The End and its Aftermath

William Gladstone died on May 19, 1898.  The Prince of Wales served as a pallbearer.  Queen Victoria, who despised Gladstone, "telegraphed to the Prince of Wales to ask what was the precedent he had followed and whose advice he had taken in acting in such a capacity.  He rather splendidly replied that he knew of no precedent and had taken no advice."

And a final footnote.  Roy Jenkins (from whose Gladstone I have been quoting) writes of his grandson, also named William:  "When he was killed in France in April 1915, at the age of twenty-nine, he had been President of the Oxford Union and was currently Lord Lieutenant of Flintshire and Liberal member of Parliament for Kilmarnock Burghs."

Unbowed Until the End

Again quoting from Gladstone by Roy Jenkins.  But first, a little background.  Gladstone is at the very end of his parliamentary career.  What he had come to see as his life's work, Irish Home Rule, has been passed by the House of Commons but decisively rejected by the House of Lords.  Britain won't again consider the issue until forced to by the uprising of 1916, followed by the Irish Free State and the vituperative Irish Civil War of 1922, followed of course by decades of terrorism, assassinations, and religious and ethnic hatred; Ireland's seething hatred so deep-seated that the Republic remained neutral rather than joining the fight against Hitler; Gladstone thoroughly vindicated and his opponents utterly discredited, those vacuous pieces of shit.

So Home Rule is dead for a generation.  But while Gladstone is exhausted, he is not yet done.  A previous Conservative government had undertaken a massive ship-building campaign, motivating France and Russia to play catch-up.  Now two of those British warships have collided with each other, with much loss of life.  The unerring logic of imperialism now compels Britain to fund yet another massive expansion of its navy (this being the only appropriate response to a naval accident).  Here Jenkins quotes Sir Edward Hamilton, who was at one point Gladstone's private secretary but who by this point has risen into a greater role in politics (note, by way of additional background, that Gladstone was a notorious penny-pincher who had in the past successfully resisted military expenditures on the grounds of fiscal prudence):

He [that is, Gladstone] again and again said it was not a question of amount:  he would swallow any amount of expenditures, however reckless it might appear to be, for such purposes as converting all our ironclads into wooden ships on the assumption that naval policy has gone through a transformation, or (say) doubling the Education grant.  No.  It was a question of policy.  Russia and France had gone ahead with their ship-building, solely owing to our Naval programme of 1889 for which we had to thank the late Government; and now we were to 'go one better', thus directly challenging Europe in the race of armaments.  It was his conviction that this competitive action of ours would accelerate some great European catastrophe:  these vast armaments must lead to some flare-up - probably the absorption of small states and the break-up of Italy.  He could not be party to this.

 Now admittedly Gladstone's foresight was probably not quite so brilliant as this isolated passage might make it seem.  But Gladstone's imagination and willingness to stand against the tide are remarkable.  He is one of the greatest anti-imperialist politicians of all time, and the consequences he incurred are a cautionary tale (though also in some cases an inspiring example) for all modern politicians with an anti-imperialist tendency.

And by the way, it was this political battle over naval expenditures, and not the far more crushing Home Rule defeat, that formally ended his political career.  In other words, at the end of his political life and very nearly at the end of his lifespan, Gladstone persevered in his obstinate right-headedness, pushing hard against the political tides that were to sweep Britain into so much needless pain and loss of life.

The T Is Silent

First, a quick and amusing Gladstone update.  Then a more somber one.

I quote from Gladstone by Roy Jenkins, who recounts "the famous exchange many decades later of Lady Oxford (as Margot Tennant had then become) with the 'blonde bombshell' Jean Harlow, who persistently addressed her as 'Margotte,' until told:  'The t is silent in my name, Miss Harlow, as I presume in yours.'"

Gladstone, Gordon, Truman, MacArthur, and the Queen

One interesting aspect of Gladstone's career, of which I was unaware until reading Gladstone by Roy Jenkins, is the voluminous correspondence carried out between Gladstone (as Prime Minister) and Queen Victoria.  The letters are remarkably frank, though of course couched in polite, formal (you could even, with some justice, call it "Victorian") language.  The letters are striking in part because, as Jenkins notes, "Cowardice was not one of Gladstone's faults in dealing with the Queen."

I will reproduce an exchange that I find quite remarkable, but first a little background.  Britain had effectively gained control of Egypt following a successful military campaign that put the Gladstone government in good light.  But an uprising broke out in the southern part of what was then Egyptian territory (and is now Sudan), and an Egyptian army under English command was annihilated by the rebels.  Gladstone's government determined to withdraw from the contested territory, and to that end General Charles Gordon was sent to organize the withdrawal (a policy he opposed - his appointment was a bizarre result of feverish public opinion which should, as we shall see, have been resisted).

Instead of discharging his duties in accordance with his orders, General Gordon essentially attempted to put down the rebellion (I am fuzzy on the details).  His forces were soon surrounded and besieged, and the question of how to proceed was hotly debated within Gladstone's cabinet.  Gladstone was of the view that Gordon's predicament was the result of his own insubordination and that he should be left to his fate.  The public, however, took up Gordon's cause and strongly supported intervention on his behalf.  (Some in Gladstone's cabinet shared this view.)  Ultimately a relief expedition was organized, but it arrived too late - Gordon had been killed.

I will pause here to observe that there are striking similarities between the Gladstone/Gordon debacle and the Truman/MacArthur confrontation.   The relative firmness and adroitness with which Truman and his Congressional supporters resisted public opinion and put MacArthur in his place are to be admired.  In fairness to Gladstone, he was much distracted by his Irish legislation (not yet Home Rule, but rather a series of less drastic but still hotly debated measures) and had delegated the Gordon matter to a committee of his cabinet, which in turn handled it rather poorly.  On top of which, by the time Gordon's insubordination came to light, events had already spiraled largely beyond Gladstone's control, whereas Truman still had an opportunity for decisive action after MacArthur's disobedience.

But at any rate, Gordon was considered a hero and his death was blamed on Gladstone's government.  (That he had flagrantly disobeyed his orders and generally conducted himself like a madman was of no consequence.)  The queen (expressing the conservative/imperialist view to which she increasingly adhered in the later years of her reign) wrote to Gladstone (as quoted by Jenkins):

These news from Khartoum are frightful and to think that all this might have been prevented and many precious lives saved by earlier action is too fearful.

This rebuke was sent by unencrypted telegram, the equivalent of a postcard and therefore amounting to an open letter to Gladstone.

Gladstone replied, in private (again, as reported by Jenkins - note that the use of the third person is typical of Gladstone's correspondence):

Mr Gladstone has had the honour this day to receive Your Majesty's Telegram en clair [that is, unencrypted], relating to the deplorable intelligence received this day from Lord Wolseley, and stating that it is too fearful to consider that the fall of Khartoum might have been prevented and many precious lives saved by earlier action.

Mr Gladstone does not presume to estimate the means of judgement possessed by Your Majesty, but so far as his information and recollection at the moment go, he is not altogether able to follow the conclusion which Your Majesty has been pleased thus to announce.

Mr Gladstone is under the impression that Lord Wolseley's force might have been sufficiently advanced to save Khartoum had not a large portion of it been delayed by a circuitous route along the river, upon the express application of General Gordon. . . .

Now, let's leave aside these details about the route of the relief party and so forth.  What's striking to me is the fine balance that Gladstone strikes between decorum and deniable sarcasm.  It is impossible for me to imagine a comparable letter being written to the queen today.  Other, of course, than the one I just fired off . . .

I Wrote Another Poem

"Map Room 2014"


What is it like
To be on the wrong side of history?

It is almost too perfect.

These pasty white boys from Nevada
Trying to play baseball
Against a south side team
Essentially 100% black.

With the whole city of Chicago behind them,
Rahm Emmanuel shutting down streets,
Clogging the intersections, bringing downtown to a standstill.
But fuck the drivers.
This is our team, these incandescent chocolate-colored boys
From the south side.

Essentially 100% white, pity these Nevada boys who
Didn't quite realize they were up against something bigger
Than themselves, than a baseball diamond.

If they could be here in this
Essentially 100% white beer bar on the north side of Chicago
(with maybe a few Asians)
Who cheer uproariously when these black boys
From the south side make a double play
And kill the dreams of Bill Buckner-looking mother fuckers.

Maybe they would realize that
It turns out you can be on the wrong side of history
Even if you are lily white.
And maybe John McCain could have told you
For sure Mitt Romney could have told you
These south side boys, with black skin and the whole city behind them
Are not to be fucked with.

It is almost too perfect.

These effete north side white liberals
On whose narrow shoulders nothing too important can be placed
Flinging magnetic curses
Have somehow understood
Have grasped something bigger and far more implacable than themselves.
And so Jackie Robinson West
(it is, as I tried to warn you, almost too perfect)
Advances to the finals
Where they will face the Koreans
Who know a little something about being on the wrong side of history.

Measuring Social Welfare

A few thoughts on GDP.  (As always, I make no claim to originality or accuracy.  Just a little wild surmise.)

GDP is not really a measure of well-being, or even of economic activity.  It is a measure of economic activity mediated by the formal marketplace.  (Or the not-so-formal marketplace:  Italy recently made waves when it announced that it would include black-market activity in its GDP calculations.)  In the classic example from introductory economics, if I hire a babysitter, then the monetary compensation I pay counts toward GDP.  But if I arrange for a family member to babysit my child, for no monetary compensation, then it doesn't count toward GDP.  This may be seen as a limitation of the metric, but for now let's just note that GDP is not all-inclusive.

Various efforts have been made to find a more direct measure of the thing we are actually trying to maximize, but as far as I know none of them has really taken off.  I think this is probably because there is a fair degree of squishiness and value judgment involved.  For instance, the per-capita GDP of the United States is considerably higher than that of Japan (according to the CIA, Japan is at $37,100 while the U.S. is at $52,800).  But Japan is undoubtedly better off in a lot of ways.  Its life expectancy at birth is 84.46 years, while in the U.S. it is 79.56 years.  Infant mortality is 2.13 deaths/1,000 live births in Japan, vs. 6.17 in the U.S.  Adult obesity is 5% in Japan, 33% in the U.S.  The unemployment rate was 4.1% in Japan in 2013, while it was 7.3% in the U.S. (now it is 6.2%).  (As far as I can tell, the CIA World Factbook does not report countries' incarceration rates.  A puzzling omission.  Anyway I would bet a substantial amount of money that it is lower in Japan than in the U.S.)

And you can draw similar comparisons between the U.S. and the social democracies of northern Europe, which have substantially lower GDPs than the U.S. but which enjoy better outcomes on a number of dimensions.  But you can't really say who is doing better unless you have a way of adjudicating the relative importance of those dimensions.  And it's worth noting that in a big-picture sense GDP is highly correlated with good outcomes on many of the most important dimensions (though perhaps obesity is not among them).

So just as an intuitive matter, I think the right way to think about it is to postulate some kind of hard-to-measure "gross domestic capacity," which is meant to reflect a society's ability to meet whatever goals it might embrace.  GDP would be a major component of (and therefore a rough proxy for) GDC, which would explain why higher GDP is generally correlated with good outcomes.  But it would be a mistake to take GDP too seriously as a measure of social welfare.  If researchers developed a new sex position that improves pleasure by 50%, it would have almost no direct effect on GDP, but it would mark a huge step forward in human flourishing.  [150% of zero is still zero, you fucking loser. - ed.  What the hell, man?]

I bring all of this up because to some extent a society can choose how to "spend" its GDC.  If you choose to "spend" it on market goods and services (cars, houses, restaurant meals), then it will appear in GDP numbers and your country will be demonstrably wealthy.  But you can also choose to "spend" it on non-market things like long vacations, short work hours, preparing meals for yourself, exercising, having good sex.  [Is there such a thing as bad sex? - ed.  I wouldn't have thought so, but my girlfriend takes another view of the cathedral.  Also, weren't you just mocking me for being bad at sex?  I was implying you don't have any sex, but obviously the one thing causes the other. -ed.]  This is essentially what northern Europe has done.

And I want to emphasize, this is to some degree a collective decision.  A market-oriented society will punish people who engage heavily in non-market pursuits (I will have some vituperative things to say about this in a separate post), while a society that taxes itself more heavily can provide public goods and non-market protections that enable non-market activity.  And it's not just political:  a society that venerates wealth will confer status on people who orient themselves towards wealth-acquisition, thus punishing those who don't (status being a positional good).  So there are limits on the degree to which an individual can simply "opt out" of his society's choices about how to allocate GDC.  We are engaged in both a political struggle and a culture war, and sadly I think the capitalists/libertarians are winning (though there have been some positive developments on the political front).

In future posts I will take this thought in two directions:  first, I will (as I mentioned) have some negative things to say about the U.S.'s brand of capitalism.  Second, though, I want to return to my earlier posts about macroeconomics and monetary policy, in examining the concept of potential output.

Encouragingly

I continue to be greatly amused by Gladstone by Roy Jenkins.  Today's entry finds Gladstone contemplating a move to a new constituency (at the time, it was common to represent a district you did not actually live in).  At this point, Gladstone represents Oxford University, and its conservatism on many of the great issues of the day is acting as a moderating influence on his public positions.  As Jenkins puts it, "Palmerston hoped Oxford would keep him at least half muzzled."  (Gladstone is serving as Chancellor of the Exchequer in Palmerston's government.)

Anyway Gladstone decides to stick with Oxford at this point (he ultimately switches to South Lancashire in 1865, after losing his seat at Oxford).  Here's Jenkins:

"Gladstone had to settle for the small step of resigning from the Carlton Club [a heavily Conservative institution], which he did in March 1860 and which his faithful amanuensis Robert Phillimore thought a considerable mistake, particularly as Phillimore added encouragingly, 'They hate Gladstone more at Brooks's than they do at the Carlton.'"

By the way, Jenkins also notes that Gladstone went to the Carlton Club to write a few letters immediately after destroying Disraeli's budget of 1852, and with it the only Conservative government between 1846 and 1858.  (And when I say immediately, I mean immediately - Gladstone wrapped up his devastating speech at 4:00 a.m. and was sitting in the Carlton Club writing letters at 4:30.)  Recalling that the Carlton Club was highly Conservative in sentiment, it was an odd thing to do - Jenkins calls it "surprising and perhaps insensitive."  So anyway you can see why they hated Gladstone at the Carlton, though he stuck around for several years after his 4:30 a.m. visit.

Dizziness from Success

To quote from the diary of then-seventeen-year-old Lucy Lyttleton, a niece (by marriage) of William Gladstone, as quoted in Gladstone by Roy Jenkins:

Uncle William has taken office under Ld. Palmerston as Ch. of the Exchequer, thereby raising an uproar in the midst of which we are simmering, [in] view [of] his well-known antipathy to the Premier.  What seems clear is that he feels it right to swallow personal feelings for the sake of the country; besides he agrees at present with Lord P.'s foreign policy, also he joins several Peelites. . . .  There is this question, however:  why, if he can swallow Palmn. couldn't he swallow Dizzy, and in spite of him go in under Lord Derby?  I don't pretend to be able to answer this, but one can enough understand things to be much excited and interested. . . .

Now there's a lot going on in this passage, but what amuses me is the reference to "Dizzy."  Can you guess who that is?  I am going to take the unusual step of inserting a "break" so that you can guess before you click to see the answer.


Read more »

You Think Hard, You Lose Clarity

Again I'm going to write a bit about macroeconomics.  I want to focus on an area I poorly understand.  At some point I will have to read some of the literature that is out there, but I will put that day off as long as I can.

The thing I am thinking about is my earlier distinction between deferring consumption and assuming risk.  The logic is that when I buy a financial asset for $x, I am generally doing both:  I am (A) spending $x less than I otherwise could have, in the hopes that I will be able to spend more in the future, and (B) taking on the risk that the asset will decline in value.  (Let's focus on traditional securities and similar products, not, like, triple-short ETFs or whatever.)  (And as a side note, the risk-bearing concept shows up in people's description of their investment activity when they say they want "exposure" to a particular region or sector.  What they mean is that they want to bear the downside risk of losses in exchange for the upside "risk" of gains.)

Now I think these two concepts (deferring consumption and assuming risk) are fairly easy to distinguish as a conceptual matter.  Of course most financial products blend the two, though you can imagine exceptions.  (For instance, if my broker allows me 100% margin, then I can "gain exposure" to a security without foregoing any current consumption.  In the U.S., this is generally not permitted for equity securities.  Or I can sell options and use the premiums to increase my current consumption - again assuming the margin requirements are low enough that I can extract the cash.)

But while I think the concepts are reasonably distinct, I wonder if we can really separate them in practice.  Here's what I mean.  Imagine that I can buy either of two Treasury securities.  One of them is a 6-month bill, and the other is a 5-year note.  (For our purposes, the only difference between a bill and a note is time to maturity.  In real life I think bills are sold on a discount basis while notes bear a coupon.  Ignore this complication.)  Imagine that these are TIPS (Treasury inflation-protected securities), meaning that the payment on the security is adjusted to reflect inflation.  Assume for simplicity that the securities bear zero credit risk and that they reflect a completely accurate measure of inflation (so that there is truly no inflation risk with these securities).  And finally, assume that the securities can't be sold or pledged.  Once I've bought them, I'm stuck with them until maturity, no matter what.

Now, there are still risks with these securities.  Most notably, there is interest rate risk - if interest rates go up after I buy the securities, then I will incur an opportunity cost - if I had held my money in a checking account, I could invest in the same securities at a higher interest rate.  And maybe I will be compensated for that risk (more so with the 5-year note than with the 6-month bill, because the risk is greater the longer I have to wait to get my money back).  But it seems as though these securities are as close to pure consumption-deferral as you can get (you are trading away $x in 2014 dollars in exchange for $y in 2014 dollars in the future), and again the compensation should be higher for deferring my consumption for 5 years than for 6 months.  (Strictly speaking, the point here is that I could either defer consumption for 5 years, or defer it for 6 months with an option to extend for another 6 months and so forth.  Since the rolling 6-month option gives me more opportunities to consume in the relatively near future, it should bear lower compensation, that is, a lower yield.)  So in ordinary conditions we would expect the interest rate to be higher on the 5-year note than on the 6-month bill.  (In rare situations the "yield curve" may be "inverted" - this just means that long-term securities actually bear a lower interest rate than short-term securities.  This might happen if short-term interest rates are currently high but are predicted to drop in the future.)

Okay, very well.  But now imagine the same securities, except they can be sold or pledged as collateral.  And imagine there is a reasonably liquid market for the securities, meaning that in practice I can sell them quickly for a reasonable price.  Now it's easy to see that I'm still bearing interest rate risk (in a sense, it's easier to see because if interest rates go up I might actually sell the securities for a loss, whereas in the previous example I was compelled to hold them to maturity).

But the crucial insight (I think!) is that I'm no longer deferring my consumption differently with the two securities.  I can sell either one of them on short notice.  I'm still taking on more risk with the longer-dated security, but I'm no longer really committing to wait 5 years before I can spend the money I'm investing.  I could sell the 5-year note next week and buy some kidney beans or whatever.  So my consumption-deferral is now roughly equal as between the two securities (although, to repeat, I am exposed to more risk, both upside and downside, on the longer-dated security).

The point here is that consumption-deferral seems to be fungible with risk-taking as an economic matter.  (Extending the amount of time I am willing to defer my consumption is fungible with bearing additional interest-rate risk.)  So distinguishing between the two might not be so easy to do in the real world.  I ought to be able to enter into some kind of derivative contract with no money down (if my counterparty is willing to take my credit risk) that exposes me to roughly the same risk as holding these securities, but doesn't require me to defer consumption at all.

Now I'm not sure what the implications of this are.  Maybe nothing?  But it seems odd that consumption-deferring and risk-bearing might be fungible in terms of how they contribute to the economy and how they are compensated.  (Again, I acknowledge that most securities involve both activities, so I wouldn't be surprised if it were difficult to sort them out if we tried to measure them.  But I am surprised that they may turn out to be truly interchangeable as an economic matter.)

In my earlier post I wrote that in our current economic climate, risk-bearing should still be rewarded but consumption-deferral should not.  (This is because we currently have a shortage of consumption, so deferring it does the economy more harm than good.)  But if I'm right now, then I was wrong then.  A more accurate way to put it is that certain kinds of risk-bearing should be rewarded and certain other kinds (the ones that replicate the economic features of consumption-deferral) should not.  Maybe this is just another way of saying that the yield curve should be flat.  Which is another way of saying  that short-term interest rates should be low for a long time.  Which makes sense.  But it lacks the clarity of my earlier framework.

And If You Don't Love Me Now

[deleting post, going to have to try again when my thoughts are clearer]

Nihilists Aren't Believers in a River in Egypt

I don't have the time [or the capacity - ed.] for a fully thought-out post, but I want to put in a place-holder to be elaborated on in the future.  (And as always I should disclaim any originality - I am quite sure in this case that I am far from any point that can be considered novel.)  Here's the basic idea.  You can think of knowledge as justified true belief (though of course you don't have to).  So when nihilists say that you can't know anything, they could be attacking a number of different aspects of knowledge.

But focus on the "justified" part.  I've written before about the difficulty of deciding what the threshold is for belief.  I will probably have to drill down a little on that concept to make all of this work.  But for now, recall that part of the problem is that people have limited mental resources and can't run all of the optimization calculations that one might theoretically want.  So for instance, if I have 10 minutes to solve a problem, I want to use that time optimally.  But solving that optimization problem is not costless:  perhaps I have to spend 2 minutes figuring out how to optimize my time, and then I can spend 8 minutes using the time optimally.  Well, fine, but how do I know whether I'm better off using a sub-optimal calculation method for 10 minutes rather than an optimal one for 8?  (And how do I know that I will have 8 minutes left once I've run the optimization calculation?)  To answer that question, maybe I need to spend a few minutes thinking about it.  But wait!  How do I know how much time to think about it?  And so on.

This is exhausting.  And at some point, on some level of analysis, it involves a brute force "retreat to intuition" (I am using "brute force" in its non-technical sense, basically meaning arational.)  And that "retreat to intuition," that abandonment of rationality, is often (always?) outcome-determinative, as a lawyer might say.  In other words, the decision to cut off the analysis and accept a belief can never, itself, be rational.  (And neither can the decision not to cut off the analysis.)

And so once we've recognized that the rationality involved in justifying a belief is sharply limited, maybe we come to feel that beliefs simply can't be justified by humans.  It depends on what kind of standards we want to maintain in the "justification" department.

And so now we have maybe a way of understanding nihilism as a somewhat attractive view of the world.  A nihilist is just someone who maintains high standards for justification, even in the face of our inability to meet those standards.  A pragmatist is someone who relaxes the standards in light of our limited capacities.  It's not so clear to me that the nihilist's approach is clearly inferior.  We don't relax the definition of "immortal" in such as way that long-lived humans can meet it.  Why should we lower our standards for justification simply so that we can call something "justified"?

And it strikes me that a nihilist need not live his life according to formal principles of justification.  A nihilist could consider it highly advisable to get out of the way of a moving car, though he does not accept that this action is based on beliefs that are formally justified or justifiable (by anyone subject to bounded rationality).  In other words, a nihilist might take a sort of Humean approach to life, distinguishing between formal justification and practical reasons for action/belief.

I emphasize that I have not fully thought this through.  Just a placeholder.  Thoughts welcome.  (The most obvious objection, I think, is that if the nihilist embraces some lower standard that renders a belief usable, but refuses call it "justification," then he is merely playing word games.  Haven't fully considered how telling this objection is.  I am okay with nihilism being a much more subtle and technical rejection of the possibility of knowledge than is traditionally assumed.)

[UPDATE:  I'm actually having pretty serious doubts about whether this way of thinking about it makes sense.  In particular, the connection between rationality and justification is one that I think bears more thought than I've given it.   I'm actually probably going to write on another topic before I return to this one, hopefully with a more worked-out theory.]

Not That McCoy, The Other One

What is it about literary feuds that fascinates us so much?  Is there something about the high/low dynamic that thrills us, that gives us a frisson of shock in an otherwise staid corner of the world?  Or is it just a chance to see our intellectual heroes from a new and not-necessarily-flattering angle?

Whatever the reason, the explosion of the long-simmering Dave/Sarang feud into public view has captivated the press, with the New York Review of Books calling it "the summer blockbuster for people who don't like summer blockbusters" and the New York Post blaring:  "LIT SNIT PITS WIT AGAINST WIT; CRITS HAVE FITS."  (This is not the duo's first encounter with the tabloid:  after the Post published pictures of Sarang holding court at his new clothing-optional nightclub, Dave suggested the headline "BRAINLESS MAN IN TOPLESS BAR.")

In truth, though, the brawls have been more salacious than edifying.  The latest flare-up started when Sarang ordered a "Dave's literary career" at the Algonquin.  When the bartender admitted he didn't know the recipe, Sarang responded that he didn't either, but he knew it was on the rocks.  Unfortunately, the famous "battle of wits" that resulted was a bit too literal for most people's taste:  Dave threw a wit beer in Sarang's face, and Sarang responded in kind.

It seems to be one of those cases in which the viciousness of the fight is exacerbated by the closeness of the combatants' views.  In fact, if anything Dave and Sarang have been allies in most of the big literary and political debates of the last two decades.  They both defended Ian McEwan against Alice Munro; they were both outraged when the Jet Propulsion Laboratory's algorithmic novel This Sun of York was blackballed by the Pulitzer committee; they both wrote novels illustrating the folly of placing the school lunch program within the Department of Agriculture.  Both men signed the St. Louis Manifesto.

Perhaps a rapprochement is on the horizon.  However grudgingly, Dave has admitted that Sarang's latest effort, Actually, Paris Is Significantly Farther North Than Montreal, breaks new ground in experimental "obnoxious fiction."  And when he was recently asked to name the 21st century's "biggest intellectual culprits," Sarang declined to name Dave, instead focusing heavily on the Polish literary establishment.  But the big test will come when this year's Booker shortlist is announced:  both men are eligible under the new, relaxed requirements.  If only one of them is chosen, expect the fireworks to light up again.

Are Numbers Real

Judd Apatow writes on my Chipotle bag:  "When I was in high school there were 500 people in my graduating class.  Out of those 500 people I had two best friends and five other real friends.  So I had a true connection with seven people and did not have a true connection with 493 people."

What is strongly implied by this - if not logically entailed - is that Apatow did not have a true connection with himself.  Or he did not graduate.  Or he is not a person.  The mind fairly boggles.

Sarang's Tomorrow Darling

Sarang's latest effort, Tomorrow Darling, has been called "a penetrating examination of the human spirit in the form of an astonishingly good mystery story" (J.M. Coetzee), "at once a love letter to the mystery genre and its high-water-mark" (Michael Ondaatje), and "the book I wish I'd written" (Dan Brown).  It has also been called "warmed-over tripe" (Michiko Kakutani) and "an unappetizing pastiche of Poe, Christie, and Conan Doyle" (Kirkus Reviews).  So it is fair to say that the book is polarizing.  But most would acknowledge that it is a welcome departure from Sarang's previous forays into the mystery genre, in which the culprits turned out to be, respectively, the subprime mortgage market; capitalism, and in particular its emphasis on exchange value instead of use value; and "man's inhumanity to man."  Darling, at least, has a flesh-and-blood murderer (or murderers).

Set in the Cotswolds in the twilight years of the Victorian era, the novel follows amateur detective Cecil Overby-Smythe on a visit to the country estate of the Barrington family.  The patriarch, William, is in poor health, aggravated in recent weeks by news of potentially disastrous financial setbacks in his large industrial concerns in North America.  And his family seems to be disintegrating.  His somewhat erratic daughter Delia has become increasingly radical and politically active (particularly on the question of Home Rule).  His older son Reginald has accepted a quasi-permanent post in India.  His younger son David has married a Methodist.  William has summoned the whole family to the manor for some unspecified purpose, and Overby-Smythe has joined the fractious gathering in the company of his longtime friend, George MacBride, the family solicitor.  (The witty if occasionally bitchy repartee between Overby-Smythe and MacBride is one of the chief pleasures of the book.)

On the morning after he arrives, Overby-Smythe goes for a stroll, braving the sullen rain, in search of mud to eat (he suffers from what today would be diagnosed as pica).  From behind a coppice of willows, Overby-Smythe witnesses a mustachioed man in a brown suit and bowler hat somberly handing a sheaf of papers to a woman in a green dress, whose features Overby-Smythe cannot quite make out.  When a woman's body is found later that day, apparently poisoned, Overby-Smythe feels bound to get to the bottom of the case.  (I won't reveal who the victim is, or whether she is the same woman Overby-Smythe witnessed on his walk, since for a time the reader is kept in the dark on this latter point.  Suffice it to say that a careful reader can piece quite a bit together from the seemingly innocuous details that Sarang weaves into his rich description of the English countryside.)

Darling is refreshingly traditional.  It bears far more resemblance to The Woman in White than it does to Banville's Quirke books (which are published under the pseudonym Benjamin Black and which have recently been turned into a television series starring Gabriel Byrne).  In short, if a literary writer like Sarang or Banville is going to spend time "slumming" in genre fiction, it is an exercise in self-indulgence unless he is willing to commit.  Banville's books barely qualify as mysteries, whereas Darling is delightfully true to the genre, from the opening scene right down through the climax, in which Overby-Smythe, munching on splinters of wood, reveals the identity of the guilty party (or parties) to the rapt audience.

So while the book definitely doesn't transcend the genre, or even much modify its time-honored formulas, it is gratifyingly rich in all of the things that make the genre so irresistible in the first place, and if you can put the book down during its last 50 pages, then you're a better man than I.

All Right Let's Do This

I went to the library, looking for a biography of Parnell, but there wasn't one, so I checked out a biography of Gladstone instead.  (A fitting metaphor for Irish/British history, I feel.)  (It is at this point that I would like to point out that Parnell was only half Irish, the other half being American.  You can say roughly the same of de Valera.)  (And I never pass up an opportunity to mention Gladstone's great Home Rule speech to Parliament, containing this memorable line:  "I must further say that we have proposed this measure because Ireland wants to make her own laws.  It is not enough to say that you are prepared to make good laws.  You were prepared to make good laws for the Colonies.  You did make good laws for the Colonies according to the best of your light.  The Colonists were totally dissatisfied with them.  You accepted their claim to make their own laws.  Ireland, in our opinion, has a claim not less urgent."  Are the "Colonies" what is now the U.S.?  If so, I wouldn't say that Parliament gracefully accepted "their claim to make their own laws."  And also, were there any great British speeches that weren't obsessed with the United States?  Recall this from Churchill's "finest hour" speech:  "But if we fail, then the whole world, including the United States, including all that we have known and cared for, will sink into the abyss of a new dark age made more sinister, and perhaps more protracted, by the lights of perverted science."  I appreciate the name-check, but note how he is careful to distinguish between the United States and "all that we have known and cared for."  In reality I think he mentioned the U.S. with an eye toward encouraging us to enter the war, which we weren't to do for another year and a half.  That's still better than de Valera's Ireland, which entered the war never.)

Anyway I didn't realize it at the time, but the author of the Gladstone biography, Roy Jenkins, was himself a Labour MP and indeed served as Home Secretary and (later) as Chancellor of the Exchequer.  (He even did a stint as a Social Democrat MP up in Scotland.)  So it is a book written by a prominent British politician about a prominent British politician.  I will not reveal which publishing house published the book in the United Kingdom, leaving that as an exercise for the reader.

Brute Force, Queues, and the Price System

The price system is generally thought to be a good way to allocate resources.  There are various levels of formality you can adopt in reaching this conclusion.  On an informal level, the basic idea is to force people and businesses to consider the cost of using scarce resources.  If you can make equally good cookies with oat flour or wheat flour, and oat flour is half as expensive (reflecting that it is cheaper to produce or it is inferior for other applications), then the price system will tell you to use oat flour.  In this way wheat flour is preserved for applications in which it is actually superior to oat flour.

On a somewhat more formal level, the price system is thought to address the economic calculation problem.  Prices convey information in an automatic, decentralized way, allowing society to allocate resources without any central direction.  This allows society to solve what would otherwise be an insurmountably complex optimization problem.

And I believe there are much more rigorous "proofs" out there.  I once sat in on a class taught by Gary Becker, and I think he was doing exactly that.

Now there are various ways of critiquing the price system.  One is to observe the social costs and benefits that do not make it into the price - that is, externalities.  Imagine that oats require much less pesticide than wheat.  By itself, that is not necessarily an externality, since the price of the pesticide will be reflected in the price of the wheat flour.  But if pesticides cause damage to people other than the farmer, then the farmer might not take into account all of the costs of the pesticides.  And if that's true, the price of wheat may be "too low" given its overall impact on society.  The prices are sending the wrong signals.

Another critique, or maybe a refinement, of the price system is Coase's theory of the firm.  The allocation of goods across society is generally governed by the price system.  But within a firm, quite often goods are allocated in a centralized manner, by fiat.  The CEO of a car company doesn't make the motor-building division bid against the exhaust-system division for steel.  He simply directs a certain amount of steel to be delivered to each division, regardless of the division's "willingness to pay."  As between the car company and its external counterparties, relations are governed by prices and legal contracts.  Within the company, relations are governed by autocracy.  There is an old Coke ad in which businessmen tell lawyers that they want to sue Coke Zero for "taste infringement" (since Coke Zero tastes so much like original Coke).  We recognize that this is ridiculous, but only because we intuitively understand that for internal purposes a company does not allocate its intellectual property using ordinary market and legal mechanisms.




And so if firms don't find the price system to be an attractive way of allocating resources, we can consider what circumstances might call for centralized resource allocation.

But there is another critique of the price system that I think doesn't get enough attention in economics classes.  While the price system provides a solution to the economic calculation problem, there's nothing to ensure that it's a good solution.  Consider the great famine in Ireland.  During most years of the famine, Ireland was a net exporter of food.  While perhaps a million Irish died of starvation, the price system was telling Irish farmers:  send your food to England, the prices are higher there.  There are English mouths to be fed, chop chop.

If this is how the price system solves the economic calculation problem, then so much the worse for the price system.  But what went wrong?  The answer is that the price system allocates resources according to willingness/ability to pay.  Our cookie manufacturer in the earlier example, who is indifferent between oat flour and wheat flour, will buy whichever is cheaper.  He will have no willingness to pay for the more expensive ingredient, and he won't receive any.  That's all to the good.  Or, if he can't sell his cookies for a high enough price to cover the cost of running his business, he soon won't have enough money to buy oat flour or wheat flour, and he won't receive any.  Again, that's all to the good - his business was a value-destroying proposition, and it should be shut down.  (Unless we can identify some externality that makes his business a net positive for society.)

But the thing about the Irish was that they couldn't pay for food.  And so they were treated just like the unprofitable cookie manufacturer:  the price system didn't allocate any food to them.  But instead of a business going bankrupt, the result was that bodies of children were found along the road, their mouths green and their stomachs bloated from trying to eat grass before they died.

The price system ensures that there is no "shortage" or "surplus" of resources by setting the price so that supply equals demand.  As we've seen, that can be a valuable thing to do.  But in a sense it is a "brute force" solution to the problem.  The reason there will never be a shortage of pencils in a free market economy is that the price will always be set so that anyone who is willing and able to pay for a pencil can get one.  But that's almost tautological:  we've defined "ability to pay" such that the price system can never fail to achieve an efficient outcome, regardless of how far it falls short in actuality.  If there are 10 pencils for 10 million people, and they are allocated by auction, then there is no shortage.  If there are 5 million pencils for 10 million people, and they are sold below the market price so that people queue up for them, then there is a shortage.  Funny how that works, right?  Shortages aren't defined by how far our resources have fallen short of what society needs, they're defined by that most execrable of human institutions, queuing.

We've basically defined efficiency as "what happens when the price system operates without hindrance," with perhaps a slight emendation for externalities.  It's a brute force solution, not in the sense that it requires trying a bunch of different possibilities to find the solution, but rather because it takes whatever solution it produces and labels it "efficient."  And that is just what happened in Ireland.  The deaths of perhaps 1,000,000 Irish people were efficient, according to the price system.  If anything, probably more Irish should have died, since the government intervened to prop up the existence of quite a few Irish people.  And as we've discussed, in the absence of externalities, government intervention is thought to be inefficient.  If the British had sent over food to be sold cheaply to the Irish, and they had queued up for it, it would have been terribly inefficient.  Thank God for Trevelyan.

I feel this example should be taught in introductory economics, so that students will understand the limits of wealth maximization as a moral criterion, and the need for independent assessment of market outcomes.