Valuing TBTF cont’d

So after commenting on some commentary about the purported $83 billion TBTF subsidy yesterday, I noticed that the discussion had already gotten way ahead of me. This should teach me to write half-cocked before getting up to speed by reading all the material. (Note: it won’t.)

To recap, Bloomberg wrote an editorial claiming that the TBTF subsidy amounts to something like $83 billion. Matt Levine wrote a piece detailing how that $83 billion is cobbled together, which (IMHO) showed that the $83 billion result is almost-certainly incorrect. That’s because along the way he showed that by having made other reasonable choices of some parameters and things, one could have come up with a value of $3.7 billion for that subsidy. Or, negative $16 billion for that matter. 

The point, I assume, wasn’t to seriously put forth those other numbers as alternative models. The point was to show how the 83 result came from making certain arbitrary and not-entirely-defensible choices as to what to value and how to value it - other defensible choices for which, importantly, would have led to wildly different results. That means at best these numbers – 83, 3.7, -16, or 4 trillion for that matter – are all ‘correct’ up to some multiplier(s), and we just don’t know what those multipliers are. If you’re a ‘modeler’ you might think this means we’re getting somewhere. If you’re me (wait, just realized: am I a ‘modeler’ too? maybe!), you don’t have the patience for this so you just parse ‘correct up to a multiplier’ as ‘wrong’ and consider this all as symptomatic of the fact that this is a Large Calculation. (Also, if you’re me, my condolences.)

But I certainly do think that the value of TBTF is X and that X>0. My point is that I just don’t know how much value there is in all these calculations and ‘models’ whose resulting estimate of X has error bars that, if fairly accounted for, would likely turn out to be multiples of X. In the interest of illustrating this by blowing yet more smoke in the eyes of people who really want to try to answer this question and really want to put a hard estimate, any estimate, for X onto their Occupy Wall Street leaflets and placards, let me just mention some other factors that I think these models are omitting entirely.

  • Decompression. While it’s presumably true that ‘TBTF’ helps, say, JP Morgan, if only by contrast it must be hurting any and all banks that aren’t considered TBTF. Right? I mean, here’s an industry. The US Government has come in and carved out a subset of the businesses in this industry, the bigshots, and declared their implicit backstop (or actually, it’s explicit now right?) for them. Surely this makes things harder for anyone not in that special subset to compete. Just like a government tax-credit subsidy for Wal-Mart hurts Mom & Pop, a government TBTF subsidy for JP – if there is one - must be hurting SmallTown Bank. However much it lowers spreads for the TBTFers, by comparison it must be harming the relative spreads of the non-TBTFers – leading to decompression. To the latter, therefore, that is a cost not a subsidy. And if the question is “How much does the TBTF ‘subsidy’ help banks?” where by “banks” you mean, like, “banks”, as in, all banks - then surely you need to include that cost in your accounting. No one seems to be doing so. Doing so might actually show TBTF to be a net cost not a subsidy. Who knows. (After all, all else equal I certainly don’t think government distortion of markets in this way makes people wealthier overall.)
  • What about the protection value itself?  My commenter Dave reminded me of this point when he put forth his alternative ‘model’ valuing TBTF at $4 trillion. Of course, he neglects to account for the fact that such a drawdown is, let’s just say, a low-probability event. But his point is not 0% valid. All the commentary has been focused only on how TBTF affects banks’ funding cost. But surely that’s not the only effect of TBTF. Surely there is also the contingent liability itself: the fact that, while these banks can take minor day-to-day losess (or even London Whale-sized losses) without the government stepping in, if indeed such a bank had such a loss that it threatened to play a “Fail” card, the government would summon a “Too Big To!”, the tapping of which would then – in that event – tangibly cost the government $X00 billion of mana. Another way to put this is to view the government as providing senior or super-senior (super-duper-senior?) credit protection to TBTF banks on, like, all of their risky activities (loans, trading, counterparty, repos, lines of credit, legal exposure to being sued for manipulating LIBOR or hiding drug money or helping tax evaders, fat-finger trades erroneously booked backwards, whatever else). If those activities’ losses never exceed some (unknown to me and you and everyone else) threshold, the government pays nothing; but if they did, then if TBTF means anything it means the government would be on the hook for some actual cashflows. This is a credit protection or insurance the government is providing, and it is worth something by itself, independently of how it affects bank credit spreads. How much is it worth? I’m not sure where banks could source equivalent super-senior tranche protection at the moment (there’s also the fact that USG is the only credible seller of this particular super-senior protection, which presumably means they could have overcharged for it if they were to charge market prices instead of giving it away for free). Golly, this is hard to say. So I shall just buttstimate** that it is worth something like 3-55bps on, like, the sum of the notionals and implied notionals of all banks’ liabilities or possible losses on anything. Note: I don’t know what that is at all but note: whatever it is, it’s actually a lot, and probably way, way more than $83 billion.

So in conclusion, if you take the above two bullets to heart, and do the same mental back-of-envelope addition of them that I’ve just done just now, I have probably helped convinced you as much as I am convinced that the TBTF subsidy is worth something between, oh let’s say, -$500 billion and +$1 trillion. I hope this knowledge helps you in your endeavors and protests.

‘Modeling’ is fun!

**buttstimate (v.): to estimate, by pulling a number out of your butt.

SeQuest 2013: The worst ‘Washington Monument’ gambit ever

Per Kurowski links to an oh so scary detailing of the cuts that would occur in – in that case – the state of Maryland under ‘Sequestration 2013′. For which I humbly submit the following as the official logo:

SeQuest2013

Now, maybe it’s just me but it seems the powers that be are really flubbing the Closing-The-Washington-Monument gambit this time around. I mean, I don’t know about you – no seriously, I don’t – but me, I read this list and my thoughts went roughly like this:

“Great! Cool. Good. Sounds good. Awesome. Great…”

And, variations on the above.

After all, the list linked above is almost entirely a list of Money Given To Other People Who Are Not Me Or Mine. I can find virtually no exceptions. Even the stuff that is supposed to ‘benefit me’ in some (very very) diffuse way, doesn’t. IMHO, of course. You can feel free to try to convince me otherwise. You. will. fail.

So, the list of ‘scary cuts’ they’ve cobbled together just isn’t scary. In fact it’s downright amazing. It’s better than I could have ever imagined in my wildest dreams. It’s warming the cockles of my heart and brightening my day. It’s put a spring in my step and a bee in my bonnet. Is everything about life going to be so different and great from now on?

Worst. Washington Monument gambit. Ever.

The Model Has No Clothes

A while back an article was making the rounds claiming to show that the government’s implicit ‘too big to fail’ backstop amounts to subsidizing banks to the tune of $83 billion a year. I did not, let’s be clear, read that article. Moreover, I am totally against ‘too big to fail’ (N.B.: in all its forms, not just banks…) so at least superficially, I should be sympathetic to publicizing such a finding as furthering my goals. But then I read Matt Levine’s debunking of the model by which the authors claimed to derive that $83 billion number, and as far as I’m concerned it rendered the matter completely and thoroughly closed. If you don’t believe me, just read it.

He pointed out at least two huge issues with the calculation: 1) the authors looked at the rating impact of TBTF protection, turned rating moves into implied spread moves (ok fine), and then apparently averaged (!) the hi and lo spread impacts. What? Simple averaging spreads? Bzzt, sorry. 2) Worse, the spread impact they come up with relates only to 5-year spreads. Again, sorry; that’s not a good proxy for how banks actually fund themselves. Or it might be, conceivably, just with some appropriate scaling/beta/multiplier? So their “$83 billion” is, at best, correct, up to some unknown scaling? You know what else is correct up to some unknown scaling? Any other number.

From these two facts alone, unless they have been misrepresented by Levine, it should be clear to any knowledgeable reader that the study and therefore the $83 billion number was garbage.

Not to everyone though, especially since “$83 billion subsidy!” made its way into a lot of peoples’ politically-motivated talking-points. Hence mathbabe has written a rebuttal response to Levine’s piece saying – in effect – that you just can’t critique a model without proposing one of your own.

  • But since I’m a modeler, I know it’s a lot easier to push over a model by complaining about an assumption than it is to come up with a better model that doesn’t make such stupid assumptions.
  • So anyone who complains should also offer an alternative.

I’m just going to point out that that is completely and totally wrong. In my book people, whether ‘modelers’ or not, can and should feel free to critique others’ models all day long and to point out legitimate problems with them. If those objections are silly or crazy, they can be easily dismissed or ignored; but if they are serious, they should be answered. Either way, the absence of a better model doesn’t mean we are somehow compelled to pay attention to or go with the results of models that are materially flawed and whose flaws have not been satisfactorily defended. (As far as I know, Levine’s objections have not been answered – certainly not in that post.)

A perfectly scientifically valid ‘alternative’ to a bad model doesn’t have to be another model – it could just be no model, and saying “we don’t know”. It is enough, or should be enough, to just point out “That is wrong”, that the Emperor Has No Clothes. This is all a healthy way for science to be done – you know, open critique, questions asked, problems raised, critics answered, and so forth. Part of what bothers me about this ‘well then offer an alternative!’ attitude is that it represents a sort of science-guild protectionism: if no one is allowed to raise problems with existing models without ‘offering an alternative’, that obviously would help to increase the power of…folks who make models. After all, really, who has time to not only dig through such things and find/identify their problems (which is valuable enough already, and kudos to Levin for rolling up his sleeves), but to cook up complete and valid ‘alternative models’ as well? A very small percentage of people. And that’s the way the modelers like it, I suppose.

The post is titled “How much are the taxpayers subsidizing too-big-to-fail banks, if not $83 billion per year?” But if the entire ‘subsidy’ premise came from a flawed model, this is sort of like asking “Okay, if bleeding the patient doesn’t cure their disease, what DOES?”. Or, “On how many giant turtles’ backs does the Earth rest, if not 63?”

You say it’s not 63? Well, how many then, smartypants! Where’s YOUR model? You don’t have one? Ha! I win. 63 it is.

I don’t know what that is, but it’s not science.

Maybe it’s ‘modeling’.

P.S. Apologies in advance to all those who read this post’s title a different way and got their hopes up.

Did they have a Oscars?

I heard they had a Oscars some night. What won? I hope Terms of Endearment won. I heard that’s a good one. Usually when I think Oscars I think Terms of Endearment. That’s your basic Oscar movie right there. (Note: never seen it.)

What is it even about? Does anyone know? The mind tries to parse, fails. How could it be explained, even in theory? “You see there’s these Terms. What sort of Terms? The kind that are of endearment. Those kind of terms. And that’s what the movie is about. Two hours of that.” And everyone loves it. Can’t get enough. Standing ovation. On the Oscars they’ll show clips of it I bet. And what are the clips? It’s like two people standing around, talking. Maybe one is crying or whatever. She has short red hair. Does something happen. Who knows? This is movies?? Also On Golden Pond. Sorry what? What about Golden Pond? Is there a waterski race or anything? Bzzt sorry. At most there’s a lot of cussing but after a while, that’s just not enough. Sorry.

See, I just don’t get Oscar taste. It’s the total opposite of something like BLUE THUNDER which is where, there’s this awesome helicopter called BLUE THUNDER which goes around solving crimes and blowing stuff up. (Plus whisper mode). With that you can totally get it. What the movie is about.

There is also Airwolf which you get them confused sometimes but Airwolf’s not as good in my book. It’s just on TV so I don’t think that qualifies. But BLUE THUNDER should be the winner if they do a Oscars but you know they’d never go for it. The whole thing’s a setup if you ask me. They never do the cool movies for Oscars. Just forget I brought it up anyways.

Brilliant health care idea: replacing fee-for-service with fee-for-no-service

Richard Thaler writes on health care, advocating among other things:

A fee for health rather than fee for service model. Doctors and hospitals should be paid for keeping their patients well. Paying them for doing more tests and surgeries creates bad incentives.

Arnold Kling asks:

When Thaler plays chess, does he think even one move ahead?  I am sure that my readers do not need me to tell them how doctors would respond to a “fee for health” incentive system, do I?

Heh. Quick doctors/hospitals, who wants to get to administer time-consuming experimental or at least palliative care to this incurably-diseased patient on a ‘fee for health’ basis? Don’t all raise your hands at once. Meanwhile, I sense some good business opportunities for PR and advertising firms offering services to doctors helping them sign up a bunch of ‘healthy’ patients that they can almost-never-see but regularly bill for…’Dear Health Ins. Co.: I kept this 19-year-old athletic male healthy again this week. No visits/tests/treatments. Send me $370 please!’

But seriously, this raises the question: what would ‘fee for health’ even mean? Someone appears to have forgotten that actual healthy people mostly aren’t even seeing a doctor, for anything, in the first place. That’s part of the definition of ‘healthy’. Isn’t it? It’s sort of like saying supermarkets should be able to bill…(someone?)…for the length of time that…(some group of people?)…doesn’t need food. Say what?

In any event, Obamacare will basically be a fee-for-health model anyway: if you’re healthy enough that you’re drawing breath, you pay. Whether you need health care or not. The way out of paying is to lose your health enough that you die. The rest is just accounting and administration, and so the distinction between that and ‘fee for health model’ is a distinction without a difference. So rest easy, Richard Thaler, you’ve gotten your wish.

Sub-full-post-level thoughts

A lot of naysayers say nay when it comes to watching to Oscars. Why watch? they say. (Nay! they also say, self-consistently.) Well, I’ll tell you why I watch**. For the PAGEANTRY.  (**Ed. note: Did not actually watch the Oscars.)

I am still concerned about Loose Nukes. Is there any update to this? Perhaps I’m overthinking this but I just can’t fathom why the Loose Nuke Tracker-Downer Super Squad would have been the absolute first on the chopping block in a ‘Debt-Ceiling-Induced Prioritization’ scenario but not be in any danger whatsoever in a ‘Sequester’ scenario (are ‘Prioritization’ and ‘Sequester’ that different? I shall have to check my copy of the Constitution). Yet the Ezra Kleins – i.e., legitimate journalists who were sincerely concerned about Loose Nukes under ‘Prioritization’ (and weren’t simply letting themselves be used as conduits for White House talking-points) - have been strangely silent about Loose Nukes under ‘Sequester’. You see? It just doesn’t compute.

Of course, maybe it’s because there’s going to be a ”DEAL”. I am so looking forward to the next ”DEAL”. There should be a ”DEAL” and it should be made by a ”GANG OF” some number between 7 and 13 (inclusive). I suggest 11. So: resolved, they should make a ”GANG OF 11” and that ”GANG OF 11” should do a ”DEAL” and then everything will be fine. They can push back the Cuts to Whenever. (I think a good time to implement these cuts would be Whenever.) John McCain could be one of the ”GANG” and he could talk angrily on TV about how Honorable the ”DEAL” they make is. I love how our government works, it is a fascinating process.

Linkdump

Stationary Waves has a plausible theory as to why $9 is a magic number when it comes to minimum-wage proposals.

I like “Thrift Shop” too and it’s great to see it become a hit, not only for the message but because I have been rooting for that guy ever since this song. I still love that song BTW.

Half Sigm THE LION OF TH’ BLOGOSPHERE predicts that Chris Christie will be the 2016 Republican Presidential nominee. You heard it there first. Pastorius, who loves Chris Christie and how fat and unmanly he is, would be ecstatic.

In Berkeley, a reported One Billion women danced to ‘celebrate women’s bodies’ – a worthy cause if there ever was one – and but also to end violence against women. I am curious to see if it worked. So far so good, as far as I can tell?

South Bend Seven, a bit uncharacteristically, doesn’t hold back on the minimum wage. Also liked John Cochrane.

I think my favorite aspect of this whole minimum wage debate has been the realization that the pro-minimum wage side is now wedded to this logic:

  1. I really really want there to be a higher minimum wage and for that to be economically non-retarded! But the arguments against it are intuitive, sort of obvious and that is discouraging and makes me feel bad.
  2. On paper/chalkboard, some blogger told me that there is a special degenerate imaginable boundary case called ‘monopsony’ in which raising wages would raise employment. Hey, that establishes that it is logically possible for rises in the minimum wage not to increase unemployment.
  3. Therefore, since it’s logically possible, and I don’t like the ramifications otherwise, we must actually be in that ‘monopsony’ situation, and are required to act accordingly! I can even call people dumb for ‘not knowing about monopsony’.

Gives me a chuckle to see this every time. I could entertain myself for an hour or two just by Google Blog-searching ‘monopsony’ and enjoying all the recent blog posts folks have littered the web with that are implicitly using logic 1-2-3 above.

I haven’t written about this stuff for a while, but it’s comforting to see that the insanity of wanting banks to somehow do banking without taking risk (which is part of the definition of modern banking) continues.

More infuriating TSA behavior. I’m pretty much at the point where my baseline assumption is that any person that takes a job going to work for the TSA in any capacity is a just plain bad human being. It is just not something that good people ought to, or would even want to, do.

Megan McArdle wrote a widely-linked piece that is basically about Smart People.

So, in case you haven’t seen this, apparently this is how you get girls’ numbers:

The RWCG Field Guide To Today’s Female Pop Stars

Now that it’s Grammy time (I think it’s some time around now) I thought I’d share with RWCG readers the Crimson Reach’s insights into our glamorous female pop stars of today. Who are these people? you wonder. What are their names? Did they do songs? And, maybe other stuff about them. Well that’s why there’s me**. (The Crimson Reach).

FEMALE POP STARS – A FIELD GUIDE

Rihanna – Rihanna is a pop singer. She is female. Her name, one presumes, is pronounced rye-hanna and rhymes with banana. Last name unknown/indeterminate. Little else is known about this diva. I think she wears skimpy dresses in her videos I bet.

Katy Perry – She is the one who looks like Zooey Deschanel. (I think they are sisters). She does some songs. They’re pretty good I think. Like not too offensive either way. I would describe her personality and stuff but I’m drawing a blank. (Same with Zooey). The good thing about this pop star is there’s not a lot to remember. You got ‘Katy’. And then you got ‘Perry’. Simple. That’s probably part of her appeal. Much easier to pronounce than Deschanel (French: “of Chanel”).

Beyonce – Well! This is the big one. Beyonce is a world famous pop star who got her big break during the Super Bowl. She is the one who was in that group but now she’s on her own. That’s what I call independent. You go girl! You probably wonder what her stage name is meant to signify. I think it is meant to sound as if it’s French for “bouncy” so that’s how they came up with it. Cuz if she’s bouncy, that’s sexy! You just can’t not think Beyonce -> bouncy -> sexy from this moment forward, can you. That’s how I always parse it anyway. I wonder if she’s from Louisiana, like she’s part Creole or something. That would explain the French. She is married to a big rapper (Warren G) so that way together they are ‘pop royalty’. Everyone is fascinated by and wants to be like them, and also, if they get a kid, we like that too.

Taylor Swift – I forget which American Idol season she was the winner of, but that’s how she became to be a pop star I think. She was the blond one on that season. Or, rather, there was Kelly Pickler and there was Taylor Swift? I texted in to Ryan Seacrest for Pickler but the rest is history as you know.

Pink – Pink.

Shakira – I know that Shakira is from somewhere in South America. That makes her diverse. Maybe she’s like an Amazon. But she dyes her hair blond. The interesting thing about Shakira is you can’t really tell what she looks like. Like, her face? Does anyone know? Her hair’s always in the way. I just find that fascinating. Anyway, if you like your pop music a little more ‘ethnic’ with a world type beat, Shakira’s the one for you probably (I’m assuming).

Alicia Keys – This one’s part not white and part white so that’s striking another blow for diversity. You can become fascinated by Alicia Keys and that way you’re not a racist without having to ever listen to a full-on not-white person, which is a bonus. She plays the piano so that’s like a Tori Amos but she does it less nasty, and presumably she’s got more soul (on account of the part not-white thing). She puts her hair on those tight braids sometimes so that’s how you can remember who’s this one.

Lady Gaga – Well what more can be said about Lady Gaga. Basically if you were around for the ’80s and ’90s, the best way to I can explain Lady Gaga, is she’s like, remember Madonna? Like that, but slightly worse. CONSTANTLY reinventing herself! A chameleon. And those videos! One word: provocative.

So there you have it, now you are completely up to date like I am with today’s female pop stars. Let me know if there’s any I’ve missed but I’m pretty sure that’s pretty much all of them.

**Disclaimer: have probably heard less than 10 minutes, collectively, of all these peoples’ music.

If the sequester goes through, will our elite standing full-time 24/7 force of loose-nuke-chaser-downers still chase down loose nukes?

Or will they stop mid-chase?

I await the crack reporting of Ezra Klein on this highly pressing issue.

How a bill becomes a law: another cherished civics myth destroyed

This debate over who is to ‘blame’ for ‘sequestration’, the President or Congress, is more than a little weird. I know I’m getting to be a broken-record but there must be something seriously wrong with what I was taught in 5th Grade Civics because, in my recollection, How A Bill Becomes A Law was always pretty clear-cut. The standard procedure:

  1. Congress passes it.
  2. The President signs it.

That means they’re both ‘to blame’. It also means neither can ‘blame’ the other. If, in particular, the President didn’t want this law to be in force, causing this supposedly-horrible ‘sequestration’ thing to happen, he needn’t have signed it back then, and (absent a veto-proof Congressional majority) it wouldn’t be happening now. Similarly, the law wouldn’t be in place had not Congress drafted and then passed it. Magic!

Or, what am I missing? Does a President now sometimes ‘have to’ sign terrible laws that he thinks totally suck? Are there cases where he signs a law but his signing of that law ‘doesn’t count’ for the purpose of allocating responsibility for how the law got passed? Conversely, does the President draft laws himself and force Congress to pass them? When the President ‘proposes’ some law does that bind Congress?

Is the standard How A Bill Becomes A Law catechism another one of those things (like individual rights, checks & balances, property rights, and the social contract) that has been demolished/disproven by realist postmodern ‘who/whom’ sophisticates to the point that Only Naive UnOvereducated People Like Myself Still Believe In Them? It would appear so.

Harlem Humbug

I’m just so glad I don’t work at the sort of ‘trendy’ place that decides to do stuff like make a ‘Harlem Shake’ video. I’d be the guy refusing to participate just wanting to stay at my desk (or go out for lunch while they do it, if they’re doing it where my desk is). And some annoying person would be all “Come onnnnn, just join us, it’s fuuun” and I’d be like No, can’t you see how stupid, faddish and lemming-like this all is? Don’t you feel dumb and robotic participating in lame nerd-trendy ‘memes’?

And then I’d have a rep for not being a ‘team player’, and would never get promoted.

Wake me in 6-9 months when the “Harlem Shake” thing shows up in the pre-credits segment of an episode of The Office, so that everyone can be appropriately embarrassed they ever paid attention to this, and so that I can laugh at them. Actually nevermind, I’m already doing that.

A philosophy professor responds to…me (?) on open borders

Read the post there. I’ll try to respond here, but as there’s a lot (and I’ve already pretty much said my piece on this subject) I may have to descend into Fiskery here and there.

First much of his time is taken up on the following question: does the government have a first, or primary duty to its own citizens. I join Steve Sailer in saying yes, for essentially the same reasons; I will even quote the same ‘ourselves and our posterity’ phrase from the Constitution from time to time. I have no originality whatsoever in this regard. Meanwhile, I don’t see the professor making a real argument otherwise (if that’s what he thinks); if the state doesn’t have a primary duty to its citizens, by what right does anyone connected with ‘the state’ wield any power or authority whatsoever, to allow or disallow immigration or anything else? I’d be interested to hear his thoughts on that subject; but they aren’t shared there.

I must have summarized this viewpoint by using the phrase ‘social contract’ at some point because the professor then debunks the (my?) idea that we have a literal social contract, and related issues surrounding the concept of one:

I know of no living person who works on political authority and thinks that we actually have a valid social contract.

Let the record show that, although I don’t ‘work on political authority’, I don’t think we ‘actually have a valid social contract’ either. Alas. The question is how we feel about that fact and whether it, however imperfect and unattained in practice, is nevertheless a thing to be desired or aimed for, to guide our (and more importantly our government’s) actions and principles. I’ll just add here that whether/how closely the ‘social contract’ concept hews to the legal notion of a contract – something the professor spends a bit too much time discussing – is a sideshow in that regard. Just call it a metaphor if that helps, who cares; the point remains.

Next the professor argues against a straw-man: that immigration restrictionists think the social contract “requires the government to promote our interests, in general, in any manner it can think of”. ‘Any manner’? No, just in manners that are part of its delegated powers in the Constitution. Right? Surely the ‘social contract’ people have a huge overlap with the ‘limited powers’ people; more troublingly, surely the professor knows this. So where does he get ‘any manner’? Possibly because there is essentially no disputing whatsoever the fact that a sovereign government, if it has any powers whatsoever, is within them in enforcing its own border.

More straw-men come:

How could this lead to the conclusion that the social contract requires the government to restrict immigration?

‘Requires the government to restrict’? How did we get here? Let’s try to keep in mind the context of this debate: one side (the open-borders faction) is asserting that the government may not restrict immigration. The contrapositive of ‘may not restrict’ is not ‘required to restrict’. This straw-man masks the fact that it is the open-borders faction which is arguing the stronger claim. All that’s required in response is to establish that a government may legitimately restrict immigration – not that it ‘must’!

The economic discussion is light and not really even to the point as far as I’m concerned (unlike perhaps(?) Sailer, I don’t think I’m a restrictionist primarily as a protectionist measure for the jobs of low-income domestic workers), but let me just note this:

Furthermore, of course, consumers benefit from lower prices as a result of businesses’ ability to hire inexpensive immigrant labor.

Shouldn’t it be noted and addressed here that what he is describing as, somehow inherently and categorically, ‘inexpensive immigrant labor’ is really black-market and what-would-have-been-called-in-less-polite-times-’wetback’ labor? There’s nothing inherently ‘inexpensive’ about legal immigrants, is there? Are we really supposed to think of the canonical ‘inexpensive immigrant’ who is ‘benefitting consumers’ so much as an IIT-trained engineer from India designing computer chips? No, there would be no such material ‘benefit’ to domestic consumers from pulling in a bunch of legal immigrants with similar/equivalent skills and training to perform labor at more or less the same wages (less, what, ~3%?), and for the record, I’d have basically no problem with virtually-unlimited import of Indian engineers from IIT in the first place. No: in practice, this ‘benefit’ he wants us to count on (permanently?) for our embrace of unrestricted immigration comes almost entirely from the fact that the category ‘immigrant labor’ is dominated by less-educated black-market workers who, due to their legal status, can often be exploited by paying them less than the minimum wage, with fewer benefits/protections, and so on.

Now, it’s okay that the professor doesn’t mention or address this. What’s more problematic to his case however is this: to the extent that his argument relies on the assertion that consumers benefit from (inherently? intrinsically? perpetually?) inexpensive immigrant labor, does this mean that immigration is only a good idea as long as and to the extent that we make sure a decent proportion of them are second-class citizens for whom most of our labor laws de facto don’t apply?

Finally there’s yet another straw-man, the idea that restrictionists must think that a government’s duty to its citizenry ‘cancels’ or ‘negates’ its duty not to violate the rights of non-citizens:

…even if we believe there are such duties, do not negate the rights of non-citizens, nor do they mean that the state may abuse foreigners to its heart’s content as long as doing so serves the interests of citizens.

Oh my. Now I’m arguing that my government may ‘abuse foreigners to its heart’s content’ am I! No wonder I also resist the idea that the Earth is round and that we came from monkeys! Non-professors like me are such cretins.

Let’s just note that in this ridiculous construction, not allowing someone to permanently relocate to the United States has been equated with abusing them to one’s heart’s content. Is this a real argument? I don’t think so. Even if the intended point here were stated in a more sober and less straw-manny way, the problem is that there is simply no Universal Human Right To Immigrate To The United States Of America. Such a thing is, if anything, even more problematic and mythical than the concept of a literal ‘social contract’. But if the professor nevertheless thinks there is such a Universal Human Right, where did it come from? Why didn’t he include his actual argument for its existence in that (already very long) piece?

Oingo Boingo

What was the deal with them? What did they think they were doing?

An RWCG Readers Open Forum.

Being calm on the minimum wage

Well the President got on TV and said something about raising the minimum wage so that’s our cue in the blogosphere to all start talking about the minimum wage.

I retain and renew my fully-paid-up libertarian credentials on this subject by agreeing with Don Boudreaux about the minimum wage.  Yes I do think (as even Matthew Yglesias understands) that if I want to hire someone to do a thing at $X/hour and that someone is willing to do the thing for $X/hour, or vice versa, this arrangement between we two is none of anyone else’s fucking business. Mind your own business. Learn some damn manners. Seriously, who raised you?

More to the point though, my considered belief is that a minimum wage hurts people rather than helps them, that politicians supporting a minimum wage therefore accrue approval-rating points from many of the very people their policy hurts (not all such people though: a big bloc whom it hurts are just ‘teenagers’). But, whatever. I doubt it materially affects me literally all that much. If the poor out there want to reward and fawn over politicians for hurting them, and Smart People want to pat themselves on the back for ‘caring’ about the poor so much that they push policies that hurt them, I find that whole dynamic annoying, perverse and tragic but what else is new.

So please note in your RWCG Daily Reading Diary that I don’t have really hugely emotional feelings about the minimum wage. That’s why it was puzzling to read that I and other conservatives need to calm down about the minimum wage. Okay! Okay! I’ll calm down. I’m taking a deep breath. Well, now that I’ve settled down from my previously oh so highly emotional and irrational state, I have time to read the arguments against the arguments against the minimum wage. What are they?

Essentially it boils down throwing up one’s hands and saying/pretending ‘we don’t know’ what a minimum wage does to employment, as if this policy is oh so subtle and hard to understand and so knowledge about its effects can only come empirically. One is certainly not allowed to use any theory. A priori ground rules have somehow been decided (odd; I must have missed this vote) that before drawing any conclusion whatsoever on this subject we need all sorts of ‘studies’ and ‘data’ and ‘statistics’ to ‘prove’ that conclusion, and that’s impossible anyway, so we permanently don’t know!

This argument is a variation of a This Policy Doesn’t Do What It Does argument. I might think that when the government puts a price floor on labor that has an effect – in the only conceivable possible direction for that effect to point – but I’m not allowed to ever say or think so without untangling this effect perfectly from every last variable with a definitive, complete ‘study’. Which is something that would be impossible for humans to do, hence, the minimum wage is permanently fine.

This know-nothing approach also allows the anti-anti-minimum-wage theorist to poo-poo arguments like Well then why not raise it to $90/hour? That’s ‘silly’, goes the logical, calm argument. It’s just silly! What is left unexplained is where the magical inflection-point occurs between $9 and $90. The anti-anti-minimum-wage theorist apparently knows there is such an inflection-point, and must indeed know where it is (or at least knows a lower-bound for it, so as to be able to know that $9 lies below it), but isn’t divulging anything further than that. Pity. But of course this I’m-not-telling-you-where-the-magical-inflection-point-lies issue plagues all This Policy Doesn’t Do What It Does discussions.

A curious argument is to suggest I’m wrong in my theory because ‘monopsony’. (Such people like to demonstrate that they know the word ‘monopsony’ a lot.) Anyway, it turns out that in a special case called ‘monopsony’, it’s possible for a minimum wage to increase employment. (How ‘it’s possible’ automatically becomes ‘therefore, that’s the situation we’re in!’ is beyond me, but of course I’m not an economist.) More puzzling, the person saying this typically then points to the Wiki page for monopsony without (apparently) having actually read it, because Wiki describes it as ‘one buyer facing many sellers’. The buyer being ‘employer’ and sellers being ‘workers or potential workers’, what on earth this theoretical textbook boundary-state has to do with the actual employment situation in any real-world non-Communist nation-state is beyond me.

And that’s it ladies and gentlemen. That concludes my literature survey of the arguments against arguments against a minimum-wage. Okay, I won’t claim it’s complete. (I’m a pretty lazy researcher.) But at least I’ve calmed down over the whole thing. From my previously hysterical state. So there’s that.

Linkdump

Cigarette taxes, the most regressive tax in America.

Some people still refuse to accept the Received Wisdom from Very Smart People that government housing and mortgage policy had no effect whatsoever on either housing prices or mortgage markets.

Accurate description of the function of a Matthew Yglesias in modern politics.

How we were lied to about health care might be more earth-shattering if all these Noble Lies weren’t apparent to everyone – including the ones who uttered them – at the time.

Standard politicized reasoning.

Why has oil become so much cheaper in America than in Europe?

David Henderson is unconvinced default must be avoided at all costs; rightly so (“___ must be avoided at all costs” is almost always false and indeed a bit of a self-contradiction; even at the cost X = [the cost of the thing you're trying to avoid] x 2?).

What President Obama means by a ‘thriving middle class’.

Canadian social mobility disappoints progressives and defies their baseless assumptions about it: ‘In Canada almost 7 out of 10 sons born to a father in the top 1% of the earnings distribution had a job with the very same employer as their fathers’. My suspicion is we in the U.S. tend to underestimate the corruption and mafia-ness present in Canada. You know, because they’re nice, and because of Degrassi Jr. High, etc.

Noah Smith on David Graeber on debt wonders how exactly lending money to people who don’t pay you back counts as a wealth-extraction scheme. Ditto that.

Arnold Kling calls out some econ bigshots who don’t know what the hell they’re talking about when it comes to mortgages but still felt free to sound off about, and conjure out of thin air, supposedly Smart mortgage policy.

Byran Caplan actually inadvertently hits upon a great idea re: illegal immigration: ‘Hand out green cards to illegal immigrants who turn in their employers for minimum wage violations.’ RTWT; the logic is sound and the feedback effects would be salutary all around.

David Friedman explains why even if global warming is a problem, we aren’t going to do anything about it.

I have just learned that this ‘business cycle’ economists are always jabbering about  is not a cycle. Does ANYTHING economists say make sense?

Peak N-word outrage

I was reading that ex-cop’s “manifesto” – I skimmed maybe 3 pages, got bored, thought ‘how long is this thing anyway?’, scrolled to the bottom, saw him mention celebrities and the elementary schools he had gone to etc. and realized I was probably only 2% through, so I quit reading – when a thought occurred to me:

Is it possible this incident will help people understand that there is such a thing as an overreaction to a case of others saying a certain 6-letter word that begins with N?

No? 

Ah, well.

Aha, this explains why Jordan is the world-renowned capital of female mathematicians

Mathbabe links to this NY Times infographipiece as evidence – ‘the smoking gun’! – of gender bias in math. The evidence? Boys do better than girls in math in the U.S. This proves gender bias in math. QED.

Here’s the key chart:

If you click through to the piece and leaf through the slideshow, you’ll see that the blue dots to the left of the axis are, in addition to the United States, notoriously misogynous, cruel-to-females places such as Denmark, Liechtenstein, Iceland and that hellhole Canada.

The healthy, gender-equitable yellow-dot countries, meanwhile, include such utopias as Montenegro, Slovenia, Jordan, Albania, and Qatar.

I mean, do I really need to say more? The case rests here, doesn’t it?

The anti-spreadsheet jihad continues

I’ve LOL’ed before at the idea of blaming the financial crisis on too much reliance on Excel, but James Kwak does have some balanced and intelligent thoughts about it, and its problems, here.

It still has always seemed to me that to focus on the Use Of Spreadsheets is to go for the capillary when it comes to financial-sector leverage, ‘innovation’ and bubble-blowing. It’s a symptom rather than a cause, and it’s a tool for shenanigans, perhaps an enabling one – but it’s just not the shenanigans themselves. Moreover, as Kwak points out, you can never really get rid of spreadsheets:

For all the talk about end-to-end financial suites like SAP, Oracle, and Peoplesoft, at the end of the day people do financial analysis by extracting data from those back-end systems and shoving it around in Excel spreadsheets.

Exactly. Imagine the most perfect Secure Spreadsheet Replacement, and now imagine every single user on a day to day basis mostly using it to scrape numbers out of it so that they can actually play with the numbers.

In a spreadsheet.

What correlates with ‘good school’?

I’m always on the lookout for research to support my half-baked ‘good schools = less non-Asian minorities in the school’ theory (please read that link before getting mad, I’m not putting this forth as a matter of my own preference per se), and this might be an example.

…student test score performance will be positively related to the percentage of school district revenues raised from local taxes and with salary levels of school district administrators

Is a high ‘percentage of school district revenues raised from local taxes’ just a proxy for ‘less non-Asian minorities around’? I don’t know, but it might be.

At that link the blogger points out that the causality might be reversed and the research might have just dug up a correlation. What my theory suggests is that all discussion of ‘good schools’ is plagued by this problem, because all factors everyone looks at are just proxies for something no one is able or willing to talk about directly.

Can anyone on the left explain Obama’s ‘future must not belong to those who slander the prophet of Islam’ post-Benghazi speech?

Since I’ve been seeing chatter about Benghazi bubbling to the surface again, I feel the need to clarify something.

One of the prevailing critiques/conspiracy theories on the right about Benghazi was that the ‘embassy’ was a front for some covert operations, e.g. gun-running. The attack, per this theory, was retaliation for/interception of those covert operations. The Obama administration’s crime, per this theory, is in its failure to publicly disclose those covert operations now (?), as well as in (we infer) a lax approach to the security of the ‘embassy’ and obtuseness regarding the blowback those operations were likely to incur. In short: (1) dishonesty/lack of transparency, and (2) ineptitude.

Now I don’t actually think an administration is supposed to or somehow required to detail all its covert operations on the front pages of newspapers. I recognize that things like gun-running to enemies-of-my-enemies will take place in these places and I’m not that worked up over it. I can even envision a scenario wherein a diplomat involved in such things does so with full knowledge of the risks, and refuses mega-security because that might threaten to blow the cover of the operation, if that’s what the administration or their defenders are trying to say.

The problem is that when this all gets filtered through the media it turns into ‘lying about a youtube video’ and sounds as if it’s the most trivial complaint in the world, because one can always just blame such ‘lying’ on the fog of war. In this context the casual news-watcher can easily be forgiven for thinking that Secretary Clinton’s ‘what difference does it make’ comment made total sense. There is a disconnect between the Critics’ Story and what the MSM/left/conventional wisdom think is the critics’ story.

One way to reduce this disconnect is to clarify why ‘lying about the youtube video’ offends so much and that’s what I’d like to do here.

In the (incorrect) lefty-interpretation, what the right is saying is that Obama et al were required to Know Exactly Why The Attackers Attacked Instantly, and tell us. We are not forgiving of intelligence that is fuzzy or vague, or (worse) we don’t understand that it can be. Equivalently, we are implicitly saying that an administration must paralyze themselves unless/until intelligence attains 100% certitude. I totally understand why if someone thinks that’s the complaint, they roll their eyes. I would too!

But look, here’s what I’m mad about – or more precisely, it’s a thing that annoyed me and which is symptomatic of the underlying Benghazi complaint – Obama, at the time, used the ‘youtube video’ to lecture us all on tolerance. He not only lectured us all, he went before the world stage and threw us under the bus by telling foreigners that (implicitly) we were intolerant and brought the attack on ourselves. What the heck, Obama?

More importantly, how to square that with the current prevailing lefty defense of ‘Oh stop being so picky, everyone knows intelligence is fuzzy in the first days after an event like this’? If intelligence was so fuzzy, why did President Obama use it to go off half-cocked on his stupid-ass ‘the future must not belong to those who slander the prophet of Islam’ campaign? Seriously, now that (everyone concedes) that event had nothing to do with anyone ‘slandering the prophet of Islam’, then please tell me what in the heck that stupid speechifying and posturing was all about?

The current administration-defense theory – that the administration was just doing the best it could with imperfect information – completely crumbles if you think seriously about that little ‘future must not belong to’ campaign.

Meanwhile, the righty conspiracy theory is completely consistent with it, because part and parcel of that theory is that the ‘youtube video’ was a smokescreen thrown up by the administration in order to muddy the waters regarding what the attack was about. Which (under this theory) they knew full well wasn’t about a youtube video.

I have not been all that vocal in the criticizing over Benghazi; in fact right after the event occurred, I was downright defensive, comparatively speaking, of the administration. And so I’m actually inclined to give the benefit of the doubt when it comes to the fog of war, covert operations, things they can and can’t reveal publicly, and so on. But please, if you’re going to completely carry water for the administration, show some sign that you have thought seriously about the ‘future must not belong to’ post-Benghazi speech and why it makes no sense whatsoever under the current Benghazi defense.

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