Scott Pilgrim vs The World: I’m fairly certain that any movie that’s put out two completely distinct excellent trailers has to be good.
DAVID LEONHARDT is among my favourite writers, and when my RSS reader showed me that this weekend he got a slot in the New York Times Magazine to talk about “What the oil spill and the financial crisis have in common,” I got all excited. Then I read it, and it’s…pretty good. Leonhardt’s premise is that what the Deepwater Horizon blowout has in common with the global financial crisis is heedlessness of tail-end risk. Black swans, an unwillingness to take seriously the consequences of very low-probability, very high-damage eventualities, and all that. And this is certainly true. As Leonhardt writes, BP executives had never seen an oil rig blow up, so they didn’t really believe it could happen, just as Ben Bernanke didn’t really believe a nationwide real-estate crash could happen.
But this isn’t the main theme the two events have in common. The main theme they have in common is much simpler than that, and has more moral valence. And it’s the main theme not just for the oil blowout and the financial crisis but for the Katrina disaster and the Enron collapse and the Chinese melanin milk scandal and an extraordinary array of scandals, disasters and tragedies so far this century. The main theme they have in common is regulatory failure. The regulations weren’t strong enough, and the regulators didn’t do their jobs. Oil companies were allowed to self-certify, and MMS inspectors let them hand in their own inspection reports in pencil, then traced over them in pen * approved their design changes within five minutes with no real review. Non-bank financial institutions escaped regulations that had been written to cover banks, and when SEC inspectors were sent in to banks to monitor suspicious debt-hiding activities they spent their time downloading porn. Dyke safety standards established by the Corps of Engineers were inadequate, and officials at FEMA were incompetent. And, obviously, the people’s elected representatives chiefly clamoured for weaker regulations and tried to stop regulators when they did attempt to enforce the rules.
We may not be heading towards an End of History, but Hegel was right that sometimes there’s such a thing as a weltgeist that moves directionally from decade to decade, and what we’re seeing here is comeuppance (or, as Hegel would put it, the antithesis) for the deregulatory exuberance of the 1980s and 1990s. Leonhardt concentrates on the unfortunate human tendency to discount the highly unlikely. This is certainly a factor, but as advice, it’s only partially useful. If the lesson of the catastrophes of the noughties is to pay attention to tail-end risk, then we should all be running around building nuclear fallout shelters and working out deflection strategies for massive asteroid strikes. And that’s not going to happen. (Though in the case of climate change, one of Leonhardt’s examples, it is useful: we should be paying more attention to the risk that global temperature rise by 2100 will be near the catastrophic 6-degree-celsius high-end estimate, not the merely awful 2-degree median estimate.) But I don’t think that is the main lesson. The main lesson is simpler and more concrete: government regulations need to be more restrictive, regulators need to be more aggressive, better-paid, and more powerful, and they need to stop people and corporations more often from doing things that may be profitable but pose unacceptable risks to the public. We had this theory for a while that economic self-interest would prove sufficient disincentive to foolish risk-taking. But now the Gulf of Mexico is on fire, so I’m afraid we need to go back to the old-fashioned system with the rules and the monitors carrying sticks. Sorry.
* It turns out this probably isn’t true. The Interior Dept. Inspector General’s Report says there were reports with pencil that were then traced over in pen, but it’s likely that the inspectors themselves filled them out in pencil for convenience in case of corrections, and they couldn’t find any evidence that any had been filled out by the oil company. They had apparently heard a rumor that this had happened, but couldn’t substantiate it.
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I nominate the Duluth NewsTribune for best headline of the year:
Andrew Sullivan passes on a letter from an unemployed reader who says that interviewers will only consider experience if you’ve already done exactly the job they’re hiring for. Kevin Drum writes that he’s always considered this widespread attitude to be bizarre, and that he always tried to hire the most talented person with any more or less relevant experience, figuring that after the first month or two the learning curves would cross and after that you’d be better off with the sharper, not more experienced, candidate.
I’ve only hired people one-by-one, for small groups, and only in two fields: web design, and journalism. In both fields, I’ve found talent is a lot more important than closely related experience. But the other thing I’ve found is that people have different kinds of talents and skills, and a lot of them don’t cross over very well. You know that thing they tell you about how anyone can learn to write? That doesn’t seem to me to be generally true, past a certain point. You may be smart, inquisitive, and well organized, but if you don’t know how to write by the time you’re 23 or so, I think the chances you’re ever going to be a passable writer decline very sharply. Conversely, you can be a great writer, but if you don’t know how to get organized by the time you’re 23…you get the idea.
But there are a couple of other things to note. First, motivation is extremely important. What does this person want to get out of this job? Does that mesh with what you need someone to do? And secondly, and relatedly, I’ve never been in an organization where people only did one narrowly defined task. Whatever the direct nature of their responsibilities, people generally fulfill a variety of roles in the organization, related to their talents. Some people are social bucker-uppers. Some people help keep everyone focused on whether tasks that need to be accomplished have been checked off. Usually when someone leaves the organization, or when the organization grows into a new role, what you need isn’t just somebody who can do one specific task; it’s somebody who can fill a range of functions that the group needs. So you need to think about that too.
Not that I’m particularly good at this, and the biggest group I’ve ever headed has consisted of four people. I’m sure at the higher levels of HR in large organizations things look very different.
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Commenters from my previous post have asked for more substantive arguments against the gold standard. As I understand it, the contention of advocates is that the gold standard is necessary because people lack confidence in the worth of fiat money. It seems to me that every single time an American accepts a US dollar as payment for goods or services rendered, he or she proves this contention wrong. The average American proves it wrong over 40,000 times per year.
Now it could be true that people have some confidence in the dollar, but more confidence in gold. If this were true, people would prefer to be paid in gold, rather than an equivalent quantity of dollars. But I certainly don’t want to be paid in gold. I don’t think anyone I know wants to be paid in gold. Gold is inconvenient to hold, exchanging it for other goods or services involves high transaction costs, and its price is volatile, much more so than currencies (especially within their own economic zones). I know I can buy a movie ticket tomorrow for $10, but I really couldn’t tell you how many grams of gold it will cost. Which is partly why I prefer to be paid in dollars or euros, as does everyone else I know, rather than the equivalent market price in gold.
And this would still be true even if the Federal Reserve mandated that each dollar was redeemable for a fixed amount of gold, unless the reserve set the amount redeemable artificially high to compensate for the transaction costs. But in that case you could arbitrage up by redeeming your dollars for gold, selling the gold for more dollars, redeeming those dollars for gold, etc. And of course such arbitrage would lead to the collapse of the gold standard as government gold supplies ran out. You could get around this by letting the amount of gold redeemable float, but that would make the idea of a “gold standard” meaningless; it would be more correct to simply say that the US government had entered the gold sales business, like anybody else who owns gold. By this standard we already have a “gold standard” today, in the sense that you can, if you wish, exchange your dollars for gold. Another solution would be for the government to set the amount of gold redeemable artificially low, to eliminate arbitrage. But this, again, would mean that people preferred to hold dollars rather than gold, which makes the point of the supposed gold anchor unclear. Or, finally, the government might prohibit people from trading privately in gold, in order to maintain the validity of the government’s gold standard price point. This did in fact take place in the 1930s when the black-market price of gold rose higher than the US government’s price point, and the resemblance to the kinds of price-setting and black-market problems faced by command economies (the USSR, etc.) is a good indication of why you don’t want to get into the whole thing.
A final way of putting this is that when you talk about a “gold standard”, you’re talking about some kind of finite supply of thing to which all other forms of currency refer back, a thing the supply of which can’t be arbitrarily increased. But we actually have such a thing. It is the cash dollar. There is a finite supply of cash dollars in the world, all notional US dollars in bank accounts, credit cards, T-bills and so forth can be redeemed for cash dollars, and no one but the US Treasury has the authority or the capability to make more of them. But the advantage of the cash dollar over gold is that you don’t have to deal with all these silly issues of how to set the price of a cash dollar in order to avoid creating black-market problems and so forth. The price of a cash dollar in dollars is always basically 1=1. (This isn’t quite true, in fact cash dollars do have some transaction costs, they’re hard to carry around, so the price of a cash dollar in notional dollars is often slightly below 1, as for example when you keep your money in a bank account even though you know the ATM may charge you a fee to withdraw cash. This could alternatively be expressed as the cash dollar having a value higher than a notional dollar when you’re walking around in the city and want to buy a hot dog from a vendor, but I think it’s clearer to think of it the other way around.)
Jeffrey Goldberg should have used the construct “both/and” rather than “either/or” in thinking about this issue: “Most Israelis are aware, unlike much of the rest of the world, that these ships were not on a humanitarian mission, but a political mission, one meant to lend support to Hamas, which seeks Israel’s destruction, so you might have to excuse Israelis for not sympathizing overly much.”
Compare, for instance: “Most Palestinian Arabs are aware, unlike much of the rest of the world, that the Exodus was not on a humanitarian mission of rescuing refugees, but a political mission, one meant to lend support to Mapai, which seeks to establish a Jewish state in historically Arab areas of Palestine, so you might have to excuse Palestinian Arabs for not sympathizing overly much.”
Which leads us to a comparison. In 1947, having blocked the Exodus and its 4500 passengers from disembarking in Haifa, placed them on more seaworthy boats, and sent them temporarily to France, where they refused to disembark, the British determined that they would have to return the refugees to camps in the British-occupied zone of Germany to screen them for “extremists”; simply setting them free posed an unacceptable risk of releasing Zionist radicals who might go on to kill British soldiers. In Hamburg, the Holocaust survivors being pulled off the boats and sent back to camps in Germany understandably resisted. The British sent in 300 soldiers to evacuate the 800-900 passengers on one of the boats. The result was 33 refugees and 3 soldiers injured. The commanding officer, Lt. Col. Gregson:
“It is a very frightening thing to go into the hold full of yelling maniacs when outnumbered six or eight to one.” Describing the assault, the officer wrote to his superiors: “After a very short pause, with a lot of yelling and female screams, every available weapon up to a biscuit and bulks of timber was hurled at the soldiers. They withstood it admirably and very stoically till the Jews assaulted and in the first rush several soldiers were downed with half a dozen Jews on top kicking and tearing … No other troops could have done it as well and as humanely as these British ones did.” He concluded: “It should be borne in mind that the guiding factor in most of the actions of the Jews is to gain the sympathy of the world press.”
A different witness, Noah Barou of the Jewish World Congress, described the soldiers as behaving in a much more aggressive fashion. But no one was reported killed.
Leon Wieseltier writes that a group of ultra-orthodox settlers who had just taken over a Palestinian house in the Arab neighborhood of Sheikh Jarrah sang a version of “ayn kamocha” as a hymn to Baruch Goldstein, the Jew who massacred 29 Palestinians at the Cave of the Patriarchs in Hebron. It seems to me that in addition to being disgusting, singing “ayn kamocha” (“there is none like unto Thee”) as an ode to Baruch Goldstein rather than God is blasphemous.
Andrew Sullivan writes that we shouldn’t dismiss libertarians as cranks just because they back the gold standard: “The insanity we take for granted every day – the Afghanistan war, for example – is a lot crazier than the gold standard.” Like Andrew Sullivan, I think the US should extricate itself from Afghanistan, but this is, to put it mildly, not a good illustration of the point he’s trying to make. Supporting the introduction of the gold standard in today’s global fiat-money economy is simply much crazier than supporting the continuation of a counterinsurgency and nation-building war against the Taliban that the US originally got into for very honorable reasons and with apparently good chances of success. Supporting the abrupt and unprovoked invasion of Iraq in 2003, I would grant, might have been compared in its craziness to supporting the introduction of a gold standard in a world economy that has long outgrown such metaphysical superstitions.
There are other reasons why, as Conor Friedersdorf says, we shouldn’t dismiss libertarians as cranks and nut jobs. But one of those reasons is that a lot of libertarians are much too smart to believe in snake-oil stuff like the gold standard.
Proposed: The discussion of Elena Kagan’s undergraduate thesis on the history of socialism in New York City from 1900-33 is dog-whistle politics for the progressive left.