining operations the shield made a vibrating sound. By countermining at these points the Barcaeans broke into the enemy’s works and slew the men they found there.
From Hayek:
When I say that the conservative lacks principles, I do not mean to suggest that he lacks moral conviction. The typical conservative is indeed usually a man of very strong moral convictions. What I mean is that he has no political principles which enable him to work with people whose moral values differ from his own for a political order in which both can obey their convictions. It is the recognition of such principles that permits the coexistence of different sets of values that makes it possible to build a peaceful society with a minimum of force. The acceptance of such principles means that we agree to tolerate much that we dislike. There are many values of the conservative which appeal to me more than those of the socialists; yet for a liberal the importance he personally attaches to specific goals is no sufficient justification for forcing others to serve them. I have little doubt that some of my conservative friends will be shocked by what they will regard as “concessions” to modern views that I have made in Part III of this book. But, though I may dislike some of the measures concerned as much as they do and might vote against them, I know of no general principles to which I could appeal to persuade those of a different view that those measures are not permissible in the general kind of society which we both desire. To live and work successfully with others requires more than faithfulness to one’s concrete aims. It requires an intellectual commitment to a type of order in which, even on issues which to one are fundamental, others are allowed to pursue different ends.
Earlier I argued that the order resetting executive compensation for the companies accepting bailout money from the US government would not impede the ability of the companies to retain their top executives because it was a predictable outcome once the companies made the decision to seek help and that any executives that would have left because of the order should have already left. Turns out that part of the story is correct. From the Washington Post today:
Even before the Obama administration formally tightened executive compensation at bailed-out companies, the prospect of pay cuts had led some top employees to depart.
But Thursday, he ruled only on slightly more than three quarters of the pay packages that were to be under his purview. The balance reflected executives who have left since he began his work in June or will be gone by the end of the year.
Many executives were driven away by the uncertainty of working for companies closely overseen by Washington, opting instead for firms not under the microscope, including competitors that have already returned the bailout funds to the government, according to executives and supervisors at the companies.
The Obama Administration made big news today by announcing that the 25 highest compensated executives at the 7 biggest recipients of funds (Citigroup, AIG, Bank of America, GM, Chrysler, and the financing arms of GM and Chrysler) will see markedly reduced compensation this coming year. The blogosphere is of course up in arms about this; lots of libertarians and conservatives think that this is a horrendously bad decision, and that this will cause executives to flee these companies. I think differently. Here are a couple reasons:
1. Expectations: executives at these companies had to know this was coming once they asked for bailout money. Government money makes business decisions at these companies a political affair and it was unreasonable for executives to not make the calculation that politics would work in their favor. That is to say, the mass exodus everyone is predicting should have happened months ago. That an exodus has not happened is telling. Perhaps it is also true that these executives have nowhere to go; would you hire a GM executive with a resume detailing their role in running their companies to the ground?
2. More expectations: I bet executives at these companies look at the endgame. Ultimately either these companies will unwind their operations or will return to profitability. In 2-5 years it will have been better for executives at companies that expect to return to profitability to have stayed with the company than to have left and tried to find work elsewhere. At some point these companies will unwind themselves from the government lifeline and have freer reign to reset compensation schemes at which point loyal executives should expect to see themselves handsomely compensated.
3. Some of next year’s compensation for these executives will be in the form of stock options, not cash, in what looks like an effort to have executives invested in their company’s performance. An attempt to solve the principal-agent problem? Likely.
4. And finally, it seems to me that part of the message that the Administration is sending is that these executives are expendable. If we can find smart people like Geithner to run big, important organizations like the Treasury Dept. for a salary that’s just under 200K, then it seems obvious that we can find qualified, motivated people to replace executives who do choose to leave. There are a lot of smart people in the world and these executives don’t have a monopoly on the qualities that make good executives. In fact, it’s probably true that some of them just don’t, since it was under their watch that these companies asked for a bailout.
So is the Administration’s decision to cut executive compensation a big deal? I don’t think so. My argument boils down to two claims: first, that there will be no executive flight (it would have already happened), and second, that even if there is executive flight, it doesn’t matter because these people are replaceable.
It feels silly to respond to an article this bad from an author who doesn’t seem to have the ability to think coherently, but Eric Hobbs (VP of the Mizzou College Republicans) has a column titled “Liberals Make me Laugh” in the Maneater this week. I can’t address the entirety of the article as there are far too many warrantless arguments made without little to no attempt at spinning a coherent narrative, but I will note that the first half of the article barely contains a single identifiable argument. My best attempt at a translation is that Hobbs makes something like the following claim: It is patently laughable that the Senate Finance Committee vote on health care legislation this past Tuesday was a vote on concepts to be included in a bill to be finished later, as opposed to a bill that had actually been written. Or alternatively, that Senate committees shouldn’t vote on concepts to be included in legislation and should instead limit their decision making to only formally submitted bills. This seems like an impossible standard to hold committee grunt-work too; the purpose and nature of Congressional committees is that they are where legislation gets fleshed out and compromises made. Cutting out that process seems to me to be unwarranted.
But the arguments that Republicans like Hobbs are making seem to me to miss the point; first, they miss an important argument the left makes, and second, they are never couched in any kind of intellectual modesty so that any engagement becomes a confrontation. As for myself, I’m hesitant to come to big picture conclusions about a public option or even the entire thrust of the Democrat push for insurance reform but there is a fundamentally attractive premise at the heart of the liberal desire for universal healthcare. It is that our national policies, both foreign and domestic, often are co-opted by moneyed interests skilled at navigating the halls of power, and that conservative leadership particularly are never identified with the desire to evaluate costs and benefits in a way that speaks beyond the cultures of money and power. Alternatively I could state that the left is far more inclusive in the demands it is willing to be responsive to than the right. I am particularly fond of citing the statistic from the 2008 Republican National Convention that 1.5% of delegates were black, or discussing the participation of women in the Republican party. The left is willing to ask why we’re willing to make a tradeoff like the decision to go fight a second war in Iraq when the money could be spent with a much more clear return providing healthcare to those who desire it and can’t afford it; the right, as far as I know, rarely crosses this conceptual bridge, eliding the debate with statements about the invincibility of markets and tenuous claims about freedom and national security. The conservative movement ends up crippled by a paucity of ideas and an unwillingness to engage in civil debate.
There is a caveat; the inclusive nature of the Democrat project does not mean that policy is not influenced by moneyed interests, or that populist demands do not get co-opted by the system, or that they are even smart demands to begin with. The attraction of the Democrat project is its inclusivity and that, I think, is a starting point lost on a GOP that insultingly layers its new website with pictures of token minorities.
Note that I’m careful to not assign moral standing to particular ideological stances or real-world actors; I think corruption is an inevitable part of politics, and it is clear that Democrats are just as corrupt as Republicans. But it seems to me that there is inherently more competition in the market for Democrat ideas than there is in the market for Republican ideas; part of the reason is the exclusionary nature of GOP participation and part of it is that the GOP meta-narrative is one that is fundamentally anti-intellectual; as a result, the GOP has lost its intellectual moorings (and most importantly, its intellectuals).
I love good food and I love searching for good food. In that vein, I leave you this gem from Blue Highways: A Journey into America by William Least Heat-Moon, page 26:
…There is one almost infallible way to find honest food at just prices in blue-highway America: count the wall calendars on a cafe.
No calendar: Same as an interstate pit stop.
One calendar: Preprocessed food assembled in New Jersey.
Two calendars: Only if fish trophies present.
Three calendars: Can’t miss the farm-boy breakfasts.
Four calendars: Try the ho-made pie too.
Five calendars: Keep it under your hat, or they’ll franchise.
One time I found a six-calendar cafe in the Ozarks, which served fried chicken, peach pie, and chocolate malts, that left me searching for another ever since. I’ve never seen a secen-calendar place. But old-time travelers– road men in a day when cars had running boards and lunchroom windows said AIR COOLED in blue letters with icicles dripping from the tops — those travelers have told me the golden legends of seven-calendar cafes.
And no, I won’t apologize to people who think this is an inappropriate subject to blog about. And yes, this is (theoretically) safe for work (no pics). But there is a book on Amazon titled How to Live with a Huge Penis: Advice, Meditations, and Wisdom for Men Who Have Too Much by Jacob and Owens. An excerpt:
When a young Samuel Clemens was a steamboat pilot on the Mississippi River, his shipmates used to joke that his penis would reach a depth of “mark twain” (12 feet) if he threw it overboard. The name stuck, though most of his readers never had a clue to its origins. In Twain’s masterpiece, The Adventures of Huckleberry Finn, scholars believe that Huck’s friend Jim (the runaway slave) represents the imprisonment Twain felt because of his huge penis.
The conflation of the narratives of slavery and Reconstruction as a priapic metaphor strike me as extremely funny satire, especially since the authors extend the subsuming conceit of the penis narrative throughout the entire book.
I attended a debate sponsored by the Residence Halls Association last night and am quoted in the Maneater along with funkbrother and Truman Scholar Eliseo Rick Puig. Here is the article. It would be more accurate to say that 47 million Americans without healthcare represents more than just a market failure; in some demographics, it does represent a market failure, in others, it represents the limits of what the market can do. But a nuanced comment like that isn’t a terribly great sound byte.
The College Republicans (led by Brett Dinkins) were embarrassingly underprepared for this debate; they at one pointed cited an article in the Washington Examiner as countervailing evidence against budget analysis prepared by the Congressional Budget Office, seemingly implying that the CBO was itself responsible for a 11 trillion dollar national debt. Such a statement shows ignorance of the structure of Congress and the way money itself is spent (politicians write appropriation bills and pass them; the CBO is essentially a glorified secretarial/research agency that calculates the fiscal impact of a proposed bill). And worse, they stuck to a terribly inarticulate “markets are best” prescriptivism that is at best really annoying and at worst extremely dangerous; I made the argument that markets are not homogenous and and behave vastly differently depending on the parameters. The market for subprime mortgages is far different from the market for lemons, for instance, or for national security; these markets behave differently and we treat them differently, for good reason.
More later.
It would be more accurate to call them paragraphs, actually, but this interview excerpt from Vincent Ostrom perfectly articulates an argument that I’ve made for a long time: that at the end of the day, a critically important feature of human institutions and interactions is that they are defined by complexity and nuance and that monolithic conceptions based on those interactions or institutions (like “socialism” and “capitalism”) are are intellectually straitjacketing. Worth your while:
Probably the best way to characterize our approach would be to start with one of our most influential themes: the idea that broad concepts such as “markets” and “states”, or “socialism” and “capitalism”, do not take us very far in thinking about patterns of order in human society. For example, when some “market” economists speak of “capitalism”, they fail to distinguish between an open, competitive market economy and a state-dominated mercantile economy. In this, they follow Marx. He argued that “capitalism” has a competitive dynamic that leads to market domination by a few large monopoly or monopoly-like enterprises. But what Marx called “capitalism”, Adam Smith called “mercantilism”. Similarly, many authors who write about “capitalism” fail to recognize the complexity of capitalist economic institutions. They overlook the rich structures of communal and public enterprises in societies with open and highly competitive market economies.
Instead, we should expect to find some combination of market and non-market structures in every society, and we should recognize the complex configuration of institutions behind labels such as “capitalism”. We might usefully think about combinations of private and public economies existing side by side. However, it’s important to stress that not all forms of public enterprise are, or need to be, state-owned and operated. Markets are diverse and complex entities. Markets for different types of goods and services may take on quite different characteristics. Some may work well under the most impersonal conditions. Others may depend upon personal considerations involving high levels of trust among trading partners. In other words, the options are much greater than we imagine, and we can see this is true if we don’t allow our minds to be trapped within narrowly constrained intellectual horizons.
A later edit or post will talk about my experiences coming to this line of thought through the rich world of critical literature.
My theory on President Obama is that he views the military as a potentially dangerous place for his Presidency. The US military is a unique institution in America and one of the great successes of this democracy have been establishing fundamental parameters on the ability of the military to act that keep it firmly under civilian control. As Commander-in-Chief, he faces a difficult route to successfully utilizing the world’s most powerful force in the conflicts abroad, particularly in Afghanistan; as a Democratic President he faces a conservative faction of the population who is not convinced of his ability to successfully protect the homeland. Not to mention his workload, which is as impressively stacked as as the cords of firewood former President Bush cut on vacation.
The objection is utterly simple: Why can’t the President just sign an executive order circumventing DADT? I suspect that the answer is that the President manages through coalition-building; as a President elected during wartime he fears that signing an executive order directing the military to disregard DADT without directly engaging the chain of command would undermine his effectiveness as Commander-in-Chief and provide his political opponents with profoundly damaging political ammunition that’s amplified by poor outcomes in Afghanistan or Iraq. Better to step slowly and surely than risk aggravating relations with the military. The evidence for this is his very careful engagement of the military and especially his retention of Robert Gates as Secretary of Defense.
The endgame here is to make sure change permanent. It would be disastrous, for instance, if Sarah Palin or any number of potential other Republican presidential nominees won the 2012 elections and proceeded to re-institute DADT. The odds of that re-institution are vastly smaller with a 2012 Obama win; policies tend to be path-dependent in the sense that they create a culture invested in their own existence and the longer that a certain institutional culture has been in existence the the stronger it is. This argument allows us to flesh out the argument more fully: the President believes in transforming the institutional culture of the military with the permanent repeal of DADT as the endgame, not the catalyst.
Ilya Somin over at the Volokh Conspiracy discusses Justice Scalia’s comments that many of our best and brightest minds end up wasted in the practice of law. Somin notes one serious argument against this claim, specifically that high prices for legal services are indicative of the high demand for those services. I think that there are two things that need to be added: first, as a tangent, that Say’s Law applies here (supply creates its own demand) and second, that the market for legal services is huge and the market clearing price for legal services is often way to high for many consumers. This interview with Jay Moses of the Center for American Progress details some elements of the supply and demand for legal services amongst the poor; this article in McClatchy details, among other things, an 11 million jump in the number of people eligible for free legal services since 2007. And this piece of advocacy from Diller and Savner is rich in detailing the extent of current legal services. Diller and Savner interestingly suggest that subsidizing legal aid for the poor also increases the quality of democratic representation, since it reduces the search and transfer costs of information about that sector of the population, allowing politicians to be more informed about the policy preferences and needs of their constituency. In shorter, more precise language one could say that subsidizing legal services for low-income users has positive informational externalities that increase the quality of democratic government (a public good).
But the second half of Somin’s argument is all too true: we have way too many laws. I recall a statistic (in a Krugman editorial perhaps?) noting that the massive body of federal criminal law implies that over half the population are de facto felons. Certainly the most egregious example is the terminally useless War on Drugs but there are far more insidious examples; there are plenty of excessively broad laws and regulations that felonize trivial things like failing to appropriately label chemicals or animal parts.
From the abstract to “Virtual Worlds: A First Hand Account of Market and Society on the Cyberian Frontier“, a December 2001 paper by economist Edward Castranova, this gem:
In March 1999, a small number of Californians discovered a new world called “Norrath”, populated by an exotic but industrious people. About 12,000 people call this place their permanent home, although some 60,000 are
present there at any given time. The nominal hourly wage is about USD 3.42 per hour, and the labors of the people produce a GNP per capita somewhere between that of Russia and Bulgaria.
Norrath, for those not in the know, is the land where the online massive multiplayer online roleplaying game (MMORPG) Everquest take place. For reference, Bulgaria’s GNP per capita in 2000 was $5,560; Russia’s was $8010 (source, Bureau of the Census 2002, L/N). Castranova’s paper is currently the second most downloaded economics paper on SSRN.
During the last 3 Republican administrations (Reagan, Bush I, and Bush II), US national debt rose a collective 7.1 trillion dollars. During the last Democratic administration (Clinton) the US national debt rose 1.5 trillion dollars. That is to say, Republican administrations accumulated .44 trillion dollars in debt in a average year, compared with .187 trillion dollars a year during Clinton’s tenure. Here is the data from the White House Office of Management and Budget (page 129).
The point of this exercise is not to weigh the relative merits of Republican vs. Democratic presidents. There are far too many variables to be weighed to make that an easy conclusion. However, I do think that the right-wingers who find President Obama an easy scapegoat for ballooning government debt doth protest too much; most of the massive national debt was incurred during conservative Republican administrations. This does suggest an alternative explanation for the advocacy of some right-wingers: they want a Republican administration that loads up the pork for them and it seems unlikely that a Democratic president will give it to them, especially a Democratic president who is beholden to different special interests than the far right.
Ducks and Economics 