Tuesday, September 30, 2014

The New York Fed: A Case of Regulatory Capture

According to The Wall Street Journal, a study sponsored by the Federal Reserve Bank of New York in 2009 uncovered “a culture of suppression that discouraged regulatory staffers from voicing worries about the banks they supervised.”[1] Whereas the report points to excessive risk aversion and group-think as the underlying problems, a fuller explanation is possible—one with clear implications for public policy.

The full essay is at A Case of Regulatory Capture.

Wednesday, September 24, 2014

The Last Emperor: A Curious Case of Limited Absolute Power

People either obey a powerful government official or rebel. A rebellion does not typically include continued loyalty to the sovereign. The French Revolution demonstrates this point. Yet in China in the 1910s as the Qing dynasty lost power, the authority of the emperor became more complex—or maybe it had been so throughout the dynasty.

The full essay is at “The Last Emperor” 

CEO/worker Pay: Perceptual Shortcomings

According to one study of people around the world, people of different cultures, incomes, religions, and other differences show “a universal desire for smaller gaps in pay between the rich and poor” than was the actual case at the time of the survey in 2014.[1] Interestingly, the respondents didn’t have a clue how much of a gap actually existed in their respective economies. The difficulty in estimation means that the public discourse on economic inequality has been rife with erroneous assumptions. Where the error lies in the direction of minimizing the gap, we can postulate that public policy allows for greater economic inequality than would otherwise be the case.

The United States, for example, surged past Peter Drucker’s wall of 20 to 1 (CEO compensation to average worker pay), hitting 40 to 1 in 1994 and then 400 to 1 in 2005. Why would America’s silent majority put up with such economic inequality? The short answer might lie with the power of corporations in using media corporations to lull television viewers into supposing that the difference in compensation is not very significant—significance involving not only perception, but judgment as well. That is to say, whether the gap is perceived to be significant is a value judgment that can be subtly manipulated.

In spite of an actual gap of 350 to 1 (CEO compensation to unskilled worker pay) in 2014, the Americans surveyed estimated the ratio to be 30 to 1.[2] Such a perceptual judgment could have been influenced by the lack of attention on the topic in the media. The ideologicalization of American broadcast journalism—the blurring of the lines between reporting and advocating—points to just how much estimates of significance can be subject to external influence.

Considering the relatively wide actual gap being allowed to exist in the American States as of 2014, what would the public policy have looked like had the perceptions of the American public been adjusted up to 350 to 1? Would the decentralized individual voters forming majoritarian blocks demanding limits put enough pressure on their elected representatives to mitigate the power of wealth in the halls of legislatures as elections loom?  

[1] Gretchen Gavett, “CEOs Get Paid Too Much, According to Pretty Much Everyone in the World,” The Huffington Post, September 24, 2014.
[2] Ibid.

Monday, September 15, 2014

The Scottish Referendum: A Political Analysis

Any political analysis of the Scottish referendum on secession from Britain should include not only the Scottish National Party (SNP) and Westminster, but also other large E.U. states and even the E.U. powers at the federal level. Such an analysis may leave the cynic wondering whether the question could even conceivably be decided by the Scots themselves—so much being on the line for state and federal officials and their respective institutions.

How much say do the voters really have? Are they actually pawns being moved without their knowledge? Perhaps large vested interests are the real deciders. David Cheskin (AP)

that keeping the British pound would be incompatible with “sovereignty.”[7] I would not be surprised to learn that Westminster was behind this timely warning to the Scots.  

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

Saturday, September 13, 2014

Beyond Breaking California Up into Six States: A Federalist Alternative

In any epoch and in any culture, the human mind displays a marked tendency to accept the status quo as the default—being so ensconced in fact that efforts at real change almost inevitably face formidable road-blocks. In this essay, I analyze the 2014 failed ballot-petition that would have put the proposal of breaking California into six separate states to Californians. I contend that the proponents could alternatively have taken up a more optimal alternative—one much easier to put into effect. Interestingly, that idea comes from the E.U. rather than the U.S.

The full essay is at Essays on Two Federal Empires.

Friday, September 12, 2014

Ebola in Liberia: The Government’s Fault?

With the Ebola virus “spreading like wildfire” in Liberia, “devouring everything in its path,” Brownie Samukai, the state’s defense minister, went on to tell the U.N. Security Council on September 9, 2014 that “Liberia is facing a serious threat to its national existence.”[1] With more than half of the epidemic’s deaths in that state—1,224 out of at least 2,2296 in West Africa as of September 6, 2014—and new cases “increasing exponentially,” the World Health Organization (WHO) declared that “the demands of the Ebola outbreak have completely outstripped the government’s and partners’ capacity  to respond.”[2] Meanwhile, the International Monetary Fund (IMF) reported that the illness had severely handicapped the mining, agriculture, and service sectors of the state’s economy.[3] Quite understandably, pleas for the government to do more peeled like frightened bells across the state. “The patients are hungry, they are starving. No food, no water,” a terrified woman told journalists. “The government needs to do more. Let Ellen Johnson Sirleaf do more!”[4] Even if valid, such blame is hypocritical to the extent that the people themselves had been refusing to do what is necessary to stop such a virus from spreading.

Concerning the validity of woman’s charge that the government was not doing nearly enough, Samukai pointed out that the “already weak health infrastructure” was overwhelmed.[5] That is to say, the government had to deal with an already-insufficient healthcare system. Why insufficient? Two theories of development give different answers. According to dependencia, or dependency theory, the infrastructure of a colony is oriented to getting commodities out to the colonizer rather than to developing an internal, web-like system. Roads of a coastal colony, for example, are prioritized that go from the interior to the coast, where ships can pick up the goods and transport them to the core economy (e.g., Europe). The colonists and even their successors cannot be blamed for the lack of internally-oriented infrastructure, yet at some point after a sufficient amount of time as a sovereign state the lack of any progress is surely blameworthy.

The modernization theory says that what holds a developing country back is not its colonial infrastructure, but, rather, things like tradition and ignorance that a people stubbornly cling to even when offered a better way. Superstition, for example, may keep people from working on certain days while tradition has it that a person should stop working as soon as he or she has enough for subsistence living. This inverse of the Protestant work ethic can keep capital from accumulating to the point that reinvestment can broaden an agrarian economy to include manufacturing industries. Rigidly sticking with the custom that puts child labor above education, a people can keep its young from becoming professionals, business entrepreneurs, and managers. Quite understandably, executives of foreign corporations are hesitant to start operations where such a base labor pool exists and reinforces itself.

Taken together dependencia and modernization theory can account for the weak health infrastructure in Liberia and other former colonies in Africa. Health-care of the natives had not been a priority of the colonizers. Additionally, education and investment, as well as even foreign direct investment, may be lacking even though they would contribute much to building a sound healthcare system.

Applied to the Ebola outbreak, we can look beyond the government and healthcare infrastructure to apply modernization theory to the people themselves. The funeral custom, for example, of touching the body the deceased friend or relative is great for the virus, which spreads by touch rather than air. Even so, the African who have this tradition stubbornly and/or ignorantly held to it even as the epidemic was spreading. Additionally, villagers took to hiding sick residents rather than allowing visiting healthcare workers to take the infected people to makeshift treating facilities out of fear that people go to die at such places; meanwhile, the villagers themselves could become infected. In some cases, villagers even attacked the visitors, stubbornly ignoring their pleas.

Scared villagers in Liberia stand far away from the healthcare worker, even as they risk getting the virus by rubbing up against each other--ignoring the worker's pleas. (Image Source: The Washington Post)

Simply maintaining a distance from other people, rather than continuing to touch them, would have done a lot to smite the Ebola. Especially sordid is the assumption that the healthcare workers and government officials don’t know what they are talking about, especially if the person also assumes that he or she cannot be wrong—such as in knowing that touching a dead body brings with it benefits that can keep the person healthy or safe. Ignorance that cannot be wrong, backed up by tradition, can indeed be a silent killer, the odor of which can only be pleasing to the Ebola virus. Blaming the government rings hollow from such a putrid drum, even if officials could be doing a better job in mopping up the mess.

[1] Abby Ohlheiser, “Ebola Is ‘Devouring Everything in Its Path.’ Could It Lead to Liberia’s Collapse?The Washington Post, September 11, 2014.
[2] WTO, “Ebola Situation in Liberia: Non-Conventional Interventions Needed,” September 8, 2014; Elahe Izadi, “Ebola Death Toll Rises to 2,296 as Liberia Struggles to Keep Up,” The Washington Post, September 9, 2014.
[3] Anna Yukhananov, “IMF Says Ebola Hits Economic Growth in West Africa,” Reuters, September 11, 2014.
[4] Abby Ohlheiser, “Ebola.”
[5] Ibid.

Wednesday, September 10, 2014

Letter to the Scots: Read between the Lines

The answer may be staring you in the face. Such might be the best feedback the rest of the world could give the Scots as they discern whether their region should break off from the state of Britain. How do the English feel about the Scots? The answer is presumably relevant, as who wants to remain where they are not liked? On this matter, the Scots could do worse than read between the lines of a poll done roughly a month before the referendum on what the English think should be Scotland’s relation to Britain if the region leaves and if it stays.[1]

"It is striking how tough people in England are on Scotland whatever the referendum outcome," Jeffery said. The message appears to be, 'Vote yes, by all means, but if you do, you're on your own.'" In the poll, two in three respondents in England said they would not want Scotland to use the British pound even though the Queen would continue as the head of state (i.e., Scotland would be in the British Commonwealth of nations--a partial residual of the British Empire). Only 1 in 4 were in favor of Britain helping an independent Scotland negotiate its accession as a state alongside Britain in the European Union and membership in NATO.[2]

If the residents in the Scottish region vote against breaking off from the state, English voters would overwhelmingly be in favor of giving the region more autonomy from the state government. Lest this seem too good to be true, those voters "also want to cut funding to Scotland and prevent Scottish members of the British Parliament from voting on issues concerning only England." The message here, according to Jeffery, one of the study's authors, is: "By all means have more devolution, but you can't then have a role at Westminster you do now, and don't expect any funding to flow northwards from England."[3]

Either way, the not so subtle message for the Scots is that they are hardly welcome. Such tension between two groups that both self-identify as a people in one state is doubtlessly counter-protective from the perspective of the state itself; two separate states in the E.U. would be more optimal, for the E.U. federal system permits both homogeneous political subunits, or states, and a diverse empire-scale polity—hence the advantages of both. A state of two contending peoples, proverbially at each other’s throats, is thus far from optimal for the federal system, not to mention the state itself. Put another way, arguing that the UK is just such a political arrangement that works best with such a basic contentious difference in terms of group-identification treats the E.U. state as if it were like the E.U. (or U.S.) itself, rather than a state thereof. A state in the E.U. cannot logically be equivalent to the E.U., or then a subunit would be commensurate to that to which it is a subunit. 

For the Scots, the simple message is that it is not good to remain in close quarters with a people who want the worst rather than the best for you. Reading between the lines, the English want you out. I submit that this factor ought not be a trivial one as the Scots deliberate on whether their region should break off from the E.U. state to become a new, relatively homogeneous one, and thus more conducive to both Britain and Scotland as states, and to the E.U. as well.

1. YouGov conducted the survey of 3,695 adults living in England via the internet on April 11-12, 2014
2. Katrin Bennhold, "How Scottish Independence Relates to Larger Tax Fights," The New York Times, August 21, 2014.
3. Ibid.

Tuesday, September 9, 2014

Oceans Arising on Edifices of Arrogance

A study published in late November 2012 in the journal Science estimates that the melting of ice sheets in Antarctica and Greenland had raised global sea levels by 11.1 millimeters (0.43 inch) since 1992. That represents one-fifth of the total sea-level rise increase in that period. Other contributors include the expansion of the sea water from warming, and the melting of glaciers, as for instance on mountains. In the 1990s, melting of the polar ice sheets in the Antarctica and Greenland was responsible for about 10 percent of the global sea-level rise, but by 2012 the effect had risen to 30 percent.[1] The study does not, however, uncover the underlying cause, or association, lying in a complexity in human nature itself. Our species has vaunted to the top of the food chain and leveraged a brain capable of engineering technological advances that would have seemed magical even just in the nineteenth century, and yet we seem hard-wired to accelerate our course to a self-destructive extinction. This lack of balance is reflected in the increasing extremes in the global climate. In this essay, I begin with the study and steadily work toward uncovering the underlying, subterranean culprit.

In Greenland, melted ice, or water, headed to the Atlantic Ocean. NYT

The study can be interpreted as essentially “firming up” what had been left to guesswork hitherto. “It allows us to make some firm conclusions,” Andrew Shepherd of the University of Leeds said. “It wasn’t clear if Antarctica was gaining or losing ice. Now we can say with confidence it is losing ice.”[2] This is significant because there are hundreds of feet of sea-level rise in the combined ice of Greenland and the Antarctica, and even that sort of rise could occur in even just two centuries. Unlike ice in the sea melting, water from land-ice is added to the sea and thus is particularly salient in the rise in sea-level.

Although correlation is not necessary causation, global emissions of carbon dioxide were at a record high in 2011, having jumped 3% from the previous year. The international goal of limiting the ultimate warming of the planet to 3.6 degrees (F) was all but disregarded at the time as unrealistic, according to researchers at the Global Carbon Project. Slowly falling emissions in some of the developed economies, including the U.S., were more than matched by continued growth in developing countries like China and India. Coal was growing fastest, with related emissions jumping more than 5 percent in 2011 from the previous year.[3]

Moreover, the level of carbon dioxide, the most important heat-trapping gas in the atmosphere, had increased 41% since the beginning of the Industrial Revolution. Meanwhile, the temperature of the planet increased about 1.5 degrees (F) since 1850. The New York Times reports that scientists expected at the time of the release of the 2011 figures that further “increases in carbon dioxide” would “likely . . . have a profound effect on climate, . . . leading to higher seas and greater coastal flooding, more intense weather disasters like droughts and heat waves, and an extreme acidification of the ocean.”[4] The volume of carbon dioxide in the atmosphere in 2013 was 396 parts per million, 2.9 ppm higher than in 2012; this represents the largest year-to-year increase since 1984, when reliable global records began.[5] As a result, "(c)oncentrations of nearly all the major greenhouse gases reached historic highs in 2013, reflecting ever-rising emissions from automobiles and smokestacks but also, scientists believe, a diminishing ability of the world's oceans and plant life to soak up the excess carbon put into the atmosphere by humans."[6] Accordingly, climatologists were predicting more accelerated ice-melt.

To be sure, distinguishing a causal connection from the sort of cycle that was responsible for Greenland being green in Mediaeval times has been the fulcrum of much controversy and debate; it is not as though scientists can treat one earth by increasing the carbon dioxide in the atmosphere while leaving another earth as a control-group and measure the differing climatic consequences. As the philosopher David Hume argued in the late eighteenth century, we actually know much less about cause and effect than we think we do. The human brain naturally that’s a strong positive correlation accompanied by a logical rationale as good enough to pronounce a causal relationship.

Regardless of whether our use of fossil fuels is a contributing factor in the melting of the ice-sheets, that the sea-level was rising even in 2011 and so much of humanity lives within fifty miles of a sea-coast suggests that major dislocations will undoubtedly be necessary within one or two hundred years, and perhaps even sooner given the record-high level of carbon dioxide in the planet’s atmosphere in 2013. As much as a third of Florida could be underwater again—whether it eventuates as a result of a natural climatic cycle or carbon dioxide emissions, or both. That the acceleration in the ice-sheet melting reported in 2012 was five times that which scientists had supposed earlier suggests that the data in from the following year may result in even more dramatic headlines. That the C02 and methane (from leaks in wells and distribution as well as from permafrost melt) levels were not only increasing, but doing so at unprecedented rates, suggests that we humans have literally outdone ourselves. It seems a fantasy to expect prudent measures that would obviate beforehand even just some of the anticipated damage. Even in the wake of Hurricane Katrina, the U.S. Government could have given Louisiana a financial incentive to rebuild the city further inland, above sea-level. That would have been an easy decision compared with what to do about Manhattan, and yet the unquestioned, knee-jerk response was to rebuild on site.

Accordingly, even the study on ice-melt reported in late 2012 and the report in 2014 of the record increase in C02 in the atmosphere were unlikely to affect public policy significantly, at least in the United States. Enabling such negligence, Andrew Shepherd of Leeds said in 2012: “The signals suggest there is no immediate threat.”[7] Meanwhile, the carbon emissions were actually increasing from the previous year. This represents two degrees of separation from a reduction. The emissions targets in the UNFCCC agreement signed in 1992 had included stabilisations at 1990 levels for some countries and reductions for others by the year 2000.   In other words, we as a species seem pretty clueless, even as we promote ourselves being of the highest and most developed species.

We are, it can be said, a species of today. The stock markets demonstrate this innate propensity clearly enough. For a complex organism not known for quick evolutionary adaption to a changing environment, it is dangerous to be so “hard-wired” for today when our artifacts collectively can shift a planetary equilibrium beyond its natural cycle. It is not a given that we will be able to rely on our prowess at technological development to make up for our convenient habit of looking on and even making a situation worse. I have personally felt this in momentary lapses of my new-found better diet when I eat one after another chocolate cookie after having fallen with one. My mind succumbs to the fallacy that in having lapsed, might as well open the flood-gates. The next morning, I make myself go running, as if the presumed cause-effect relation might prevent any future lapses. Nietzsche may have been right in suggesting that thoughts are really instinctual urges and reasoning is their tussling for dominance.

As Mark Twain observed, speaking through an angel in The Mysterious Stranger, “Man’s mind clumsily and tediously and laboriously patches little trivialities together and gets a result—such as it is.”[8] Yet so conceited is that mind, and in other matters too. In spite of having a moral sense, and perhaps because of our knowing right from wrong, our “paltry race [is] always lying, always claiming virtues which it hasn’t got.”[8] From an angel’s point of view, homo sapiens—arrogantly self-named here as the “wise man” species—can only be “dull and ignorant and trivial and conceited, and so diseased and rickety, and such a shabby, poor, worthless lot all around”[10] as to be met with utter indifference from the angelic perches so different—the pathos of distance being hollow rather than filled with empathy or even sympathy.[10] Twain’s angel does not mince words. Humans “have nothing in common with me—there is no point of contact; they have foolish little feelings and foolish little vanities and impertinences and ambitions; their foolish little life is but a laugh, a sign, and extinction.”[12] It is not merely the staying power of the moneyed commercial caste that moves us as a species to our own extinction; all of us are complicit.

We have built our mammoth edifices and modern conveniences on such a scale, and we use them as if we were junkies on a drug-fix that we have outstripped our own capacity as a species even to mop up after ourselves. This vulnerability becomes truly dangerous now that we are capable of having a significant impact on the planetary ecosystem, including its atmosphere. Even so, we continue to single our species out as “Made in the Image of God,” and as we preach our moral sense, ignorant of the probability that a more intentionally cruel and self-destructive race has never roamed on the land or swam in the sea. Our reckless conceit, it would seem to all outward appearances, is in such denial of its own existence that we naturally assume we cannot be wrong—that we affirm with such factuality, “I know what I know.” If only the ice on this towering edifice would melt from global warming; if only we could be so lucky.

1. Gautam Naik, “Polar Ice Melt Is Accelerating,” The Wall Street Journal, November 30, 2012.
2. Ibid.
3. Justin Gillis and John Broder, “With Carbon Dioxide Emissions at Record High, Worries on How to Slow Warming,” The New York Times, December 3, 2012.
4. Ibid.
6. Joby Warrick, "CO2 Levels in Atmosphere Rising at Dramatically Faster Rate, U.N. Report Warns," The Washington Post, September 9, 2014.
7. Gillis and Broder, “Carbon Emissions at Record High.”
8. Mark Twain, The Mysterious Stranger in The Mysterious Stranger and Other Stories (New American Library: New York, 1962), p. 212.
9. Ibid., p. 192.
10. Ibid., p. 172.
11. Ibid., p. 176.
12. Ibid., p. 211.

Sunday, September 7, 2014

Natural Rights in Europe and America: Shoring-Up Each Other’s Weak Spots

The Declaration of Independence made by the thirteen newly sovereign American states in 1776 recognizes “that all men are created equal, that they are endowed by their Creator with certain inalienable rights, that among these are Life, Liberty and the pursuit of Happiness.” These rights are not dependent on any government, and thus exist equally so in the state of nature. The Declaration of the Rights of Man and the Citizen, made in Europe thirteen years later, omits any mention of a creator-deity. “Men are born and remain free and equal in rights.” The equality here is more limited, being solely in terms of rights, “man’s natural and imprescriptible rights” in particular. These “are liberty, property, security, and resistance to oppression.” We can thus compare and contrast the two sets of rights, which important implications for public policy for both America and Europe.

The entire essay is at "Natural Rights in Europe and America."

Tuesday, September 2, 2014

The Scots Weigh Independence from Britain as the British Consider Leaving the E.U.

The debate over whether the Scottish region of Great Britain should secede from the UK extends beyond whatever provincial interests unite and divide the state’s regions; it "is also part of a larger question that extends well beyond Britain, to Texas and Colorado, for example, and elsewhere: What are the benefits and drawbacks of larger, politically diverse countries, compared with smaller, more homogeneous ones?"[1] Yet is Britain a large, heterogeneous country even as it is a state in the European Union? Texas is much larger, and yet  it too is a state in a union of relatively homogeneous states. 

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.