Misuse of Power

Remember how Steve Jobs was sick? Turns out he got a liver transplant for cancer.

From what I remember watching House, those aren't too easy to get. Turns out, they're not. Jobs managed to use his considerable wealth and power to jump the line.

Such is life.

(Written on my new MacBook Pro)

The Worst Part About Graduating Is

Meeting other graduates. You tell them where you went, then you see a spark in their eyes and a lift in their posture. They go, "Oh! Me too. So you got out alive, eh?"

It's not enough that a spirit combining self-deprecation and unbelievable pretentiousness about the nature of their education pervades life at the UofC. Or that this feeling is nurtured throughout graduation (no contingency for rain! That's how hardcore we are). But--this feeling has to apparently dominate every future interaction with other graduates.

I guess I could just avoid such people--but they're everywhere!

Ok--enough Chicago rants, back to regularly scheduled rants.

Live from New York, it's...

I really hate those blogs/articles/reports from some heavily populated part of the world. After all, millions of people seem to live there just fine, so what exactly is newsworthy about that? Not to mention the Survivor phenomenon, where people trek to obscure places--where people have been living just fine for tens of thousands of years--and pat themselves on the back for surviving. Even the drama, I'm sure, is more intense at the village ten miles over.

None of this will stop me from blogging about New York, or from repeating the cliches about it.

This place really is Trantor writ small. The insane density means that you get everything at your doorstep. The total cosmopolitanism provides insane levels of variety and diversion. While, somehow, every square block of the city maintains its own micro-local character. A random hundred yard stretch will yield more hustle, bustle, culture, and interest than a whole neighborhood in Chicago (or, at least, some other city).

And then there's the pizza. Chicago-style pizza is fine, but in Chicago fashion, you have to hit those traditional places which sell it at a price. New York has democratized the pizza, throwing stands and tiny shops city-wide. They've done it with street food too--this place has the food quality of somewhere far poorer (go immigrants go).

It also, apparently, has a transportation system likewise. I'm mildly amused by the prevalence of rickshaws. Why are hipsters biking tourists around, rain or shine, as if they were in Calcutta-while the guy who is actually from Calcutta is driving a cab? Our generation, bereft of challenges, has apparently decided to pretend like hundreds of years of economic development never happened. This absolves them of the perennial guilt they hold--the original sin of the left-liberal--while giving them something to occupy themselves with. I hope climate change washes every last green fanatic into the sea. I laugh inside every time they complain it's too cold.

Fortunately, as far as I can tell, the hipster rebellion here is just one of a million mutinies, rather than being a social experiment gone horribly, horribly wrong and dominant. Maybe I should check out Brooklyn though. [ed-or else stop being cranky]

Fun fact: the guy who came in to fix my door assured me that New York's decline in the 70s and 60s dated back to its failure to attract container shipping, which went (along with ancillary industries) to Jersey. Sounds plausible, and would also explains why Newark crapped out a bit after New York. But then they (again, a bit later) got a mayor with national aspirations! All you budding politicians out there--find some manufacture heavy part of the country about to decline, then offer to run and fix it. The people will love you forever, or at least until you fail the Florida primary (really, what was that strategy? Step 1: Get New York expats in the South to vote for you. Step 2: ??? Step 3: Win! Send that strategist back to powerpoint school).

I guess the people are supposed to be really rude, but the first time I was walking down the street, someone said hi. Go figure.

Even the cabs are more advanced. They have these nice LCD screens in the back showing the local news, from which I confirmed that local news is consistently horrible around the country. Difference, though is that the pseudo-sexual banter between the hosts here is just about subway etiquette.

Bottom Line: Hyde Park needs to die. Seriously, I don't care what the density is, throw down some retail and food, and a hotel too. And stay up past ten. If bumfuck, IA has fast food options at three in the morning, so should a (nominal) College town. While you're at it, connect to public transport like a reasonable part of the city.

Culture and the Bush Years

Blogging has been light. I've been busy promoting Mitch Daniels, here, and blogging at the Indian National Interest, here. I'll try to keep this place going too, though, for more whimsy stuff.

Now, I'm a huge fan of TV--I think we're in a Golden Age of television, with a whole slew of great dramas and sitcoms. If you look at the complexity or originality of shows in any other decade, even the 90s, I think you'll find that the average show in the last decade is substantially better, while the best shows are pretty amazing today and beat just about anything put out before.

A lot of this has to do with viewing styles. Now that people buy DVDs, show makers can expect their audiences to be paying attention, and so can put out something beyond the "monster a week" staples. The talent working on TV shows, I suspect, got a lot better, and overall it seems people have a much better grasp of the dynamics and possibilities TV gives you.

All this in mind, Newsweek had a bit a while ago about major television series in the Bush years. The mention some good shows, but miss out the absolute best representation of the Bush years ever: Arrested Development.

What better way to capture the neuroses and fixations of the last years then by looking at a dysfunctional family, in which the son desperately tries to fix a failing company? Add the facts that the father sold houses to Saddam Hussein, and that they are in the middle of the housing bubble in California.

And then there are all of the little touches, which get at every tiny bit of this decade. Michael Cera with his awkwardness, the overall meta flair, corporate fraud, insider trading, the "Mission Accomplished" banner, Abu Ghraib, the evangelicals, etc etc.

Now, you can say this just means that the show is rather topical. But beyond depicting events, it gets a good chunk of the mood and flavor of the nought years--the unbridled consumerism, general loss of faith in authority, failing institutions, and institutionalized bizarreness. The very absurdity of the show highlights how odd this decade was, when "truthy" could be a word, cell phones became ubiquitous, and anxieties and unresolved conflicts dominated.

Of course, It's Always Sunny in Philadelphia also lays some claim to the title.

Supreme Court Rules Itself Unconstitutional

In a stunning 8-1 decision, the Supreme Court has ruled, in the case of The Supreme Court vs. The Supreme Court against the constitutionality of the Supreme Court.

Justice Scalia said, "Every since Marbury vs. Madison, the Supreme Court has taken on responsibilities and powers wholly incommensurate with the intent of the Founding Fathers, and must be radically changed to preserve the Constitutional nature of the Republic."

Chief Justice Roberts, writing the majority opinion, wrote, "Of course, the lack of clarity about the Court's role in government stems from the vagueness of the Constitution itself.

Nevertheless, the politicization of the body and it's growing unchecked clout have resulted in a political crisis. The court has seen fit to establish entirely new rights and overturn state and federal statutes at will, and has shielded itself from popular accountability--and, frankly, comprehensibility--through complicated judicial legerdemain."

He added, "Hell, I'm not even sure that Kennedy has even read the Constitution."

Justice Ginsburg agreed, adding that "This is a bipartisan issue. The proliferation of both left-wing judicial activism and right-wing strict constructionism makes a mockery of the supposed non-partisan nature of the Court. We're accepting that the source of legal decisions lies not in precedent or established law, but rather in the political beliefs of justices. The Supreme Court is a de facto super-Congress, with additional powers over the Executive Branch, but one that operates completely without oversight or checks."

Newly appointed Justice Sotamayor also concurred, saying that "The acceptance of identity-informed decisions means that I may justifiably get a different ruling from a particular group of justices with one composition, and yet another from a court with different members. This virtually establishes the court as a political body, rather than one devoted to upholding a particular set of statues. As such, it must either be eliminated, or be held subject to the same principles of democratic accountability that underlie our other political institutions."

Justice Kennedy, known as the crucial 'swing vote,' was the lone defector, saying, "The last 50 years have seen more overturned federal statutes than the previous 150, many of then by narrow 5-4 votes. Issues of utmost national importance--from abortion, to the limits imposed on the President, or even the outcomes of electoral races--are essentially determined by my feelings on any particular day."

He added, "That's totally awesome."

When asked about pending cases, including those pertaining to controversial issues such as gay marriage, Justice Kennedy responded, "How the hell should I know? Let the people decide."

Economic Stability

A big reason why we have a Federal Reserve handle monetary policy is to smooth out the economy over time and prevent recessions and booms.

But interest rates aren't the only reason why economies fluctuate. These days, oil prices are really important--their spike last year is a big and underappreciated contributor to the current economic problems.

The reasons why oil went up that high haven't gone away. Much of the remaining oil is controlled by autocratic regimes with nationalized oil companies, who chronically underinvest in new production. The rest is barely accessible, poor quality crude, in deep sea deposits, or tar sands. Combined with price controls in important consumer areas--the Middle East, South and East Asia--this results in inelastic demand and supply.

And that means huge price fluctuations in energy. But today's economy is very dependent on energy prices--it made the crash worse, then low prices contributed to a quick rebound, and higher prices in the future might cut off a recovery.

That means, as long as the price of oil remains as volatile, America's economy will remain very unstable, and will respond to and drive the cost of oil. Especially now that monetary policy is very limited, being immune from world energy prices would really help stabilize the economy.

And that would require a very different energy source.

Memorial Day

Look, I respect fallen American soldiers--just as I respect those killed in action from other countries (every country?).

But, as a sometimes libertarian, it disturbs me a little how Memorial Day has expanded from an activity simply remembering fallen soldiers into one which equates their sacrifice with American freedom. This is the old "liberty comes from the blood of patriots" line. Something like this did happen in the Revolutionary and Civil Wars, and the American military did a lot to preserve the liberty of other countries in World War II.

But these actions, strictly speaking, only established the independence and unification of America. Plenty of countries are independent and whole--acts often achieved from the blood of patriots--but not free. Liberty in America came from something else: The desire of the property-holding class to limit the powers of government, and then from the continual actions of civil society to hold government accountable.

You have a similar situation in other countries. You could say that Britain "fought" to establish its parliamentary system, but really, liberty came when groups within society asserted their rights against Leviathan. Or look at the democratic transitions in East Asia, which generally happened without much bloodshed in response to political activism from the middle class. In India, democracy is boosted by an engaged and energetic professional elite, and sustained by enthusiastic participation by all sections of society. Soldiers weren't even necessary to liberate the country, while in neighboring Bangladesh and Pakistan, the Army constitutes the biggest threat to democracy.

Liberty doesn't, fundamentally, come from soldiers--who fight for a state which may or may not promote freedom. It comes from within, from the selfless actions of activists, journalists, and protestors, as well as from the selfish acts of the bourgeois class.

The Costs of Empathy

The buzz about Obama's nominee for the Supreme Court is that her diverse life background will add an important perspective to the deliberations of the nation's highest judicial body.  This may or may not be true, but it is also partially irrelevant--this is a choice driven to gain the votes of a particular demographic.  

But why do people keep assuming that high-profile minority appointments will translate into political gains?  The experience of the Bush Administration--which had posts given to the likes of Alberto Gonzalez and Colin Powell--comes to mind.  It's not as if Clarence Thomas, Antonin Scalia, or Ruth Ginsburg brought in their respective demographics into either party.  Voters simply don't make their decisions based on these types of issues--often, they are not even aware.  

But the cost of going with the best jurist who is a female Hispanic, rather than the most talented legal theorist, will be felt in the coming years.  Had Obama went with an intellectual hotshot, one who could rival Roberts and Scalia by establishing a liberal counterweight, and who could woo the centrists through competent jurisprudence, he could drastically change the temperature of the Supreme Court, even as the executive and legislature have gone through major political shifts.  This is the stuff of realignment.  

This appointment is symptomatic of the broader problem of short-term politics.  Politicians often seek to dominate the short-term news cycle, and gain the approval of the heads of interest groups.  But that's not what voters care about.  Throw away the weekly opinion polls, narrowly targeted policies, and stop talking to union bosses and teachers unions.  Focus entirely on offering good governance.  If employment is high, and inflation low--Obama will win a second term, no matter who his nominees are.  

More Bad News

From Matt Yglesias,

The only way to clean [Financial Crisis] up on a tractable time frame is to take insolvent banks into receivership, explicitly pay off enough outstanding bank obligations to get things in decent shape, break up and reprivatize new healthy institutions, and manage “legacy assets” for the long-run.

But basically nobody wants to do this. Obama and congressional liberals want to focus on their core agenda—health care, energy, labor law, education. Republicans don’t want to appropriate money. And bank managers want to continue to take advantage of implicit government guarantees and recapitalize themselves out of operating profits while paying themselves multi-million dollar strategies. Given enough time, that should work. But it could easily take years and give us a prolonged period of sluggish growth.

The political economy here is really messed up.  Because the government cannot spend enough money or muster the political capital to really deal with the banking crisis, the problem continues to fester.  But because the government has some influence, it tries desperately to prevent institutions from failing, and so throws money around, preventing the banks from bothering to solve the problem themselves.  Continued political meddling from Congress makes any private actor very reluctant to trust government policies.

I suspect that had the government taken a clear stance early on not to bail out financial institutions, we would be in a much better place.  In the end, how bad was Lehman's failure?  We've already endured all of the problems that would supposedly happen if banks failed.  Without implicit government guarantees, and government meddling, people on their own would have much bigger stake to solve the problems themselves.  

But if you are going to bring the government into it, you might as well do so in a way that manages to fix the problems, while not risking taxpayer money.  That's not happening.

The Republicans/populists now stand in the way of the kind of spending and policies necessary to fix the banks.  But the Democrats too are unfocused on the problem, preferring to capitalize on the crisis to pass sweeping reforms on the domestic front rather than solve the crisis.  As the economy fails to recover, because we will still have a financial crisis, these debts will pile up.  And they will be inflated away at massive cost to ordinary Americans.  

Bank Nationalization

From the WSJ:

We've come to this pass in part because the Obama Administration is afraid to ask Congress for the money for a meaningful bank recapitalization. And it may need that money now in part because Mr. Paulson's Treasury insisted on buying preferred stock in all the big banks instead of looking at each case on its merits. That decision last fall squandered TARP money on banks that probably didn't need it and left the Administration short of funds for banks that really do.

The sounder strategy -- and the one we've recommended for two years -- is to address systemic financial problems the old-fashioned way: bank by bank, through the Federal Deposit Insurance Corp. and a resolution agency with the capacity to hold troubled assets and work them off over time. If the stress tests reveal that some of our largest institutions are insolvent or nearly so, it's then time to seize the bank, sell off assets and recapitalize the remainder. (Meanwhile, the healthier institutions would get a vote of confidence and could attract new private capital.)

Bondholders would take a haircut and shareholders may well be wiped out. But converting preferred shares to equity does nothing to help bondholders in the long run anyway. And putting the taxpayer first in line for any losses alongside equity holders offers shareholders little other than an immediate dilution of their ownership stake. Treasury's equity conversion proposal increases the political risks for banks while imposing no discipline on shareholders, bondholders or management at failed or failing institutions.

Populist anger is building, and will soon be so strong as to prohibit any useful action to save the economy from taking off.  Obama needs to get on TV right now and build political capital to make the unpleasant and necessary spending to fix the banking sector while he's still popular.  

Instead, he's saving a few million here, overhauling the autos, etc etc.  Fixing the banks should have been the priority for the last year.  It's a lot more important than the million and one commitments the government has recently entered into.  And Geither has neither the money or people to do his job.  We're tracing one by one the steps Japan took into its lost decade.  

 

Freshwater Economists

This is getting a little out of hand--Brad DeLong and Krugman know more about Chicago economic theory than Chicago economists.  I'm not a fan of the Treasury's plan to fix the banks--I don't think anyone is--and I'm fairly mistrustful of the stimulus as passed.  The administration's plans on energy, healthcare, and education leave me a little worried.

But even more scary is the complete lack of credible opposition.  A world in which Cochrane and Lucas are apparently willing to have the government do nothing about a massive credit crunch and economic downturn is one that spells complete intellectual disrepute for the conservative movement.  Add the fact that the media foot soldiers--your Rush Limbaughs and so forth--are completely radioactive.  And then that Republicans in Congress can't think beyond spending freezes, and apparently don't realize that Americans want affordable healthcare.  

Sure, Republicans will win again after liberal overreach.  But the quality of that governance will depend on people thinking now about how to apply their principles to pressing issues.  

No More Brain Research!

I'm not sure why I keep bothering with this, but there's another neuroscience article going around on how poverty causes stress which causes inter-generational poverty; a fact that scientists discover by peering into stress levels in the brain.  

I don't even care for the moment whether the causal link is true or not; for all I know, it may be.  The broader point is that things can be real without you finding where they are in the brain.  Moreover, you finding a correlation between something in the brain and something in the real world does not let you ascribe full causal force to the thing in the brain.  And if you want to link the thing in the brain to future poverty, you might as well actually test that link, instead of saying "it hurts working memory by a little!  Our work is done."  Plus, how many interesting dynamic things are the in the world, where, say, poverty changes or income changes or something happens.  This kind of stuff happens all of the time.  Notice how you can explain exactly none of those changes using something that is a fixed human constant.  

This stress thing is really popular among people who study healthcare too.  But there's really nothing you can do about stress without radical social engineering.  On the other hand, there are a million and one interventions you can think of on education and healthcare that can radically improve both.  DC's voucher program, for instance, improves kids reading scores by a half grade. Except that program just got killed by Congress.  Awesome.  

Defense Cuts

If Gates gets away with his sweeping budget cuts in Defense spending, I'll be really happy. Cutting the F-22? Cutting white-knight, pie in the sky projects like the Future Combat Systems? Cutting missile defense spending? That's amazing. It'll be even more amazing if this can survive Congress.

Unfortunately, Defense spending is still going up, because spending on unconventional wars is rising. Obviously some of this is necessary for Afghanistan and Iraq. But how much of that reflects the conflicts America will get into after these wind down? One school of thought suggests that American strategic interests will demand future interventions in failing states to curb instability and terror. This is no doubt what will actually happen.

Alternatively, people could set 'Defense Priorities' with actual resources in mind. We could say that sending soldiers into every last rotten country around the globe doesn't represent an affordable goal. We could say that Europe and South Korea can shoulder their own defense needs on their own, instead of piggy-backing on American tanks. They also depend on American pharma research because they've destroyed their own industry with price controls, and need to be gifted iPods because their firms are too lazy and their consumers too complacent to develop technology.

Anyway, back to the point: Serious draw-downs in military spending will only happen when the last neoconservative is strangled with the entrails of the last humanitarian hawk.

Post-Modern Journalism

People are concerned about trends in journalism which elevate partisan and political folk over your tried and true journalists.  It's true; the lines between objective media and normal, partisan, rabble-rousers are blurring.  But there are reasons to think that this was never a particularly strong link to begin with, and that breaking it may even have some good effects.

Consider all that we know from psychology about the impact of beliefs on behavior.  Even when the NYT puts up a solid, grounded article, the biases of the author are going to show up.  It's impossible to judge facts or events without a worldview, and it's better to be forthright about what that position is (like British newspapers, or American ones in the 19th century), than to studiously pretend that some sort of 'objective' middle ground can be reached.  

This is also part of the trend where we get rid of 'jounalists' who use their intrepid fact-finding abilities to ferret out the truth, regardless of the subject at hand or their initial knowledge.  Now, people can turn to actual experts (or smart lay-people) on the subject, who can communicate directly with readers instead of being intermediated by journalists.  I can't imagine a world in which the only news I had about the financial crisis came from the NYT, instead of, say, commentary from Brad DeLong, Tyler Cowen, and so forth.

Populist Outrage

Looks like Goldman Sachs is about to return its bailout money, as a number of other banks are about to do as well.  While Goldman might be doing fine, it points to a general problem: No one thinks that the banks are capitalized.  They're still short of capital, and billions of public dollars are necessary so that people trust the banking system and credit starts flowing again.  This is unpopular, but nothing short of ruining the taxpayer will prevent large-scale economic chaos.  

But that's not what people are focusing on, reflecting a lack of coherence across two administrations.  Paulson and Bernanke ignored the problem as long as they could, then came into Congress with the half-assed TARP plan.  This wasn't a great idea, but at least it did something--and was eventually used to pump in capital at a time after Lehman when people were really afraid about general collapse.  

Then six months passed, and the best government plan is still TARP, plus some private additions.  The ruckus over the AIG bonuses has destroyed whatever credibility that bailouts had in the first place, so Geithner is left cobbling together a solution without additional funds from Congress.  Nobody thinks this will be enough.  Worse, he's doing this while trying to create a new regulation regime, and has for months been working in an office which has been understaffed due to tight ethics standards for appointees.  Everybody else has been working on the stimulus package.

This is exactly the road Japan went down, and they found that nothing will get better until you tackle the banks, no matter how hard it is, or how much you work on rebooting the economy in other ways.  Everything can wait until the banks are fixed.