Showing posts with label human nature. Show all posts
Showing posts with label human nature. Show all posts

Monday, January 9, 2017

A way to market to conservatives the science behind climate change more effectively

Past-focused environmental comparisons promote pro-environmental outcomes for conservatives. By Matthew Baldwin and Joris Lammers
http://www.pnas.org/content/113/52/14953.abstract

Significance

Political polarization on important issues can have dire consequences for society, and divisions regarding the issue of climate change could be particularly catastrophic. Building on research in social cognition and psychology, we show that temporal comparison processes largely explain the political gap in respondents’ attitudes towards and behaviors regarding climate change. We found that conservatives’ proenvironmental attitudes and behaviors improved consistently and drastically when we presented messages that compared the environment today with that of the past. This research shows how ideological differences can arise from basic psychological processes, demonstrates how such differences can be overcome by framing a message consistent with these basic processes, and provides a way to market the science behind climate change more effectively.


Abstract

Conservatives appear more skeptical about climate change and global warming and less willing to act against it than liberals. We propose that this unwillingness could result from fundamental differences in conservatives’ and liberals’ temporal focus. Conservatives tend to focus more on the past than do liberals. Across six studies, we rely on this notion to demonstrate that conservatives are positively affected by past- but not by future-focused environmental comparisons. Past comparisons largely eliminated the political divide that separated liberal and conservative respondents’ attitudes toward and behavior regarding climate change, so that across these studies conservatives and liberals were nearly equally likely to fight climate change. This research demonstrates how psychological processes, such as temporal comparison, underlie the prevalent ideological gap in addressing climate change. It opens up a promising avenue to convince conservatives effectively of the need to address climate change and global warming.

Monday, December 26, 2016

What scientists think of themselves, other scientists and the population at large

Who Believes in the Storybook Image of the Scientist?
http://www.tandfonline.com/doi/full/10.1080/08989621.2016.1268922 
Dec 2016

Abstract: Do lay people and scientists themselves recognize that scientists are human and therefore prone to human fallibilities such as error, bias, and even dishonesty? In a series of three experimental studies and one correlational study (total N = 3,278) we found that the ‘storybook image of the scientist’ is pervasive: American lay people and scientists from over 60 countries attributed considerably more objectivity, rationality, open-mindedness, intelligence, integrity, and communality to scientists than other highly-educated people. Moreover, scientists perceived even larger differences than lay people did. Some groups of scientists also differentiated between different categories of scientists: established scientists attributed higher levels of the scientific traits to established scientists than to early-career scientists and PhD students, and higher levels to PhD students than to early-career scientists. Female scientists attributed considerably higher levels of the scientific traits to female scientists than to male scientists. A strong belief in the storybook image and the (human) tendency to attribute higher levels of desirable traits to people in one’s own group than to people in other groups may decrease scientists’ willingness to adopt recently proposed practices to reduce error, bias and dishonesty in science.

Tuesday, December 6, 2016

My Unhappy Life as a Climate Heretic. By Roger Pielke Jr.

My Unhappy Life as a Climate Heretic. By Roger Pielke Jr.
My research was attacked by thought police in journalism, activist groups funded by billionaires and even the White House.http://www.wsj.com/articles/my-unhappy-life-as-a-climate-heretic-1480723518
Updated Dec. 2, 2016 7:04 p.m. ET

Much to my surprise, I showed up in the WikiLeaks releases before the election. In a 2014 email, a staffer at the Center for American Progress, founded by John Podesta in 2003, took credit for a campaign to have me eliminated as a writer for Nate Silver’s FiveThirtyEight website. In the email, the editor of the think tank’s climate blog bragged to one of its billionaire donors, Tom Steyer: “I think it’s fair [to] say that, without Climate Progress, Pielke would still be writing on climate change for 538.”

WikiLeaks provides a window into a world I’ve seen up close for decades: the debate over what to do about climate change, and the role of science in that argument. Although it is too soon to tell how the Trump administration will engage the scientific community, my long experience shows what can happen when politicians and media turn against inconvenient research—which we’ve seen under Republican and Democratic presidents.

I understand why Mr. Podesta—most recently Hillary Clinton’s campaign chairman—wanted to drive me out of the climate-change discussion. When substantively countering an academic’s research proves difficult, other techniques are needed to banish it. That is how politics sometimes works, and professors need to understand this if we want to participate in that arena.

More troubling is the degree to which journalists and other academics joined the campaign against me. What sort of responsibility do scientists and the media have to defend the ability to share research, on any subject, that might be inconvenient to political interests—even our own?

I believe climate change is real and that human emissions of greenhouse gases risk justifying action, including a carbon tax. But my research led me to a conclusion that many climate campaigners find unacceptable: There is scant evidence to indicate that hurricanes, floods, tornadoes or drought have become more frequent or intense in the U.S. or globally. In fact we are in an era of good fortune when it comes to extreme weather. This is a topic I’ve studied and published on as much as anyone over two decades. My conclusion might be wrong, but I think I’ve earned the right to share this research without risk to my career.

Instead, my research was under constant attack for years by activists, journalists and politicians. In 2011 writers in the journal Foreign Policy signaled that some accused me of being a “climate-change denier.” I earned the title, the authors explained, by “questioning certain graphs presented in IPCC reports.” That an academic who raised questions about the Intergovernmental Panel on Climate Change in an area of his expertise was tarred as a denier reveals the groupthink at work.

Yet I was right to question the IPCC’s 2007 report, which included a graph purporting to show that disaster costs were rising due to global temperature increases. The graph was later revealed to have been based on invented and inaccurate information, as I documented in my book “The Climate Fix.” The insurance industry scientist Robert-Muir Wood of Risk Management Solutions had smuggled the graph into the IPCC report. He explained in a public debate with me in London in 2010 that he had included the graph and misreferenced it because he expected future research to show a relationship between increasing disaster costs and rising temperatures.

When his research was eventually published in 2008, well after the IPCC report, it concluded the opposite: “We find insufficient evidence to claim a statistical relationship between global temperature increase and normalized catastrophe losses.” Whoops.

The IPCC never acknowledged the snafu, but subsequent reports got the science right: There is not a strong basis for connecting weather disasters with human-caused climate change.

Yes, storms and other extremes still occur, with devastating human consequences, but history shows they could be far worse. No Category 3, 4 or 5 hurricane has made landfall in the U.S. since Hurricane Wilma in 2005, by far the longest such period on record. This means that cumulative economic damage from hurricanes over the past decade is some $70 billion less than the long-term average would lead us to expect, based on my research with colleagues. This is good news, and it should be OK to say so. Yet in today’s hyper-partisan climate debate, every instance of extreme weather becomes a political talking point.

For a time I called out politicians and reporters who went beyond what science can support, but some journalists won’t hear of this. In 2011 and 2012, I pointed out on my blog and social media that the lead climate reporter at the New York Times,Justin Gillis, had mischaracterized the relationship of climate change and food shortages, and the relationship of climate change and disasters. His reporting wasn’t consistent with most expert views, or the evidence. In response he promptly blocked me from his Twitter feed. Other reporters did the same.

In August this year on Twitter, I criticized poor reporting on the website Mashable about a supposed coming hurricane apocalypse—including a bad misquote of me in the cartoon role of climate skeptic. (The misquote was later removed.) The publication’s lead science editor, Andrew Freedman, helpfully explained via Twitter that this sort of behavior “is why you’re on many reporters’ ‘do not call’ lists despite your expertise.”

I didn’t know reporters had such lists. But I get it. No one likes being told that he misreported scientific research, especially on climate change. Some believe that connecting extreme weather with greenhouse gases helps to advance the cause of climate policy. Plus, bad news gets clicks.

Yet more is going on here than thin-skinned reporters responding petulantly to a vocal professor. In 2015 I was quoted in the Los Angeles Times, by Pulitzer Prize-winning reporter Paige St. John, making the rather obvious point that politicians use the weather-of-the-moment to make the case for action on climate change, even if the scientific basis is thin or contested.

Ms. St. John was pilloried by her peers in the media. Shortly thereafter, she emailed me what she had learned: “You should come with a warning label: Quoting Roger Pielke will bring a hailstorm down on your work from the London Guardian, Mother Jones, and Media Matters.”

Or look at the journalists who helped push me out of FiveThirtyEight. My first article there, in 2014, was based on the consensus of the IPCC and peer-reviewed research. I pointed out that the global cost of disasters was increasing at a rate slower than GDP growth, which is very good news. Disasters still occur, but their economic and human effect is smaller than in the past. It’s not terribly complicated.

That article prompted an intense media campaign to have me fired. Writers at Slate, Salon, the New Republic, the New York Times, the Guardian and others piled on.

In March of 2014, FiveThirtyEight editor Mike Wilson demoted me from staff writer to freelancer. A few months later I chose to leave the site after it became clear it wouldn’t publish me. The mob celebrated. ClimateTruth.org, founded by former Center for American Progress staffer Brad Johnson, and advised by Penn State’s Michael Mann, called my departure a “victory for climate truth.” The Center for American Progress promised its donor Mr. Steyer more of the same.

Yet the climate thought police still weren’t done. In 2013 committees in the House and Senate invited me to a several hearings to summarize the science on disasters and climate change. As a professor at a public university, I was happy to do so. My testimony was strong, and it was well aligned with the conclusions of the IPCC and the U.S. government’s climate-science program. Those conclusions indicate no overall increasing trend in hurricanes, floods, tornadoes or droughts—in the U.S. or globally.

In early 2014, not long after I appeared before Congress, President Obama’s science adviser John Holdren testified before the same Senate Environment and Public Works Committee. He was asked about his public statements that appeared to contradict the scientific consensus on extreme weather events that I had earlier presented. Mr. Holdren responded with the all-too-common approach of attacking the messenger, telling the senators incorrectly that my views were “not representative of the mainstream scientific opinion.” Mr. Holdren followed up by posting a strange essay, of nearly 3,000 words, on the White House website under the heading, “An Analysis of Statements by Roger Pielke Jr.,” where it remains today.

I suppose it is a distinction of a sort to be singled out in this manner by the president’s science adviser. Yet Mr. Holdren’s screed reads more like a dashed-off blog post from the nutty wings of the online climate debate, chock-full of errors and misstatements.

But when the White House puts a target on your back on its website, people notice. Almost a year later Mr. Holdren’s missive was the basis for an investigation of me by Arizona Rep. Raul Grijalva, the ranking Democrat on the House Natural Resources Committee. Rep. Grijalva explained in a letter to my university’s president that I was being investigated because Mr. Holdren had “highlighted what he believes were serious misstatements by Prof. Pielke of the scientific consensus on climate change.” He made the letter public.

The “investigation” turned out to be a farce. In the letter, Rep. Grijalva suggested that I—and six other academics with apparently heretical views—might be on the payroll of Exxon Mobil (or perhaps the Illuminati, I forget). He asked for records detailing my research funding, emails and so on. After some well-deserved criticism from the American Meteorological Society and the American Geophysical Union, Rep. Grijalva deleted the letter from his website. The University of Colorado complied with Rep. Grijalva’s request and responded that I have never received funding from fossil-fuel companies. My heretical views can be traced to research support from the U.S. government.

But the damage to my reputation had been done, and perhaps that was the point. Studying and engaging on climate change had become decidedly less fun. So I started researching and teaching other topics and have found the change in direction refreshing. Don’t worry about me: I have tenure and supportive campus leaders and regents. No one is trying to get me fired for my new scholarly pursuits.

But the lesson is that a lone academic is no match for billionaires, well-funded advocacy groups, the media, Congress and the White House. If academics—in any subject—are to play a meaningful role in public debate, the country will have to do a better job supporting good-faith researchers, even when their results are unwelcome. This goes for Republicans and Democrats alike, and to the administration of President-elect Trump.

Academics and the media in particular should support viewpoint diversity instead of serving as the handmaidens of political expediency by trying to exclude voices or damage reputations and careers. If academics and the media won’t support open debate, who will?

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Mr. Pielke is a professor and director of the Sports Governance Center at the University of Colorado, Boulder. His most recent book is “The Edge: The Wars Against Cheating and Corruption in the Cutthroat World of Elite Sports” (Roaring Forties Press, 2016).

Sunday, September 25, 2016

The Value of Prospective Reasoning for Close Relationships

this is not only useful for close relationships:

 

The Value of Prospective Reasoning for Close Relationships

  1. Alex C. Huynh1
  2. Daniel Y.-J. Yang2
  3. Igor Grossmann1
  1. 1Department of Psychology, University of Waterloo, Waterloo, Ontario, Canada
  2. 2Child Study Center, Yale University, New Haven, CT, USA
  1. Alex C. Huynh or Igor Grossmann, Department of Psychology, University of Waterloo, 200 University Avenue West, Waterloo, Ontario, Canada N2L 3G1. Emails: alex.huynh@uwaterloo.ca; igrossma@uwaterloo.ca

Abstract

http://spp.sagepub.com/content/early/2016/07/27/1948550616660591.abstract

We examined how adopting a future (vs. present)-oriented perspective when reflecting on a relationship conflict impacts the process of reasoning and relationship well-being. Across two studies, participants instructed to think about how they would feel in the future (vs. present) expressed more adaptive reasoning over a relationship conflict—low partner blame, greater insight, and greater forgiveness, which was then associated with greater relationship well-being—for example, more positive versus negative emotions about the relationship and expectations that the relationship will grow. These findings were driven by a decrease in person-centered language when reflecting on the conflict. Implications for understanding how tempo

Saturday, March 12, 2016

A New Tool for Avoiding Big-Bank Failures: ‘Chapter 14.’ By Emily C. Kapur and John B. Taylor

A New Tool for Avoiding Big-Bank Failures: ‘Chapter 14.’ By Emily C. Kapur and John B. Taylor

Bernie Sanders is right, Dodd-Frank doesn’t work, but his solution is wrong. Here’s what would work.

WSJ, Mar 11, 2016



For months Democratic presidential hopeful Bernie Sanders has been telling Americans that the government must “break up the banks” because they are “too big to fail.” This is the wrong role for government, but Sen. Sanders and others on both sides of the aisle have a point. The 2010 Dodd-Frank financial law, which was supposed to end too big to fail, has not.

Dodd-Frank gave the Federal Deposit Insurance Corp. authority to take over and oversee the reorganization of so-called systemically important financial institutions whose failure could pose a risk to the economy. But no one can be sure the FDIC will follow its resolution strategy, which leads many to believe Dodd-Frank will be bypassed in a crisis.

Reflecting on his own experience as overseer of the U.S. Treasury’s bailout program in 2008-09, Neel Kashkari, now president of the Federal Reserve Bank of Minneapolis, says government officials are once again likely to bail out big banks and their creditors rather than “trigger many trillions of additional costs to society.”

The solution is not to break up the banks or turn them into public utilities. Instead, we should do what Dodd-Frank failed to do: Make big-bank failures feasible without tanking the economy by writing a process to do so into the bankruptcy code through a new amendment—a “chapter 14.”

Chapter 14 would impose losses on shareholders and creditors while preventing the collapse of one firm from spreading to others. It could be initiated by the lead regulatory agency and would begin with an over-the-weekend bankruptcy hearing before a pre-selected U.S. district judge. After the hearing, the court would convert the bank’s eligible long-term debt into equity, reorganizing the bankrupt bank’s balance sheet without restructuring its operations.

A new non-bankrupt company, owned by the bankruptcy estate (the temporary legal owner of a failed company’s assets and property), would assume the recapitalized balance sheet of the failed bank, including all obligations to its short-term creditors. But the failed bank’s shareholders and long-term bondholders would have claims only against the estate, not the new company.

The new firm would take over the bank’s business and be led by the bankruptcy estate’s chosen private-sector managers. With regulations requiring minimum long-term debt levels, the new firm would be solvent. The bankruptcy would be entirely contained, both because the new bank would keep operating and paying its debts, and because losses would be allocated entirely to the old bank’s shareholders and long-term bondholders.

An examination by one of us (Emily Kapur) of previously unexplored discovery and court documents from Lehman Brothers’ September 2008 bankruptcy shows that chapter 14 would have worked especially well for that firm, without adverse effects on the financial system.

Here is how Lehman under chapter 14 would have played out. The process would start with a single, brief hearing for the parent company to facilitate the creation of a new recapitalized company—a hearing in which the judge would have minimal discretion. By contrast, Lehman’s actual bankruptcy involved dozens of complex proceedings in the U.S. and abroad, creating huge uncertainty and making it impossible for even part of the firm to remain in business.

When Lehman went under it had $20 billion of book equity and $96 billion of long-term debt, while its perceived losses were around $54 billion. If the costs of a chapter 14 proceeding amounted to an additional (and conservative) $10 billion, then the new company would be well capitalized with around $52 billion of equity.

The new parent company would take over Lehman’s subsidiaries, all of which would continue in business, outside of bankruptcy. And the new company would honor all obligations to short-term creditors, such as repurchase agreement and commercial paper lenders.

The result: Short-term creditors would have no reason to run on the bank before the bankruptcy proceeding, knowing they would be protected. And they would have no reason to run afterward, because the new firm would be solvent.

Without a run, Lehman would have $30 billion more liquidity after resolution than it had in 2008, easing subsequent operational challenges. In the broader marketplace, money-market funds would have no reason to curtail lending to corporations, hedge funds would not flee so readily from prime brokers, and investment banks would be less likely to turn to the government for financing.

Eventually, the new company would make a public stock offering to value the bankruptcy estate’s ownership interest, and the estate would distribute its assets according to statutory priority rules. If the valuation came in at $52 billion, Lehman shareholders would be wiped out, as they were in 2008. Long-term debtholders, with $96 billion in claims, would recover 54 cents on the dollar, more than the 37 cents they did receive. All other creditors—the large majority—would be paid in full at maturity.

Other reforms, such as higher capital requirements, may yet be needed to reduce risk and lessen the chance of financial failure. But that is no reason to wait on bankruptcy reform. A bill along the lines of the chapter 14 that we advocate passed the House Judiciary Committee on Feb. 11. Two versions await action in the Senate. Let’s end too big to fail, once and for all.
 
Ms. Kapur is an attorney and economics Ph.D. candidate at Stanford University. Mr. Taylor, a professor of economics at Stanford, co-edited “Making Failure Feasible” (Hoover, 2015) with Kenneth Scott and Thomas Jackson, which includes Ms. Kapur’s study.

Sunday, January 17, 2016

The Secret of Immigrant Genius - Having your world turned upside down sparks creative thinking

The Secret of Immigrant Genius. By Eric Weiner 

Having your world turned upside down sparks creative thinking


Wall Street Journal, Jan 16, 2016

http://www.wsj.com/articles/the-secret-of-immigrant-genius-1452875951

Scan the roster of history’s intellectual and artistic giants, and you quickly notice something remarkable: Many were immigrants or refugees, from Victor Hugo, W.H. Auden and Vladimir Nabokov to Nikolas Tesla, Marie Curie and Sigmund Freud. At the top of this pantheon sits the genius’s genius: Einstein. His “miracle year” of 1905, when he published no fewer than four groundbreaking scientific papers, occurred after he had emigrated from Germany to Switzerland.

Lost in today’s immigration debate is this unavoidable fact: An awful lot of brilliant minds blossomed in alien soil. That is especially true of the U.S., a nation defined by the creative zeal of the newcomer. Today, foreign-born residents account for only 13% of the U.S. population but hold nearly a third of all patents and a quarter of all Nobel Prizes awarded to Americans.
But why? What is it about the act of relocating to distant shores—voluntarily or not—that sparks creative genius?

When pressed to explain, we usually turn to a tidy narrative: Scruffy but determined immigrant, hungry for success, arrives on distant shores. Immigrant works hard. Immigrant is bolstered by a supportive family, as well as a wider network from the old country. Immigrant succeeds, buys flashy new threads.

It is an inspiring narrative—but it is also misleading. That fierce drive might explain why immigrants and refugees succeed in their chosen fields, but it fails to explain their exceptional creativity. It fails to explain their genius.

Recent research points to an intriguing explanation. Several studies have shed light on the role of “schema violations” in intellectual development. A schema violation occurs when our world is turned upside-down, when temporal and spatial cues are off-kilter.

In a 2011 study led by the Dutch psychologist Simone Ritter and published in the Journal of Experimental Social Psychology, researchers asked some subjects to make breakfast in the “wrong” order and others to perform the task in the conventional manner. Those in the first group—the ones engaged in a schema violation—consistently demonstrated more “cognitive flexibility,” a prerequisite for creative thinking.

This suggests that it isn’t the immigrant’s ambition that explains her creativity but her marginality. Many immigrants possess what the psychologist Nigel Barber calls “oblique perspective.” Uprooted from the familiar, they see the world at an angle, and this fresh perspective enables them to surpass the merely talented. To paraphrase the philosopher Schopenhauer: Talent hits a target no one else can hit. Genius hits a target no one else can see.

Freud is a classic case. As a little boy, he and his family joined a flood of immigrants from the fringes of the Austro-Hungarian empire to Vienna, a city where, by 1913, less than half the population was native-born. Freud tried to fit in. He wore lederhosen and played a local card game called tarock, but as a Jew and an immigrant, he was never fully accepted. He was an insider-outsider, residing far enough beyond the mainstream to see the world through fresh eyes yet close enough to propagate his ideas.

Marie Curie, born and raised in Poland, was frustrated by the lack of academic opportunities in her homeland. In 1891, at age 24, she immigrated to Paris. Life was difficult at first; she studied during the day and tutored in the evenings. Two years later, though, she earned a degree in physics, launching a stellar career that culminated with two Nobel prizes.

Exceptionally creative people such as Curie and Freud possess many traits, of course, but their “openness to experience” is the most important, says the cognitive psychologist Scott Barry Kaufman of the University of Pennsylvania. That seems to hold for entire societies as well.

Consider a country like Japan, which has historically been among the world’s most closed societies. Examining the long stretch of time from 580 to 1939, Dean Simonton of the University of California, writing in the Journal of Personality and Social Psychology, compared Japan’s “extra cultural influx” (from immigration, travel abroad, etc.) in different eras with its output in such fields as medicine, philosophy, painting and literature. Dr. Simonton found a consistent correlation: the greater Japan’s openness, the greater its achievements.

It isn’t necessarily new ideas from the outside that directly drive innovation, Dr. Simonton argues. It’s simply their presence as a goad. Some people start to see the arbitrary nature of many of their own cultural habits and open their minds to new possibilities. Once you recognize that there is another way of doing X or thinking about Y, all sorts of new channels open to you, he says. “The awareness of cultural variety helps set the mind free,” he concludes.

History bears this out. In ancient Athens, foreigners known as metics (today we’d call them resident aliens) contributed mightily to the city-state’s brilliance. Renaissance Florence recruited the best and brightest from the crumbling Byzantine Empire. Even when the “extra cultural influx” arrives uninvited, as it did in India during the British Raj, creativity sometimes results. The intermingling of cultures sparked the “Bengal Renaissance” of the late 19th century.

In a 2014 study published in the Creativity Research Journal, Dr. Ritter and her colleagues found that people did not need to participate directly in a schema violation in order to boost their own creative thinking. Merely watching an actor perform an “upside-down” task did the trick, provided that the participants identified with the actor. This suggests that even non-immigrants benefit from the otherness of the newcomer.

Not all cultural collisions end happily, of course, and not all immigrants become geniuses. The adversity that spurs some to greatness sends others into despair. But as we wrestle with our own immigration and refugee policies, we would be wise to view the welcome mat not as charity but, rather, as enlightened self-interest. Once creativity is in the air, we all breathe a more stimulating air.

—Mr. Weiner is the author of “The Geography of Genius: A Search for the World’s Most Creative Places, From Ancient Athens to Silicon Valley,” just published by Simon & Schuster

Sunday, November 29, 2015

The Fed: shortcomings in policies & procedures, insufficient model testing & incomplete structures & information flows for proper oversight

The Fed Is Stressed Out. A WSJ Editorial
www.wsj.com/articles/the-fed-is-stressed-out-1448574493
What if a bank had the same problem the regulators have?Wall Street Journal, Nov 28, 2015

Almost nobody in Washington cares, and most of the financial media haven’t noticed. But the inspector general’s office at the Federal Reserve recently reported the disturbing results of an internal investigation. Last December the central bank internally identified “fundamental weaknesses in key areas” related to the Fed’s own governance of the stress testing it conducts of financial firms.

The Fed’s stress tests theoretically judge whether the country’s largest banks can withstand economic downturns. So the Fed identifying a problem with its own management of the stress tests is akin to an energy company noticing that something is not right at one of its nuclear reactors.

According to the inspector general, “The governance review findings include, among other items, a shortcoming in policies and procedures, insufficient model testing” and “incomplete structures and information flows to ensure proper oversight of model risk management.” These Fed models are essentially a black box to the public, so there’s no way to tell from the outside how large a problem this is.

The Fed’s ability to construct and maintain financial and economic models is much more than a subject of intellectual curiosity. Given that Fed-approved models at the heart of the so-called Basel capital standards proved to be spectacularly wrong in the run-up to the last financial crisis, the new report is more reason to wonder why anyone should expect them to be more accurate the next time.

The Fed’s IG adds that last year’s internal review “notes that similar findings identified at institutions supervised by the Federal Reserve have typically been characterized as matters requiring immediate attention or as matters requiring attention.”

That’s for sure. Receiving a “matters requiring immediate attention” letter from the Fed is a big deal at a bank. The Journal reported last year that after the Fed used this language in a letter to Credit Suisse castigating the bank’s work in the market for leveraged loans, the bank chose not to participate in the financing of several buy-out deals.

But it’s hard to tell if anything will come from this report that seems to have fallen deep in a Beltway forest. The IG office’s report says that the Fed is taking a number of steps to correct its shortcomings, and that the Fed’s reform plans “appear to be responsive to our recommendations.”

The Fed wields enormous power with little democratic accountability and transparency. This was tolerable when the Fed’s main job was monetary, but its vast new regulatory authority requires more scrutiny. Congress should add the Fed’s stressed-out standards for stress tests to its oversight list.

Sunday, June 7, 2015

Five Bedrock Principles for Investors. By Morgan Housel

Brilliance isn’t the only key to Warren Buffett’s investing success. See rule No. 5.



The U.S. economy shrank last quarter. The Federal Reserve is widely expected to begin raising interest rates later this year. U.S. stocks are expensive by many measures. Greece’s national finances remain fragile. Oh, and election season already is under way in the U.S.

Investors who are tempted to sell risky assets and flee to safety don’t have to look far for justification.

If you are one of them, ponder this: Most of what matters in investing involves bedrock principles, not current events.

Here are five principles every investor should keep in mind:

1. Diversification is how you limit the risk of losses in an uncertain world.
If, 30 years ago, a visitor from the future had said that the Soviet Union had collapsed, Japan’s stock market had stagnated for a quarter century, China had become a superpower and North Dakota had helped turn the U.S. into a fast-growing source of crude oil, few would have believed it.

The next 30 years will be just as surprising.

Diversification among different assets can be frustrating. It requires, at every point in time, owning some unpopular assets.

Why would I want to own European stocks if its economy is such a mess? Why should I buy bonds if interest rates are so low?

The appropriate answer is, “Because the future will play out in ways you or your adviser can’t possibly comprehend.”

Owning a little bit of everything is a bet on humility, which the history of investing shows is a valuable trait.

2. You are your own worst enemy.

The biggest risk investors face isn’t a recession, a bear market, the Federal Reserve or their least favorite political party.

It is their own emotions and biases, and the destructive behaviors they cause.

You can be the best stock picker in the world, capable of finding tomorrow’s winning businesses before anyone else. But if you panic and sell during the next bear market, none of it will matter.

You can be armed with an M.B.A. and have 40 years before retirement to let your savings compound into a fortune. But if you have a gambling mentality and you day-trade penny stocks, your outlook seems dismal.

You can be a mathematical genius, building the most sophisticated stock-market forecasting models. But if you don’t understand the limits of your intelligence, you are on your way to disaster.

There aren’t many iron rules of investing, but one of them is that no amount of brain power can compensate for behavioral errors. Figure out what mistakes you are prone to make and embrace strategies that limit the risk.

3. There is a price to pay.

The stock market has historically offered stellar long-term returns, far better than cash or bonds.

But there is a cost. The price of admission to earn high long-term returns in stocks is a ceaseless torrent of unpredictable outcomes, senseless volatility and unexpected downturns.

If you can stick with your investments through the rough spots, you don’t actually pay this bill; it is a mental surcharge. But it is very real. Not everyone is willing to pay it, which is why there is opportunity for those who are.

There is an understandable desire to forecast what the market will do in the short run. But the reason stocks offer superior long-term returns is precisely because we can’t forecast what they will do in the short run.

4. When in doubt, choose the investment with the lowest fee.

As a group, investors’ profits always will equal the overall market’s returns minus all fees and expenses.

Below-average fees, therefore, offer one of your best shots at earning above-average results.

A talented fund manager can be worth a higher fee, mind you. But enduring outperformance is one of the most elusive investing skills.

According to Vanguard Group, which has championed low-cost investing products, more than 80% of actively managed U.S. stock funds underperformed a low-cost index fund in the 10 years through December. It is far more common for a fund manager to charge excess fees than to deliver excess performance.

There are no promises in investing. The best you can do is put the odds in your favor. And the evidence is overwhelming: The lower the costs, the more the odds tip in your favor.

5. Time is the most powerful force in investing.

Eighty-four year old Warren Buffett’s current net worth is around $73 billion, nearly all of which is in Berkshire Hathaway stock. Berkshire’s stock has risen 24-fold since 1990.

Do the math, and some $70 billion of Mr. Buffett’s $73 billion fortune was accumulated around or after his 60th birthday.

Mr. Buffett is, of course, a phenomenal investor whose talents few will replicate. But the real key to his wealth is that he has been a phenomenal investor for two-thirds of a century.

Wealth grows exponentially—a little at first, then slightly more, and then in a hurry for those who stick around the longest.

That lesson—that time, patience and endurance pay off—is something us mortals can learn from, particularly younger workers just starting to save for retirement.


Saturday, March 14, 2015

Disrupting Disruptive Physicians. By Bruce Gewertz


Viewpoint

Disrupting Disruptive Physicians

Bruce L Gewertz, MD
 
JAMA Surg. Published online March 11, 2015. doi:10.1001/jamasurg.2014.2911.


On Thursday mornings, our operating room management committee meets to handle items large and small. Most of our discussions focus on block-time allocation, purchasing decisions, and alike. However, too often we talk about behavioral issues, particularly the now well-characterized disruptive physician.

We have all seen it or been there before. A physician acts out in the operating room with shouting or biting sarcasm, intimidating colleagues and staff and impeding them from functioning at a high level. The most debilitating perpetrators of this behavior are repeat customers who engender such fear and uncertainty in all who contact them that the morale of the nursing staff and anesthesiologists is undermined, work becomes an unbearable chore, and performance suffers.

When one engages a difficult physician on his or her behavior, the physician responds in characteristic fashion. He or she defends his or her actions as patient advocacy, pointing out the shortcomings of the scrub nurse or instruments and showing limited, if any, remorse. He or she argues that such civil disobedience is the only way to enact change. In truth, disruptive physicians’ actions are often admired by a sizable minority of their colleagues as the only way to articulate real frustrations of working in today’s highly complex hospital. In extreme situations, these physicians become folk heroes to younger physicians who envy their fortitude in confronting the power of the bureaucracy.

A few days after a recent outburst by a particularly unpleasant and repeat offender, I was enjoying my daily interval on the stationary bicycle at my gym. My thoughts were wandering to a broad range of topics. I spent some time considering what really drives this nonproductive behavior and how otherwise valuable physicians could be channeled successfully into a more collegial state. As in the past, I was long on theory but short on conviction that it would make a difference.

After my workout as I prepared to shower, I received an urgent email. A patient I was consulting for upper extremity embolization had developed confusion and possible cerebral emboli despite full anticoagulation. I responded that I was on my way to see her and suggested a few diagnostic tests and consultations.

As I typed my message, a custodial employee of the gym reminded me that no cellular telephones were allowed in the locker room. I pointed out that I was not using my cellular telephone but rather an email function and I was not offending anyone by talking. He again pointed out that cellular telephones were not allowed under any circumstances. As I argued back, “I am a physician and this is an emergency.” My voice got louder and I became confrontational. I told him to call the manager. Another member next to me said quietly that the reason for the cellular telephone ban was the photographic potential of the devices and that I could have simply moved to the reception area and used the telephone any way I wished.

I felt like the fool I was. I trudged off to the showers feeling, as in the Texas homily, lower than a snake’s belly. After toweling off, I approached the employee and apologized for my behavior and for making his job more difficult. I told him he had handled the situation far better than me and I admired his restraint.

The lessons were stark and undeniable. Like my disruptive colleagues, I had justified my boorish behavior with patient care. I had assumed my need to break the rules far outweighed the reasonable and rational policy of the establishment; after all, I was important and people depended on me. Worse yet, I felt empowered to take out my frustration, enhanced by my worry about the patient, on someone unlikely to retaliate against me for fear of job loss.

I have come to realize that irrespective of disposition, when the setting is right, we are all potentially disruptive. The only questions are how frequent and how severe. Even more importantly, from a prognostic perspective, can we share the common drivers of these behaviors and develop insights that will lead to avoidance?

The most common approaches used today are only moderately effective. As in many other institutions, when physicians are deemed by their peers to have violated a carefully defined code of conduct, they are advised to apologize to any offended personnel. In many instances, these apologies are sincere and are, in fact, appreciated by all. Unfortunately, on occasion, the interaction is viewed as a forced function and the behavior is soon repeated albeit in a different nursing unit or operating room.

When such failures occur, persistently disruptive physicians are referred to our physician well-being committee. Through a highly confidential process, efforts are made to explore the potential causes for the behavior and acquaint the referred physician with the consequences of their actions on hospital function. Often, behavioral contracts are drawn up to precisely outline the individual’s issues and subsequent medical staff penalties if further violations occur.

That said, as well intentioned and psychologically sound as these programs are, there remains a hard core of repeat offenders. Despite the heightened stress and ill will engendered by disruptive physicians’ behavior, they simply cannot interact in other than confrontational fashion when frustrated by real or imagined shortcomings in the environment.

Based on nearly 20 years of physician management experience, it is my belief that in these few physicians, such behaviors are hard wired and fairly resistant to traditional counseling. An unfortunate end game is termination from a medical staff if the hostile working environment created by their outbursts is viewed as a liability threat by the institution. Such actions are always painful and bring no satisfaction to anyone involved. These high-stakes dramas, often involving critical institutional players on both sides, are played out behind closed doors. Few people are privy to the details of either the infraction or the attempts at remediation. Misunderstandings in the staff are common.

I suggest that an underused remedy is more intense peer pressure through continued education of those colleagues who might silently support these outbursts without fully realizing the consequences. This would begin by treating these incidents in the same way that we do other significant adverse events that occur in our hospitals. In confidential but interdisciplinary sessions, the genesis, nature, and consequences of the interaction could be explored openly. If indeed the inciting event was judged to be an important patient care issue, the problem could be identified and addressed yet clearly separated from the counterproductive interaction that followed. In addition to the deterrence provided by the more public airing of the incidents, the tenuous linkage between abusive behavior and patient protection could be severed. It is this linkage that provides any superficial legitimacy to the outbursts.

Through this process, peer pressure would be increased and provide a greater impetus for self-control and more productive interactions. Importantly, with such a direct and full examination of both the character and costs of poor conduct, whatever support exists for such behaviors within the medical staff would be diminished.
 
Bruce Gewertz, MD, Cedars-Sinai Health System Published Online: March 11, 2015. doi:10.1001/jamasurg.2014.2911.
Conflict of Interest Disclosures: None reported.

Thursday, July 10, 2014

Our Financial Crisis Amnesia - Remember the S&L crisis? Nobody else does either. And we'll soon forget about 2008 too

Our Financial Crisis Amnesia. By Alex J. Pollock
Remember the S&L crisis? Nobody else does either. And we'll soon forget about 2008 too.WSJ, July 9, 2014 6:50 p.m. ET
http://online.wsj.com/articles/alex-pollock-our-financial-crisis-amnesia-1404946250

It is now five years since the end of the most recent U.S. financial crisis of 2007-09. Stocks have made record highs, junk bonds and leveraged loans have boomed, house prices have risen, and already there are cries for lower credit standards on mortgages to "increase access."

Meanwhile, in vivid contrast to the Swiss central bank, which marks its investments to market, the Federal Reserve has designed its own regulatory accounting so that it will never have to recognize any losses on its $4 trillion portfolio of long-term bonds and mortgage securities.

Who remembers that such "special" accounting is exactly what the Federal Home Loan Bank Board designed in the 1980s to hide losses in savings and loans? Who remembers that there even was a Federal Home Loan Bank Board, which for its manifold financial sins was abolished in 1989?

It is 25 years since 1989. Who remembers how severe the multiple financial crises of the 1980s were?

The government of Mexico defaulted on its loans in 1982 and set off a global debt crisis. The Federal Reserve's double-digit interest rates had rendered insolvent the aggregate savings and loan industry, until then the principal supplier of mortgage credit. The oil bubble collapsed with enormous losses.

Between 1982 and 1992, a disastrous 2,270 U.S. depository institutions failed. That is an average of more than 200 failures a year or four a week over a decade. From speaking to a great many audiences about financial crises, I can testify that virtually no one knows this.

In the wake of the housing bust, I was occasionally asked, "Will we learn the lessons of this crisis?" "We will indeed," I would reply, "and we will remember them for at least four or five years." In 2007 as the first wave of panic was under way, I heard a senior international economist opine in deep, solemn tones, "What we have learned from this crisis is the importance of liquidity risk." "Yes," I said, "that's what we learn from every crisis."

The political reactions to the 1980s included the Financial Institutions Reform, Recovery and Enforcement Act of 1989, the FDIC Improvement Act of 1991, and the very ironically titled GSE Financial Safety and Soundness Act of 1992. Anybody remember the theories behind those acts?

After depositors in savings and loan associations were bailed out to the tune of $150 billion (the Federal Savings and Loan Insurance Corporation having gone belly up), then-Treasury Secretary Nicholas Brady pronounced that the great legislative point was "never again." Never, that is, until the Mexican debt crisis of 1994, the Asian debt crisis of 1997, and the Long-Term Capital Management crisis of 1998, all very exciting at the time.

And who remembers the Great Recession (so called by a prominent economist of the time) in 1973-75, the huge real-estate bust and New York City's insolvency crisis? That was the decade before the 1980s.

Viewing financial crises over several centuries, the great economic historian Charles Kindleberger concluded that they occur on average about once a decade. Similarly, former Fed Chairman Paul Volcker wittily observed that "about every 10 years, we have the biggest crisis in 50 years."

What is it about a decade or so? It seems that is long enough for memories to fade in the human group mind, as they are overlaid with happier recent experiences and replaced with optimistic new theories.

Speaking in 2013, Paul Tucker, the former deputy governor for financial stability of the Bank of England—a man who has thought long and hard about the macro risks of financial systems—stated, "It will be a while before confidence in the system is restored." But how long is "a while"? I'd say less than a decade.

Mr. Tucker went on to proclaim, "Never again should confidence be so blind." Ah yes, "never again." If Mr. Tucker's statement is meant as moral suasion, it's all right. But if meant as a prediction, don't bet on it.

Former Treasury Secretary Tim Geithner, for all his daydream of the government as financial Platonic guardian, knows this. As he writes in "Stress Test," his recent memoir: "Experts always have clever reasons why the boom they are enjoying will avoid the disastrous patterns of the past—until it doesn't." He predicts: "There will be a next crisis, despite all we did."

Right. But when? On the historical average, 2009 + 10 = 2019. Five more years is plenty of time for forgetting.

Mr. Pollock is a resident fellow at the American Enterprise Institute and was president and CEO of the Federal Home Loan Bank of Chicago 1991-2004.

Friday, April 25, 2014

Daniel Schuman's Thomas Piketty Revives Marx for the 21st Century

Thomas Piketty reviu Marx per al segle XXI. By Daniel Shuchman
Wall Street Journal, Apr 21, 2014
http://online.wsj.com/news/articles/SB10001424052702303825604579515452952131592

Translated by Un Liberal Recalcitrant from Thomas Piketty Revives Marx for the 21st Century, below.

Thomas Piketty li agrada el capitalisme, ja que assigna eficientment els recursos. Però ell no li agrada com es distribueix la renda. No, pensa que pràcticament és una il·legitimitat moral qualsevol acumulació de riquesa, i és una qüestió de justícia que aquesta desigualtat pot radicar en la nostra economia. La manera de fer això és eliminar les rendes altes i reduir la riquesa existent a través d'impostos.

"El capital al segle XXI" és una densa exploració de Thomas Piketty en la història dels salaris i de la riquesa en els últims tres segles. Presenta un desgavell de dades sobre la distribució dels ingressos en molts països, provant de demostrar que la desigualtat ha augmentat dràsticament en les últimes dècades i que aviat tornarà a ser pitjor. Independentment de si un està convençut per les dades del Sr Piketty  -i hi ha raons per a l'escepticisme, donat el cas de les pròpies advertències de l'autor i pel fet que moltes estadístiques es basen en mostres molt limitades dels registres de l'impost sobre béns de dubtosa extrapolació- en última instància aquest és un fet de poca importància. Conseqüentment aquest llibre no és tant un treball d'anàlisi econòmica com el d’una norma ideològica estranya.

Professor de l'Escola d'Economia de París, el Sr Piketty creu que només la productivitat dels treballadors de baixos ingressos pot ser mesurada de forma objectiva. Ell postula que quan un treball és replicable, com el d’un "treballador de la línia de muntatge o el d’un cambrer de menjar ràpid",  es pot mesurar de forma relativament fàcil el valor aportat per cada treballador. Per tant, aquests treballadors tenen dret al que guanyen. Ell troba que la productivitat de les persones amb alts ingressos ´rd més difícil de mesurar i creu que els seus salaris es troben en el final de la "gran mesura arbitrària".  Són el reflex d'una "construcció ideològica" més del mèrit.

Segons Piketty, els sous altíssims per "supermanagers" corporatius ha estat la major font d'augment de la desigualtat, i aquests executius només poden haver arribat a la seva recompensa gràcies a la sort o falles en el govern corporatiu. Es requereix només una mirada ocasional a aquest diari per confirmar això. No obstant, l'autor creu que cap CEO podria mai justificar el seu salari en funció del rendiment. Ell no diu que qualsevol professional –atletes, metges, professors d'economia, que venen llibres electrònics per 21,99$ de marge amb cost zero per còpia- tingui dret a majors ingressos perquè no vol "gaudir de la construcció d'una jerarquia moral de la riquesa".

Ell admet que els empresaris són "absolutament indispensables" per al desenvolupament econòmic, però el seu èxit, també, està generalment contaminat. Mentre que alguns tenen èxit gràcies al "treball per part del veritable emprenedor," altres tenen senzillament sort o aconsegueixen l’èxit a través del "robatori descarat". Fins i tot seria el cas de les fortunes fetes del treball empresarial que evolucionen ràpidament cap a una "concentració excessiva i duradora del capital". Això és una injustícia d'auto-reforç, perquè "la propietat a vegades comença amb el robatori, i el retorn arbitrari sobre el capital pot perpetuar fàcilment el delicte inicial. "De fet tot el llibre incorpora com a una hostilitat gairebé medieval la idea de que el capital financer tingui un retorn o benefici.


El Sr Piketty creu que com més rica es torna una societat, més gent va a la recerca de la millor posició social relativa, condicionant més desigualtat. Rememora les atemporals autoritats econòmiques com Jane Austen i Honoré de Balzac en la cartografia del nostre futur. Al llarg del llibre es divaga amb les maquinacions inadequades, perseguint de personatges de novel·les com "Sentit i sensibilitat", i obsessivament, amb el calculador "Papà Goriot": Són els fruits del treball dur superiors a les intencions per casar-se i aconseguir una fortuna? Si no és així, "per què treballar, i per què comportar-se moralment bé?"

Mentre que els executius corporatius dels Estats Units són la seva “bèstia especial”, el Sr Piketty també està profundament preocupat per les desenes de milions de persones treballadores -un grup que ell anomena despectivament "petits rendistes"- que els seus ingressos els col·loca molt lluny de l’u per cent, però que encara tenen estalvis, comptes de jubilació i altres actius. Considera que aquest gran grup demogràfic es farà més gran i que el seu creixement de riquesa es transmetrà mitjançant les herències, essent això "una forma bastant preocupant de desigualtat". Es lamenta del difícil que és "corregir" tot això perquè es tracta d'un ampli segment de la població, no una petita elit, més fàcilment “satanitzable” .

Llavors, què cal fer ? El Sr Piketty insta a constituir una taxa impositiva del 80 % en els ingressos a partir del 500.000$ o 1 milió. "Això no és per recaptar diners per a l'educació o per augmentar les prestacions d'atur.  Contràriament, no ho espera d’un impost d'aquest tipus perquè el seu propòsit és, simplement, "posar fi a aquest tipus d'ingressos”. També serà necessari imposar una taxa -del 50/60%- sobre els ingressos més baixos, com els de 200.000$. Afegeix també ha ha d'haver un impost a la riquesa anual de fins el 10 % sobre les fortunes més grans i una càrrega fiscal, d'una sola vegada, de fins el 20% sobre els nivells de riquesa més baixos. Ell, alegrement, ens assegura que res d'això reduiria el creixement econòmic, la productivitat, l'emprenedoria o la innovació.

No és que el creixement i la millora no estigui en la ment del senyor Piketty,  sin´ó que es tracta com un assumpte econòmic i com un mitjà per a una major justícia distributiva. S'assumeix que l'economia és estàtica i de suma zero; si l'ingrés d'un grup de població augmenta, un altre necessàriament ha d’empobrir-se. Ell veu la igualtat de resultats com la finalitat última i exclusivament per al seu propi bé. Objectius -tals alternatives com la maximització de la riquesa general de la societat o l'augment de la llibertat econòmica o la recerca de la major igualtat possible d'oportunitats o fins i tot, com en la filosofia de John Rawls, el que garanteix que el benestar dels més desfavorits es maximitza -són ni mínimament esmentats.

No hi ha dubte que la pobresa, la desocupació i la desigualtat d'oportunitats són els principals reptes per a les societats capitalistes, i els diversos graus de la sort, el treball dur, la mandra i el mèrit són inherents a la humanitat. El Sr Piketty no és el primer visionari utòpic. Cita, per exemple, "l’experiment soviètic" que va permetre a l'home llançar "les seves cadenes juntament amb el jou de la riquesa acumulada." En el seu relat, només va portar el desastre humà perquè les societats necessiten mercats i propietat privada per tenir una economia que funcioni. Ell diu que les seves solucions ofereixen una "resposta menys violenta i més eficient per l'etern problema del capital privat i del seu benefici. En lloc d'Austen i Balzac, el professor hauria de llegir "Rebel·lió a la Granja” i "Darkness at Noon".

Shuchman és un gestor de fons de Nova York que escriu sovint sobre el dret i l'economia.


---
Thomas Piketty Revives Marx for the 21st Century. By Daniel Schuman
An 80% tax rate on incomes above $500,000 is not meant to bring in money for education or benefits, but 'to put an end to such incomes.'
Wall Street Journal, April 21, 2014 7:18 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702303825604579515452952131592

Thomas Piketty likes capitalism because it efficiently allocates resources. But he does not like how it allocates income. There is, he thinks, a moral illegitimacy to virtually any accumulation of wealth, and it is a matter of justice that such inequality be eradicated in our economy. The way to do this is to eliminate high incomes and to reduce existing wealth through taxation.

"Capital in the Twenty-First Century" is Mr. Piketty's dense exploration of the history of wages and wealth over the past three centuries. He presents a blizzard of data about income distribution in many countries, claiming to show that inequality has widened dramatically in recent decades and will soon get dangerously worse. Whether or not one is convinced by Mr. Piketty's data—and there are reasons for skepticism, given the author's own caveats and the fact that many early statistics are based on extremely limited samples of estate tax records and dubious extrapolation—is ultimately of little consequence. For this book is less a work of economic analysis than a bizarre ideological screed.

A professor at the Paris School of Economics, Mr. Piketty believes that only the productivity of low-wage workers can be measured objectively. He posits that when a job is replicable, like an "assembly line worker or fast-food server," it is relatively easy to measure the value contributed by each worker. These workers are therefore entitled to what they earn. He finds the productivity of high-income earners harder to measure and believes their wages are in the end "largely arbitrary." They reflect an "ideological construct" more than merit.

Soaring pay for corporate "supermanagers" has been the largest source of increased inequality, according to Mr. Piketty, and these executives can only have attained their rewards through luck or flaws in corporate governance. It requires only an occasional glance at this newspaper to confirm that this can be the case. But the author believes that no CEO could ever justify his or her pay based on performance. He doesn't say whether any occupation—athletes? physicians? economics professors who sell zero-marginal-cost e-books for $21.99 a copy?—is entitled to higher earnings because he does not wish to "indulge in constructing a moral hierarchy of wealth."

He does admit that entrepreneurs are "absolutely indispensable" for economic development, but their success, too, is usually tainted. While some succeed thanks to "true entrepreneurial labor," some are simply lucky or succeed through "outright theft." Even the fortunes made from entrepreneurial labor, moreover, quickly evolve into an "excessive and lasting concentration of capital." This is a self-reinforcing injustice because "property sometimes begins with theft, and the arbitrary return on capital can easily perpetuate the initial crime." Indeed laced throughout the book is an almost medieval hostility to the notion that financial capital earns a return.

Mr. Piketty believes that the wealthier a society becomes, the more people will claw for the best relative social station and the more inequality will ensue. He turns to those timeless economic authorities Jane Austen and Honoré de Balzac in mapping our future. Throughout the book, he importunately digresses with the dowry-chasing machinations of characters in novels like "Sense and Sensibility" and " Père Goriot. " He is obsessed with the following calculus: Are the fruits of working hard greater than those attainable by marrying into a top fortune? If not, "why work? And why behave morally at all?"

While America's corporate executives are his special bête noire, Mr. Piketty is also deeply troubled by the tens of millions of working people—a group he disparagingly calls "petits rentiers"—whose income puts them nowhere near the "one percent" but who still have savings, retirement accounts and other assets. That this very large demographic group will get larger, grow wealthier and pass on assets via inheritance is "a fairly disturbing form of inequality." He laments that it is difficult to "correct" because it involves a broad segment of the population, not a small elite that is easily demonized.

So what is to be done? Mr. Piketty urges an 80% tax rate on incomes starting at "$500,000 or $1 million." This is not to raise money for education or to increase unemployment benefits. Quite the contrary, he does not expect such a tax to bring in much revenue, because its purpose is simply "to put an end to such incomes." It will also be necessary to impose a 50%-60% tax rate on incomes as low as $200,000 to develop "the meager US social state." There must be an annual wealth tax as high as 10% on the largest fortunes and a one-time assessment as high as 20% on much lower levels of existing wealth. He breezily assures us that none of this would reduce economic growth, productivity, entrepreneurship or innovation.

Not that enhancing growth is much on Mr. Piketty's mind, either as an economic matter or as a means to greater distributive justice. He assumes that the economy is static and zero-sum; if the income of one population group increases, another one must necessarily have been impoverished. He views equality of outcome as the ultimate end and solely for its own sake. Alternative objectives—such as maximizing the overall wealth of society or increasing economic liberty or seeking the greatest possible equality of opportunity or even, as in the philosophy of John Rawls, ensuring that the welfare of the least well-off is maximized—are scarcely mentioned.

There is no doubt that poverty, unemployment and unequal opportunity are major challenges for capitalist societies, and varying degrees of luck, hard work, sloth and merit are inherent in human affairs. Mr. Piketty is not the first utopian visionary. He cites, for instance, the "Soviet experiment" that allowed man to throw "off his chains along with the yoke of accumulated wealth." In his telling, it only led to human disaster because societies need markets and private property to have a functioning economy. He says that his solutions provide a "less violent and more efficient response to the eternal problem of private capital and its return." Instead of Austen and Balzac, the professor ought to read "Animal Farm" and "Darkness at Noon."

Mr. Shuchman is a New York fund manager who often writes on law and economics.

Thursday, April 10, 2014

Views from FYR of Macedonia: Russia, the West, America

Views from FYR of Macedonia: Russia, the West, America

After sharing with some people an article on new software for US military cargo helicopters to take more autonomous decisions*, a Macedonian in the group wrote (Spanish):
Si, tenemos suerte y los rusos nos defienden. Si no estamos j[xxx]dos con los americanos y sus maquinas de muerte

Translation: Yes we are lucky that the Russians defend us. If not, we would be [doomed] by the Americans and their Machines of Death.

The article: Navy Drones With a Mind of Their Own. WSJ, Apr 5, 2014. http://online.wsj.com/news/articles/SB10001424052702303532704579481510076347466

 

Thursday, December 26, 2013

Views from Japan: Abe Visit to Yasukuni Shrine

Views from Japan: Abe Visit to Yasukuni Shrine

1  Abe Visit to Controversial Japanese Shrine Draws Rare U.S. Criticism. By George Nishiyama
Visit to Yasukuni Raises Concern Premier Shifting Focus From Economy to Nationalistic Goals
Wall Street Journal, Dec. 26, 2013 3:04 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702304483804579281103015121712

[...]

Mr. Abe visited Tokyo's Yasukuni Shrine on Thursday, triggering strong criticism from Beijing and Seoul, but also a rare disapproval by Washington, which has pushed the Asian neighbors to mend ties that are strained by territorial disputes and differences over wartime history.

Many Asian nations that suffered from Japan's wartime actions view Yasukuni as a symbol of Tokyo's past militarism because it honors not just Japan's war dead but also some convicted World War II war criminals, including Hideki Tojo, who was prime minister for most of the war.

"The United States is disappointed that Japan's leadership has taken an action that will exacerbate tensions with Japan's neighbors," said the U.S. Embassy in Tokyo on its website, in an unusual direct criticism of Japan's leader by its main ally.

Mr. Abe has repeatedly said he regretted not visiting the shrine during his first tenure as prime minister from 2006 to 2007 and said his critics misunderstood his intentions. "I offered my respects to those who lost their precious lives for our country, and prayed that their souls may rest in peace," he told reporters after the visit. "I have no intention at all of hurting the feelings of the Chinese or the South Korean people."

Although a well-known conservative who has stated that changing the pacifist constitution drafted by the occupying U.S. forces was his "life's work," Mr. Abe had adopted an economy-first policy after taking office in December 2012, putting his nationalist agenda on the back burner.

His so-called Abenomics policy featuring government spending and monetary stimulus has spurred consumption, resulting in the Japanese economy recording the strongest expansion among industrialized nations in the first half of this year, although the country's growth rate slowed in the third quarter.

The improved economy has helped make Mr. Abe one of the most popular Japanese leaders in recent years, with his support ratings hovering around 60% for most of the past year.

All of that has come as a relief to Washington, which faces a rising military power in China and is wary of the regional tensions developing into physical confrontations. The U.S. has also tired of a revolving door of short-lived Japanese prime ministers.

During an October visit to Tokyo, U.S. Secretary of State John Kerry and Defense Secretary Chuck Hagel paid respects at the Chidorigafuchi National Cemetery, a tomb for Japan's unknown war dead, in a move widely seen as a message to Mr. Abe that there are alternatives to Yasukuni.

While Mr. Abe had refrained from going to Yasukuni until Thursday, on the anniversary of his taking office, some of his cabinet ministers had visited, each time inviting protests from China and South Korea. Mr. Abe's visit, the first by a prime minister in seven years, drew angry responses from the neighbors.

China's foreign minister summoned Japan's ambassador to protest and criticized Thursday's visit as the latest attempt by Mr. Abe to gloss over Japan's militaristic past. "Under these conditions, not only does the Japanese leader not show restraint, but instead makes things worse by manufacturing another incident over history," spokesman Qin Gang said in a statement. "Japan must bear all the consequences arising from this."

Seoul also decried the move. "Our government cannot but deplore and express anger about Japanese Prime Minister Shinzo Abe's visit to the Yasukuni Shrine despite concerns from neighboring countries and the international community," said Yoo Jin-Ryong, a South Korean spokesman.

Analysts in the region agreed the move would further deteriorate relations. The development is severe, said Wang Shaopu, director of Japan Institution at Shanghai Jiao Tong University. "It will worsen China-Japan's already bad-enough relations."

Others said Mr. Abe had gone ahead with the visit because he felt he had nothing to lose given that ties were already frayed. While he has visited all of the Association of Southeast Asian Nations, he has yet to visit China or South Korea nor has he held formal bilateral meetings with their leaders.

"Mr. Abe probably thought that a visit to Yasukuni at this point wouldn't have too much of an impact on prospects of future summits with Beijing and Seoul considering how chances already seemed slim," said Masafumi Kaneko, a senior research fellow at the Center for International and Strategic Studies at PHP Institute.

Mr. Abe's aides said what they cared about most was the U.S. reaction. "The biggest, or should I say, the only concern is what the U.S. would say," said a senior government official who was aware of the prime minister's plans in advance. He expressed confidence that the ties between the allies wouldn't be affected, noting that President Barack Obama was relying on the prime minister to help seal a deal over a trans-Pacific free-trade forum and to move forward plans to relocate U.S. troops in the region.

The government official said Mr. Abe intended to stick to making economic recovery the top priority, stressing how investors would start to see deregulatory measures—the last of the three pillars of his economic policy—in action in the new year. "We intend to keep the ball rolling for Abenomics," the official said.

But Mr. Abe may have miscalculated the U.S. response, analysts said. "The U.S. reaction was unexpected. Mr. Abe is moving to bolster the Japan-U.S. alliance, and the focus is whether they can move beyond just a military alliance, and share values," said Koji Murata, a political-science professor and the president of Doshisha University. "The U.S. may be frustrated at Mr. Abe, who is obsessed with history issues."

Diplomatic feuds have shown they can affect business interests in the region. After the previous Japanese government nationalized disputed islands in the East China Sea in September 2012, Chinese consumers boycotted Japanese products, dealing a serious blow to Japanese firms, including car makers.

But the Tokyo stock market took Mr. Abe's visit to the shrine in stride on Thursday, finishing higher. Investors said other factors, including a weaker yen, were more important than diplomatic issues.

[...]

—Alexander Martin, Kosaku Narioka and James T. Areddy contributed to this article.



2  A Japanese citizen weighs in:
hello,

this is a pretty simple issue... it's a thing about "mind" or "philosophy" for Japanese and "political" for China or Korea. it'd not been a problem until middle of 80s indeed. they are just always looking for something to claim or criticize Japan to let us compromise us one-sidedly. they are just trying to do this in the name of human-right. Japan has to be 100% evil, and they have to be 100% victims forever. so they will never forgive us no matter how we apologized.
if PM Abe didn't do it, they would find something another.

it's not known very much in other countries, but Japan's already apologized many times, paid much and supported in many ways even the countries didn't let their citizens know about that. 
major Japanese started to think it looks waste of time and effort to make a good relationship with them any longer.

more than 70% of Japanese agree with PM Abe's Yasukuni visit this time in a survey of a TV channel (this is so-called "liberal" channel). we all know he just wants to thank people who worked and died for this country, and wishes peace. 
personally, i go to the shrine when i'm in Tokyo (my grand father died in WW2).

have a good new year!

Wednesday, December 18, 2013

The Volcker Ambiguity - The triumph of political discretion over financial clarity

The Volcker Ambiguity. WSJ Editorial 
The triumph of political discretion over financial clarity.
Wall Street Journal, Updated Dec. 11, 2013 3:52 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702304744304579250393935144268

Just in time for Christmas, financial regulators have come down the chimney with a sackful of billable hours for securities lawyers. Truly a gift that keeps on giving, the Volcker Rule adopted on Tuesday by five federal agencies will create a limitless supply of ambiguity and the need for experienced counsel.

We supported former Federal Reserve Chairman Paul Volcker's simple idea: Don't let federally insured banks gamble in the securities markets. Taxpayers shouldn't be forced to stand behind Wall Street trading desks. What we can't support is the "Volcker Rule" that was first distorted in the 2010 Dodd-Frank law and has now been grinded and twisted into 71 pages of text plus 882 more pages of explanation after three years of agency sausage-making.

The general idea is to prevent "proprietary trading," in which a bank makes trades not at a customer's request but simply for its own account. Or at least some trades. The rule's new trading restrictions do not apply when Wall Street giants are trading debt issued by the U.S. government, state and local governments, government-created mortgage giants Fannie Mae and Freddie Mac, and in some circumstances foreign governments and even local or regional foreign governments.


You'll notice a pattern here. Like so many recent financial regulations, the Volcker Rule offers banks and investors big incentives to lend money to governments rather than private businesses. One Wall Street objection to the Volcker Rule has been that it will reduce liquidity in America's capital markets. And fear of a lack of liquidity in the market for government debt—especially Treasurys and European sovereign debt—is precisely the reason politicians and regulators have gone to such lengths to exempt government bonds from Volcker. Maybe Wall Street has a point.

What we don't know about the new rule are important details that will only become clear over time. At least that's according to Commissioner Daniel Gallagher of the Securities and Exchange Commission, who dissented on Tuesday along with fellow Republican appointees Michael Piwowar of the SEC and Scott O'Malia of the Commodity Futures Trading Commission.

Mr. Gallagher said the vote occurred in "contradiction of our procedural rules for voting on major rule releases, including the longstanding guideline that Commissioners should be given thirty days to review a draft before a vote." He added, "Not until five days ago did we have anything even resembling a voting draft, giving us less than a week to review the nearly one thousand pages of the adopting rule. In short, under intense pressure to meet an utterly artificial, wholly political end-of-year deadline, this Commission is effectively being told that we have to vote for the final rule so we can find out what's in it."

Lawyers will certainly find plenty of opportunities for judgment calls that will generate all those billable hours. Banks are still allowed to make markets in securities and to underwrite the issuance of new stocks and bonds, all of which often requires them to hold securities in anticipation of customer demand.

Banks also retain some ability to hedge—to make trades for the purpose of offsetting other risks that they've taken on for clients. The work required to define the difference between legal market-making, underwriting and hedging on the one hand and illegal proprietary trading on the other will now be ample enough to spark a new building boom at downtown D.C. law offices.

Rest assured banks will find loopholes. And rest assured some of the Volcker rule-writers will find private job opportunities to help with that loophole search once they decide to lay down the burdens of government service.

The long, convoluted Volcker process and result illustrate the central problem of Dodd-Frank: the belief that regulators given ever more discretion to craft ever more complicated regulations will yield a safer financial system. The Bank of England's Andrew Haldane and Vasileios Madouros have shown the opposite is true. The complexity of banking rules before the crisis failed to prevent catastrophic risks and made the job of addressing the crisis harder by obscuring the true condition of giant banks.

Especially with banking regulation, simple rules that are difficult for lobbyists and bankers to game are likely to work far better. Bankers would know what to expect and couldn't cry ambiguity if they crossed a line. And regulators would be far more likely to spy violations. The danger with this Volcker Complexity is that we'll get litigation, investing loopholes, and greater financial costs, but not a safer system.

Friday, November 22, 2013

Control d'armes en acció: Els nois dolents enganyen i les democràcies no fan res

Les sancions contra l'Iran no es manipularan. . Per Douglas J. Feith
Control d'armes en acció: Els nois dolents enganyen i les democràcies no fan res.
Translation to Catalan of Sanctions on Iran Won't Be Cranked Back Up. By Un Liberal Recalcitrant
Wall Street Jounal, updated Nov. 18, 2013 7:24 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702303914304579193652675971392

El president Obama vol que l'Iran suspengui parts del seu programa nuclear a canvi d'alleujar les sancions econòmiques internacionals. Els crítics sostenen que si Occident arriba a un acord en aquest sentit, l'Iran podria enganyar molt més fàcilment, molt abans que la resta del món pogués establir noves i dures sancions. Però el senyor Obama insisteix que relaxar les sancions és reversible : Si els iranians estan pel "no seguir endavant", va dir recentment a NBC News, "Podem anar endavant ".
Els acords de pau i el control d'armes tenen una llarga història que hauria de ser un advertiment contra aquestes garanties. Els països democràtics, durant molt de temps, no van poder aconseguir el que esperaven dels seus antagonistes no democràtics - i després es van veure incapaços o no van estar disposats a complir el tracte-.

Després de la Primera Guerra Mundial, els tractats de Versalles i Locarno van sotmetre Alemanya  a mesures de control d'armes, incloent la desmilitarització de Renània. Quan el règim nazi d'Alemanya, va remilitaritzar audaçment la Renània el 1936, ni la Gran Bretanya, ni França, ni cap altre signant del tractat va prendre cap tipus d’acció legal.

Aquest i d’altres incidents del segle XX van portar l’estratega dels EUA Fred Iklé a escriure un clarivident article el 1961 a la revista "Afers exteriors", titulat "Després de Detectar-ho - Què ?" Va sostenir : "Si signem un acord de control d'armes, hem de saber no només que som tècnicament capaços de detectar una violació, sinó que també nosaltres, o la resta del món, estarà en condicions de reaccionar eficaçment si es descobreix una violació, ja sigui legalment, política o militar. " Iklé va preveure que els soviètics violarien els seus acords i que als presidents dels Estats Units els resultaria difícil o impossible de posar remei a les violacions.

No obstant això, els EUA va fer una sèrie de tractats de control d'armes amb els soviètics i quan es van produir les violacions previstes, no va haver-hi cap tipus d'imposició, ni tan sols es va intentar.
Durant el govern de Reagan, les autoritats nord-americanes van detectar un enorme radar a la ciutat soviètica de Krasnoyarsk que violava el Tractat de Míssils Antibalístics del 1972. Malgrat la seva reputació de ser un escèptic en relació al control d'armes i de la línia dura anti - soviètica, Reagan va concloure que no tenia bones opcions, fora de la de queixar-se. Els EUA seguí per adherir-se al tractat per als següents 16 anys, fins que el president George W. Bush ho va retirar per raons no relacionades amb les violacions del tractat.

Una altra democràcia que no ha aconseguit complir els acords és Israel. Quan Israel va signar els Acords d'Oslo amb l'OAP el 1993, al després Ministre de Relacions Exteriors israelià Shimon Peres se li va preguntar què faria Israel si es es violés l'acord. Ell va declarar que era un tractat "reversible", assegurant que era escèptic i que si l'OAP trenqués les seves promeses de pau, Israel no només aturaria els recessos territorials, sinó que reprendria territoris ja negociats.
L'OAP va violar ràpidament el Tractat d’Oslo de diverses maneres, el més flagrant amb la Segona Intifada l’any 2000. Però cap govern israelià d'esquerra o de dreta mai va liquidar els acords, i encara menys revertir qualsevol retirada.

El que sol passar amb aquest tipus d'acords és el següent : Al costat democràtic, els líders polítics donen publicitat a l'acord per als seus votants significantlo com una gran fita diplomàtica de la que cal sentir-se’n orgullós. Per l’altra banda  -generalment el costat no democràtic, es porta a terme l’engany, la deshonestedat i l’agressió.

Els líders democràtics no tenen cap desig de detectar la violació perquè no volen admetre que l'acord o plusvàlua, per raons diverses, és una eina de relacions amb l’altra part i, òbviament, no volen pertorbar aquesta relació. En els casos que no es pot passar per alt la violació, afirmaran que l'evidència no és concloent. Però si és concloent, en menyspreen la importància de la infracció. Els funcionaris del costat democràtic de vegades actuen de facto com a advocats de la defensa per als tramposos.

Recordem el cas de Krasnoyarsk. Alguns funcionaris nord-americans en les reunions internes de l'administració en què he participat, van dir que no hem d’acusar els soviètics de violar el Tractat ABM, simplement perquè es va construir el radar en un camp de futbol  gran. Per desgràcia, però sostingut de forma descarada, vam haver d’esperar a que els soviètics el posesin en marxa..
Quan els funcionaris de l'OAP en la dècada de 1990 van violar el tractat d’Oslo per incitar a l'odi contra Israel i donar suport al terrorisme, els israelians que havien signat el tractat, van oferir excuses similars i vergonyoses tals com: "No ens importa el que diguin, només el que fan" i "Cal fer les paus amb els enemics, nopas  amb els amics. "

Un acord que realment desmantellés el programa nuclear iranià seria un èxit formidable. Però si Obama pot justificar el seu acord amb l'Iran només amb la promesa de “relaxar les sancions” als tramposos iranians, ningú donarà credibilitat al programa.. La història ensenya que hem d'esperar sempre l'engany, però no una aplicació efectiva del tractat.

Feith, investigador principal a l'Institut Hudson,  va exercir com subsecretari de Defensadels EUA per a la política ( 2001-05 ) i és l'autor de  "War and Decision: Inside the Pentagon at the Dawn of the War on Terrorism" (Harper, 2008)


--- Sanctions on Iran Won't Be Cranked Back Up. By Douglas J. Feith
Arms control in action: The bad guys cheat, and democracies do nothing.Wall Street Jounal, updated Nov. 18, 2013 7:24 p.m. ET
http://online.wsj.com/news/articles/SB10001424052702303914304579193652675971392

President Obama wants Iran to suspend parts of its nuclear program in return for easing international economic sanctions. Critics contend that if the West strikes a deal along these lines, Iran could cheat far more easily than the rest of the world could reinstate tough sanctions. But Mr. Obama insists that relaxing sanctions is reversible: If the Iranians are "not following through," he recently told NBC News, "We can crank that dial back up."

Peace and arms-control agreements have a long history that warns against such assurances. Democratic countries have time and again failed to get what they bargained for with their undemocratic antagonists—and then found themselves unable or unwilling to enforce the bargain.

After World War I, the Versailles and Locarno Treaties subjected Germany to arms-control measures, including demilitarization of the Rhineland. When Germany's Nazi regime boldly remilitarized the Rhineland in 1936, neither Britain, France nor any other treaty party took enforcement action.

This and other 20th-century incidents led U.S. strategist Fred Iklé to write a prescient 1961 "Foreign Affairs" article titled "After Detection—What?" He argued: "In entering into an arms-control agreement, we must know not only that we are technically capable of detecting a violation but also that we or the rest of the world will be politically, legally and militarily in a position to react effectively if a violation is discovered." Iklé foresaw that the Soviets would violate their agreements, and that U.S. presidents would find it difficult or impossible to remedy the violations.

Nevertheless, the U.S. made a series of arms-control treaties with the Soviets. When the predicted violations occurred, no enforcement actions were even attempted.

During the Reagan administration, U.S. officials detected a huge radar in the Soviet city of Krasnoyarsk that violated the 1972 Anti-Ballistic Missile Treaty. Despite his reputation as an arms-control skeptic and anti-Soviet hard-liner, Reagan concluded he had no good options other than to complain. The U.S. continued to adhere to the treaty for another 16 years, until President George W. Bush withdrew for reasons unrelated to violations.

Another democracy that has failed to enforce agreements is Israel. When Israel signed the Oslo Accords with the Palestine Liberation Organization in 1993, then-Israeli Foreign Minister Shimon Peres was asked what Israel would do if the agreement were violated. He declared it was "reversible," assuring skeptics that if the PLO broke its peace pledges, Israel would not only stop territorial withdrawals, but retake the land already traded.

The PLO promptly violated Oslo in various ways, most egregiously by launching the Second Intifada in 2000. But no Israeli government—on the left or right—ever terminated the Accords, let alone reversed any withdrawals.

What typically happens with such agreements is the following: On the democratic side, political leaders hype the agreement to their voters as a proud diplomatic achievement. The nondemocratic side—typically an aggressive, dishonest party—cheats.

The democratic leaders have no desire to detect the violation because they don't want to admit that they oversold the agreement or, for other reasons, they don't want to disrupt relations with the other side. If they can't ignore the violation, they will claim the evidence is inconclusive. But if it is conclusive, they will belittle the significance of the offense. Officials on the democratic side sometimes even act as de facto defense attorneys for the cheaters.

Recall the Krasnoyarsk case. Some U.S. officials in internal administration meetings in which I participated said we should not accuse the Soviets of violating the ABM Treaty simply because they built the football-field-size radar. Rather, they disgracefully but brazenly argued, we should wait until the Soviets turned it on.

When PLO officials in the 1990s breached Oslo by inciting anti-Israel hatred and supporting terrorism, the Israelis who had made the deal offered similarly disgraceful excuses along the lines of: "We don't care what they say, only what they do," and "You have to make peace with your enemies, not with your friends."

An agreement that actually dismantled the Iranian nuclear program would be a formidable accomplishment. But if Mr. Obama can justify his deal with Iran only by promising to "crank up" the relaxed sanctions if and when the Iranian regime cheats, no one should buy it. History teaches that we should expect the cheating, but not effective enforcement.

Mr. Feith, a senior fellow at the Hudson Institute, served as U.S. undersecretary of defense for policy (2001-05) and is the author of "War and Decision: Inside the Pentagon at the Dawn of the War on Terrorism" (Harper, 2008).