Saturday, August 29, 2015

Lost in Reagan's Revolution: Trust

I've just finished a wonderful book by Eric Beinhocker called The Origin of Wealth: The Radical Remaking of Economics and What it Means for Business and Society.

Generally I'm extremely skeptical of claims about reinventing economics; the usual practitioners of this art are cranks, charlatans, hucksters, or simply people who are ignorant of the field's history. But Beinhocker is a distinguished exception, and if you have any interest in economics you should read his book. I'll probably discuss it more in future posts.

But today I want to focus on something that is sort of peripheral to the book's main theme, yet has important implications for American politics. And that is the question, long pondered by social scientists, of why some countries prosper, while others devolve in a downward spiral of poverty and hopelessness.

There are lots of proposed answers to this puzzle, most of them ideological in some way. If you're a religious zealot, you'll assert confidently that Country A failed because it had the wrong religion. If you're a free-market fundamentalist, the reason for Country B's failure is of course too much government meddling. There are even a few non-ideological explanations, such as Country C succeeding thanks to its rich natural resources, or geography that protects it from invaders.

But this question has by now been studied pretty thoroughly, and none of these explanations will do. As just one example, there are resource-poor countries that do quite well (Japan, South Korea), and resource-rich countries that are disasters (much of Africa).

One explanation that keeps popping up, though is culture. There are plenty of definitions of the word, but Beinhocker's captures a key point: culture is an emergent characteristic of a group of [people] and is determined by [their] rules of behavior (or norms) for acting in their social environment and for interacting with each other.

A word about this notion of "emergent" behavior. It's a popular theme in the study of complex systems (Beinhocker calls his new framework "Complexity Economics"). It means, among other things, that if you take a bunch of "agents", each guided by simple rules, and set them to interacting with each other, amazingly complex and unexpected things can appear, seemingly out of nowhere. The huge, intricate mounds built by termites aren't designed by termite architects laboring in offices, and their construction isn't supervised by termite foremen wearing tiny hardhats. They simply emerge out of the billions of interactions between the millions of insects in the colony. No individual termite knows the whole scheme, or has a plan for executing it, but the collective "hive mind" gets the job done.

Similarly, a society's culture isn't pre-planned: it just emerges from the many interactions between its people, each guided by their personal norms and the norms of the culture as a whole. And there's a feedback loop at work: culture is shaped by norms, and norms in turn are influenced by culture.

So the key question is: what kind of cultural norms tend to produce a successful country? A strong work ethic, for sure. A habit of saving for, and investing in, the future. And one of the most critical: simple trust in the people and institutions of the society. Independent of other factors, a society of suspicious, uncooperative people is marked for failure.

And that's where Reagan and his fellow travelers have really blown it: by mounting a richly-funded campaign—still in full swing—to destroy Americans' trust in government, higher education, science, the media—even in facts, logic and reason—conservatives have made it harder and harder to unite the citizenry to tackle our problems. And long-term, this is a recipe for failure as a country.

As Beinhocker notes, the Right's embrace of free-market fundamentalism leads naturally to this position. Culture doesn't have much of a role in Traditional Economics, because people are presumed to be perfectly rational, totally self-interested agents, each seeking to independently maximize their personal gain. All relationships are economic ones—what can I get from you, and what do I have to do to get it?

It's well established that real humans aren't like this, but conservatives cling to these assumptions because they provide justification for their anti-tax, anti-regulation ideology. Corollaries of this "Rational Man" hypothesis include (a) government intervention can't do anything but screw up the perfection of the marketplace, and (b) greed is good. And culture is an afterthought. Who needs trust if you can simply go to the market for whatever you need?

Starting with Reagan's famous line that "The nine most terrifying words in the English language are: I'm from the Government, and I'm here to help" and right up to today, conservatives have been hard at work tearing down one of the main pillars of America's success: the fact that we could once trust each other enough to join together to do great and difficult things. Now we can't agree to fix a bridge that's falling down because OMG! it must be a boondoggle. And we'll have to reduce our personal consumption a bit to pay for it—screw that! We've been thoroughly indoctrinated in the politics of distrust.

Is anything to be done? Probably not without some seriously coordinated effort. Daniel Patrick Moynihan laid it out: The central conservative truth is that it is culture, not politics, that determines the success of a society. The central liberal truth is that politics can change a culture and save it from itself. Beinhocker's own prescription for rebuilding our "social capital" includes measures like:

  • campaigns to increase social involvement of citizens 
  • educational programs to build norms of trust in the next generation
  • encouraging people to interact with their neighbors (in part by reversing the suburban sprawl that has isolated people in their homes and cars and consumed their free time with long commutes)
  • promoting voting and political involvement

As far as I can tell, these are not top-priority items on the Republican agenda.

Donald Trump wants to "make America great again". He could start by repudiating the culture of mistrust and selfishness that is a direct outcome of Ronald Reagan's sorry "revolution".

Friday, August 07, 2015

Wanted: Debate Police

Of course the country is atwitter about last night's first Republican debate. But here's something I wish more people would demand of the candidates: when you're asked a question, answer the fricking question!

Of course, all politicians tend to use virtually any question as a jumping-off point for whatever message they're trying to get out, whether or not it's related to the subject of the question. Many of them are true artists at changing the subject. But last night's candidates seemed especially egregious. The moderators could have asked "What's your position on cottage cheese," and the candidate would launch into how many jobs he created as governor, or whatever.

The debate moderators tolerate this, and I don't really see why. Perhaps they think viewers are smart enough to see this misdirection for what it is, but I think we need a "get tough" policy.

Here's my proposal: at each debate, we have a panel of "subject matter police" watching, with their fingers on some nice, loud buzzers. These people should be experts in rhetoric, logic, and political science. Maybe to ensure "fairness," we choose a conservative, a liberal, and an independent, and require that at least two of the three have to hit their buttons for the buzzer to sound.

The panel would closely monitor each candidate's response to each question, and the instant he or she departed from the subject of the question, they'd be essentially drowned out by the loud, annoying buzzer. After a couple of seconds of this, they'd be allowed to try again.

The idea is to create conditioned reflexes in the political class to stick to the damned topic!

If this were pursued consistently, it seems like we could train them to be a little more responsive in their communications.

(Note that whether or not their answers are truthful is a separate issue; one that I'd love to see addressed. But that might be overreaching, eh?)

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Sunday, May 03, 2015

An Open Letter to Bill Maher

Dear Bill:

I've been a loyal viewer of Real Time since it began. I seldom miss an episode, I look forward to Fridays when new ones come out, and I feel a bit lost when you're on hiatus. I frequently recommend your show to people (both acquaintances and strangers), and I think many of your "New Rules" rants are classics of political humor. We very much need your voice in the national conversation!

All that said, I have a complaint, and it concerns your interviews with the "pre-panel" guests you feature at the beginning of each show.

In a word, I wish you would just get out of the way and let them say what they have to say.

In many cases, these are important and highly accomplished people who don't get enough public exposure. Good on you for giving that to them. But I can't count the number of times I've been frustrated when you chose to interrupt them with some trivial diversion, just when they were about to make a critical point.

You don't seem to realize that these people, distinguished as they are in their fields, are often not experienced media figures who know how to "give good TV interview." They're sincere, earnest, and they have a lot to say. You need to just give them the time and space to say it.

This was brought to a head for me by your session with Nobel prize-winning economist Joe Stiglitz. I remember at one point you asked him to talk about the opportunity costs of the Iraq war. I would have loved to hear that! But just as he was gearing up, you switched subjects. Stiglitz gamely tried to play along, but the net result was an awkward train wreck that wasted his time and that of your viewers and missed a golden opportunity for some real and substantive communication. I've seen similar misfires time and again.

Could I ask you, with respect, to try to put your ego aside, avoid going for the cheap joke and the irrelevant digression, and just let us hear what these amazing and important people have to say?


--Rob Lewis

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Sunday, February 22, 2015

Subsidies of Scale: how the poor and middle class help pay for the lifestyles of the rich

Preface: I'm well aware that genuinely new ideas in virtually any subject are few and far between. I haven't seen the following concept discussed anywhere before here and now. That doesn't mean it hasn't been. But if I've come up with a new insight, well, good for me!

The idea in a nutshell: economies of scale achieved by mass-producing goods for the lower classes help to make high-end versions of these goods more affordable for the upper classes. Absent the demand generated by the lower classes, these economies of scale would not be attained, and luxury goods would cost far more. Thus, the lower and middle classes are in effect subsidizing the lifestyles of the rich and famous. 

Most of the parts in a Cadillac are identical to, or derived from, parts in a Chevrolet. Most limited-production high-end spirits are produced by distilleries that sell large volumes of more affordable brands. In fact, a large proportion of luxury goods depend on mass consumption of less-costly versions for their availability and affordability.

Let's stick with the Cadillac–Chevrolet model for now. Tooling up to build a car is enormously expensive. The only thing that makes today's cars affordable is the fact that they are cranked out by the millions, so the tooling costs can be spread out over all those millions of units. In fact, key components like engines are almost always shared between different models and brands of cars, to achieve greater economies of scale and hence lower costs (as an example, the engine in my very modest Saturn was a joint development effort of GM, its German subsidiary Opel, Saab, and Lotus, and was used in numerous GM cars, including some Cadillacs).

Imagine that wealth inequality in America continues to increase, to the point that only the rich can afford new cars. The market for Chevrolets dries up, while the demand for Cadillacs booms. Where are those Cadillacs going to come from? Without a large base of Chevrolet parts to choose from, Cadillac engineers will be forced to design and tool more of their own. But instead of spreading out these costs over millions of vehicles, they'll only be able to amortize them over a few thousand luxury cars. Bottom line: the per-unit cost goes up massively. A Cadillac you can buy today for $60,000 could easily cost twice that or more. At $120,000, even a few rich people might think twice. If sales decline, the unit cost goes up even more, leading to a classic downward spiral.

So the key point is this: middle-class purchases of mass-produced goods subsidize luxury versions of these goods. Every new Chevrolet that's sold to a factory worker helps the worker's boss afford a Cadillac.

By providing support at the bottom of the market, in the form of demand for clunkers on their last wheels, even the poor help to subsidize fancy cars for the rich. If poor people could no longer afford to buy these cars on the used market, their current owners would wind up hanging onto them longer, depressing the demand for new Chevrolets, and again making Cadillacs more expensive.

This effect is just one of the things I've been thinking about, under the general topic of Rising inequality: how does this end? Taken to its logical extreme, inequality has consequences that even the 1% might be wary of.

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Wednesday, December 17, 2014

Another reason not to trust Jeb Bush

OK, did anyone doubt that "the smart Bush brother" would eventually run for President? The only reason he wouldn't is if there were enough scandals in his background to make him unelectable. Of course, some of us think that handing the 2000 election to his brother is enough to disqualify him, but there's a lot more.

Including what I'm about to describe, which almost certainly won't be talked about in the campaign, but IMO is very important. It takes a bit of explaining, so bear with me…

Remember Terri Schiavo? The woman who was in a permanent vegetative state in Florida back in 2005? Her husband had a state court order to disconnect her life support, and her parents objected. They appealed to Federal court, which (quite properly) declined to get involved, noting this was a state matter. 

The Christian Right staged a massive freakout, which led to a special session of Congress passing a law to "save Terri" by transferring her case to Federal court. President Dubya flew back from Texas to sign the bill at 1:00 in the morning. (The Federal courts denied the appeals and Schiavo was eventually allowed to die.) 

The interesting thing about the case is that the right wing, which endlessly beats the drum about individual liberty, states' rights, and limited government, was anxious for the Federal government to get involved. One of the few sane Republicans, Chris Shays (from the Northeast, naturally), said "My party is demonstrating that they are for states' rights unless they don't like what states are doing. This couldn't be a more classic case of a state responsibility. This Republican Party of Lincoln has become a party of theocracy." 

There. He said it. In fact, it appears that the Schiavo matter was basically an early test case for the right wing in using the power of the Federal government to enforce their religious beliefs. 

In explaining how this involves Jeb Bush, I'll quote from Frederic Rich's novel Christian Nation
I think this incident is incredibly revealing of what we can expect from the fundamentalists. And it's not just the casualness with which personal liberty, states' rights, and the rest were thrown aside. This was a manufactured 'crisis.' Millions of good people around the country were manipulated into really caring about the woman. They cried when she died. And so the movement gained a martyr—a symbol that the puppet masters, when it suits their purposes, can use to reconnect the faithful with that emotion. … The movement flirted with violent resistance. [Governor] Jeb Bush actually dispatched armed state agents to forcibly remove Terri Schiavo from the hospice in violation of court orders, but those state agents were stopped by the local police who upheld the law. Jeb Bush should have been impeached and jailed for that stunt. But instead he became one of the heroes. 
I doubt Jeb cared much one way or the other about Schiavo's fate. But he was more than willing to use the power of his office to pander to the wishes of a group of religious fundamentalists for political purposes. Despite his bland exterior, the man is a snake. 

But hey, if you don't like Jeb for President, there's always Chris Christie (another snake), and, Lord help us, Mitt Rmoney! 

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Thursday, December 11, 2014

Hey, Comcast customers: The company is wasting your money!

More than 15 years ago, my wife and I had a small company operated out of a post office box in our tiny little town in Puget Sound. As you might expect, the direct-mail marketers got wind of our existence and sent us all kinds of "exciting offers."

Before long, our company went out of existence, but you'd never know it to look at the mail we get. There are a few stalwart mega-corporations that haven't given up hope that our long-defunct business will someday, somehow buy something from them. And one of the most persistent is your friendly local cable company.

Just the other day, in fact, Comcast sent us a "business savings voucher." The terms of the offer aren't important; what's remarkable is that they are still chasing a company that hasn't sold a product, sent an email, run a website, run an ad, renewed a business license, or done anything in 15 years!

Now, direct mail as practiced by big companies is a pretty exact science. If you do it right, you spend your money on things that are likely to result in sales. You avoid things that have a low probability of success—including, I would argue, mailing to "prospects" that haven't been heard from in a decade and a half and aren't listed in any directory. By any reasonable standard, this qualifies as scraping the bottom of the barrel. Any savvy marketer regularly "cleans" their mailing list of obsolete or defunct entries.

The logical conclusion is that whoever runs Comcast's direct-mail operation is stupid or incompetent. Either that, or the company has so much money that it isn't troubled by wasting it chasing ghosts. Whichever, Comcast's customers are paying for this egregious waste, and they shouldn't be happy about it.

Now, about those credit cards that Chase is constantly offering our defunct company…

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Monday, July 21, 2014

Are environmentalists using the wrong strategy about climate change?

You can sympathize with owners of beachfront property for not wanting to face the fact that their homes are doomed, but legislating "head in the sand" policies is just nuts.

This makes me wonder if environmentalists are using the wrong strategy about climate change. Many years ago as a young ad copywriter, I learned the principle that you should never present your product as the solution to a problem that is too horrible to contemplate.

So, for example, filtered cigarettes weren't marketed as a way to prevent lung cancer: the ads talked about preventing those unsightly nicotine stains on your fingers. Or they ignored the issue entirely.

With climate change, we truly have a problem that is too horrible to contemplate. So maybe activists should talk about stopping it so you won't have to worry about getting your shoes damp as you walk on the beach.

It seems it couldn't work any worse than telling us we're all going to die is working.