Where Fun Comes to Die

As most of us likely learned in grade school, the U.S. government is built on a system of checks and balances.  Each of the three branches of government — legislative, executive, and judicial — serves as a check on the others.  It could be said, not unreasonably, that the people have their own “check” on the government: amendments to the U.S. Constitution.  If the people don’t like the laws passed by the legislature, as interpreted by the courts, the people (through their representatives — an imperfect proxy, of course) have the ultimate authority: they can simply change the rules.  The Supreme Court can overturn any law passed by the legislature, but it can’t do a damn thing about what the Constitution says.

Amendments are serious business, which is why they’re also seriously difficult to pass.  First two thirds of Congress must vote in favor of the proposed amendment.  After it passes in Congress, it’s put to the vote of the states, a full THREE QUARTERS of which must vote in favor of the amendment.  Clearly, the Constitution is far more important, and far more powerful, than run-of-the-mill legislation.

Which brings us to the land of fruits and nuts, my strange and beautiful home state of California.  I learned something new this year: to amend the California constitution, you need only a simple majority.  51%.  Or, I suppose, 50.0001%, or whatever is the equivalent of a single vote tipping it over 50%.  Not a two-thirds supermajority or a three-quarters super-duper-majority.  Just a plain old majority.  The exact same majority you need to enact any old law.

So I’m just wondering: if you can change the constitution just as easily as you can make or change any other law, what’s the point of having a constitution?  Seriously, I’m wondering.

This article on a legal auction of government ivory got me thinking about the unintended consequences of the ivory ban. I don’t think government prohibition ever works nearly as well as planned, but it seems to me that there’s an especially perverse incentive created when the government bans luxury goods. After all, what’s the point of a luxury good except to show off your ability to get things other people can’t have?

Ivory is a little bit useless. You can’t eat it, you can’t live inside of it, and (as I learned through a disastrous youthful experiment with an antique billiard ball) it cannot be crushed and snorted. It’s so valuable because it’s a status symbol, and it’s a status symbol because it’s so hard to get. This is why men are willing to pay tens of thousands of dollars to eat an animal that is the last of its species, even if the meat is gamey and improperly seasoned.

An outright ban will never be completely successful in stomping out the ivory trade, because there will always be some rich jackass who’s willing to break the law in order to prove that he’s a cool guy who can buy forbidden wares. No, the only way to stomp out the ivory trade is to make ivory uncool.

Instead of auctioning off its ivory willy-nilly to any passing elephant-hater with a fistful of yen, Namibia should have given it to undesirables. What better way to ensure the safety of the African elephant than by ensuring that Amy Winehouse shows up at rehab wearing ivory jewelry? Michael Jackson could be given a fine ivory mask to hide his wretched face, and Stephen Hawking could receive a beautiful ivory wheelchair. Elephant bone aficionados may risk a fine in order to get ahold of precious ivory, but they will not risk being in the company of yard-sleepers, famed perverts and nerds.

The phrase was coined by a series of sketches in Monty Python’s Flying Circus, parodying the actual Spanish Inquisition.  In these sketches, a character would exclaim in frustration, “I didn’t expect the Spanish Inquisition!” at which point the Inquisition cardinals would burst onto the scene shouting, “Nobody expects the Spanish Inquisition!”

“Spanish Inquisition” type events are unexpected because they are singular.  But as we stand on the brink of another singular event, one that the Bank of England Deputy Governor Charles Bean referred to on Friday as “a once in a lifetime crisis, and possibly the largest financial crisis of its kind in human history,” one wonders whether it might not be a good idea to start regularly factoring in the possibility of a Spanish Inquisition after all.  But if so, how?

Is it smart to factor in the possibility of a Spanish Inquisition type event?  On the one hand, even a very small chance of a great calamity can be significant.  On the other hand, they are infrequent and difficult/impossible to predict.  Of course, Nobel winning economist Paul Krugman has been praised for predicting the current housing-bubble crisis.  But as fellow Chicago grad Megan McArdle pointed out, “If you keep predicting a recession, eventually you will be right.”  Still, expecting calamity can be profitable.  I know a guy who has been shorting the market since late 2007.  When I spoke with him in April, he felt certain that the market would continue to decline through December when most of his puts expired.  I questioned his judgment then, but can only imagine how much money he has made this month.  Anecdotally, it seems smart to expect a Spanish Inquisition event, but so does playing the lottery.

Still, many suggest that we could and should plan for such calamities.  The problem is, how?  If these calamities result from systemic failures, could we rely on the same system to predict and prevent them?  Regulation may work when the problem is confined to a few power players and firms, but in something like the current financial crisis, the problem extends past that small group and spreads to the general populace.  Like a typical zombie movie, the infection spreads until all succumb and become part of the problem.  At that point, might it be better to let the disease run its course?  The weak may die, but the strong will be inoculated against another similar calamity, as was arguably the case with the Great Depression generation.  Anything else we could do would not be a cure, but rather just an attempt to alleviate symptoms.  Until we discover a vaccine, we may have to live with the occasional Spanish Inquisition.

So the Monty Python boys were mainly right: no one expects a Spanish Inquisition, except the people who always expect a Spanish Inquisition (useless) and those who have lived through a similar calamity before (inoculated).  Once someone expects it, they would be hypervigilant to prevent it, which involves its own problems including (wasted?) energy, effort, risk averseness, paranoia, and being a cantankerous grandparent.  The more accurate phrase then is perhaps “The Spanish Inquisition only occurs when not expected, but expecting it can be its own version of torture.”  But, that’s decidedly less catchy.

The other night I was watching this cool Discovery show about the conception, intrauterine development, and birth of puppies.  In high def.  It was pretty awe inspiring actually, and I am not a big dog lover.  In my mind, this depiction of the birth of a libertarian is just as awe inspiring, especially considering the natural inclinations of this particular budding libertarian (as you will see).  It just goes to show that there is a little libertarian in all of us, trying to claw it’s way out of our stomach and wreak havoc on the world.  That’s right, the libertarian distinction welcomes all: religious, areligious, liberal, conservative, animal lover, animal hater–just as long as you have among your myriad beliefs the core libertarian value that government should get out of people’s way as much as possible.  Here it is:

Friend: i don’t think gay couples should be allowed artificial insemination.  i also don’t believe single individuals should be allowed it.  i don’t think the right of parenting should be afforded to all people.

me: whoa, you want there to be qualifications for people to be parents?  you know people can just have sex with whoever and get pregnant, right?  there’s an easy alternative to artificial insemination if the government starts regulating it.  and even if artificial insemination was somehow necessary, basically what you would be doing is sending those and related services to the black market, like drugs.  and it would be unsafe and unregulated and the money would fund criminal organizations that would kill and oppress.  i realize that you have this idealistic view of parenting, but do realize that most of the world doesn’t share your thoughts?

Friend: i realize that.  doesn’t mean i should stop wishing that weren’t the way things went.

me: yeah, but it is totally not enforceable

Friend: i know

me: so you wish everything were different, but you are fine not doing anything about it?

Friend: as long as nobody steps on my toes.  if there is some sort of “acceptance” shoved down my throat, I don’t know if I will stay quiet

me: well how would it be shoved down your throat?

Friend: well, my personal beliefs are that children should be born to a mother and father who love each other and are in a committed relationship sanctioned by the state and by God.  that may be idealistic, but it is still my goal and i want society to be as conducive to that as possible.

me: yeah, but we’re not going to make it illegal to do otherwise, right?  single motherhood, alternative family relationships…

Friend: right, but i think those other arrangements should be stigmatized like they used to be so that they won’t happen as often

me: sure, and no one is going to stop you from trying to stigmatize it.  that’s your right, within certain parameters.

Friend: well, i just worry that sexual orientation being a protected class will disallow stigmatizing

me: right.  you can stigmatize, but you can’t do it by discriminating against people based solely on their sexual orientation.  and you wouldn’t want the law to be otherwise, either, because then you open up the possibility of whatever group you belong to being discriminated against at hotels, restaurants, hospitals…

Friend: hmm, so i guess it is best to prohibit discrimination because we’ve got our share of crazies who won’t always discriminate justly.

me: right.  i mean, do we really want each individual doctor to decide who he thinks good and bad parents will be?

Friend: no.  and generally speaking, people who are going to doctors for artificial insemination are better parents than the random teenagers who get knocked-up simply because they are making the decision by choice.  but still, i wouldn’t mind God exercising some righteous judgment.  and if we can’t have that, then i guess we don’t want anyone else to have all the power to decide.  not much government in that

me: right.  see, maybe you’re a libertarian at heart

Friend: is that what defines libertarianism?

me: as little government intervention as possible in every aspect of life

Friend: hmm.  maybe

me: that was easy.  i should be getting some sort of compensation from the libertarian party for this.

California has a Proposition to amend the constitution to state that “only marriage between a man and a woman is valid or recognized in California.”  According to some polls, 10% of voters are still undecided.

The first step for undecided voters is deciding whether your preference is voting for rights or for the greater good.  If you believe that marriage is an inalienable basic civil liberty, then there should be marriage equality.  If you believe that marriage is something we permit because it benefits our society and to the extent it ceases to benefit our society we will cease to endorse marriage, then you need to examine how you think same sex marriage would benefit and/or harm society.

Although the general rule seems to be that people have the right to marry, we have traditionally denied people the right to marry anyone of their choosing in certain circumstances.  In many states there is a minimum age requirement for marriage.  In some states, certain blood relatives cannot marry, presumably even though they are consenting adults and are past child-bearing years.  People may not marry again if they already have one spouse.  Why do we have these restrictions on marriage?  Because society thinks it is bad for business.  Our forefathers made the judgment that in those marriages, the harm exceeded the benefits such that society would not condone them.

Same sex marriage has been traditionally disallowed, but just because our forefathers thought the harm outweighed the cost doesn’t mean it is true.  Anti-miscegenation laws were also presumably based on a cost/benefit analysis, but most would agree now that the benefit to allowing interracial marriage in our society outweighs the harms.  The same could be true of same sex marriage, in fact opponents of the amendment cite Massachusetts and several other countries as positive test cases for same sex marriage.  Same sex couples in California have been participating in de facto marriages, what would be the harm of making it official?

It is also possible that the harm for same sex marriage outweighs the benefits.  The California Supreme Court in the In re Marriage case relied on the rights based argument and so did not perform a detailed cost/benefit analysis, however the gay population is estimated at less than 5% of the population.  Benefits to that small a portion would have to be great to counteract even a small harm to the other 95% of the population.  Proponents of the amendment point to allowing no-fault divorces (which some blame for the current divorce rate of 50%) and allowing unwed mothers on welfare (which some argue has led to the sharp increase in the number of welfare babies) as real world examples of the unintended consequences that laws aimed at a small percentage of the population can have overall.  Proponents of the amendment also point to the fact that under California law, same sex couples in civil unions will still have all the same legal rights as married couples.  Additionally, sexual orientation will still be a protected class such that no law can discriminate against a person because of his or her sexual orientation in California.

People complain about how much time, money, and effort are being put into this debate.  To paraphrase a Chicago law professor opposed to certain campaign finance limits, with something this important, I would like to see more time, money, and effort spent on both sides of the issue.  There is a great deal of uncertainty about what effects governmental endorsement of same sex marriage will have in the long term.   The only thing that is certain is that same sex marriage will have some effect; the only question is in what ways and to what extent.  All things considered, I sort of admire the indecision of that 10% of the population in the face of such lasting potential consequences.

Prognostication is always a tricky game. But right now, it appears that Barack Obama is almost certain to be the next President of the U.S.A. Unless he marries Bill Ayers in a nationally-televised Muslim ceremony, it seems that he’s got a lock. McCain’s done a fine job of exciting a party that wasn’t predisposed to like him, but he’s turning off independents in the process and the Republican party is losing ground badly in voter registration.

McCain’s recent problems with independents and the tone of his campaign have got me thinking about Cass Sunstein’s work on group polarization. The basic theory is that groups of like-minded individuals tend to adopt more extreme positions than the individuals would independently . People in groups of conservatives will tend to become more conservative, people in groups of liberals will tend to become more liberal and so on. 

I’m not as up to speed on the literature as I probably should be, but it seems to me like one of the natural side effects of this phenomenon would be that as group opinion hardens, a group will tend to shed its more moderate members through self-selection or outright expulsion. As the group gets smaller and smaller its beliefs will become more and more intense, until all you’ve got left is a small, intensely devoted core. 

This theory would certainly seem to explain for some of John McCain’s recent problems with his own supporters. Who wants to associate themselves with yahoos like these?  The base, meanwhile, is busily casting out heretics when it ought to be making converts.

Although I certainly don’t want McCain to win the election (libertarians hated McCain before it was cool), it can’t be good to have one of the two major political parties melting down so completely. We are at a time when the size and power of the federal government is about to expand on a massive scale. It would be nice to have a credible, intellectually vibrant opposition standing athwart history yelling ‘stop’ (or at least ‘slow down a bit’), and unfortunately, we don’t have anything of the sort. 

So what can be done? McCain could probably heal a lot of the damage by stressing civility and good sportsmanship for the rest of the campaign and sending Palin off to a nunnery. But that would entail giving up any hope of victory. I think McCain would rather face a glorious blowout loss than a noble forfeit (which, to be fair, is an entirely human and understandable instinct).

The system does have some capacity to correct itself. A few years in the wilderness will probably help the Republicans regain some of their appeal. Absolute power will begin to corrupt the Democrats absolutely. More importantly, absolute powerlessness will give the GOP some time to think about what it’s done wrong. But in order to regain its lost ground, the Republican party must have the capacity for honest self-examination and self-criticism. It’s an open question if the party can learn those virtues even as it shrinks towards critical mass.

Everybody (except the europeans) is wondering whether the bailout will work.  Hasn’t it worked already?  If not financially, at least socially by enforcing our societal preferences for the redistribution of wealth/guilt/etc.?

Punishment is now unfashionable… because it creates moral distinctions among men, which, to the democratic mind, are odious.  We prefer a meaningless collective guilt to a meaningful individual responsibility.

Thomas Szasz

What we’re going to see, in short, is the Gingrich revolution in reverse and on steroids. There will be a big increase in spending and deficits. In normal times, moderates could have restrained the zeal on the left. In an economic crisis, not a chance. The over-reach is coming. The backlash is next.

David Brooks, “Big Government Ahead”, http://www.nytimes.com/2008/10/14/opinion/14brooks.html?_r=1&partner=rssnyt&emc=rss&oref=slogin.

I’ve been saying this for a few weeks now, and it’s looking inevitable. God help us.

The headline says it all: “EU takes a €2 trillion financial gamble”:

The governments of Europe yesterday embarked on their biggest financial gamble since the launch of the euro single currency with the boldest financial rescue scheme ever seen. They are pledging to buy up tottering banks, underwrite their lending, and flood the markets with liquidity in a package that could run to a staggering €2tn in total across the EU.

Interestingly while the main focus of the bailout in the United States was on whether it would work or not, the Euros seem more interested in showing up the United States:

The scale, ambition and potential costs of the programmes announced yesterday suggested that European leaders such as Gordon Brown, President Nicolas Sarkozy of France and Germany’s chancellor, Angela Merkel, were determined to rise to the challenge of the financial crisis through concerted action, displaying a degree of leadership that put Washington, the global economic leader, in the shade.

“United Europe has pledged more than the US,” said Sarkozy, chairing the EU, as he announced a €360bn package for France. “European policymakers are racing ahead of the US in their efforts to solve the crisis,” said Italy’s Unicredit bank.

It’s more, for sure, but not that much more.  Only €1 trillion is coming from the actual EU, which has a GDP of a little under $17 trillion, compared to the U.S. contribution of $700 billion with a GDP of a little over $13 trillion.  While the EU’s contribution of 5.8% of its GDP is slightly higher than the U.S.’s contribution of 5.4% of its GDP,  I don’t know if that necessarily puts the U.S. “in the shade.”  And in any case, are we sure that a bailout is the right solution?  I didn’t realize we had all reached a consensus about that, even when taking into account today’s stock market rally.

Paul Krugman won the Nobel Prize in Economics today, and it is well-deserved. Krugman’s most important work, called new trade theory, solved the puzzle of why most trade is between very similar countries, like the U.S. and Canada.

Why is this a puzzle? Well, the historical justification for trade followed Ricardo and comparative advantage. If the U.S. is good at producing cars and China is good at producing clothing, then there are gains from trade to be had if the U.S. specializes in making cars and trades them to China, where production is being focused on clothes. This basic idea was refined in the 1920′s, so that what’s actually important is the proportion of inputs each country has. If the U.S. has a bunch of capital (relative to people to work) and China has a bunch of people, then, again, there are gains from the U.S. specializing in producing goods that require capital and China producing goods requiring labor.

OK, so good so far. The only problem is, that most real world trade doesn’t work like this! The U.S. trades primarily with Canada and Europe, while China did most of it’s trading with poor, undeveloped countries. This pattern, dubbed “North-North trade” doesn’t fit the traditional trade story at all.

This is where Krugman comes in. He pulls two ideas together to solve this apparent puzzle. First, people like variety. We enjoy having several different types of cars to choose from, and having 30 differents restaraunts instead of 5. Second, firms have what we call returns to scale, which implies that, the smaller a market of consumers is, the fewer firms will exist to produce goods.

Therefore, when the U.S. opens its doors to Europe, the market base for firms drastically increases (because of scale returns) which allows us to get way more variety than we had before. Voila! Trade happens and it is good for everyone.

Along with new trade theory, Krugman also made several seminal contributions in understanding currency crises and in the resurgence of economic geography. Although he has spent the past 10 years or so as a public intellectual with all the political baggage that entails, this Nobel is justly deserved for his economic contributions.