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Archive for the ‘Politics’ Category

Science!

Scienceblogs has a nice review of a book called Unscientific America. Here’s the money quote:

Whereas good science is rewarded for being painstaking and nuanced, politics is the enemy of subtlety–political battles are fought in sound bites, decided in up or down votes. In this context, the politician often suspects that the scientist cannot see beyond his or her narrow specialty and spends too much time on minutia.

I actually think politics unfairly gets the monopoly on ridicule here. Or, at least, the behaviour of politicians is unfortunately all that is represented by the term “politics”.

Reinsurance professionals live in the awkward middle territory between ‘science’ (if actuarial analysis can be called such) and ‘commercial reality’. Sometimes the ‘science’ is right and sometimes it is wrong. Most times it is horribly, needlessly complicated and, perhaps tellingly, the people that ultimately make the decisions are not ‘scientists’ (though this is slowly changing).

Politics happens when you have the opportunity to exploit imperfect information. There’s a quote out there (Feynman? Einstein?) that goes: “if you can’t explain it to a 6-year-old, you don’t understand it”. Since 6-year-olds probably don’t understand much about actuarial pricing theory, I imagine there’s a pretty fair degree of error in it.

The message? Science can be overrated and, because of that, anyone with a view on something is a politician.

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Sully Rulz

Sully Rulz

Anyone remember the heroes on US Airways 1549 that crashed into the Hudson? Well, AIG has managed to screw up their involvement in that, too. They’re denying liability.

When a homeowner has a burglary or a driver has a crash, all it normally takes is a call to the insurance company and a description of the loss to activate the policy. But aviation liability insurance is different. It is activated by a finding of negligence on the part of an airline. If there is no negligence, then arguably there is no liability, and no obligation to pay claims.

For those of us who take immense pleasure in AIG’s cascade of fail, this is a delight. I’m picturing the following sequence of events:

1. Some Senator calls up Liddy and widens his poop shoot yet further (“these people are heroes!”)

2. Liddy calls up his claims department and says: “pay the fucking claims and call back the NYT, you FUCKING moron”

3. Liddy calls up the same claims exec the next day: “oh, and you’re fired”

4. Liddy gets summoned to the Hill again so the polititians can fall all over each other to play the righteous outrage card a bit, which will be a welcome break from the befuddled economic architect hand they’ve been making  a hack job of lately.

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Be honest. You're a geek, too.

Be honest. You're a geek, too.

I’ve been trying to get a chance to read through this paper by Philipe Swagel on the insider view of the financial crisis and I’m happy to say I’m half done.

In typical blogging fashion, I’m going to post something now and, hopefully, finish it and post further thoughts later.

Two things have jumped out at me: first, when staring down massive financial risks, the proposed solutions are often commonplace in (re)insurance; and, second, how inevitably technocrats fail.

I didn’t fully realize this last year, but the US Treasury originally proposed to create a runoff company (aka, Bad Bank) to suck in all the mortgage assets and give constituent banks ownership, presumably along with some kind of gbmnt particiaption.

Amazingly, they would take it one step further and actually increase the information available by creating a centralized database with policy level data on all of the mortgages. It appears that one of the issues behind this whole mess is that the holders of the risk don’t actually know too much about it; indeed, the implication is that they know far less than those who sold it on to them and will be stocking the database.

What a win/win. As any intermediary worth a damn quickly finds out, you can restructure deals all day long but they don’t get done without real data. The only hope you have of making a “toxic” deal better is to introduce information.

Wasn’t implemented, though, which brings me to pointe deux. Technocrats fail because their second-rate pay yields second-rate talent and stale or non-existent private-sector expertise means they have less information. The experts in the private sector, though, are always happy to give ‘advice’, which comes packaged with some serious bias.

The above solution was killed because the same banks that, only nine months later, would get outed as irony_ruleszombies and quasi-nationalized allegedly got all twitchy with the UST telling them what to do. 

That would be called irony.

Any chance that the banks were really worried about those assets being marked down?

Generally, voters get frustrated because like to think (hope) that those working on their behalf know what they are doing but really have no way of seeing the difference between the 85th percentile of knowledge (gbmnt avg?) and the 99th (avg Wall Street jobber). Most voters, after all, are even lower down the (nonlinear) ladder.

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95% of the interesting parts of my education have come long after I graduated from University and much of that 95% has come from the links in that blogroll to the right.

I’d say the most consistently informative link is to Econtalk with Russ Roberts. It’s a podcast that I listen to religiously. I’m so happy I didn’t get a graduate degree in economics because it would have been a waste of time and money. I get all the learning I want for free!

For instance, I had never heard of Public Choice Theory before a few months ago, but it has given a framwork for so much of my intuitive reactions to politics and economics.

THIS, from Dave Henderson, is why government scares me. It’s a wonderful peek into the birthplace of power and how horribly mangled ideals become at the hands of powerful individuals with some kind of agenda and horrible hair.

The basic idea is that a prefectly sensible amendment (which prevents those who misrepresent something in their mortgage application from getting a handout) was made to a bill in committee, passing 21-3. The bill was then changed to neuter the amendment without a vote and sent to Congress.

Ouch. Read the comments.

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Update – I nearly didn’t put this in, becaue the chain is so long, but this is by Stan Collander  (from Yglesias via Cowen)

Lost in all of the debate (and the reporting about the debate) on the earmarks in the omnibus 2009 appropriations bill the Senate is still working to adopt is the basic fact that cutting earmarks doesn’t save any money.

This is not open for discussion.  An earmark simply is a congressional decision to allocate part of appropriation for a particular purpose.  Eliminating the allocation doesn’t reduce the appropriation, it simply leaves the allocation decision to a federal department or agency rather than to Congress.

Emphasis from Yglesias. The point here is that there is no such thing as the Government. There are politicians (individuals all with talents, agendas and faults) and bureaucrats (with much the same). Which do you prefer? I say it doesn’t really matter.

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Knowledge vs Power

I’m becoming a greater and greater fan of Arnold Kling, who blogs at econlog, which is an organization that it seems he created. Very interesting guy.

Anyway one idea that he harps on about is that there should always be an equivalence between someone’s knowledge(/skill) and his/her power.

For example:

A fire marshal has the knowledge of what is and is not a fire hazard and also has the power to condemn a building if it is unsafe. That’s good.

If the fire marshal is the idiot son of the mayor who gets appointed because he can’t get a job anywhere else and has no relevant experience in the job he can still condemn a building for being unsafe. That’s bad.

Now, Kling speaks about how in society there is an increase in the dispersion and specialization of knowledge, which means that to become an expert in something takes a very long time learning the specialty (specialization) and that there are many many more specialists that are necessary for the world to function properly (dispersion).

In ancient Greece the economy and society was primitive enough that a person could conceivably be able to know just about everything worth knowing and so could be (relatively) trusted with more power.

So, if the the scope for any person’s power should encompass only what they know, a progressively smaller part of how the world should be subject to any single person’s power.

Now this becomes a problem when a crisis hits because in a crisis people crave leadership, for someone to tell us it’s all going to be “ok” and then go and make it “ok”. But what if the crisis is so large and so complicated that nobody can really be capable of righting the ship alone? Sounds like a compelling argument for why the US leadership is floundering around so much, even though they such “really smart guys“.

I’ve occasionally found myself in a position of leadership during a crisis. It’s scary because all I want to do is have someone else make the problems go away. A natural leader is someone who feels the burden of that kind of responsibility lightly, I think. A good leader is someone who makes the best possible decisions in such circumstances.

Not the same thing.

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Cultrual Voyerism

Today’s article in the NYT about the waning of the South as a political force in the US irritates me a bit.

These kinds of articles inevitably wind up in the “most emailed” list because they always publish comments designed to outrage liberally-minded readers of the NYT. Interviewees talk about how Obama is a muslim and how they’re worried that his election with make “the blacks more aggressive”, call such claims “racial conservatism” (not racism?) and offer as proof of the universality of these opinions McCain’s improvement over Bush in the election.

Maybe they’re right. Maybe this is the only explanation for the voting patters of the counties that these people call home and we need to be reminded of how these people think to drive the point home. I certainly think the comments are outrageous, I just also think that the NYT is “revving up” its own “base” because they know that poeple love nothing more than a little righteous indignation. It makes you feel so good to gloat over how you’re so obviously superior to someone else. And if these people have their bigotry thrown in their face by a new President’s race it surely makes it extra-sweet.

I just hate being manipulated.

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Saving Private Ryan

Was the decision to save private Ryan in the eponymous film a political decision?

I’m having an argument with a colleague at work about this and I believe it is. Here are my reasons:

1. The goal of saving Private Ryan is to bolster morale in the military and craft a suitably heroic narrative of bravery and selfless sacrifice to keep war support high back home.

2. These are fundamentally political problems that require political solutions. Sacrificing the lives of several soldiers for the sake of one doesn’t make any sense in strict strategic analysis.

I think that people don’t realize just how political humans are. We care aobut symbolism and perception and are willing to engage in irrational acts to make ourselves feel good. A good definition of politics might be action (or promise of action, ie rhetoric) to support the positive human emotions (feelings of happiness, justice, fraternity/sorority and pride).

And it is also worth mentioning that politics is not irrational, though it sometimes can be.

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