The Selfish Gene and Altruism

I just finished Matt Ridley's book The Origins of Virtue. It was a great pleasure to read because it consistently managed to stand particular ideas of mine on their heads. Ridley persuasively argues that humans have social instincts, ultimately to be trustworthy. Virtuous behavior has been selected for by our genes.

The Selfish Gene is, of course, a famous book by Richard Dawkins (which I have not read) about a revolution in biology. At its core, the idea is that "individuals do not consistently do things for the good of their group, or their families, or even themselves. They consistently do things that benefit their genes because they are all inevitablly descended from those that did the same. None of your ancestors died celibate."

This conception solved some mysteries in biology. Social insects who help their sisters to breed rather than trying to breed themselves, left more copies of their genes in the next generation. "From the gene's point of view, therefore, the astonishing altruism of the worker ant was purely, unambiguously selfish." But how does that leave space for altruism?

Classical economists had supposed that people act out of self-interest. However, this idea revealed a much more powerful engine of behavior. "Selfish genes sometimes use selfless individuals to achieve their ends. Suddenly, therefore, altruism by individuals can be understood." People really do act selflessly because this tendency is selfishly useful for their genes.

What makes human beings different is culture, which leads to a different kind of evolution; a competition not just between genes, but between culturally different individuals or groups. "A person may thrive at the expense of another not because he has better genes, but because he knows or believes something of practical value."

There is one kind of cultural learning that makes cooperation more likely: conformism. It must be remembered that we evolved as small groups of hunter/gatherers, so conformisn strengthened the group. Thus, we get the tendency that it is usually cheaper and better to do what other people say. Humans have always fragmented into hostile and competitive tribes. This leads to our tendency to perceive the world in terms of us or them (the competing group). And war. This is the dark side of our social instincts.

The book also makes use of game theory; in particular, strategies for dealing with prisoner's dilemmas, a difficulty that occurs whenever there is a conflict between self-interest and the common good. This is a situation where each indidividual in a group will rationally choose a course of action that is not really in his own self-interest, another mind-boggling concept.

The book is full of wonderful anthropological studies, including many hunter/gatherer societies we have encountered in the modern age, and comparative biology between species. Once again, I am forced to realize how little I know, but that just means that there are more interesting surprises in store. On to Genome.

Tony Judt and God

I asked awhile ago why Tony Judt, the brilliant author of Postwar and other books and articles, has seemed to be absent from the public forum lately. The answer is that he has ALS. Here is a very moving description of his condition at present. This is very sad and I think everyone should read it to get some idea what this terrible disease is like. Usually, when it is diagnosed, you have a couple years to live and the end is like Mr. Judt's condition. I have enormous respect for this man's humanity and intellect even though I have never met him. I know others who have gotten such death sentences and I hope I appreciate how lucky I am not to be under one at the moment, although that is the conclusion of all life. As so I apologize for the segway into the next topic; I do not mean to minimize the tragedy of his destination. I thank him for all the erudite and stimulating words he has written. He has made my life immensely richer.

I contrast this tragedy with an insight from reading Matt Ridley's The Origins of Virtue, a wonderful book on evolutionary psychology. Mr. Judt's situation leads one to ask how could there be a Christian God. The following suggests why it is natural to think so. Ultimately, I believe that this metaphysical issue is secondary in importance. My religious friends are often the most dedicated to the common good and treat others with respect. We are on the same side. We cannot settle the metaphysical issue anyway. That is why I am an agnostic.

Why does it seem so natural for people to believe in God? It is ultimately because we evolved largely as social creatures in relatively small hunter/gatherer groups. The possibility of altruism was created by the possibility of reciprocity. I will help you now and share with you now because of the probability that you will do so in the future. People who formed such groups were more likely to survive. However, as in all Utilitarian schemes, there is the problem of the “free-rider.” An individual may say to himself “why should I risk my life or even exert effort to kill the wild animal for food if I will get it from somebody else anyway?" As a result of this problem, humans developed a highly developed unconscious device for detecting cheaters or slackers. And potential cheaters developed devices such as blushing and other facial expressions which made them readable by others in the group.

This was one of our biggest problems as small groups of hunter/gatherers. So we developed the sense that all problems are problems of agency, rather than some naturalistic cause. There were no accidents or luck. We developed beliefs about those events that were very important to us, dangerous or helpful, in terms of agency. That is, we created gods for understanding these occurrences. And we treated them as we may treat any who have power over us; we offered gifts and attempted to avoid behaviors that would antagonize the gods. We routinely anthropomorphized the natural world as a system of social exchanges.

The history of religion is one of progression from paganism, worshiping a number of gods, to monotheism, although Hinduism and some other religions do not fit this model. This hardwired ability and tendency to calculate the world as social exchanges or a social contract, keeping score of who has done what, is part of our nature. So people are naturally altruistic (they intend to do good for others for the benefit of the other) even though such a feature arose because of its success in allowing the formation of social units. Those who did not were kicked out of groups or never formed groups, and died out, not spreading their genes. Of course, these hunter/gatherer groups were limited in size due to our score-keeping limitations. The advent of larger groups or societies raises questions of what social ordering forces allowed them to exist. We must assume that the organizing forces were path-dependent, that is they are based on our instinctual nature as social animals.

The Filibuster

In the aftermath of the health care reform bill, there is a lot of talk about why the filibuster, or the mere threat of a filibuster, has become such a significant part of Senate politics in our time. I am looking forward to James Fallows' upcoming article in the Atlantic, but here is an interesting interview with a historian.

The real surge in filibuster use was in the early 1990's, apparently as a feature of partisan politics. Because we had ideologically distinct parties, the minority party realized that if it merely deprived the majority of real victories, they could be successful. The republicans not only didn't pay a price for obstruction, they ended up taking over Congress. But did we really have ideologically distinct parties and, if so, why did that happen?

The power of a mere threat of a filibuster must have something to do with other changes. The airplane made it possible for Congresspersons to travel quickly to their constituents. The increased money required to campaign, partly due to mass media, made it necessary to campaign much more of the time, which the airplane made possible. The mass media also made possible other ways of gaining power and to be a big player. It was less necessary to be on good terms with the senior members; rather, individual members could direct their efforts directly to the media.

Mass media never has stories like "things haven't changed." They always look for a win-lose angle. That is what attracts readers' attention. That addresses one of Zakaria's points about the failure of our government. I still don't understand at all the ideology part, but campaign finance reform in terms of individual contribution limits and perhaps term limits would address the first two points, and perhaps the filibuster. Because the schedules of members of Congress have become so full of fund-raising events, even the threat of a filibuster is potent. However, either of these moves would require a Constitutional amendment. Some of the other ideas floating around about curbing the power of the threatened filibuster seem more attainable. After all, the filibuster is just an outdated Senate rule and is not part of the Constitution.

The Post-American World

Fareed Zakaria’s The Post-American World turned out to be a lively and informed book. Or maybe I just agree with him about a lot of things. He sees America’s hegemonic position as disappearing not because of weakness in America, but because of the rise of other countries out of poverty. The emerging economies of China and India are the clearest examples of challenges to our economic hegemony (not military). I am going to list some points that struck me as insightful or obviously correct.

(1) War and organized violence in the world over the last two decades have declined dramatically, while per capita income has risen dramatically. According to Steven Pinker, we are probably living in the most peaceful time in our species’ existence.

(2) Iraq weakened Al Qaeda because in order to attract Sunni support, it morphed into an anti-Shiite group, thus depriving it of its claim to represent Islam. We ought to be recognizing the distinctness of many of the jihadist groups. The improvised strategy has a crippling weakness; it kills locals, thus alienating ordinary Muslims.

(3) The best counterterrorism policy is resilience; if we are not terrorized, then it doesn’t work.

(4) The financial force that has powered the new era is the free movement of capital around the world. This was largely due to the removal of fixed exchange rates. And the hyperinflation of the 1980's was curtailed due to monetary and fiscal discipline.

(5) The most acute problem of increased wealth in the world is the impact of global growth on natural resources and the environment.

(6) In many countries, there is a pent-up frustration with Western or American narratives. For instance, the standard narrative about World War II is how the U.S. and Britain heroically defeated the Nazis. But the Eastern front involved more land combat than all other theaters of war combined and many more casualties. It was where three-quarters of Germans fought and where they sustained 70% of their casualties. The war is portrayed as a heroic struggle of good over evil, but Britain committed many troops from its empire while denying those people freedom at home. However, the world is currently moving from anger to indifference, from anti-Americanism to post-Americanism. Now that the Cold War has ended, the emerging strong economies can go their own way.

(7) Globalization and outsourcing have actually helped America’s bottom line. Growth (3% vs. 2%) and productivity (2.5% vs. 1.5%) have averaged a full percentage point higher than Germany or Japan. U.S. exports as a percentage of the world have dropped only 1% since 1980 (from 10% to 9%) and the U.S. remains the most competitive economy in the world.

(8) Most Americans (less so for the young) are ignorant of the world beyond their borders and remain convinced that they do not need to learn about others. Thus, they remain convinced that their way must be the best and most advanced. This makes us increasingly suspicious (afraid) of the emerging global era. We are the only country in the world to issue annual report cards of every other country’s behavior. This isn’t just confined to the chest-thumping machismo of the neocons.

(9) The view of multinational companies is far more positive elsewhere. We want the world to accept American companies but when other companies with overseas bases come here, it is a different matter.

Those are from the first two chapters. He goes on to give an account of how the West became supreme which will be quite recognizable to anyone who has read Germs, Guns and Steel. Early in the 20th century, the process of domination culminated with a handful of Western capitals ruling 85% of the world’s land. He then has a couple of very insightful chapters on China and India. They are different in significant ways from the West. Neither Hinduism nor Confucianism believes in universal commandments or the need to spread the faith. And for practical reasons, they are far more interested in economic development to feed the vast number of poor than to engage in traditional western-style military hegemony.

The Chinese-American relationship is one of mutual dependence. China needs the American market to sell its goods; the U.S. needs China to finance its debt. It would be in the interests of each to cooperate. Ironically, while China’s central government allows it to complete grand projects, India’s multi-ethnic democracy makes such projects difficult. Instead, it’s growth comes from a U.S.-style capitalism now that they jettisoned their failed experiment with socialism. Surprisingly, 50% of their GDP is services and their level of personal consumption is second only to the U.S. (67% vs. 70%). Unwittingly, the legacy of Britain’s English language is a great asset in a world economy. The organized minorities are even more powerful in India than here. Only Americans have a more favorable view of the U.S. than Indians (71% vs. 83%).

The last two chapters trace the passing of the world’s hegemonic superpower status from Britain and lay out principles for approaching changing times. We need to learn from Britain’s successes and failures. A number of sensible reforms could be initiated here (e.g. diminished wasteful spending and subsidies, increased savings, achieving significant efficiencies in energy use, etc.), but our political process seems to have lost its ability to create broad coalitions on complex issues. Politics has been “captured by money, special interests, sensationalist media and ideological attack groups.” We have thrived because of our openness to the world–to goods and services, ideas and inventions, people and cultures. Unfortunately, much of our population has been gripped by fear and loathing that fails to recognize what a positive position historically we are in the world today.

The Eve of ?

One of the many interesting points in the PBS documentary "From Jesus to Christ" is that scholars do not believe that Jesus was born anywhere close to the 25th of December. So what is this really the eve of? I can't help but recall that sixties song "The Eve of Destruction." It wasn't then and it isn't now, at least in the short run.

If all the world's theists recognized that they are all worshiping the same god it would do a lot to ease the religious warfare. It is that simple. Of course, it would help if they stopped seeing God as a Big Guy who bothers to intervene in world events and rather just looked at theism as a way to make sense of the universe or the human race as having a purpose. What gets in the way is the human mind, which mostly evolved in hunter-gatherer societies. But Robert Wright says that religion evolved in ways that keep us from seeing that life is a zero-sum game (if one wins, the other must lose). Rather, like trade, both can win. "If more and more Muslims feel respected by the West and feel they benefit from involvement with it, that will cut support for radical Islam, and westerners will be more secure from terrorism" (page 415). Win-win.

In the shorter term, there are some sticky problems. One is Iran. What we really should hope for the most is that the reform movement succeeds and reestablishes democracy. Unfortunately, this whole argument over the nuclear issue is going to be used by the conservatives to rally people behind nationalistic feelings. Here is a good article about the dilemma.

Gwynne Dyer's piece in the op-ed section of the Trib today suggests that what needs to happen is that the U.S. populace needs to realize that the U.S. needs to pay for most of the reduction in CO2. Mr. Dyer is a Canadien who lives in London and does not realize that this is not going to happen here, at least fast enough to make a difference. And so world meetings are not going to solve the problem. Sorry to be a pessimist on this. Human beings are going to have to adapt or some technological changes are going to have to occur. We have the technology to replace coal-burning plants. It is what France did. Nuclear power. However, we need to solve the transportation problem which causes dependence on oil. Gee, what about plug-in electric cars? We could use better batteries, but the solution is there already. And how about cheap solar energy not dependent on the grid? We just need the technology to be cheaper, or at least cheaper relative to energy from the grid. The U.S. can be a leader here, which would also alleviate the temptation to play superpower in the Middle East.

The brilliant Alma Guillermoprieto, author of several wonderful books on Latin America, has a report from Bolivia which shows just one of the problems that we will have to adapt to or overcome, the shortage of water in a globally warming world.

If one realizes what most of the world was thinking in 1910, one realizes that in 2010 we really have no idea what the world will be like in 30 years. Let's hope we don't have to undergo a history similar to theirs.

Addendum: This article tells me that I should follow my own advice. In 1910, who predicted the personal computer or the internet?

Rain Man

If you read the Salt Lake Tribune today, you probably read this article about Kim Peek, the "Rain Man." Here is a website with some great stuff on savant syndrome and the different kinds of autism. I am impressed that some of the musical savants are attending Berklee School of Music, where my friend Mary's son has a scholarship this year. Tyler Cowen also discusses different kinds of autism in his book Creating Your Own Economy.

Religion

We are in the season of western religious celebrations: Christmas (the birth of Jesus, not the joy of shopping), Hanukkah, Ashura (the martyrdom of Hossein), and others (does this have anything to do with the winter solstice?).

How can so many people believe in a religion? It is pretty clear that what religion a person believes in is usually directly linked to how he or she was raised. Why do so many people in Japan believe in Buddhism while the vast majority in the Middle East believe in Islam? And the vast majority of Americans are Christians. It seems like these beliefs are merely accidents of birth. How do they differ from the stories we were told when we were young which we eventually found out were false? And yet, most people claim that their religion is the one “true” religion.

Even if particular religions cannot logically defend the truth of their beliefs, are people even better off for having religious beliefs? After all, wars are going now and have been for a long time between different religious groups. How many people have been killed in the name of some god or other? The major conflicts of the world now are secondarily between nation-states or communism vs. capitalism. They are primarily between religions. Every major religion it seems is in conflict with every other. You can look at India/Pakistan, Palestine, wherever. Of course, it is not new. Look at the Crusades. How many people died trying to control Jerusalem?

The three major western religions, Christianity, Judaism and Islam all believe in prophets. How does such prophecy work? Why should a prophet’s views be given such extraordinary weight? Doesn’t this require some kind of magic? You have all sorts of people running around claiming to be prophets. Which one should you believe?

Divinity experts agree that a large number (if not most) of the utterances attributed to Jesus in the Bible were not made by him. Robert Wright has pointed out how the idea of God has even changed over time in the Bible. Even if you don’t believe in prophets, how can such a text provide guidance? Is it even consistent?

So why do most people have religious beliefs? One way to go about explaining this would be in terms of psychological needs. People have a difficult time tolerating uncertainty. They are afraid of dying. They want to know why they should be good people. They want an explanation of the apparent injustice of the cheaters and liars and other evildoers who appear to profit from their bad behavior (and hence the appeal of karma and reincarnation, as well as God’s laws and heaven). They want to have a sense that their life has a purpose. But how does religion help if you are just a tool of the Big Guy?

It seems that there must be some evolutionary advantage to having religious beliefs. One can see how such beliefs could help bond people together in a society and to enforce a morality that allows individuals to get along harmoniously. However, this may just mean that your beliefs are vestiges of ancient ways of thinking; a useful fiction at best. Why are they still relevant? Are you not just believing in something to make yourself feel good? What does that have to do with truth? Shouldn’t one be more skeptical of beliefs that make you feel good; your reason for believing is that feeling rather than evidence?

While I think that these are powerful arguments against many religious views, I also think that there are responses. I'm still working on that and am rereading the final part of Robert Wright's The Evolution of God as part of the process. But it might begin with a comparison with studying philosophy; one looks for a bigger and more fundamental picture of the world that addresses real human concerns. You may not get answers, but you may get something else.

Up in the Air

We saw Up In the Air yesterday afternoon at the Gateway. It is a terrifically written movie with many funny moments, and along the way has some very smart observations. We loved it. I am beginning to appreciate going to movies again. Being in the theater sweeps one away into another world in a way that a DVD cannot do, even on a 50 inch high def. It is especially fun this time of year when there are so many good movies coming out and it is cold outside.

We also loved A Serious Man. I wonder where the Coen Brothers get their crazy ideas. Men Who Stare at Goats was also funny, although not in the same league as the other two. George Clooney sure gets a lot of great roles. I will be standing in line January 10th for Sundance tickets. Probably won't be much left but we are planning on going to the documentary winner. It is the closest thing to a guaranteed good movie I know (maybe two movies if there is a tie). It looks like Park City has become more difficult to navigate since I've last been there. I fondly remember the days when we had our secret parking place just off Main Street. Looks like you have to take a shuttle bus now.

Addendum: Here are Roger Ebert's favorite movies of 2009.

Sunday musings

This story in the Salt Lake Tribune about the Utah Supreme Court overturning a conviction because of the judge's refusal to allow an expert to testify about the dangers of eyewitness testimony caught my eye. This followed an episode on the PBS newshour looking at the man in Florida who was released after 35 years in prison based on DNA evidence. A group of advocates have overturned many convictions. The biggest culprit in the improper convictions was eyewitness testiimony. Humans are fallible even in perception, but much more so in our perceptual memory. And because we are so convinced by what we think we saw, we convince juries. Another episode in the story of human folly.

This story in the NY Times today reminded me of the superficial way that our mass media reports international news. This ayatollah had to die before anyone in the West heard about him. Our tendency to see the world in simplistic terms is astounding. There are many divisions of opinion in Iran and our perpetual focus on unimportant events, like the current dispute over an oil well, plays into the hands of the conservatives in Iran who are now rampantly abusing its citizens and quashing speech and democracy.

On the note of misunderstanding the Middle East, I have been very much enjoying Eugene's Rogan book The Arabs. But now I am at the point after World War I where the British and French are dividing up the remains of the Ottoman Empire for the own empires. Sorry Niall Ferguson, this colonialism is disgusting and has led to a number of unintended consequencs that we deal with today. Wilson was in favor of self-determination for these peoples. Why didn't that happen?

Finally, here is a good article on politics. The shrill debates about Obama are becoming very tiresome. Of course, those on the right who have been bashing Obama from the beginning for various reasons, such as the birthers, are silly but totally predictable. The bashing from the left is also predictable. What did you think was going to happen after we elected this one guy? He can't change Congress.

On that note, Ezra Klein is doing some good blogging about what is in the Senate health bill. Let's pass the bill and get on to other problems, like the banksters. It does some very good things but it is only the beginning. We can make improvements later.

And finally, the article on politics came from this interesting website which talks about some of the powerful ideas of conventional economics. I think these are very powerful ideas which contain deep insights into the world. I know some of my lefty friends will argue with some of them, but this is a good presentation in terms that are understandable by a person without an economics degree.

Hooman Majd

I just finished Majd's book The Ayatollah Begs to Differ. Here is a review by Steve Coll. It is a wonderfully entertaining book full of insights about Iranians (or Persians, if you will). In the West, we clearly fail to understand them. Here is a post by Majd in September, which gives you an idea of the reason behind Ahmaddinejad's outrageous statements about the holocaust and why the nuclear issue plays into the hands of the conservatives who stole the election. They are deflecting attention from the clash between the reformers and conservatives in Iran. Mr. A has a lot of supporters but most Iranians know he stole the election, a first in the country of which they are very proud. It is not because there is so much difference between A and Mousavi; they are angry that their votes wre taken.

The nuclear question is one on which most Iranians agree, as is the centrality of Shia Islam in their country. As Shias everywhere, they see themselves as persecuted. And Western powers ran Iran for many years prior to the 1979 revolution. They are not interested in a western-style democracy, but they deeply care about their Islamic democracy.

I continually wonder at all the Americans that continue to portray all Muslims as the same. This is real ignorance. Iranians hate the Taliban, who are Sunni fundamentalists. Shia have Ayatollahs, or religous authorities, somewhat similar to Catholics. Sunni's do not. So those who say "why don't their religious leaders protest the terrorism" are guilty of not undertanding Islam on many levels. There are no Sunni authorities per se and the terrorists are Sunnis. Within Iran, there are many views of religion, and different Ayatollahs disagree strongly.

Addendum: Started reading Eugene Rogan's The Arabs. Arabs were ruled by non-Arabs beginning with the Ottoman Turks in 1571. Of course, Persians are not Arabs. Many refer to Arabs as "locust eaters," according to Majd.

Best Books of 2009

Everyone is coming out with their lists. Here are my top 12 books published in 2009.
(1) How Markets Fail by John Cassidy
(2) The Evolution of God by Robert Wright
(3) Lords of Finance by Liaquet Ahamed
(4) The Good Soldiers by David Finkel
(5) Create Your Own Economy by Tyler Cowen
(6) The Media Relations Department of Hizbollah Wishes You A Happy Birthday by Neil MacFarquhar
(7) The Healing of America by T.R. Reid
(8) Guardians of the Revolution by Ray Takeyh
(9) Dangerous Games by Margaret MacMillan
(10) How We Decide by Jonah Lehrer
(11) Justice by Michael Sandel
(12) In Fed We Trust by David Wessel

There are some books that I haven't started or finished which may end up on the list:
The Inheritance of Rome by Chris Wickham
Empire of Liberty by Gordon Wood
The Arabs by Eugene Rogan

Here is my top ten published in 2008:
(1) Fixing Climate by Wallace Broecker and Robert Kunzig
(2) Predicatably Irrational by Dan Ariely
(3) The Purpose of the Past by Gordon Wood
(4) Nixonland by Rick Pearlstein
(5) The Ascent of Money by Niall Ferguson
(6) The Trillion Dollar Meltdown by Charles Morris
(7) The Great Warming by Brian Fagan
(8) The Man Who Loved China by Simon Winchester
(9) The Shadow Factory by James Bamford
(10) The Ayatollah Begs to Differ by Hooman Majd
Also considered are Outliers by Malccom Gladwell, The Logic of Life by Tim Harford and While America Aged by Roger Lowenstein.

Here are top three (or so) for other years:
2007: The Black Swan by Nassim Taleb; A More Perfect Constitution by Larry Sabato; The Forgotten Man by Amity Schlaes
2006: War of the World by Niall Ferguson; Omnivore's Dilemma by Michael Pollan; The Prince of the Marshes by Rory Stewart
2005: Postwar by Tony Judt; Collapse by Jared Diamond; My Year of Magical Thinking by Joan Didion; Blink by Malcolm Gladwell and The Undercover Economist by Tim Harford
2004: Ghost Wars by Steve Coll; The Americanization of Ben Franklin by Gordon Wood; The Anatomy of Fascism by Robert Paxton; Under the Banner of Heaven by Jon Krakauer
2003: Master of the Senate by Robert Caro

Who can believe that it has been nine years since Gladwell's The Tipping Point and over ten years since Germs, Guns and Steel by Jared Diamond and Righteous Victims by Benny Morris? Time flies. And The Guns of August by Barbara Tuchman was published in 1962. Hard to believe this wasn't taught in our boring high school history classes. But we now know, as my friend Vern says, that everything we were taught about history there was a lie.

New Gawande

Atul Gawande has an article in the current issue of the New Yorker praising the Senate health care bill for its address of the cost issue in health care reform! His view is partly based on the fact that we do not know all the answers in how to do this, emphasizing both our epistemic position and the fact that there is not one global solution. It is also based on the idea that trial and error is the way to approach this. I very much like this way of thinking, although I would also like to see government create more incentives to cut costs, although maybe I am missing something. His account of the growth of agricultural science is interesting in its own right. I do wonder, though, whether the analogy really holds up, one of the difficulties in arguing by analogy.

On agriculture in developing countries, Daniel Little has a tale of caution. You may increase productivity but at the expense of greatly increasing inequality such that many of the poor are worse off than before. I very much support his reference to Sen in helping people have the basic necessities to flourish. You can argue for this in a number of ways. I prefer a Rawlesian justice argument, but one can see how a utilitarian could also argue for this because once a person has the basic necessities, other goods have decreasing marginal utility. You can also see how this sort of action would violate Rawls' principle of Pareto efficiency; increases in wealth should not make anyone any worse off.

More Af-Pak

The paragraph below is from the Sabrina Taverise article, which you can access here. And here is the Scott Shane article. She is interviewing a Pakistani psychiatrist.

I asked him to spell it out. “It’s coming from Americans, Jews and Indians,” he said. “It’s an axis of evil that’s being supervised by you people....” In recent months, Pakistan has begun challenging the Islamist extremists on its border and the extremists have directed bombings against Pakistani citizens and institutions. Even so, Pakistan’s powerful news media aggressively trumpet the conspiracy theories, which are consumed by anyone who picks up a paper or turns on a TV.

The Shane article also has a terrific map that one can click on and enlarge. Some other interesting facts. Karzai is a Pashtun whose father was murdered by the Taliban. He is part of a Pashtun group that supported a return of the King years ago after the exit of the Soviets. However, the CIA and the Saudis funneled their money through the Pakistani ISI, which gave most of it to jihadists like Hekmatyr. Later they supported the Taliban to counteract Indian support of the northern forces (who were also supported by Russia).

Before the Taliban took over, one could not drive through Afghanistan without periodically having to pay extortion (tolls) to bandits. Unless the current surge can make living conditions better, many people will favor the Taliban in spite of their fundamentalist excesses and harboring terrorists. Currently, the government is rated the second most corrupt in the world (Iraq is fourth). So part of what has to happen is for the corruption to lessen.

As long as terrorists and insurgents can merely cross the border into Pakistan and be safe, not much will be achieved. We need Pakistani cooperation.

Terrorists can organize anywhere. The anarchist movement in the era around 1900 is a good example of this. Given all these factors, should we really expect very much long term from this "surge?" Maybe not. Then why spend the money and American lives? On the other hand, what is the danger that if this region is taken over by Taliban-like forces, that terrorists will get nuclear weapons? There is no easy answer to these questions.

Addendum: After posting this, I ran across this article which makes the argument so much better than I did.

Af-Pak

There are three articles in today's New York Times on Afgahnistan and Pakistan. On the front page is an account of how Obama came to his decision. Then there are two in the Week in Review section by Sabrina Tavernise and Scott Shane. Trying to understand how people in these countries think is crucial to our dealing with the region. Southern Afganistan, western Pakistan and eastern Iran are the home of the Pashtun tribe, the originators of the Taliban. One must also understand that Pakistan's biggest long-time enemy is India, who supported the northern forces (Turkmen, Uzbeks, etc.) in the civil war in Afghanistan against the Pashtun Taliban. Pakistan has historically supported the Taliban in Afghanistan, partly as a counter to India's influence. But now Pakistanis are actually feeling the effects of terrorism in their own homes. As with Saudis (and Americans), terrorism is far more acceptable when it happens to somebody else. These are ccomplex and interesting issues. The bottom line is that we want the Afghan central government to succeed and the Taliban to fail, for several reasons, not the least of which is to halt the movement of Islamic extremism whose goal is to take over the Middle East.

For me, this is one more example of Obama's competency. To the dithering charges, I say that GW should have dithered or thought more and not listened to Cheney so much. As to those on the left who say things like "we wanted change and we got more of the same," I say to you who was naive enough to think that electing a new president would change Congress? Domestic policy has to be pursued through Congress, which the Constitution gave the ultimate power to spend. Of course, over the last 50 years the executive branch has increased its power to conduct foreign policy without explicit funding approval by Congress, which is why Obama can be more effective here.

For more on goings on in Afghanistan and Pakistan, check out Steve Coll's (the author of the excellent Ghost Wars) column at the New Yorker magazine and the Af-Pak channel at www.foreignpolicy.com/afpak.

In Fed We Trust

This is a book I just finished by David Wessel on the meltdown of the last couple years mostly from the view of Bernanke and the Fed. It covers how the stage was set going back to August 2007 and is very good on the events of last fall. It is amazing how much was going on that even very knowledgeable people did not understand. And the extreme measures the Fed had to take.

There are some funny moments, too. When Bernanke and Paulson had to go to Congress to request money, Harry Reid commented that it would take the Senate two weeks to pass a bill to flush the toilet.

I'm not sure what to read or finish next. I've got several books started, but either lost interest or they were too long or intimidating. I am feeling intellectually bored and need to find some outlet. So I signed up for the Osher Program at the University of Utah, which is for we seniors over 50 years of age. They have six-week classes that meet once a week for an hour and a half during the daytime. I am taking a class next semester on the history of Iran and how it relates to the present. If anybody has some other ideas, I'd love to hear them. Lifelong learning at the U is too artsy-crafty and I am not sure I want to devote the effort to taking a real class, especially if it meets more than once a week. The great joy of graduate school was reading books and discussing them...with a very knowledgeable instructor. I need to figure out how to replicate that kind of experience.

Rational Irrationality

How Markets Fail by John Cassidy is one of the best books I’ve read in the last couple years. It is first about ideas. It then integrates them in helping us understand what went wrong with our financial system. The first third of the book contains a history of economic thinking from Adam Smith, Hayek, Keynes, Arthur Pigou, von Neuman, Kenneth Arrow, Milton Friedman, Robert Lucas, Kahneman and Tversky and many others. It details the increasing use and sophistication of mathematics in economics and the revolutionary insights of game theory. The stagflation (the inflation rate jumped into double digits but unemployment did not fall) of the 1970's was an event that mainstream Keynesians could not explain, paving the way for the revival of conservative economics. Friedman’s view that the real culprit of the Great Depression was the Federal Reserve’s failure to counteract the decrease in the money supply also paved the way.

Cassidy then shows how these ideas got incorporated into theories about finance (efficient market theories). Finally, he explains how this led to the financial meltdown, including the seizing of credit markets, which continues to affect us today. In doing so, he explains some of the complicated financial innovations such as structured investment vehicles (SIV’s) and credit default swaps. This sounds daunting, but Cassidy is so knowledgeable and such a good writer that he pulls it off.

John Von Neuman, a genius who made significant contributions in many areas, formulated game theory. Game theory is an inquiry as to how actors will behave when they have to take into account the actions (or expectatios) of others. The prisoner’s dilemma is a commonly occurring situation in which rational individuals will choose an outcome that is not in either’s best interests even in something as simple as a two-person game. With ten people in becomes virtually impossible to sustain a cooperative outcome. In the economic arena, it helps explain situations where rational self-interest in the marketplace leads to socially damaging outcomes. A general manifestation is the Tragedy of the Commons; a more particular outcome is destroying the planet by industrial pollution. This is one type of “market failure” (externalities). Since one of the insights of classical economics is seeing how rational self-interest can lead to mutually beneficial outcomes (the invisible hand), it poses a potential problem for this theory.

Frederich Hayek’s big insight is that prices convey information which allocate resources. Firms do not need to ask consumers what to make and how much; prices transmit the information. This results in what he calls an “economy of knowledge.” Individual participants in the market need to know little to be able to take the right action. Hayek later expanded this efficiency of the market into a political theory; he viewed the free market as the only effective guarantor of individual freedom. The failure of communism only reinforces this view. However, just because central planning failed, how can we be sure that the price signals the market sends are the right ones? The general equilibrium theory was supposed to answer this question by showing the existence of a set of market prices at which all goods will be supplied in exactly the quantities that people demand. This can be done, but only by assuming that each industry contains many competing firms and that the firms are not able to lower the unit costs merely by raising output. At these prices, it is not possible to make anybody better off without making someone else worse off. This theory was very persuasive to economists because of its mathematical elegance.

However, in any economy, even the most efficient, some people will fare off better than others. How do we decide which economic outcome is preferable? Who decides? Kenneth Arrow’s work showed how the models could do this. I will leave out the intriguing details, but he showed how the free market could generate a Pareto-efficient outcome (meaning you cannot make one person better off without making someone else worse off. However, the difficulty in applying the theory to reality was not only the restrictive assumptions, but later work showed that in order for such a formal model to work, people would need access to an infinite amount of computation capacity (there had to be perfect information). The axioms of individual rationality and perfect competition were not sufficient to determine what would happen.

On top of this, the work of behavioral economists following Kahneman and Tversky have shown many of the foibles of human reasoning. We are not able to approach making the calculations required by classical economics. We are very bad at probability. Instead, we use “rules of thumb” (heuristics) to reach conclusions. These are “wired-in” and have been selected for by evolution. For much of human history, it was more important to think quickly than to deliberate. One of the irrational responses is to go with the herd despite available contrary information. This leads to bubbles. But it is rational for financial actors to go along with the herd. They continued to take such risks because everyone else was doing it and making a lot of money. If they didn’t, they would not have had jobs. But this just made the bubble bigger. As opposed to the negative feedback loop of general equilibrium theory, this is a positive feedback loop.

George Akerlof showed how hidden information can lead to market failure (adverse selection). This is potentially an issue in any market where the quality of goods is difficult to ascertain other than by casual inspection. The problem of hidden information eventually shows not only is there not a single set of assumptions under which markets are Pareto-efficient, but that with real economies (all those that exist outside of economics textbooks), they are never Pareto-efficient. There is always a potential policy intervention that could improve the welfare of at least one person while leaving nobody worse off. Just as externalities lead the system to issue the wrong price signals, so does hidden information.

Instability is true in most markets but most important in financial markets, for its failure has cascading effects on the rest of the economy (it is also important in the health care market, leading some people to not be able to get any insurance, not just expensive insurance). In an economic downturn, lenders have difficulty ascertaining which borrowers are good risks. This was amplified in recent history by financial innovation; the markets for items like credit default swaps disappeared, making it impossible to value them, which was exacerbated by the opacity of various large financial actors like hedge funds and investment banks. And because of the opacity of credit default swaps, it was difficult to determine who owed what to whom. This implosion was also exacerbated by the myth that financial institutions could mathematically model risk (hello Nassim Taleb), which contributed to rising leverage levels and more risk. A house of cards getting bigger all the time as well as more fragile, with the big players surfing the bubble.

In the efficient market view of finance, speculators play a stabilizing role, purchasing undervalued assets and selling short overvalued ones. However, during bubbles speculators play a destabilizing role (it seems like they do when the bubble bursts, too). Hyman Minsky went beyond Keynes in describing how booms and busts are created. The process does not depend on any external shock. The primary causes come from the competitive forces that are at work in the financial sector. Any period of stability “leads to an expansion of debt-financing,” with innovation and novel financial assets. Efficient markets theory turned on its head. This is a theory of rational irrationality, with the individual rational actions of banks and other financial firms serving to destabilize the entire system.

Cassidy argues that the current crisis is similar to the S & L crisis of the 1980's. The central causes are the same; a misguided faith in the free market, deregulation that was heavily influenced by industry lobbyists (and the conservative movement) and an unsustainable real estate boom. This does not mean that government is usually better than markets at allocating resources or that markets are not a means for driving prosperity. However, the debate should not be between laissez faire capitalism and a command economy. Markets do enable people to make mutually advantageous deals (win-win games). The place to begin looking for appropriate government action should be centered on market failure, which Cassidy calls reality-based economics (vs. utopian economics). The primary source of economic instability is the short-term rational (at the individual level) actions of the financial sector. Wall Street should be one of our biggest concerns and it needs to change. Business as usual is no longer rational for our society.

Overconfidence

In my last post, I raised the question why most people seem unwarrantly confident in their own opinions. I suggested that this may be partly due to fear. But there is another reason. Because it is naturally how we, as human beings, think.

The groundwork for modern behavioral economics was laid by Kahneman and Tversky. In the old model of human rationality, it was assumed that people were able to make probablistic calculations. What has been found is that instead we use unconscious rules of thumb, or "heuristics." These thought processes probably had evolutionary value at some time. Better to think fast when the lion is coming than reason.

One of the heuristics is to generalize on the basis of insufficient evidence. Once people are convinced that a small sample is representative of reality, they place unwarranted faith in their ability to forecast the future. Of course, overconfidence is often a valuable trait in itself. Currently, it leads people in sales, law and leadership positions to often be more effective. There is no reason not to think that some such traits often had evolutionary value in primitive societies, too. In order to have evolutionary value, it just means that you were more likely to pass on your genes. Certainly, the lotharios were better able to do this than the slackers.

There are other heuristics that make us likely to be wrong or overconfident. The availability heuristic leads people to give more weight to dramatic events, even if they occur less frequently. People can get "anchored" by even random occurences. For instance, studies have shown that a person presented a certain number randomly prior to making a decision will influence his decision dramatically. And then there is "confirmation bias." We tend to look for facts that confirm our already held views, rather than facts that would disconfirm them.

Often procrastination and laziness play in. It is easier go with your "intuition," your belief based on unconscious heuristics, than it is to deliberate. The latter requires effort. These tendencies have been correlated with regions in the brain by neurologists. Deliberation fires up the frontal cortex. Unconscious processes, the limbic system, which are the site of emotions. So even though it may be natural to be overconfident, the awareness of how little you know may also fire up the limbic system, making people even less likely to evaluate their beliefs. And the less likely you are to consider that you may be wrong, or even that your view is a prejudice based on little evidence, may make you even more overconfident.

Corrections

The last sentence of my last post looks just a day later to be pretty off the mark. After reviewing a bunch of posts on Steve Coll's blog, it appears that McChrystal's counterinsurgency strategy is to create outposts of government control around major cities, "ink blots." In order to police the country, one would need at least 500-600,000 more troops. Needless to say, we cannot afford that.

Yesterday, I was reading Juan Cole's Engaging the Muslim World. Cole is a professor of history at Michigan and was often interviewed during the Iranian protests. This is a wonderful counterpoint to much of the Muslim-bashing that goes on here. He makes the point that it is unlikely that a foreign military force could repress the rebellious Pashtun tribes in the south anyway. And many of the tribal regions do not want a strong central government ruling them. He also points out that our attempts to eradicate opium production robs many in the poorer regions of their means of livelihood. One in seven Pashtun farmers in the Helmand region who saw their poppy crops destroyed reported that they had to sell one of their children as a result. He also points out that a massive number of foreign troops in the area may just make it a magnet for radical Islamists. However, his bottom line is that what Afghans need is international aid and an intensive strengthening of good governance, i.e. Karzai needs to get rid of corrupt officials in areas of government control.

He also has an interesting chapter countering what he calls the Wahhabi myth, to which I may be susceptible. While private funds were given to madrasses in Pakistan who preach violence, the government of Saudi Arabia has been an ally. He also has some very important things to say about our attitudes about other Arab countries, including Pakistan, that are not based on facts. One is that Pashtuns were not primarily radicalized by these madrasses and that Pakistanis have overwhelmingly voted against Islamist parties. There are also a lot of good points about how the Bush administration made things worse in this part of the world. Arabs have good reasons to feel anxiety about U.S. presence, given our history of military intervention and the fact that they sit on most of the world's readily available oil as well as huge deposits of natural gas. But all that is for another day. I need to think about something else for awhile.

I started reading This Time is Different by Kenneth Rogoff and Carmen Reinhart and How Markets Fail by John Cassidy. The first is a study of financial failures over the last 800 years. The beginning was very good, but I may skip to the last part about our current situation. One has to ask the question of whether we can keep incurring more debt as a government. Cassidy's book looks to be more about the ideas that have led us into this situation. But there is never near enough time or energy to read everything that is interesting. It is instructive, however, to see how my views can change from one day to the next. I don't see how so many people can express the amount of certainty they seem to have about their opinions. I guess it causes too much anxiety for them to appreciate how little they really know.

Lessons from Ghost Wars

Steve Coll's book Ghost Wars was a marvelously written history of our involvement with Afghanistan from the late seventies to 9/11. His new edition contains facts that came out of the official U.S. investigation. The book reveals many points at which decisions were made that had far-reaching effects, such that things could have turned out differently. Such books cast doubt over histories that portray events along one overreaching narrative, whether it is Chomsky or Podhoretz.

We helped create the power of radical Islamism, initially by facilitating the rule of Ibn Saud's family over the area we now call Saudi Arabia (which was intimately bound with radical Wahhabi preaching), and more directly, through supporting the mujahedin in their war with the Soviets. Since we failed to have a CIA presence in Afghanistan, we relied almost entirely on Pakistan's intelligence agency, the ISI, and in the process made both the ISI and the mujahedin very powerful...with even more support from the now-rich Saudis. When the Soviets left, we completely disregarded the country. We cannot afford to do so again. So we cannot just pull out without there being a strong government. Otherwise, the Taliban will facilitate radical Islamic terrorism, as they did before.

But it has now been over 8 years since 9/11. What has Afghanistan become? What have the Taliban become? What has Pakistan become? We need to realize that Pakistan continually lied to us about their support for radical Islamists in order to fuel terrorist activity in Kashmir against India. India is always their biggest worry and they will do what they think they need to do. One has to wonder how stable their civilian government is. The main two actors are not much recommended. Will the military seize control again? However, one should be cheered that they are finally taking some action against rebels in the west of their country. And one should be cheered that the Obama administration is engaged with both countries and is attempting to force the Karzai government to reform.

The last third of the book concerns the activities of Al Qaeda and our various government entities, who knew he had big plans and were very worried. This history involves many more failures on our government's part. It easily could have turned out differently. 9/11 could have been prevented. You might also check out James Bamford's book The Shadow Factory, for more specific failures by the NSA in this regard.

All that said, we need to get beyond the surge mentality of the right. Afghanistan is a very different place than Iraq. There will never be a simple military solution. As Steve Coll reminds us in his blog at the New Yorker (which I have linked to on this page), we first need to consider what our goals are. I think that he is right that one of them has to be to prevent the Taliban from coming to power again. Unfortunately, that is going to involve negating their power in the south, the Pashtun land of Baluch.

Wed. bits

I am still reading Ghost Wars so I've been a little over-focused the last few days. Hey, it's a long book. But highly recommended. It is changing my views on Afghan policy. Here are a couple tidbits off the top of my head. When Saddam invaded Kuwait in 1991, bin Laden went to the Saudi king and requestd a jihad against Saddam using his soldiers. The king decided to allow American troops to do the job. Bin Laden was pissed. Or another: we were hunting and trying to kill bin Laden for years before 9/11. There was even a separate division of the CIA devoted to bin Laden. In 1999, George Tenet, head of the CIA announced publicly that Al Qaeda was the second biggest security problem we faced.

Here is a review of Steve Landsman's new book, which I thumbed through in the bookstore. I loved his argument about religious belief.

Here is Malcolm Gladwell's response to Steven Pinker's review of What the Dog Saw.

And here are Tyler Cowen's suggestions for health care reform.

Books

The Atlantic Magazine has published its 25 best books of the year here. Gordon Wood, easily my favorite author regarding the early history of the U.S. and the revolutionary era has a new book out called Empire of Liberty. Other books on the list that caught my attention are The Thirty Years War, The New Old World, The Arabs and This Time is Different. I also ran across a book called The Cold War that looks interesting. If anyone has read any of these, give me some feedback.

I am a huge Malcolm Gladwell fan, especially his New Yorker articles and The Tipping Point. He has a collection of his articles out called What The Dog Saw. Steven Pinker has some pretty incisive criticisms in his review in the NY Times today.

I wonder when Robert Caro is going to publish his fourth volumn of his biography of Lyndon Johnson. The Senate was a brilliant book. I hope Nassim Taleb is working on something new. I have read The Black Swan twice and may read it again when I get my loaned copy back. And where has Tony Judt been lately? I love his articles and Postwar was brilliant. I am getting a little burned out on behavioral economics and the financial meltdown, which is unfortunate because the best stuff on the latter is probably coming out now, after authors have had some time to digest and write. Andrew Sorkin's new book looks interesting but I know I wonuldn't read it for quite some time. It also purportedly doesn't contain much analysis, but Sorkin apparently had great access to the big Wall Street players.

Back to Steve Coll's Ghost Wars. This book is full of so many surprises that I can't wait. And it is very timely with the questions about Afghan policy swirling.

Ghost Wars

I am reading Ghost Wars by Steve Coll, an account of Afghanistan from the Soviet invasion of 1979 through 9/11. It is page-turner, with the first quarter of the book setting the background, with some great chapters on the history of Saudi Arabia, bin Laden, William Casey and the years leading up to 1986. Covert funding for the Soviet opposition increased dramatically in the mid-80's due to Congressional appropriations to the CIA (led by Charlie Wilson), which were matched by official Saudi contributions by their intelligence agency, and by massive private Saudi contributions. The CIA did not even have an outpost in Afghanistan in 1979 and for years we funneled all our money through the Pakinstani intelligence agency, the ISI. Although there were many groups fighting the Soviets, most of this massive surge in funding went to the Islamist groups such as Hekmatyar's. The Pakistani border ended up being a huge enclave of ISI, Arab volunteers and Wahhabi madrasses. They trained 6000-7000 jihadists a year.

The U.S. promoted these jihadists and the recruitment of Arab volunteers. The focus of the Reagan administration and especially Casey, was the defeat of the Soviets at all costs. Casey saw links of revolutions to Russia everywhere, including the IRA, Basque nationalists, Palestinian terrorists, and others. He was also very religious and saw a natural coalition of Christians with the Islamists against the atheistic communists.

The Islamist movement had been becoming more radicalized over the years, initially from the Muslim Brotherhood in Egypt in the 1920's. Cairo was the intellectual center from which the radical views spread, eventually to the university bin Laden attended in Saudi Arabia, but also to Afghanistan. However, most Afghans were primarily influenced by Sufiism and little in common with the Wahhabi-led extremists. They were a diverse bunch and included Ahmed Shah Massoud, the most formidable Afghan military leader who headed a northern alliance. Robert Gates, then second in command at the CIA, remarked in his memoir in 1996, that "no one should have any illusions about these people coming together politically."

The Saudi budget for 1969-74 was $9.2 billion. For the next five years, it was $142 billion. A generation removed from nomadic poverty, they were now powerful players. From the beginning, Ibn Saud had linked his power with the Wahhabis. Sensing the threat from Islamic radicalism, he embraced it, hoping to control it. There seemed to them to be no plausible politics but strict official religiousity and many of the royal family were true believers. Their state was, after all, the only modern nation-state created by jihad. In Afghanistan, bin Laden was just one of a variety of actors. But he began to ask the question of whether the jihad should not be just against the communists, but also against the corrupt governments of the Middle East, the U.S. and Israel. He was well-connected, wealthy and moved freely in circles of Saudi intelligence.

The Soviet introduction of the elite Spetsnaz, along with their Mi-24D Hind attack helicopters, seemed to be winning the war in 1984. But along with the increased funding, Afghan rebels now got satellite reconnaissance and Stinger hand-held missiles. On September 26, 1986, they were first put into use, detroying three Soviet helicopters.

Review of Three Kings

Lloyd C. Gardner’s Three Kings; The Rise of An American Empire in the Middle East after World War II is a highly readable account of U.S. policies regarding the Middle East beginning before the end of the war and continuing up to around 1980. It was interesting enough that I ordered his previously published The Long Road to Baghdad; A History of Foreign Policy from the 1970's to the Present. It focuses mainly on two episodes, one dealing with the crisis in Iran in 1951-53, when Mossadegh came to power, the Shah fled, and Iran threatened to nationalize their oil industry. In response, we (through the CIA) organized a coup which led the Shah back into power. The second centers on our dealings with Nasser in Egypt.

The main lesson I take is that the turbulent situation in the Middle East was caused partly by our policies. After the war, the British wanted help controlling the Middle East (they wanted to keep their empire) and the U.S. was only too willing to help, eventually replacing the Brits as the reigning power. After all, the oil that lay under the ground was a source of military power. We promoted stable governments by supporting dictators. Not only the Shah, but we also helped install Saddam in Iraq in 1963 and made it possible for the family of Ibn Saud to rule Saudi Arabia. One of the unintended consequences was that these dictators thereafter were able to blackmail us for money and arms. This was inconsistent with our professed aim, which was to promote self-determination of countries leaving the colonial era and democracy. What we did was to work to thwart Arab nationalism and it led to an arms race. It retarded political change, but when that change came it was virulently anti-U.S., such as during the Iranian revolution in 1979. After that, we tried to use Saddam to prevent the spread of such theological revolution by helping to fund the eight-year war with Iraq. We all live with the consequences today.

The ultimate justification for these actions was the “war against international communism,” even though Russia was not really a threat in this region and there was no universal communist threat as China and Russia were opposing powers. No one doubts the power of Russia in Eastern Europe at the time, but we made our conflicts into an ideological war in order to mobilize public opinion. In promoting these policies, various presidents acquired more power for the executive branch by funding wars without Congressional approval. Whatever you think of the communist threat, the success of these policies in the Middle East was temporary at best.

Irony abounds in this tale. As another example, Truman, in order to win the 1948 election, needed Jewish finance, so he opposed the British, who had the mandate on Palestine and tried to limit Jewish immigration. Ultimately, the Brits tired of this role (they could no longer afford their empire) and abruptly gave up the mandate, after which Israel declared itself a state. And, of course, we ended up being the fund of Israel’s military power, too. Our dealings with Nasser actually drove him to accept Russian assistance in the late 1960's. By keeping Saud in power, we also indirectly empowered the Wahabbis, who Saud had to appease because of the presence of Mecca in his country. Now we also have a dictator in Egypt, are supporting a corrupt government in Afghanistan, and are heavily involved in propping up the governments of Pakistan and Iraq.

These policies involved a uniting of political and economic interests. I imagine that those on the left believe it was the corporate interests that controlled. While this has certainly been the case in the past in some places, such as our invasions of various Latin American countries, I think that here the main force was a misguided effort at keeping the world safe. Of course, the oil companies benefitted, too, at least for awhile. Those on the right would have had us become more directly involved militarily, which ultimately we did in Iraq, partly justifying the action as spreading democracy! Whatever this history teaches us, it at least shows why they don’t trust us. Is it also partly responsible for the rise of violent Islam?

Addendum: This book would be better described as a history of US State Department and executive policy toward the Middle East from 1947-1960, during the Truman and Eisenhower years. Gardner implies that during these years we set the policy that we would follow for years to come.

Afghan Health Filibuster

Maybe it is because I woke up too early and am tired that I'm finding so much interesting stuff this morning on my news and blog troll. Here is a great interview asking the question why don't the democrats let Joe and the Party of No fillibuster. It is more complicated than what I suspected, but one source of the reason that just the threat of filibuster is so powerful nowadays is that Congressmen are busy campaigning 24/7.

Ezra has a another interview with health economist Jon Gruber on why a version of the Senate health care bill should be passed and he addresses the question of whether it does enough to address cost. I concur. It should and it does as much as we can expect at the moment. Nicolas Kristof suggests that in deciding whether to send more troops to Afghanistan we should consider the real costs of doing so, and compare those with health care reform. I have been arguing that we need to consider what we hope to accomplish, and this makes me even more leery of more troops. And Megan McCardle advises us not to get consumed with the sunk costs. She also praises Obama's rationality. If only our electorate was as rational. I read in the paper today that 57% favor more U.S. troops. I am still undecided on this issue and am reading Steve Coll's Ghost Wars, which is about Afghanistan from the time of the Russian invasion to 9/11. Already you can see how stupid our leaders were and how little the CIA knew. Kinda reminds me of James Bamford's book The Shadow Factory. Our intelligence agencies knew all about bin Laden long long ago and were spying on him. The NSA was even monitoring the planning center of 9/11 in Yemen and knew about several of the highjackers, but they did not confer with the CIA or the FBI.

T.R. Reid

Dave Leonhardt in the NY Times today has an article on why the Senate bill will be better on dealing with health care cost issues. So maybe some of my pessimism is not warranted. And it is not given that premiums will rise. Healthier people are supposedly being added to the pool as well as riskier.

T.R. Reid's appearance on Frontline last night was interesting. I was disappointed that the show was a rerun from last year. Isn't this November? His book The Healing of America is a welcome look at how other wealthy democracies deal with health care. He says that while the US "does well when it comes to providing medical care, it has a rotten system for financing that care." He argues that what other countries have that we don't is a unified system; everybody is included in the same system and covered by a single set of rules. This doesn't necessarily mean a Canadian-style single payer system. Germany has more than two hundred different insurance plans. Japan has more than two thousand. And in Germany, these plans cover people their entire lives. They don't have Medicare.

He also argues that universal coverage has to come first because it is "an essential tool to control costs and maintain the overall quality of a nation's health." Only this will create the political will to accept limitations and cost-control measures within the system.

Maybe we are on the right track. It is a slow track, but we are not going to be able to change everything at once. Reid's book is a good place to start thinking about it. Let's try to learn from what others have done rather than reinventing the wheel.

The Health Care Bills

I have not studied the bills in-depth, so I may easily change my mind. But first, I think we need to pass a bill. And what we pass is not going to effectively address the big elephant in the room, costs. But it is going to do some good stuff, including giving access to most of those people who cannot get insurance and eliminating preexisting conditions as a basis for denial. By doing so, premiums are going to rise. You add riskier people to the pool. The public option question at this point is only about the small percentage of people who will not be able to get insurance. Who are these going to be anyway? If we have an exchange where these people can choose the coverage they want, how important is a government-run program? So liberals, get over it. The right wing focus on the public option is stupid, but it is not that important. In the long run, we are going to have to return to look at the single payer option anyway when we finally get around to addressing costs. Continuing to link health insurance to employment is not the future. You can look at any other wealthy democracy to see this. And Medicare needs to be independent from Congress to eliminate special interests from blocking reform. Ultimately we need to do things like eliminate fees for services payments. If Medicare shows that it can deal with costs in a more innovative and effective way, then you have an argument for Medicare Part E (for everyone). I happen to think exchanges that give people choices are a better way to go, but that is partly an empirical question to which we do not know the answer. And you could always have both, a basic Medicare program along with exchanges for Medicare supplemental insurance. What happens in the future is dependent on what has happened in the past and what is happening now. We need to get a health care reform bill passed now. But knowing the Senate works, you have to be skeptical. After all, the Senate managed to keep blacks from exercising their civil rights in the south, including voting, for 100 years after the Civil War. One of the most effective methods was the registration test, graded by local board members so that no black could pass. Or having to have a sponsor to register. Let's also realize that many of the provisions do not go into effect until 2013. The debate about costs needs to continue. Holding out for the perfect plan now is less likely to result in healthy reform in the long run.

Addendum: For the fiscal year 2008, Medicare cost per enrollee was over $11,000. According to the Kaiser Family Foundation, cost per enrollee was $7439 in 2004. The fair amount for someone who is not subsidized by the government is cost per enrollee. No insurance company profits to figure in. So, instead of creating a whole new agency, why not let those who cannot get insurance sign up for Medicare and pay the premium? I would like to give them some different options.

20 Years Ago

Of course, 20 years ago the Berlin Wall fell. There were already hundreds of thousands of East Germans fleeing their country for the West because their living conditions were so abysmal. It raises the issue of the failure of communism. One of the most potent criticisms is the lack of an ethical dimension, which combined with the view that one was on the right side of a mechanistic history, gave people permission to do terrible things. I ran across this article which largely expresses my own views. And here is an interesting article on ethical reasoning. In my own study of Marx twenty-five years ago, I came to realize that he had no theory of the state and that his belief in the revolution was a quasi-religious one of conversion. And, of course, his idea that the world would be split into two classes has been proven false in successful countries. But why should one think the world will be better when the proletariat take over?

Addendum: This post does not convey what an enormous moment this was in Europe, as you may have seen on various news reports today. It also assumes that one knows how many well-meaning intelligent leftists in the 20-40's supported communism, even the Stalinist state. And it does not acknowledge the hysterical reaction to communism in this country, often manipulated by our leaders. The movie The Invasion of the Body Snatchers is in its own way a comic take on this attitude.

The Tribune and Disability

Here is a column from the Salt Lake Tribune last week on the rise of Social Security disability claims. You will see my comment at the bottom. I did not mention that the assertion that 13% of cases are approved at the administrative law judge level is laughably false. It is over 50%. I wrote a letter to the editor pointing this out as well as why a couple assertions by Mr. Allsup are ridiculous. They refused to print it. We know newspapers are in trouble, but when I read stories like this on an issue I know something about, and they are so wrong, I wonder about other stories. This is lazy journalism. Get a couple quotes from somebody, no matter how disrepected he is in the professional community, and a response from somebody else, and call it journalism. And explain nothing. The aging of boomers has already caused an increase in disability claims and this recession has been hardest on older men. If you lose your job, you are less likely to get hired for another job. Disability rules reflect age. If you are over 55 and cannot do your past work, the rules are more lenient. Of course, when many are unemployed and prospects are slim, people are looking for a way to get by. But the author could have at least explained what "silver tsunami" means and why it is occurring.

The Great Game Cont.

I am reading Three Kings; The Rise of an American Empire in the Middle East After World War II by Lloyd C. Gardner, a professor of history at Rutgers. So far, the action is taking place during WWII. In 1941, Russia and Britain occupied Iran, although it was nowhere near the war zone. This was another episode in the contest between the Russian Empire and the British Empire over the land south of Russia, called The Great Game. Of course, everyone knew that there was a lot of oil there. This is when FDR began his negotiations with Ibn Saud for access to Saudi oil and a military base on Saudi soil. We managed to fund Saud's government during the war by using the lend-lease program, even though the Saudis were not in the war's theatre (as Presidents began creating funding mechanisms that did not need the approval of Congress). Saud proceeded slowly, partly playing the Brits against the U.S., but also because he was held personally responsible for keeping the land around the sacred sites "free from the taint of foreign occupations" (bin Laden's primary complaint...and he attacked the base there in 1996).

It is perhaps well-known that the British had no intention of relinquishing their empire after WWII and that this was opposed in principle by FDR (in the Atlantic Charter). But everyone was working behind the scenes during the war to determine what would happen in the oil-rich middle east after the War. FDR's freedom of self-determination of countries took a second seat behind practical considerations around oil and bases for air power, which was the emerging force in the capacities of armies and in transportation. And the Truman doctrine, which immediately was about aid to Turkey (under pressure from Russia) and Greece (under pressure from local communists), but was also one of the first political announcements of the Cold War (after Churchill), was also an ideological chimera behind which real political decisions took place. Anything could be justified by an appeal to the fight against "international communism."

The Good Soldiers

I started The Good Soldiers by David Finkel earlier this week. I would read a chapter and then have to go blow my nose and wipe tears out of my eyes and that was usually enough for one day. Last night I picked it up and couldn't put it down until I finished at about 1 a.m. This is very powerful book. It is written by a reporter embedded with the 2-16 batalion in East Baghdad during "the surge," and takes place from April 2007 to March 2008. I don't believe that anyone who has not been in a situation like that can really imagine it, but this book gives you a vivid sense of the human consequences of war on soldiers. This particular war, with multiple deployments, better medical care in the field, and better armor has led to many more soldiers being saved, but many more damaged in different extreme ways, including severed limbs, closed head injuries from explosions and PTSD. I'm not sure how a human being couldn't have some PTSD after going through that. A great piece of writing.

Health Care Costs

Here is Ezra Klein raising the question of why every unit of health care, e.g. drugs, doctors, hospital care, costs much more in the U.S. than other wealthy democracies.

And even in Medicare Congress refuses to accept cost-saving measures because of lobbying from interest groups. Can we really hope to reign in costs with Medicare Part E (Medicare for Everyone)?

Potpourri

How come op-ed writers are so bad? The one I am most likely to find interesting is David Brooks, but today's column is a stinker. He compares Obama's position to Lincoln and Churchill. But the Afghan war is not the Civil War or WWII. Why should we care about places in the Stan where almost nobody lives? Why should we want to be their police force?

Ezra has more good columns today on health care. In one he questions how cost-effective the public option is going to be. It seems pretty clear that premiums are going to rise and that some people who don't have care now in order to get insurance are going to have a huge bill. Of course, the penalty for not getting coverage is miniscule. But maybe that is a good thing. If they really can't get coverage, now they will be able to. But since they will tend to be the most in need of health care, they will be more expensive. Either the premiums are going to be high or taxpayers are going to be stuck with more expenses that are currently imagined.

I'm not a therapist, a buddhist or a philosopher, so this may be really simple-minded. But isn't a feature of all three that they require detachment from your emotions or beliefs to work? Of course, you have to feel the emotions first so that you know what they are. But then you can detach from them instead of identifying with them. Same with beliefs. We can carry around unexamined beliefs that determine our opinions, including what the relevant facts are.

Justice Part 3

Rawls idea that we would choose equal liberties and to be treated with respect by government of course assumes that we would choose to have a government. Remember, we are trying to envision what kind of society we would create if we did not know what our situation was...our talents, starting points, etc. I am going to bypass this point, but any anarchists out there might want to challenge this. It seems pretty obvious to me that we would want to have the essentials of any sort of decent life. If we were unlucky in health and could not work, we would want to have at least the basics covered by those luckier. The basics would at least include food and shelter. What if we were too poor to afford necessary medical care? That seems like an essential. Well, our government provides food stamps, housing assistance, Medicare, Medicaid and Social Security disabilty benefits for those who are poor, old or unlucky. Another question is to what extent should we provide these services. With food, the answer is clearer. People need a certain caloric intake to be able to function. How about medical care? As a friend pointed out to me some time ago, we really haven't been addressing what is the basic level of medical care that should be provided. In fact, beginning to do so seems to leads to screaming from various people about rationing. I understand that it is rational for seniors to be worried about this issue, but we cannot afford to give everyone every treatment they want. But what about all reasonable and necessary treatment?

Justice and Contracts

The idea that there is a sort of social contract that defines our rights and duties in a society is an old one, tracing back to at least John Locke. But, of course, none of us has actually agreed to such a contract, although immigrants must agree to obey the law in order to become citizens. Locke came up with the idea of tacit consent, if we enjoy the benefits of government we consent to the law and are bound by it. In contract law, not all contracts are enforceable. For instance, to be a contract there must be consideration (something given in exchange for a promise). Likewise, the mere fact that you and I make a deal does not make it fair. In Sandel’s words, the contract must respect autonomy and reciprocity; it must be voluntary and mutually beneficial. He uses the example of an elderly woman who agreed to a contract to pay a contractor $50,000 to fix a leaky toilet (supposedly a true story). Enforceable? Morally binding?

But a contract between parties who were equal in power and knowledge and equally situated would be a perfect contract. The terms of such a contract would be just by virtue of their agreement alone. This explains why Rawl’s idea of the original position behind the veil of ignorance is so powerful. It is the pure form of an actual contract.

Rawls proposes that the first principle that would be agreed upon would be a principle of equal liberties for all citizens, including the right to liberty of conscience and liberty of thought. We wouldn’t want to be oppressed, even if it turned out that we were in the minority. We want to pursue our ends and be treated with respect because we are human beings. What other principles would we choose?

As an aside, thinking about justice and contracts is part of what my friend objected to about changing the terms of the agreement later, such as if I work and pay Social Security taxes based on the promise that I will be taken care of when I retire, then it is unfair if the majority change the rules after I have made the contributions asked of me. The fact that there is not an actual contract doesn’t matter. What matters is our understandings when we made the deal.

Of course, any employer can fire anybody for any reason with no recompense if there is no employment contract. And in this country any remedy for such a breach of contract is not going to be you keeping your job. In companies that haven’t paid back their TARP loans, they are partly employees of the taxpayers. Why can’t our representative lower their salaries or prevent outrageous bonuses? We never had the understanding that these guys could pay themselves whatever they want. So I think the moral argument still fails here. But it also shows why this is an inadequate response even to bank pay. The guys at Goldman Sachs who have paid their TARP money back can give themselves whatever bonuses they want, subject to the wishes of the shareholders, which appear to be inadequately protected by the board of directors.

Justice

I am reading Michael Sandel's book Justice and last night Tita asked me about it and said I should talk about it on the blog. So here goes. Sandel's class on justice draws 1000 students at Harvard each time it is taught and this book is easily understandable, although like all good philosophy it is not casual reading. One problem in deciding what our societal institutions should do is that we reason from our particular situations. If I come from a rich family and am healthy I will look at the world differently than someone who is born poor with a disability. John Rawls, one the most famous modern philosophers, came up with a way to think about the issue more objectively. He uses the idea of a social contract but with some twists. Imagine that you make judgments behind a veil of ignorance, that is you do not know what talents you have, what your social standing is, etc. You could end up on either end of many spectrums that do not result from anything you are responsible for, but are just a matter of luck. How would you have our institutions function?

More on health care costs

As much as I loved the discussion of costs with Atul Gawande on the New England Journal of Medicine site that I posted on Facebook, Ezra Klein asks some very good questions after his discussions with the head of Kaiser Permanente. Why haven't they taken over the market? The short answer is employer-based health care. Before you get too excited by the idea of single payer government health care, consider that Canada spends a greater per cent of GDP on health care. Do they have better care? He also notes that we pay much more for a unit of service than people do in Europe, which doesn't have a Canada-type system. For instance, a CT scan there costs a couple hundred dollars and here it costs over $15,000. Why? Below is the abstract for a paper dealing with this issue, which you can access through Ezra.

ABSTRACT: This paper uses the latest data from the Organization for Economic Cooperation
and Development (OECD) to compare the health systems of the thirty member countries
in 2000. Total health spending—the distribution of public and private health spending
in the OECD countries—is presented and discussed. U.S. public spending as a percentage
of GDP (5.8 percent) is virtually identical to public spending in the United Kingdom, Italy,
and Japan (5.9 percent each) and not much smaller than in Canada (6.5 percent). The paper
also compares pharmaceutical spending, health system capacity, and use of medical
services. The data show that the United States spends more on health care than any other
country. However, on most measures of health services use, the United States is below the
OECD median. These facts suggest that the difference in spending is caused mostly by
higher prices for health care goods and services in the United States.

The Future

What will the world be like in 50 years? Here is an ongoing fun discussion at Marginal Revolution...a good example of why Tyler Cowen is my favorite blogger. As another blogger remarked, Tyler not only has an opinion of everything, he has thought about everything. Of course, not true, but still...

As many of you know, I am a huge Nassim Taleb fan. Check out his website at www.fooledbyrandomness.com/ There is a discussion there with Daniel Kahneman that I have to watch sometime. Apparently Nassim thinks we ought to nationalize the banks.

What do I think? I think we are pretty clueless because of the existence of Black Swans. Maybe the Great Disruption will be December 21, 2012. Whatever the black swans are, do not assume they will all be bad. Who in 1960 predicted the internet?

Executive pay cuts (and Social Security)

A good friend writes:
The president's comments on executive pay. While it seems true that shareholders should have a voice in how their "employees" are paid and most shareholders would agree that they are being decidedly overpaid, there is a problem with the government limiting pay in this particular event. The government made a contract with the banks and car companies (which I did not and do not agree that they should have). Then after agreeing to the terms of that deal comes back and unilaterally changes the terms apparently for political purposes IE: the taxpayers deserve better. A notion that should have occurred to our politicians long before now but still flies in the face of contract law. Done properly, it should have been part of the original contract's terms not an afterthought. Worse, the decision to do this is not being made by Congress but by appointees of the current administration. By the way, this is not entirely without precedent as they did it to social security recipients by adding a tax to their benefits and are trying to be more egregious by trying to means test social security benefits. That would mean that in spite of paying premiums for forty plus years some bureaucrat will just decide that you already have enough retirement funds so you won't need any from your social security "insurance" fund.
http://online.wsj.com/video/obama-comments-on-executive-pay-caps/909115ED-8E6A-4195-B7D5-75363F247869..html

Was there a contract between the government and the banks? I don’t know. If so, you may have a point. I doubt that there was time to draw up contracts when Paulsen began bailing out the banks. The meltdown was occurring.

Let me address Social Security first, where there clearly is no such contract. Retirees’ benefits are paid for by current workers. It is an ongoing pay-as-you-go system that is already hugely welfare-oriented. That is, those who put in the most get a far lower return than those who put in little. Those who first got benefits got an even better deal; they didn’t pay in anything, which leads some to call it a ponzi scheme. However, I think Social Security has been a great idea. I think that those who can work ought to pay for our elders when they get old. The problem becomes that people live longer now and as boomers retire there are going to be fewer workers paying for more retirees. You have to raise the retirement age, lower the benefits or raise the FICA taxes. Geezers like me might think it is unfair to do either of the first two, but I imagine younger workers would think it is unfair to raise the taxes they pay (for a system they doubt will continue to exist because we can’t face our problems as a society).

My biggest beef about the pay cuts is that they will do little to change the incentives on Wall Street. John Cassidy had a good piece called Rational Irrationality about this. And I believe Henry Blodgett originally made the distinction between the risky deals that were being made and the career risk of a trader who wasn’t in on the action. So if people were being rational and taking these huge risks that almost melted down the economy and made the current recession much worse, then something needs to be done about the financial system from a regulatory or structural point of view. Does banker pay even matter?

A panel of business bigshots at the Aspen Festival this last year had some interesting thoughts on the short-term thinking that has become too common in the boardroom. Below is Steve Pearlstein’s take on its history (the link to the Aspen Festival report is here, too).

The roots of this short-termism go back to the 1980s, with the advent of hostile takeovers mounted by activist investors. This newly competitive "market for corporate control" promised to reinvigorate corporate America by replacing entrenched, mediocre managers with those who could boost profits and share prices. In theory, the focus was on increasing shareholder value; in practice, it turned out to mean delivering quarterly results that predictably rose by double digits to satisfy increasingly demanding institutional investors. Executives who delivered on those expectations were rewarded with increasingly generous pay-for-performance schemes.
As fund managers grew more demanding of the short-term performance of corporate executives, investors became more demanding of the short-term performance of fund managers. To deliver better returns, managers responded by moving money from bonds and blue-chip stocks to alternative investments -- real estate, commodities, hedge funds and private equity funds -- where there was more risk, higher leverage and bigger fees. In time, the managers of these alternative investment vehicles began looking for new strategies to improve their results, and Wall Street was only too willing to accommodate with a dizzying new array of products.

I will leave discussion about what should be done about Wall Street for another day as I barely have a clue other than making derivatives and hedge funds more transparent (and current proposed legislation seems be giving companies huge loopholes). Even if there was no contract, you may have a moral point. But it gets way harder to make. In the first place, the bankers had the information. Maybe the most critical thing I can say about the pay cuts is that many of the people who got the cuts have left and the rest just may go somewhere else. If the American public thinks these cuts are really going to solve any problems, then maybe that just shows how uninformed we are.

Continuation Day

I am having a fine anniversary of birthday, or as one of my buddhist friends says, continuation day. Tita took me out for dinner last night at a terrific restaurant www.log-haven.com and has something going in the crockpot while she is at work. I had curried pecan cauliflower soup and bison rib-eye steak. We have a snowstorm coming in early tomorrow so I got all the deck furniture stored in the garage yesterday. I couldn't stand watching the end of the Bears game they were so bad so I decided to accomplish something outside instead. Saturday we got in some golf but quit after nine holes after we got hailed on. Don't know how many days we have left of golf. One nice thing about this time of year is that Tita really gets into cooking. She has already planned what we are having Tuesday!! This is a new first in planning ahead meals. Usually we just go with the flow day by day (one of the traits I did not pick up from my dad). But she loves to cook and I love to eat...a win-win situation. Every time I buy her a new cookbook I get rewarded many times over. She says that when she retires she is going to become a gourmet chef and take classes. I don't think that this is just a means to get out of working anymore but you never know. Luckily, she also likes her job.

I have decided that I am going to be even lazier than usual today. My boss says I have to go in for a few minutes this afternoon but I don't have much to do (other than a brief that isn't due for four weeks). I might even go out and use the raincheck (or hailcheck) to finish my round of golf. Tom and I were chatting so much that I didn't bother to keep score, but then I know I didn't really do well enough for it to matter, so I didn't go back and figure it out.

I have been wasting an inordinate amount of time trolling the internet and now have a bunch of blogs I read. I really am going to start reading books again and even finished one on the misuse and abuse of history that I mentioned here earlier. I am actually reading a philosophy book called Justice by Michael Sandel, a famous philosopher. It is very clearly written and so far takes me through some of my own adventures in ethics and political philosophy. Also have a book called The Good Soldiers about the lives of a unit in Iraq that has gotten great reviews. Of course, I have many other unread books lying around, too.

We had a wonderful time in San Francisco and I learned some more very good stuff on VA law and ERISA. Looking forward to helping vets but not so much dealing more with insurance companies. We had incredible dinners every night and hung out for two days with my old friends Vern and Jennifer K. Pesces, Campton Place and R & C Lounge in Chinatown stand out. They had a car so we took a drive to Muir Woods north of the city on Saturday missing the turnoff and taking a scenic drive down highway one before we figured out we were lost after ending up in a hippie village called Bolinas. Luckily, we were able to find a gas station and then found Muir Woods where we did a great hike amongst the 250 foot redwoods and other beautiful plantlife.

Every day is a coninuation day so if you want to goof off, go ahead. You are adults and don't need permission.