Asymmetrical Information

From the desk of Jane Galt:

InstaPundit has an unflattering picture

InstaPundit has an unflattering picture of Clinton at Wellstone's funeral, sharing a laugh with Mondale. Angry readers say it's a cheap shot.

I don't think so. Hell, I've laughed at funerals without being any less sincere for it. But state funerals, which this approaches, are not quite the same protocol as the family getting together to share some reminiscences after Aunt Dahlia finally passes. What really got me, though, were the live clips I saw from the event, with various Democratic icons, most prominently the Clintons, getting applauded as they walked in.

I thought, "What the #@%!?"

It wasn't a fundraiser, or a public speaking event, or indeed any sort of occasion in which it would be marginally appropriate for the Democratic elite to be taking curtain calls. It was a funeral. The purpose of the funeral is to honor the dead, not the important people with whom they were acquainted.

Paul Wellstone died four days ago. He was an honorable, courageous man, and I don't think it's somehow wacky or unrealistic to expect that at the hour set aside to honor his memory, that's what the people attending the service would be doing. Particularly after they'd spent the day

a) Furiously complaining that the Republicans had already begun campaigning by proposing that there be some debates so that Minnesota voters could find out something about the man they might want to vote for, rather than just ratifying him in the Sacred Memory of Wellstone
b) Filing a lawsuit because the supplemental ballot didn't suit them
c) Expressing their displeasure at the way Republican premature campaigning had profaned Wellstone's memory, by disinviting President Cheney from the birthday party. . . excuse me, funeral.

Well, hey, it's their guy, right? It just struck me as extremely wierd, even more so because the Clintons, rather than bowing their heads in respect, stood their waving while everyone applauded them. So no, I do not think that the picture was particularly unfair; it seems to me rather to have captured a very unpleasant undertone that just seemed -- off. And I don't think it's going to go over well publicly; it makes the party seem petty and grasping. Any momentum they might have gained by castigating the Republicans was lost when they put their own machine into action, and shattered when the party's national figures stole the limelight.

A minute ago I thought Democrats were going to keep the Senate. Now I don't know again. It does seem that every time they gain some advantage, Bill and Hillary and Terry grab the party by the neck and start shaking until all the voters fall out.

From the desk of Jane Galt:

Everyone who's going to vote

Everyone who's going to vote next Tuesday should go read Jacob Levy's terrific exposition on the implications of a 50/50 national Democrat/Republican split.

Incidentally, for those in New York, I'm looking for a public place to watch the election returns so we can have Blogger Bash 3.635. Nathan Hale's apparently doesn't have anything planned -- anyone else got any suggestions? And would anyone be interested in attending such an event?

Update The permalink is broken -- fie on blogger! Just go to his main page and scroll down.

From the desk of Jane Galt:

Just when you thought it

Just when you thought it was safe to go back in the water. . . a FedEx truck has just blown up on a highway near St. Louis. The cab is intact, and the occupants, thank God, escaped without harm. . . which makes it almost certain that this was a bomb of some sort.

Yes, sir, we sure do live in interesting times.

Update Seems the problem was not a nutjob sending bombs, but that other bane of Live from The WTC -- an overtired truck driver who nodded off.

From the desk of Jane Galt:

So every time we talk

So every time we talk about prescription drugs, we get people complaining about advertising. And the drug they complain about most is Vioxx. Sigh. They say that in most cases aspirin would do just as well, that it's an unnecessary expense, that the commercials send patients scurrying to their doctors to demand drugs they shouldn't have.

For the past year, my mother's had pain in her arm and hand that has gotten worse over time. Aspirin helps, but not enough. She can't open cans or bottles if the lid is tight, and she's had to give up needlepoint. Yesterday, she finally went to a doctor to find out if it really was arthritis, or something else.

He prescribed (I know you saw this coming): Vioxx.

She didn't ask for it; my mother has never seen a Vioxx commercial, as she doesn't watch much television. Moreover, she's not the kind of person who walks in to her doctor's office with helpful suggestions for the guy who spent 10 years studying medicine and another 20 practicing it. So clearly, some doctors do use the stuff, despite the insistence of my interlocutors that it's just more expensive aspirin, good for nothing except pumping up pharmaceutical firms' bottom lines.

I just spoke to her. "The pain is gone", she said, with wonder. "I can't believe it -- I just took the first pill last night. It's gone. Until this morning, I didn't even remember what it felt like not to have pain in that arm. I can't tell you what it's like not to wake up in the night . . . to sleep all night and wake up without that pain." When we finished speaking, she was off to see if she could open a bottle of Pellegrino, a task that has been beyond her for the last year.

It's a pity she didn't see those useless Vioxx commercials six months ago.

From the desk of Jane Galt:

What are the Democrats thinking?

What are the Democrats thinking? From Kausfiles:

Valerie Bauerlein of TheState.com reports on the recent debate in South Carolina between Democratic U.S. Senate candidate Alex Sanders and Republican Lindsey Graham:

Sanders said Graham was the one running a TV endorsement from Rudy Giuliani, former mayor of New York City.

"He's an ultra-liberal," Sanders said. "His wife kicked him out and he moved in with two gay men and a Shih Tzu.

"Is that South Carolina values? I don't think so."

Prediction: Sanders will get a pass for his gay-baiting a) mainly because it's the sort of deliciously cynical cheap shot reporters who enjoy covering politics savor; b) secondarily because he's a Democrat running against a Clinton-impeacher and won't be attacked by gay-rights groups; c) because he has some sense of comic timing; d) because he's a pretty appealing fellow; and e) because he's going to be repudiated by the voters... But Sanders probably should be blasted for it anyway. Over to you, Frank Rich.

I feel at little upside-down here. When did the Dems become the party of gay-baiting? Toto, I don't think we're in Kansas any more.

From the desk of Jane Galt:

Busy, busy right now. .

Busy, busy right now. . . little time to post. Hope I can tide you over with this fascinating email from one of my readers:

Jane,

A very brief note on a phenomenon that struck me last night as I watched German TV. Sabine Christiansen is a well-regarded talk-show moderator, who hosts a number of guests on her show every other Sunday evening. (Unlike most of her American counterparts, she seems content to set the stage with a few comments at the outset and minimal interference during the discussion. Her guests are generally 'doers' rather than talking head, and each show seats 5-6 people of various stripes in an attempt at a roundtable discussion of events of the day - to the extent that guests refrain from spouting set-piece sound bytes.)

Anyway, last night the theme was the German economy, or more specifically reforming the German economy. Remarkably (or at least I remarked to my girlfriend), not a single guest was from the private sector ! I may be overstating, but if there's a clearer indictment of what's wrong with the German concept of the economy, I don't know what it could be. This panel encapsulates perfectly the German idea that government (either liberal or conservative, but still government), unions and academia are the forces to
decide how to organize the economy. Small wonder that Germany's now being referred to as the 'sick man of Europe'.

Don't know that many of your readers would be interested in this tidbit (since Germany is already so far on the outs that it would take major rehabilition to get back to 'misguided'), but the show certainly demonstrated the gulf between accepted economic theorizing in the US (even among liberals) and in Germany (even among conservatives).

Cheers,
Bob

PS - There was so much statism in play, that I couldn't bear to watch any longer and switched to a in-depth piece on the Moscow horror.

It's interesting, when you hang out with Europeans, to find how different our conception of liberal/conservative is. Even liberal Europeans are in many ways more socially conservative than conservative Americans; they're willing to tolerate a degree of enforced conformity that is quite amazing to an American. Though they may argue about what the One Right Way to do things is, they have little problem with the state, not to mention the neighbors, deciding there is a One Right Way and setting policy around that ideal.

Which I suppose just feeds into the prevalance of the idea, even among conservatives, that there is also a One Right Way for the economy, and that the state should be the driver behind that as well.

Many of my European friends tell me that to them, the political spectrum in America seems bizarrely cortated -- they have parties much farther to the left, and even some much farther to the right (socially), than ours. But on the other hand, the substantive disagreement between their parties is not between more or less state intervention; it is over how, not whether, the state should run people's lives.

From the desk of Jane Galt:

Jeff Jarvis points out the

Jeff Jarvis points out the biggest problem with Tablet PC's -- no keyboard.

Back in the dark ages, when I was a secretary (we spelled it "administrative assistant"), I had a boss who got himself some dictation software. Looked like fun, so I tried it. Uggh!! I type around 80 words a minute, last time I checked. The talking software clocked less than 30. It was like trying to wade through a molasses thought-fog while wearing concrete neuron-boots.

[Okay, that was a stretch. Work with me, people. I'm breaking new literary ground here.

Okay, well, actually I'm not. The entire New York writing community seems to have arrived at the Impossibly Complicated Mixed Metaphor long before I got there. And what fun it is!

Just clap and cheer, like you do for the slow kid at the end of the race, 'kay?]

Anyway, I'm with Jarvis -- until they figure out a way to get my dictation or handwriting speed up to my typing speed, I'm sticking with the laptop.

From the desk of Mindles H. Dreck:

More on SEC & Reporting Reform

A thoughtful anonymous reader had the following comments on my reporting reform ideas (inserted in [brackets] for reference). I'm responding in an "interlinear" fashion, but do not mistake it for a you-know-what-ing.

1) [repeal IRS 162 limiting salaries] Agree

2) [revise regulation FD] Disagree. Transparency is not a goal of FD, equal access to information is. If the only value add the analysts had was to be able to wheedle material information out of the Company that no one else had, then they are only exposing the quality of the Company’s Investor Relations, not its operations. It seems to me that Wall Street analysts are a lot like CIA analysts; the problem is not too little data, but too little analysis. Let analysis stand on its own and be paid explicitly for the value it adds. Otherwise, it is, and always will be, only a marketing arm of the investment bank’s corporate finance department. And it will be worth what it is paid by those who pay it.

I think the reader shortchanges the role of questioning in analysis. Analysis consists of looking at the available information and using it as a guide for where to look next. In the case of a sell-side analyst, that would result in a request for an unreported metric (think book-to-bill and things like that) or nugget of information that exposes the weakness or strength in the company's outlook. Regulation FD makes providing that sort of information to analysts difficult.

I agree with my reader that there is already a sea of information there, and that Wall Street wasn't paying attention (remember, analysts need to figure out what people will pay, which may or may not be connected to the fundamentals....). FD may not have hurt quantity, but it hurt quality and the ability to look deeper.

3) [dilute primary earnings with outstanding options] Agree and raise you. It seems to me that fully-diluted shares should include all shares in option pools, regardless of whether they have been granted or not. Also, no fancy methods of computing number of shares, just primary and fully-diluted as if every share that could be issued were.

Yeah, although it might seem a little unfair if companies started issuing deep out-of-the-money options.

4) [supplemental disclosure of compensation] Disagree. Effective August 29, 2002 any change in beneficial ownership by a director, officer or 10% shareholder must be reported on Form 4 before the end of the second business day following the date on which the transaction was executed, with some exceptions for situations in which the insider does not control the date of execution, e.g. 10b-5(1) plans and other employee benefit plans. Form 4 shows the number of shares and the price for the transaction. What more do you want?

I agree that all the information is available in the footnotes and 10Ks and nobody looked (as discussed in this post). I'm saying value the option grants using Black-Scholes (rather than expense) and put it up front with earnings, just to satisfy the options hawks.

5) [auditors should disclose fees by category] Strongly disagree. The biggest problem with audit is that it has been degraded to a loss leader for consulting. Now, you want to put additional price pressure on them at the same time you want them to get rougher with management! I can hear the next board meeting now: Director A, “CFO, did you see on the web that Amalgamated is getting its audit for 80% of what we’re paying? Why are we paying so much?” CFO, “They had a lot of clean up work to do from the mess my predecessor left, but we’re going to drive them down to a reasonable level this year!” I don’t know if you have noticed it, but many of your proposals push the auditors and the government closer together. That may seem to make sense at first, but at the end, and we’re approaching it soon, we’ll get audits that look more like sales tax audits than evaluations and judgments by sophisticated, knowledgeable professionals on the accuracy and veracity of financial statements. Besides, do you really think auditors are adding value to a company’s financial reporting?

I agree that auditing has been commoditized (and I said so). Seriously, though, you don't think this already happened in a cozy phone call? It is up to the auditors to maintain price discipline. Disclosure might work both ways. In answer to the last question-rarely.

6) [disclose contracts with affiliates] I certainly need more information about this, but for starters, are you asking to have the entire contract disclosed? The in addition item is shutting the barn door after the horses have left. What ever rule you set up there, the crooks will find a way around it and it is a needles nuisance to the vast majority of companies that are not run by crooks.

This generation of horse has left, but their offspring have not. Revenue recognition methods produce a scandal every five years or so - from pre-fab housing to AOL. Contracts are a good way to transfer value in contingent liabilities and legal control instead of numbers. Large contracts involving affiliates should have their principal terms disclosed. Arms-length contracts would have to meet a materiality test. Certainly, any encumbrances should be disclosed.

7) [eliminate corporate taxation/double taxation] Couldn’t agree more, though, what I would do is not eliminate the corporate income tax, but limit it to a percentage of the net cash flow from operations less dividends paid within 90 days of the end of the tax period. Clean, neat, simple. If managers want more capital to operate the business, they should have to go to the capital market to make their case, just like any start up. They should not have this competitive advantage of a constant, captive, involuntary, free source of capital from retained earnings. In fact, they should be taxed if they fail to return earnings to the shareholders. This would force managers to be much more responsive to the needs of the market for information and give the market many more opportunities to gather information and discipline wayward managements.

Unfortunately, cash flow from operations can also be manipulated, especially if the company is active in the financial markets. Enron's were pretty opaque - they tended to run negative in the first three quarters and have a big fourth quarter.

The SEC provides little information that institutional investors could not get and no information that is of use to small investors. I doubt that the SEC did much to contribute to the quality of markets in the 50 years prior to 1990. Nor do I think the SEC had much to do with the excesses of the ‘90s. I think the most important factor in the debacle of the last decade is that there were less than 10 people left on Wall Street who worked there during the Crash of ‘29. And I will go way out on a limb and suggest that the next outburst of irrational exuberance will commence in 2070 and end in 2080, (both dates plus or minus 10 years). Following that I would list the GREED of every INVESTOR who thought they deserved venture capital returns on treasury bill risk. Thinking there was something the SEC could or should have done that would have prevented it is naive. Trying to prevent it in the future is futile. The best we can do is make the hangover less painful. And so far the ‘00’s are a lot less bad than the ’30’s.

Too true. We can try to club people over the head with the "right" metrics, but it's clear that the bread crumbs were all there. See Michael Lewis on this today. I think his point about the old economy biting back is valid.

I agree that transparency and the rule of law are necessary to efficient markets and there are opportunities for improvement.

First the rule of law. We have enough laws on the books now. What we do not have is enough enforcement. What the SEC should do is not to try to find the 1 in 1,000 business that are crooked by making life hell for 999 businesses. It should make sure that life for the 1 crook is a hell of disgrace, public humiliation and hard time followed by death in poverty. If found guilty, Bernie Ebbers and Andy Fastow should spend a substantial potion of the remainder of their lives at a maximum security prison, not Club Fed. If they get Jeffrey Dahmer for a cell mate, so be it. Who caused society more misery? So, the SEC should enforce the law by making the guilty, not the innocent, pay with great public fanfare to dissuade the other 999 from following in their footsteps.

I agree that there are plenty of existing laws to deal with most of the recent fraud. It's not so much enforcement as prosecution where we fall down. I'll leave it to the lawyers to figure out why we can't send white-collar criminals to jail.

Transparency? I think the virtual elimination of retained earnings together with weekly public reporting on cash and revenue, monthly release of financial statements and the elimination of the 10-Q would go a long way to assuring transparency. This is information that the companies are already producing for internal use so should be no incremental burden to the Company and substantial new information for investors.

Well - now he's sounding like me.

From the desk of Jane Galt:

Now . . . big

Now . . . big Live from the WTC kudoes will go out to the first reader who notes and instance of a journalist or academic making reference to, without irony, Bellesiles work "proving" that early Americans didn't have a lot of guns.

Update Reader Dave F. emails this link, from the Violence Policy Center. It'll be interesting to watch if they change this, now that the work has been about as thoroughly discredited as is possible without an extended John Edwards session with the Founding Fathers, but we're looking for works that are

a) Unironic: the writer is unaware that Bellesiles has been discredited.
b) Written after Emory's findings.

Although if you'll keep emailing me links that show people who are knowingly continuing to use a tainted source -- as we must assume that the VPC, which has been heavily involved in this case, is. Or at least, we can so assume if they continue using it, as they've hardly had time to find every link to him on their site yet. Anyway, if you keep sending me the links, I'll put them up. I think it's worthwhile to expose these things. I also think it would be worthwhile, at this juncture, to write the Nation and let them know that you expect them to notify their readers that a non-partisan group of highly respected historians has given Bellesiles the thumbs-down.

From the desk of Jane Galt:

If the blogosphere is a

If the blogosphere is a neural net, let's throw some brain cells this guy's way.

From the desk of Jane Galt:

I hate to bring it

I hate to bring it up, but it's interesting, and several readers have emailed about it. Remember a couple of weeks ago when Slate had an article claiming that the stock market liked Democratic presidents? Which was cute, because the article achieved this miraculous effect by carefully choosing it's time period: 1947 on. If you'd chosen something more obvious, like say, the 20th century, you'd find that the stock market absolutely hated Democratic presidents, since it enjoyed all but one of its worst years under FDR. Or if you'd knocked out the most glaring bubble portions of the Clinton years, where it's obvious the stock market wasn't doing us any favors by rising so precipitously, you'd reverse the effect. Which is not to say that this is correct either. The data is extremely thin, and there's generally too many things going on to isolate the effect of the executive. Was Nixon a better president for the economy than Carter? Worse? Everything was so awful in the 70's, it's sort of like trying to answer that age old favorite: burn to death or freeze to death?

[The answer, by the way, is freeze. Sure, it takes longer, but at the end you get nice and sleepy and deliciously warm, as anyone who's ever had hypothermia will tell you. Overall, not a bad way to go. Burning, on the other hand. . . not so nice. But I digress.]

The article wasn't any sillier than any other sort of spurious correlation journalists pick up on to fill the barren expanse of column inches their editor demands. But it was hardly the compelling economic evidence that some lefty bloggers decided it was.

However, over very short time periods, it's much easier to both establish correlation, and do something akin to a natural economic experiment. Which is why what happened in the stock market yesterday is so interesting: as soon as word came across the wire that Paul Wellstone had died, the market turned around and started going up. It's hard to avoid the conclusion that traders were trading on the now-suddenly-higher probability of getting a Republican Senate. It wasn't Wellstone in particular; it could have been any Democrat up for re-election. But the traders clearly think that a Republican Senate will be good news for them. The timing is just too close for it to be anything else, particularly as there was no other news I'm aware of in the market.

Now, that isn't necessarily good news for us. They might have decided that they were going to get less crackdown on corporate thieves, which is not, on net, a good thing. They might have decided that this meant we were going to invade Iraq, subdue the Middle East, and begin shipping booty, women, and slaves back for the kings of Wall Street to feast on. We don't really know what it is they preferred about a Republican Senate. Hell, if my experience with traders is any guide, they probably don't know what they prefer about a Republican Senate.

But at the very least, this should teach people to stop taking every puff piece as a sterling vindication of their deeply held convictions.

From the desk of Jane Galt:

So Michael Bellesiles has resigned,

So Michael Bellesiles has resigned, and it's hard to read the findings of the investigating committee without feeling a wave of compassion. If you've ever read academic reviews, this finding is the professorial equivalent of running around the quad shrieking "He's a big, fat liar!"

This was the right result. The review process worked, although obviously much, much less quickly than it should have -- the finding goes out of it's way to spank the journal where Bellesiles work on guns was first published, asking why no editor had thought to ask that Bellesiles supply the basic information needed to understand his tables. This is the professorial equivalent of giving them the fish eye and saying, "So, you guys just publish anything any idiot hands you? Or aren't you bright enough to read the little numbers in the boxes?"

It's instructive, though, that it took too much publicity to get the right result. Happy as we are that the integrity of the profession of history has been upheld, it's troubling that absent publicity, it probably would have taken 20 years or more for the record to be set straight. During that time, Bellesiles' work would have been incorporated into court cases, public policy, and the minds of millions of people . . . damage that would probably continue long after professional historians knew the work to be false. This tendency is apparent in almost every profession, particularly cloistered ones like academia, medicine, and police work, where practicioners tend to feel that it is "us" against "them", and when one of our own screws up, it's better to circle the wagons and protect him than risk one of "them" finding out that we aren't perfect. This should be a wake-up call to academics everywhere -- but of course, it won't be.

It's also instructive that Bellesiles thought he could get away with it. A friend has a theory that Bellesiles, like the guy at Bell Labs, wasn't in it for self-aggrandizement, exactly, but is just a compulsive liar. He got such a high from putting one over that he simply couldn't stop, even though the longer he went on, the more likely it was that he would be discovered. Another friend, an academic, thinks it more probable that Bellesiles really believed that he could get away with it. And of course if he had, the rewards were astronomical. Being the TV historian for gun issues . . . the lecture circuit. . . the prestigious prizes . . . [here I interject the opinion of an anonymous emailer, a graduate student in history, that the most embarassing thing about all of this is the famous historians trying to save face by claiming that the book was a towering work that would have gotten the Bancroft even without the probate records, indeed even had the subject not been so controversial: "the rest of the book, at least the parts that aren't misrepresented, is a trivial recount of explosive new facts that have been well known to professional historians for a hundred years"] . . . and indeed, it's hard to ignore the fact that Bellesiles became very famous for contradicting commonly accepted views of historical gun rights, even before his data was challenged. It seems likely that he picked his topic with that end in mind -- it's hard to imagine the New York Times devoting that much space to a shattering new interpretation of, say, early 19th century tariff laws.

So one can say he tried to lie his way to fame and fortune, and got a much-deserved comeuppance. And yet, I feel sorry for him. Just as I feel sorry for Monica Lewinsky and everyone else who sought fame and fortune, and found it in very public humiliation. We've all had the feeling, I imagine, of not being quite able to make it. We've all been tempted to push the envelope, go out on a limb, do something maybe not quite right just to put ourselves over the top. Thank God we didn't. We found a job or a field where we were more qualified, or we learned to compensate, or we accepted that we weren't ever going to win the Nobel Prize. But is it really so hard to imagine yourself taking that first step -- making up a couple entries in a table, maybe, to make your case look a little better? And when no one caught it, to make up a little more, so your case was really dazzling? And when people responded by showering you with praise for your results, is it hard to imagine how intense the pressure must have been to keep serving them up? People on HNN have been jumping all over a history professor for suggesting that this is a tragedy for Bellesiles -- that the peer review system served him as badly as it served us -- but really, couldn't we have saved ourselves a lot of grief by catching this the first time? Bellesiles might have been spanked and sent back to do better research, instead of rewarded in a way that demanded he produce ever more outlandish results. And how hard is it to imagine the hell he has been living in over the past few years, desperately lying to cover his previous lies, breathing a little easier as the questions receded for a time. . . but then the noose inevitably closing in? He didn't behave well, and he doesn't deserve mercy. But when we see a man destroy himself by inches, I hope we can muster up some compassion. His life is effectively over. He will never work again in his chosen field. He will never publish again. He stands revealed to everyone whose opinion ever mattered to him as a liar and a fraud. Frankly, I find it hard to imagine what he will do, since professors rarely have a lot of money, and their skills are somewhat rarified. Most of the professors I've worked for couldn't even type or file well enough to work in an office.

We shouldn't gloat, and we shouldn't say that Clayton Cramer and James Lindgren "won". It wasn't a contest. I think Volokh is right: they deserve our thanks for helping to set the record straight, not our congratulations.

Update Erin O'Connor makes an important point about the general condition of research in academia. As Instapundit points out, peer review is good for picking out problems with methodology -- but true frauds just fake the data. Hard science does a lot better at this -- generate interesting results, and you'll be deluged with requests to see the data so that other scientists can replicate it. It's time for the humanities to adopt the same standards, giving points for replicating results as well as generating them.

I also don't find it particularly likely, as some have accused, that Bellesiles was out to destroy the gun rights movement. He certainly wasn't fazed by the idea that his work would do them harm; indeed, it may have tickled him. But I don't think he would risk spiking his career this way for a political conviction he didn't seem to hold that strongly. I think he did it to get famous, not to advance his political agenda. Obviously, the better way to get famous was to pick something controversial, and I'll even venture to add, take the liberal side so the New York Times will give you good press. But it's a little extreme to think that he did this just to get the NRA.

From the desk of Jane Galt:

And the conspiracy theories are

And the conspiracy theories are already flying. On the left, I've already had two emailers suggest that this is a plot by my "best buddy, Shrub, the presidant-select" [sic] to. . . well, that part isn't very clear. Rid the world of dangled participles, perhaps. From the right comes a slightly more plausible correspondent who points out that the Democratic Party is probably better off trying a Jean Carnahan than trying to get Wellstone re-elected; in a year, when the passions have cooled, the Dem goes back in a walk. But while I am hesitant to state that there is no depth to which the leadership of either party would sink in order to get re-elected, I find it rather hard to believe that Tom Daschle and company have been scurrying about the country arranging for planes to crash in remote areas of Minnesota. To those on the right who do not put that much faith in the goodwill of the Democratic leadership, let me point out that this would take far more organization and planning than anyone in the party has heretofore displayed this election cycle.

Now, I like a good conspiracy theory as much as anyone. But there are times when you've just got to crunch a little extra tinfoil into your hat and accept that sometimes people die just because, hey, that's the way we're designed. That's why they call us mortals.

Update I've been chastised for calling the right-wing conspiracy theory more plausible. Let me make it clear that I meant that it was more plausible in the sense that I think this helps, rather than hurts, the Dems chances of holding the senate -- NOT in the sense that I think that Tom Daschle is more likely to have ordered Wellstone killed than, say, George Bush.

From the desk of Jane Galt:

So the reason McCall is

So the reason McCall is making such a poor showing here, apparently, is that he's out of money; spent it all on the primaries against Andrew Cuomo, the never-never candidate who, as you may recall, managed to drop out of the race after costing McCall the maximal amount of money. Democratic sources in the now say there's now a better than 50% chance that he'll finish behind Golisano, which means that the Independence Party will precede the Democratic on the ballot for the next four years. I won't venture a guess as to whether or not New York voters are so stupid that this will actually make a difference in the party's standings here.

Now the Democratic Party is telling the campaign they won't help him unless he gets his numbers up, which is idiotic, because he's had no money for media, running against two candidates that are saturating the airwaves. It's probably too late, but if Democratic readers want to put a little money in, or lean on the party to do so, it would help avoiding a seriously embarassing incident. It's going to be a nice black eye if one of the most reliably Democratic regions in the country drops the Democrats below the party of Ross Perot. Full disclosure: McCall isn't going to win. But hey, at least the Democrats could hold their head up in the state.

From the desk of Jane Galt:

Well, Blogger was out, because

Well, Blogger was out, because it was hacked, but it seems to be back up now.

For fellow amateur pundits who use Blogger, this means that you should change your password immediately, even though it’s improbable they scooped it. At minimum, you should change your passwords for your ISP, and any obviously related services, such as Yahoo or Hotmail, for which you use the one password you’ve managed to remember.

[Don’t shine me on. I used to work in IT. I know you use the same password for everything. Time for a change. And not the kind of change where you add a number or letter to the old password, ‘kay?]

We apologize for the inconvenience. We now return you to your regularly scheduled blog.

From the desk of Jane Galt:

Paul Wellstone and his wife

Paul Wellstone and his wife and daughter have been killed in a plane
crash. I didn’t agree with his politics, but I admired his conviction and integrity.This is a terrible tragedy.

From the desk of Jane Galt:

Has Jimmy Breslin lost his

Has Jimmy Breslin lost his mind?

From the desk of Jane Galt:

Interesting. . . seems Books

Interesting. . . seems Books Online is segregating books that have been pulled from public domain in the US due to the recent copyright extension. Of course, if you are in the United States, where such works are still protected, you shouldn't look. No, not even if you cover one eye.

From the desk of Jane Galt:

The guys on the news

The guys on the news are saying that Muhammed shot "expert" in the military. For non-military readers, I think the way it works is that everyone who goes through basic training has to qualify on a rifle range as able to shoot the darn thing without taking their foot off or hitting a bystander. There are a number of levels at which you can qualify. . . some dim memory is telling me that among the levels are "marksman", "expert", "high expert" and "sharpshooter", in approximately that order, but I can neither guarantee that that list is exhaustive, nor that it is correct and in the right order. At any rate, I seem to remember that qualifying as an expert is not any particular feat; the media is making it sound as if it's just a short step from there to being a sniper. Can someone from the military comment?

From the desk of Jane Galt:

Spoke too soon -- looks

Spoke too soon -- looks to me like a couple of nutjobs, one of whom possibly wanted to create his own private Al Qaeda. But I'm not going to bet on whether this is true or not, because sure as shooting, as soon as I come out in favor of the lone nut theory, it'll turn out that this Muhammed character is the bastard stepchild of Osama Bin Laden and Yasser Arafat.

From the desk of Jane Galt:

I have to go down

I have to go down to Washington next Thursday. Washingtonians, if I have to be at 2400 E Street NW at 7 AM, where's the best area to stay the night before?

Northwest Washington
Foggy Bottom/Georgetown
Dupont Circle/Embassy Row
Airport
Arlington

I'll have a car, (though I don't know if I can park it where I'm going). Deeply appreciate any input.

From the desk of Jane Galt:

Whoa, I walk away from

Whoa, I walk away from the TV for ten minutes, and suddenly they go and link the sniper to international terrorism? Can't I leave you guys alone for a second?

I don't know what's going on, but I assume it's terrorism. They wouldn't be looking for people in Washington and Alabama unless they had some pretty good evidence (or so I devoutly hope), and I don't see how they could be searching areas that dispersed unless there's some kind of group involved, which makes it terrorism. IF it's terrorism, I find it unlikely to be our domestics -- this isn't their kind of nuttiness. But who knows? Maybe they're trying to get Hale-Bopp back or something.

Boy, oh boy, I can't wait until the whole story comes out.

From the desk of Jane Galt:

Someone else is suing the

Someone else is suing the airlines for making them sit next to someone who took up more space than they paid for. And this time it's in England, where you can't blame it on our crazy liability system.

From the desk of Jane Galt:

For those arguing that national

For those arguing that national health care wouldn't cut research spending, there's this from Derek Lowe, who is a pharmaceutical research chemist:

I well recall that pharmaceutical brown-out known as the Clinton Health Care Plan. Everyone just stopped hiring scientists - raked the resumes into the trash can and spent the interview budget on something else. It wasn't a great time to be a fresh PhD or post-doc, that's for sure. Not that it was a picnic being employed, because some companies seemed to take the opportunity to make unpopular moves. And why not? If you didn't like it, where else could you go?

I'm sure some commenters are even now warming up their fingers to point out that he works for a pharmaceutical company. Well, yes, he works in research. I doubt he much cares whether they cut their advertising budget; what he wants is for there to be lots of jobs researching drugs. And he doesn't think there will be if there's national health-care -- and apparently, neither did the pharmaceutical companies, who, I dare point out, probably know better than you do. And when they thought the health care system was going to be nationalized, what did they do? Slash advertising? Nope, research.

From the desk of Jane Galt:

Outstanding: Mindles Dreck has some

Outstanding: Mindles Dreck has some suggestions for real reform of the way we regulate disclosure, not just handing the SEC more money and eliminating the expensing of stock options. And so I've decided to make a list of my own: reasons why just increasing the budget of the SEC will not magically make companies honest.

1) Regulatory Capture (follow the link -- one of the most outstanding "explanation" posts of all time) The SEC, like every other regulatory agency in history, eventually comes to serve the interests of the industry it regulates rather than the public at large.

2) The investment banks and their law firms have more money than the SEC The main enforcement guys at the SEC are lawyers. I don't know how much they make, but it's some embarassing sum lower than 40K a year. How much lawyer do you think you could buy for 40K per annum? Yup, the market works. And that means that the lawyers thinking up ways to evade the regulations are going to be, on average, smarter, more driven, and working longer hours, than the lawyers trying to enforce them.

Raise their salaries to the level of other government lawyers, you say. 70K? Starting salaries for freshly minted JD's at white shoe law firms are in the $125-$150K range. You going to pay the SEC lawyers that much? Honey, that's what the director of a government agency makes, not his enforcement staff. Meanwhile, the gap between what experienced lawyers in the public and private sector make is even more stark. And the same dichotomy holds true for accountants. You can make more setting up shop as a private accountant (after a couple hungry years, anyway) than you will ever make as a government agent. And while the FBI and the Justice Department are able to attract some talent anyway, they attract it largely because going after criminals is sexy, which going after the guy who erroneously booked his depreciation on a piece of equipment in Q1, even though the machine didn't ship until Q2, is not. And because there are lucrative opportunities in the private sector for people who put in a couple of years at the FBI or the Justice Department. The same is true of working for the SEC, of course. . . and those lucrative opportunities are located at the firms you are asking the SEC enforcers to descend on like the proverbial ton of bricks.

3) Many of the rules that need changing need Congress to change them. Congress is filled with two kinds of people: people whose eyes glaze over and whose palms begin to sweat when you start saying things like "NOL carryforwards" and "insufficient allowance for return of merchandise received"; and people who understand these terms, indeed revel in them . . . because they spent a significant amount of time working for one of the banks or law firms you want them to regulate, made most of their money that way, and still count the titans of that industry as close personal friends.

4) The public doesn't understand anything about accounting regulations. This makes them easy to demagogue. Hell, I understand accounting regulations better than, apparently, 99% of my readers, and 100% of journalists. Yet I often have to have Mindles or a similarly erudite person take me gently by the hand and explain to me why my take on a particular regulation is. . . ahem. . . idiotic. It is very, very difficult to make an informed decision about an issue like, say, the expensing of stock options.

(Thank you, incidentally, to those anonymous fellows who emailed to say "I think you're an idiot. Why not just pass a simple regulation?" It is instructive in these situations, I think, to ask yourself something: given that all the people arguing about it know quite a lot about accounting, and given that you don't know anything about accounting, do you think that it is more probable that the answer really is simple and everyone else is just an idiot, or that the answer is very complicated, and they're not the idiots here? If you answered the former, why don't you go find some physicists and lecture them on how you could do things better. The accountants already have enough back-seat drivers.)

Because the public has no realistic hope of actually making intelligent decisions on issues such as that one, agencies tend to careen between two states of affairs:

a) No one is paying attention to what they do, because it's complex and boring.

The agency regulates in a way that benefits the people who do care -- the companies, and their lawyers and banks -- because those are the people who are going to go to congress and complain if the SEC rules against them. Witness the march on congress of the technology industry in the face of a proposed change in the taxation or regulation of stock options. These are not, by and large, executives who are concerned about aggrandizing their own wealth (well. . . not solely concerned, anyway.) These are executives who are genuineley concerned about their ability to attract both capital and prime techie talent if the regulations are changed. They're self-interested, but not necessarily in a way that seeks to screw the rest of us for their own benefit. And in California, they vote. Cross them, and you can expect to have Boxer and Feinstein screaming in your ear in no time flat.

b) Something has gone horribly wrong and everyone is paying attention, and the public is screaming for you to do something now.

At this point, journalists, who know just about as much about accounting as they know about 7th Century Mayan Pottery (much less, in many cases) are going to be paging through all the regulations, searching for one that sounds relevent and can be paraphrased in a single sentence. Chances are better than even that they will either misunderstand the regulation (such as the journalists who appeared to think that the reason Enron's off-balance sheet entities were fraudulent was that they were located offshore), or totally misunderstand its implications (such as the journalists who think that banning accounting firms from consulting will eliminate conflicts of interest, without noticing that the audit firms still get all their revenue from the same source, the companies they audit; they just get less of it now.). Because they haven't the faintest clue how to read a financial statement, and aren't going to waste valuable time learning just so they can do some stupid story on financial statements, they are going to get the majority of what they report factually wrong, and come up with suggestions that will be as well thought out and useful as a journalist suggesting to an aerospace engineer that because birds can flap their arms and fly, we ought to be able to do so as well. Those will be the stories that the public reads that generate such useful thoughts as "Why is it so hard to just pass a simple regulation?"

Then their congressmen, aided by political science graduates who get all their ideas about accounting from the journalists, are going to pass some laws based on what will make the voters who read the journalists' stories think that their congresscritters are doing something about the problem. Given the public process by which the likely subject of those new laws has been selected, there are three possible outcomes:

i) The law will solve more problems than it creates.
ii) The law won't do anything much, or will create as many problems as it solves
iii) The law will create more problems than it solves.

Given the fact that the people involved have absolutely no background that would enable them to actually assess the effects of the laws they pass, the best-case scenario is that it mimics a random distribution: in other words, you have a 2/3 probability of doing nothing worthwhile. The worst-case scenario is that the bad ideas are easier to explain, and thus more likely to get passed, than the good ideas. Anyone who has ever actually tried to get the government to do something can judge for themselves which is more likely.

5) IT IS NOT POSSIBLE FOR THE SEC OR THE PRIVATE AUDITORS TO CATCH A COMPANY DETERMINED TO COMMIT FRAUD. I don't like to shout, but I'm a little fatigued by people who seem to imagine that a "beefed up" SEC is going to be some kind of real-life Hall of Justice, where accounting heroes swashbuckle about uncovering corporate fraud and abuse. First of all, as I pointed out above, you can't afford to hire the superheroes. And second of all, you have absolutely no idea about the scope of what you're proposing.

The public thinks that when Arthur Anderson went in to check a company's books, they poured over each and every entry, scrutinizing it for possible fraud, checking that it all tallied, and interrogating the executives about anything even slightly suspicious. Or rather, they think that this is what Arthur Anderson was supposed to do, and didn't. Child, when an audit team goes in, they take last year's results, check any "material variances", a.k.a. big changes in the numbers, and do a few spot-checks. That's how audit works at all teh companies. And that's how it will continue to work, because it's just not possible to apply the kind of scrutiny you're imagining.

It takes companies a fleet of accountants, payroll people, managers, and finance staff to generate all the numbers you're talking about. Checking everything they do would require an even bigger fleet. Plus, you'd have to make the number of finance, etc. employees 3 times bigger, because they'd be spending a significant portion of their time explaining to the auditors what they'd done. Which would in turn require more auditors. . . meanwhile, the company can't actually make or sell anything, because they're too busy explaining what they made or sold last year to the auditors. Compared to the level of scrutiny currently in place, you're talking about a simply massive reallocation of resources to audit.

Say getting a really good audit requires increasing the number of employees by 1%. That's probably conservative. You're talking about taking enough workers out of the limited pool of skilled labor and transferring them to do work that is economically unproductive: all it does is check that companies actually made the stuff they say they made. Now, it's worth it if the damage to the economy is more than, say, 1% of GDP. But that isn't the case. The scandals were bad, and they hammered the market. But the market was going to get hammered by something, because it was enormously overvalued. The cost is all out of proportion to the benefit.

Meanwhile, if the company really, really wants to lie, they're going to put in five of their really sharp folks to surround the area they're lying about, and you're not going to catch them, because they're good liars, and because they know what you're looking for, but you don't.

Increasing the SEC budget may be worthwhile, but absent the kinds of structural changes Mindles is talking about, it's not going to fix the problem. And those changes can only come from reasoned debate between people who understand the issues, not mass hysteria.

From the desk of Jane Galt:

Well, smack my fanny, the

Well, smack my fanny, the Democrats are worried they're going to finish third in the New York governor's race.

That would be a major ouch! for the party, since it means they'd drop to third on the ballot, behind the Republicans and the Independance Party, for the next four years.

This is thanks to a lackluster campaign run by Carl McCall, combined with the advertising strength of filthy rich, certified wing-nut Tom Golisano, who has been attacking Pataki, but ironically, seems to be picking up Democrats who want to vote against Pataki, instead of the apparent target of his ads: Republicans who want to vote for someone who will actually, you know, govern like a conservative. Fiscally, I mean. Not that Golisano is necessarily that man; he's run for election before, and looking over the platforms he's run on, it's hard to see what he really stands for, except of course election.

Meanwhile, Pataki has been running some really atrocious ads against Carl McCall, basically accusing him of wanting to rape the environment, leave our children unwashed and illiterate, kill our needy seniors, and all manner of other horrors. . . all because as Comptroller, he didn't vote for companies to embrace price caps on prescription drugs, bizarrely cost-ineffective environmental proposals, and similar sterling ideas. In other words, he didn't violate his fiduciary duty to the people he was supposed to be representing. We've reached a pretty pass when the Republican governor is running to the left of the Democratic candidate -- except it's hard to be sure that's actually the case, because I've yet to see anything from McCall except a couple of genial news conferences at which he comes out foursqare in favor of Mom, Apple Pie, and Our American Values. I don't like the Pataki ads, but it's hard to be too angry about them, because the McCall response is so weak. Pataki's campaign has saturated the airways 'round here, and not once have I seen a McCall ad running against them. I know they may be short on cash, but what are you saving it for, Carl? The concession party? Election's in two weeks.

I still don't know which way I'm going to vote; every time I think I've decided, another ad runs and I change my mind. But my mother, who is an invaluable barometer for The Sentiment of the People, is thinking about voting for Golisano. She knows he's a wing-nut, but. . . "Pataki's just too much of a tall white man," she says. And McCall?

"Who's McCall?" she says, frowning. "Oh, the Democratic candidate? Is that his name?"

I think the Democrats are right to be very, very afraid.

From the desk of Mindles H. Dreck:

A Few Suggestions for Corporate Reform

Paul Krugman feels the administration has intentionally sidelined the corporate reform effort, thereby leaving the foxes in charge of the henhouse and making the world unsafe for democracy, etc. etc.

He has a point, although some would be more forgiving given the distractions of international politics at this precise moment. I take issue with the reflexive solution of simply growing the SEC's enforcement budget. Why throw money at something that isn't working? The SEC was pretty formidable prior to the end of the bubble, despite characterizations to the contrary.

Training and fielding additional examiners may actually be counterproductive. The SEC should take advantage of the fact that the marketplace itself is particularly interested in transparency and fraud avoidance at this time. The SEC regulates both listed companies and the brokers and investment managers that invest in them. My first recommendation is for the SEC to separate those regulatory functions in different agencies and enforcement personnel and have the company regulators ally themselves with the money management ("buy side") community as opposed to remaining the "cop" to both investors and investees.

Given the enormous increase in risk premia in the stock and bond markets, buy side analysts are focused on separating the wheat from the chaff in the corporate world. There is no reason the SEC can't leverage this marketplace pressure productively. Companies are incentivized to reveal as little as possible to "cops". They have substantially greater incentives, particularly now, to be transparent to the investor community.

So I am suggeting the SEC take advice from the money management community in seeking new disclosure and transparency requirements. In form, I would suggest the SEC not wait for FASB to change its rules, but establish a set of new disclosures that could be answered in a supplemental periodic public SEC interrogatory (part of the 10Q, perhaps), accompanied by an auditor letter (just like the annual report). In time, perhaps this interrogatory could become a "laboratory" for new accounting standards.

In addition, we probably need some changes to existing rules (both SEC, and Federal code). Many of them fall under the heading of "unintended consequences" of prior regulation.

Here are some proposed rule changes and potential interrogatory disclosures:

1) Repeal the laws (IRS 162) reducing tax deductibility of non-incentive-based compensation. Usint tax policy to discourage base pay packages in excess of $1 million (the amount where Congress apparently takes moral issue with pay) was partly responsible for the increase in use of options over the last decade. Actually, using the tax code to legislate morality is stupid anyway.

2) Revise regulation FD. While the intention of making all information available simultaneously to all investors was honorable, the result has been that many companies have chosen simply to disclose less (or rather less of material value, not necessarily quantity), based on scary legal advice like this. We were left with less transparency and a hoard of Wall Street analysts trying to figure out how to differentiate their research with their information edge gone. It was the added information from smart questions that institutional investors were willing to pay for (in the form of commissions). Since the lack of informational advantage left analysts without an institutional following, some fell back on their ability to tout the stock to large numbers of retail investors and others worked on M&A; deals. You know the rest of the story by now.

3) Require that fully-diluted earnings include all perpetual or long-dated options or warrants, whether in-the-money or not. Bring back the old definitions of primary and fully-diluted EPS with this change to the "common stock equivalent" tests.

4) Require supplemental disclosure of compensation, including the market value of all options received.

5) Require the auditor to disclose in their cover letter all fees received and contracted for related to the subject company over the prior three years, breaking the audit fees out from all others.

6) Require supplemental disclosure of large contracts (>10% of period revenues), and the values of any contracts that include tying arrangements requiring vendors to purchase or use the company's products and payments in kind. In addition, require disclosure of contracts with unconsolidated affiliates (the notorious "special purpose vehicles") and all guaranties or hypothecations on behalf of those entities.

7) Eliminate differential treatment of dividends and capital gains (in fact, eliminate double taxation, but that's a whole 'nother post and it violates the expense restriction stipulated above). Jane Galt covered this issue well back in the good ol' days.

This post is a work in progress, so I haven't thought through everything above as thoroughly as if this were a professional journal (ahem) - but that was the point of posting it. I'll add some other items as I get the chance. In the meantime, I welcome your comments and any additional points you might offer about SEC structure and disclosure requirements.

UPDATE: You may be surprised by the regulatory ambition I display in this post. People who know me well know that my objection to regulation relates as much or more to an antipathy to bureaucracy than to the inevitable conclusion that free markets benefit more people in greater quantity than the alternatives. Transparency and the rule of law are necessary conditions to the free market. Regulatory bureaucracy, however, can be antithetical to free markets as well as morally hazardous and just plain hard on the senses.

SECOND UPDATE: A cynical reader might decide that I'm suggesting the resources of the SEC be co-opted for money managers! Bwha-ha-ha!

From the desk of Jane Galt:

Is all pharma advertising bad?

Is all pharma advertising bad?

I just watched a commercial aimed at people who have been misdiagnosed with depression, but in fact are manic-depressive, urging them to reassess their condition.

As it happens, I know a couple of people who had just this sort of thing happen, and it can be dangerous -- the medicines prescribed for depression can make bipolar people worse, not better.

The commercial was sponsored by Lilly, which, unsurprisingly, has a medication for bipolar disorder. Sure, it promotes the company's self interest. On the other hand, it seems to me, it also promotes people with bipolar disorder getting correctly diagnosed and treated. I know physicians hate those Celebrex commercials which put hordes of people in their office demanding meds they don't need. On the other hand, my sympathy is limited by the fact that hordes of people demand (unadvertised) antibiotics they don't need, and physicians comply just to get them out of their office. Live by the sword. . .

Anyway, isn't this just the sort of advertising we'd want done under a nationalized health care system? And who'd pay for it then? It's not like the government will have any interest in spending a lot of money in order to encourage people to seek expensive mental health treatment.

From the desk of Jane Galt:

Mindles H. Dreck, before whose

Mindles H. Dreck, before whose intelligence and erudition I kneel in awed admiration, has posted this table from the Census showing the income-to-poverty ratios from the census. This tells you, for each quintile (fancy word for fifth of the population, divided by income), what their income was as a percentage of the poverty line.

What does it show?

The bottom quintile held steady, or slightly faltered, from 1967, ground zero for Paul Krugman's edenic economic paradise. The second-from-the-bottom increased slightly. The middle quintile increased markedly. The second-from-the-top increased even more markedly. And the top quintile increased very markedly.

What does this tell us?

Well, Krugman is right that inequality is increasing. But it seems to deny his assertion that it is increasing because the bottom 4 quintiles have basically stayed stat, with all the increase in GDP since 1970 accruing to the very rich. The very bottom has stayed flat, but then, we'd expect that; the very bottom consists either of very young workers with no skills, or people for whom the government's baseline has set a floor on their standard of living. If that baseline was supporting life in 1967, you wouldn't expect it to have increased much since.

From the desk of Jane Galt:

Why it's hard for the

Why it's hard for the Fed to fight asset-price bubbles.

From the desk of Jane Galt:

University of Chicago Philosophy Professor.

University of Chicago Philosophy Professor. With a blog. Double-yum.

From the desk of Jane Galt:

Gridlock. Yummmm.

Gridlock. Yummmm.

From the desk of Jane Galt:

A number of you have

A number of you have emailed to ask what I think of the Paul Krugman article. I know you're all expecting me to dump all over it, but I quite agree with a lot of it. It's been obvious to me for quite some time that the level of many CEO salaries was based less on their personal acumen, and more on their ability to build a captive board that ratified insane stock options. And other unsalutary developments, about which I'll explain more later.

Some of the sections are terrific, such as this able summation of the theories behind rising inequality:

In the middle of the 1980's, as economists became aware that something important was happening to the distribution of income in America, they formulated three main hypotheses about its causes.

The ''globalization'' hypothesis tied America's changing income distribution to the growth of world trade, and especially the growing imports of manufactured goods from the third world. Its basic message was that blue-collar workers -- the sort of people who in my youth often made as much money as college-educated middle managers -- were losing ground in the face of competition from low-wage workers in Asia. A result was stagnation or decline in the wages of ordinary people, with a growing share of national income going to the highly educated.

A second hypothesis, ''skill-biased technological change,'' situated the cause of growing inequality not in foreign trade but in domestic innovation. The torrid pace of progress in information technology, so the story went, had increased the demand for the highly skilled and educated. And so the income distribution increasingly favored brains rather than brawn.

Finally, the ''superstar'' hypothesis -- named by the Chicago economist Sherwin Rosen -- offered a variant on the technological story. It argued that modern technologies of communication often turn competition into a tournament in which the winner is richly rewarded, while the runners-up get far less. The classic example -- which gives the theory its name -- is the entertainment business. As Rosen pointed out, in bygone days there were hundreds of comedians making a modest living at live shows in the borscht belt and other places. Now they are mostly gone; what is left is a handful of superstar TV comedians.

The debates among these hypotheses -- particularly the debate between those who attributed growing inequality to globalization and those who attributed it to technology -- were many and bitter. I was a participant in those debates myself. But I won't dwell on them, because in the last few years there has been a growing sense among economists that none of these hypotheses work.

Although I would like to point out that one of the reasons he won't dwell is that he was firmly behind the "skill" theory, which doesn't track with the data. And personally, I think the theory he seems to prefer now is a little. . . well, iffy:

Some -- by no means all -- economists trying to understand growing inequality have begun to take seriously a hypothesis that would have been considered irredeemably fuzzy-minded not long ago. This view stresses the role of social norms in setting limits to inequality. According to this view, the New Deal had a more profound impact on American society than even its most ardent admirers have suggested: it imposed norms of relative equality in pay that persisted for more than 30 years, creating the broadly middle-class society we came to take for granted. But those norms began to unravel in the 1970's and have done so at an accelerating pace.

I'm afraid I just don't believe that people refrained from, say, making themselves enormous compensation awards in the 60's because they felt it wouldn't be cricket, but feel no shame about doing so now. This relies on a somewhat utopian view of corporations:

Exhibit A for this view is the story of executive compensation. In the 1960's, America's great corporations behaved more like socialist republics than like cutthroat capitalist enterprises, and top executives behaved more like public-spirited bureaucrats than like captains of industry. I'm not exaggerating. Consider the description of executive behavior offered by John Kenneth Galbraith in his 1967 book, ''The New Industrial State'': ''Management does not go out ruthlessly to reward itself -- a sound management is expected to exercise restraint.'' Managerial self-dealing was a thing of the past: ''With the power of decision goes opportunity for making money. . . . Were everyone to seek to do so . . . the corporation would be a chaos of competitive avarice. But these are not the sort of thing that a good company man does; a remarkably effective code bans such behavior. Group decision-making insures, moreover, that almost everyone's actions and even thoughts are known to others. This acts to enforce the code and, more than incidentally, a high standard of personal honesty as well.''

John Kenneth Galbraith's "New Industrial State" is not exactly a quotation to fill me with confidence in what comes behind, since it is arguably the worst of Galbraith's breathtakingly bad books on economic theory. (His economic history books, such as the Great Crash of 1929, are much better.) And Krugman himself seems to be confusing GM's press releases with their actual behavior. Managerial self-dealing was rampant in the 50's, 60's and 70's, the era of takeovers done for no reason other than to build personal fiefdoms; expense accounts that would make a con man blush; and tax-deductible everything.

On the other hand, I flat out disagree with this:

Economists also did their bit to legitimize previously unthinkable levels of executive pay. During the 1980's and 1990's a torrent of academic papers -- popularized in business magazines and incorporated into consultants' recommendations -- argued that Gordon Gekko was right: greed is good; greed works. In order to get the best performance out of executives, these papers argued, it was necessary to align their interests with those of stockholders. And the way to do that was with large grants of stock or stock options.

I don't disagree that economists said this, but Krugman's implication is that they were wrong. They were right. They still are. What they didn't do was predict the ways that certain regulatory schemes -- schemes, I might add, that were passed to curb the inequality Krugman is lamenting -- interacted with this theory to produce a disaster. The law capping the deductibility of cash or stock compensation at $1 million pushed CEO compensation into stock options. This was compounded by the fact that stock options are tax favored, for both company and employee, over other forms of compensation.

This had several effects. Some seem to have taken unconscionable risks because options are a different security from the one investors hold, one that encourages risk taking behavior since executives have unlimited upside if the price rises, but the downside is the same whether the stock price holds steady or falls to 2 cents. It exacerbated an already strong trend towards earnings management, since executives generally want to liquidate their options as soon as they mature, and therefore needed, each and every quarter, to keep earnings from the precipitous slump an earnings restatement can produce. It also pushed a lot of compensation off-balance sheet, making it easier to raise it to unconscionable levels.

Now, many of my interlocutors will say that this doesn't matter, because investors will just back the options out and produce a "real" EPS number. I believe this is mistaken in several ways. First of all, during the bubble, many investors were trading on something other than a full understanding of the numbers. I was at a dinner last week, listening to several financial professionals agree with each other that it was ludicrous that people should trade stocks based on research done by investment banks, when the conflicts were obvious. Well, yes they were, to us. Not to my mother, or the millions of investors like her. Not to mention the fools who mortgaged the house to day trade. Many of the spectacular rises in price were produced by those folks, buying what they didn't understand. Executives with stock options profited handsomely from this sort of trading.

The other reason this doesn't hold is that the balance sheet is where the majority of people are going to look for executive compensation. Stock option grants are delayed compensation, and don't show up on the public radar until the executive cashes in some years later. Thus, any present grant is a painless gift for the board to make to the CEO; no one's going to complain until it's too late.

However, none of this invalidates the general theory that stock aligns CEO incentives with those of the shareholders better than does cash salary; it does. The companies of those halcyon days Krugman is recalling were logy with corporate fat, brought on by the astounding disconnect between what was good for the shareholders, and what was good for the managers who owned not very much corporate stock. Economists were trying to revitalize our economy by getting rid of the compensation structure that made management uncompetitive, and in fact I would argue that they succeeded in doing so. That they did not anticipate a market structure and tax/regulatory scheme that would give CEO's the ability to game the system to award themselves outlandish loot, does not make the theory a failure. It's more an indictment of the regulatory scheme than the theory.

Parts are also disingenuous:

It was one of those revealing moments. Responding to an e-mail message from a Canadian viewer, Robert Novak of ''Crossfire'' delivered a little speech: ''Marg, like most Canadians, you're ill informed and wrong. The U.S. has the longest standard of living -- longest life expectancy of any country in the world, including Canada. That's the truth.''

But it was Novak who had his facts wrong. Canadians can expect to live about two years longer than Americans. In fact, life expectancy in the U.S. is well below that in Canada, Japan and every major nation in Western Europe. On average, we can expect lives a bit shorter than those of Greeks, a bit longer than those of Portuguese. Male life expectancy is lower in the U.S. than it is in Costa Rica.

Still, you can understand why Novak assumed that we were No. 1. After all, we really are the richest major nation, with real G.D.P. per capita about 20 percent higher than Canada's. And it has been an article of faith in this country that a rising tide lifts all boats. Doesn't our high and rising national wealth translate into a high standard of living -- including good medical care -- for all Americans?

Well, no. Although America has higher per capita income than other advanced countries, it turns out that that's mainly because our rich are much richer. And here's a radical thought: if the rich get more, that leaves less for everyone else.

Now, first of all, the median is also higher than anyone else's median, which means it isn't just the rich getting richer. And second of all, I'm told that if you back out immigrants, Americans do, in fact, have the highest life-expectancy in the world; the 15% of our population that was born somewhere else has a dramatically lower life-expectancy than the native born. If you back out the effects of our sedentary lifestyle, it's even starker. It's not as if Krugman, an economist, is unable to compare median incomes, or look at the difference in health care outcomes for the native-born, both of which are obvious reality checks.

There's also the fact that after spending a lot of time comparing personal income data and concluding that the rich are getting richer, he then declares we're not allowed to compare income data between the US and Sweden, because it's not a good measure of quality of life. There's some validity to this, but if the problem is difficult when making comparisons between nations, it's even more difficult when making comparisons between eras, as Krugman is doing.

Has the qualitative life experience of the rich really increased, while the poor stayed stagnant? Since the 50's? 60's? 70's? I would argue it's the reverse. The head of GM's life is not, qualitatively, much better than that of the head of GM in the 50's. The poor, on the other hand, have more space, better food, more and better clothes, color televisions, VCR's, automobiles. . . items that were beyond the wildest dreams of the poor in the 1950's. The numbers may have diverged, but I would argue that the quality of life is converging. Consider that many of the things the poor routinely own mimic the servants available only to the very rich until a short time ago: answering machines and cell phones to substitute for butlers and personal secretaries. Cars to substitute for the coach and four. Appliances to substitute for the cook, parlormaid, laundress, and scullery maid. Television and movies to substitute for the performing arts. Exact reproductions that make the Great Masters available for any livingroom wall. You can make your own list.

CEO compensation is an easy, and correct, target. Others are less obvious: sure, a one-time capital gains tax on rich Americans who renounce citizenship because of the tax burden sounds nice, but I have to tell you, the more I look at the nasty states around the world, the gladder I am that I live in one that lets its citizens leave at any time, for any reason. You don't have to be a libertarian to feel that way. (I should also point out that it wasn't, to my recollection, a "capital gains" tax; it was a plan to liquidate the assets of said citizens, and then charge them a capital gains tax. . . tactics which do give a little whiff, though Krugman may call it hyperbole, of Nazi Germany. Essentially they were saying that they were going to seize the property of anyone who decided to emigrate, sell it off, and then award some fraction of the proceeds they deemed "fair" to the owner. Since this is, in fact, what Nazi Germany and a number of other unsavory regimes did in order to maintain their control over their citizens, the comparison is hardly unjust.)

Nor am I enamored of the "correlation equals causation" argument by which liberals attempt to generate a causal relationship between the lower income inequality of the 50's and 60's, and the growth of the economy during that period, which, as far as I know, have at best little to do with each other. This is beneath an economist of Krugman's stature.

And the policy segment is, well, disappointing.

The problem with raising taxes on the rich is that you don't get the folks you want to get: the CEO's pulling in billions. What you get is the folks making 300K as a corporate lawyer in Atlanta, or what have you. Sure, you don't feel sorry for him if you make 50K as a lathe operator, but if it's not fair for you to pay more of your income in taxes than he does, surely it's not fair for him to pay more of his income in taxes than Jack Welch. Ditto the estate tax. Krugman cleverly elides the highly disproportionate share of the estate tax that falls on estates in the lower end of the range. Both occur for the same reason: these are people in a high bracket, but not a high enough one to afford massive tax planning. Jack Welch can take his income in any time period he wants, in any form he wants. He has a fleet of tax lawyers to help him do so. The poor bastard pulling down 200K as a CIO faces a tax rate that can easily top 50%, and can't afford to shift income to shelter it in tax-free munis, or as capital gains. Nor can he set up a trust to make sure that his zillion useless descendants never have to worry about where their next meal is coming from. Krugman wonders why tax cuts sell politically? Well, that's why. Not many of us think we're going to be Jack Welch. But a lot of us can imagine being successful enough to pull in 200K -- and getting kicked in the teeth by a tax system designed to "soak the rich".

("Just close the loopholes!" I hear you cry. Not possible. The more complicated you make the tax code trying to "close the loopholes", the more loopholes you create, and the more it favors rich people who can afford experts to sort it all out. Don't ask me -- ask your accountant. He'll tell you.)

I really am sympathetic. I think CEO compensation is outrageous. And as I was watching a documentary on television the other day on the houses all the Vanderbilt heirs built, I thought "this is really revolting." Those enormous palaces built just to show other people that you were the sort of person who can afford to build an enormous palace and crust it with marble. . . well, I can see why the anarchists wanted to blow it all up.

But I also don't believe it's a failure of social norms; I think that's a flood of Kennedy nostalgia talking. Nor do I think, as Krugman seems to, that this just provides proof that people whose politics I disagree with are evil, venal fools. Although you'll probably be unsurprised to hear that I do think my political opponents are partly responsible: I think a lot of it has to do with regulation.

Some of it is the regulation of CEO pay and associated items, most of which were designed to limit the phenomenon that they instead exacerbated: the cap on the deductibility of cash compensation; the corporate raiders who were supposedly looting companies for their own benefit, but who actually had provided a powerful check on the self-dealing of top executives.

Some of it is the creation of locii in the economy, through regulation, where people could make truly vast fortunes with very little effort. I am thinking, in particular, of product liability lawsuits and especially class actions; and investment banking.

Because the myriad of SEC regulations presents an insurmountable barrier to entry for most new entrants into the investment banking business, and because of regulations regarding fees that limit competition, investment banks were able to charge fees of 7% of each IPO. Roll that around. 7% of IPO's that could top $1 billion, for several hundred hours' work. When you look at that kind of money, it's obvious: of course research was abused; of course banks flogged off crap on unsuspecting retail investors. We're talking hourly rates of close to $1 million. That's a lot of money to walk away from on principle.

Without the SEC, investment banking business would probably barely exist; a couple 100K to help do the valuation, a couple 100K to register the security on the electronic exchange, and hey, you're good to go. Ditto M&A; without the SEC, that work would mostly fall to the lawyers, not the bankers, and the bankers certainly wouldn't make the kind of fees they do now; valuation is not rocket science.

Now think about class actions. Hourly rates there are also outrageous, easily topping $10K an hour, sometimes venturing into the millions. Often, this is for suits of trivial benefit to the alleged plaintiffs, such as the one that got me a $3 coupon from some fast food restaurant I'd never heard of for some alleged abuse I don't recall.

Of course, not all our newly rich are investment bankers or trial lawyers. But a lot of them are, and they're getting richer all the time.

That's why I have to laugh when people point triumphantly to say, Jon Corzine, and say "More regulation must be called for! Even Jon Corzine is in favor." Well, of course he's in favor, sweety. . . more regulations mean more investment bankers making him more money. Just like you'd be in favor if the government was going to pass a law requiring everyone to buy some expensive product from some company you own. It's not proof of the majestic truth of the law, but of plain old government rent-seeking.

Interesting, isn't it, that the alleged champions of the people are the ones pushing laws to keep these chaps fat and happy?

Update Having skimmed through that long and pointless screed, you can now read Arnold Kling's better, more succinct write-up here.

From the desk of Jane Galt:

Damn, I love this man.

Damn, I love this man.

From the desk of Jane Galt:

A Ted Barlow snippet caught

A Ted Barlow snippet caught my eye:

Steve at Deinonychus had a counter-post to my argument on single-payer health care. I personally don't find it terribly convincing, because (in my reading) it's basically a philisophical libertarian attack on the idea of treating health care as a public good. But I know I'm never going to convince a libertarian to support single-payer health care philisophically; I'd have to do it practically. That is, I'd have to show that countries that have single-payer health care manage to provide better care to more people for a lot less money per patient. I think that's true. Nonetheless, Steve's post is well worth reading.

That's an interesting question: would single-payer systems be cheaper if they were implemented here?

Single-payer advocates assume the answer is "yes" because health spending is lower in countries with single-payer than here. But that result doesn't necessarily follow.

1) Medical research. The top research facilities in the world are almost all in the US. Right now, those facilities are paid for, in large part, by the payoff from successful procedures: if you're the only guy who can do a heart-lung-spleen transplant, you can charge a lot for it, especially to people who come from other countries, paying full freight, for the privilege.

2) Medical equipment. Most major advances again come from the United States, where the market for medical machines is lucrative. You pay $1500 for an MRI in order to compensate for the cost of developing the MRI. Governments, which negotiate in bulk, pay less than the average cost of the equipment.

3) Prescription drugs. Argue, if you will, that you could save money by lopping off the advertising budget, but advertising is only 1% of a company's SG&A; budget, and junkets are much less than the cost of the stuff that would still have to be done, such as printing information about the stuff to give to doctors. There's also the lengthy approval process involved in selling to a government agency. If you want to assess the potential cost, consider that much of th eR&D; spending by drug companies is really compliance spending to put things through the FDA.

In all of these cases, the free market is subsidizing the government purchases, both domestically and abroad. Kill the free market, and the price of the government purchases will have to rise.

Other arguments I've seen, such as the fantastic savings to be gained in administrative costs, strike me as unconvincing. Sure, Medicare has a low administration cost, but that's because they push it off to the doctors, who do 4-8 times as much paperwork for a Medicare patient as for a regular patient, which is why many won't take new Medicare patients -- they lose money on every visit.

Also, all of the labor in a government-run system will be union, even if they're contractors. This says to me that labor costs are going to rise, and productivity is going to fall, and really bad health-care workers are going to stay in their jobs while evidence is gathered and a the process runs out (average time to fire a worker in the New York state system: 7 years).

Also, there are problems in the other systems: doctor and nurse shortages, for example. Sure, some of them come here. But some of them are just deciding to do something else.

Finally, two of the main savings come from exogenous political variables not possible to implement here. The first is extremely limited liability: we're talking about awards in the $100,000 range for someone who mistakenly had the wrong limb amputated. That's not going to fly here. The second is low immigration, which improves costs and health outcomes; a very high percentage of expensive emergency room care is focused on people who were not born here, and are thus less healthy. A third is the sedentary American lifestyle and rich American diet, which are not going to change short of police-state tactics.

There are also difficulties in predicting how the market would evolve in the face of a US single-payer system. For example, drug costs. Assume, please, that much of, of not all of, the price premium on pharmaceuticals is necessary either to run the company or research the product. We are not going to make drugs 20%, much less 40% cheaper, by going to a single payer system. Unless we gut pharmaceutical research, that is.

I just went on a new drug, Singulair. It's the first really new type of asthma treatment in 40 years. It's not an exaggeration to say it's changed my life. Oh, sure, it's a "lifestyle" drug, in the sense that it's a "lifestyle" choice to engage in physical activity, and not visit the emergency room to have tubes stuck up your nose. Pharma profits bought that drug. I don't want to miss the next one. And I think most of you don't want to miss the treatment that will save, improve, or extend your life. We're willing to pay for it.

A US single-payer system unambiguously would have the power to gut the research budget. They can force pharmaceutical companies to sell near marginal cost, simply by taking the drug off the "approved" list if they don't agree. The pharmas can then sell, or go under. I find it hard to believe that politicians would refrain from so doing. The medical budget would simply be too large a portion of GDP, the taxes too unpopular, to hold back. I know that my friends on the left believe corporations can buy themselves any law they want, but that's simply not true. They can buy themselves addendums, riders, little changes in the law that benefit them at the expense of some other company -- but not at the expense of the majority of voters. Try this thought experiment: how much money from, say, Hollywood liberals, would it have taken to get congress to vote against the Iraq resolution? Answer: there is not enough money in the country to make Tom Daschle vote to get himself unelected next time around.

The open question, then, is whether the companies that are currently subsidized by the US would spread the costs around more, raising everyone's health spending to ca 13% of GDP -- a win for the US, a loss for everyone else, but no net loss of medical innovation -- or whether the political calculations of the various government officials involved, combined with monopoly purchasing power, would force margins down to the point where little research gets done. I'm betting on the latter. Government is, by its nature, a short-term enterprise. Politicians look to the next election, not the untold generations stretching ahead.

Building a model of what the system would look like is difficult. But there is ample reason to think that it would not be cheaper than the current system in most regards.

From the desk of Jane Galt:

From Den Beste: (On Screen):

From Den Beste:

(On Screen): Don't ever underestimate the courage of Australians:

A man armed with a number of handguns opened fire indiscriminately on a room of students at Monash University's Clayton campus today, killing two and injuring five people.

The man, aged in his mid-30s, was tackled by several people after opening fire in a classroom at the Menzies Building, part of the campus in outer south-eastern Melbourne, at about 11.20am.

They didn't dive for cover. They dived for the gunman.

Here was my first thought: what will the gun controllers say now? That they need stronger gun laws?

Update: For those who didn't understand the question, guns are banned in Australia.

From the desk of Jane Galt:

Survey reveals what journalists have

Survey reveals what journalists have always known: they're smarter than the rest of us put together.

From the desk of Jane Galt:

Here's a fascinating little tidbit

Here's a fascinating little tidbit -- a woman who was fired by Costco for refusing to remove her eyebrow ring is suing for, get this, religious discrimination. She claims to belong to the Church of Body Modification, which requires her to wear these things.

This is. . . what's the word I'm looking for? Oh, right, I can't use that word on a family blog. It's a crock, that's what it is. And it's really quite apalling. One hesitates to ask "Is nothing sacred?", but really, what other words will do? When you make up an entirely specious religion in a juvenile attempt to shelter your fashion choices behind the first amendment, what sort of morally bankrupt person are you? One realizes the judges are hesitant to start making pronouncements on what constitutes a "real" religion, but really, where will it end? The Church of Drinking at Work and Telling My Boss to Go [Censored]?

Well, not everything has a legal solution; sometimes, the social realm has to take over. Unfortunately, one imagines that this woman's sniggering little friends think this is all too cool. In time, however, she will grow up, and have to get other jobs, and work with real live adults who have better things to do than debase freedom of religion in this country in order to protect their right to accessorize. So, her name is Kimberly M. Cloutier of West Springfield, Massachussetts, and I'd like to urge, from this humble platform, that if you should ever run into Miss Cloutier, you do your best to know what the rest of society thinks of this sort of behavior. If you are an employer, I will point out that while it is not legal to make a hiring decision on the basis of someone's religion, it is perfectly legal to make it on the basis of their being an amoral twit. So if Kimberly M. Cloutier's resume ever comes across your desk, don't hesitate to send it to the circular file. And if you meet her socially, don't hesitate to give her what for. Politely, of course. There's no need to descend to her level.

From the desk of Jane Galt:

The most likely scenario, it

The most likely scenario, it seems to me, is that the Republicans keep the house and pick up one seat in the Senate. In which case, it is likely that Chafee will defect in order to keep control in Democratic hands.

But why? I mean, I understand the ideological reasons. . . kinda. It's not like he'll get anything passed as a Democrat. And for the same reason, it's not like the Republicans will get super-extreme bills passed if they get control, because they won't have a bullet-proof majority; that requires 60 seats. I guess there's the judges. But the Democrats have made it clear that they aren't going to approve judges unless they're. . . well, apparently, unless they're moderately lefty Democrats. Obviously, both sides are going to try to curtail the extremes, but as far as I can tell, Leahy isn't prepared to approve anyone to the right of Ruth Bader Ginsberg. That's not really a position even a nominal Republican can support, especially since the dearth of judges on the federal bench is going to approach crisis level if the Dems hold the Senate for another two years. Don't even THINK about Bush winning in '04; I shudder to think what our courts will look like if the Dems hold the Senate in that scenario.

On the downside, no one likes a traitor. Jeffords has found out it's not much fun to be Benedict Arnold; the Democrats don't need to treat him with kid gloves, because the Republicans wouldn't have him back. . . and the Republicans wouldn't vote for anything that helps Vermont if Jesus Christ himself came down to the Senate floor and commanded it. (Vengeance is mine, saith Trent). Once Chafee switches, he'll be in the same unenviable position. And quaking in fear lest the Republicans ever get control of the Senate again, which seems likely if Bush does well in '04, pulling a couple of candidates in behind him.

I hate to predict he won't, because I don't know what's going on in his head. But it doesn't seem like it has a whole lot of advantages for him.

From the desk of Jane Galt:

I kind of understand why

I kind of understand why Sadaam Hussein released all these prisoners. . . it's a way of defusing the political prisoners thing without admitting he holds political prisoners. But is the international community really so morally bankrupt that it's going to applaud Saddaam for releasing regular criminals to go prey on the population? And ignore it when he starts rounding up the political prisoners again? Or fail to notice how many political arrestees won't be making it home?

From the desk of Jane Galt:

So this is who's teaching

So this is who's teaching the teachers we are going to charge with shaping America's young minds.

From the desk of Jane Galt:

WaPo says Republicans are already

WaPo says Republicans are already planning for their takeover of the Senate. According to the article, most of these plans consist of technocratic plans to subsidize "key" industries. Gridlock has never sounded so sweet. On the bright side, they seem to be considering medical malpractice reform, without which a levelheaded friend who works with the insurance industry thinks that we will face a doctor's strike within the year; and lowering corporate taxes, which is a pet project of Live from the WTC, although they seem to be leaving the other half out, which is eliminating special treatment for capital gains. And don't snicker, Democrats -- if they get elected, and we get a raft of corporate welfare, it will be in large part because the Democratic leadership primed the voters by demanding that Republicans come up with a plan for the economy. If there's anything we should have learned from the last century, it's that when the government actually gets around to the planning, no one likes what results.

In related news, I have already commenced preparations for my appointment as Dictator For Life of The United States, Emperor of Canada, and Blessed Protector of Mexico, Luxembourg, Bora Bora, and the Associated Territories. Anyone who wishes to beg my mercy now, or shower me with gifts, should be aware that doing so immediately will be looked upon much more favorably than waiting until my inevitable reign is consecrated. And if Lincoln Chafee thinks that he can stop me with his puny threats, let it be known that I will impale him on the Imperial Sword of Justice should he attempt to challenge my power. Those who are doubtful about my ability to pull of this coup should spend a little time considering how much they might regret such a decision once I stand astride the world like a mighty colossus.

We now return to our regularly scheduled programming.

From the desk of Jane Galt:

D-Squared (who has fled my

D-Squared (who has fled my comments section for some reason, and is greatly missed) has a nice item on the nobel prizewinning experimental economics work.

One of the great problems for libertarians is that the longer we study economic theory, the clearer it becomes that people are apparently incapable of rationally maximizing expected value in many cases. This is due to two things: first, we don't have access to all the information we need, and second, we don't always make decisions rationally. The great contribution of Kahneman and Tversky (whose work I highly recommend if you can get your hands on it; they're not so impenetrable as to be incomprehensible to the layman), was to test out the ways in which people made bad decisions, in order to try to reveal the processes that were causing them to engage in non-value-maximizing behavior.

Now, many on the left who had never heard of these folks are triumphantly saying "See! We told you so!" Not so fast, l'il ranger. First of all, it's not like professional economists are unaware of the work. They're working on incorporating it into theory. In some ways, some of the decisions which might appear sub-rational simply manifest themselves as preferences in the larger model which have already been accounted for: risk aversion, for example. Second of all, the great lesson of studying either regulation or people who try to make their living gaming markets, such as financial professionals, is that the technocrats are subject to the same decision-making problems as the mass of consumers. That means that while it certainly means we need a more complex model for markets than we're currently using, it also means that government regulation is not the automatic solution to the problem.

Take one phenomenon documented by Kahneman and Tversky: loss aversion. This is the interesting discovery that people fear loss more than they value gain.

Take one game, where people can either take a $50 sure gain, or a $100 possible payoff, with a 50% chance of getting the cash, and a 50% chance of getting nothing. Most people will take the sure thing.

Now, take a game where people can either take a $50 sure loss, or a $100 possible loss, with a 50% chance of losing nothing, and a 50% chance of losing the whole $100. Most people will choose to gamble. This tells us that people evaluate expected losses differently from the way that they evaluate expected gains: they will assume more risk in order to avoid a loss.

Now, let's look at a government agency such as the FDA. The FDA's ostensible mandate is to maximize health and safety for everyone. In a rational world, this would involve doing a cost-benefit analysis of the expected gains, weighing it against the expected side effects, and approving drugs whose expected benefit outweighed the expected risk.

Is this how the FDA actually works? Of course not.

Remember Thalidomide? Approved in Europe, not here. Not, mind you, because the FDA was prescient; they were incompetent, and couldn't get the paperwork together. This stalled the release long enough for the horrible teratogenic effects to become known. The FDA was a hero. And ever since then, they have been ever-more inclined to err on the side of not approving. I was shocked to hear a pharma person of my acquaintance say that he didn't think Prozac could be approved now -- too many known interactions with other drugs, side effects, what have you. I know that, for example, aspirin probably couldn't get approved now, but Prozac hasn't been around that long. That indicates a dramatic rise in risk aversion in the agency in a relatively short time.

Is this because the FDA people are mean, and want us all to die? Because they are stupid, and do not know how to weigh benefits against risk? Because they're bureaucrats, and just don't give a hoot?

No, it's because they're weighing risks far more heavily than gains. And in some part, this is a rational reaction to the fact that we are weighing risks far more than gains. If the FDA approves Thalidomide, a lot of people are going to get yelled at and probably lose their jobs. If they don't approve Prozac, are they going to get a horde of depressed people marching on Washington to roust them from their sinecures? No, the depressed people are going to be home in bed, eating ice cream and pondering whether two weeks is too long to go without showering. And most of us would probably say "better safe than sorry". The failures loom much larger to us than the successes. They mirror that.

So, no, this is not an excuse for the uninformed to decide economics is all bunk. You have to study for years before you're allowed to come to that conclusion, leave your PhD program, and move to Nova Scotia to become a lobsterman. Trust me. After you've done a couple of years in a department full of economists, you'll start to appreciate the lobsters more.

At any rate, it's interesting, interesting stuff, and we'll be thinking about it for years to come.

Update

Juan Non-Volokh has more on why proving that people don't always have perfect information, or behave perfectly rationally, does not thereby bolster the cause for government intervention.

From the desk of Jane Galt:

James Rummel knows more about

James Rummel knows more about both guns and law enforcement than I do, so you should go read what he has to say about the sniper.

From the desk of Jane Galt:

The moral of the story

The moral of the story is, don't invite Amy Langfield over unless you want her dancing around with a tequila bottle at 2 am saying "What are you, some kind of a wimp? It's pansies like you who are dragging down the spirit of A Once Great Nation."

But out of pounding, throbbing, hangovers, and the untold suffering of those whose immune systems, impaired by tequila, have succumbed to a miserable flu, comes. . . genius.

I give you: Iron Blogger.

From the desk of Jane Galt:

Question of the Day: Is

Question of the Day: Is there anything the Clinton foreign policy team did that was successful?

I'm serious about this, not inviting partisan rants. So far this year, we've seen Ireland unravel, Palestine implode, North Korea admit that they've got nukes and the means to deliver them, Pakistan and India go head to head with weapons they acquired on Clinton's watch, Al Qaeda confess that Clinton's response to their incursions led them to believe that they could stage 9/11 with impunity.

Am I being unfair? Was this simply the inevitable result of the post-Cold-War reality, that no one but a brilliant visionary could have halted?

Did the administration have some successes that I'm not thinking of?

Incidentally, as I've said before, I think Clinton's foreign policy failures are at least as much ours as his -- we didn't want to act like grownups because we were having too much fun to stop the party for boring old international security. So I'm not looking for indictments of the man -- rather, I want to know what was going on in his foreign policy, and whether we could realistically have expected significantly different results from a different president.

From the desk of Jane Galt:

I'm sick as a dog

I'm sick as a dog and can't come up with anything witty to say, but go read Arthur Silber on Michael Bellesiles and the echo chambers of the left and right.

From the desk of Jane Galt:

Titter. Snort. Someone is letting

Titter. Snort. Someone is letting the power of the web administration tools go to their head:

For the last 21 months, we have tried very hard to keep this discussion board open to all left-wing points of view. It was one of our guiding principles, because we believed deeply that talking is better than not talking.

But now we have come to the conclusion that the current state of affairs is untenable. In the past few months I have become convinced of two things:

1) There is a small but outspoken group of liberals who simply are not our friends. Please be aware that I am not singling out Greens, most of whom are capable of participating on this message board in a productive and thought-provoking way. Rather, I am referring to people who are consumed with hatred and contempt for any and all liberals who don't share their exact point of view.

2) It is simple to disrupt this message board, and post the most vile and offensive propaganda if you simply declare yourself to be a liberal, Green, or even a Democrat. Some of the things posted by our "fellow liberals" would make a FReeper blush. In fact, some of these "fellow liberals" might even be FReepers. If they are, they've found a rich vein for disruption, because I let them get away with it. Well, no more.

Over time, the result has been an increase in postings by rude, anti-social disruptors, and a decrease in postings by thoughtful, productive members.

In case you haven't heard, there is a very important election occurring in less than three weeks. The stakes in this election are as high as they have ever been. You are being given a clear choice: Hand over complete control of all three branches of government to the forces of evil - or don't.

There is no viable third option. Choosing not to vote (or to vote for a third party) is a morally bankrupt decision during this time of crisis when the potential harm to our country is so great. You may claim you are standing on principle, but simply calling it "principled" does not make it so. Your stand on principle will have dire consequences, and you will share the blame when the Republicans in the House, Senate, White House, and Federal Courts undo a half century of progress.

As the administrator of this message board, I have the opportunity to have an impact on the outcome of this election. As an American, I have a moral obligation to do what I can to stop the conservative juggernaut. For the next three weeks, that is my greatest concern.

We still allow all points of view, but we have our limits.

For the next three weeks:

It is forbidden to use the DU message board in an effort to make our members withhold their precious votes from the Democratic Party, which is the only organization capable of stopping the Republican onslaught.

It is forbidden to use the DU message board to organize protests or other actions against members of the Democratic Party.

If the administrators of DU decide that the rhetoric of your posts would be more appropriate on Free Republic than on DU, then you are going to get banned.

We understand that many of you feel deeply disappointed with certain members of the Democratic Party right now. We wish to make clear that you are still free to criticize the Democratic Party, the Democratic leadership, or individual members of the Democratic Party.

But the stakes are too high to let DU argue its way to Armageddon. The stakes are too high to let a few angry partisans with dubious intentions hijack this message board.

I know what side I am on. If you are rooting against the Democratic Party in this election, then just let me know by posting in this thread and I will shut off your account myself.

To repeat: these changes are in effect until the election is over. At that point, we will review whether it is in the best interests of DU to remove these restrictions.

Thank you for your understanding.

Skinner
DU Administrator

The forces of evil. Not naughtiness, venality, or sheer old fashioned greed. Evil. I confess that I found it hard to read past this point, as with every word I was more firmly seized with the vision of Mr. Skinner composing his posts wearing his Dick Tracy Secret Decoder Ring and his Superfriends underoos.

Which would be, of course, how he knows that his cause is so very just -- so very, very important and special -- that it must be advanced by any means necessary, including rigidly censoring opposing viewpoints so that we don't risk the readers making up their own minds. This cause, mind you, is making sure that the center-left party signs the checks for the farm bill and associated boondoggles, instead of the center-right.

One imagines that if the adults hadn't left already, the open admission that he considers them as childish mentally as he is rhetorically would push them out the door.

(Via Croooooow Blog)

From the desk of Jane Galt:

I just read this piece

I just read this piece on journalism in Iraq by Franklin Foer. It gives example after example of something we all kinda knew -- that journalists in Iraq are too busy trying to maintain their presence in Iraq by sucking up to the regime to actually do any reporting.

When I asked CNN's Jordan to explain why his network is so devoted to maintaining a perpetual Baghdad presence, he listed two reasons: "First, because it's newsworthy; second, because there's an expectation that if anybody is in Iraq, it will be CNN." His answer reveals the fundamental attitude of most Western media: Access to Baghdad is an end in itself, regardless of the intellectual or moral caliber of the journalism such access produces. An old journalistic aphorism holds "access is a curse." The Iraqi experience proves it can be much worse than that.

I really don't understand this. Why would you want to dress up and pretend to be a reporter in Iraq, knowing it was all a sham? Especially when by doing so, you're spreading propaganda for one of the world's most apalling dictators. I suppose it's the all too-human desire to feel important -- which just makes it more horrifying.

From the desk of Jane Galt:

I love this headline from

I love this headline from the Washington Post:

N. Korea Admits Having Secret Nuclear Arms
U.S. stunned after Pyongyang admits program violates 1994 agreement

A secretive dictator who has apparently starved millions of his own people actually violated an international arms control agreement? Who could have imagined? Is there nothing sacred left on God's green earth?

Meanwhile, I'm waiting for the anti-war crowd to crawl out of the woodwork to tell us

1) The government is lying
2) This in no way means that they should reconsider the idea that Saddaam might be developing weapons we don't know about. North Korea is totally different. For one thing, it's on the Korean peninsula. And for another, it's full of Koreans. And Koreans are different from Iraqis. They talk different, and they're not Islamic. And they eat kimchee. Iraqis hate kimchee.

Tell me again how much better the Gore foreign policy team would be handling the war on terror?

From the desk of Jane Galt:

Eugene Volokh has picked up

Eugene Volokh has picked up on a DSA bulletin (Democratic Socialists of America), trying to mobilize young people to come to Minnesota to save Paul Wellstone:

DSA’s national electoral project this year is the Minnesota Senate Election. Together with YDS, DSA’s Youth Section, we are mobilizing to bring young people to Minnesota. Minnesota is one of the few states that allow same day voter registration. We will therefore focus our energy on registering young Minnesotans. Wellstone will need a high percentage of young people to register and vote for him if he is to stave off the campaign that Bush, the Republicans and the Greens are waging against him. He is the Right’s Number One electoral target.

Volokh says it sounds fishy. Mark Kleiman argues not so; to him, sounds like it's just a drive to get people to come to Minnesota to help register young voters. He asks the sensible question -- why would they bother trucking voters in from outside Minnesota?

Well, here are a couple of thoughts:

1) Why would they bother waiting until election day? Why not have their drive during the weekends, when young people are thick on the ground, than on election day, when they are likely to be in class or at work?

2) Why the emphasis on youth? It could be that they think young people are more likely to convince other young people to vote. But it could also be that young people move around a lot, and are less likely to have utility bills and such in their name. Note the procedure for registering:

Can I register on election day?

If you miss pre-registering, you can still register on election day at your polling place. You will need proof of your identity and the address where you are living on election day. Use one of these for proof...

A current Minnesota Driver License, learner permit or identification card (or receipt for a new one) with your address

One of the above with a former address and a utility bill*

A U.S. passport or military ID card and a utility bill*

a "Notice of Ineffective Registration" card mailed to you by your county auditor (if you turned in a registration card late)

someone who is registered in the precinct where you live to vouch for you at the polling place

someone who is registered in the precinct where you live to vouch for you at the polling place

Now, if you try to get say, one Democratic Socialist to allege that 20 adults live in their precinct, but are not possessed of such sundries as utility bills or driver's licenses, this is probably not going to fly. If you do the same thing with college-aged people in a University precinct, on the other hand, it's more believable, since college students tend to live like sardines, and only one person can have the utility bill in their name.

3) Moving votes could help the DSA in several ways.

One of the really atrocious parts of our election system is that there's no cross checking between states; I knew people in college who voted two or three times, by absentee at their parents' residences, and in person at school. I'm sure Kleiman, who is a professor, is familiar with the phenomenon. So students, who usually have absentee ballots anyway, could easily hop over to Minnesota and vote again. Hell, I've heard of people voting multiple times in the same state.

It could also leverage votes. Say you work or go to school in a state where the Republicans have a lock on all the important offices. Why not bring your socialist vote to Minnesota, where it could make a difference?

Contrariwise, say you go to school in New York, where the Dems are going to sweep the area just fine without your help. Why not shift your vote to help out where it's needed?

Well, because the express purpose of the system is not to let voters selectively apply leverage; if we had a national system, it would look a lot different, and Paul Wellstone would never be elected. It's illegal and immoral to switch states, and if you don't think so, just imagine the other side doing it to your candidates. . . howdja like a couple of Republican Senators from New York? Paul Wellstone is supposed to represent the voters from Minnesota, not the DSA.

4) Is it unlikely? Well, I belonged to similar organizations in college, and let's just say it wouldn't surprise me. They tend to be young, arrogant, extremely ideological, and their ethics are . . . let's just say, somewhat situational. I think anyone who has spent time in this sort of group would be hard pressed to honestly say that such a tactic is beyond them. (I don't know whether the right-wing groups are similar; I'm not sure there really is a parallel sort of group, and I've never belonged to one if there is.)

I don't know whether they're trying to commit fraud or not. But given the history of elections in this country, I wouldn't be the least little bit surprised. It's crystal clear that we need a real registration system, one that requires photo ID and a social security number to make sure the voter belongs in the database. Obviously that wouldn't eliminate fraud. But it might do away with a lot of the graveyard vote, and about time. That we're even asking this question is unworthy of a democracy as rich as ours.

From the desk of Mindles H. Dreck:

Axis Facts

North Korea has admitted to a nuclear arms development program.

I hope everyone heard that correctly. 1) they are developing nukes 2) they admit it.

In light of this, and other developments in the Axis of Evil, will anyone be re-thinking their criticism of the hard-line adopted by this administration? Is it possible there was something to that infamous speech?

Don't answer, it's a rhetorical question.

(via Stuart Buck)

From the desk of Mindles H. Dreck:

Lew's words from dead-tree Harper's

Thanks to 2blowhards, I can now provide Lewis Lapham's actual words deplored by yours truly in this post:

When asked by worried friends and acquaintances whether the President was borrowing his geopolitical theory from the diaries of Joseph Stalin and Adolf Hitler, I assured them that the President didn’t have the patience to read more than two or three pages of a Tom Clancy novel.

As Friedrich advises:

Some of your arguments, are, well—I don’t know how else to put this, darling—a bit shrill....It seems like you still might be a bit, well, peeved about the Florida situation. Maybe it’s time you moved on, dear.

From the desk of Jane Galt:

Jim Henley has been advancing

Jim Henley has been advancing several interesting theories on what kind of person the Maryland sniper might be. The analysis centers around the pattern -- no weekends -- and the vehicle.

Of course, I have to quibble, so I'll point out that the initial reports of a white van in the area have probably resulted in the police getting reports of any white vehicle that was within a 25-mile radius of the shootings. And weekends are a bad time to do anything if you want to get maximum media exposure, which seems to be what this fellow is after. But those are just quibbles; his theories make a lot of sense.

Personally, I have entertained three theories about what might be going on.

First, it's possible that this is some sort of a terrorist. I don't think it's a domestic terrorist, not because they're incapable of such things, but because I don't see how this tactic advances the goals of our homegrown nuts. So a foreign terrorist, presumably Islamic. In which case, I would think that this is aimed at distracting the police in preparation for something else. However, it's gone on for so long right now that if it is meant as a distraction, we're so royally screwed that it doesn't bear thinking about.

Second, it could be someone who's trying to cover up a crime. He wants someone dead, but he doesn't want the police asking questions. So he shoots a bunch of other people so that his target's death will be written off to the sniper. Possible, but at this point, it's gone on a little too long. It's getting damn risky now, and he keeps going, which wouldn't be necessary if he just wanted to cover up a crime.

Third, it could be a nut job. The only problem with this theory is that this is not a typical pattern for a nut job. It's also frightening because there's no particular reason it should end. Unless you blanket Maryland and Virginia with police, your odds of running across the guy are just damn slim; he can be out of sight before anyone even knows there's been a shooting. And because his targets are random, it's hard to gather any evidence. And he can always just start driving farther to commit his crimes, if it gets too hot in Maryland.

From the desk of Mindles H. Dreck:

Turns out the rich are like us

Loser: los·er
Pronunciation: 'lü-z&r;
Function: noun
Date: 1548
1 : one that loses especially consistently
2 : one who is incompetent or unable to succeed; also : something doomed to fail or disappoint
3. Blogger who, upon reading a post in Jane Galt's Weblog a) focuses on one somewhat tangential comment -

The income effect is good -- richer people tend to save more of their income.

b) spends the rest of the evening locating a copy of a study that suggests this is not true, at least over a career, and c) thereby uses up his blogging time for the evening.

Except to marvel at one of the comments that suggests that "a retirement system, ANY retirement system, is a wealth transfer from one group to another." Only if you believe voluntary sale and forced redistribution are somehow equivalent! Put me down in favor of choice.

From the desk of Jane Galt:

Here's a good idea: send

Here's a good idea: send some flowers to the Australian embassy in condolence. I'm slightly stony this month, so I'm going to bring some to the consulate here, but Instapundit's using 1-800-FLOWERS, and for the more upscale among you, may I suggest Calyx and Corolla, which sends the nicest flowers you'll ever see anywhere. Come on, guys. . . let's start a meme! Some overwhelming support for our brethren in Australia, for whom I am sure your heart breaks as much as mine.

From the desk of Mindles H. Dreck:

"Conversations on Iraq"

Conversations on Iraq is a joint on-line forum sponsored by Stanford, Oxford and Yale:

Does Saddam Hussein pose a grave and immediate threat to the United States and its allies? Could the U.S. legally and diplomatically launch a pre-emptive strike against Iraq, particularly if the mission lacks the support of the United Nations? What precedent would a unilateral strike set for the future of diplomacy and the conduct of warfare? Beyond that, would an American-led strike bolster American counterterrorism efforts, or have the unintended effect of jeopardizing these efforts and potentially destabilize an already unstable Middle East? And what would Iraq look like in the years following an invasion? Would Iraq become a modern democracy built with U.S. financial assistance, or something closer to today's Afghanistan? These important questions and more will be addressed by six distinguished faculty members from Oxford, Stanford, and Yale in a unique online forum. Each panelist will address different aspects of the Iraq crisis in a short video lecture, provide suggested readings, and respond to questions and comments in an online discussion following his presentation. Meant to inform the larger public debate, AllLearn's forum will help participants critically assess arguments made by politicians, pundits and journalists and ultimately draw informed conclusions, whether pro or con, about U.S. military action in Iraq.

The faculty are listed within the description. I'm thinking of signing up, although it's a bit late for this....

From the desk of Mindles H. Dreck:

Joni goes Jacko

Joni Mitchell is pissed at the music industry, not because of intellectual property issues, but because of the crassness of MTV and the fact that her albums, while critically acclaimed, sell poorly.

Here's why they don't sell: every track I've heard from every album she's recorded since Wild Things Run Fast sounds exactly the same. Inspirationally speaking, she hit a brick wall. I stopped buying after Turbulent Indigo.

Also, some of us concert-goers know the thrill of her audience-berating walk-offs. Apparently it's OK for her to hold a drink and a cigarette while performing, but not OK for the audience to move around. It's not surprising that fans become alienated.

Note that this comes from someone who wore out the grooves on Court and Spark, Shadows and Light, Mingus,Hejira and Miles of Aisles.

I guess I'm a Joni reactionary.

From the desk of Jane Galt:

Stuart Buck is asking why,

Stuart Buck is asking why, if the 18-34 demographic is a small group with little discretionary income and a huge overxposure to advertising, advertisers spend so much money pursuing them. On the face of it, it doesn't make much sense. But that's short term thinking. (You lawyers!) Eventually, those 18-34's are going to be well heeled 45's. And by then, many of their brand preferences will already be set.

Oh, maybe you're like me and you read consumer reports and buy what's cheap. But the majority don't. My mother used Whisk for 40 years, and trying to convince her that the cleaning stuff in whatever is on sale is exactly the same stuff as the stuff in the Whisk was like trying to convince Thomas Aquinas that maybe it's all just, y'know, random chance.

When was the last time you switched your laundry soap? Your shampoo? Your dishwashing liquid? Your toothpaste? (Switched brands, I mean). If you drive an American car, there's a very high probability that your last car was American, and chances are better than even that you're driving one made by the same auto company. People are very loyal to their brands, and while they probably won't be wearing their Tommy Hilfiger Hip Hop Specials in 10 years, in most cases, if you get them early, you've got them for life.

The 40-55 segment, on the other hand, is in their peak years. They've already got a shampoo, a laundry soap, a wrinkle cream, and a car. Advertising is both less effective, and offers lower long-term return, than it does when spent on the 18-34's.

Or anyway, that's the theory.

From the desk of Jane Galt:

Wow. I got mentioned in

Wow. I got mentioned in WaPo. I feel pretty. . . oh, so pretty. . . I feel pretty, and witty, and bright. . .

From the desk of Jane Galt:

The other night, I was

The other night, I was discussing the problem of intellectual honesty with Susanna Cornett. It boils down to this: I don't try to fudge up numbers to back my ideological predispostitions. I try to look at the data and see what it really says, not just mine it for items that tell me what I want to here. I try to present disconfirming data as well as confirming. I try to show where I am making a value judgement that can't be validated empirically. I try to assume that my opponents are ignorant or making a different value judgement from me, not venal dishonest fools who are just lying because they're mean. I try not to engage in ad hominem attacks. Oh, sure, y'all have seen me wing a couple of people, but I hope that it was only after they'd repeatedly attacked me. Or in a couple of special cases, because I know beyond a shadow of a doubt that the person involved doesn't really believe what they're saying.

Larry Summers came and spoke at Chicago while I was there. Now, most of you probably think that Chicago economists are just a bunch of fanatic Republicans, but the fact is (apparently -- I haven't confirmed this myself) that the faculty of both the business schools and the economics department splits about 50/50 Republican/Democrat. Nonetheless, you knew that Summers was about to get roasted, because Al Gore's economic plan was a) fictional and b) dreadful.

[I thank my Democratic readers in advance for their angry letters. Yes, I am a drooling, venal dishonest fool who is just lying because she's mean. I'm sorry, I actually ran through the numbers analysis on both the Gore and Bush budget proposals, and both of them were so far off in never-never land that you couldn't even see them without a handful of pixie dust and Peter-Pan to guide you.]

What was particularly dreadful about Gore's tax plan was the "targeted tax cuts" that appear to be the dearest wish of half the left-wingers in the Blogosphere. From the point of view of most economists, there is nothing more distortionary and growth-hammering than "targeted tax cuts", aka deductions. For those of you who have run simple neo-classical models, this is the "D" variable that always produces those outlandish reductions in growth with a very small raise in the amount of the deduction. Let me see if I can explain why:

We'll work with a very simple economic model in which there are two ways to grow the economy: increase the supply of capital, or increase the supply of labor.

When we look at the effect of a tax cut on the economy, we want to know whether it encourages people to work or save more or less; this will tell us whether or not it grows or shrinks the economy.

There are two types of tax cuts you can have: cuts in marginal tax rates, like George Bush's cut, or deductions, like Al Gore's. Deductions can be implemented in a number of ways. You can increase the standard deduction, or you could increase the number of things people are allowed to deduct, like child care, education, home mortgages, etc, or the amount of each "targeted" deduction. Clear so far?

[There's actually a third type of tax cut you could have - a cut in the capital gains rate. But neither party was proposing one, so I'm not going to go into it.]

Now, there are tradeoffs involved in decisions to save or work: every dollar saved is a dollar you can't consume now. And every hour worked is an hour of leisure lost.

When people are making tradeoffs between two goods, economists analyze it from the point of view of two effects: the income effect, which is the effect on your demand for a good of a change in your income, and the substitution effect, which is the effect on your demand for a good in the change of the relative prices of the good and it's substitutes.

Breathe deeply. The bleeding from the ears stops after a little while.

Seriously, it's not that hard to understand. Think of a good -- say Ramen Noodles. The income effect on this good is negative: as your income goes up, your demand for Ramen goes down.

The substitution effect is also easy to understand: if McD's is having a 99 cent Big Mac special, you shelf the cup o' noodles and head out for some mystery meat.

Got it? Great. So let's look at the two types of tax cuts.

First, a cut in marginal rates.

Is there an effect on savings? The income effect is good -- richer people tend to save more of their income. But the substition effect is very complicated, as it depends on things like how permanent people think the tax cut is -- if they think it's temporary, they'll save more than if they think it's permanent, because people like to smooth their consumption over a long period of time, and saving lets them push some of their current consumption into the future. However, the difference in the savings produced by marginal rate cuts and deductions probably isn't large, so if it's all the same to you, we'll just look at the effect on labor, rather than capital.

Well, the cut in marginal rates effectively increases your income. The income effect on demand for leisure v. work is unambiguous: as they feel richer, people want to work less and play more.

The substitution effect is also easy to comprehend. The tax cut just effectively raised your hourly rate. Leisure is therefore more expensive. Say you were taking home $10 an hour, but now you're getting $12. Every extra hour you decide to play instead of work is costing you more money. The marginal hours, the ones you spent watching shows you don't really like on Saturday afternoon, or arguing with your boyfriend about whose turn it was to get the car washed, might have been worth $10 but just aren't worth $12. So you work more.

The entire argument about the effect of marginal tax cuts on the economy thus hinges on a debate over whether the income effect or the substitution effect is larger. That debate is still raging, and it's a post for another day. Suffice it to say that Bush's economists think that the substitution effect outweighs the income effect, so that cutting marginal rates will grow the economy.

[Righties -- this is why simply cutting marginal tax cuts is not an unambiguous boon to the economy. Lefties -- this is why marginal rate cuts are not just "giving money to the rich"]

Now, let's look at Al Gore's tax cut.

The income effect is just as clear: people get more money, so they stay home more.

The substitution effect is. . . hey! Where's the substitution effect? Answer: there is none. There's no incentive to work more; you get the targeted tax cut for doing something non-wealth producing, like buying a house, having children, going to college, etc.

[Isn't education wealth producing? -- ed. You think so? What did you learn in school that is helping you produce wealth today? For engineers and such, yes, but for most people, education is an elaborate signalling tool that tells employers you were smart enough to make it through a tough admissions process -- or at least not to drool on yourself during history class. But it just serves to reallocate existing jobs, not improve them or create new ones.]

Actually, deductions hurt the economy in a third way: they're distortionary. For example, the mortgage tax credit doesn't seem to boost home ownership, but it does create a hugely volatile housing market in tight spaces like Manhattan, while encouraging people elsewhere to occupy larger houses than they otherwise would. There's no reason to divert resources to larger homes when people might prefer to have something other than a big house, in the absence of the tax credit. Education credits just mean that more people will be getting useless degrees; if there were a demand for their degree in the marketplace, it would already pay them to get it. MBA's, lawyers, and doctors have no trouble getting private loans instead of government ones for their education; it's the comparitive folk dancing students who need the help.

[Are you saying degrees in Folk studies are useless? -- ed. Not exactly; I'm saying that I don't want to pay people to get one.]

So, since Larry Summers, who everyone respects as an economist, had been on the stump for these "targeted tax cuts" that are the bane of economists, you knew it was going to be bloody. And indeed, one of my favorite professors grilled him mercilessly.

But Summers had an answer. Ultimately, he said, it's a value judgement. Sure, these tax cuts were going to hurt GDP. But he thought the amount of the hurt would be sufficiently small to merit helping groups he favored, and because most people are economically completely illiterate, getting the targeted tax cuts passed was the only way to help them. That's why I respect him so much -- he gave an honest answer, rather than trying to fudge up data to support his desires, as do many, many figures on both the left and the right. (Of course, a friend points out that he was hardly going to get away with fudging up data in a room full of Chicago economists, but he's subsequently kept impressing me. So there.)

That's why I do get angry when people make disingenuous arguments. For example, there was a guy here a while back who was arguing against privatizing social security. Now, I'm in favor of doing so, with some safeguards, but I can be convinced otherwise, provided you can show me some real data about how we think privatization would end up looking worse than the current system. (There are reasons, having to do with demand and earnings growth and the demographic effect on the economy, that I can conceive it might). Unfortunately, many lefty type economists, who don't want social security touched because it's currently a prime vehicle of income redistribution, haven't gone that route. They also haven't gone the route of saying "I don't want social security touched because it's currently a prime vehicle of income redistribution". They've gone the route of saying ridiculous things that they couldn't possibly believe to support their desire to keep social security intact.

This chap was arguing that there was no crisis because when social security starts running a deficit, they'll just start rolling over the bonds, and the net debt of the United States won't change until 2040 or some such.

This is ridiculous. Let me show you why:

It is one of the most basic identities of economics that government spending must equal taxes plus borrowing plus net foreign income (what foreigners give us, minus what we give them -- for the US, it's a trivial figure)

S = T + B + NFI

This chap was arguing that spending overall could rise -- that we would be increasing social security payments, without decreasing any other spending. Yet at the same time, he was also arguing that neither taxes nore borrowing would be going up. Unless he's found a large pool of foreign donors, this simply isn't possible -- the money has to come from somewhere.

[They could print it -- ed. Yes, they could print it. But that wouldn't help. What we're worried about is not having a sufficient supply of little green pieces of paper; it's about making enough stuff to support everyone in the style to which they've become accustomed. Inflating the currency just hurts the pensioners -- ask the Russians.]

I could also have refuted his argument more directly; he was using the strange structure of government accounts to obscure the cash flow issues. But here's the problem: that argument is very, very complicated, probably beyond my poor powers to simplify for popular consumption. To most of y'all, I'm just a talking head. He's another talking head. We're having an argument about something we understand and you don't. He can BS you guys, and I can stand here screaming "He's lying", which is true, but you don't know that. Those readers who desperately want to believe that social security is just fine as is will simply choose the talking head they like better. That's why journalists so often get things wrong -- they don't understand what they're talking about, so they just choose the expert who validates their beliefs. That's how you get articles on guns that only present the VPC side.

But there are people who ought to know better. When I make a statement about something like economics, I do my best to define my terms, show you my reasoning, and make sure you can follow along with me. When I make a judgement call, I tell you so -- for example, my opinion that drug price controls would effectively end pharmaceutical research, which I believe is right, but not empirically proveable without resorting to price controls. I don't always get it right, but when I miss, I do my best not to fudge, but to admit I erred. And frankly, I'm getting too old to debate people who want to use arguments to obscure the truth, rather than jointly determine what the truth is. It's too tiring, and frankly, if all you're looking for is some rationale for your political views, you're going to take their word over mine no matter how compelling my logical argument. I'm very interested in debate with people who are airing important questions. But not with people who are trying to snow readers who can't tell the difference.

From the desk of Jane Galt:

Incidentally, here's an interesting dilemma

Incidentally, here's an interesting dilemma -- Lincoln Chafee is clearly thinking of switching parties if the Dems lose a seat. Personally, I think if he's thinking about it, he should be a man and let his voters know that he's running on the other ticket, but no matter.

Here's the interesting question -- I think some of the Democratic presidential hopefuls are from states with Republican governors, or may be after the election. Chafee (if he switches) and Jeffords' worst nightmare is the Republicans ever getting back control of the Senate, because they can look forward to living out their days as the most junior man on the Indian Affairs decorating sub-committee. So does Chafee want to bet that the guy who drops out to run for President either won't be from the Senate -- or won't be from a state that has a Republican governor?

From the desk of Jane Galt:

Mark also seems to think

Mark also seems to think that I believe that the Wagner Act is a regulatory taking. No, I don't think so -- but I think ordering companies to stay open when they were losing money by doing so, might be. After all, what you're doing is telling them that they have to run down the assets of their shareholders -- no less a regulatory taking than telling someone they can't build on land they own.

From the desk of Jane Galt:

Mark Kleiman has a response

Mark Kleiman has a response to the post below, as does Max Sawicky. Mark seems to be a little put off by the fact that I want the Wagner act repealed, but gosh, that's just the beginning of what would happen If Jane Were King. Repeal the corporate tax! Normalize treatment between income and capital gains! Negative income tax to really End Welfare As We Know It! Free health care for children under eighteen! End the student loan programs! And much, much more! If you'll just elect me king, I'll have things ship-shape and economically efficient in no time flat.

But seriously, I wasn't actually arguing that the government should have intervened -- only that if it did intervene, there was no sense in intervening on the side of the union (forcing the companies to pay them for not working), since that wouldn't cost the economy much less than the lockdown is costing. Remember, the result of forcing the companies to continue paying these guys is not just that the companies lose money, it's that the cargo still doesn't move. Why bother? Because dockworkers are cute?

More broadly, the biggest problem with labor law is that if you try to help the workers at all, you end up giving them too much power. Power between unions and companies is asymmetrical in our labor system; a union worker can decline to work for a company, but a company can't look outside the union for labor. At the same time, the way the system is set up, unions who want to play havoc with it can quickly make a company unprofitable. There is something really odd about the government giving the dockworkers union the power to essentially shut down a port, which is what a slowdown is. At least when the owners do this, they lose money, which gives them an incentive to minimize such actions; when the union stops the cargo from moving, they continue to get paid. They have zero vested interest in moving the cargo -- what are the shippers going to do, send it back? The labor system, in deliberately dis-aligning the incentives of workers and employers in key areas, created this mess.

Personally, I think they should have let it work itself out. The economy was losing $1 billion a day, which is a lot -- and those who are supporting the union are not allowed to complain about the cost of the war in Iraq any more, since the slowdown you're supporting chewed through the entire cost of the invasion in 2 weeks. But it's not that much in the grand scheme of things; about 3% of GDP, if it lasted a year. Which it wouldn't. Either the shippers or the dockworkers would have gotten hungry and gone back to the table. But unlike Max and Mark, I don't much care which it was. I don't think that companies are wonderful humanitarian value maximizers -- and I don't think unions are either. I don't think that either group is entitled to my help.

On a side note, Max says that dockworkers don't get paid as much as everyone's saying. Well, he's calculating 50 40-hour workweeks, off of their hourly wages, to get a lower number (still more than I make!!!) But here he has stumbled on one of my areas of indisputable expertise -- union payrolls!

It doesn't work that way. First of all, he doesn't know what their collective bargaining agreements look like; many unions get time-and-a-half after seven hours. (At least, I'd be surprised if he did read them, first because they're confidential, and second, because they're incomprehensibly long) Second of all, ports are staffed 24/7. There are night differentials, shift differentials, equipment bonuses, hazard bonuses, paid holidays, double or often triple time on Sundays, time and a half all day on Saturday, (double or triple time after eight hours), and a zillion other special rules for calculating what they actually get paid. And unlike you and I, whose overtime gets calculated on a weekly basis (anything over 40 hours), the overtime clock starts ticking for a union worker if he stays one minute after his straight time. It is an unusual worker indeed who does not rack up some nice overtime over the course of a year. Say you're on a crane, in the middle of moving a load. Does your boss tell you to get off the crane when the clock ticks over? No, you pick up half an hour or an hour, depending on what the calculation unit is.

It only gets more sweet when you become a foreman. Often there is an extra (all overtime) hour every day, just for being you. You pick up OT, because you're officially on the job until the last guy from your crew goes home, even if you left before him. There are all sorts of bonuses that make it totally inappropriate to just take their hourly rate and multiply it by 2000. And unlike you and I, who get the same amount of health insurance and such no matter how much overtime we work, these guys often have their bennies multiplied by the same factor as their overtime.

Both Max and Mark point out that some of these guys won't work a full year. Some won't. But even in construction, a lot of guys work on stable crews -- it's the screw ups who drift from team to team. A port, which is steadier, operates more like a factory -- most of the workers are going to be fairly permanent, with helpers coming on at peak times. And to the employer it doesn't matter whether they're paying the rough annualized salary to one guy, or seven -- they pay a certain average amount of salary for every body they have on a shift. If that's getting split up among seven transient guys, that doesn't save the employer money; seems to me, that indicates that the union is admitting too many people. But anyway, $80K doesn't seem at all outlandish for a dockworker, who makes about what our laborers do.

Both Max and Mark seem to think there's something vaguely sinister about shippers negotiating in a group -- monopoly power! Actually, it's for the benefit of the workers. Workers do move around as demand changes, and it'd be an awful pain in the ass to have to figure out a different set of rules every time you move. Also, if the union had to sit down with all the hundreds of small companies that do business with them, they'd never get anything done. It's not like autos or steel, with 3 or 4 companies to negotiate with. Nor would workers like to have varying dates, rates, and differentials for their various employers -- they'd never know where they were.

I think that often those who voice fairly unconditional support for unions are those who are comfortably removed from dealing with them. It is really, really hard to spend a year or so dealing with union labor and not see how many ways that unions produce a truly dysfunctional workforce. I don't fault the unions for doing what they do; it's what I would do in their place. But I don't think that they're some unique repository of virtue against the cold, hard, corporate masters; mostly what unions do is look for ways to use as many people as possible to do as little as they can possibly get away with. I don't see this as a winning model for growing the economy.

Max argues that all the unions want is to make sure that the new jobs using improved technology are union, and that this is just an argument about who gets a bigger share of the profits from shipping. Umm. . . no. The union doesn't just want to make sure that the new jobs are union -- it wants to make sure that there are as many jobs using the new technology as there were doing it by hand. That sort of defeats the purpose of implementing the technology. And it isn't a fight over safeguarding current workers; it's about making sure there's a steady stream of new workers, using exactly the same number of people to move cargo as have always been used. I'm not really sure why we have an economist arguing that we shouldn't want labor to be any more productive than it has ever been.

On one level, Max is right -- this is an argument about divvying up the rents from shipping. But on another level, that's hopelessly simplistic. First of all, for the economy as a whole, it is not a good thing to be using more people to do work than is necessary. On a very basic level, the economy has two inputs -- capital and labor. Our output is the product of those two resources, multiplied by teh productivity of the resources. Using more people to do a job than you have to makes the overall labor input less productive, which shrinks the size of the pie we have to divide. Second of all, when a union has a government conferred monopoly, it does just what any other monopolist does -- maximizes its revenue at a lower level of production than would be achieved in a competitive marketplace. So the union guys get higher wages. Some of that comes out of the shippers' pockets, but some of it comes out of the customer's pockets (mostly out of the customers, I would guess, in this case, since shipping has only weak substitutes currently available). Stuff that's getting shipped from Asia isn't, by and large, high-margin stuff; a lot of it is going to be stuff where raising shipping rates will make the difference between profit and loss. That stuff won't get shipped there. Assuming for the minute that American retailers and manufacturers are buying the stuff from Asia because it's cheaper, not because it's fun, that means that GDP will drop.

It's kind of like taxes -- there are good reasons, moral and otherwise, to be against higher taxes. But believing that lowering taxes somehow raises revenue is not one of them. Similarly, it is possible to simply favor unions because you like them, or think that they deserve what they get, or what have you. But it's foolish to argue that the unions will not maximize their self interest at the expense of the company and the economy, because they manifestly do. I think that companies do the same, when they're given the incentive to do so. I think in general, however, that the market does a good job of aligning the company's incentives with those of us who would like a snazzy, productive economy. I don't think that the union's incentives are so aligned. And I have seen no evidence, empirical or statistical, that would cause me to change my mind.

From the desk of Jane Galt:

The left-wing blogosphere is up

The left-wing blogosphere is up in arms about the President's invocation of the Taft-Hartley act. Mark Kleiman says:

The left blogosphere has been full of complaint about the President's invocation of the Taft-Hartley Act to re-open the West Coast docks. As Sam Heldman summarizes the situation, the union and the shippers were at loggerheads about job protection in the face of labor-saving technological change. The union started a work-to-rule slowdown to put pressure on management. Management staged a lockout. Eugene Scalia, the Solicitor of Labor (a Bush recess appointee after the Senate made it clear he wouldn't be confirmed) proposed a simple 30-day contract extension, which the union accepted but management rejected.

[Note: Joshua Micah Marshall at Talking Points Memo notes that Scalia, in private practice, had represented the Pacific Maritime Association, the shippers' group that staged the lockout. Marshall provides a copy of Scalia's financial disclosure form, on which he lists PMA as a former client. I don't know what the rules are about this, but it doesn't smell right. And it makes it even curiouser that the the union should have accepted, and the PMA rejected, Scalia's proposal. But maybe the PMA knew how the endgame would play out.]

Bush intervened, and got an order ending the lockout for an 80-day cooling-off period and requiring the workers to work at normal pace. [More on the legal aspects of slowdowns from Nathan Newman.. Note that "work-to-rule" simply means sticking to the letter of the existing contract. "Sanctity of contract," anyone?]

It's not hard to see the economic justification for reopening the ports, though whether the lockout truly threatened health and safety, as specified in the statute, is less clear. But can anyone in the right blogosphere come up with either a different statement of the facts or a justification for what appears to be an Administration tilt toward the side that (1) started the work stoppage and (2) rejected the mediator's suggestion for ending it? Why reward stubbornness?

Well, my Dad's organization does collective bargaining, and I've worked on union jobs, and so I've heard a little bit about this. A couple of things spring to mind:

(1) I'm under the impression that it wasn't a "work to rule"; it was a "work to OSHA requirements". OSHA is awfully well intended, but from what I've seen, it's not really possible to actually get work done while fulfilling all of their directives, which are legion, conflicting, and often so vaguely defined that it's hard to tell whether you're in compliance or not. You can make things go awfully slow by, say, demanding that the company take time to measure every step on a staircase to see whether it is 6 feet off the ground and therefore requires fall protection, "accidentally" losing your equipment and trekking back for more, etc. In any slowdown, it isn't the working to rule that's the problem -- it's the endless arguing about what constitutes compliance.

(2) While I'm libertarianish, and therefore in sympathy with the argument that the government shouldn't interfere in private labor disputes, you have to remember that the only reason these yabbos can shut down the job is that the government set up a whole class of rules protecting them from the kind of discipline that you and I face if we decide to, say, lower our productivity by half.

Kleiman talks about the sanctity of the contract, and notes that all they're doing is "workign to rule" -- sticking to the letter of the contract. He doesn't seem to wonder why the unions have a contract which, if enforced, would put the employers out of business. Writing such contracts is hardly standard business practice, at least not among businesses that hope to stick around for any length of time.

Why? Because the NLRB weighs in heavily on the side of the union, giving them monopoly power over the shippers: if they don't sign a contract with the union, they are not legally allowed to sign a contract with anyone else, and have to shut down. If the government's free to violate that "sanctity" in order to help the unions, I don't see any legal or philosophical principal that prevents them from doing so to help the owners as well, other than a political or personal preference for one side over the other. If it weren't for the NLRB, these guys would have been fired and replaced a long time ago -- what they're doing is not brain surgery. I don't have all that much sympathy when, having abused the artificial power conveyed upon them by the government, they see the government step in to limit some of that power's more deleterious effects.

[Abuse? -- ed. Yes, I think slowdowns are abusive. How would you feel if your child's tenured professor decided to only teach 1/3 as much material because he thought he deserved to be paid more? Abuse of his sinecure, no? In general, if you want to know why employers hate unions, imagine how you'd feel if the government legally required you to sign a contract with a certain dry cleaner. Imagine what kind of service you'd get from said dry cleaner. Imagine how you'd feel if the dry cleaner told you you couldn't switch to business casual, because he needed the revenue from your shirts. You too would lie awake nights, plotting ways to knock off your dry cleaner and reclaim your shirts for your own.]

(3) It's fun to cast the PMA as the villain, but none of this addresses the central point, which is that during the slowdown, cargo was stacking up and the PMA was losing a lot of money every day they operated under slowdown conditions. I don't think the government can order a company to operate at a loss, which is what Kleiman seems to be suggesting they should have done -- it's a regulatory taking, and if the government wanted to go to the wall on it, the companies could just file for bankruptcy protection, at which point the union contracts would be null and void. This would not improve the lots of the dockworkers, the owners, or any other citizens.

If we want an extension, we, as taxpayers, could decide that we want to foot the bill for the $80-$160K annual salaries these chaps would be drawing, while doing their personal best to ensure that no cargo moves through the port, thus maximizing the cost not only to the shippers, but also the vast majority of us who consume things that get shipped. Personally, I make a lot -- a lot -- less than that, and I'm not inclined to offer up more of my meager earnings to subsidize them.

(4) There's not really much point in sending the workers back to work on slowdown. With the workers deliberately slowed to a crawl, the cargo ships would still be stacked up outside the ports, which is why the government is getting involved in the first place. They would of course be moving faster than they are when the ports are shut down, but not all that much faster -- slowdowns can cost as much as 2/3 of productivity, and union labor is often pretty damn unproductive to start with. My old company used to compete with one of the electrical unions here for business laying network cables, and the union guys took easily 2-3 times as long as our guys to complete the same work.

The government intervened not because the PMA is so darned cute, but because it's costing the economy close to $1 billion a day. Cutting that number to, say, $660 million is hardly sufficient.

(5) The union side in this is just unattractive. They're not fighting for living wages, or safer working conditions -- they're fighting to make sure that the ports remain unproductive always and forever. I have some sympathy for the guys in their 50's who don't know how to do anything else. But it's simply ridiculous to argue that we should keep bringing on new, younger workers to do drone jobs that can be done better, cheaper, and faster by machines. Replacing human muscle with technology is, by and large, how an economy grows.

[But don't we, as a society, have to find something to do for people who don't have the skills and intelligence to get good skilled jos? -- ed. Yes, but we can find something better for them to do than gumming up the works in one of the linchpin supply points for our economy.]

(6) What Scalia proposed was not really much of a temporary solution -- a 30-day contract extension would have allowed the slowdown to continue, or at least that's how it works here. It's a temporary solution from the standpoint of the unions, whose members are getting paid. From the point of view of the companies it solves nothing -- they're still hemorrhaging cash, and the requirements of the unions are such that in order to get a contract, they have to agree to terms which just mean they'll bleed to death more slowly.

(7) That said, I don't see how you require union workers to work to speed. If they want to slow things down, they will. Are you really going to put someone in jail for "accidentally" fouling a crane line and taking it out of commission for a day, or any of the other million and a half ways I can think of to slow things down?

(8) All of this just validates basic economic precepts. The government stepped in to set a floor -- a damn high one! -- on the price of certain labor. With the price artificially high, demand for that labor melted away. "Living Wage" proponents, take note. See that Kleiman (whose blog I adore, by the way) is reduced to essentially arguing that the company should be forced to continue to employing these workers, even though it makes the companies uncompetitive and, in this case, would actually cost them more money to employ each worker than each worker produced in revenue. You cannot run an economy that way. Ask anyone from the former Soviet Union if you don't believe me.

[Are you calling Kleiman a Communist? -- ed. No, silly. But many general beliefs, "support for unions" among them, lead their proponents through an interesting logical process. As each well-meant regulation has it's predictable result, they try to patch the "loophole" with another regulation, which results in something else they don't like, until we arrive at "companies should be forced to employ these workers even if it hurts their business to do so" -- something that I think it's hard to dispute that complying with the union's demands would do. Not just lower their profits, I mean; actually worsen their competitive position considerably. While most people who arrive at such a pass would never state such a principle a priori -- "Companies should employ workers who produce less than they're paid" -- they end up making such statements in defense of the first principle. You can see a similar phenomenon at work in otherwise reasonable pro-lifers who support shooting abortion doctors.]

While there's a certain part of me that revels in the glorious struggle of the unions in the 20's and 30's, I think trying to maintain a unionized workforce in 21st century America is a losing battle. Unions are rigid, combative, and fiercely protective of their turf, the exact opposite of what makes our economy so effective. They made perfect sense when people were just more dexterous horses, as in coal mines, or cheaper machines, as in assembly-line workers. But our technology has made that model outdated, not merely because we can replace workers, but because we can make them so much more productive, if only the unions will allow it. And in fact, high-paid unions only hasten the demise of their worker's jobs, since their wages make machinery much more attractive -- witness the demise of the typesetter's union for a perfect example of this. Unions also, because of their perfectly understandable desire to have as many members as possible paying them dues, wage constant war to make each worker as unproductive as possible, which hurts not just the companies in question, but the economies as a whole. I find it hard to see a compelling state interest in encouraging this.

From the desk of Mindles H. Dreck:

Lewis Lapham succumbs to Godwin's Law

I picked up a copy of Harper's to read on the plane this week. The issue on Newstands features .article by Lewis Lapham against the war in Iraq. (The preceding link is only a summary - you can't read the article on-line yet).

I thought I might be exposed to some intelligent anti-war discourse.

I was wrong.

Basically, Lewis Lapham assumes that Iraq poses no threat to the U.S. or U.S. interests (using the now familiar "no new evidence" ellipsis). Here's the summary:

"I had assumed that not even the Bush Administration was so stupid as to take up arms against a figment of its own imagination," writes Harper's Magazine editor Lewis H. Lapham in an essay arguing against the impending invasion of Iraq. Even though there are no links evident between Saddam Hussein and Al Qaeda and scant intelligence as to the extent of his arsenal, Bush's threats to depose the Iraqi leader betray "the character of a government in the state of decadence." Turning to Thucydides' History of the Peloponnesian War, Lapham finds similarities between Athens and the United States, both once great democracies corrupted by a lust for global domination.

It's even worse than that sounds. Early in the article Lapham likens Bush to Hitler and Stalin, with his only saving grace that Bush is too stupid to be a real Hitler or Stalin. Jeez.

(UPDATE: I found the quote.)

Not only does Lapham assume away any defensive interest, he assumes away any benefit to the Iraqis of potential liberation. Once you've done that, an anti-war stance kind of has to seem pretty rational.

You could also assume away altitude and step out of a plane without a parachute. I don't recommend it.

Unfortunately, I left my marked up copy in the seat pocket, so some passenger on a subsequent flight will get a sense of my ink-spilling reaction, and I can't type in quotations here. Perhaps I'll pick up another copy on the way home to expose the true horror of Lapham's lament.

Once again, I tried in good faith to round out my sources but ended up sadder and no wiser.

UPDATE: Please excuse the now-corrected "Godwyn". If I'd bothered to add a link I might have spelled it right. Sheesh.

From the desk of Jane Galt:

I just saw the ad

I just saw the ad that the Republican in Montana is complaining was an attempt by the Dems to imply that he's gay. Normally I'm suspicious of such claims, and to be honest, I think the guy should be pre-emptively impeached for the leisure suit they show him wearing, but ultimately I have to agree; it reeks homophobic to me. The footage in question has absolutely nothing to do with the topic of the ad, which purports to be about something he did wrong while he was the proprietor of a beauty school 20 years ago. Not that the ad dwells on whatever it was he did, because too much chatter would distract from the footage of a younger, hipper Senate candidate massaging another man's face and applying powder with a pink powder puff. They couldn't have made their message any clearer without, say, a shockwave of him prancing around in a maribou robe, singing excerpts from Judy Garland's greatest hits while waving a sign that says "Queer as a $3 bill!"

Just what Montana needs -- another event to build their sterling reputation on homosexuality.

And where are the Democrats? Has anyone on the left come out to say that trying to win a campaign by underhandedly implying that your candidate is homosexual is, y'know, wrong? I mean, I know that political campaigns often take on aspects of an eighth grade popularity contest. But we don't have to encourage it, dammit.

At the very least, I think the state Republicans should be allowed to give the state Democratic leadership an enormous wedgie.

From the desk of Jane Galt:

Man Bites Dog Henry Copeland

Man Bites Dog
Henry Copeland is not only doing original blog reporting, but also coming up with juicy facts: the NY Times website's readership has surpassed the newspaper's.

From the desk of Jane Galt:

Hoist by their own Petard

Hoist by their own Petard

All the left-siders who have been arguing that of course, if the shoe was on the other foot, they would be thrilled to allow the Republicans to sub in a more popular candidate, and the right-siders who have been arguing that of course, if the shoe was on the other foot, they would insist that their party stick to the rules, are going to get the chance to put their money where their mouth is.

Sounds like the Republican candidate in Montana who was trailing badly has just decided to drop out of the race amid accusations that the Democrats ran a homophobic ad against him.

Who will be the first Democrat to step up and say that of course this is totally different, and the Republicans can't be allowed to stick in, say, Montana's popular Republican governor, at the last minute?

From the desk of Jane Galt:

You know, sometimes we just

You know, sometimes we just need to be reminded to be grateful.

From the desk of Jane Galt:

Michael Tinkler points out that

Michael Tinkler points out that American students are heading to Canada for the cheapie education.

This makes me think, of course, of prescription drugs.

Now, whatever you think the reason is, it's obvious that prescription drugs cost less in Canada than in the US. It is also obvious that this is not an equilibrium unless you can keep consumers in the higher priced country from shopping in the lower priced country.

With prescription drugs, it's not obvious where that equilibrium is going to shake out -- whether our prices will fall to Canadian levels, or theirs will rise, or they'll meet in the middle.

But I am interested in education. Canadian taxpayers are essentially providing us an enormous subsidy. Not only do they ship large numbers of their educated people here; now it appears they're also educating our children at a steep discount. They can rectify the latter by refusing our money. . . but how do they rectify the former? Will NAFTA spell the end of low-cost education in Canada?

From the desk of Jane Galt:

As an addendum to the

As an addendum to the previous post, I should say that I am very, very sympathetic to those who fear that America is turning into an empire. I share those fears. But I also don't think that merely invading Iraq makes it inevitable. We have done lots of things in our past that violated the grand isolationism at the heart of the American spirit. Our very first military action abroad was, essentially, an imperialist war against a weaker nation that was harboring terrorists, in pursuit of naked economic interest: the invasion of Tripoli, where the Barbary Pirates were succored.

Nor is violating civil liberties in wartime new. Democrats, take note: your hero, FDR, not only held military tribunals, but when he was unable to make a case in court against people he thought were a threat to national security, he had them committed to St. Elizabeth's mental hospital for the duration of the war.

Yet, Thomas Szasz and Noam Chomsky aside, we do not make a habit of either practice. And neither resulted in the breakdown of American society, possibly because there is no Barbary Pirates Studies program at Yale.

I think that these things should be subjected to national debate. And they should be undertaken with the knowlege that they are not our ideal, but an imperfect action in an imperfect world. And our resolve to make things better where we can, so that such things do not need to happen any more. But while I am cognizant of the slippery slope, I think it's silly to say that every less-than-ideal action is a nail in the coffin of liberty.

From the desk of Jane Galt:

Nuclear Deterrence Part V: Wherein

Nuclear Deterrence Part V: Wherein I Wrap It All Up and You Worship Me as a Living God

Warning! Looooong Post on Defense Policy written by Non-Defense-Expert

In Part I, we discussed how MAD closes off potential areas of escalation. In Part II, we discussed the principle of overwhelming force. In Part III, we discussed the importance of presenting a credible threat. In Part IV, we talked about why non-proliferation is crucial. Now I'll try to wrap it all up and show you overall why this makes me so unconvinced by the anti-war arguments I've heard.

Those of you who listen to Good Morning Scotland on Radio Scotland, which is, I presume, none of you, actually heard me debating the war the other day. The chap I was debating with was well meaning, well informed, but he was doing exactly what the majority of anti-war commenters I've seen do: pissing all over other people's arguments without actually offering any concrete proposals of his own.

One of my favorite b-school professors, in whom I took a class on technology business models, had a great line he got from his grandmother: "If all you've got is 'no', go peddle it somewhere else. We're full up here." By which he meant that it is easy for us to sit in a clean white room with 60 other students and make fun of other peoples' business plans. There is no plan so outstanding that someone cannot come up with a criticism; no model so compelling that someone cannot demonstrate a circumstance in which it will not work. The world is littered with businesses that wiser heads were convinced could not succeed: Nike, FedEx, and Coca-Cola, just to name three off the top of my head.

It is fine to pick holes in what other people are saying. That is the strength of the liberal system of debate. But in the end, if you do not like someone else's plan, you have to do more than come up with 3 zillion reasons it won't work. You have to come up with ways to make it better, stronger, faster, or you have to offer a plan of your own. And the anti-war side isn't really doing this.

Easiest to make fun of are those -- and there are more than a few of 'em -- who are incoherent. They just don't like the US government, they particularly don't like the Republicans, and they hate George Bush with a passion seldom found in one so young. They do not believe anything they hear from government sources, but they accept uncritically whatever Noam Chomsky says. There's no point in talking to them, first because their logical, mathematical, military, and historical education is so deficient that one would have to send them to class for a few years before we could have a meaningful argument, and second, because this debate for them is religious in nature. They are no more interested in actually finding out what range of possibilities is likely to work than a Carmelite nun is in trying to figure out how the Apostles might have faked Jesus' death.

Second easiest to make fun of are the people who want to spend the next ten years having questions and concerns. It is perfectly valid to have these things, of course; I've got loads of them myself. But in many cases the questioning is a substitute for any attempt to obtain answers. The chap I was debating ended up, after the interview was finished, debating the occupants of the bar we were at. He had lots of questions about why we were doing this, and how our foreign policy had failed, and what have you. And one guy looked at him, after fifteen minutes or so, and said, as I should have: "That's fine. But what would you do?"

Somewhat taken aback, he said "Well, I'd first like to look at the ways in which we created this mess with our foreign policy --"

At which point his interlocutor cut him off. "Great. Let's look. But what would you do?"

He had no answer. And this segment of the anti-war brigade doesn't. They don't have any plan for containing Iraq, keeping Saddaam from getting nukes, protecting our interests in the region, protecting Saddaam's neighbors. . . all they have is questions. Questions are necessary. I too, would like to know in what ways our foreign policy went wrong, so we can hopefully avoid those mistakes in the future. But at the end of the day, whatever we did or did not do, we have to resolve the situation as it exists now. Only if this group gets their way, we'll be far too busy gazing at our own navels to ever actually act.

Slightly less risible are the merely ignorant. They don't understand a large segment of the debate, and don't know that they don't understand it. Take, for example, the isolationists: let's walk off and leave the Gulf to its own devices. These come in two flavors: the right-wingers of various flavors from anarcho-capitalist to Pat Buchanan, who think that things will somehow work themselves out satisfactorily without our guming things up, and the left wing "No blood for oil" crowd. It's a compelling slogan, or at least I thought so when it was first released, in 1991. Of course, I was 17 then, and I also thought Sting was deep.

Both groups are either ignorant of, or deliberately ignoring, the realities of a complex modern industrial economy. They are not confronting what would actually happen if, for example, the oil supply were to contract by 10%.

Answer: the price of oil has a very, very tight inverse correlation with our GDP, which is to say that a percentage drop in the price of oil produces a corresponding percentage rise in GDP. So try this excercise. Look around you at all the stuff that is made with petroleum derivatives. You can start with all the plastic, many of the synthetic materials, much of the rubber, many of the drugs you take.

Now take 10% of them out of your house and throw them away. You don't get to use them any more.

Take 10% of the gas out of your car. Hope you like carpooling.

Turn your thermostat down; you'll be using 10% less heating oil this winter.

Remember when I said to take 10% of the plastic things and throw them away? Now take 10% of all the remaining stuff that isn't manufactured locally and throw it away too. We'll be using 10% fewer trucks from now on.

You can also take 10% of your salary and give it back, because using 10% less oil is going to make you 10% less productive, on average. It'll be better in some industries, like grocery clerking, and worse in others, like truck driving. But 10% is a good starting average. Just keep in mind that your mortgage, your groceries, and your kid's clothes aren't going to get any 10% cheaper.

And actually, I'm underestimating. Because the inverse correlation becomes less advantageous the bigger the cut. Which is to say that if we cut 1% of our oil consumption, our economy works around it. But when we cut 20%, things start grinding to a screeching halt. A good metaphor is to imagine that you decide to put less motor oil in your car. 1% less, you probably won't notice. 20% less and . . . hello, Mr. Repairman, will you give me an estimate or shall I just hand over my firstborn now?

Is it unrealistic to think that Saddaam, if allowed to control of over 50% of the world's proven oil reserves, would cut world supply by 10%? I'm not an energy expert, but I suspect it's all too realistic. There are only three large oil producing countries that are not currently pumping most of their proven capacity: Russia, Iraq, and Saudi Arabia, which underproduces in order to make up for the other OPEC nations who cheat.

[Multilateralists here might want to note that Russia has strong financial incentive to leave Saddaam in place. If he does manage to invade Saudi, Kuwait, Oman, etc., and cuts supply in order to maximize his profit, Russia will make out like a bandit.]

It is well known in economics that monopolists maximize profit at a higher price, and lower volume, than a competitive market. Demand for oil is so very inelastic that I suspect that 10% is well within the possible range -- especially since unlike the Saudi Royal family, Saddaam will be looking to maximize short term revenue that accrues during his lifetime, rather than long term profits.

We had a 10% contraction in GDP once. You may have heard your grandparents speak of it: the Great Depression.

We cannot have a high-functioning industrial economy if the key commodities that fuel it are produced in regions wracked by terminal instability. Now, if you are willing to accept the economic consequences, I can accept that, but not if you are denying them. And acceptance means accepting, too, that it is the poor and the children who will suffer most. The rich haven't really gotten richer, in any meaningful sense, this century: Bill Gates has neater gadgets, but his standard of living isn't really much better than John D. Rockefeller's -- except on measures that you and I also share, like better health care and transportation. Bill Gates' life isn't going to suffer because our GDP is 8 trillion instead of 10 -- how many billions can he spend? The single mother waitress is the one who will notice because we can't afford new shoes for Junior this year.

While we are noting the stupid arguments category, let us not forget the "Why Now?" crowd. I don't want to hear this argument unless you have some actual reason that you think it will be better to invade Iraq in two years instead of today.

But I will answer it anyway. The answer is that before 9/11, we were a different country. We believed in largely reactive warfare. The problem with this argument is that while it is possibly appropriate to conventional warfare, it is simply inappropriate when applied to WMD or terrorism.

The only even vaguely coherent people making this argument want to wait for solid proof. Well, in a conventional world, you can see the threats coming to some extent. If those perfidious Canadians are massing on the border for an invasion, the folks in Maine are going to notice something's up. What sort of proof would you like that Saddaam is close to getting a nuclear bomb that is not:

1) Saddaam announcing that he has a nuclear bomb and telling US forces in the region to get the hell out of Dodge.
2) Classified intelligence information.

I mean, let's face it, we have to trust the government to some extent, because the information is asymmetrical, and it has to be. The price of maintaining an open society that welcomes people from around the world is that we can't tell everyone everything, because some of it would get back to our enemies. The problem with demanding intelligence information is that if we keep it non-specific, the government could say anything they want. They can tell us they have photographic proof that Saddaam is even now plotting to stage a Kathy Lee Gifford Christmas Spectacular, and how can we say any different until the horror is unleashed on the world? On the other hand, if they give us the kind of specific information that would make us believe them, we have also given Saddaam a chance to find out

a) What we know
b) How we know it.

If Bush tells us information gleaned from a meeting that only eight generals attended, well, tomorrow Saddaam will have eight fewer generals, and we'll have one less intelligence source. This is not a recipe for victory.

No, we're going to have to trust him, for now -- with the caveat that there will be hell to pay if they lie to us. But here's the other thing: I have yet to meet one person who wants to wait for more information who is also willing to put a substantial sum of their own cash down on the bet that if we invade we will find nothing in Saddaam's archives that silences the majority of those criticizing the invasion.

(For the record, I'm not making that bet, but only because I can't figure out how to quantify it. And because everyone to whom I've put the proposition has hedged like a husband with lipstick on his collar.)

There are those like Tom Daschle who would be for the war if only a Democrat were getting the credit. I don't blame them, exactly, but it's hard to take it seriously, either.

Then there are my favorites: the inchoate "But nothing's happened yet" folks. By that logic, someone who has jumped out the window and is now hurtling past the 15th floor is perfectly all right.

Finally, we have those drawing ill-informed lessons from history. It's certainly true that those who fail to learn from history are doomed to repeat it, or else why do we keep having Love Boat Reunion shows? But it's also true that those who spend all their time looking at the past let the future slip through their fingers.

The fact that conventional deterrence has worked on Saddaam is irrelevant. Conventional deterrence is ineffective against nuclear threats, and against terrorism, for reasons that I hope I've shown here. Ask yourself this: if Saddaam gets a nuke, do you think that things in the Middle East are going to stay the same, or is the map going to get redrawn? C'mon, be honest -- there's no one listening. Just in your deepest heart of hearts. Can you really convince yourself that when Saddaam has amassed say, 10 atomic bombs, he's going to say "Well that's all right then" and store them in a secret basement just so he can go down and pet 'em once n a while?

The fact that non-proliferation wasn't irreparably destroyed when Israel got a Bomb does not mean that it will therefore be okay if 40 other nations get them. Go read the Tipping Point. Then say to yourself: if Saddaam gets a nuke, so will all his neighbors. Then get out your tap shoes and try to explain why that is a healthier, more stable situation than us invading now.

That's why those who want to leave things just as they are are so maddening: things aren't going to stay the way they are no matter what we do. We can control the change, or we can let Saddaam control it. But we can't all just put on our Red Hot Chili Peppers t-shirts, fire up some Pepsi Clear, and declare that henceforth, it will always and forever be 1995.

The fact that MAD worked on the Soviet Union is likewise irrelevant. MAD was a very carefully constructed structure, one that fails if the integrity of any of its pillars is breached. Those who were carping on tangential issues in the comments of this series of posts completely missed the point, which is that there is no way to produce a workable system that has the stability and effectiveness of the system that guided us to the successful conclusion of the Cold War. Unless you have an architecture that reproduces the critical elements of MAD to contain Iraq, it's completely pointless for us to argue about the precise kill range of the weapons Saddaam is likely to obtain, or the probability of missile deployment. There are many ways to deploy and use nuclear weapons; any containment system has to address them all. If you think you can work out a containment system where all the defense wonks have failed, have at it. But it had better be more compelling than "It worked before", and it has to operate on something other than your belief that you can read Saddaam Hussein's mind.

There are people who are weighing the costs and benefits carefully, and because they're weighting the risks of action more highly than inaction, they wish to stay our hand. But I'll tell you what I've noticed: the defense and intelligence folks for the Clinton administration aren't among them. They're asking questions, intelligent questions. But they aren't advising us to stay our hand en masse. That, more than anything else, convinces me that the argument in favor of action is probably pretty solid, and that it was politics, rather than policy, that kept Clinton from pursuing Saddaam more aggressively.

So if you want to convince me that we shouldn't go to war, you have to convince me that you have a system that will work better than war. That I am wrong in my belief that inspections won't work. (That's an awfully tough sell; no one I've seen is even seriously arguing this point any more.) Or that you have a defense framework that is going to provide for security and stability at home and in the Middle East.

Just don't ask me any more questions unless you've got some answers.

From the desk of Jane Galt:

I've just discovered this column

I've just discovered this column by Ron Rosenbaum, a self described "libertarian liberal Democrat", with whose politics I probably do not agree, but whose integrity, at least as it is presented in this piece, is admirable.

From the desk of Jane Galt:

Apparently, many Americans are clinically

Apparently, many Americans are clinically obese, but don't know it.

How do you not notice that you are obese? We at Live from the WTC are well aware how the pounds can creep up on one. . . post 9-11 stress, combined with an unusually sedentary lifestyle brought on by the inevitable respiratory effects of working at Ground Zero, and an unusually level high sugar consumption brought on by the kindness of the Salvation Army, rendered us temporarily horrified at our weight until we could get back into the gym. Obese, however, is not something that happens overnight. It is also not something that happens invisibly. After you've pushed through a couple of dress sizes, don't you notice something? Such as the fact that you can no longer view your feet without a mirror?

From the desk of Jane Galt:

VodkaPundit, we missed you! For

VodkaPundit, we missed you!

For one, long, soul-wrenching, gut-searing, but-VodkaP-where-will-I-go-what-will-I-do week, he's been silent. Now he's back, with outstanding posts like this one that remind us just what it was we were missing all this time:

A very wise man once said that if we throw away our freedom, if we renounce our heritage, there can never be another America. Never again on this planet will the political, geographical, and philosophical stars align they way they did in 1776. There are no new continents to find, explore, settle, and to which to escape all the bloody history of the Old World. This is it – humanity’s one shot at a new creation.

But we might just blow it if Washington can’t protect it.

Be afraid of George W. Bush if you must. But your real fear should be your neighbors, if Bush fails us in this Terror War. We’re just one more attack away from trading a lot of freedom for a little security – and getting the neither that we deserve.

With al Qaeda hurt and scurrying, our biggest danger now lies in Iraq. Iran’s government is rotten fruit, ready to fall on its own. North Korea is starving. Saudi Arabia exists at our whim. Syria is hapless. Libya is like Italy under Mussolini – loud but mostly laughable. Pakistan is worrisome, but mostly to itself, not to us. Only Iraq has the combination of means and menace to threaten us directly.

A nuclear-armed Saddam doesn’t actually have to level Los Angeles or New York to put National Guardsmen on every street corner. He doesn’t actually have to spray us with smallpox to bring our economy to a halt. He doesn’t actually have to lob Sarin missiles into Israel to blow apart our foreign policy.

Saddam only has to demonstrate that he can. Then we become a very fearful people again, much worse than we were on September 12.

Part of what makes America special is our simple physical separation from the Old World. We have no Kaiser on our northern border, rattling his sword. Our southern flank is poor Mexico, not expansionist China. Enemy warships don’t patrol our coasts, threatening our lives and livelihoods. Those simple facts accord us much of our freedom. 9/11 showed that none of those facts count like they once did. So now we must either police our threats, or police-state ourselves.

Most civil libertarians fear what will happen to us if we attack Saddam. I fear what will happen if we don’t.

Welcome home, Vodka Boy. Welcome home.

From the desk of Mindles H. Dreck:

Cats and Dogs

The WSJ endorses the IMF:

....all the more reason to cheer a recent IMF/World Bank study that fleshes out a legitimate Third World gripe: First World protectionism that keeps closed precisely those markets where poor nations really can compete.
Take textiles. According to the IMF/World Bank findings, every First World textile job saved by tariffs and quotas translates into 35 lost jobs in the Third World. That's a huge negative impact on struggling nations, for which the labor-intensive textile and clothing industries typically represent the first crucial rung up the economic ladder.

Developed world agricultural markets are even worse. African farmers, the study notes, are the "lowest cost cotton producers in the world but cannot compete with international competitors who receive $4.8 billion annually in subsidies." With an estimated three-quarters of the world's poor living in rural areas heavily dependent on farming, the real costs of European and American subsidies to their agribusiness are borne by the poorest of the poor.

Rich-country protectionism -- tariffs and quotas, farm subsidies, anti-dumping laws, restrictive rules of origin, product standards and more -- translates into huge hurdles for Third World producers. As the World Bank's chief economist argues, developing countries would still do better to open their markets regardless of what the rich countries would still do better to open their markets regardless of what the rich countries do. But the benefits to all of us would "be much larger if the rich countries lead by example."

We should get some worn-out celebrities and have a rally. Maybe the Pot Whore will show up.

From the desk of Jane Galt:

I think that the New

I think that the New York Times is suggesting that we attack Turkey. Why? Because (I am not making this up) they're our biggest supporter in the Middle East.

I don't want to hear from anyone else telling me how the left are the masters of diplomacy, 'kay?

From the desk of Jane Galt:

So it looks like the

So it looks like the Republicans tried to do the same thing as the Democrats did -- evade the time limit on a ballot change.

Or did they?

Left wing bloggers are predictably calling for the righties to retract their statements about the Democrats. I find, to my relief, that I did not make any statements about the Democrats, only about their arguments, which I still think are awful. Horatio, who made comments about the Democrats, but who also is a Democrat, declines as of this writing to issue a retraction.

Since I have called for no appellate action, I feel I'm allowed to explore the issue of whether or not they are in fact different things. I think so, actually.

First of all, the actual issue in the earlier case was whether Forrester's name could be moved, not whether he was on the ballot. Apparently, in New Jersey, the annointed party nominee occupies the top spot. The previous occupant of this slot had resigned over a scandal after the deadline for changing the ballot in the primary, which just goes to show, say some correspondants, that the Democrats haven't had an original thought in years.

Now, you can argue that this is mere quibbling: that the real question is the rule of law. And I have some sypathy to this position. I think you could also argue, however, that the latter violates the intent of the law, while the former doesn't.

Again let's ask why the laws specify a deadline? To ensure that the ballots are printed and distributed, and presumably to ensure that people have time to educate themselves about the candidates, and that the candidates are given a fair shot at the race. Clearly, there was time for the ballots to be printed and distributed, because they were. So let's look at the latter two issues. This has some traction with Lautenberg/Torricelli, but Forrester was in the race already. The only thing that changed was the materially important fact that he was the party's candidate, a fact that is conveyed to New Jersey voters via their ballot. It would be nice if the primaries got a ton of coverage and we knew about all the minor candidates, but in a heavily Democratic state whose constituents are serviced by the media markets of two major cities, this is unfortunately not true. The voters were not being denied a chance to educate themselves about the contestant; he was already in the race.

What about the candidates? Do they have any legally allowable interest in all this? Let's face it: Lautenberg's switch has materially harmed Forrester's campaign, and not just because "he doesn't get to run unopposed". He has spent a lot of money running against a candidate who is not in the race any longer: research, ads, focus groups, polls, etc. For the piddling sum of $800,000, the Democrats just arranged for Forrester to waste more than half his campaign funds. I notice the court has no interest in making him whole on that loss. And please don't give me any whine about how this is somehow uniquely Republican, because people can get seriously hurt laughing that hard.

Of course, you could argue the same thing about the woman who sued to stop Forrester's name from being moved. But it's hard to see how she was actually harmed. If they didn't change the ballots, it's probable that the guy who resigned would have won anyway, or so it seems to me from my limited experience in following primary elections. At which point the party would have nominated someone to replace him: Doug Forrester. Which is not true in the same way of Torricelli/Lautenberg; the Democrats don't want to buy themselves a year's time, but to win the Senate seat for another 6 years. The only way they can do that is by running a different candidate.

It's certainly possible to argue that this is all pilpul. And since I've been telling the Republicans to drop it all along, none of it changes my basic opinion. But I do think there's an argument to be made that the cases are materially, as well as technically, different.

From the desk of Mindles H. Dreck:

O.K., that makes sense

Democrats believe we can fire the NJ Poet Laureate for what he says, but can't terminate "Homeland Security" officials for incompetence.

From the desk of Jane Galt:

Those who want to know

Those who want to know why I think the free market is almost always preferable to government should go read Steven Den Beste's simply outstanding piece on European v. American wireless systems.

From the desk of Jane Galt:

Call me crazy, but I

Call me crazy, but I don't see why everyone is talking as if the Montgomery County shooter is some kind of crack paramilitary marksman. The guy drives around in a white van looking for targets. He picks people who, from what the news is saying, are standing still -- pumping gas, sitting at a bus, etc. Crack shot? He sounds to me like the newbie hunter who has to sprinkle salt on the ground because he can't hit a moving target. He gets to lie in a relaxed, prone position, aim at his leisure, probably with a scope (although the human head is a lot larger than the targets I used to hit with my not-terribly-well-sighted bolt actions at camp). Given that he's shooting for the head in all but one case (the lawnmower guy, who was moving, and where he apparently aimed for the heart), and probably from a distance, if he misses, he's likely to miss entirely. Meaning the bullet would more likely plow harmlessly into a building wall or the car upholstery, than wound. For all we know, there are bullet holes in buildings all over Montgomery County where he overshot his target, who never heard a thing, and moved on.

Of course, the police are saying he must be some sort of superpredator, but then the police like to make everyone out as a superpredator -- no one wants to admit they're being outwitted by Barney Fife. But this sounds to me as if its the randomness of the crimes, rather than the skill of the shooter, that's making him hard to catch.

From the desk of Jane Galt:

Okay, I'm not going to

Okay, I'm not going to defend Ann Coulter's politics or her style. But when people start dissing on tall, skinny pundit chicks for being, well, tall and skinny, I feel that I have to step in and say. . . um. . . stop dissing on tall, skinny pundit chicks. We have feelings too, you know.

From the desk of Jane Galt:

Volokh is arguing that one

Volokh is arguing that one could view Moses as a terrorist, given that he was the henchman delivering extortionate threats of slaying firstborn children, etc. But I don't think that that's the right way to look at it. We have a special category in the law for "Acts of God", which is, after all, what these things were. So Moses was less a henchman delivering threats than the farsighted scientist in the science fiction movie, trying to tell the intransigent government officials how they could avoid the otherwise inevitable catastrophe. Or so I mote.

From the desk of Jane Galt:

Andrew Sullivan says his Mac

Andrew Sullivan says his Mac is hosed, so he took it to the Apple Store. Now, I don't want to enter, once again, on the Mac wars. . . . but 10 days to replace a hard drive? What are they doing, smelting the alloys for the hard drive case themselves? For the price of a Fedex, PC manufacturers will get you a new hard drive overnight. You pop out the old one, pop in the new, and whe-hee! Up and running again. Some companies Fedex you a whole new machine.

This interests me because it comes immediately after the death of the Mac at one of my clients, followed by the discovery that, during a recent move, they'd lost all the software CD's that came with it. Now, when this happens with a PC, you call the manufacturer, and even if it's out of warranty, they send you a neat little bootable recovery CD, which restores all the software and drivers the computer came with. When you call Apple after this has happened, they say "Gee, that's really too bad" and advise you to buy the software again. Which we did. For the PC, a Pentium III that's running Photoshop and Quark beautifully.

I don't doubt that Macs have many advantages; it's just that most of my work was in the financial sector, where they're not even a possibility. But their tech support seems to be weak in some critical spots. Come a year, when things start breaking down, people who followed the "Why I switched" campaign may be descending on Apple in an angry mob, demanding to know why they can't have things fixed now, like Dell did.

From the desk of Mindles H. Dreck:

Nadering Nabobs

Well, I listened to about 20 minutes of the Nader/Green rally. A busy afternoon prevented further scrutiny.

Strangely, my overwhelming feeling as I departed was sadness. Is this what has become of the left? If so, we have a problem, because it isn't dissent, it's a circus sideshow. (see the comments for more on that - Ed.)

The crowd, including the faithful on Federal Hall's steps, numbered about 500-800 at 12:15. I spoke briefly with one of the dozens of motorcycle police standing around on an empty Wall Street, and he said, with a smirk, that they had been anticipating several thousand.

Directly in front of Federal Hall are "behind the ropes" attendees with green passes around their neck allowing them behind the police lines in front. The first one I notice is a blond wearing almost nothing and holding a sign saying "Pot Whore" (the links are from her sign, I take no responsibility). Around her are several individuals who haven't bathed or washed their clothes or combed their hair in weeks, many of them are smoking, and appear to have been doing so constantly for the last 50 years. Everybody has a pamphlet (green party, free Palestine, animal rights..the whole shootin' match). Just to complete the party atmosphere, an odd looking fellow in a suit and suspenders is carrying a sign saying "corporate America feeds our children" and "meat-eating Republicans thank Nader for electing Bush".

Up on stage I hear a woman pleading to unite the anti-war and anti-corporate "movements". The next speaker (a sociology professor with diction problems) has an environmental workfare program for greedy CEOs and is angry about the New York Stock Exchange headquarters. Is that Phil Donahue introducing the speakers? Finally, Mark Green is up. He acknowledges the importance of the financial services industry to New York (silence from the crowd, other than a few giggling Street denizens), but then goes on to record his opposition to "capitalism ....er.. unregulated capitalism." He objects to the "two party monopoly". Hmmm.

All the speakers joke about how Bush isn't really the President, but even the hardcore faithful have trouble responding. Nobody cares. Everybody is here to wave their sign or watch the strange spectacle of anachronisms waving signs, exposing themselves, or butt-fumigating themselves into small, grayish-yellow piles of ashes.

I've never been a fan of Mark Green, but he needs to disassociate himself from events like this. There is a coherent left-liberal school of thought. It doesn't live here. Reading Zell Miller's column and looking in on this "rally" makes me worry. (here's another example).

Back at the office I remark on this to my colleagues. "I remember these things being a lot more interesting," I say. A colleague responds "it was just the booze and the sex."

I can get all the booze I want now.

UPDATES: More descriptions here and here:

This was the first political rally I had ever been to and it was creepy. The threatening rain didn't help as we stepped on each other's toes and got too close to some seriously ugly people. I can't stand angry ugly people. Once in a while I'd catch a pretty face and sigh with relief. I helped pull their interests towards JMRN as he dealt with potential sales and clinched them. Ralph Nader, Phil Donahue, Patti Smith, Mark Green, politicians, and yohos I never heard of barked on the mic while a tall blonde woman named Pot Whore in her latter 30s wore a G-string and B-cup bra hawking her right to run for mayor, or whatever the hell it was she wanted, on the sidelines with a handful of fric-and-fracs promoting their two cents.

From the desk of Mindles H. Dreck:

New Pet in the Dreck Household!

My son's birthday present, a young male boa constrictor*, is now happily in his cage. He was truly pissed when I pulled him out of the shipping container in which he spent the last 24 hours, and he had a little hissy-fit with the first handling, but he's fine now, and already seems to enjoy being held.

I used to keep pythons and boa constrictors years ago. It's nice to hear the sound of little scales sliding around the house again!

My last snake, a Columbian Red-Tailed Boa like this one, was named Miles. If anyone has a creative name suggestion, I'm sure my son would be interested in hearing it.

*such is the lot of the hyper-allergic household

From the desk of Jane Galt:

The Donk's got the latest

The Donk's got the latest update in the battle in the courts to ensure our civil right to a "competitive election".

From the desk of Jane Galt:

Looks like the shooter at

Looks like the shooter at the UN said it had something to do with human rights in North Korea. And Instapundit's asking why no one's talking terrorism. . .

Axis of Evil, anyone?

From the desk of Jane Galt:

Okay, so the New Jersey

Okay, so the New Jersey Supreme Court ruling is appalling. I mean, really appalling. Nonetheless, it's time for the Republicans to move on. Not merely because it isn't helping anyone to make this another nasty, hate-filled drama, but also because going to the Supreme Court isn't going to help; it's just going to piss voters off, and mobilize the Democratic base. Far better to take the high road "more in sorrow than in anger" and -- let Forrester resign in favor of Tom Kean.

No, I'm kidding. Run Forrester. Lautenberg barely won last time, when no one had ever heard of his opponent. Now Forrester's got some free publicity, and a nasty charge to hurl at the Democrats -- that they'll do anything to keep power, even abrogate the law. Now, I'm sure the Republicans have polled this to death, but I really think they could get a hell of a boost by refusing to take it to court. On the other hand, no one's asking me to run their campaign, either.

From the desk of Jane Galt:

Fox News is reporting that

Fox News is reporting that the New Jersey State Supreme Court is going to rule in favor of the Democrats.

I'm listening to the arguments and they're outrageous. The Democrats aren't even trying to pretend that what they're doing is legal; they're asking the court to override the law by fiat. And the court seems to be complying.

I still don't understand how they're overcoming the equal protection violation, since apparently the military ballots can't be replaced quickly enough, and others supposedly have already come back.

From the desk of Jane Galt:

The biggest question in all

The biggest question in all of this is why Torricelli won't just resign. If he resigns on Friday, the Governor can appoint a replacement who goes straight onto the ballot, avoiding the messy court battle that we look set to embark upon. So why isn't he?

The answer appears to be that he hates Frank Lautenburg so much that he will cost his party the election to spite him. That's why the Democrats tried to grab several popular congressmen, until Gephardt told Daschle to back off. Now they're stuck with Lautenburg, and apparently Torricelli is refusing to play ball.

Now it looks like the Democrats are going to prevail in state court -- sorry, Horatio! -- which means that the Republicans will be petitioning the Supreme Court to take the case. The lesson, as one correspondant notes, is that if you are a state supreme court, it behooves you to tread carefully in national elections. But all is not lost -- it is, after all, less "national" than the presidency, the election hasn't gone off yet, and the opening day of the Supreme Court's calendar is Monday, which means delay. Delay is the Republicans' friend -- at some point, it becomes too late to reprint the ballots.

Oh, there's nothing like a knotty election controversy to arouse the sleeping pundit in me.

From the desk of Jane Galt:

The latest buzz is in

The latest buzz is in from Live From the WTC's secret sources:

With the hearing set for next Wednesday, the Democrats are revving up to put Lautenburg in his place. But secret sources with an eye on New Jersey politics point out that two can play at this game. While everyone who knows what they're talking about seems to be highly doubtful that a) the New Jersey Court will willfully abrogate their election law and b) the Supreme Court will permit this to pass, it's not entirely out of the question. The New Jersey court is dominated by Democrats, and the Supreme Court doesn't particularly want to get its hands dirty again, although this time it does have a rock solid violation, in the matter of the absentee ballots, to hang it on.

So what if it passes? Wily observers note that what is good for the goose is good for the gander. . . if the Democrats succeed in their plea, money is on Tom Kean, former governor of New Jersey, to step into Forrester's place. Forrester can be bought off by the party leadership, since he's highly unlikely to win re-election if he crosses them. . . and Tom Kean beats Lautenburg, who barely squeaked by in his last election, hands down. Kean initially refused to run because he didn't want the bother of raising money, but with the race handed to him like this, it would be hard to pass up.

If nothing else, it would provide hours of fun for the entire family watching the Democrats try to explain why their guy should be allowed to drop out, but the Republican candidate shouldn't -- without mentioning that they nominated a crook.

From the desk of Jane Galt:

This excellent, chilling interview shows

This excellent, chilling interview shows that Nazi Germany wasn't a nation of monsters; it was a nation that became monstrous, baby step by baby step.

We all know the term "final solution" to the Jewish problem, and we think, usually without thinking, that the final solution was there from the beginning. If you look closely at the history of Nazi policy and practice with regard to the Jews, one sees that the Nazis developed their solutions until ultimately they came to the final solution -- the annihilation of all the Jews in Nazi-occupied regions. The Nazis never wanted the Jews; they always wanted to get rid of the Jews. The question is: What does "get rid of" mean?

Initially, it meant sending them off, enforced emigration. Then, when the Germans conquered larger and larger tracts of Europe, millions more Jews came under their control. The original solution was no longer working. So they devised other solutions that took care of larger numbers of people and that are workable during wartime. The next solution is some kind of reservation. Such a reservation was created in the Lublin district [in Poland]. Then the Germans got this idea that they would send the Jews off to Madagascar. They really believed that might happen; it was on the drawing board. . .

The Nisko reservation in the Lublin district was a disaster; even the Nazis recognized that. The Madagascar option never materialized because Britain did not fall so the Germans never controlled Madagascar. They turned to other solutions. But the practice of killing Jews came before the policy decision to murder the Jews of Europe.

From the desk of Jane Galt:

So the word on everyone's

So the word on everyone's lips today is "Torricelli" and I wish I knew how to spell it, and/or wasn't too lazy to look it up. No matter; that's the kind of devil-may-care, damn-the-torpedos, details-what-details? commentary that draws people to my blog. Or so I devoutly hope.

Anyway, I've had a change of heart: now I'm on the fence.

I have some natural sympathy for the Republicans. I'm a firm believer in the sanctity of electoral law, in the sense that I think it is disastrous to start changing the rules after the players have taken the field. Not because the rules themselves may be very good, but because once you know who is likely to benefit from a given change, it is nearly impossible for mortal humans to separate their personal electoral desires from the issue of whether or not the change should be made. Take Florida. Now, I don't want you to email me with your opinion on how the [Democrats/Republicans] were just trying to [break the plain-as-the-nose-on-your-face rules/excercise abusive power just because they happened to hold certain offices] in order to get [Gore/Bush] elected. As I found when I wrote on it, the subject of the 2000 election has taken on something of a religious nature. The partisans refuse to admit that there is anything at all suspicious in the way their position on Florida's electoral law neatly served to bolster their candidate, much less consider that those on the other side might feel exactly the same way about their position, rather than plotting madly to overturn the [clear rules/legislative intent] and thereby unfairly seize power. Just work with me for the nonce, and agree that whether or not your position on the 2000 Florida election happens to be the legally correct one, it is very, very hard to separate your opinion on the law from your opinion on the candidates. You can see this, because all those stupid fools you are friends with who voted for the other guy seem to genuinely believe that the court should have voted in their party's favor. It is therefore, on principle, a bad idea to let people alter or reinterpret the statutes when they know how those alterations are likely to affect the outcome of the race.

But I have more sympathy to this argument when it happens after an election has taken place. It's not immediately obvious what is really hurt by substituting candidates with a month to go to the election.

On the other hand, I find it very hard to be sympathetic to the Democrats, because their argument is, in its entirety: give us power.

Let's dispense right now with the idea that there is a "right" to competitive elections. If that's the case, the Republicans in my state have a hell of a court case ahead of them, because for many, many offices Democrats run unopposed. This is an argument of convenience, not of principle, and I don't want to hear anyone bring it up to me because it's idiotic on its face. A majority of national offices are not competitive, and its possible that a majority of local ones aren't either, if New York is anything to go by. So nail the coffin shut on that one.

The other argument I hear from Democrats is, basically, that it's not fair. You jest. Your party protected him. Your party let him run again. Your party voted for him in the primary. And now you want to call a do-over because everyone else is disgusted by what your party did?

The Democrats proffering this argument are pretending that this is some sort of act of God, as though they woke up Tuesday morning and found, to their utter shock and horror, that unbeknownst to them the man that the Democratic-controlled Senate had just admonished for taking bribes had somehow become their party's nominee for the New Jersey Senate seat. We are all supposed to imagine their relief at finding that Torricelli was willing to rectify this inexplicable mishap by stepping down immediately, so that the correct candidate could be inserted on the ballot -- and their bewilderment and sorrow when they found that venal Republicans were trying to block their efforts to make sure that New Jersey voters had a real choice. In fact, while they won't say it, many people have noted that it is probable that the Republicans staged this entire scandal simply to gain electoral advantage.

Call me when the shuttle lands. The Democratic leadership, who were entirely willing to put up with Torricelli's bribe-taking until he made the mistake of becoming unelectable, descended on the Torch like an angry mob. The locals wanted him out because it will depress their turnout, and boost the GOP's, while the nationals just woke up to the fact that he's probably going to cost them the senate. The only new facts here are his abysmal poll numbers. These are the sort of facts that the election law is designed to prevent people from acting upon. If they'd wanted to substitute someone, they should have put the full court press on earlier. They rolled the dice and lost.

Both parties are whining like little children because they thought they had the Senate in their hands and now the court is threatening to take their pretty toy away. For this I have no patience at all. Neither party has a right to the Senate. And I am thoroughly, thoroughly apalled by the people on both sides I've heard say that it's more important to get control of the Senate than to have clean elections. If you would trade liberty for power, you will get, and deserve, neither, unless it is secured by better men than you.

I see several large principles. The first is that people should have more choice, if possible. It's not a right, but we should try to secure it where we can.

The second is that we shouldn't have people in the Senate who take bribes. That's why I wouldn't mind if the Republicans let this pass -- let's do what it takes to get the Torch out, 'kay?

The third is that rules shouldn't change midstream. If we allow this, we encourage parties to push the envelope on electoral law, trying to get their people in a position to change the result post facto. This is a bad thing, and I think we should draw exceptions narrowly. It is instructive, I think, at this point, to consider why the legislature sets things up as they are. Why are primaries so far in advance? Why the 51 day limit? I don't have access to the floor debate on the sections of the law in question, but I think it's reasonable to assume that they did it in order to give people time to learn about the candidates. Will they have enough time to consider Lautenburg? Maybe. Maybe not. There's also the issue of giving one campaign an unfair advantage. Most of Torricelli's campaign, especially the adjunct "issue ads", will transfer straight to Lautenburg. Forrester, on the other hand, has to start again from scratch. It gives the Democrats an unfair advantage, I'd argue.

And now that I've said all that, I'll tell you that I think it's moot. Mercer County has already started to get absentee ballots back. I think it's highly unlikely that a New Jersey Court is going to invalidate those ballots. And if they do, I think there's a fair-to-middling chance that it will go to the Supreme Court, where it will be overturned.

I'm actually very interested in the Democratic legal strategy. Why now? Poll numbers aside. The buzz around here is that the dossier on Torricelli is starting to leak, and if it gets out, he's doomed. But what are they hoping for? Unless he resigns by Friday, the governor can't appoint a replacement -- so why are they waiting? Do they want to test the idea that the governor can cancel the election? Or (my guess) do they want to throw up their hands, keep him on the ballot, and have the governor promise to appoint Lautenburg in his place as soon as he resigns? Everyone seems to agree that that's legal. And if it works. . .

Well, I look forward to seeing how the Dems justify their opposition when the Republicans try it.

From the desk of Jane Galt:

In this article on the

In this article on the cost of the war by Robert Shapiro, which is fairly good, though I disagree that the war would have any noticeable stimulative effects on the economy, one paragraph jumped out:

But an actual interruption in crude from the Gulf would still send world oil prices sky-high. If the conflict wears on or, worse, spreads, the economic consequences become very serious. Late last year, George Perry at the Brookings Institution ran some simulations and found that after taking into account a reasonable use of oil reserves, a cut in world oil production of just 6.5 percent a year would send the United States and the world into recession. The price of a barrel of oil would rise to $75, a gallon of gas would cost $2.78, inflation would jump 5 points, and U.S. growth would fall nearly 3 percent. A 10 percent net cut in the world's supply of oil for a year would be very nasty: Crude would sell for as much as $160 a barrel, gasoline would cost nearly $5 a gallon, 15 points would be added to the inflation rate, and growth would drop 4.6 percent.

That's why Saddaam waging undeterred conventional wars of territorial expansion is a bad, bad, bad, bad, bad idea. 6.5% is nothing compared to the contraction he could achieve -- profitably, for him -- with the Gulf in his pocket.

And please, before you send me your chirpy emails on the wonders of conservation: this is not 1973, thank you very much. The low hanging fruit of conservation has already been picked. Also notice that it took years for, for example, the auto fleet to turn over. Just because gas is $5 a gallon doesn't mean that people will suddenly be able to stump up 20K for a new car. Right now the only reason compacts are so cheap is that the automakers subsidize them heavily in order to achieve their CAFE numbers, which are based on the average of all cars sold. It's not because the cars cost so much less to make; labor, overhead, and marketing are by far larger expenses than the materials in the car. If demand for SUV's goes off a cliff, the price of compacts will rise a lot. Not to mention that its hell getting three kids and a dog into a Beetle.

Conservation is not going to achieve, say, a 10% reduction of demand for petroleum instantaneously.

From the desk of Jane Galt:

Nuclear Deterrence, Part IV: Non-Proliferation

Nuclear Deterrence, Part IV: Non-Proliferation

In Part I, we discussed how MAD closes off potential areas of escalation. In Part II, we discussed the principle of overwhelming force. In Part III, we discussed the importance of presenting a credible threat. Now we'll talk about the central role of non-proliferation.

Believe it or not, you are not the first Americans to worry about the possibility of a suitcase nuke. Before MAD, this was the biggest worry Americans had about the new atomic age. The Russians did not, at the time of their first nuclear test, have the long-range delivery capacity to destroy us. What they did have was the open-ness of our society -- and issue we find ourselves facing once again.

At one point in the early years, there was actually a proposal to decentralize our entire economy in order to make it nuke proof. Ideas ranged from the mild (bury cities; move key factories out to the middle of nowhere) to the drastic (mandate a maximum population density, and forcibly disperse the populations of the cities, accepting the social and economic consequences that would follow.) We didn't do it; it was politically and economically nearly impossible. Instead we got MAD.

An important part of MAD, however, was making sure that our opponents had no incentive to put, say, a nuke in our 20 largest cities, and then deliver their demands. Or, more likely, put a nuke in our 20 largest city and blow them, effectively destroying us as a military and economic power. How did we do that? By treating such an attack the same way we would have treated any other attack on the territory of the United States, and launching our strategic nuclear arsenal.

Central to this, however, was non-proliferation. In 1951, if an atomic bomb had gone off in Cleveland -- well, we could be pretty sure it wasn't the British or the French.

In 1981, the differences in nuclear technology between the Chinese and the Russians would have likewise enabled us to identify the culprit. And we'd still be -- well, fairly sure, anyway -- that it wasn't the French.

But there were two other important reasons that non-proliferation was central to MAD. First of all, it removed the temptation to engage in proxy wars. "I gave a bomb to the Turks so that they could protect themselves from those crazy Greeks, and oops! they accidentally nuked Moscow. I've told them and told them you need to maintain an airtight maintenance schedule on those launchers."

And second, the nature of a MAD-type scenario is that while it is very stable with a small number of players, it is highly unstable as the number of players rises. And the decrease in stability with each additional player is exponential, rather than arithmetic.

Raising the number of players erodes the other pillars of deterrence we've been talking about. It reduces the credibility of your threat, because you can no longer take unilateral action. It likewise hampers overwhelming response. And instead of closing off potential avenues of escalation, it opens them, because as each player is added, there are more and more lines along which conflict can occur. At some point, the number of potential avenues begins to generate what I think of as collisions -- it is impossible to avoid one avenue of conflict without opening another.

This is why people who say we should just sigh and resign ourselves to the inevitable proliferation make me crazy. Because as far as I am aware, no one has yet designed a stable large-player system that would deter nuclear use. It isn't impossible to deter nuclear proliferation; for one thing, it would be possible for us to conquer every nation that supplies uranium and make sure none gets exported. Or conquer every country that even looked like it was trying to develop nuclear capability. It's just very, very unattractive. But then, so is the prospect of countries resolving border disputes with nuclear weapons. And since it's a lot easier to deter nuclear proliferation than it is to deter nuclear use once proliferation has occurred, I'd like to concentrate on the former rather than waiting for the latter.

Next: I wrap it all up and show you why I'm right and you're wrong. About everything. You bow down and worship me as a living god. I spend the rest of my days on earth lounging in my luxury apartment while humble disciples bring me tribute from the far corners of the earth.

From the desk of Mindles H. Dreck:

Smart=Liberal. Or was that Liberal=Smart?

This has got to be one of the funniest NYT forum contributions ever:

Here's the deal: Open-minded folk, who are able to assess information and make rational decisions that sometimes extend beyond the scope of what's best for only themselves are generally brighter folk.

To rise to a prominent position in national media requires an above-average intelligence.

Therefore, it only makes sense that a majority of those who have risen to prominent positions in the national media have liberal viewpoints.

Talk about begging the question!

Of course, other forms of success, such as...oh...the Presidency, or rising the corporate ranks require only a below-average intelligence.

UPDATE: Best of the Web has another one:

In seeking faculty, universities look for people who can analyze and discuss matters of some complexity, who are unafraid to challenge the wisdom of simple solutions, and who have a sense of social responsibility toward those who cannot buy influence. Such people tend to be put off by a political party dominated by those who believe dogmatically in the infallibility of the marketplace as a solution to all economic problems, or else in the infallibility of scripture as a guide to morality.

In short, universities want people of some depth, subtlety and intelligence. People like that usually vote for the Democrats. So what?

Stop it (gasp), you're killing me.

SECOND UPDATE: Stuart Buck's article on Supreme Court justices provides some sober contrast to the slapstick above:

In fact, "smart" people are all too often prone to fall for the belief that they alone know how to run the world, and that government should be massively centralized, so that "smart" people like themselves can make decisions properly. One sees this in the intellectuals (e.g., Heidegger) who sympathized with the Nazis, and much more so in the predilection that many Western intellectuals had for Communism and socialism. Judging from the 20th century, it seems that "smart" people are more, rather than less, likely to support the evils of totalitarianism.

From the desk of Jane Galt:

Someone who argued the 2000

Someone who argued the 2000 elections with me, who has asked to be referred to by the nom-de-bloggue of Horatio Hornswoggle, sends this in response to my post on Torricelli. I am not allowed to give too many biographical details, but I am allowed to say that he is the staunchest of Democrats, and that he and I had words -- many, many words -- on the subject of Bush v. Gore.

Dearest:

I am shocked, shocked, shocked by your essay on Torricelli. Two years ago you were arguing that it was unthinkable to re-write election law ex post facto. Now you want to let the Supreme Court waive electoral process so that the Democrats can stick someone else in at the last minute? Have we totally taken leave of our senses?

Oh, it does kill me to say this, but you were right, and I was wrong. At least about that. I am still apalled at the torturous logic of the ultimate Supreme Court resolution, and I don't like Republicans any more than I did back then. Nonetheless, we are finding ourselves with too many highly public cases in which we are bending the electoral rules in order to achieve the "just" result in elections. If we make a habit of this, we are going to lose the public faith in the electoral process that we depend on to make democracy work. Obviously, I would like to see Democrats control the Senate. I would even be willing to endure the Torch's sleazy ethics in order to maintain it. My problem is that it is the very importance of the race that makes it so important that we keep it honest. How can we sustain civil society if people think that the Democrats are willing to break the election law whenever it threatens their power? You and I know that it isn't true (or at least, any more true than it is of Republicans). But I'm afraid that we'll mow over the last hope anyone had of making our system more than a raw grab for power by whatever interest group can get a majority of judges. In 2000, I thought that the unique situation called for a unique response. Now it seems it isn't so unique.

They are my party, but --- let's be honest. This isn't an accident like 2000. This isn't an unforseeable death. The Torch had every opportunity to resign. My party had every opportunity to kick him out. They chose not to. Now, when the polls are down and there's no hope, they want to pull him out and put someone in who might win. That's a clear violation of both the intent and the letter of the law. The precedent it sets would be --- the legal term is "extremely icky".

You should have stuck to your guns. You can't re-write the rules when the game's in full swing.

(I am enjoying the Democrat lawyers *so* much though. They're all talking about the people's "right" to "a competitive election". I must have been out when we covered that one in Constitutional Law. If the court lets it stand, I am very much looking forward to the Republicans suing to axe Forrester in exchange for Colin Powell.)

As for my opinion on the law, I've got some money with my colleagues that it will be denied at the state level. The law is much clearer than it was in Florida, and the New Jersey court is more conservative. They have no interest in getting spanked by the Supremes. Plus one of the counties has already gotten some absentee ballots back, so there's all sorts of juicy legal issues. If they hadn't gotten the absentee ballots already, I could see a possibility, but I don't think it will fly. The rumor around here is that the Torch plans to resign on Saturday, when the governor is legally allowed to appoint a replacement who can serve for a full year before he faces a special election. However, with ballots already back in it's really tricky. I've got one friend who practices in New Jersey who thinks that the state court will order the resignation delayed until after the election, or order him to resign by Friday. But others don't agree. I think it's a disgusting mess, any way you look at it, and I'm mad as hell that the party leaders got us into it. Every morning I come out of the train, look across the river to New Jersey, and ask myself "What the [expletive deleted] were they thinking?"

From the desk of Mindles H. Dreck:

Happy Birthday MTZ

More Than Zero's (Dreck's site before joining AI) first post was on October 1, 2001. From humble beginnings...humble anniversaries.

Unlike, say, the occasion of being attacked by vile terrorist theocrat scum, an anniversary probably is an appropriate time for introspection. So I'm considering where this effort goes next.

Thanks for reading. And a special thanks to so many of you who have become my new friends.

From the desk of Mindles H. Dreck:

Yuck

Perpetrators of the well-known Nigerian 4-1-9 Fraud have invented a new and sick twist:

FinCEN has recently become aware that the perpetrators are trying to provide legitimacy to the scheme by sending a letter on imitation U.S. Government letterhead with the forged signature of FinCEN’s Director, James F. Sloan. In addition, this letter indicates that pursuant to the USA PATRIOT Act and an Executive Order, any money being wired into the country requires a fee to be paid, which would be applied to rebuilding the World Trade Center. The information contained in this letter is false and the letter is fraudulent. FinCEN has never issued such a letter, there is no such fee required under federal law and Director Sloan’s signature was falsified.

From the desk of Jane Galt:

Nuclear Deterrance, Part III In

Nuclear Deterrance, Part III
In Part I, we talked about walling off potential avenues of escalation. In Part II, we covered the principle of overwhelming response. Now, we're going to talk about credible threat.

It's pretty obvious: when you're playing a game with such high stakes, you'd better make damn sure that your opponent believes you will launch. If he has any doubt at all, MAD won't work.

How do you establish credibility? Well, I've heard persuasive arguments that we didn't until the Cuban Missile crisis. That was what really convinced both sides that they didn't want to approach any of those potential avenues, because the other side was serious.

The problem is, we had to risk a nuclear war to get there. And in that case, both sides had a lot of advisors, a lot of communications, and a lot of mechanisms for restraining escalation.

The biggest weakness the Soviets feared was falling behind in the arms race. The biggest weakness we feared was that a pacifist might get into the White House and start unilaterally disarming. Those would have eroded the credibility of the threat they presented the other side. Obviously, if McGovern had been elected, he couldn't have just started dismantling our nukes. But he would have given the Soviets the -- correct -- impression that we were less likely to respond. That's why most defense policy people back then were hawks. Unilateral disarmament just didn't make sense in the context of a nuclear standoff.

Now, as to Saddaam: what threat do we want to project? Well, the Middle East. Saddaam with a nuke might hand it off to terrorists -- you don't know, and I don't know, and no combination of facile reasoning is going to divine that answer for us. More likely, however, is that he will use his nuke to invade his neighbors, with the threat of either nuking our troops if they show up, or one of our cities, or Israel. This threat will be made very publicly.

My take on this is that we would have to let him. We are not prepared to make the kind of committments that would be required to stop him.

Commit to sending troops to a theater after Saddaam had promised to turn them into radioactive dust?

Commit to blowing up Miami to save Riyadh?

Commit to the destruction of Israel (it wouldn't take many bombs for that) in order to save Kuwait? With the radiation scarred victims running night after night on every channel next to Saddaam saying he warned us?

Commit to saying that we'll use nukes on him if he uses them on us.

Well, yes, we will. But Saddaam can better afford to lose a city than we can. You're talking about committing to pound Iraq into radioactive dust.

But if we were presented with a threat to nuke us if we resisted conventional force, I think we'd back down rather than place ourselves in harm's way.

Well, that's just your opinion, say my interlocutors.

Well, yes, but you see if there is any reasonable doubt, you no longer have a credible threat. The wall around the potential avenues of escalation just came tumbling down. I don't have to prove that we wouldn't nuke Iraq if they invaded Kuwait, or nuked Israel, or if an atomic weapon went off in an American city and we could not trace its provenance; you have to prove that it is so utterly certain that we would do so as to provide credible deterrance to Saddaam. And you can't prove that. For one thing, we have elections every four years. And for another, it just isn't that likely.

I didn't say nuke Iraq if he invaded Kuwait --

You said "send conventional troops that he can only repel with his nuclear weapons, which will cause us to nuke him". In other words, enter on a potential avenue of escalation, which is exactly what nuclear deterrance is supposed to avoid. I don't think we would nuke Saddaam if he invaded Kuwait. I also don't think we would send troops in the face of a direct threat to use nukes on them. That's exactly what the architects of nuclear deterrance were trying to avoid: confronting a nuclear opponent on territory of sufficient importance that he might feel it necessary to deploy a limited nuclear response. That's why the Soviets didn't invade West Berlin.

As Den Beste said, the problem is that we are more sensitive to a nuclear risk than our opponent. He will enter onto an avenue of escalation, gambling that we will not risk meeting him there. And he's probably right.

All right, so we'd let him take Kuwait. . .

And Saudi Arabia, and the rest of the Gulf states. Do you have any idea what this means, economically?

Right now, the OPEC cartel is restrained in its price fixing because members have high incentive to cheat. The restraint is thus actually quite modest, because otherwise cheating becomes rampant, and the price drops anyway.

Saddaam with nukes and a free hand in the Middle East would be sitting on more than 50% of the world's proven oil reserves. Given the extreme inelasticity of demand for oil, a quasi-monopolist like that would have incentive to produce far, far less than he's currently pumping in order to maximize his revenue. Most of the other OPEC members are already near full production; it's the Saudis and Iraqis who are producing much less than they could. Ratchet back the rest of the Middle East oil and the price jump would make the 70's look like Bargain Hunter Day at the oil mart. The effect on the world economy -- well if you think it's bad now, wait 'til productivity plummets because oil's too expensive.

Could he hold the Middle East? You'd better hope so, because now if he falls we have no way of controlling what whackos get hold of his nukes. Those who have been arguing he's "rational" have no such guarantees for his successor.

In short, we are unable to mount a credible threat that we will respond with overwhelmingly disproportionate force in the face of nuclear-backed aggression, or to repel territorial goals in the Middle East. A third pillar of nuclear deterrance is not available to us.

I can't stress enough how important this is. There is no such thing as deterrence if your opponent is not certain that you mean what you say. The more weasel room there is, the less believable it is.

Contrast this with MAD. At least to my knowlege, no one doubted that in the face of certain actions, we would launch on the Soviets. The hawks and the peaceniks, the left and the right, all believed that we would, indeed fight the Soviets over Western Europe, over missiles in Cuba, etc. And so, we now know, did the Soviets.

The very fact that people are arguing about whether or not we would launch on Saddaam in the face of an Iraqi incursion into Kuwait means it has already failed. There is reasonable doubt about our response. Which makes it potentially lucrative to enter an avenue of escalation. We know that Saddaam will gamble; what else could you call deciding to go up against the world's biggest and most advanced military after they'd staged a massive buildup on your border?

When nuclear weapons are involved, the last thing you want is to roll the dice.

Next: Why non-proliferation is central to deterrance.

From the desk of Jane Galt:

Donald Sensing wants to bring

Donald Sensing wants to bring down Saddaam by, in essence, offering the Iraqis moral support to overthrow him. He argues that even dictatorships have to govern by the will of the people.

Well, kinda. But I don't think propoganda is going to bring Saddaam down.

For one thing, revolutions rarely succeed without outside help -- real outside help, with tanks -- unless there is a power vacuum, or the military is involved. Saddaam has killed all the military leaders who might stage a coup. And a couple of Special Forces platoons are not sufficient to topple even a bad army like Saddaam's. I've heard the suggestion more than once that we just send the SEALs or the Green Berets in there to "take Saddaam out", as if the special forces were a crack team of superheroes. The special forces are very good at what they do, but they can't find a dictator when no one knows who he is, run around a rigidly controlled country looking for him with guns, and then stage a Mission:Impossible style assassination, as some people believe. Unfortunately, on this mission, they won't be able to bring all the special effects guys and stunt doubles that make this sort of thing work in the movies. Those people eat a lot, and they expect to have it catered. And we can't afford to pay union scale.

For another, there's a reason rebel groups hide in the forest. In wide open terrain, it's easy to go looking for them with tanks. They do, after all, have to live somewhere, and that somewhere shows up from the air unless there are trees in the way. As far as I know, Iraq is short on dense jungle for the rebels to fade into.

For a third, Sensing is comparing civil obedience that didn't threaten regimes, such as Danish protests against the Nazis, with a revolution. Yes, if Mothers of War Veterans are protesting on the Plaza, Saddaam's going to tell the Republican Guard to hold their fire. But if they're stormng the palace, they're going to open fire. Guys with machine guns or a couple of tanks can take on a lot of unarmed rebels -- if memory serves, one British machine gun killed 20,000 tribesmen who hurled themselves against it.

Using propaganda, but not military force, implies tha what the Iraqi people are really concerned with is who's going to mop up afterwards. I'm guessing, but I think what they're worried about is probably not the shape of a post-Saddaam state, but whether they and their families will be shot.