Saturday, November 30, 2013

FLG Still Thinks NATO Should Be Disbanded

Since he's been writing about his time horizons theory again, FLG might as well mention that he still thinks NATO ought to be disbanded.  Quick recap for those of you unfamiliar:  FLG contends that NATO's rasion d'etre since the Berlin Wall fell, November 10, 1989, almost a quarter century ago. Ever since its bureaucracy and its supporters have been thrashing about trying to find a new motivating reason.

The assumption, and FLG does mean assumption because its almost never explicitly articulated, that the alliance won the Cold War (therefore it was successful) and contains the world's most powerful militaries of democracies, so its continuing existence must be good.  This piece from June is representative of the type sympathetic to NATO.  FLG will jump right to the conclusion:
We must urgently redefine what NATO can do realistically, both militarily and politically, to ensure that NATO will be institutionally relevant in the future. 
 The mental model people seem to use is that NATO is like an aircraft carrier.  It can launch airstrikes, provide natural disaster assistance, and project power by its mere presence.  FLG, however, views it more like a pair of pizza shears when we are all out of pizza.  Good for the purpose it was designed, but not much else. To be clear, it's not a question of whether the constituent militaries lost their capabilities, but that without the existential threat of the Soviet Union and Warsaw Pact there's no political focus and never will be.

You see the borderline delusional thinking prevalent with NATO supporters in the piece that FLG quoted from earlier.  At the beginning, we have this:
Hi, my name is NATO and I have a defense spending and political leadership problem.
 Okay, FLG is on-board.  He thinks, however, let's put the damn alliance out of its misery.  Supporters instead offer this:
Step Four: Despite the difficulties, stay positive. Perpetual optimism is a force multiplier.
Holy fuck!  Maybe we could solve the alliance's problem by booking it on Oprah.

NATO Delenda Est.

Friday, November 29, 2013

Obama, Ideology, And Time Horizons

FLG read this with some interest:
The president said something recently that I believe was interesting and underreported.‎ At a Democratic campaign fundraiser, the president said he was “not a particularly ideological person.” Assuming he meant it, that was a remarkable thing to say, given that Republicans think of him as a classic liberal ideologue. How did so many get the wrong idea? The president doesn’t see an ideological bent in his actions; he sees himself doing what needs to be done without any ideological motivation.
This is a self-conception that FLG, probably unsurprisingly, attributes to time horizons.  Here's what FLG wrote a few years ago about Ezra Klein's claim that Republican preference for smaller government is  counter-balanced by a preference for larger government, not broadly, only where it makes sense.

Liberals, always desiring to be rational, empirical, and scientific, naturally focus on what can be easily measured. This necessarily means limiting one's focus. For example, when conservatives worried/worry about death panels because of health reform, Ezra points out that the bill in question doesn't contain anything like them. That's an empirical, fact-based statement. But it also doesn't address the real issue, which is that health care reform will require cost controls and those cost controls presumably will fall on those who account for the most costs, which means people toward the end of life, which means death panels. It's not about the specifics of the health care bill, but the incentives it sets up. The road where it leads in the long run.
 and
My point here is that despite the pretensions of those who would use government of they're being rational, scientific, and most importantly practical, they in fact hold an ideological position that policy makers can gather enough information and use it effectively enough that unintended consequences are mitigated. And to do that one must necessarily limit the scope of their analysis, for practical reasons, to the near term. 
It's a question of Bastiat's seen and unseen consequences:
In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them
 When you start trying to foresee the the longer term effects of a policy the certainty of any policy position, especially with something as complicated as health care, becomes far less certain.  But here's the thing, what you often here in response to concerns about longer term effect from these so-called practical, non-ideological people is one deep skepticism or outright hostility.   It is unavoidable that the precision with which we can predict the effects of a policy diminishes with the longer the time horizon of the analysis becomes.  For the non-ideological, practical liberal this lack of certainty and precision of effects far off in the future means they can be dismissed.

The concern about death panels was dismissed as fear mongering or lying.  The practical, non-ideological response was that there were no death panels in the law.  But that isn't exactly the point the critics were making.  The issue is that the trajectory of the health law and the stated goal of cost control through increased government involvement in the health sector logically leads to something like death panels.  That it does not exist in the law, as an empirical fact, is almost irrelevant.  

To these practical, non-ideological thinkers, however, concerns about long-term consequences, which are not empirically verifiable in the present, is misguided at best, often viewed as irrational, and at worst view as downright immoral.

So, Obama is downright blind to his ideology because his entire way of thinking is rooted in an empirical, short-term analysis.  Long-term concerns are almost inherently non-empirical (because how can you empirically measure concerns about the distant future), and so are dismissed as self-evidently irrational.   Thus, he is non-ideological because he reaches the only conclusion dictated by the demonstrably empirical facts and the an analysis limited to the short-term effects of his policies.

Wednesday, November 27, 2013

Time Horizons and Leisure

Last night, FLG read Economic Possibilities for our Grandchildren (PDF) for bazillionth time.  The juxtaposition of the time horizons still fascinates him.

At the outset, more or less, Keynes writes:
My purpose in this essay, however, is not to examine the present or the near future, but to disembarrass myself of short views and take wings into the future. What can we reasonably expect the level of our economic life to be a  hundred years hence? What are the economic possibilities for our grandchildren?
So, he's taking a long view, and, in fact, proceeds to look back at basically all of known history very quickly. FLG will fast forward to:
The modern age opened; I think, with the accumulation of capital which began in the sixteenth century
And looking forward to the year 2030 he thinks we will have solved the problem of how to produce enough to satisfy our basic wants as a race:
I draw the conclusion that, assuming no important wars and no important increase in population, the economic problem may be solved, or be at least within sight of solution, within a hundred years. This means that the economic problem is not-if we look into the future-the permanent problem of the human race. 
And then a little later:

Thus for the first time since his creation man will be faced with his real, his permanent problem-how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well.
He then goes on to criticize the long time horizons that come with and are necessary for the accumulation of capital:
purposiveness means that we are more concerned with the remote future results of our actions than with their own quality or their immediate effects on our own environment. The “purposive” man is always trying to secure a spurious and delusive immortality for his acts by pushing his interest in them forward into time. He does not love his cat, but his cat’s kittens; nor, in truth, the kittens, but only the kittens’ kittens, and so on forward forever to the end of cat-dom.
For Keynes this is view is not misguided or problematic, but downright immoral, even if they are necessary to get to the economic land of milk and honey he envisions.  Once there, however, this view must be discarded.
I see us free, therefore, to return to some of the most sure and certain principles of religion and traditional virtue-that avarice is a vice, that the exaction of  usury is a misdemeanour, and the love of money is detestable, that those walk  most truly in the paths of virtue and sane wisdom who take least thought for the morrow. We shall once more value ends above means and prefer the good to the useful. We shall honour those who can teach us how to pluck the hour  and the day virtuously and well, the delightful people who are capable of  taking direct enjoyment in things, the lilies of the field who toil not, neither do they spin. 

Here's what so fascinating to FLG.  

First, the juxtaposition between the long time horizon of his analysis, which spans back thousands of years and projects into the future a century with his view of an individual's time horizon.  For the individual, a long time horizon investing for the future is semi-criminal.  Someone who "give the least thought for the morrow" is the ideal.    

Second, that piece is arguably the most concise and coherent expression of the view what FLG considers to be the end goal of liberalism, since at least Marx, which is a misunderstood form of Aristotelian Leisure.  (Besides that one link, FLG wrote a lot about Leisure back then).   This is an entirely present and motivating force even today.  Nancy Pelosi was just one person to make the following argument during and after the healthcare bill passage "Think of an economy where people could be an artist or a photographer or, eh, a writer without worrying about keeping their day job in order to have health insurance"  

FLG would argue the end goal of liberalism is one in which people can be an artist or photographer or a writer with worrying about any material things.  Health care is but one piece, a large piece, of the broader vision.

Saturday, November 23, 2013

Politics and the English Language

FLG read these sentences by Charles Blow:
Change is hard and often messy, and a movement and a messenger — the progressive cause and this president — whose whole identities are about change will always be linked to any discomfort that change brings. 
Every policy change — particularly large ones — will have winners and losers. For now, the Republicans will keep highlighting the losers. Democrats must keep highlighting the winners, while reminding people that data points are not the data set. In the end, this health care law will be judged by its overall effects on the population and the economy, which I wager will be a net positive.

While undoubtedly unfair and hyperbolic on his part, but in the context of the Obamacare debate as well as filabuster change, FLG was immediately reminded of this passage in Orwell's Politics and the English Language:
‘While freely conceding that the Soviet regime exhibits certain features which the humanitarian may be inclined to deplore, we must, I think, agree that a certain curtailment of the right to political opposition is an unavoidable concomitant of transitional periods, and that the rigors which the Russian people have been called upon to undergo have been amply justified in the sphere of concrete achievement.’

Obviously, the Democrats aren't Stalinists and the curtailment of political opposition in the current case is limited to progressive politicians and media talking heads whining about obstruction and changing parliamentary rules.  Losing one's current health care plan is so different in scope from execution and imprisonment that they are materially different, but there is a slight connection in that they only differ along the need to break a few eggs to make an omelette attitude by how bad the egg break is.

Although, FLG will say, given his focus on time horizons, he is sympathetic to Blow's take that let's look at the longer-term impacts of the law, not what's happening at the beginning.  It just so happens that FLG thinks they'll be a net negative.

Wednesday, November 20, 2013

Sightings

FLG saw Roy Williams walking down Pennsylvania Ave.  In case you are wondering, FLG did not see Oprah or William Jefferson Clinton (F'68)   A few minutes later, he did see Chuck Todd though, in almost the exact same spot he saw Tom Ridge a few weeks ago.

Updated the list.

Sunday, November 17, 2013

A Conversation In Futility

Miss FLG Maior:  Daddy, can we have a lemonade stand?

FLG:  Sure, but not until it gets warm again.

Miss FLG Maior:  In the summer?

FLG:  Right.

Miss FLG Maior:  I'm going to charge five cents for the lemonade.

FLG:  That seems a little low.  You might want to charge a bit more.  How about fifty cents?

Miss FLG Maior:  BUT DADDY, that's what Lucy charges Charlie Brown!


FLG:  Well, sweetie, that show is from a long time ago.  Five cents isn't what is used to be.

Miss FLG Maior:  But it's five cents!

FLG:  Yes, but there's this thing called inflation.

Miss FLG Maior:  What's inflation?

FLG:  After a time, money isn't worth what it used to be.

Miss FLG Maior:  But mummies last a really long time.

FLG:  Not mummies, money.

Miss FLG Maior:  I thought you said mummies!

FLG:  No, money isn't worth what is used to be.

Miss FLG Maior:  But it's five cents.  Five is five.

FLG:  Yeah, but it doesn't quite work that way.

Miss FLG Maior:  You aren't making sense, Daddy.

FLG:  You sound like Aristotle.

Miss FLG Maior:  Who is that?

FLG:  Nevermind.

Friday, November 15, 2013

Time Horizons Across Classes

FLG thought this was an interesting piece of data:
[P]eople differ in one crucial way. “The marginal propensity to consume,” according to the paper, “is substantially larger for low-wealth than for high-wealth households.” Rich people behave like the hyperrational agent. They plan for the future. They save during a stimulus, thinking about the taxes to come. And they can borrow during a fiscal contraction.
Poor people are what economists call “borrowing constrained.” They tend to have more needs than are being met, so when money arrives, they spend it. When the government stops spending and credit is hard to come by, the mythical everyman, like the rich person, continues to spend. But most real people don’t have access to credit, and they hunker down. Carroll’s findings have been confirmed by other academics in the last two years who looked at Italian and U.S. data.

FLG has a question about the causality implied above.  Isn't it just as reasonable to argue that people who plan for the future would build wealth and thus be rich.  As in being rich doesn't cause somebody to have a lower marginal propensity to consume, but rather having a lower marginal propensity to consume (.i.e the person saves more) makes them rich?

FLG gets how if you look at the different populations at a point in time - here are rich people, here are poor people, that at that moment the issue is borrowing constraints, but what led up to it is the question.

STEM versus Liberal Arts

FLG liked this passage in the WaPo:
That is why the humanities and social sciences are an essential part of undergraduate education. Most successful careers, including in technology and engineering, do not result simply from technical knowledge. They require leadership skills, social and emotional intelligence, cultural understanding, a capacity for strategic decision-making and a global perspective.

Years ago, FLG went further and argued innovation comes from liberal arts, not technology.  He still holds that view.

FLG the Expert

FLG was in an advanced finance and banking training course a couple of weeks ago when he realized something that feels weird-- he's an expert on the international financial system and banking.

It's not that he knows everything. Who does?   But he was in that course with people whom he considers to be experts on banking and finance and FLG was totally up to speed and able to predict where the conversation was going to go next.  Moreover, FLG realized during the Coursera course he recently took on internationalization of the renminbi that he knew probably 90% of the content.  The new stuff was rather esoteric, for example, how offshore renminbi settlement works in Hong Kong.

FLG first decided to learn about the international financial system about ten years ago, and the idea of becoming an expert was never in his mind.  But he went back counted how many university courses related to international finance, banking, and trade he's taken over those years, and it's more than 20.   (This count omits general economics courses.)  He's read dozens of books and countless articles on the topic.

This realization is a shock.  He was even half toying with the idea of studying for another degree in a few years, either part-time or online, tailored specifically on the international financial system, under the assumption that he had more to learn about the international financial system.  But now he realizes he probably knows about as much as any university courses are going to teach him.  The only place he could learn more would be to do a PhD, and even then he thinks he would only earn more mathematically advanced theory of what he more or less already knows.

#Duh

Did nobody at JPM think, um, hey, if we solicit comments on Twitter, it's going to be a fiasco?

More broadly, however, FLG has been in too many meetings where somebody, usually an executive type or super-excited-pr-person, asserts that the organization has be to on social media.  When pressed further for their justification --- it seems cool.  When pressed further for their plan --- let's post some shit and see what sticks.  FLG is sure there are some smart social media strategists out there somewhere, but he's only see snake oil salesmen and posers.

Sunday, November 10, 2013

Time Horizons and Writing

RCP:

My research on Civil War writing leads me to one conclusion. If you are literate today, it does not mean you can write -- not even close to it in many cases. But if you were literate in 1863, even if you could not spell, you often could write descriptively and meaningfully.

In the century and a half since, we have evolved from word to image creatures, devaluing the power of the written word and turning ourselves into a species of short gazers, focused on the emotions of the moment rather than the contemplative thoughts about consequences and meaning of our actions. Many everyday writers in the mid-19th century were far more contemplative, far more likely to contextualize the long-term meaning of their actions. They meticulously observed and carefully described because, although photography was the hot new medium during the Civil War, words remained the dominant way of communicating thought, memory, aspiration, hope.

Friday, November 8, 2013

Quote of the day

National Journal: 
America and the rest of the world should be less concerned about a rising China than about a sputtering—or even a crashing—China that could someday turn the world economy's greatest growth center into a global albatross.

FLG thinks the quote overstates it, but as long-time readers know he has been far more skeptical of the inexorable rise of China and even more skeptical of this translating into post-American period where China is more influential worldwide.  Two things lead him to this skepticism.  First, everybody so convinced of the Chinese economy has basically been projecting forward linearly, but long run economic development at the country scale looks more like a logarithmic function, not linear.  FLG believes, based ultimately on a WAG, China is in or approaching the part of the curve that implies less growth.  Second, China is going to grow old before it gets rich and is seeing so many new internal problems that whatever new wealth they generate will be primarily directed toward domestic, not foreign, issues.   Sure, they'll be able to build aircraft carriers and project a bit more power in the region, but worldwide superpower they will not be in FLG's lifetime.
 
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