RWCG


Connections
July 23, 2015, 8:05 pm
Filed under: Uncategorized

Interesting piece on how little we in the West know/understand about the rise of ISIS. We just can’t understand what attracts people to it:

Again, we can list the different external groups that have provided funding and support to ISIS. But there are no logical connections of ideology, identity, or interests that should link Iran, the Taliban, and the Baathists to one another or to ISIS.

Well, except for that whole Islam thing.

But other than that, no logical connections that anyone can think of!



Volcker Rule: Bloody murder, so what
July 22, 2015, 9:23 pm
Filed under: Uncategorized

Matt Levine in this piece on the Volcker Rule makes essentially all the same points, observations, and critiques about it that I did in my quixotic bizarre early-2010s campaign against it. Including

  • You can’t sharply, objectively distinguish ‘prop trading’ based on the trades themselves.
  • If there’s a distinction, it exists largely in the trader’s mind.
  • To take the stated criteria of which trades aren’t ok literally and consistently would mean to ban banking as we know it.
  • Since no one’s  really proposing to do that (EDIT: almost no one), the ban will (inevitably) be enforced vaguely and inconsistently, which invites regulators to second-guess after the fact and make up ad hoc criteria for what is/isn’t ok – with unstated but obvious implications for the rule of law. A quote from the Levine piece:

    “we’re entering a period of rulemaking by enforcement, in which regulators will look at stuff, give it the smell test and say, ‘That’s OK,’ or give it a sniff and say, ‘That’s not OK.’”

    Oh, lovely. Yglesiocracy FTW!

  • The attempt to regulate away ‘prop’, given the impossibility of defining it, becomes like trying to (as per the title of Levine’s 2015 piece, and of my 2012 piece) just ban losing money.

These are all points Levine now, in 2015, makes matter-of-factly, almost as asides, with a gentle chuckle, in a random piece. I guess they’re now just conventional wisdom, everyone knows them already, yeah, yeah, ad hoc regs, fake distinction, there’s no rule of law, we get it. Yet they are the very points I, internet wacko, was banging my head against a wall trying to drive home in 2011-13!

This is all very depressing because from this we learn:

1. I can point to confirmation of my judgment on this entire matter and basically every point I ever made for my case, and yet
2. It just doesn’t freaking matter.

It’s as if I’ve been screaming ‘bloody murder’ only to encounter – after a long delay – the response: ‘ok, so there’s a bloody murder. And? Your point?’

Everyone Knows, independent of any given facts or arguments, that the Volcker Rule was a necessary thing that Needed To Be Done. Even most of the people who will read the Levine piece and nod their heads. But then walk away still intoning the catechism, “but the Volcker Rule still Needed To Be Done.”

So, whatever. Bloody murder, big whoop, who cares.

P.S. One place I do quibble with Levine:

The rule told banks to stop doing proprietary trading. Banks stopped doing proprietary trading.

I get he’s trying to make a point there, but it’s important (to me anyway) to emphasize that strictly speaking this isn’t actually true. Not really. They certainly stopped having desks called ‘prop desks’, and I’m sure nobody in a regulated bank with any smarts is doing trades they’re willing to (openly/in mixed company) call ‘prop trades’. But again – as Levine agrees elsewhere in the piece! – some fraction of business-as-usual trading and underwriting and similar activity (including, I would assert, much of what actually makes them money, and bonuses) just is ‘prop’ by any sane definition, if ‘prop’ were ever to be consistently-defined. Which it won’t.

So, congrats regulators. You did it! You set up a regulatory framework that will induce bank employees to become better at hiding and less transparent about the prop trading they do to make their yearly P&L targets, camouflaging all their activity as just ‘meeting expectation of client demand’ so that now – as opposed to 2010 – it will look as if what they’re doing to collect their fat bonuses is blessed and wholesome, instead of the same ol’ shit.



Use and misuse of metrics
July 21, 2015, 8:35 pm
Filed under: Uncategorized

The idea that, counter to their supposed rugged-individualist philosophies, ‘red’ states siphon more money from the fedgov than ‘blue’ states is a pretty standard and well-worn Smart talking-point. Something seems fishy about this though.

Using data from the IRS, WalletHub ranked all 50 states on four key metrics: return on taxes paid to the federal government, federal funding as a percentage of state revenue, the number of federal employees per 1,000 residents, and the number of non-defense federal employees per 1,000 residents.

Seems like these rankings are then (ugh) blended together, using some arbitrary and made-up weights. The resulting mess is put forth as a metric of ‘dependency’, i.e., of the state on the federal government. (I guess, though even if this metric made sense it’s a pretty muddled concept.)

Anyway, some of the graphs in the piece are confusing (N.B. the red dots are not ‘red’ states), but the headline result is clearly supposed to be that ‘red states’ are more ‘dependent’ on the federal government than ‘blue states’. They are so by a precise score of 33.2 to 18.3:

Aha! Gotcha, you leeching red states! This is just #science.

Let’s take a closer look at this dependency-metric. One of the factors: ‘federal funding as a percentage of state revenue’. Well, state revenue = state taxes + federal funding, more or less. There are presumably exceptions, states (e.g. Alaska?) that get significant revenue from natural resources or other non-tax sources, but generally speaking, a state with low or zero taxes should almost automatically score ‘high’, i.e. bad, i.e. ‘dependent’ on this metric. So all else equal, what is being touted as a finding that red states are dependent is just a tautology – states with low state-tax revenues get low state-tax revenues, duh! – in disguise.

Another component of the metric has to do with how many federal employees a state has. This takes a deeper dive but could very well have a similar explanation (i.e., if it has fewer state employee positions, that portion of the workforce naturally takes more fed jobs?). Curiously, the authors use & rank two separate categories for federal employees and non-defense federal employees (weighted, #scientifically, with factors 0.5 and 0.25 respectively), so there’s room for all sorts of speculation as to why they felt the need to do that. (Make blue California look better?)

The other big component is ‘return on taxes paid to the federal government’, which isn’t quite clear but seems to just correlate with GDP. Have a low GDP, your residents will send less income-tax dollars to the feds, this will make that state’s ‘return on taxes’ higher, all else equal. And then if GDP-by-state correlates with red-blue – for example because ‘blue’ states are dominated by snooty effete wealthy SWPL cosmopolitans – well there you go.

Anyway, from all this we ‘learn’ that low-state-tax states don’t collect a lot of state taxes, and low-GDP states don’t contribute a lot of net federal tax revenue. These obvious and, on the face of them, a priori morally- and ‘dependency-‘ neutral facts about such states have been relabeled as those states being ‘dependent on the federal government’ for your spinning pleasure. In conclusion, New Mexico is the ‘most dependent’ state. Enjoy & use this talking-point wisely, Smart People.

And so that’s how you use and misuse ‘metrics’ in social science and schlock pseudo econ analysis.

UPDATE: Some more thoughts about New Mexico. My guess is that New Mexico’s outsizes number of federal contracts/employees relate mostly to (a) national labs and (b) military bases. Anyway, the fact that the federal government set up national labs & military bases in New Mexico, and pays people to work there and maintain them, presumably plays a large role in why New Mexico becomes scored by the above metric as ‘dependent on the federal government’ – like it’s getting a handout.

That’s a bit strange, isn’t it? I don’t mean to discount the influence and role of federal money, nor that New Mexico’s legislators lobby to keep it flowing. But is the rest of the country getting nothing whatsoever from the deal? Presumably the country gets scientific research and, well, defense out of it. If these sites weren’t in New Mexico, and we still wanted to have them, they’d have to be somewhere else. In fact, couldn’t one justifiably say that the federal government is disproportionately ‘dependent on’ New Mexico for a good chunk of its scientific research and military siting? When you pay someone to haul your trash, do your taxes, or police your neighborhood, is he ‘dependent on’ you or are you dependent on him?

Actually, isn’t the real answer ‘neither’?

Seems to me the notion of ‘dependence’ painted by this metric is just the household fallacy (=treating the government as a household), combined with the sort of backward mercantalist economics that treats a salaried job as a handout instead of an exchange.



Yglesias, totally disinterestedly, complains that you have to be ‘rich’ to get your kids in ‘good’ public schools
July 21, 2015, 11:58 am
Filed under: Uncategorized

Matthew Yglesias complains on Vox: Want a good public education for your kids? Better be rich first.

He features this chart:

It doesn’t take a socioeconomic genius to see the logical problem here, as many already have on Twitter. The plot correlates a measure of a) how smart the students are vs. a result of b) how wealthy the parents are, binned by school. And lo and behold it reveals the (wholly unsurprising) fact that higher family wealth correlates with kids who do better on tests.

What’s that got to do with how ‘good’ the school actually is? (Unless of course by ‘good’ you mean something else entirely.)

So that’s funny enough. What really makes that post a perfect-storm for RWCG-fodder though is that (as usual with Matthew Yglesias) it seems likely there’s an autobiographical angle. I know it’s unsporting and against the rules of polite debate to point this out, but it’s just that so often, the (ostensibly class-conscious and disinterestedly progressive) topics that interest Matthew Yglesias tend to magically align with whatever’s going on in the life, and threatens to hinder the social advancement (or even mere convenience) of, one Matthew Yglesias. I’m not gonna bother to dig up links but if you wish you can find Yglesias posts on such things as

  • Things that inconvenience him (e.g. how Amtrak trains handle boarding procedures, the bad wi-fi on Amtrak, or more recently, brick sidewalks that make it hard to push strollers)
  • Things that he finds aesthetically displeasing (e.g. cracks in the sidewalk)
  • Zoning rules which make housing more expensive/restricted, especially in DC (a big interest of his especially around the time he was buying a condo in…DC)

To pause on that last item for a moment. The conservosphere made a big deal of his purchase, which I criticized at the time. (Dude’s gotta live somewhere, this is just what stuff costs where he is, etc.) But now that he’s (as his readers also know) recently had a kid, and suddenly blogging about these (faux) ‘school goodness’ statistics, surely one can be forgiven for connecting some dots and wondering, golly, where would that Logan Circle condo he bought a couple years back places him on the DC public-school-zone map. Can’t one?

Well, it’s not that hard to look this stuff up, and best I can tell (I could certainly be wrong), it should place him in Garrison. Just to be clear, that’s the lonely dot in the lower-right quadrant, with a relatively high average home price but a super-low (~25%) test-score metric on par with some of the more, er, diverse areas. Yet just nearby are acceptably upper-right-quadrant schools Seaton & Cleveland, and he would appear to be tantalizingly close to that top-rightmost dot Ross, representing Dupont Circle.

So, I mean. I’m just gonna ask it. Is that what the bleeding-heart lefty is really complaining about with this piece? That his pricey condo still wasn’t enough to get him to the cream of the crop areas where the public-schools are ‘good’ (i.e., where the kids his kid would be mixing with come from more uniformly-wealthy families)? I mean like, damn, what’s an important voxsplaining progressive gotta do to keep his kids from the rabble?

Just saying.

Of course, never fear. I’m sure his kid is destined for private school anyway, and/or they’ll sell out & move to the ‘burbs before kindergarten. Can’t wait to see the caring selfless disinterested lefty blog-post socioanalyses that’d result from that.

UPDATE: I rest my case, I guess. Kind of anticlimactic really. Like, he doesn’t even have any self-consciousness about it.

UPDATE 2: A more careful analysis that correlates home-price to something that actually does try to measure school quality, ‘median growth percentile’. Which may not be a perfect metric but at least (unlike mere test scores) it tries!

The result for Yglesias’s school?

But I crunched the numbers, Matt, and Garrison is hardly terrible. If you had used better metrics, you would have discovered it’s just about average.

So we see that according to the data, Yglesias’s complaint can simply not be that his local school is ‘bad’. It can only be that the kids it contains test as if they are, on average, from poorer families. One possible, even likely, reason for this phenomenon is that the school just has a high dispersion in wealth/demographics – i.e., some kids from wealthy and super-wealthy families mixed in a population with a larger bloc of kids from poorer families.

I note as an aside that, for example, Garrison is about 85% black & Hispanic. Idyllic nearby super-achieving Ross, meanwhile is 32% black & Hispanic, 49% white, 8% Asian.

So again, I’m just wondering, what precisely is Yglesias’s complaint with all this fretting about whether his nearby school is ‘good’? Gee, I wonder.



Millenials!
June 16, 2015, 2:53 pm
Filed under: Uncategorized

Millenials. Is there anything you can’t say about them?

Here’s some things Millenials want: homes, to get married (but not the same way that other generations do), to make the world a better place, to change the world (but make money too), but also not a well paid job but a job that’s fun, more than money, work-life balance, more flexibility in workplace schedule, food to be fresh and fun, to work in tech more than any other sector, stylish design, flavorful writing, and not just junk web video, to party not gamble in Atlantic City, and last but not least value but not at the expense of quality.

To hone in on the job issue, here’s some things Millenials want out of a job: meaningful work, high pay, sense of accomplishment. I mean, can you believe it? A starker difference between Millenials and preceding generations I cannot imagine. Who on earth ever heard of wanting meaningful work and high pay before 1990? The times, they sure are a-changin’ all right.

Here‘s a helpful piece with a photo, captioned “Millenials seek out value from their retailers”, of a guy (presumably a Millenial?) doing (presumably) just that. Did you ever imagine in your wildest dreams that a generation of people would come along who seek out value from their retailers instead of not seeking out value, as had been the custom and the norm since time immemorial?

Which reminds me, here’s some things Millenials value: experiences over owning things, stories and photos over video for trip inspiration, seeing the world up close and in person, birth control, transparency from the people and companies they interact with, ‘elationships’, immediacy, transparency, flexibility, simplicity and reliability, organizational “fit”, on-site or subsidized childcare, flexible work arrangements, as well as paid parental leave, Netflix, and smarts (which is not to say they don’t value quality because they do, it’s just that they expect to get it at the best possible price).

Isn’t all this fascinating?

I know I sure am riveted. What a scintillatingly unprecedented generation of humans, to have discovered and invented all these heretofore-neglected and unheard-of, new, and revolutionary wants and needs. Stuff the rest of us never even thought of, you know, stuff like: tasty food, and fun, and being entertained, and having good comfortable job situations rather than bad ones, and being happy with oneself instead of sad, and feeling like you’re doing good/right things instead of bad/wrong ones, and seeing your kids instead of not seeing your kids, and getting more stuff with one’s limited resources rather than less stuff, and sex and being able to have it instead of not have it, and (eureka! why didn’t I ever think of wanting this!) homes. I mean I could keep going because the list just goes on and on but you get the idea.

Millenials! They came up with all this stuff from scratch in just one short generation. Amazing!



Kling on ‘good schools’
June 14, 2015, 9:51 am
Filed under: Uncategorized

Arnold Kling on schools:

One of my pet peeves is the metro section’s constant reference to the “excellent reputation” of Montgomery County schools. What the schools have is a reputation for having an excellent reputation

But that’s enough! That’s all you need, really. You want your kid in a school known for having an excellent reputation. Nothing more nothing less.

As I’ve said many times, the idea that some parent out there wants a ‘good school’ because of the diffuse statistical effect it will supposedly statistically have on his kid’s (cohort’s) expected-test-score N years forward, as can only be measured/distinguished in large dubious regressions with often statistically-insignificant loadings and problematic methodologies that lack sufficient control, just makes no sense. To the extent this is even about anything academic at all (see below), you want your kid in the ‘good school’ based on what college admissions will treat as ‘good schools’. And if the school is ‘only’ good by reputation that’s still sufficient. I mean I don’t even know what else ‘good’ can possibly mean, academically.

In fact, if you plot the percent of students that perform well on tests against percent of students not on free and reduced meals, Montgomery County schools fall right in line.

Well, sure. ‘Good schools’ is largely a euphemism for social class. You want to be in a neighborhood where your kid will be in a ‘good school’ because of what it indirectly indicates about the things you’re (in polite company, and in some cases, legally) not allowed to ask/say directly about that neighborhood.



The Important Guy With The Student Loans
June 10, 2015, 11:25 pm
Filed under: Uncategorized

As you may have heard, Some F’ing Guy You’ve Never Heard Of (I think that’s his name, remind me to doublecheck later) wrote a piece in the New York Times about how he hasn’t yet paid back his student loans because that would’ve inhibited him (Some F’ing Guy) from becoming the important person to the world that he is today. And then the world kinda freaked out for a day or two.

I say ‘hasn’t yet paid back’ rather than ‘defaulted on’ because, although the article is accompanied by a visual of what is presumably meant to be a Student-Loan-Card (is there really a card?) being burned, the debt isn’t magically gone, and it’s not quite clear to me or – as far as we can tell – even to him how he’ll possibly avoid paying it back eventually (unless he dies soon? but still, the government could garnish his, like, Social Security benefits?). This is because, as everyone knows, student loans are not dischargeable in bankruptcy for some historical vestigial reason no one can quite seem to articulate or justify nowadays. Which to me says, you simply can’t of your own volition fully ‘default on’ your student loans and call it a day the way Michael Scott declares “bankruptcy!”. I mean you can not-pay the payments they tell to pay but that just means that (unless/until they cut you some kind of deal) you’re delinquent on them, you’re late in paying them. You’re in the ’90+ days-delinquent’ bucket from day 90 forward. Well, this particular guy in the 90+ bucket sounds like when you drill down into the actual details he’s about 30 years delinquent, and his point in writing the article was to say, he thinks that’s just fine, he does, especially given how important to the world he turned out to be, and he just wants everyone to know that he’s made his peace with his own not-paying-money-back. Which (the writing of all that, if not the action behind it) you gotta kinda admire in and of itself, in a way?

But that’s not my point in bringing this up. My point in bringing this up was to say that I was wrong in my reaction to the spectacle. I was wrong on Twitter, because I Tweeted that I thought it was fine and dandy (basically) of him to ‘default on’ [sic] i.e. not-yet-pay-back his student loans. Now, my longtime readers know that I keep a mental tally of how many times I’ve been Wrong On The Blog, and when I consult this mental tally I think this now brings it up to 6. (If tweets count.) So this seems significant.

How was I wrong? Well, ‘you guys should default on your student loans’ – if that’s what he was saying – is just terrible, awful advice. My assumption based on taking what he wrote at face value was that it was a strategy that worked out for him (although on reflection I’m not even all that sure of that), but even if it did, it would work out horribly for 99.999% of everyone else. Not from ‘society’s’ point of view (I am not at all concerned about the morality of not-paying-back these loans) but from their, the borrowers’, point of view. Seriously kids, don’t try it.

Why was I wrong? I think it’s that ‘mood affiliation’ thing all the cool econ bloggers talk about (though I can’t be sure as I mostly just skim those guys). Basically, I am anti-student-loan, I have a bee in my bonnet when it comes to student loans, and so a guy coming forward who appears to throw a monkey-wrench in the logic behind them appealed to the dark nihilistic side of me that just wants to blow it all up. I really want to believe that guy is right when he intimates, for example, that if more followed his lead,

The government would get out of the loan-making and the loan-enforcement business.

Hear, hear! Can I get a hell yes. (I’m not sure he really means it BTW. Does this also mean no loans to Solyndra and Tesla?) Because yes, it was kind of stupid, in retrospect, to turn the U.S. Department of Education into one of the world’s largest banks, and to assign Department of Education administrator type people (who, don’t get me wrong, are perfectly nice people I’m sure) to run one of the world’s largest loan portfolios, inadvertently. I mean, wasn’t it?

On the other hand, maybe the government getting out of loan-making is not what would happen at all if everyone ‘burned their student-loan cards’. Maybe something much, much worse. After all he also says, in the very next sentence,

Congress might even explore a special, universal education tax that would make higher education affordable.

Which is just ill-thought-through shallow lefty blather. (I do like the idea that it’d be not just any-ol’ tax but a ‘special’ tax! “Honey would you put out the special good China, it’s time to pay the special tax today”)

The serious point behind my reaction is my awareness the rule no discharging of student loans in bankruptcy, combined with the rule of fair-value accounting for student loans, has led to something perverse. When the government makes a student-loan it pays out money, and it expects to get interest in return for the next 10+ years. Since that interest rate is 6.5% or whatever, which is higher than prevailing interest rates, the government gets to tell itself it has made money on the act of paying out money! Every. single. such. act. So every student loan being made reduces the deficit, it ‘makes taxpayers money’ – Elizabeth Warren is technically right about that.

This is perverse of course because in reality (if not accounting), some large fraction of those interest payments are never going to come. Some fraction of the student loan principal will never be paid back, one way or another. So the future money the government pretends to think it’s going to get from these people (which is why it ‘makes money’ in the act of making the loan) isn’t going to be there. There is, in reality, a large amount of losses baked into the accounting, and those losses just haven’t arrived yet. But they have started trickling in already. (Also! The loans that might actually be just fine are being methodically skimmed away for private profit. So we’ve got that going for us too, which is nice.)

So the reason I kinda-sorta liked this guy’s op-ed is because he was reminding the world and everyone: no, in fact, all these student-loans aren’t going to be automatically paid back. Since that is an obvious truth, my preference would be to recognize it, instead of to hide it in the accounting. Take the pain now instead of later. Pull off that band-aid. Let’s get it over with.

I stand by that. But meanwhile no, the literal advice the guy is giving – if that’s what it is – is totally dumb and horrible and misguided, for almost any person in a position to receive it.

Good column, Guy. I now see how important to the world you were that we needed to buy you a buncha degrees!




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