Saalon Muyo

But maybe the lesson is that we need less regulation. The attempt to reduce risk to zero is an illusion. Maybe it is better to have the risk more out in the open where investors are much more cautious because the government is not the backstop.

- Russell Roberts, “The Shadow Banking System

As I see it, the crux of the Chicago & Austrian schools of economics’ arguments comes down to two things.

1. Don’t tax me.
2. Don’t legislate the market.

The opposition to any stimulus spending is that it must ultimately be paid for by taxes.  The opposition to regulation is that the market should not be interfered with by the government.  I don’t mean to oversimplify a school of thought in defense of which volumes have been written, but as advocates of the school deny that the market can be successfully manipulated (or even understood), there isn’t a lot of room for theory.  As Marlo put it, “The game be the game.”

Russell Roberts – who has caught my critical eye more than once – wrote today about his reactions to Paul Krugman’s The Return of Depression Economics and the Crisis of 2008.  It’s a good read, and one of Roberts’ few posts not filled with snide remarks in place of reasoned ideas.  He doesn’t attack Krugman on the grounds that he’s Krugman.  Instead, Roberts gives a fairly clear description of his market ideals when it comes to regulation.

In explaining his views, Roberts points clearly to the problem I have with his school of economics: its success requires a world every bit a fantasy as Marx’s Communist utopia.  In the supply-side world, the lack of regulation will reshape the market into a self-policing, transparent economic machine.  It’s an idea that, if such an idealistic world could ever come to pass, might make sense.  That it requires a wholesale change in human nature is where the theory collapses, just as Marx’s Manifesto only works if the majority of human beings suddenly began to care more about community than themselves.

Roberts suggests that transparency would enable the market players themselves to gauge risk without the government telling them what they can and cannot do.  He’s right, too.  Transparency would do exactly what he’s suggesting.  But how to achieve that transparency?

Freed from regulations, how many corporations would not only open their books, but do so in a fashion that precludes stat juking or misdirection?  If a bank is losing money, what’s to stop them from hiding their losses in creative bookkeeping, just as they did in the run-up to this crisis?  The problems facing our financial systems originated in largely un- or under-regulated domains; just look at the havoc caused by the unregulated, privately traded Credit Default Swaps that the market used to hedge against risk.

The fact of the matter is, when corporations were far less regulated – such as at the end of the 19th century – they engaged in all manner of shady practices.  It’s been demonstrated time and again that short-term profit motive is one of the most common and unquenchable desires in the human makeup.  That a lie is unsustainable, that a practice is ultimately destructive, that a bonus today will lead to termination tomorrow; none of this matters if the perceived short term reward is large enough.

Roberts is suggesting that less regulation would lead the market demanding transparency so as to properly assess risk.  I think his suggestion is right, but the market demanding and the market providing are not the same thing.  If there are no legal ramifications for misleading others about the risk you represent, why would a corporation be honest?  The price you pay in the market for misrepresenting yourself is the eventual collapse of your company.  Is this punishment at all meaningful to someone who has already gotten paid large sums of money prior to the discovery of the lie?  If you’ve gotten so rich off of your deception that you no longer need to work, what leverage does the market have against you?

Being rich means less in prison than it does on St. Croix.  Effective regulation gives the public – the entire public, not just market players with enough money to make waves – the power to punish those who execute their positions improperly.  Regulation also puts the onus of investigation onto those with the resources to do it properly.  While a institutional investor has a chance at assessing the risk of an opportunity, individuals looking for somewhere to place their retirement savings  do not.

Think back to Upton Sinclair’s The Jungle.  What chance did an average citizen have of discovering the conditions under which their meat was stored and processed?  Even if Cargil would allow me to walk through their factories, how am I to afford making such a trip just to ensure I’m not eating rat poop with my pork chop?

Now, imagine a corporate accounting department with CPAs, lawyers and former physics students.  They’re doing everything they can to hide forthcoming losses.  How am I – a simple .Net programmer – going to have any chance of assessing the risk of any investment in that kind of environment?  Will I trust the risk assessment of a third corporation,  hoping that they are both competent and  have no vested interest in misreporting the facts? Or the media, who are now owned by the same corporate interests we ask them to watch?

I believe that Roberts is saying that our current regulatory system has failed.  I agree.  I also agree that transparency is a necessary component to risk assessment.  Here’s my question: How do we demand honest transparency without regulation of some kind?  It would be saner to demand a regulatory system that provides the transparency that the market needs to do its job without further interference.  A world where corporate interests support full transparency is a fantasy, far less likely than one in which government regulation can provide enough oversight to reduce the frequency and scope financial shocks.  Roberts doesn’t trust the government, and I can sympathize, but why he trusts corporations more is a mystery to me.

My government is flawed, cracked and sometimes utterly non-functional.  Yet, I can still vote for its officers.  I can demand changes, fight corruption and support its best efforts.  I need no money, no capital, to have this voice.  Instead, my vote is given freely to me, a right of citizenship that all possess.  Not so with corporations, who have sold the majority of their votes to high-income members of their own world.  My control over my government is weak, but it’s the greatest gift this nation has given me.  It’s a gift no corporation will ever give me, under any circumstances.  If I must choose to trust an institution – and, like it or not, we are forced to do so every day – I choose the one that calls me a citizen, not a customer.

Everyone in the Pittsburgh Area!

This weekend, from Wednesday, January 21 to Sunday, January 25, I will have a short film running in my friend’s show The Body Beautiful.  The show will be at 8 P.M every day except Sunday, when it will be a 3 P.M. matinee.

My film’s short, but it came out OK considering I shot it on 3 hours of sleep.  I’d love if you could come out and see it, but don’t kill yourself if you can’t.  I’ll put it online once the show is closed.

In case you’re interested, it’s called “Pretty Girl” and is my second short film in a row centered around a dead body.  What’s wrong with me?

As a writer and a programmer, one of the most difficult things to which I’ve come to terms is this: The people who inspire us in our craft can disappoint and infuriate us when they discuss any other topic.  A novelist whose books idealize everything you want to be as a writer can open his mouth, talk about politics or race and drive you insane.  This is the person who I respected?  This is what they really believe?

This has happened over and over again, and I suspect the rise of the Internet has only made this problem worse.  Fifty years ago, for a novelist’s private thoughts to be published, someone needed to believe they would make them money.  Now, all it takes is a one-click install of Wordpress and anyone can sound off with the whole world watching.  Orson Scott Card can write close-minded, reactionary tracts about homosexuality; Dan Simmons can write time-travel psuedo-essays; Eric S. Raymond can say ugly, racist things.  Can I go back to their writings that I love, that changed me as an artist or as a programmer and still respect them?

I came to the decision that I had to separate out the things I loved from the people who wrote them.  The worth of Ender’s Game is not related to how much I want to talk to Orson Scott Card; it’s that when I read it, it meant something specific and important to me.   It might change how I see their future novels, now that I’m seeing the subtext of their writing differently, but what they did that mattered still matters.

That said.

I’d feel better if, as my heroes demolished themselves before me that they would leave alone their seminal works.  I listened today to the EconTalk podcast, which had Eric S. Raymond on as a guest.  EconTalk is, as you may have guessed, an economics podcast, and for this episode had Raymond discussing The Cathedral and the Bazaar. I was concerned as soon as I saw the pairing.

Russell Roberts, the George Mason University economics professor who hosts EconTalk, has shown himself to be  a smarmy, intemperate ideologue.  He spends more time bashing liberals, the government and Keynes than he does presenting actual evidence in support of his  supply-side Chicago/Austrian economic theories.  I’m still unsure how he keeps getting time on Planet Money.  And as for Raymond, it wasn’t long after I read and loved The Art of Unix Programming that Brennen directed me to his disappointing, extremist political blog posts.  I did not want to see The Cathedral and the Bazaar get dragged into the middle of our country’s complicated economic debate as proof of anything at all.

Thankfully it never devolved into the free-market = open source software praisefest I was afraid it would become, but that didn’t stop them from scooting over to the issue when they could, including the end when Roberts decided to talk about the fiscal stimulus proposal as if it has anything to do with software development at all.  It’s a perfect example of the danger of having worthy and important thoughts in one field and trying to apply them to another field about which you are more passionate than knowledgeable.  Their brief digressions into analogies between open source organizations and the way the free market organizes itself were unwelcome and unsupported.  The model for open source software relates to scientific peer review of theory, not to macroeconomic policy.

The Cathedral and the Bazaar is useful in understanding the quality of software in relation to how it was designed and developed,  not the saleability of that software, nor of the economic forces that affect the industry as a whole.  Raymond just sounded silly when suggesting that The GIMP was not developed because Photoshop was too expensive, but because the developers thought it would be fun to develop a photo application.  I’m not saying they didn’t think it would be fun, but are we supposed to ignore The GIMP’s similarities to Photoshop in this? If Photoshop cost $30, would The GIMP’s user base be as large?  Would it have been worked on to the level of polish that it has been by the development community?

There are interesting economic anaologies to draw between The Cathedral and the Bazaar and the way the market functions, but it has very little to do with Central Planning vs. unregulated free markets, or whether or not the government should spend money on things.  If the financial system was software, the privately owned credit rating agencies would be closed source software, in contrast to an open, peer reviewed system of corporate accounting practices and financial balance sheets.  Or, in examining the problems of government actions in the market, consider this: is it that the market is analogous to Linux?   Or that the lack of public transparency and democratic control over our government’s actions is depressingly similar to the closed source software we are often forced to purchase if we wish to get our jobs done?

At least this phenomenon of good writers going crazy isn’t new.  After all, once Martin Luther was through reforming Christianity, he decided he had some ill advised things to say about Jewish people. In comparison, Dan Simmons pretending a time traveler came to tell him that Muslims are evil seems almost quaint.

You’ve got to love an argument in favor of sweatshops set beside a picture of the author in a business suit. It’s almost all the argument against itself that the column needs. “Look at me,” it says, “wearing a suit made by people working in almost slave-like conditions. I’m paying for it by writing that making it was good for them. Symbiosis!”

The article is by Nicholas D. Kristof and it’s worth reading before you plow into my commentary. It’s well written and, despite my tone of derision, not completely insane. It just conveniently ignores one of the main reasons these sweatshops exist.

Here’s the thesis, more or less:

[W]hile it shocks Americans to hear it, the central challenge in the poorest countries is not that sweatshops exploit too many people, but that they don’t exploit enough.

…

I’m glad that many Americans are repulsed by the idea of importing products made by barely paid, barely legal workers in dangerous factories. Yet sweatshops are only a symptom of poverty, not a cause, and banning them closes off one route out of poverty.

What Kristof is saying is that sweatshops, as bad as they are, are better jobs than the other options available to people subjected to crushing poverty.  In this, he’s right.  Certainly the factory jobs pay better than much of the employment available to them; it was the same story during the Industrial Revolution in Europe and America. Those factories were brutal, injuring and killing the workers it didn’t simply beat down.  At the same time, they helped create a middle class that may never have existed without them. With a little help from violent labor strikes and government intervention against greedy corporate robber barons, anyway.

That sweatshop jobs are better than, as Kristof says, pulling a rickshaw, but that doesn’t justify his point that we shouldn’t address the terrible conditions at the factories that make our stuff.  Kristof never mentions the elephant in the room, the people who pay the sweatshop bills and demand that their goods come in at the lowest price point possible: American corporations and their consumers.

I think it’s informative to listen to another side of the story, especially since Kristof mentions Cambodia and its attempts to pay better wages to its workers.  It’s a topic This American Life addressed in 2005, and unlike Kristof they talk about how important the corporations’ willingness to pay for these higher priced goods is to their success.  There are some companies, like The Gap, that have made sourcing only from countries with fair labor standards a priority. They’re in the minority.

We live in the richest country in the world, and yet our consumer binge of the past two decades demanded that we pay as little as possible for every single item.  We penny pinch on our clothes and electronics, never connecting the cheaper prices to what those prices require: cheaper production.  Given the choice between a $15 pair of jeans and a $20 pair, most Americans would buy the $15 one, choosing a small savings regardless of the human cost of their savings.

But don’t let this all be put at the feet of the consumer.  What of the corporations, who look to keep production costs low not just because of consumer thriftiness but because they want to increase their profit margins as high as possible?  If Walmart’s customers are willing to pay $15 for a pair of jeans, and they can cut the cost of production 10% simply by moving production from Cambodia to Vietnam, who benefits? The consumers? Unlikely; they’ll still be paying $15 for the jeans.  Instead, the savings will appear in Walmart’s increased profit margin, in their share prices  and in the bonuses of a few executives.  Reign in the insatiable greed of corporate America – not eliminate, just reign it in – and the workers in those sweat shops would see their conditions improve.

As embarrassing as it is to admit, a lot of my generation got our morality tales out of comic books, and there is none better known than the tale of Peter Parker.  When bit by a radioactive spider, Peter was given strength and speed beyond that of a normal human.  And yet, after being cheated out of his pay by a wrestling promoter, Peter allowed a criminal who had robber the promoter to escape.  The criminal fled the scene and came across Peter’s uncle Ben.  In the ensuing struggle, Ben Parker died.  If Peter had used the strength he had been given, the powers that were now his, he could have stopped it from happening.  His uncle’s most important lesson sunk in: With great power comes great responsibility.

With all our wealth and power, to allow ourselves to be convinced that we can just let the indignities of the workers who clothe us slide is to renounce the responsibility our power brings. The other side of the coin, the side Kristof neglected to examine, is that the profits of American corporations are inversely proportional to the standard of living in the countries that make our goods.  To compete for work, these factories must lower wages and reduce standards. We are, in no uncertain terms, responsible for the poor conditions in these factories.

Kristof can argue that a sweatshop is better than a rickshaw, and he might be right.  We can’t stop there.  Not when we’re the richest, most powerful nation in the world.  Not with all the responsibility that power brings.   If a sweat shop is better, then better is not enough.

I was so tired this morning that I had to reach back to something I haven’t watched in years to perk me back up. It’s called Rejected and it’s a classic work of offbeat animation. Maybe not classic yet. Yet.  It will be.

I am a banana…

I’m trying something new.  A friend of mine is putting up a show in a next week at Your Inner Vagabond called “The Body Beautiful” of which yours truly will play a part.  One thing I’ll be doing is premiering a short film, but that’s not the new thing.   That’s just a little extra shameless promotion there.

The new thing is that I’m filming something unfictional.  Something downright truthy.  This week I’m filming interviews with the cast and crew of “The Body Beautiful” to talk about the way they view the body as a work of art, and how they see their own body in that context.  The intent isn’t to make a coherent documentary out of it. Instead it’s going to be a bit of video art that will play both before the show and over the intermission.

Usually at plays you have soundtrack playing to set the mood.  Instead, we’ll run pieces of these interviews, giving the audience a peek at the people who made the show happen, and how the themes of the show are personal to them.

I’ve never shot anything that wasn’t a piece of narrative fiction before, so it’s an odd experience.  I like doing the interviews; it’s something I’ve always wanted to do, but never had a project that merited it. Now it’s in front of me and it’s totally different from shooting a film.  It’s personal and intimate, a private conversation, but one that’s meant to be shown to as many other people as possible.

There’s a bit of fantasy fulfillment in it, I think.  When I was a kid, I imagined myself flying an X-Wing.  Now I imagine myself doing a piece for This American Life.  Oh how we grow up.

If you’re in the area next weekend, come out and take a look.  There will be plays and films and exhibited art and photography.  Should be a good time.   Shows run Wed Jan 21 8pm – Wed Jan 21 10:30pm (Daily at 8pm until Sat Jan 24 8pm).  Tickets are $12.

Thanks to @paulkies & xkcd for this one.

It’s no secret I’m a huge fan of The Wire.  Between that show, reading Homicide: A Year on the Killing Streets and reading The Corner, I’ve developed an affinity for the workings of the real Baltimore.  When news hits about its murder rate or about its political scandals, it feels a bit like hearing about a place you used to live.

So when I found out that the Baltimore Sun has a Google Maps hack that tracks the location and nature of homicides in the city I let out a morbid little laugh.  I mean, I’ve spent more time in books and television shows about Baltimore than I have in the actual city, but I see something like that and I can’t help but thing…yep.  That’s B-more.

Honest question: Are Austrian School economists out and out wrong or are they universally terrible rhetoricians?

Arnold Kling at EconLog, while discussing his discomfort with the fiscal stimulus package proposed by President-Elect Obama and criticizing some of its supporters, wrote the following:

2. Both of them are keen on trying a big stimulus. Stiglitz says that everything done so far has been a failure, but again he doesn’t draw the obvious conclusion. Instead, he says we have to try something bigger and different.

You have to sort of marvel as someone tries to make a clear point and just straight up undercuts it themselves.  Exactly what’s wrong with someone saying “What’s been done  isn’t working so we have to do something different?”  I know that what he’s trying to knock is the “bigger” portion, but saying “Let’s try something bigger,” and saying “Let’s try something bigger and different” are two wildly different things.

Not that Kling’s point would necessarily be valid if he had stopped at “bigger.”  His post goes on to compare the fiscal stimulus package to the Battle of the Somme in World War I, equating it to the decision to follow up failed offensives with a larger  and ultimately unsuccessful offensive.  He’s saying, basically, that if something isn’t working, it’s obvious that a greater quantity of the must also not work.

Is it true in this case?  Maybe, but it’s not a certainty by any stretch of the imagination.  How about a different analogy?  My couch is on fire.  I’ve been told that water puts out fires, so I grab the biggest container near me – a gallon pitcher – and fill it up.  By the time I’ve returned to the living room, the whole couch is engulfed in flames.  I toss the water on the fire, but other than a lot of steam and slightly smaller flames on the area where the water directly hit, I’m still in crisis.  Only, it wasn’t the action I took at fault.  It was the magnitude.  Bringing in a fire hose and dousing the couch with hundreds of gallons of water would leave me with a charred but flameless couch.  It would  not result in the Battle of the Somme.

I enjoy dissent, and I like that people are engaging in a spirited debate of our economic crisis.  But I’m becoming frustrated with many of the laissez-faire economists who have little to offer but unsupported negativity.  I’m unlikely to support the kind of anarcho-capitalism they stand behind (were I to go for anarchy, I think the Anarresti variety is preferable), but when it comes to new ideas I try to take something away from them to challenge and augment my own views.

It’s not easy when even their scholars can’t form a coherent argument.  My suspicion – since every pure free-market argument I read is littered with misleading statistics, incorrect inferences and poor logical construction – is that they’re simply wrong.  This might be unfair.  A badly made argument is not, by default, untrue.  But at this point I’d think one of them would be able to articulate their views without falling back on overstatements and murky analogies.

Holy crap!  Park Chan Wook, director of the great Sympathy For Mr. Vengeance, the amazing Oldboy and the phenominal Lady Vengeance is doing a vampire movie.  I mean, when you were reading Twilight, wouldn’t you have rather seen Edward do something like this?

Anyway, check out an early image from Thirst:

Extra bonus: That’s the father from The Host!  Korean cinema is kicking more ass than should be allowed lately.