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February 2007

Social Security Private Accounts: An Add-On, Not a Carve-Out

Greg Ip finds former Bush Treasury Secretary John Snow saying that he was on our side of the Social Security reform debate--he thought private accounts should be add-ons rather than carve-outs too.

It would have been nice if he had signaled this at the time:

Washington Wire: A Bridge Too Far: Former Treasury Secretary John Snow says the Bush administration's first effort to overhaul Social Security failed because the Administration was "intransigent" on private accounts. Mr. Snow, who was Secretary of the Treasury from 2003 to 2006, says that the administration's insistence that a Social Security fix include private accounts carved out of the program shifted the focus away from making the retirement program solvent, and added that would have been better to propose private accounts on top of the existing program as some Democrats have suggested.

"You can't do health care reform or Social Security reform.... without a bipartisan consensus," Mr. Snow said at the Private Equity Analyst Outlook conference last week.... "If we made a mistake, it was not approaching it in more of a bipartisan way. We were pretty intransigent about the private accounts," he said.

Mr. Snow said the administration may have succeeded "If we had been a little cleverer and talked about augmentation of 401(k)'s, augmentation of private savings, but not by diverting money out of Social Security. I think that that was a winning formula. What wasn't salable was the fundamental argument that we make Social Security stronger for our children and grand children by diverting money out of it: putting it into private accounts, running up trillions of dollars of debt in the interim and it will all be okay in 2094," he said. "That was a losing argument."...

Current Treasury Secretary Henry Paulson, who succeeded Mr. Snow last year, is trying again to revive efforts to fix Social Security by reaching out to Democrats on Capitol Hill. But he has said that depoliticizing the issue so the next president can solve the problem may be the best he can do in the two years before Mr. Bush leaves office....

On a separate issue, Mr. Snow said, "I don't think a case can be made that Sarbanes-Oxley is making U.S. capital markets fundamentally less competitive," referring to the 2002 law that tightened the responsibilities and oversight of public corporations in the wake of the Enron and WorldCom scandals. Much of the loss of market share by U.S. capital markets, he said, reflects the natural, growing sophistication of other markets.... Mr. Snow said while Sarbanes Oxley should be re-examined, chief executives ought not to seek a wholesale change...

The Symmetry Argument for Cooperation in One-Shot Prisoner's Dilemma

A commenter writes: The claims made by Axelrod in favor of tit-for-tat are wildly overblown, and frequently just plain wrong. Anatol Rapoport cannot really be blamed for his sloppiness, although he did (re)invent the Symmetry Fallacy that purports to demonstrate that it is rational to co-operate in the one-shot Prisoners' Dilemma. A good place to read a game theorist's reaction to all of this is in Ken Binmore's "Playing Fair: Game Theory and the Social Contract I," Chapter 3, (MIT Press, 1994).

The Symmetry Argument is not the Symmetry Fallacy. I think that it's remarkably deep and subtle, raising many of the issues that arise in Newcomb's Problem.

To review the one-shot Prisoner's Dilemma game. A and B play a one-shot game. Each has two strategies: C(ooperate) and D(efect). A and B are identical. Each is a self-interested being, caring only about his or her own payoffs--they are neither altruistic nor envious. Each is a logical being, understanding the structure of the game and capable of following the strategic logic to its conclusion. The payoffs to this one-shot game are as follows:

Basic Prisoner's Dilemma

B CooperatesB Defects
A Cooperates(2,2)(-5,3)
A Defects(3,-5)(-4,-4)

Here is the traditional argument for the traditional dominant-strategy equilibrium:

A thinks: "Whatever B does, I am better off doing strategy D. Moreover, whatever I do, B is better off doing strategy D. It would be best for us both if we both did strategy C. But I cannot afford to do C--I would do better doing D, and B knows I would do better doing D. For both of us, strategy D strictly dominates. So I would have to conclude that B was insane or irrational to expect B to do strategy C--and even if B does, I am still better off doing D than C." B thinks the same.

Here is the Symmetry Argument for doing strategy C:

A thinks:

B is identical to me. I am a logical thinker. B is therefore a logical thinker, who will think the same thoughts I think. There are, however random elements--what B had for breakfast, for example--that may lead B to choose a different strategy than me. Let's model those random elements by a random variable b drawn uniformly from [0, 1]. And let's model the logical, systematic part of B's deliberations by having B choose a number p, so that B chooses strategy C if b < p and chooses strategy D otherwise.

What number p will the logical part of B choose?

Well, the best model I have of the logical part of B is what number p I have chosen. Viewing myself as an agent whose logical thought is identical to that of B, what number p will I choose? Let me calculate my expected return as a function of p. It is:

2p2 - 2p(1-p) - 4(1-p)2

This is maximized for p = 1. So I should choose p = 1--should always cooperate--and expect a payoff of 2.

Should I take the problem one step further? Should I reason that since B is choosing p = 1, I should choose to defect, and thus get an expected return of 3? Ah. But if I choose to defect, I am choosing my own p = 0, and my forecast of B's choice of p changes as well, and my expected return is not 2 but -4.

A has to confront two truths. On the one hand, A's payoff is greater by one if A chooses to defect rather than to cooperate. On the other hand, if A plays the dominant strategy of "defect" then A's expectation of their payoff drops by 6. +1 or -6? The issue of which truth to act on is, I think, the same issue we find in Newcomb's Problem.

I am a dominant-strategy guy. If you find the Symmetry Argument convincing--well, Grasshopper, you have once again failed to snatch the pebble from my hand. But I feel the force of the other side: If you find the Symmetry Argument an obvious fallacy--well, Grasshopper, you have once again failed to snatch the pebble from my hand.

If you set up as an axiom of rationality that a rational, logical agent must always choose to play a dominant over a dominated strategy--well, Grasshopper, you have begged the question, and you have to answer the next order question: why you think that your rational, logical agents are smart?


Hoisted from Comments for Further Discussion: TIT-FOR-TAT...

I wrote what I thought was an innocuous:

Tom Slee Tells Us That Game Theorist Anatol Rapoport Has Died: Rapoport's "Tit-for-Tat" solution to repeated prisoner's dilemma has two huge things going for it:

  1. You cannot exploit it. You are always better off cooperating than attempting to game it. It's simple, so it's easy to figure out what it is and what it is doing.
  2. These are two very powerful advantages in any strategic interaction.

Crooked Timber: Anatol Rapoport... perhaps... most widely-known... the Tit-for-Tat rule for repeated games of the Prisoner's Dilemma, embodied in a four-line program Rapoport successfully entered in a contest run by Robert Axelrod. Rapoport's program co-operates inititially, and thereafter matches the other player's last action, defecting in response to a defection, and returning to co-operation if the other player does so...

And produced a bunch of comments:

[Simplicity and non-exploitation] can be said for many other strategies, including cooperating until the other player defects and then defecting in perpetuity. It adds nothing to the literature on credibility in decision-making save a convenient reference. Kenneth Arrow's work is non-obvious and counterintuitive. Much of the rest [of game theory] is formulaic rationalization built on questionable axioms which drive to logical conclusions assuming one buys into those axioms. It may be a bit much holding Rappaport responsible for what game theory has become. May he rest in peace.

I don't quite understand the comment. It's true, of course, that there are other strategies that meet those two stated conditions; but (and perhaps this ought to have been stressed along with them) it was Rapoport's that won the contest against all the clever complexities that were submitted. Its ability to run up a higher score against a variety of strategies under more or less realistic conditions than "defect in perpetuity" seems fairly clear a priori. Again, is there a reference for "holding Rappaport responsible for what game theory has become"? It's not clear that Tom Slee is making such a strong claim; nor whether that's supposed to be a good thing or a bad one. Certainly AR was a leader of opposition to what the Rand Corporation was turning game theory into, and he seems to have been influential in that effort; and it's hard to see that as any but a good thing.

It certainly seems to describe historical reality pretty well... "...two agents playing tit for tat remain vulnerable. A one-time, single-bit error in either player's interpretation of events [e.g.Iraq] can lead to an unending 'death spiral'. In this symmetric situation, each side perceives itself as preferring to cooperate, if only the other side would. But each is forced by the strategy into repeatedly punishing an opponent who continues to attack despite being punished in every game cycle. Both sides come to think of themselves as innocent and acting in self-defense, and their opponent as either evil or too stupid to learn to cooperate" i.e. the armchair general types hunkered down in front of their TV sets and war blogs, with buckets of popcorn, drawn into the Iraq War like the complicated plot of a fiendishly violent soap opera, feverish imaginations convinced that that the only option is to keep playing, playing, and playing, double or nothing, until Norman Podoretz's World War 4 egg is finally hatched and the corpses pile high.

In econ and ev psych Gintis and others have supplemmented simple reciprocity (approximately tit for tat) with strong recoprocity (altruistic retaliation against defectors, even at personal cost for the retaliator). Individualist simple reciprocity can't deal with a crippling first strike. Strong reciprocity usually works within a defined community, all members of which are committed to backing up the others.) "Moral sentiments and Material Interests", Herbert Gintis, Samuel Bowles, Robert Boyd, and Ernst Fehr, eds., MIT, 2005.

Walktheline's comment was the first I've ever seen making counterintuitivity a necessary requirement of good work, though economists and the like often seem to behave as though it were. The dadaists of science...

The claims made by Axelrod in favor of tit-for-tat are wildly overblown, and frequently just plain wrong. Anatol Rapoport cannot really be blamed for his sloppiness, although he did (re)invent the Symmetry Fallacy that purports to demonstrate that it is rational to co-operate in the one-shot Prisoners' Dilemma. A good place to read a game theorist's reaction to all of this is in Ken Binmore's "Playing Fair: Game Theory and the Social Contract I," Chapter 3, (MIT Press, 1994).

Jesus, this guy has enemies.

I've seen very, very unpleasant things written about Rapoport's intro to the Penguin edition of Clausewitz, though whether those comments illuminated R. or his critics I could not say.

It's not clear what Brad DeLong means by 'Rapoport's "Tit-for-Tat" solution to repeated prisoner's dilemma.' Tit-for Tat is neither evolutionarily stable nor subgame perfect in the infinitely repeated Prisoners' Dilemma, so not really a "solution" at all. In fact no strategy is evolutionarily stable in this game, but there are many subgame perfect strategies, including the Grim Strategy, which punishes by reverting to Confess forever after the first deviation from cooperation. Anatol Rapoport was a great man in many ways, and a pioneer of applied game theory, but the confused acclaim accorded to his tit-for-tat strategy probably does him little justice.

Porlock -- I may have been unfair to Rapaport. I'm just underwhelmed by the inference that mathematically formalizing tit-for-tat behavior is an intellectual accomplishment. John Emerson -- I understand your point. In my defense, I just don't see the point in embracing game theoretical models unless they teach us something new. The novelty of most such papers I've read lies in the implicit claim they make about social rationality through their use of models that quantify utility. There are major problems with this, not the least of which is that it is rarely clarified whether the models presented are intended to be descriptivist (attempts to explain actor behavior) or prescriptivist (strategies to maximize utility). Note the way comments two and three on this thread assume different things here. Anyway, I consider it incredibly misleading (a major step backwards) for scholars to embrace a form of argument that permits form to obfuscate what is really under discussion. Working through something like Arrow's theorum is a reminder of the validity and worth of the approach though, because Arrow avoids these traps and teaches us something we don't already know. So I 'm not willing to dismiss the approach, but I don't get anything close to that from reading Rapaport or Axelrod or the other IR game theorists.

Let me just re-comment on two:

Tit-for Tat is neither evolutionarily stable nor subgame perfect in the infinitely repeated Prisoners' Dilemma, so not really a "solution" at all. In fact no strategy is evolutionarily stable in this game, but there are many subgame perfect strategies, including the Grim Strategy, which punishes by reverting to Confess forever after the first deviation from cooperation...

Anatol Rapoport cannot really be blamed for his sloppiness, although he did (re)invent the Symmetry Fallacy that purports to demonstrate that it is rational to co-operate in the one-shot Prisoners' Dilemma...

The fact that GRIM is subgame-perfect suggests a problem with subgame-perfection as one's equilibrium concept, no?

And the Symmetry Argument is not the Symmetry Fallacy. It's remarkably deep and subtle, raising many of the issues that arise in Newcomb's Problem. Let me see if... No, this would take too long. More later...

A Note on a GRIM Game of Repeated Prisoner's Dilemma...

Ken Binmore writes:

Robert Axelrod - The Complexity of Cooperation: On examination, it turns out that TIT-FOR-TAT was not so very successful in Axelrod's simulation. Nor is the limited success it does enjoy robust when the initial population of entries is varied. The unforgiving GRIM does extremely well when the initial population of entries consists of all 26 finite automata with at most two states.... Why not follow Linster (1990, 1992) in beginning with all finite automata with at most two states? The system then converges from a wide variety of initial conditions to a mixture in which the strategy GRIM is played with probability greater than 1/2. But GRIM is not forgiving. On the contrary, it gets its name from its relentless punishment of any deviation for all eternity...

GRIM can only be beaten only by programs that (a) defect first, and (b) thereafter follow TIT-FOR-TAT by never offering cooperation this turn in response to defection last term. GRIM can only be tied by another GRIM, by TIT-FOR-TAT, by JESUSCHRIST, or by other programs that never defect in response to cooperation.

It is important to be clear about why GRIM "succeeds": it "succeeds" not because it does well but because it ensures that everybody else does extremely badly. As soon as GRIM learns that it is not playing against another instantiation of GRIM, it then does everything it can to make the other's score as low as possible. In evolutionary game-theory set-ups, GRIM will tend to increase its share within a community, but communities that have a lot of GRIMs in them will have low average scores (and hence, presumably, be unlikely to expand much).

I would argue that Binmore is working with the wrong definition of "successful": solitudinem faciunt et "successful" appellant. "Successful" means that one does well, not that one turns one's surrounding environment into an instantiation of Road Warrior.

We're in a situation of reflective equilibrium with game theory here: results that are rigorous but are counterintuitive suggest a modeling error; results that are intuitive but unrigorous suggest a wishful-thinking error.

Tom Slee Tells Us That Game Theorist Anatol Rapoport Has Died

Rapoport's "Tit-for-Tat" solution to repeated prisoner's dilemma has two huge things going for it:

  1. You cannot exploit it. You are always better off cooperating than attempting to game it.
  2. It's simple, so it's easy to figure out what it is and what it is doing.

These are two very powerful advantages in any strategic interaction.

Crooked Timber: Anatol Rapoport has died at the age of 95. Among many contributions, perhaps his most widely-known was the Tit-for-Tat rule for repeated games of the Prisoner's Dilemma, embodied in a four-line program Rapoport successfully entered in a contest run by Robert Axelrod. Rapoport's program co-operates inititially, and thereafter matches the other player's last action, defecting in response to a defection, and returning to co-operation if the other player does so...

Kash Mansouri's Job Market Update

Kash Mansouri writes:

The Street Light: Job Market Update, January 2007: The BLS has new data about the US job market this morning:

In January, total payroll employment increased by 111,000, to 137.3 million, seasonally adjusted. This increase followed gains of 196,000 in November and 206,000 in December (as revised). In 2006, payroll employment rose by an average of 187,000 per month. In January, employment continued to increase in some service-providing industries. In addition, construction employment was up, while manufacturing employment continued to trend down.

Taking a look at some of the other numbers describing the US job market, we find that the employment-population ratio has (at least temporarily) stabilized, after a nice improvement during 2005 and 2006. Earnings, on the other hand, did not improve in 2006 as much for American production workers as, say, Exxon-Mobile's earnings did. In recent months the drop in gas prices has pushed real earnings noticeably higher, but those earnings are still only around 2% above where they were seven years ago.

So after accounting for consumer price inflation, the average production worker takes home about $10 more per week than he or she did in the year 2000. It's no wonder that lots of people feel that economic growth is passing them by...

Why Oh Why Can't We Have a Better Press Corps? (Yet Another Washington Post Edition)

Dean Baker is unhappy with Michael Abramowitz and Lori Montgomery of the Washington Post:

Beat the Press: I apply the strict "net gain" standard to budget reporting.... [A] typical reader should be better informed about the budget and tax/spending priorities after reading the piece than before they started. The Post's article on President Bush's request for another $245 billion for the wars in Iraq and Afghanistan does not meet the net gain standard.... [H]ow about telling [readers] that the 2008 request is equal to approximately 5 percent of total spending, or maybe $2,000 for a family of four? The article then tells readers that President Bush is proposing a 1 percent increase in non-defense discretionary spending. There are probably about 50 budget wonks that can assign any meaning to this information....

Since I'm on the topic of beating up on the Post's budget reporting, let me also call attention to a bit of excessive gullibility in Friday's story on the Senate's minimum wage bill ("Senate Adds Tax Breaks to Minimum Wage Bill," 2-1-07;A1 [sorry, no links, the Post's website is not being cooperative]). This article reported that the tax breaks would help "businesses that would be hardest hit by the minimum-wage increase." Some qualifications would have been in order here like "businesses that Republicans claim would be hardest hit by the minimum-wage increase." I haven't studied the tax breaks closely, but according to the article, one of the tax breaks is an accelerated depreciation schedule for investments by small businesses. That does not seem obviously designed to help businesses that would be affected by the higher minimum wage...

It's been a long time since I've run into any economist willing to argue that the Washington Post ought to survive.

Why Oh Why Can't We Have a Better Press Corps? ("Mainstream" Department)

Atrios watches as Time's Jay Carney says that the civil rights movement is not part of America's "mainstream":

Eschaton: Well, not exactly swampland, but in this edition Swampland's Jay Carney reveals his definition of mainstream:

CARNEY (1/31/07): What Biden was saying, and this is Biden's fault for not being clear in what he was saying in this interview, is that there hasn't been a candidate, a viable African-American candidate with all those qualities in one.

MATTHEWS: And mainstream.

CARNEY: Who is mainstream.

MATTHEWS: Mainstream is the key to me.

CARNEY: Who didn't come from the civil rights movement, you know...

Will to Power

John Holbo has three posts that I think are linked: one about Josh Trevino, one about David Frum, and one about Karl Schmitt. Call it a project to analyze a particular current of thought--Dark Satanic Millian Conservatism.

Here Holbo watches Josh Trevino say that we must not be squeamish about dealing death and destruction on people for no reason other than it would be convenient for our Imperial Mission; he watches David Frum say that we must make the lower orders fearful and stressed--the circumstances of the Donner Party are mentioned--in order to make them morally righteous; he watches Karl Schmitt say that it would be insane to go to war to make a profit but that it is our bright shining mission to go to war for no comprehensible advantage at all.

It is a trifecta: ruling elites must be willing to slay villages and put entire populations in concentration camps abroad; ensure that those of the lower orders who breach the principles of thrift and good morals find themselves in poverty and misery at home; and accept the probability of their own violent death for no reason other than that they have labeled somebody else an "enemy." I think that these three currents of opinion are definitely of the same origin. But I don't quite see how they all fit together.

John Holbo on Josh Trevino:

: [T]his, by Trevino (a.k.a. Tactitus):

Americans simply do not wish to suffer, and do not have the senses of patriotism, pride, and honor that buffered such suffering for earlier generations.... The ability of a society to see through grinding conflicts like the Philippines Insurrection or the Boer War augers well for its future, lest it lose the mere capacity to conquer, and be susceptible to humiliation by any small power with no advantage save mental fortitude. It is indeed difficult to imagine now the methods that transformed the Philippines for us, and South Africa for the British, from bitter foe to steadfast friend being applied in Iraq. Would that they were....

Republicans, the suffering for suffering's sake party? It all reminds me of this post by Henry: "There's an important strain within US conservatism that is interested not only in revolution, but in permanent revolution. The struggle itself is what is important, not a successful resolution, which is dull, and somehow slightly distasteful. The everyday politics of policy and markets just aren't very interesting. Some conservatives never seem more comfortable and happier than when they are engaged in an epic struggle between good and evil." Only now I guess feelers are being put out into "beyond good and evil" territory. Conservatives will indignantly respond that Trevino is not an immoralist, [that] "we can accomplish absolutely anything in the world through the application of sufficient military force. The only thing limiting us is a lack of willpower." Do you think the problem with people who think this way is that they don't read enough comic books, or do they read too many?...

John Holbo on David Frum:

John & Belle Have A Blog: Dead Right: I can see why Marshall finds Frum’s book... interesting....

Social conservatism is potentially more popular than economic conservatism. But severed from economic conservatism, social conservatism too easily degenerates into mere posturing. The force driving the social trends that offend conservatives, from family breakup to unassimilated immigration, is the welfare function of modern government. Attempting to solve these social problems while government continues to exacerbate them is like coping with a sewer main explosition by bolting all the manhole covers to the pavement. Overweening government may not be the sole cause of America’s maladies.... The nearly 1$ trillion the federal government spends each year on social services and income maintenance -- and the additional hundreds of billions spent by the states -- is a colossal lure tempting citizens to reckless. Remove those alluring heaps of money, and the risks of personal misconduct would again deter almost everyone, as they did before 1933 and even 1965.

It’s a bit-- um, ripe -- to analogize immigrants and single-parent families directly to sewage. Nevertheless, this can still be read as more or less pure economic libertarianism (with just a layer of slime on top.)... It turns out economic inefficiency isn’t what ‘offends’... Frum.

The great, overwhelming fact of a capitalist economy is risk. Everyone is at constant risk of the loss of his job, or of the destruction of his business by a competitor, or of the crash of his investment portfolio. Risk makes people circumspect. It disciplines them and teaches them self-control. Without a safety net, people won’t try to vault across the big top. Social security, student loans, and other government programs make it far less catastrophic than it used to be for middle-class people to dissolve their families. Without welfare and food stamps, poor people would cling harder to working-class respectability than they do not.

The thing that makes capitalism good, apparently, is not that it generates wealth more efficiently than other known economic engines. No, the thing that makes capitalism good is that, by forcing people to live precarious lives, it causes them to live in fear of losing everything and therefore to adopt – as fearful people will -- a cowed and subservient posture: in a word, they behave ‘conservatively’. Of course, crouching to protect themselves and their loved ones from the eternal lash of risk precisely won’t preserve these workers from risk. But the point isn’t to induce a society-wide conformist crouch by way of making the workers safe and happy. The point is to induce a society-wide conformist crouch. Period. A solid foundation is hereby laid for a desirable social order....

[L]aissez faire capitalism is good if and only if under capitalism the masses are forced to work in environments that break their will to want to ‘jump across the big top’, i.e. behave in a self-assertive, celebratorily individualist manner. Ergo, a dark satanic millian liberal will tend to oppose capitalism to the degree that, say, Virginia Postrel turns out to be right about capitalism ushering in a bright new age of individual liberty, in which people try new things for the sheer joy of realizing themselves, etc., etc....

Contemporary conservatives still value that old American character.... [T]here have been hundreds of such changes -- never mind since the Donner party’s day, just since 1945.... All of these changes have had the same effect: the emancipation of the individual appetite from restrictions imposed on it by limited resources, or religious dread, or community disapproval, or the risk of disease or personal catastophe. (p. 202-3)

Words fail me; links not much better. The Donner party? Where did all these people go? Into each other, to a dismaying extent.... The stoical endurance of the Donner party in the face of almost unimaginable suffering is indeed moving.... But it is by no means obvious... that lawmakers and formulators of public policy should therefore make concerted efforts to emulate the Donner’s dire circumstances.... “It’s the economy, stupid! We need to bury it under ten to twelve feet of snow so that we will be forced to cannibalize the dead... [to] be objects of moral edification to future generations.”...

I’ve had enough of this. I’m stopping. The funny thing about this book is: it isn’t nearly as bad I just made it sound.... The middle chapters -- full of history and policy detail, so forth -- are quite cogent. Just the main chapters have problems...

John Holbo on Karl Schmitt:

Carl Schmitt: War! What is it good for?: John Quiggin writes:

So, let me start with the observation that war is inherently a negative-sum activity and the empirical fact that, in practice, aggressive war is almost invariably a negative-return activity for the inhabitants of countries that undertake it, Germany in the first half of C20 being a striking example. Schmitt and similar thinkers manage to construct logical frameworks that insulate them from crucial facts like this....

And yet here is what Schmitt actually says on the subject in The Concept of the Political....

War as the most extreme political means discloses the possibility which underlies every political idea, namely, the distinction of friend and enemy. This makes sense only as long as this distinction in mankind is actually present or at least potentially possible.... [I]t would be senseless to wage war for purely religious, purely moral, purely juristic, or purely economic motives.... [R]eligious, moral and other antitheses can intensify to political ones and can bring about the decisive friend-or-enemy constellation. If, in fact, this occurs, then the relevant antithesis is no longer purley religious, moral, or economic, but political. The sole remaining question then is always whether such a friend-and-enemy grouping is really at hand, regardless of which human motives are sufficiently strong to have brought it about. (p. 36)

More succinctly:

To demand seriously of human beings that they kill others and be prepared to die themselves so that trade and industry may flourish for the survivors or that the purchasing power of grandchildren may grow is sinister and crazy (p. 48)

Schmitt is running John Quiggin's point more or less in reverse[:]... since the economic reality does not support war, but it is clear that the possibility of war remains real, therefore the friend-enemy distinction must be fundamental. I have to admit it: that makes a dismal sort of sense to me. And reading the newspaper doesn't make it make less sense, I'm sad to say.

I also agree with Quiggin that Schmitt seems weirdly insulated from these facts, even though he more or less lays them out himself. He complains about one sinister, crazy thing -- going to war for profit -- but seems placidly untroubled by the [even greater] sinister craziness of going to war even though its not profitable, just because you are locked in a friend/enemy thing...

IPCC Global Warming Projections (as of 2/2007)

Climate model estimates of twenty-first century global warming are still fuzzy to a factor of three--plus the uncertainty about what policies will be, and what the effects of policies on emissions will be. But they are a lot less fuzzy than they were a decade ago.

The prospect of a world that is five degrees warmer in a century is unsettling. More unsettling is what happens after 2100.

Impeach George W. Bush. Impeach Him Now

Impeach George W. Bush. Impeach him now. Mark Kleiman:

The Reality-Based Community: Puzzle solved?: Why didn't Patrick Fitzgerald indict anyone for the substantive crime of revealing the identity of a CIA NOC?

Perhaps because he discovered that the revelation was done on the orders of the President, who (at least arguably) can't be indicted by a Federal prosecutor. Anyone down the chain (Libby, Fleischer, Rove) would have had a good defense that he or she was acting in good faith to carry out a Presidential order.

George W. Bush Sets Forth to Strengthen Muqtada al-Sadr

If you ignore all Washington and New York reporters and all TV reporters in Baghdad and just listen to Tom Lasseter, you will be better informed:

Lasseter from Baghdad: U.S. 'Surge' Might Only Help al-Sadr: Tom Lasseter, whose reports from Iraq for Knight Ridder and then McClatchy over the past three years has earned wide praise -- and many notices in E&P -- is back in that country after several months of reporting from Lebanon and elsewhere. He filed the following eye-opening dispatch today....

The U.S. military drive to train and equip Iraq's security forces has unwittingly strengthened anti-American Shiite Muslim cleric Muqtada al-Sadr's Mahdi Army militia, which has been battling to take over much of the capital city as American forces are trying to secure it. U.S. Army commanders and enlisted men who are patrolling east Baghdad, which is home to more than half the city's population and the front line of al-Sadr's campaign to drive rival Sunni Muslims from their homes and neighborhoods, said al-Sadr's militias had heavily infiltrated the Iraqi police and army units that they've trained and armed.

"Half of them are JAM. They'll wave at us during the day and shoot at us during the night," said 1st Lt. Dan Quinn, a platoon leader in the Army's 1st Infantry Division, using the initials of the militia's Arabic name, Jaish al Mahdi. "People (in America) think it's bad, but that we control the city. That's not the way it is. They control it, and they let us drive around. It's hostile territory."

The Bush administration's plan to secure Baghdad rests on a "surge" of some 17,000 more U.S. troops to the city, many of whom will operate from small bases throughout Baghdad. Those soldiers will work to improve Iraqi security units so that American forces can hand over control of the area and withdraw to the outskirts of the city.

The problem, many soldiers said, is that the approach has been tried before and resulted only in strengthening al-Sadr and his militia. Amid recurring reports that al-Sadr is telling his militia leaders to stash their arms and, in some cases, leave their neighborhoods during the American push, U.S. soldiers worry that the latest plan could end up handing over those areas to units that are close to al-Sadr's militant Shiite group.

"All the Shiites have to do is tell everyone to lay low, wait for the Americans to leave, then when they leave you have a target list and within a day they'll kill every Sunni leader in the country. It'll be called the' Day of Death' or something like that," said 1st Lt. Alain Etienne, 34, of Brooklyn, N.Y. "They say, 'Wait, and we will be victorious.' That's what they preach. And it will be their victory."...

After U.S. units pounded al-Sadr's men in August 2004, the cleric apparently decided that instead of facing American tanks, he'd use the Americans' plans to build Iraqi security forces to rebuild his own militia. So while Iraq's other main Shiite militia, the Badr Brigade, concentrated in 2005 on packing Iraqi intelligence bureaus with high-level officers who could coordinate sectarian assassinations, al-Sadr went after the rank and file.

His recruits began flooding into the Iraqi army and police, receiving training, uniforms and equipment either directly from the U.S. military or from the American-backed Iraqi Defense Ministry.

I don't like Editor & Publisher's calling this dispatch "eye opening." These are, after all, the reasons that the generals were not in favor of a "surge" last summer. This isn't new.

Everything You Ever Wanted to Know About Climate Change

Felix Salmon on global warming:

RGE - IPCC report released: Everything you ever wanted to know about climate change: The IPCC Report is out. In the New York Times, Elisabeth Rosenthal and Andy Revkin have a good summary of the summary:

If carbon dioxide concentrations reach twice their pre-industrial levels, the report said, the climate will likely warm some 3.5 to 8 degrees. But there would be more than a one in 10 chance of much greater warming, a situation many earth scientists say poses an unacceptable risk. Many energy and environment experts see such a doubling as a foregone conclusion sometime after midcentury unless there is a prompt and sustained shift away from the 20th-century pattern of unfettered burning of coal and oil, the main sources of carbon dioxide, and an aggressive quest for expanded and improved nonpolluting energy options.

They also note that the IPCC, by its very nature, errs on the side of conservatism:

Scientists have recently reported evidence that the glaciers and ice sheets in the Arctic and Antarctic could flow seaward far more quickly than estimated in the past and have proposed risks to coasts could be much more imminent. But the I.P.C.C. is proscribed by its charter from entering into speculation and so could not include such possible instabilities in its assessment.

Meanwhile, Brad DeLong points to a story about how Exxon-Mobil-funded denialists are already trying to pay scientists to "undermine" the report -- since clearly none of the thousands of scientists who worked on the IPCC report have sufficient skepticism.

What annoys me is the way in which the IPCC report, which is truly the gold standard for any scientific project, is criticised as though it were the work of a small group of cranks. None of its critics really take its methodologies and results seriously, as opposed to deciding at the outset that it must be wrong -- probably because if they did, then they wouldn't be nearly as critical.

Barry Ritholtz: Taking Apart Robust GDP Data

Barry Ritholtz worries about the good 4Q GDP growth, seeking to put a dark cloud around the silver lining:

The Big Picture | Taking Apart Robust GDP Data: Now, you may not be surprised to see this sort of chatter from me or the even more bearish Nouriel Roubini. However, you should be... shocked to see it from the generally bullish Tony Crescenzi....

I don't mean to discredit the fourth-quarter gain completely, and I have been upbeat about growth, but the reported gain must be watered down to some degree. Let's take a look at each of the four factors listed above and how we can interpret the data.

Crescenzi notes that business spending fell during the quarter -- equipment and software dropped 1.8%, the 2nd decline in three quarters and the largest since Q4 2002. That's consistent with the contraction in the Chicago PMI, suggesting the U.S. manufacturing sector is still decellerating.

The residential spending figure was called "sobering" -- "it subtracted 1.2 points from GDP, and fell for a fifth consecutive quarter, by 19.2%. That follows decreases of 18.7% in the third quarter and 11.1% in the second quarter. The fourth-quarter decline was the highest since 1991..."

Also of note: The relatively large contribution from the government sector. Spending increased 3.7%, with Uncle Sam spending 4.5% more, largely due to an 11.9% spike in defense spending. State and local spending increased 3.3%. Government added 0.7% of the Q4 GDP gains.

Where Tony really surprised me, however, was his take on personal spending.

On the surface, the figure looks solid, increasing 4.4%. The problem, however, is that it reflects a gain of just 3.6% in nominal spending because the personal consumption deflator fell 0.8%, its first decrease since 1961 and the largest decline since 1954, according to Market News.

This means that if the inflation rate for the quarter were at a normal level, say, up 2.0%, personal spending would have seen a very small gain of just 1.6% for the quarter. (I get this by subtracting 2.0% from 3.6%.)

The low level of nominal spending, which was the weakest in four years, reflects strain on the consumer. This figure represents the total amount of money that consumers spent during the quarter, a tally that looked good only because they caught a break with the decline in energy costs. Had energy costs increased, it would have produced a much different result. For context, nominal spending in the overall economy has increased at a pace of 5.6%; it increased at a pace of 5.0% in the fourth quarter.

The bottom line: A good number, but with some hair on it, likely benefiting from warmer weather, government spending, decreased energy prices -- but also likely subject to further revisions.

The Usually Reliable Robert Pear Misses a Catch

The usually-reliable Robert Pear misses a catch. And Dean Baker is unhappy:

Beat the Press: A New York Times article discussing President Bush's plans to cut Medicare and Medicaid spending notes that Democrats are likely to oppose these plans. At one point, it reports that Democrats in Congress want to save money by reducing payments to the private insurers that operate within the Medicare program, because they claim that Medicare overpays these plans.

Actually, that is not just a claim of the Democrats. The Medicare Payments Advisory Commission, a non-partisan governmental commission, concluded that Medicare pays an average of 11 percent more per beneficiary for people enrolled in the Medicare Advantage program than for people in the traditional fee for service Medicare program.

It would be helpful if the NYT would distinguish between partisan claims and the assessments of presumably neutral bodies. In this case, Democrats in Congress are advocating a policy that is based on the assessment of a panel of experts, not just their own assertions.

Spencer Ackerman Is Shrill!

He summarizes the National Intelligence Estimate:

TPMmuckraker February 2, 2007 10:58 AM: Wow, this is grim. According to the just-released Key Judgments of the National Intelligence Estimate on Iraq, political reconciliation is likely a bridge too far over the next year and a half.

The Sunnis remain "unwilling to accept minority status" and believe the Shiite majority is a stalking horse for Iran. The Shiites remain "deeply insecure" about their hold on power, meaning that the Shiite leadership views U.S.-desired compromises -- on oil, federalism and power-sharing -- as a threat to its position. Perhaps most ominously, the upcoming referendum on the oil-rich, multi-ethnic city of Kirkuk threatens to be explosive, as the Kurds are determined to finally regain full control over the city.

Interestingly, the listed prospects for reversing Iraq's deterioration contradict the NIE's assessment of where things actually stand. For instance, "broader Sunni acceptance of the current political structure and federalism" and "significant concessions by Shia and Kurds" could lead to stability -- but the NIE's earlier section viewed both these events as unlikely. To put this in the realm of the current debate, President Bush's "surge" is designed to give political breathing room to events that the intelligence community formally judges as unrealistic:

...even if violence is diminished, given the current winner-take-all attitude and sectarian animosities infecting the political scene, Iraqi leaders will be hard pressed to achieve sustained political reconciliation in the time frame of this Estimate.

About Iran. This must have been one of the most controversial elements of the estimate: Iraq's neighbors are "not likely to be a major driver of violence or the prospects for stability because of the self-sustaining character of Iraq's internal sectarian dynamics."... [N]o matter how much Bush wants to lay the blame for the disintegration of Iraq on the meddlesome interference of Iran and Syria, the U.S.-sponsored political process itself -- indeed, the new, U.S.-midwifed Iraqi political order -- itself sows the seeds for the country's destruction. Apparently Bush could attack Iran to his heart's content, and Iraq would still remain inflamed.

Oh, and one final thought: this is just what's unclassified. If past NIEs are any prologue, what remains classified is much, much grimmer than what we see here. More likely than not, this is the most optimistic presentation of the NIE possible. Happy Friday.

Impeach George W. Bush. Impeach Him Now

Why oh why are we ruled by this loser?

Real Climate:: there are some curious patterns in the search engine. It turns out that it has been blocked from returning most results if the search phrase includes "global warming" - even if it's from the President himself. For instance, searching for "issue of global" gives as top result the President's Rose Garden speech in June 2001 on Global Climate Change, but searching for "issue of global warming" (which of course is the full phrase used) returns nothing...

Help Us, Fafnir! You Are Our Only Hope! We Need Your Pie Expertise!

Is a life without Fafblog worth living?

John & Belle Have A Blog: Fontana, agreed. I left the OED out of my first comment, expecting universal acclamation and thanks, but then everyone ignored me, and damn, you can't ignore a blogger. Posted by: ogged

How good that we agree. What's really sad about this whole thing is that we don't get 20-something comments on anything at that other blog and Belle does it with dessert. Posted by: FL

ogged you are crazy. Your definition would exclude not just the Boston cream pie and the Shepherd's pie but the noble and evertrue Pumpkin pie. If a pumpkin pie is not a pie, wellthen I do not want to live in a world with your cold mechanical robot pies! Posted by: fafnir

Fafnir is right. I do not eat pecan cake. Neither do I eat key lime cake. In a sane world, all cakes would be square and all pies would be round and we'd all join hands and raise songs of praise for our precise dessert categories. Bundt would be neither cake nor pie, but in a category with doughnuts. But the world is insane. And I have only been able to secure three and twenty blackbirds for my cake. Posted by: apostropher

A Money-Making Opportunity!

Ah. I think John Quiggin and I should try for the cash:

Scientists offered cash to dispute climate study | The Guardian | Guardian Unlimited: Scientists and economists have been offered $10,000 each by a lobby group funded by one of the world's largest oil companies to undermine a major climate change report due to be published today.Letters sent by the American Enterprise Institute (AEI), an ExxonMobil-funded thinktank with close links to the Bush administration, offered the payments for articles that emphasise the shortcomings of a report from the UN's Intergovernmental Panel on Climate Change (IPCC)....

The AEI has received more than $1.6m from ExxonMobil.... The letters, sent to scientists in Britain, the US and elsewhere, attack the UN's panel as "resistant to reasonable criticism and dissent and prone to summary conclusions that are poorly supported by the analytical work" and ask for essays that "thoughtfully explore the limitations of climate model outputs". Climate scientists described the move yesterday as an attempt to cast doubt over the "overwhelming scientific evidence" on global warming. "It's a desperate attempt by an organisation who wants to distort science for their own political aims," said David Viner of the Climatic Research Unit at the University of East Anglia. "The IPCC process is probably the most thorough and open review undertaken in any discipline. This undermines the confidence of the public in the scientific community and the ability of governments to take on sound scientific advice," he said.

The letters were sent by Kenneth Green, a visiting scholar at AEI....

The contents of the IPCC report have been an open secret since the Bush administration posted its draft copy on the internet in April. It says there is a 90% chance that human activity is warming the planet, and that global average temperatures will rise by another 1.5 to 5.8C this century, depending on emissions. Lord Rees of Ludlow, the president of the Royal Society, Britain's most prestigious scientific institute, said: "The IPCC is the world's leading authority on climate change and its latest report will provide a comprehensive picture of the latest scientific understanding on the issue. It is expected to stress, more convincingly than ever before, that our planet is already warming due to human actions, and that 'business as usual' would lead to unacceptable risks, underscoring the urgent need for concerted international action to reduce the worst impacts of climate change. However, yet again, there will be a vocal minority with their own agendas who will try to suggest otherwise...

Anyone have a .pdf of the letter?

Applied Utilitarianism: The Price of Oranges in Berkeley

The big frost that devastated the California citrus crop was two weeks ago, yet prices did not jump immediately. Only recently have the prices of boxes of small EZ-peel oranges at Trader Joe's risen, from $4.99 to $7.99 a box.

This tells us that such oranges are not storable--if they were, Trader Joe's would have kept them in the back until now, and so made an extra $3 a box. This also tells us that the memory of eating oranges is not storable either--it it were, consumers would have gorged themselves on oranges as soon as they realized they were going to be scarce this winter, and so saved themselves an extra $3 a box.

What other goods can you think of that are "nondurable," in the sense of neither being storable by producers or sufficiently memorable to consumers? What goods are "durable" in either of these senses.