Pur Autre Vie

I'm not wrong, I'm just an asshole

Monday, November 23, 2015

A Good Society for Everyone

It is becoming increasingly clear to me that the foremost moral issue of our time is treating Muslims fairly and trying to bring the Muslim world into some kind of accommodation with the non-Muslim countries that basically run the world.  This is obviously not something that is susceptible to generalizations, but I think the basics are really quite simple. 

It's hard not to admire Western/Northern Europe for building some of the best societies in the world.  But then, you see shit like this (transcript from a Terry Gross interview of Elaine Sciolino, a New York Times correspondent reporting on France):

SCIOLINO: Muslims feel stigmatized, and it's only gotten worse in the last couple of years with the rise of the radical right. The far-right National Front leader, Marine Le Pen, is brilliant. She's a lawyer, she's extremely clever and articulate and she's able to penetrate the hearts and minds of those franco-francais - the working class, lower and middle-class French, who believe that their country is being taken away from them. And she will run for president in 2017, and she's expected to do quite well. Even Nicolas Sarkozy, who was always center-right and, you know, he was president in France from 2007 to 2012, has created a new party. And he will run again on a law-and-order ticket that will call for much more security, fewer civil liberties and a return to something that will look much more like a French police-state.
GROSS: What are other signs of the far-right's growing power in France?
SCIOLINO: The far-right has won in local elections in some small but crucial cities in the south of France. And there are some absurd manifestations of some of the things they want to do and have done. For example, some of these mayors have said, there are too many kebab shops in France because kebabs - which are Turkish, not even North African Muslim - are not French. So we need to put back our (speaking French) [I think she is saying "boulangeries" - James] and our little French cafes and ban kebab shops from expanding. Recently, there's been a controversy because some of the far-right political leaders have called for forcible serving of pork in all public schools. Muslim and Jewish students cannot eat pork. So they're being told, if you don't want to adhere to our secular Republican ideal and what is part of the French cuisine, go to your own private schools.
GROSS: Whoa.
Whoa, indeed.  This is terrifying.  The idea of forcing public school students to eat pork would be completely laughable in the United States.  If some idiot in Alabama did that, the national press would come down on him like a ton of bricks.  But certain elements in France want nothing more than to humiliate France's Muslims residents, with Jews as collateral damage (or possibly as the intended targets in some cases).  For some reason (maybe because France never went through something comparable to the civil rights movement in the United States, or maybe because freedom of conscience is central to our conception of ourselves, whereas secularism is built into the French system of government), French politicians get away with provocations against Muslims/Jews that would be career-ending here.

Of course this is disgusting.  Execrable.  But it is not limited to France, they just happen to be the biggest assholes about it (excepting maybe the Russians).  Assholes in Italy, the Netherlands, the United Kingdom, and (sadly) the United States are all playing this game.  The key thing to recognize is that in a liberal society, the assholes are going to be permitted to voice their despicable opinions, and there's no legal way to stop them (nor should there be, unless they cross the line into harassment and threats).  Even if a large majority of people want to be welcoming to Muslims, it only takes a handful of people to publish a Charlie Hebdo-like newspaper, and to rub Muslims' noses in their status as despised second-class citizens (even if only a small minority of people despise them).

So what is to be done?  I don't know.  "More speech" is the traditional liberal answer to hate speech, and certainly I think people should be expressing their support for Muslims, as Governor Jay Inslee of Washington did (and plenty of other Democratic governors have as well).  (As a quick side note, this goes back to one of my old arguments about how the Democratic Party is one of the most reliable forces for morality in the modern world.  Stands up pretty well, I think, especially when you consider how many liberals fell all over themselves to embrace Charlie Hebdo and celebrate its commitment to humiliating French Muslims, going so far as to give it an award for its despicable efforts.  The Democratic Party as a whole has been far less willing to embrace hatred and fear.)

But there is really no replacement for basic respect, and this is something that the West will never give Muslims on a unanimous basis.  It's true that Muslims who consider carefully our (by which I mean, the United States') commitment to freedom of conscience and pluralism may find a kind of structural respect built into our society's foundations.  In other words, you might say that the United States has hard-wired a basic respect for all humans into its constitution (and Constitution—I acknowledge here the difficulty with blacks, but we fought and won that fight, eventually winning a clear victory on the legal/political level and a substantial if incomplete victory on the social level), and Muslims are welcome to come here and build good lives for themselves, regardless of a few assholes who hate them.

But this is a begrudging, legalistic kind of respect.  The best you can say is that Muslims are on the same footing as other minorities that have faced discrimination.  Catholics, Jews, blacks, Latinos, gays...  almost no minority escapes a certain amount of antipathy and hatred here, but the beauty of our society is that the assholes don't get to intrude on your life too much (this was hard-fought, obviously, and there is still plenty of room for improvement, but we really have built a society where Catholics, Jews, blacks, Latinos, and gays—and Muslims!—can do all right).  It's important to remember that these Republican governors fulminating about Syrian refugees can't actually prevent them from moving into their states.  (Unfortunately I think they can make Muslims' lives miserable, if they want, especially Muslims who rely on public support.  This kind of discrimination is deeply immoral and should be punished at the ballot box for as long as their sins are within living memory.  Still, there are limits to how far these assholes can go, and those limits reflect well on the United States.)  If Muslims realize that they are getting as fair a shake as Jews get, then...  maybe that's good enough?

But that's too much to hope, I think.  First, good luck convincing Muslims to take such a generous view of our society when all they have to do is flip on a television to see bloviating Republican assholes trying to drive them out of our country.  But more importantly, it's just not true right now.  Secular Jews are pretty well integrated into our society, and religious Jews have achieved a level of acceptance that Muslims have not.  So even if we asked Muslims to settle for Jewish levels of social acceptance, we wouldn't be able to deliver it.

But we have to try.  Right now the assholes are dominating the conversation.  We have to fight to build a good society that welcomes Muslims, the same way we fought for blacks, the same way we fought for gays.  We believe in a good society not just for a privileged few, or for a homogenous majority, but for everyone.  Everyone.  The most agonizing part of all of this is that by and large we have done a good job of welcoming Muslims into our country.  Plenty of Muslims have better lives here than they would in a majority-Muslim country.  That's because we are prosperous, democratic, free, and safe.  And tolerant.  But that tolerance is being sorely tested, and our struggle is to preserve it to the best of our abilities.

Sunday, November 22, 2015

Be Warned

I'm going to write a bunch of posts, and if you don't like them, fuck you.

Friday, November 20, 2015


"Today, LivingSocial is more unicorpse than unicorn."

Sick burn in the New York Times.

Thursday, November 19, 2015


Man, Anonymous is everywhere.  Who knew a hacker collective would have time to write so many traditional folk songs?  Makes you think.

The Syrian Refugees

This Republican push to stop taking Syrian refugees is strongly reminiscent of Republican demands for Obama to shut down flights from West Africa during the Ebola outbreak.  It is also, of course, along the same lines as the general conservative antipathy to immigration.

Immigration is a legitimate political issue, but it never made any sense to shut down flights from West Africa.  The Syrian refugee situation is somewhere in between, but I think it's fair to say that the Republican reaction is overblown.  Paul Ryan says that the program should be halted "until we can be certain beyond any doubt that those coming here are not a threat."  That's a standard that can't be met for any immigrant group ever.  (To quote the New York Times article:  "'It’s that simple. And I don’t think it’s asking too much,' Mr. Ryan added."  Not asking too much?  It's literally impossible to verify that any given individual isn't a threat.)

The question is why this kind of thing appeals to voters—first the nonsensical proposals on West Africa, now this weird insistence that Syrian refugees must meet a standard that immigrants from, say, Ireland have never had to meet.  I hesitate to resort to psychoanalysis, but this case really seems to call out for it.  Obama wants to bring impure, foreign bodies into the United States, and the Republicans are playing the role of the nation's immune system.

This kind of "thinking" is sick.  We must resist this nonsense and insist on a humane, sensible approach (like the one that was taken by the federal government during the Ebola crisis).  We badly need politicians who will stand up for what is right.

That's my thought for the day (good to get it out of the way early).  Now for a little rambling:

1.  The epithet for anti-Semitism in the SPD was "the socialism of fools."  The SPD's steadfast opposition to religious hatred is to its eternal credit.  This is how political parties earn their place in history:  by standing against the tide when it is pushing the wrong way.  And when political parties give in to hysteria and fear, they earn our scorn.

2.  Robert Peel was Prime Minister at the very start of the Great Famine.  He took prompt and vigorous action to alleviate the crisis, and it is commonly noted that no Irish starved to death while Peel's government was in power.  His brand of sensible, responsible governance would be taken up years later by his protégé William Gladstone, who was not quite as pragmatic as Peel but made up for it with an unusually strong sense of morality.  Britain was very lucky to enjoy such farsighted and responsible leadership in difficult times.

By contrast, the Republicans today are an utter embarrassment.  They simply aren't up to the task of governing.  They are failing test after test—it is doubtful they could handle even the most basic problem, much less a full-fledged crisis like the Great Famine.  This is all a reminder of how delicate our current equilibrium is, and how easily we could slip into shameful hatred and cowardice.

Monday, November 16, 2015

How We Should Respond to Terrorist Attacks

I feel motivated to share this very brief David Foster Wallace essay.

Friday, November 13, 2015

What the Fuck?

What the fuck?

Thursday, November 12, 2015

Risk as the Bedrock of Economic Activity

I've been led to believe that there is not much truth to the idea that skyscrapers are clustered in midtown and downtown because the bedrock is near the surface in those places, and deep in between.  (Here, in PDF, is what seems to be the relevant paper by Jason Barr and Jeffrey Cohen.)

But let's use bedrock as a metaphor anyway.  I want to think a bit about macroeconomics.  As always, my ideas are not remotely original.  My basic claim is that macroeconomic cycles can be thought of as expressions of the collective risk-bearing capacity of the economy.  In support of this, I'll use a metaphor in which every expenditure on physical assets or labor in the economy rests on the bedrock of a financial asset, which exists by virtue of the willingness of some economic actor to hold her wealth in the form of that financial asset.  This willingness to hold financial assets is an expression of willingness to bear risk.  So ultimately a society's risk-bearing capacity supports its economic activity, the way bedrock supports skyscrapers.  We will observe prosperous economies in those places where risk-bearing capacity is strong and easily accessible.  And fluctuations in risk-bearing capacity explain macroeconomic cycles.

Risk is ubiquitous in a capitalist economy.  And risk is traded in the market like other things—this is most obvious in the case of insurance, but it's also true in the financial markets overall.  In general, economic activity depends on some person or entity being willing to bear risk at an affordable price.  (I'll give some examples below to flesh this idea out.)  There are a variety of reasons that the risk-bearing capacity of an economy might fluctuate.  An unexpected loss could call into question the accuracy of the models used to measure risk, leading to an increase in perceived riskiness (this could be an overreaction, or it could be that perceived riskiness was too low previously—or both!).  A large loss, even if consistent with pre-existing models, reduces wealth and in doing so eliminates risk-bearing capacity.  Also, there can be large spillovers, so that as one person withdraws his risk-bearing capacity from the market, the overall risk for the economy goes up.

First, let's explore what risk means.  I think for our purposes risk should be understood as the possibility of loss of wealth (or some close substitute for wealth).  To be a risk-bearer, you have to have wealth in one form or another, so that you have something to lose.  (However, one form of wealth is anticipated future earnings, so a penniless person can take risks.)  We are not including activities that are risky but that aren't economic in nature.  Every time you use Tinder or Grindr you risk a broken heart, but that is not what we are talking about today.  We are mostly concerned with voluntary (and therefore compensated) risk-taking.  That is, we are asking what holders of wealth demand in exchange for risking that wealth.  (As a side note, the existence of casinos shows that some people are willing to bear risk for negative compensation—they are willing to pay someone else to let them take risks, whereas in the financial markets they could get paid to take risks.  Let's ignore that puzzle for now.)

Note what this means, if I am right:  society's risk-bearing capacity is a function of its wealth (since you have to have wealth to take risks), society's economic activity is a function of its risk-bearing capacity (as I will explain below), and a society's wealth is a function of its economic activity.  This means that economies will be subject to virtuous circles on the way up and vicious circles on the way down.  Or another way of looking at it is that there is a multiplier effect.  An exogenous increase of n units of wealth ultimately leads to an extra nm units of wealth, where m is greater than 1.  This is because the initial increase in wealth also increases risk-bearing capacity, and that spurs a further increase in wealth.  The same multiplier would apply in the case of an exogenous destruction of wealth.  (Note that the multiplier depends on how the marginal unit of wealth is invested, not the average unit.  We'll return to this.)

What do I mean when I talk about risk-bearing capacity and its relationship to economic activity?  Imagine a farmer with limited wealth.  Some of his land is used for chickens and cows, and some of his land is forested.  Currently he uses the forested land for firewood, but this is a relatively low-value use of the land.  He would like to cut down a section of the forest and plant an orchard.  However, the area is prone to hailstorms in the summer.  The forest trees are basically impervious to hail, but fruit trees could lose their crop of fruit if a hailstorm strikes at the wrong time.  The farmer's estimate is that hailstorms will be infrequent enough that the expected value of the orchard is positive (in financial terms, its good years will more than make up for the years in which the fruit is lost).  However, if the farmer borrows money to finance the orchard, a hailstorm or two at the wrong time could render him insolvent, and the farmer isn't willing to risk losing his farm.  So the farmer doesn't build the orchard.

But then an insurance agent comes to the farm and offers to write a policy that would compensate the farmer for any losses caused by a hailstorm.  What will the farmer do?  Well, it depends on the premium.  If the premium is low enough, the expected profits will be worth whatever risk remains in the project, and the farmer will invest in the orchard.  The farmer will pay the insurance premium, he will pay to clear an area of land, he will pay for fruit trees, and he will pay to have them planted.  (If he does some of the work himself, he is effectively paying himself to do the work.)  Therefore we observe increased economic activity, and greater social wealth, once the insurance company makes its risk-bearing capacity available to the farmer.  (Of course, if the insurance company were to reduce its risks elsewhere, we would have to net that out.  But let's just assume this insurance company is entering a new line of business, and neither it nor its investors compensate by reducing risk elsewhere.)

The same logic applies to any business venture.  We can think of each business venture as a "black box" that requires inputs of money at time t0 and possibly at other times, and that spits out money at various future times tx, ty, and so forth.  Each venture will use money to employ real resources—machines, raw materials, labor, real estate, etc.  That employment of resources is what we call economic activity, and it reduces unemployment and generates wealth for the suppliers of those inputs.  For a potential venture to be undertaken, someone must be willing to risk the cost of the real resources that it will consume.  The level of risk depends on the reliability of the future payments the venture will generate.

Risk can be allocated in many different ways.  Imagine a business venture that is financed by issuing securities.  (In other words, the business sells shares of stock or bonds to generate money up front, and then in the future it makes principal and interest payments on the bonds, and it may pay dividends on the stock.)  The business venture could finance itself with lots of equity (stock) and a modest amount of debt (bonds).  In that case, the business would issue lots of fairly safe stock (low probability of bankruptcy) and a modest amount of very safe debt (again, low probability of bankruptcy).  Alternatively, the business could finance itself with a modest amount of equity and lots of debt.  In that case, the business would issue a small amount of risky stock (risky because the probability of bankruptcy is much higher) and a large amount of risky debt (risky for the same reason).  Note that the second approach isn't necessarily riskier overall—stock is generally riskier than debt, so increasing the portion of debt financing and decreasing the portion of equity financing may offset the increased riskiness of both.  There isn't a right or wrong answer here, it just depends on what investors have more taste for.  (There may be externalities—a highly leveraged business may impose a higher risk of layoffs on its workers, and it may not fully compensate them for it—but let's ignore that for now.)  If it proves economical to do so, the business could buy an insurance policy, so that its investors don't bear the full risk of the enterprise.  Equivalently, the business could use swaps or futures to hedge some of its risks—again, this means that some of its risk is being borne by non-investors.

Now, not all potential business ventures will be financed, and so some will never happen.  It depends on whether there is some combination of financing and hedging/insurance that makes the numbers work.  As more and more people are willing and able to bear risk (that is, willing to buy stocks and bonds, or invest in insurance companies), more and more business projects become feasible.  Willingness to hold financial assets creates a bedrock, and on that bedrock business ventures spring up.  As economic activity increases, people get richer, and more wealth is available to finance projects.

However, it's important to recognize that the same amount of wealth can bear different amounts of risk and support different amounts of economic activity.  Let's say you have $100.  You can hold that wealth in the form of a bank deposit, where it incurs almost no risk, but where it also supports relatively little economic activity.  You can hold your $100 in the form of a corporate bond, in which case it incurs a bit more risk and probably supports a bit more economic activity.  You can invest $100 in a single stock, which is very risky.  You can invest $100 in a stock index mutual fund, which is risky, but less risky than the single stock.  The collective risk-bearing capacity of a society's wealth depends on exactly what form that wealth is held in.

That last example, the mutual fund, is very important.  A mutual fund is generally less risky than investing in a single issuer.  That's because the risks of the individual components of the index offset to some extent (we are assuming their correlation is less than 1—if not, an index is really no less risky than its components).  But that risk reduction is "free."  An economy can fund the exact same projects with equity financing raised through index funds as it can with equity financing raised by selling a different stock to each investor, but the index funds are less risky for each individual investor.  As capitalism develops "technologies" to spread risk in this way, it increases the amount of economic activity that can be supported by a given level of risk-taking.  It's like increasing the height of buildings that can be supported by a given amount of bedrock.

Now we can see why a recession is sometimes cast in terms of a glut of demand for safe assets (this is also sometimes called a savings glut).  For a given level of wealth, more economic activity can be supported if people are willing to hold that wealth in the form of risky financial assets such as stocks.  On the other hand, if people shift their holdings toward safe assets, this will reduce the economic activity that can be supported for a given level of wealth.  In all likelihood, it will also be accompanied by a collapse in asset prices that reduces wealth, and so not only can society support less economic activity for a given level of wealth, the level of wealth is also reduced, increasing the magnitude of the economic downturn.  Projects that were feasible before the crash are no longer feasible, and so unemployment increases and resources languish unused.  (A reduction in risk-bearing capacity destroys wealth in at least two ways.  First, it reduces economic activity and increases unemployment, making people poorer.  Second, the mechanism by which stock prices reflect a higher "price" for risk-bearing is by dropping in value until their expected return is sufficient to induce investors to hold them.  This collapse in stock prices destroys a lot of financial wealth.)

This framework can also explain why monetary and fiscal stimulus can be effective.  In general, long-term bonds are riskier than cash.  When it wants to stimulate the economy, the central bank buys long-term bonds, so that the public holds more cash and the central bank holds more long-term bonds.  In essence this means the central bank is increasing the risk of its portfolio, thus supporting more economic activity.  (Another way to look at it is that the central bank is taking risk off the public's hands, inducing investors to look for risk elsewhere.)  However, even long-term government bonds are relatively safe, so there is a limit on how much traction the central bank can get, unless it is willing to invest in risky private-sector assets.  There are a variety of reasons this might be a bad idea, although the Federal Reserve did invest in some privately issued securities during the financial crisis (and it still holds a large portfolio of them).

But fiscal stimulus is not limited in this way.  The government can spend money directly on projects while issuing debt.  These are obviously public sector projects, not privately funded projects, but that makes no difference to the people and resources employed.  The public badly wants government debt because it is the safest asset.  So deficit-financed expenditures soak up the money that people want to invest in safe assets and use it to employ society's resources, increasing economic activity.  Government debt financing is a technology that transforms investment in low-risk financial instruments (government bonds) into lots of economic activity, much more activity than could be supported by safe private-sector assets.  (The reason we don't use this technology in ordinary times is that we might question whether government-directed economic activity generates as much social welfare as would an equivalent amount of private sector economic activity.  If government projects are really worthwhile, they should be undertaken no matter what the macroeconomic conditions.  But during a recession, even relatively low-yield government projects can make everyone better off.)

This is obviously far from a complete story of macroeconomic fluctuations.  But it seems coherent and satisfying.  I will probably try to piece it together with other models to create a kind of mental framework I can use to think about macroeconomics.

"Clouds Through a Window 2"

The midtown office towers
Are stabbing the clouds with their needlelike spires.
The clouds swirl in pain,
Dragging along, opening the wound,
Incontinent and leaking the rain.


It seems that every election, a candidate in the Republican presidential primary says that he wants to abolish several federal departments.  As everyone knows, Rick Perry effectively ended his career when he couldn't remember which departments needed to go (he quickly named the Department of Commerce and the Department of Education, but struggled to remember the third:  the Department of Energy).  In the November 10, 2015 debate, Ted Cruz named five agencies that should be abolished:  the IRS, the Department of Commerce, the Department of Energy, the Department of Commerce, and the Department of Housing and Urban Development.

So Ted Cruz wants to abolish the Department of Commerce twice.  I regard that as a much bigger "oops" than Perry's lapse in memory.  The Department of Commerce runs the National Oceanic and Atmospheric Administration, which itself runs the National Weather Service and the National Hurricane Center.  I have no idea why Ted Cruz thinks that the government should get out of the weather forecasting business.  It is a crucial service that helps the government predict natural disasters and respond effectively to them, and of course on a day-to-day level it makes life better for almost everyone.  Weather forecasting is also a public good that is unlikely to be adequately supplied by the private sector.  (Bear in mind that most private weather forecasters rely heavily on government data, so it's not as though the private sector would necessarily be able to take up the slack if the National Weather Service and the National Hurricane Center were abolished.)  Ted Cruz is a monster whose preferred policies would lead to vastly more preventable deaths from hurricanes and other natural disasters.

The Department of Commerce also runs the United States Census Bureau.  If eliminating the National Weather Service would be a disaster, eliminating the census would be a total calamity.  The Constitutional allocation of representatives is based on census data.  I have no idea how Ted Cruz would allocate congressional seats in accordance with the Constitution in the absence of census data.  But on a more basic level, what objection could anyone possible have to the census?  I'm sure there are improvements that could be made around the edges, but on the whole it seems extremely valuable and uncontroversial to collect comprehensive data about the people who live here.  Census data isn't just used by the government, it is available to academia and the private sector, allowing them to get a better understanding of our society.  I doubt even 1% of social scientists think it would be a good idea to abolish the census, as Ted Cruz is eager to do.

Now maybe I'm being unfair.  Maybe Ted Cruz wants to abolish the Department of Commerce while moving its services to other departments.  But what would that accomplish?  Programs don't become cheaper when you move them from one department to another.  And I can't imagine voters would attach much importance to abolishing the Department of Commerce and then redistributing its duties among other departments.  That's a bureaucratic detail, not a fundamental reimagination of the role of government.  If Bernie Sanders suggested abolishing the Department of Defense, there would be a huge outcry, because everyone understands that it would involve eliminating the activities currently assigned to it.  If Sanders said, "No, no, we'll just establish a new Department of War to handle those duties," no one would believe that was what he originally meant.  Why use the term "abolish" if you really mean "rename"?

So Ted Cruz is either  highly dishonest or totally insane.  (That "or" is inclusive.)  Anyone who believes that the government has a role to play in taking the census or predicting the weather should be appalled by Ted Cruz's rhetoric, and the media should hold him accountable for it.