WTF Are the Police on the Other Side of Missouri Doing?: Live from The Roasterie CCCXIV: August 22, 2014
Liveblogging World War II: August 22, 1944: A Photographer’s Story

#FF: The Best of Daniel Davies: Over at Equitable Growth: Friday Focus for August 22, 2014

NewImageOver at Equitable Growth: Robin: Stock and flow: "Flow is the feed...

...It’s the posts and the tweets. It’s the stream of daily and sub-daily updates that remind people that you exist. Stock is the durable stuff. It’s the content you produce that’s as interesting in two months (or two years) as it is today. It’s what people discover via search. It’s what spreads slowly but surely, building fans over time. I feel like flow is ascendant... but we neglect stock at our own peril...

A Baker's Dozen of keepers for the stock from the excellent but (and?) highly irascible Daniel Davies... READ MOAR

...of D-Squared Digest and Crooked Timber:

  1. The D-Squared Digest One Minute MBA
  2. New Ideas From Dead Political Systems
  3. Choose Your Own Greek Default Adventure
  4. Is there a general skill of “management”?
  5. Learned helplessness, strategic victimhood and… the Democrats
  6. The future of monetary economics
  7. The tribute that vice pays to virtue
  8. No Riff-Raff
  9. Globollocks, v2.0
  10. Rules for Contrarians: 1. Don’t whine. That is all
  11. You Can't Have a Modern Industrial Economy If You Have to Stage a Wife-Swapping Party Everytime You Want to Buy a Blanket...
  12. I tell this anecdote every time...
  13. This is such a big heap of partisan rightwing bulls--- that there must be a pony in there somewhere!

Daniel Davies: The D-Squared Digest One Minute MBA - Avoiding Projects Pursued By Morons 101: "Literally people have been asking me...

..."How is it that you were so amazingly prescient about Iraq? Why is it that you were right about everything at precisely the same moment when we were wrong?" No honestly, they have. I'd love to show you the emails I've received, there were dozens of them, honest. Honest.

Anyway, I note that "errors of prewar planning" is now pretty much a mainstream stylised fact, so I suspect that it might make some small contribution to the commonweal if I were to explain how it was that I was able to spot so early that this dog wasn't going to hunt. I will struggle manfully with the savage burden of boasting, self-aggrandisement and ego-stroking that this will necessarily involve. It's been done before, although admittedly by a madman in the process of dying of syphilis of the brain. Sorry, where was I?

Anyway, the secret to every analysis I've ever done of contemporary politics has been, more or less, my expensive business school education (I would write a book entitled "Everything I Know I Learned At A Very Expensive University", but I doubt it would sell). About half of what they say about business schools and their graduates is probably true, and they do often feel like the most collossal waste of time and money, but they occasionally teach you the odd thing which is very useful indeed. Here's a few of the ones I learned which I considered relevant to judging the advisability of the Second Iraq War.

Good ideas do not need lots of lies told about them in order to gain public acceptance: I was first made aware of this during an accounting class. We were discussing the subject of accounting for stock options at technology companies. There was a live debate on this subject at the time. One side (mainly technology companies and their lobbyists) held that stock option grants should not be treated as an expense on public policy grounds; treating them as an expense would discourage companies from granting them, and stock options were a vital compensation tool that incentivised performance, rewarded dynamism and innovation and created vast amounts of value for America and the world. The other side (mainly people like Warren Buffet) held that stock options looked awfully like a massive blag carried out my management at the expense of shareholders, and that the proper place to record such blags was the P&L account.

Our lecturer, in summing up the debate, made the not unreasonable point that if stock options really were a fantastic tool which unleashed the creative power in every employee, everyone would want to expense as many of them as possible, the better to boast about how innovative, empowered and fantastic they were. Since the tech companies' point of view appeared to be that if they were ever forced to account honestly for their option grants, they would quickly stop making them, this offered decent prima facie evidence that they weren't, really, all that fantastic.

Application to Iraq: The general principle that good ideas are not usually associated with lying like a rug1 about their true nature seems to have been pretty well confirmed. In particular, however, this principle sheds light on the now quite popular claim that "WMDs were only part of the story; the real priority was to liberate the Iraqis, which is something that every decent person would support".

Fibbers' forecasts are worthless: Case after miserable case after bloody case we went through, I tell you, all of which had this moral. Not only that people who want a project will tend to make innacurate projections about the possible outcomes of that project, but about the futility of attempts to "shade" downward a fundamentally dishonest set of predictions. If you have doubts about the integrity of a forecaster, you can't use their forecasts at all. Not even as a "starting point". By the way, I would just love to get hold of a few of the quantitative numbers from documents prepared to support the war and give them a quick run through Benford's Law.

Application to Iraq: This was how I decided that it was worth staking a bit of credibility on the strong claim that absolutely no material WMD capacity would be found, rather than "some" or "some but not enough to justify a war" or even "some derisory but not immaterial capacity, like a few mobile biological weapons labs". My reasoning was that Powell, Bush, Straw, etc, were clearly making false claims and therefore ought to be discounted completely, and that there were actually very few people who knew a bit about Iraq but were not fatally compromised in this manner who were making the WMD claim. Meanwhile, there were people like Scott Ritter and Andrew Wilkie who, whatever other faults they might or might not have had, did not appear to have told any provable lies on this subject and were therefore not compromised.

The Vital Importance of Audit: Emphasised over and over again. Brealey and Myers has a section on this, in which they remind callow students that like backing-up one's computer files, this is a lesson that everyone seems to have to learn the hard way. Basically, it's been shown time and again and again; companies which do not audit completed projects in order to see how accurate the original projections were, tend to get exactly the forecasts and projects that they deserve. Companies which have a culture where there are no consequences for making dishonest forecasts, get the projects they deserve. Companies which allocate blank cheques to management teams with a proven record of failure and mendacity, get what they deserve.

I hope I don't have to spell out the implications of this one for Iraq: Krugman has gone on and on about this, seemingly with some small effect these days. The raspberry road that led to Abu Ghraib was paved with bland assumptions that people who had repeatedly proved their untrustworthiness, could be trusted. There is much made by people who long for the days of their fourth form debating society about the fallacy of "argumentum ad hominem". There is, as I have mentioned in the past, no fancy Latin term for the fallacy of "giving known liars the benefit of the doubt", but it is in my view a much greater source of avoidable error in the world. Audit is meant to protect us from this, which is why audit is so important.

And so the lesson ends. Next week, perhaps, a few reflections on why it is that people don't support the neoconservative project to bring democracy to the Middle East (a trailer for those who can't wait; the title is going to be something like "If You Tell Lies A Lot, You Tend To Get A Reputation As A Liar"). Mind how you go.

1 We also learned in accounting class that the difference between "making a definite single false claim with provable intent to deceive" and "creating a very false impression and allowing it to remain without correcting it" is not one that you should rely upon to keep you out of jail. Even if your motives are noble.

Daniel Davies: This is such a big heap of partisan right-wing bullshit that there must be a pony in there somewhere! "Just before this slips down the grating...

...Brad DeLong waves the waggy finger of disapproval at anyone who slurs Milton Friedman's name by suggesting that the US PATRIOT Act is of a piece with the shmibertarian tendency to turn a blind eye to authoritarianism as long as it cuts the rate of capital gains tax.

One would imagine from this that Milton Friedman approved of the Un-Patriot Act--which he most definitely did not. Unlike Hayek, Friedman believed in individual liberty and autonomy first, and order and hierarchy second if at all.

tsk those liberals and their always poisoning the debate! Why can't they leave principled old Uncle Milton alone. But hang on ... what did Friedman actually say about the US PATRIOT Act?

DA: In a time of war, how do we maintain our freedom?

MF: We don’t. We invariably reduce our freedom. But that doesn’t mean it’s a permanent reduction. As long as we really keep in mind what we’re doing, that we keep it temporary, we need not destroy our freedom.

DA: Are you concerned that some of the measures we’re taking now to fight the war, like the Patriot Act, may be more than just temporary?

MF: It’s not clear. The Patriot Act is a very complicated issue, and I’m not going to get involved in that. But I think that on the whole, this war is small enough relative to our economy that it is not going to be a serious impediment to our freedom. But the sooner we can get rid of it and out of it, the better.

DA: Do you agree with President Bush that the actions in Iraq were necessary as a part of our war on terrorism?

MF: I think you can argue either side of that. Where I do feel strongly, is that having gone into it, whether we should have or not, we must see it through.

DA: Even if it costs some of our freedoms?

MF: There’s no way to avoid a burden on your freedom. The costs themselves are a burden on your freedom. The restrictions that are necessary in order to get rid of the terrorists are a burden to your freedom. So there’s no way in the short run to avoid a restriction on your freedom. But if we’re going to avoid a permanent reduction in freedom, we have to see this war through

In other words, he was in fact for it, and if that bit about "the sooner we get rid of it, the better" fooled you, then I've got a second hand bridge k% monetary policy rule for you to buy.

They're always hacks, Brad. Always. Yes, even Milton Friedman. The more independent-minded ones will occasionally come up with a liberalish or fair-minded idea or two, but this is purely for display, not for ever doing anything about if to do so would run the risk of a higher rate of capital gains tax. The ideological core of Chicago-style libertarianism has two planks:

  1. Vote Republican.
  2. That's it.

Why are American liberals so damnably obsessed with extending intellectual charity to right wing hacks which is never reciprocated? It reaches parodic form in the case of those tiresome "centrists" who left wing American bloggers are always playing the Lucy-holds-the-football game with. Oh, but their politics are sooo centrist! They're practically 50% of the way between Republicans and Democrats! Yeah, specifically they're right-wing Democrats in non-election years and party line Republicans any time it might conceivably matter (note that here, two years after the White House ceremony at which Friedman apparently "spent most of his 90th birthday lunch telling Bush that his fiscal policy was a disaster", here he is signing a letter in support of more of the same).

I wouldn't mind, but it's clearly not intellectual honesty that makes American liberals act pretend that Milton Friedman wasn't a party line Republican hack (which he was; he was also an excellent economist, which is why he won the Nobel Prize for Economics, not the Nobel Prize for Making A Sincere and Productive Contribution To The National Political Debate, which he would not have won if there was one). If it was just pure scholarly decency that made Yank liberals so keen on recognising the good qualities even in their political opponents, then you'd expect that they would also be quick to recognise the good qualities, analytical insights and so on in prominent Communist intellectuals. And do they? Do they fuck. I won't link to the Paul Sweezy obituary, because I think everyone involved agrees that this wasn't Brad's finest hour, but it certainly wasn't atypical.

Of course the explanation's quite sensible. American liberals kiss up to Friedmanites and kick down on Reds because they're still, twenty years after the fall of the Berlin Wall, scared of being red-baited. One of the enduring reasons why I regard JK Galbraith as a hero is that practically alone among mainstream commentators of the era, he by and large refused to play this game.

Daniel Davies: Learned helplessness, strategic victimhood and… the Democrats:" Recall: Obama’s whole strategy was based around abandoning all other priorities such as carbon tax... effective stimulus bill, half his nominations, most of the financial sector reforms and so forth, all to concentrate on passing health care. And he only got about half of that – the version passed was something he’d specifically camapigned against as not being anything like radical enough. So given that, how are we to suppose that President Romney would be able to push through an agenda five times as radical, including the ultimate third-rail issue of abortion? You would have to believe that under a Democratic administration Congress is a sclerotic, obstructionist institution which prevents all possibility of effective government, but as soon as the Republicans get in it becomes a streamlined ideological machine.

Which is in fact not far from what’s being argued here and it’s really quite frightening. Part of the case for persuading people to vote to keep the Democrats in government is that they’re so terrible at being in opposition. Specifically, their very weakness and incompetence in carrying out the business of politics is being used as an electoral asset. That’s not a cool rhetorical ju-jitsu move; it’s nightmarish. Similarly, the case has been advanced that the time for the liberal wing of the Democrats to express their opinions is at the primary stage, but there wasn’t a primary this time – the economy was so weak and the administration so unpopular that nobody wanted to risk weakening the candidate further.

This is the problem with lesser-evilism – it’s very vulnerable to strategic behaviour. If all you care about is the gap between parties, you can increase it either by making your own party more attractive to vote for, or by making the other side look even worse (either by strategically weakening your ability to resist them, or by being somewhat adventurous in your claims). This is really just a specific case of Henry’s general point that in the long term, one is unlikely to change the behaviour of any self-aware entity by constantly rewarding it for going on in the same way.

NewImageDaniel Davies: The future of monetary economics: "I think we can all agree that things will go better...

...if all currently working monetary economists stop teaching their models to undergraduates and instead adopt my modelling approach: 1. A bank is a box, with "BANK" written on it. 2. A central bank is a box with a pitched roof and lines on the front representing the fascia of the Bank of England. 3. The household sector is a stick man. 4. The industrial sector is a box with a sawtooth roof. 5. Long term savings are a stick figure with a top hat. With these basic concepts, plus sufficient scribbled arrows, more or less any problem in monetary economics can be solved, up to the level of accuracy of any other model. You can even do international monetary economics by drawing circles round one monetary system and scribbling somewhat larger arrows in and out of the circle.


Update! Lots and lots of consensus building on this one and I may yet win that Nobel Prize after all. Two big points of controversy - 1) does the box representing a bank really need "BANK" written on it? and 2) shouldn't the industrial sector also have a chimney? I think that's enough of a debate to keep the journal publishers in business. Update! Brad DeLong shows us how it's done. Note that in this version of the model, bonds are a perfect substitute for money, hence the absence of a stick figure with a top hat. Update! Eric Rauchway provides historical context, in a sectoral model which has three types of industry (chimney + sawtooth roof, chimney but no sawtooth roof, stylised steel mill) and an extractive sector. That's clearly Sraffian. Update A more substantial objection in BdeL comments - we haven't got a government sector or fiscal policy in this model. I tend to draw the government as a big bag of money, but frankly this isn't satisfactory as it is tends to result in people pointing and saying "what's that? it looks like a balloon with a pound sign on it". If anyone has a bright graduate student and some crayons, I think this could make a good dissertation topic.

Daniel Davies: Is there a general skill of “management”?: "There probably is...

...In his very definition, Blackburn pretty much gives it away; he says that “[the myth of management] claims that people can be managed like warehouses and airports”. What does this even mean? How do you manage a warehouse or an airport if it’s impossible to manage people? If he had said “like machines” or even “like factories”, then it might have been comprehensible, but a warehouse which doesn’t have any people working in it is just a shed full of stuff and doesn’t require any management.... And an airport without people is just a warehouse for planes. Warehousing and transport are two very labour-intensive industries.

There are two possibilities here. One is merely that Blackburn is a snob.... But to assume this would be wildly uncharitable. The other... explanation is that Blackburn has no idea whatsoever about what managing a warehouse or an airport would entail and no real interest in finding out....

The kernel of my argument for the existence of a general skill of management is that it is pretty obvious that there is a general deficit or “negative skill” of mismanagement.... The general skill of management has two basic components – administration and leadership....

The ability to keep track of and prioritise detail.... People through the ages have come up with a number of technologies to extend the human ability to administrate, such as alphabetical filing systems, double-entry accounts, activity reports and so on; the majority of the structures in Fred Brooks’ book fall into this category too. The majority of the skill of organisation is having the mastery of these tools and the self-discipline to use them consistently. The first is what they teach you in business schools; the second sounds more like an innate ability, but I would guess that it too can be taught....

A species of emotional intelligence; some people are better applied psychologists than others....

Of course, the fact that there’s a general skill of management doesn’t mean that everything can be managed, any more than the fact that there’s a general attribute of strength means that everything can be lifted.... Nor does it necessarily mean that there is a caste of individuals who can be dropped into managerial roles in any organisation and immediately start managing successfully.... On the other hand, it does suggest that if you have a management problem, there is some sense in asking someone who’s really good at management if they have some advice about it.... What it does mean is that the fundamental attribution error is not always an error in this context.... There really is a right way and a wrong way to run a warehouse.

Daniel Davies: The tribute that vice pays to virtue: "[T]he single most sensible thing said in political philosophy in the twentieth century...

...was JK Galbraith's aphorism that the quest of conservative thought throughout the ages has been "the search for a higher moral justification for selfishness".

  1. Some rightwingers are not hypocrites because they admit that their basic moral principle is "what I have, I keep".

  2. Some rightwingers are hypocrites because they pretend that "what I have, I keep" is always and everywhere the best way to express a general unparticularised love for all sentient things.

  3. Then there are the tricky cases where the rightwingers happen to be on the right side because we haven't yet discovered a better form of social organisation than private property for solving several important classes of optimisation problems...

Daniel Davies: No Riff-Raff: "Entering into the Brad DeLong Eat The Rich Controversy...

...I offer this observation:

If it is not the case "that the rich are spiteful--that they enjoy the envy of the poor", then why is the word "exclusive" so popular in the marketing material for hotels, nightclubs, holiday resorts and residential property developments. "Exclusive" is probably these days an advertising man's synonym for "nice", but it also has a clear and specific literal meaning. It means that the hotel, nightclub, resort etc is providing a bundled service; partly, the provision of a normal hotel or nightclub, and partly the service of excluding a segment of the population from that service. One pays extra to go to a health club whose swimming pool is not polluted by the greasy, hairy polloi.

The reason that this service is valuable is that those who consume it get utility from a) dividing society into two groups, rich and poor, b) creating institutions which physically and socially segregate these two groups and c) them being in the "rich" group. Nobody would apply for membership of Bouji's or the Bucks if it was just a matter of waiting your turn and paying your fee. This would completely defeat the point of the exercise and destroy the value proposition. The point is that in order to attract a better class of customer, you have to keep the riff-raff out. Basil Fawlty understood this; why doesn't the blogosphere?

Daniel Davies: Rules for Contrarians: 1. Don’t whine. That is all: "I know a little bit about contrarianism...

...So I’m disturbed to see that people who are making roughly infinity more money than me out of the practice aren’t sticking to the unwritten rules of the game. Viz Nathan Mhyrvold:

Once people with a strong political or ideological bent latch onto an issue, it becomes hard to have a reasonable discussion; once you’re in a political mode, the focus in the discussion changes. Everything becomes an attempt to protect territory. Evidence and logic becomes secondary, used when advantageous and discarded when expedient. What should be a rational debate becomes a personal and venal brawl....

The whole idea of contrarianism is that you’re “attacking the conventional wisdom”, you’re “telling people that their most cherished beliefs are wrong”, you’re “turning the world upside down”. In other words, you’re setting out to annoy people. Now opinions may differ on whether this is a laudable thing to do – I think it’s fantastic – but if annoying people is what you’re trying to do, then you can hardly complain when annoying people is what you actually do.... If Superfreakonomics wanted a calm and rational debate, this chapter would have been called something like: "Geoengineering: Issues in Relative Cost Estimation of SO2 Shielding", and the book would have sold about five copies.

Viz also, Stephen Dubner:

They have given the impression that we are global-warming deniers of the worst sort, and that our analysis of the issue is ideological and unscientific. Most gravely, we stand accused of misrepresenting the views of one of the most respected climate scientists on the scene, whom we interviewed extensively. If everything they said was actually true, it would indeed be a damning indictment. But it’s not....

The other point of contrarianism is... you assemble... points which are individually uncontroversial... and put them together to support a conclusion which is surprising and counterintuitive.... [T]he aim of the thing is the overall impression you give.... [T]he entire point is to make a defensible argument which strongly resembles a controversial one.

So... you don’t get to complain that people have “misinterpreted” your piece by taking you to be saying exactly what you carefully constructed the argument to look like you were saying. Fair enough, you might not care to defend the controversial point it looked like you were making, but a degree of diffidence is appropriate here, because the confusion is entirely and intentionally your fault:

(That is the “global cooling” in our subtitle. If someone interprets our brief mention of the global-cooling scare of the 1970’s as an assertion of “a scientific consensus that the planet was cooling,” that feels like a willful misreading.)

No it doesn’t; it feels like someone read the first two pages for the plain meaning of the words and didn’t spot that you were actually playing a little crossword-puzzle game where the answer was “consensus”. In general, whatever “global cooling” meant, it was put on the cover in full knowledge of the impression it would give to a normal reader so once more, it is not legitimate to complain that this phrase was interpreted in the way in which it was intended to be interpreted.

In general, contrarians ought to have thick skins, because their entire raison d’etre is the giving of intellectual offence to others. So don’t whine, for heaven’s sake. Own your bulls--

Daniel Davies: New Ideas From Dead Political Systems: "I occasionally pitched an idea...

...“Great Ideas From Failed Companies”, the idea being that when you have the perspective of the entire history of a corporate story, you’re probably going to get a more honest appraisal of its strengths and weaknesses, and that although companies like Enron, Northern Rock and Atari clearly had major problems, they quite likely also had some good points too, or how did they ever get so big in the first place?

Obviously, carrying out a similar exercise on failed social and political systems is a bit of a minefield, since most social and political systems which have been tried and failed have tended to take down a hell of a lot of innocent lives with them as they did so. I don’t think anyone but the most studiedly mindless (and tasteless) contrarian would bother to ask the question “but what did the Nazis get right?” at any great length. But there’s always a temptation to do so with Soviet communism. It killed quite a lot more people than Nazism but (for the most part, and after the 1920s) in a less obviously criminally insane way, and as a system it does have the characteristic that lots of people and countries at various times did want to have a go at it....

“Red Plenty” isn’t, or at least not directly, a book about the Fifties, Gargarin and the years of 7% growth.... By the time the action gets going... the dream is basically over. Some of the characters seem to realize this and some don’t; as always the economists are the most romantic and least realistic of characters.... Elsewhere... people cheat and swindle, do what they must do to survive, and often fail and get crushed by the system, in a terribly realistic and human way which is all the more elegiac because we know how it all turned out. I’m fascinated (as in the Greece choose-your-own-adventure post we ran a while back) with this approach to history.... It makes me wonder what a sort of prequel to Red Plenty which did actually deal with the go-go-Gargarin years would be like....

The novelistic first-person-shooter approach to history is so potentially powerful that you have to be careful about the sort of character and system you’re humanizing, and the sad truth of Soviet communism is that the only honest way to write about the “Fifties dream” is in a way which makes it clear it was a great big lie, and that the only lesson from that system is not to do that again.... The Soviet economy grew because of the vast increase in resources thrown at it.... There never could have been a golden future of plenitude and consumption just the other side of the hill, because the economic growth and the repression of domestic consumption were the same thing. It was all a con game.... I don’t think that there are any really great ideas to be learned from the Soviet system, and “Red Plenty” is basically correct in finding the whole thing to be similar to one of those rather depressing Russian fairy tales in which the moral is “try not to be an idiot all your life”. A better world is, and was, possible – but this wasn’t it...

Daniel Davies: I tell this anecdote every time the subject comes up on CT, but it’s true... I will repeat it again. In a career as a stockbroker, I have met:

  1. A Japanese person who reads the Economist every week to find out about the USA and Europe, ignoring the Asian coverage.

  2. An American who reads it to keep up with the overseas news, although of course the US coverage is a bit crazy.

  3. Numerous Europeans who read it because the American coverage is great, but you have to ignore every word they write about Europe.

Personally, I used to read it a very long time ago, while ignoring the awful c--- they wrote about Britain and about economics...

Daniel Davies: You Can't Have a Modern Industrial Economy If You Have to Stage a Wife-Swapping Party Everytime You Want to Buy a Blanket... "Too Big To Fail: The First 5000 Years...

...It’s also notable that actually over the years, debt (by which I mean, the commercial and mercantile kind of debt) has worked noticeably better than most of the alternatives. The dzamalag ceremonies described in the book… certainly have some attractive qualities, but although Graeber wins the battle against the “Myth of Barter” here I think he loses the war – really, although the discussion of socially embedded exchange is incredibly interesting and illuminating, I think anyone who reads the passage above is going to end up sympathising with the people in the economics department who say that you really can’t organise a modern industrial society on the basis of organising a wife-swapping party every time you want to buy a blanket.

Perhaps the fact from the book that will end up resisting the longest against the onslaughts of late nights and Scotch whisky on my ability to recall, is that more or less every urban society in the world has ended up inventing an equivalent phrase to “Please”, and “Thank you”, terms which have the social function of asserting between parties to a commercial transaction that the transaction itself does not embed them in any deeper social relation….

[T]the debt contract is basically a tool of industrial organisation that escaped from the laboratory and ran wild. But I think [Graeber] understimates the extent to which there have always been domesticating influences on the concept, and the extent to which the debt relation has always been, correctly, the subject of revision and reappraisal, with the basic underlying question being that of economics rather than anthropology – “How do we best organise the decision making process with regard to production, consumption, and exchange?”…