Saturday, June 30, 2007

Human Life

Human life revolves around a misty mythos of the "typical you" - the idea of you imposed upon yourself in the environment. This drives personal habits (often inherited from the local family), ultimate goals and self-image (culturally driven), values, and expected behavior in every day life. This can explain the wide and powerful difference between cultures. Of course, the overriding human urge is simply powerful self-interest - and most habits of human beings will be similar as they all exist in the same natural world with the same basic features. But some cultures will, by chance, learn to adapt and perhaps even

Friday, June 29, 2007

SS2BM Means Ebay Sucks

For some reason I began investigating eBay an hour or so ago after reading a comment . What I've found is a fascinating example of monopolistic business behavior (with its usual despotic psychological overtones). I've been hearing about the borderling illegal tactics of eBay through Paypal (eBay's subsidiary - for years now - suspending people's accounts and refusing to let them transfer money. People who tried to resell PS3s or Xbox 360s ran into this problem. Why eBay cracks down on people like this is somewhat puzzling, but it will drive their sellers (and eventually their customers) away. When unhappy eBayers protest eBay fee increases and attempt to point people to better alternatives they are silenced. A community has grown up around eBay alternatives at the Pheebay forum.

The good news is that there are alternatives. eCrater is completely free, so avoid the fees and head on over there when you're looking to bid for something! Why should a customer avoid fees? Economists have been telling people forever that fees are ultimately passed on to the consumers, and there is no better example of this than online auction sites. eCrater will certainly be cheaper than eBay. Let's hope eBay doesn't buy their competitors just as they are starting to take off - though I'm sure eBay will try. The big new thing is for companies to buy competitors and shut them down, which is what eBay did with Paypal competitors.

eBay is currently facing a class action antitrust lawsuit. Paypal settled one class-action lawsuit in 2004 and lost another one more recently.

eBay has a network monopoly. In the days of the internet these monopolies are ubiquitous. Myspace/Facebook, Digg, Microsoft, and even these Wiki sites are protected by network monopolies.

As some economists forget, the goal is always social good - and when market failure happens, social good isn't maximized. That justifies intervention in the market. On the other hand, should the government legislate that eBay stop it's oppressive tactics? At this point, I think not. Instead, let them keep angering their customers - that gives people the incentive to seek a newer, better alternative - in this case, eCrater: a completely free auction site.

Saturday, June 09, 2007

Economics student

A decent economics student (or philosopher of economics, at least, lacking deep mathematical tools) looks at objects around him and thinks, "I wonder what the supply and demand for that object is." And when he looks at people he thinks, "I wonder what desires for objects drives their actions." Yet does he ever look deeper than that? Is happiness or sadness; harm or benefit not an object? But people don't respond to happiness, you think, or sadness, or else they would always act smarter, more rational, more harm-avoidant. Or could pain cause benefit for people? Do they desire pain for a reason? One time, years ago, a pathetic female friend of mine said, "People desire pain. It makes them feel distinguished." Somehow I'd thought the same thing, and nodded without saying much. Why could we desire pain?

Broken Contract: A Memoir of Harvard Law School

I'm in the middle of this book right now, and it's really pretty good. The guy is more leftist than I have ever been (or ever will be), but at the same time he has some common sense stemming from consistent principles and an ability to understand economics; he recognizes the contradictions and ugliness of standard leftism. He is very similar to Sidney Rittenberg who's book The Man Who Stayed Behind I just finished. Sidney's story is a classic example of propoganda and idealism fooling an intelligent person (with a Bachelor's in Philosophy) to the point that he supports a despotic totalitarian Chinese government. He joins their inner Communist circle, then is imprisoned for six years. When he leaves prison he becomes a propogandist; a man who spends his every day deliberately twisting real information into complete falsehoods. Then, after speaking out in favor of democracy, he is imprisoned for another ten years. Even then he doesn't repudiate Communism until he's finally seen how much damage it caused to the Chinese economy.

Kahlenberg, the author the Broken Contract, comments on the Law & Economics group at Harvard Law School:
steve Shavell, a bespectacled economist, gave an abstract, conservative, and, at times, nasty lecture. In the specific case we were studying, Shavell argued that a judge should not order a landlord to improve living conditions, because it would be more "efficient" for government to aid in the redistribution of wealth and let the tenants decide for themselves whether they wanted to use the money to move to better housing or for something else. The argument, of course, completely ignored the political reality that a direct cash payment to the poor lacks a powerful constituency; programs need corporate beneficiaries, farmers in the case of food stamps, developers in the case of housing.

I don't know whether direct cash in this case is appropriate. It doesn't seem easily workable (cash transfers to all renters?), but he raises a decent objection. The problem is not necessarily that it lacks a constituency (renters are a fairly powerful constituency, as rent controls attest); it's more that a direct cash payment to renters (not "the poor" -- renters in general are what we are talking about, and some of them are definitely middle-class) seems like welfare while a requirement that landlords keep up their apartments seems like fairness. HSAs have the same problem - monthly HSA deposits to the poor seems like welfare, where universal healthcare at least seems "fair" in that everyone stands in line. Yet does that justify the latter policy over the former? Not at all, especially when the latter likely would cause more harm than good.

He first mentions his disagreement with the left on the area of civil rights; he believes in harsh punishments because crime disproportionately hurts the poor. So far he's mentioned two areas of left ridiculous. The first has to do with his female "Critial Legal Studies" professor who doesn't get tenure, Clare Dalton:
In the late spring, my displeasure with the left at Harvard increased as I watched it react to Clare Dalton's tenure battle. Dalton my second-semester Contracts professor, a crit, and the worst teacher I ever had. In class, she would move from case to case, failing to tie them together or distill any broader meaning from them. She tried to employ deconstructionist analysis and critical legal theory, but her methods were never convincing. The level of noise in our classroom was embarrassing evidence of how little respect she commanded ... Even she could not have known how her case ... would become the cause celebre among the liberal community in Cambridge. Favorable pieces appeared in the media, petitions circulated, and rallies were held. At graduation, students wore yellow armbands, and one group of graduates raised letters spelling TENURE DALTON ...

To make the story short, she didn't get tenure - but she did assign the following exam:
Dalton's eight-hour take-home Contracts exam was an outrage. It contained two questions, one of which involved a hypothetical professor, Joe Levin, who was sueing the "Nameless School of Law" for denial of tenure. His case was based on "ideological discrimination" and "denial of academic freedom" ... the case was clearly not his but hers, which was disturbing and detracting for a few reasons. First, you felt that if your exam made powerful arguments on the university's behalf ... Dalton ... would have trouble grading objectively ... second, there was a sense ... that you were being used to as a source of theories and ideas upon which Dalton could base her own case ... she should have been sensitive to the perception that she was exploiting us just as surely as the worst capitalist exploits his workers. Illegitimate hierarchy, indeed.

Looks like Harvard Law School (or Northeastern Law, where she now teaches) aren't always what they're cracked up to be - that test question is indeed astonishing. To me, adopting the legal positivism that I usually dislike, the case is clear: universities go through their process and grant tenture based on what their board decides. There's no reason to judge differently.

The second example is more interesting and far-reaching; in fact, it stretches back to Sidney Rittenberg and his work in propaganda. Words and information are strange things; they have the power to subvert, destroy order, spread untruth or, most significantly, cause moral dissolution. In some cases the line can be drawn between clear truth and untruth, but on philosophical or moral/ethical topics that line is not so clear (Social Darwinism is an easy example of a perspective that one could easily justify suppressing even if its scientifically correct). Here is what happened:
I read a story in The New York Times headlined CONTRA LEADER"S HARVARD APPEARANCE DISRUPTED ... Adolf Calero ... had been prevented from delivering his speech at HLS when he was attacked by a Tufts University senior shouting, "Death to the contras" ... dozens of students in the audience clapped ... the left's negative response in this instance was as shortsighted and unprincipled as its positive response to Clare Dalton had been ... Didn't Kimball realize that his statements pushed liberals like me to the right? That he actually made a figure like Calero look victimized and sympathetic? Not only was the left's position tactically stupid, it was also intellectually arrogant. Who was Kimball to decide for the entire university that Calero was not fit to speak? Who gave him veto power?

This idea is surprisingly common among the left (as well as, of course, the fascist right). It is not common among classical liberals, but perilously few of us are politicians. In this case the left was motivated by anger, but in many cases the left is motivated by fear. Their fear is that the right will justify its position with something that makes sense, and weaken the left's position. This was the basis of the massive propaganda in Communist China. Literally all information in China was propaganda. Only insider news executives such as Sidney Rittenberg were allowed access to anything resembling real news, and even Rittenberg was never told about the tens of millions of peasants starving to death during The Great Leap Forward. Liberal elitists (which all leftists ultimately are) believe that the masses are not responsible enough to handle information on their own, or that offering good information to the masses is not beneficial to society.

This sort of belief manifests itself, for example, in Adam Rawling's argument that scientific research (both social and physical) should be restricted only to those who "are willing to push past barriers to access it", despite the obvious benefits of free information which is easily referenced, discussed, and examined. Imagine a Wikipedia which referenced a list of all scientific articles covering a particular issue, free for anyone to examine and critique individually.

The Council on Foreign Relations is a foreboding example of liberal elitism, with its penchant for surreptitiously advancing elitist "liberalism" and internationalism through unconstitutional and illegal means, if necessary (see FDR, his National Recovery Administration, and his attempt to pack the Supreme Court. The CFR's strongest supporters were Democrats such as FDR, Dean Acheson, George Marshall, and David Rockefeller. Some of these people found their way into Sidney Rittenberg's story: at one point a Communist says that Mao Zedong appreciates "deeply respects Dean Acheson and George Marshall." Later, after Senator McCarthy finally started to figure things out, economist Frank Coe (Soviet spy) is banished to Communist China to smoke cigars and live the easy life. Coincidentally, he was a high-ranking official in the Department of the Treasury, the, United Nations and the International Monetary Fund. Sol Adler was another Marxist spy and Department of the Treasury official who ended up in China working for Mao Zedong. Coincidentally, he worked for the CFR and Rockefeller funded Institute of Pacific Relations, the CFR's sister agency.

For those of you who feel the knee-jerk reaction to demonize McCarthy (spare me the standard rhetoric and offer me some history) - think about why. Do you really know what happened then? McCarthy was elected in 1946, but he didn't begin his attack on Communism until 1950. Meanwhile, the House Un-American Activities Committee was founded in 1947 and blacklisted Hollywood employees. McCarthy, in the Senate, was uninvolved with that effort. McCarthy's focus was on the State Department, and his attacks were largely ineffective. Read those Wikipedia articles on them for a decent little summary. It may also be of note that Communists in general supported an ideology which supported totalitarian control over information and people.

If I had the Shadows of Power book handy I could into the CFR at incriminating length, but I'm forced to transcribe the information, which is time-consuming. Nevertheless, trust me - it is damning. Some might say "well, if these guys were Communists, then why is Communism dead?" Well, who knows if they actually believed in Communism - if they believed in it as an idealistic tool towards peace and prosperity, then perhaps they came to their senses. If they believed in it as a tool towards power, then obviously they found that their strategy must change - and it obviously has changed. There are still people seeking to consolidate their already significant power in the world, but today one might find them in the Bilderberg Club. Not that the CFR isn't powerful - today, they happen to have Peter Peterson (don't recognize the name? Do you recognize the name Blackstone Group?) as their Chairmain, and one of the members, Fouad Ajami, just so happens to be one of the few Middle Eastern scholars who believes strongly in the Iraq War. I ought to check the early editions of Foreign Affairs.

Now I need to finish this book. Incidentally, it seems that Richard D. Kahlenberg (the author of Broken Contract has written several ostensibly favorable books on school vouchers, and another arguing against Affirmative Action in favor an economically-based affirmative action program.

Thursday, June 07, 2007

Autistic Economics

I've been browsing last few issues of The American Economic Review and it's making me feel duller than usual. Sometimes I can really relate to Nietzsche's disgust with myopic "deductive" logic.

Then again, perhaps what's most striking is how many articles point out that consumers are not rational and that markets are not always efficient.

Here is the abstract of an interesting (and less jargon-strewn) article from the AER Vol. 96, No. 3, 2006:
Long-Term Educational Consequences of Secondary School Vouchers: Evidence from Administrative Records in Colombia
Joshua Angrist, Eric Bettinger and Michael Kremer

Colombia's PACES program provided over 125,000 poor children with vouchers that covered the cost of private secondary school. The vouchers were renewable annually conditional on adequate academic progress. Since many vouchers were assigned by lottery, program effects can reliably be assessed by comparing lottery winners and losers. Estimates using administrative records suggest the PACES program increases secondary school completion rates by 15 to 20 percent. Correcting for the greater percentage of lottery winners taking college admissions tests, the program increased test scores by two-tenths of a standard deviation in the distribution of potential test scores. (JEL: I21, J12, I28)

Could the free market be the solution to education woes? I think so.