I know he’s Brad Pitt and all and is probably pretty secure in that, but I wouldn’t let Angelina Jolie anywhere near Bill Clinton if I were him. Ms. Jolie has lost a lot of weight lately, but she is totally the ol’ hound dog’s type. And Ms. Jolie was married to Billy Bob Thorton so we know she has a high tolerance for dried up, grey old guys and vulgar male pantings in that dopy Southern accent.
Lawrence Summers has an editorial in yesterday’s Financial Times arguing against excess concern with moral hazard (“Beware the Moral Hazard Fundamentalists,” 24 September 2007, p. 11). It is a well deserved and long overdue point. Whenever an economic crisis looms, the usual suspects trot out all the laissez faire tut-tuting. It was probably a day or two after the major news stories about the most recent central bank interventions that The Wall Street Journal editorial page started in with the boiler plate about how a few routine government interventions today spelled cataclysm of serfdom down the road. Mr. Summers’s editorial or others like it should be kept at the ready at more responsible economic editorial boards around the country.
I’m going to refrain from reposting Mr. Summers’s analysis because it is long, but it is worth reading at the link. It is worth noting that Mr. Summers doesn’t split hairs about the significance of his argument though.
Moral hazard fundamentalists misunderstand the insurance analogy, fail to recognise the special features of public actions to maintain confidence in the financial sector and conflate what are in fact quite different policy issues. As a consequence, their proposed policies, if followed, would reduce the efficiency of the financial sector in normal times, exacerbate financial crises and increase economic instability.
Mr. Summers’s three points of contention all argue that moral hazard, as its soothsayers characterize it, does not in fact obtain. I’m not an economist, but I’m going to go further and suggest that even if it did, under sufficiently dire circumstances, we still shouldn’t concern ourselves too much with it.
The economy isn’t a system that admits a state of perfect tune, but instead of optimization. Many factors trade off and the object is a state of affairs where maximum benefit is derived from a given factor without the deleterious effects of said factor overwhelming the positive. The Philips curve or patent protection are good examples, but others abound. It’s part of the power of economic-like thinking. And the economy is dynamic: the advantageousness or deleteriousness of a certain ratio of factors may change with time, or in relation to a third factor. For instance, central banks may have an easier time controlling inflation and may be able to do so at lower rates of interest when governments balance their budgets.
Given a dynamic balance of harms and advantages, moral hazard is a factor like any other. Moral hazard trades off with other objectives. Like the present, the most common example that people point to where it trades off is with capitol liquidity. Mr. Summers compiles a good list of examples of so objected government programs to preserve liquidity.
Moral hazard is indeed something to be minimized when times are good, it’s affordable, and its harms relatively troubling compared to the mix of harms on the horizon. But it is a goal to be relaxed when its attainment becomes extremely costly in the face of our other goals.
Think of it like this. Not spilling hot coffee in out lap is one of our objectives and under most circumstances it’s a pretty affordable one. On the go, you may have to drink from one of those sippy-cups and lean into a swig as an extra precaution, but still pretty easy. When suddenly an oncoming car swerves mid-coffee-sip into your lane, the equation shifts and the time, attention and dexterity to maneuver the coffee cup into your car’s dashboard cup holder becomes unaffordable. In order to achieve some of your other goals, you may forgo the no-hot-coffee-in-lap objective and just drop the damn cup to get the second hand on the steering wheel in a timely fashion.
When faced with a potential economic crisis, a little moral hazard may be an acceptable sacrifice. So long as the government preserves an element of roulette and just deserts in who survives and who perishes in a crisis and cultivates a reputation of preferred laissez faire — or at least an adequate amount of uncertainty about where and when it will intervene — then economic actors will remain sufficiently terrified about the future as to plan accordingly.
Also in nuclear news, despite some pretty severe smack-downs from some prominent names in the arms control community, Glenn Kessler and the Washington Post are apparently sticking by their story that Israel bombed a Syrian nuclear installation on 6 September 2007 (“Israel, U.S. Shared Data On Suspected Nuclear Site,” 21 September 2007, p. A1).
Joseph Cirincione, coauthor of the widely consulted reference, Deadly Arsenals: Nuclear, Biological and Chemical Threats, calls this story “nonsense” (“North Korea-Syria Nuclear Ties: Déjà Vu All Over Again?,” Foreign Policy, Passport, 14 September 2007) and Jeffrey Lewis of Arms Control Wonk goes so far as to call it “bullshit” (“Did Israel Strike a Syrian Nuclear Facility?, 16 September 2007). Mr. Cirincione writes and Mr. Lewis excerpts approvingly:
The Washington Post story should have been headlined “White House Officials Try to Push North Korea-Syria Connection.” This is a political story, not a threat story. The mainstream media seems to have learned nothing from the run-up to war in Iraq. It is a sad commentary on how selective leaks from administration officials who have repeatedly misled the press are still treated as if they were absolute truth. Once again, this appears to be the work of a small group of officials leaking cherry-picked, unvetted “intelligence” to key reporters in order to promote a preexisting political agenda.
This is definitely the administration that has cried wolf too many times, but the Washington Post article seems pretty heavily sourced. And I don’t believe that Syria is an Israeli bombing range where the IDF just flies out for practice missions. If they went in, they must have had some pretty serious concerns. I’m going to need a lot more than unnamed Bush officials and bluster before passing judgment on this story.
The Washington Post put a major story about the six nuclear armed cruise missiles unwittingly flown across the country on the cover of the weekend edition (Pincus, Walter and Joby Warrick, “The Saga of a Bent Spear,” 23 September 2007, p. A1). Details on the exact point of failure remain under wraps, but it sounds like an instance of a single failure leading to a chain of subsequent failures.
The article goes on to point out that this is just the final, high-profile outcome of a longstanding, but not yet newsworthy problem:
A secret 1998 history of the Air Combat Command warned of “diminished attention for even ‘the minimum standards’ of nuclear weapons’ maintenance, support and security” once such arms became less vital, according to a declassified copy obtained by Hans Kristensen, director of the Federation of American Scientists’ nuclear information project.
The Air Force’s inspector general in 2003 found that half of the “nuclear surety” inspections conducted that year resulted in failing grades — the worst performance since inspections of weapons-handling began. Minot’s 5th Bomb Wing was among the units that failed, and the Louisiana-based 2nd Bomb Wing at Barksdale garnered an unsatisfactory rating in 2005.
Both units passed subsequent nuclear inspections, and Minot was given high marks in a 2006 inspection. The 2003 report on the 5th Bomb Wing attributed its poor performance to the demands of supporting combat operations in Iraq and Afghanistan. Wartime stresses had “resulted in a lack of time to focus and practice nuclear operations,” the report stated.
It’s worth noting that it’s not just the Army that is being degraded by the excess demands of the administration’s war in Iraq.
I imagine John a lot more Eddie Bauer, whether it’s out fly fishing or carrying his concealed piece. With a cable-knit sweater and mock turtleneck you can’t very effectively wear one of those cool strappy holsters that situate your gun high under the arm (there’s probably a lesser-known leather-man fetish around these holsters), but the ankle holster is pretty cool too. It results in some awesome crouched action poses. Or maybe John has two sawed-off shotguns rigged up his sleeves a lá John Conner in the first Terminator film.
When Violet Blue posted that she had been invited to appear on the Tyra Banks Show to talk about women and pornography, I thought that maybe there was a dollop of intelligence to be found somewhere in the daytime television world, that maybe there was something slightly enlightened about Tyra Banks (she did tell reporters to “Kiss my fat ass” when the usual rags had run some stories about how she may have put on some weight). Well, Ms. Blue has the post-taping report up (“Tyra Banks Show — *Not* America’s Next Top Blogger,” Open Source Sex, 20 September 2007) and it sounds like daytime television remains the wasteland of small-mindedness and petty sadism that I remember it.
[Annotation (3 September 2011): in a previous incarnation, this blog was titled “This is Not a Dinner Party”]
Finally, and most awe-inspiringly, that someone sat down at a keyboard, tapped away and made The Dinner Party — a crippling, dribbling, mewling homunculus of plagiarism. And, having done it, they didn’t turn white and book themselves into an ashram. They said: “This is cool. I’ll show it to the grown-ups”, and pressed Send. The next time this writer sees his or her name in print, I abjectly pray it’s under “Employee of the month” at Burger King.
One of the titles that we considered for this blog was homunculus. But I remind you, this is not a dinner party.