Monday, March 17, 2014

Political Theater III

Picking up on a theme I wrote about (wow!) ten years ago . . . the press and talking heads still seem to be obsessed with "signalling" and "messages" and "perceived weakness" as if global politics were Kibuki theater and not a pursuit of real, material advantages.

Part of this is because theater is something we all understand. We all watch TV and we all are familiar with the images of power and gamesmanship we've seen on shows like the West Wing. Very few of us are familiar with the real stakes in international politics and the cards in the hands of the multitudinous players. So it is far easier for us and far easier for our hired storytellers to tell the story of international conflict as a continuation of West Side Story, where there are no stakes to speak of, just posturing, pointless risks and revenge. Conflict boiled down to pure image is something we can all understand.

And there is another side to this as well. International politics, like poker, is about maturing accepting the right losses. For a long time the US had such strong hands that it seldom had to do this--we could chase most pots, because we had the good cards. Today, the good cards are spread around the table. We've still getting good hands, but we have be a bit more careful how we play.

This conflicts pretty seriously with our self-image, though. We usually think of ourselves not as a player at the table, but as above the game--as an officiator or policeman who governs the game. Well, we're not. We cannot control how other people play their hands. Which means that we will lose some pots. We have to accept this.

We also have to accept that the behavior of others is NOT a mere refelction of our behavior, of our "perceived weakness" or "perceived strength." The other players have hands that they can play and multiple interest groups and audiences to whom they are playing.

Did Putin invade Ukraine because he thought the US was weak? The way you answer that question isn't to ask "Well do I think we look weak?" The question is about Putin, about Putin's interests and Putin's perceptions. So, assuming Putin wanted to act to keep Ukraine within his sphere of influence, what had he to fear from the United States? Chest thumping from the President? I am skeptical that Putin actually fears that. Armed intervention? Well that's be something to fear, but clearly that has never been in the cards anyhow. Not under Bush, not under Obama. Sanctions? Well, only a moron would have expected these not to come, and they will. And as the Europeans begin to really consider what a belligerent and expansionist Russia means to their interests, we will see those sanctions get pretty tough, particularly if Russia pushes its advantage in the region (they're already there, we & the Europeans aren't) too far.

So why now? Because we look weak now? No:Because up until now, Russia had a compliant regime in place in the Ukraine. They had been using all sorts of covert means to ensure that was the case. Why didn't they intervene during the last pro-Western regime was in power--they did, refusing to sell gas to the Ukraine. But during the last pro-Western regime nothing of a lasting change was made as the pro-Western forces spent a great deal of time fighting each other.

Now the Ukraine–European Union Association Agreement is on the table. That could turn into a lasting change of orientation for Ukraine. That changes things. That makes Putin willing to seize the pretext of constitutional crisis in Ukraine to take what he can, in spite of the risk of sanctions. Taking this opportunity has shored up his power base at home and may get him a naval base and, perhaps, in the end, a satellite country to his west. The cost for all of this will be more or less the same cost he'd have paid under Bush--sanctions and a more hostile posture from the US and many of its allies.

Under either President, the maintenance of that hostile posture would have been difficult--the Europeans have complicated interests and fears in regard to Russia. Under Bush that would have been compounded by the fact that they despised him and his chest-thumping. (See, for instance, the amount of cooperation he attained for his Iraq invasion).

Bush's approach would probably have been to loudly declare that any Europeans not going along with the strictest possible sanctions regime were miserable appeasers and we'd no doubt seen plenty of tiresome clips of Neville Chamberlain and "Peace in Our Time." We'd have looked like "leaders." Administration officials would have taken every opportunity to bask in their Churchill, but such an approach would have distracted the Europeans: their hate and resentment of us coming to the forefront just as we'd like them to be focused on their fear and loathing of Putin. Our image: tough guy defenders of freedom. Their image: vacillators. End result: Russia goes largely unpunished. So if image is your be all, end all. We win. But if the point is to discourage people like Putin from misbehaving . . . we haven't accomplished the goal, we've only covered over our failure with a lot of posturing.

Obama takes a quieter approach, and in this case that's all for the good. By NOT being the leader, by NOT calling attention to our brave opposition stance, by NOT calling any who disagree miserable appeasers, by NOT becoming the issue, he lets the Europeans concentrate on Russia and come to their own conclusions. And they are: Putin is scary.

Probable result: US image: lots of hand-wringing over not "leading"; European image:  determined; probably result: some pretty stiff sanctions, significant cooperation between US & rest of NATO to stem the threat posed by Russia.

If you are concerned only about image, this is bad. We aren't leading (to a failed outcome), we're merely influencing (to a desirable outcome).


Always playing to our self-image is like going all-in on every hand in poker. It's a stupid way to play. Image is only one factor in winning at this game. Over the long haul you win by advancing your interest with reasonable expenditure of resources. That means walking away from some pots; that means letting the bad guys win sometimes; that means letting YOUR calculation of interest determine your behavior, and not being a predictable slave to some notion of credibility that is easily manipulated by the other players.

All of the hand-wringing over our "image" and how, apparently that's all that matters in foreign policy is hand-wringing by cynics (who know better, but who also know that most people DO NOT know better) and the many naifs who can only understand cheap melodrama, not actual politics.

Saturday, November 02, 2013

The problem with The Trolley Problem

Opened the last Atlantic and finally read the piece I'd been putting off for some time--Robert Wright's essay on innate morality ("Why We Fight and Can We Stop" in the print version). I put it off because I often find Wright to be . . .umm, rather credulous, I guess is the phrase I want. He seems to believe strongly that information about the origins of a human trait is always immediately useful in guiding us as to how to deal with that trait. I think that's a hopelessly naive attitude, so I often find Wright's work to be more than a little patience trying. On the other hand, he usually deals with interesting topics and its often pretty productive in making me try to figure out why I think Wright (or his subjects) have got something wrong.

For instance in this piece Wright prominent features the work of Joshua Greene, who has helped make the Trolley Problem--an ethical thought experiment--famous. Here it is as conveyed by wikipedia:
There is a runaway trolley barrelling down the railway tracks. Ahead, on the tracks, there are five people tied up and unable to move. The trolley is headed straight for them. You are standing some distance off in the train yard, next to a lever. If you pull this lever, the trolley will switch to a different set of tracks. Unfortunately, you notice that there is one person on the side track. You have two options: (1) Do nothing, and the trolley kills the five people on the main track. (2) Pull the lever, diverting the trolley onto the side track where it will kill one person. Which is the correct choice?
There is a variation:
As before, a trolley is hurtling down a track towards five people. You are on a bridge under which it will pass, and you can stop it by dropping a heavy weight in front of it. As it happens, there is a very fat man next to you – your only way to stop the trolley is to push him over the bridge and onto the track, killing him to save five. Should you proceed?
Many people opt to pull the lever but not push the fat man, in spite of the fact that the end results are the same. Some use this result to argue that human moral reasoning is essentially irrational, or that our moral reasoning has less to do with outcomes than it has to do with keeping ourselves above moral reproach:
. . . people who obey their moral intuitions and refrain from pushing the man to his death are just choosing to cause five deaths they won’t be blamed for rather than one death they would be blamed for. Not a profile in moral courage! 
But there is a big problem with this sort of thought experiment--they depend on the subject feeling a sense of certainty about outcomes (the five people in the car are definitely heading to certain death; the fat man's fall will definitely stop the train; the diverted train will definitely hit the one person on the track you divert to). Our life experience--the experience our brains have evolved to cope with--is all abut dealing with unexpected contingencies. We very seldom face situations where we know for certain what the consequences of our actions will be, and our natural suspicion when faced with the fat man situation is not that we'll have one death blamed on us--it's that we'll have six. That's how we think, even when told not to. We are beings who have evolved and grown up to deal with unexpected contingencies--we actually come to expect them in a way, and we tend to act modestly as a result. That's what the Trolley problem really points out. That's why we like Captain Kirk's solution to the Kobayashi Maru dilemma (he cheated), because in life there are lots more contingencies, uncertainties and opportunities than there are in tests and experiments (experiments being designed to absolutely minimize all of these). By attempting to test real-world judgements with a controlled experiment, all the Trolley Problem does is reiterate the difference between experience and experiment.

Wednesday, September 25, 2013

The Two Culture Again . . . again

Now this whole thread of writings and counter-writings around the idea of the relationship between the disciplines--science & the humanities, specifically--comes out of a Steven Pinker article in the New Republic. The article is a rambling advocacy piece for science as against the humanities.

Pinker has long been a cheerleader for science and has long had an axe to grind with the humanities. And, in fact, most of his points against the humanities go back twenty years or so. Some of them aren't really very current anymore. But since Pinker has a profitable sideline in attacking things like postmodernism, philosophical anti-science and political correctness, he has no interest in learning that none of these things is really very important anymore.

Is there some hostility to science out there still? Sure. But you'll find most of it attached to environmentalism. Not postmodernism. Some streams of environmentalism is ambivalent about science because science has given man the capability to do a great deal more damage to the Earth than he otherwise could have wrecked. For those who, seemingly, value ecosystem above all, this is a black mark against science--it has given dangerous tools to the baby (Us), with predictable results.

And yes, there is ambivalence in academia and everywhere about science that one doesn't find, say, with history. Why? because history is not powerful. Even if one is inclined to think history is bunk, one doesn't fear it. Science, though, is power, and a lot of people in the humanities think that power needs to be constantly checked and curbed.

This current push for science to, essentially, colonize the humanities is but a case in point. Years ago Pinker wrote a book called the Blank Slate, which as a piece of argumentation is an utter piece of crap. Pinker, or more likely his graduate students assiduously mined social science and humanities texts for evidence that human nature was ignored, Pinker then inserted the quotes, in many cases baldly misinterpreted them, and then railed against the notion that human nature was unimportant,past and especially present.

The story that Pinker doesn't tell you is that the concept "human nature" was a huge impediment to the advancement of the social sciences because it was an empty signifier--it meant whatever the speaker would like it to mean at the moment he (inevitably) spoke it. By dispensing with it, observers were able to move on to observing how social interactions social customs and social institutions actually worked. And they could ask questions about the nature (or possible nature) of social groups as apart from individual human nature. No one ever believed that human beings were infinitely malleable, because that notion is absurd on its very face.

But at some point a radical feminist must have taken Pinker cruelly to task for his "essentialism" and he's been taking his revenge (on us) ever since. Frankly it's long since gotten beyond tiresome. Yes, every social science was said to be essentially an expression of "human nature." That's what thinkers in the 18th Century said pretty much reflexively. And emptily.

Today science has some solid things to say about human nature. But human nature is a big & complex thing, and most of science's observations are narrow and limited. And they often seem to contradict one another as far as their take home message about "human nature." And there seems to be some very sloppy thinking going on in science around this idea--more sloppy and more dangerous than simply bracketing the term--agreeing that we can't agree what the term means, so we can't use it to explain things--which is what the humanities have largely done. (On science's sloppiness around making determinations about human nature see this piece from Jaak and Jules Panksepp and its sequel.)

Using "human nature" as a means to "settle" disputes in the humanities is frankly folly. While science has certainly learned some things about human nature since the 18th century, they are a long way from defining the term. A long, long way. The picture is incomplete. But what Pinker and other advocates of this idea are looking for is to use and expand the authority of science, even where science doesn't really have answers to offer. In fact, so far we've seen little new insight created in these fields by science. That's bound to change, but that's where it stands at the moment.

Mostly because all heuristics and posturing aside the humanistic tradition has never really abandoned the concept of human nature, and the observations of humanists about human nature are at a far better developed and nuanced than science's are at the moment. The notion of human nature is, of course, still deeply fraught with conflicts, but science isn't about to settle those

And special pleading by those who don't know the humanistic tradition--the very best repository of our experience and thinking and knowledge on the question--is no help.

The Two Cultures. Again.

Been reading a fair deal of Jerry Coyne lately. He writes the whyeveolutionistrue blog. I am in full agreement with his two basic points: evolution is, indeed, true. And God, I'm afraid, is a myth.

And Coyne is a great scientist. His work on speciation is a big deal (haven't read it myself, but I'll trust other folks' opinion on that).


But (here's the but) he reads and writes like a bad college freshman. He doesn't recognize changes in voice, he can't understand subtle arguments or distinctions, he hunts through the works of others for selective quotes to condemn and mock regardless of the passage's intended meaning. In short, as a blogger, he's like a malignant growth on the positions he supposedly represents.


And now he figures that he should share the blessings of his blinkered and deficient worldview to the rest of the world . . . to the humanities in particular. Here he is arguing against someone proposing that the path of influence between the two cultures ought to be a two-way street:



I take issue with that on two grounds: scientists are so pressed for time that we can barely get our own work done and, more important, the potential benefit of philosophy to the conduct of science seems less to me than the potential benefits of infusing humanities with science—benefits described out by Steve [Pinker] in his New Republic piece.
I am not saying that philosophy or the humanities are without value. Far from it. What I am saying is that the marginal benefit of adding more science to the humanities is greater than vice versa. I personally absorb tons of what could be considered “humanities,” including literature, nonfiction, art, and philosophy. They’ve enriched my life immensely—but I can’t say with confidence that they’ve made my science better, or different.  I’d still have published the same work on speciation if I’d never read philosophy, although I wouldn’t be writing this website.  My benefits are personal, not scientific.

Though Coyne's benefits from the humanities may be "immense" I have to question how good a judge he is of his own case. For one thing, he can't read properly.


For another, we have to ask, aren't Coyne's humanistic deficiencies important to his blog, where he sets himself up as a spokesperson for science and atheism? And doesn't that blog trade on the authority he's gained in his scientific area of specialty in order to advance views that are more directly related to his rather incomplete humanist education that his scientific expertise?


Just a small for instance (you can find these practically anywhere Coyne reads unsympathetically). . . here Coyne tries to refute Gary Gutting, who is advocating for more philosophy in science as well as more science in the humanities: 



Gutting: And to tell the truth, rather than speaking about the theory of evolution, it is more accurate to speak of the theories of evolution. The use of the plural is required here—in part because of the diversity of explanations regarding the mechanism of evolution, and in part because of the diversity of philosophies involved. There are materialist and reductionist theories, as well as spiritualist theories. Here the final judgment is within the competence of philosophy and, beyond that, of theology. . .
Coyne: What are those materialist and reductionist theories, much less the spiritual ones? I am aware of only one going theory of evolution, which, while it has its controversial parts, does not deal with “materialism vs. reductionism” much less “spiritualism.”
How does Coyne go from what Gutting wrote to "materialism VS reductionism?" Gutting says AND, clearly meaning to pair the two rather than oppose them. Why can't Coyne tell the difference between what people say and the stupid things he'd like them to have said? Because however life-changing his experience with the humanities has been, he is essentially a philistine. He appreciates the humanities, but he is no judge of their importance, either in his own life or in society, any more than I'm a judge of differential calculus. His very limiting of the impact of the humanities to the "personal" marks him as such.

Stephen Gould had a bit to say (a lot, actually) about scientific philistinism, which he saw as not just happenstance, but as a pervasive and actively cultivated part of the culture:
Virtually every empirical scientist has a touch of the Philistine. Scientists tend to ignore academic philosophy as an empty pursuit. Surely, any intelligent person can think straight by intuition. . . . Although I will try to refute Bethell [an opponent of evolution generally], I also deplore the unwillingness of scientists to explore seriously the logical structure of arguments. Much of what passes for evolutionary theory is as vacuous as Bethell claims. Many great theories are held together by chains of dubious metaphor and analogy.  (Darwin’s Untimely Burial, 1976)
The humanities are about reading carefully, considering fully and expressing accurately. They probably play a small role at the workbench, but work isn't done at the bench for no reason--it's done to advance human interests. And when it comes to analyzing, evaluating, synthesizing and applying those bench results we often see scientists failing badly. Because they are "too busy" to have had a proper humanistic education.

Coyne's problems are indeed general. Steven Pinker, whose New Republic article he cites is a repeat offender in the misreading, misinterpreting, misconstruing and miscontextualizing lockdown. For which Coyne's former student and co-author H. Allen Orr (not a philistine) has repeated taken him down in print (see, here and here). Pinker and Coyne--trading off of real or supposed scientific expertise--have become prominent spokespeople for science. Neither of them could hope for the sort of prominence they have on the basis of their at-best-shaky scholarship, injudicious writing and narrow-mindedness. But their science background, real or imagined, gives them authority in areas where they do not deserve it. And that is the danger of the one-way street of influence between science and the humanities. Scientists are, typically, deficient in some very important areas of human discussion and decision making. But they are completely without compunction in trading on their scientific authority in venturing into every other field that kindles their mild or passing interest. Even if they have little idea what that field actually does, how it works or what it's done. Like the humanities.


The potential benefits of more science in the humanities are definitely worth considering. But there are potential pitfalls as well, which Coyne doesn't see or doesn't care to see. And those pitfalls are already well on display in the work of Coyne and Pinker, who I fear probably are better representative of the *best* than the worst science has to offer at present.


More later.


Sunday, December 11, 2011

The Two Cultures

My title here is a phrase strongly associated with a controversy stirred up by CP Snow back in the Space Age, when many in the West feared we were falling behind the Soviets in science and technology. For the English and the American upper class, part of this worry was related to the bias of their higher education systems toward non-technical subjects. What Snow observed was that as our culture matured, the most highly educated people in the humanities tended to know scandalously little about science; and likewise, those with the greatest technical knowledge tended to be rather uncultured.

Snow was well aware that there were always and would always be exceptions to this general tendency. In fact, Snow himself was one of those exceptions, being both a respected novelist and a student of physics (he earned a doctorate in the subject). So the many takedowns of the Two Cultures idea you may find online that say, point to JBS Haldane--look, a mathematically minded scientist who could write! who knew Greek! who wrote history!--as proof there aren't two cultures, are completely missing the point. Haldane and Snow were exceptional. Snow didn't argue that it was impossible to inhabit both cultures--being who he was, how could he?--only that it was not the norm.

In speaking of Snow, we should also acknowledge how much his piece is of its time and place: Part of Snow's thesis, an important part, was his particular attack on the English school system as a source for the split between technical and cultural knowledge. (He actually holds up the American university system as a positive counterexample.)

However, the basic conflict he is observing goes much farther back, to the very beginnings of the modern world and the conflict between the ancients and the moderns in the 17th century. That conflict was essentially a conflict between ancient wisdom and modern, mostly scientific knowledge. Swift's Battle of the Books was a satiric look at this conflict which came down, as we might expect from a literary man who hated math, pretty heavily on the side of ancient wisdom. Over the long haul, though, science has mostly won this battle--shaping and changing our world to an extent that even Swift could hardly have imagined.

And, worse still from Swift's point of view, science is increasingly the arbiter of truth in our society.

But not the only one. Anyone taking a look at say, the controversies over global warming can see that science often has an uphill battle against "common sense" when its truths are inconvenient. Science is, no doubt, still the servant of our desires; though a servant upon whom we are as dependent as Wooster is upon Jeeves.

And yet our universities are--still!--filled with people who smilingly admit to incompetence in basic mathematics; who don't know anything about science aside from the fact that its advances sometimes harm the environment; people who criticize science but who cannot distinguish the real thing from ridiculous parody. If Bertie Wooster were a doctrinaire ingrate as well as an ignorant fool, he'd be the model for many of our present day humanities professors. But such a character could never win even the provisional sympathies of any reader.

Such a response to science does little honor to the tradition that Swift defended. As was the case in Snow's day--the worst offenders in the two culture business are on the side of the humanities. One is far more likely to find an articulate and cultured scientist than a scientifically knowledgeable humanities type. There are more Goulds and Lewontins and Orrs out there than there are George Levines.

Which is a shame. Because there are also scientists out there who have very little knowledge of or respect for the Western tradition who now want to explain it all for us. Who don't seem to appreciate that you cannot explain "it all" without a conception of what "it all" is. Who don't seem to realize that there simplistic explanations have been around for a long, long time, and have been roundly and soundly rejected by those to whom the phenomenon in question is most familiar.

One of the things I hope to see in future is a generation of humanities and social science people who embrace science but are not in thrall of it.

Sadly, I haven't seen much that looks much like that, though.

Sunday, December 04, 2011

Our Runaway Economy




I was intrigued by the dueling opinion pieces by Paul Krugman and David Brooks in this past Friday's NYT (02.12.2011). Down the right edge Paul Krugman makes his Keynesian, technocratic case for government intervention, in the fat bottom piece David Brooks extols the Germans for defending "values," "effort," "self-control," "merit," and "enterprise" in resisting that same intervention.

While Krugman's knowing, arrogant tone have long since worn thin on me, he's still a) an actual economist and b) has so far been consistently right on how this crisis would play out, as opposed to, say, folks like Niall Ferguson, who have been just as consistently wrong.

Brooks is of course right when he says that there is a political cost to the "value blindness" inherent in the purely technocratic calls for crisis intervention right now. When irresponsible governments get "bailed out" it does call the legitimacy of the status quo into question (thus, the tea party movement).

But, as Brooks acknowledges over and over again, we are in a crisis, and crises like these demand decisive actions that may or may not comport with your general morality.  What crises demand is action, not actions contingent upon something else happening. If, as agreed, we have a crisis, then we need action to stave it off. It's as if I saw a car beginning to roll freely down a hill: my first action is not to seek out the driver to make him or her promise to use the handbrake in future. My first action is to see if this person was also irresponsible enough to leave the door unlocked.

Is it fair that I should have to do this? No. It's what you do to prevent a calamity.

And that gets to one of the funny little things about living in a complex society--questions like "Is this fair?" or, more generally, "Does this comport with how I conduct myself or my family life?"--are often the wrong sorts of questions to be asking. Why? Because the point of the system isn't to be fair. The system wasn't made to retell the story of Pilgrim's Progress or Horatio Alger. And this has always been the case with how the managers of that system have made their decisions.

Capitalism over the last 100 years or so has gone through some interesting developments--it's interaction with the more inclusive democractic political system has become both fruitful (witness, the postwar economic boom in the West) and more fraught (witness, the post-1980 shift in reward structure, the Occupy Wall Street movement). For people like Brooks the story of our economic system--the deserving are rewarded and the undeserving punished--is more important than tending to the technical function of the system because of that now very strong interaction between democracy and capitalism.

But the fact is, that story is a lie and always has been a lie. Are there strategies that you can find out about that are likely to lead to success in our system? Yes, certainly, particularly when it is working well. Do those strategies necessarily have something to do with deservingness by some other yardstick (moral, utilitarian)? No.

A crisis is not a time to try to shore up tired old lies: it is a time when we ought to be being a bit more honest with ourselves. If "virtue rewarded and vice punished" is what you are looking for from your economic system, capitalism is not your baby--we can condition the competition and power plays of capitalism so that we reach this outcome more often, but we have to do it. It won't do it itself. It isn't designed to do so.

And there are absolutely no economic rewards for virtue in and of itself. If your virtue turns out to be economically non-viable, you don't get an economic reward. The moral/political realm and the economic realm are separate. They interact constantly, but we should really stop encouraging people--as Brooks is urging--to think they are the same thing.

This is really part of a collective growing-up we've got to do, akin to discovering that your parents were not the paragons of the virtues they so strongly urged on you. A crisis is a time for a bit more truth. Let's acknowledge that preventing the calamity and the virtue of the people rescued from it are two separate issues to be dealt with in their own proper occasions. So lets see if that driver's side door is open, shall we?


Thursday, November 10, 2011

First, Let's Get Rid of the Economic Lawyers


I was amused by an exchange between Ron Paul and Ben Bernanke that happened this past summer but I only came across recently:

Paul: Do you think gold is money? Bernanke: (pregnant pause) No. It's not money? It's a precious metal. Even if it has been money for 6,000 years, somebody reversed that and eliminated that economic law? Well, it's an asset. Would you say Treasury bills are money? I don't think they're money either, but they're a financial asset. Why do central banks hold it? Well, it's a form of reserves. Why don't they hold diamonds?Well it's tradition -- long-term tradition. Well, some people still think it's money. In the U.S. anyway, those people are wrong. 
From Daniel Indiviglio's blog at The Atlantic
The economic law that gold is money? I must have missed that. Is it in the Bible or something?

Amusingly, Ron Paul's fanboys think that this exchange somehow displays Paul's fantastic grasp of basic monetary issues and Bernanke's inability to deal with him. Anyone watching the video of their exchange will see Bernanke is clearly bored during Paul's Long run-up to this bit of questioning.

What all of this boils down to is that Paul believes gold has transcendent value. As established by God, no doubt and that value is to be measured only in gold. Or should we say Gold? This is merely arbitrary. An alternative fiat to fiat currency, and a bad alternative for reasons I'll explain below.

And Paul thinks that value itself has to be a transcendent. He offers no reason why this should be so.

Economic value is contingent. It always is. It is less contingent in a developed economy such as ours, but it is contingent. A smallholder brings in 100 bushels of wheat one year, and lives comfortably off the proceeds one year, the next year he brings in 150 and barely scratches a living. How could this be? 150 is bigger, and therefore more valuable than 100, no? But having 150 bushels of wheat in a year when there is too much wheat is worse than having 100 when it is scarce.

The one economic law we should all know well, the law of supply & demand, the basic observation behind capitalism, says "value is contingent." And that law applies to everything, Gold included.

Which means that the wild fluctuations we've seen in the price of gold in USD over the past 40 years or so are NOT just a reflection of the value we put in the dollar, but also a reflection of the contingent value of gold as a commodity. In a flight to quality, gold goes way up and US bond rates way down because there is additional demand for those reputed safe harbor investments, this over and above any implied valuation of the currencies involved.

Now why does gold have a reputation as a "quality" investment? Because the supply is relatively stable and predictable.

So why not tie the value of your currency to gold? Because one of the big reasons you have a currency is the first place is to enable you to manipulate its supply to deal with economic contingency. If you tie the value of your currency to gold, then you've taken this possibility off the table.

And why would you want to manipulate the supply of currency? Because economic value is not measured in Gold, it is measured in human well-being, in people eating, in their having a warm & dry place to stay, in having employment and enjoyment, in having some security in the future. That's "value." And while this definition may sound a little bit nebulous, the fact is that this gets to the real gist of the matter, where merely posited abstract, supposed absolutes, like Gold, just defer the question infinitely--isn't Gold shiny enough to make you stop asking questions?

Value is rooted in perceived human good. Full stop.

Money is an exchange medium which creates a common index to measure value of very different things, because it--money--can be exchanged for many different things--a weight of gold, some barley, a night with a prostitute, a slave, a jug of wine, a pair of shoes, the services of a porter for a day. However, because all of these things are subject to the law of supply & demand, including money itself, the value, as measured in this common index, fluctuates constantly.

Money is a representation of value. Value fluctuates constantly. And the value of the representation itself is subject to change. If the representation is easily counterfeited, it's value will inevitably fall as people do just that.

Hence gold--it is difficult to counterfeit and supply was pretty stable and it thus became a great medium for early exchange. But gold currency had its problems, too. Gold was very scarce and it was difficult to make coinage small enough to represent the value of many many trades. (Most people in the year 1000, say, would never have used a gold coin for any transaction for their entire lives.)

And since weighing coins and calculating for purity was an inconvenient process to undertake at each exchange, coin the clipping and debasing of coinage could be quite profitable enterprises for both governmental and non-governmental entities.

And the supply wasn't always stable. A major strike could wreak havoc on the value of gold as measured in (at the time) more stable commodities. For instance, after the discovery of America, or the California discoveries circa 1850, gold and silver were suddenly much easier to come by in Europe, causing inflation.

And so money was ever a problem, not just in the household economics, but also in any exchange. Coinage was non-standard in every way. The solution to this problem was representational currency. The currency would be essentially valueless in itself, but it would represent and be exchangeable for gold, which represented actual value in a hard to counterfeit way.

But that didn't solve all the problems with Gold. Over the short term, tying your economic policy to gold mean long term price stability, but relatively violent fluctuations over the short term. And since we've all got to put food on the table and pay next month's rent in the short term, this wasn't so good for regular folk. For people who were stashing away large sums of money off of which their grandchildren would live idly, the sub 1% long term inflation rate was great. But near 60% (+40/-20) variations in the annual inflation rate were hardly the stuff that made wage-earners smile and love the gold standard. And they didn't.

In short, a government that cared about wage earners and small holders needed to be able to act to create short-term economic stability, even if that was at the expense of some erosion of long term price stability. This isn't so bad a trade, and the proponents of tying money supply to the gold supple ought to be a bit more honest about what the gold standard brought us--lots of volatility, big increases and decreases in prices that tended to cancel each other out in the long run.

If what you long for is more short-term stability, for your dollar to be worth the same this year as last or two years ago, then Gold is not the answer. In fact, it is precisely the opposite of the answer.

Contingency can't be escaped. Gold is not God--He's said as much. The Gold standard does not bring transcendent truth to our financial transactions, it is only mental children who think so, or even hope for it. Financial transactions depend on other people. There is no guarantor for your wealth or goods against any and all contingencies.

Speaking of children, watching the video of the Bernanke/Paul "showdown" really impressed me with how childlike Ron Paul can be. Paul querying (and wearying) Bernanke is just like watching a toddler trying to find the man inside the TV.

Well folks, there is no man in the TV, there is no ultimate truth behind a dollar bill. Just our collective promise and the likely prospect that others will accept it just as you did. Paul thinks that kind of social trust is a Ponzi scheme. Actually it is life as fully cognizant adults live it.

There is no "law" that says only gold is money, just as there is no "law" that says your parents will always be there for you, or that you will always be the center of the universe. Your parents will die, you are one person among billions, and you will have to face and deal with life contingencies one way or another.

But, hopefully not with tiresome delusions like Gold.

Monday, November 07, 2011

The Education Bubble

http://newssun.suntimes.com/news/8655507-418/analysis-is-student-loan-education-bubble-next.html

The link above is to a relatively thoughtful and thought-provoking article from the AP on the current expansion in higher education & higher ed financing during this financial crisis. Much of this is only to be expected when people lose high-paying manufacturing jobs that aren't coming back and look to tool-up for something comparably paid but quite different in the future. But there are, as the article points out, some signs for a little bit of worry about this new wave of college attendees and the debt they are accruing.

Perhaps the least interesting part of the article is Peter Thiel's fellowships. The $100,000 awards handed out to young people *not* to attend college are great headline fodder, but they're pretty meaningless to the typical high school student. Did someone look at your business plan and hand you 100K? Then you might not need to go to college to succeed. In fact, since college can be rather time consuming, it might be better to concentrate your attention on a big idea that has already inspired people to lay down some big money. Otherwise, you might want to remember the single biggest indicator of class divide in most of the country: a college degree or lack thereof.

And while you are at college you might even, like Mark Zuckerberg, stumble on that big new idea.

Peter Thiel's big complaint with higher education is that it gets in the way of entrepreneurship. But the vast majority of 17-year-olds have little or no entrepreneurship to get in the way of. They are not destined to be 22-year-old Internet millionaires. In fact, even in some dreamed of future of constant innovation, most people are going to work for someone else, doing something that is not insanely great or startlingly innovative. Basing education policy on fostering future Peter Thiels is like basing it on fostering future Powerball winners. The winners are going to be few and far between and your education policy will have little to do with fostering them or with increasing their number.

What education policy *can* do is provide those entrepreneurs with employees with some basic knowledge of how business finance works, or how to market their product, or how to do basic accounting, or how to hire and fire without getting sued, or how to read a report, understand what it is saying and ask some pertinent and challenge questions of its authors, or how to write the code that actually does the insanely great things would-be entrepreneurs dream up.

That's what education and education policy is for: to create competency and to build the groundwork for excellence. Education and education policy do not exist to foster the very, very small percentage of young people who actually have salable ideas. We rely on those folks to fend for themselves, as they have already demonstrated they are able to do by coming up with these ideas in the first place.

Which brings me to a second point about the education bubble: there is one, but not for the reason Thiel thinks. Thiel's line of thinking tends toward the notion that higher education is irrelevant in some "new world" of constant innovation and entrepreneurial thinking. Actually, it isn't a world, it is simply a small class of young people who have opportunities that outweigh the advantages of higher education. But the this kind of millenarian thinking (everything has changed! We need to change our approach to everything to comport with the new reality!) goes on everywhere and seems particularly resonant these days. Actually it was a big contributor to several of our recent asset bubbles. (Who can forget the 1990s?)

But the real reason there may be an education bubble is that, like entrepreneurship, higher education is relevant, but only if you are in a position to take advantage of it. The expansion in college attendance and higher ed financing largely represents a new cohort to the groves of academia. Their parents didn't complete a college degree and, crucially, they are themselves poorly prepared, academically, socially & emotionally, to succeed at college. 

As I was suggesting earlier, if Thiel were to succeed and got society to foster a significantly larger cohort of young entrepreneurs to develop their ideas, we would quickly start reaching a population of people who didn't have the ideas, the maturity or the personal traits to succeed as entrepreneurs. Traditional higher ed is already at that point: the expansion we're seeing now is reaching a lot of folks who can't succeed in reaping the true benefits of higher education. Largely because our primary and secondary educational systems have served them so badly, but also because their parents have not prepared them to succeed on their own. At anything.

The financial risks here are not really harrowing, and, who knows, there may be enough good bets in this wave of new college attendees to outweigh those who are wasting their (and our) time & money. But, from what I've seen, I'm dubious. And I say this as someone who, like this new crop, had parents who did not graduate from high school and who had to borrow heavily to attend college.