From the monthly archives:

January 2005

It’s your money

by Ted on January 27, 2005

Something’s been bugging me about private accounts. Correct me where I’m wrong here.

It’s difficult for me to imagine that any version of Social Security private accounts would offer account holders complete flexibility with their assets. Managing and ensuring the safety of millions of small accounts will be expensive under the rosiest assumptions. The fees don’t have to look like Chile’s, but they’re going to be considerable[1]. It seems reasonable to assume that any sensible administration would limit costs by limiting investment options to a small number of funds, something like a 401K plan.

The most appropriate investment vehicle would be a broad-based index fund such as the Wilshire 5000, which invests in pretty much every public company in the US, weighted for market capitalization. Index funds have a history of better returns than actively managed funds, and the broad footprint of the investment would minimize market distortions from the impact of (eventually) trillions in new investments. Most importantly, it keeps the government out of the business of picking winners and losers. The temptation to misuse trillions of investment dollars for political leverage will be awesome. A blind investment strategy also minimizes the reciprocal pressure on businesses to scramble to please the current administration in order to get under the umbrella of investments in a managed SS fund.

As an investment strategy, this would work pretty well for most Americans. However, a mandatory savings program isn’t for most Americans, it’s for all Americans. Since it’s a forced program, administrators will have to answer the question, “Why is my money being taken out of my paycheck to support X?”[2]

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Conservative Cultural Engineering Again

by Henry Farrell on January 27, 2005

More on trade-unions as the Bush administration tries to “restrict collective bargaining”: at the Department of Homeland Security, and ask Congress “to grant all federal agencies similar authority to rewrite civil service rules governing their employees.”

bq. Yesterday, union leaders decried provisions that would curtail the power of labor unions by no longer requiring DHS officials to negotiate over such matters as where employees will be deployed, the type of work they will do and the equipment they will use. They also object to provisions that would limit the role of the independent Federal Labor Relations Authority and hand the job of settling labor-management disputes to an internal labor relations board controlled by the DHS secretary.

After going back and forth on this, I’m coming to the conclusion that this is of a piece with tort reform and the privatization of social security. They’re all part of a massive experiment in conservative cultural engineering, which aims to transform the Democratic party into a permanent minority by eviscerating the political power of its key constituencies (trade unions, trial lawyers) and transforming ordinary citizens into a new investing class. As I’ve “said before”:, I don’t think that this will work – but I’ve no doubt that the administration can do some serious damage to Democrats’ ability to raise funds, and (much more important) get volunteers out on the streets to canvas for votes. I’ve no doubt that the Democratic party could live without the trial lawyers – but if the administration succeeds in crippling unions, it will very seriously hamper Democrats’ ability to win back the Presidency and other offices in 2008. I suspect that many middle class bloggers simply don’t realize how important unions are in organizing and getting out the vote in the Midwest and elsewhere. As Sam Rosenfeld has “said”:, it’s frustrating that the Democratic leadership in the Senate isn’t saying anything about strengthening labour law – improving the bargaining position of unions is clearly in the long term organizational interests of the Democratic party.

Update: “Sam Rosenfeld”: has more to say on this story too.

Buy Generously (yet again)

by John Holbo on January 27, 2005

Good deal at Amazon. 43 volumes of original Twilight Zone DVDs on sale for $4.99 each. I recommend volume 2. It’s got Shatner as the salesman who sees the gremlin on the plane wing. Plus a post-apocalypse Burgess Meredith bookworm. Plus "The Monsters Are Due On Maple Street". Plus some other thing. Plus, on a more serious note, I’m still doing the thing where I advance my Amazon Associates proceeds to tsunami disaster relief, which is still needed. I’ve raised a little over $600 so far and am getting ready to cut another check. (The Singapore Red Cross wanted to raise S$1 million and they have raised S$48 million. I’m still hoping to hit US $1000 before the quarter ends.) If you haven’t just plain donated – say, to the American Red Cross – it’s still a very good time to do so. I’ll just stick another Amazon search box under the fold. If you were going to buy anyway, buy in a way that helps disaster victims. It makes sense.

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Pinochet’s private pensions

by John Q on January 27, 2005

For twenty-five years or so, the privatised pension scheme introduced in Chile under the Pinochet regime by his labour minister, Jose Pinera, has been touted as a model for the world to follow. It’s been particularly influential in the US debate over social security privatisation but has also had some influence in Australia, which has a somewhat similar setup, though we arrived at it by a different route – Chile scrapped its defined-benefit state pension scheme, keeping a basic safety net, Australia started with a means-tested flat-rate pension, but has tried to expand private superannuation since the 1980s

Now the New York Times reports that the Chilean scheme is not delivering the promised benefits . Lots of people are getting less than they would have under the old scheme and large numbers are falling back on the government safety net. Fees have chewed up as much as a third of contributions.

Why has this bad news taken so long to emerge. Complaints about fees have been around almost since the start, but right through the 1980s, they were ignored becuase investment returns were exceptionally high. This in turn reflects the fact that Pinera had the good luck or good judgement to start the scheme when the stock market was at an all-time low, thanks to a financial crisis (in retrospect the first of many cases where financial market darlings got into trouble). The economy recovered and the stock market boomed. Once gross returns fell back to normal levels, the bite taken out by fees became unbearable.

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by Kieran Healy on January 27, 2005

Kevin Drum “relays the bad news”: that high self-esteem is basically good for nothing in terms of tangible outcomes. These findings sound much like the literature on optimism and pessimism, which finds that optimists overvalue their abilities and blame others for their mistakes. People with sunny dispositions are a real menace to society. A solid Irish Catholic upbringing (or functional equivalent) is guaranteed to inoculate you against these problems for good. Where I grew up, people thought “self-esteem” was the Italian for “sauna”.[1]

fn1. I wish I could claim authorship of this joke. But I’d feel very guilty if I did.

More eggnog, less drowning

by Ted on January 26, 2005

I was just looking around Tim Lambert’s Deltoid in a slow moment, when I came across this priceless story from BoffoBlog about a presentation from “More Guns, Less Crime” author John Lott. In this episode, the hapless AEI scholar gave a presentation arguing that elections have become more expensive because of growth in big government:

His evidence consisted of a correlation between growth in federal spending and growth in campaign spending, and from that he concluded that Big Government caused expensive campaigns. Two lines trending upwards, and he claims with perfect seriousness — and without performing any of the necessary tests — that the one causes the other. When we pressed him on his analysis, not only had he not performed any appropriate tests, but he seemed wholly unfamiliar with the relevant econometrics literature…

It made for a very uncomfortable ninety minutes. Afterward, we agreed that it was the worst presentation any of us had ever seen at the workshop, worse than any first-year grad student’s. Then, when he gained his notoriety it did not surprise me in the slightest that his other research turned out to be as shoddy as it was. When he continued to get backing by organizations like AEI in spite of the astonishingly poor quality of his work, it only confirmed my impression that the “idea factory” of the right is less concerned about the quality of those ideas than whether it can make the most noise.

Value-Added League Tables

by Harry on January 26, 2005

A couple of weeks ago the DfES released its annual school league tables (don’t switch off, American readers, this matters to you). The tables have a new component: a ‘value added’ score, which is supposed to show not how well the children performed but how well the school taught them. The presentation of the league tables in the papers I saw stayed with the ‘raw score’ ranking, but included information about the ‘value-added’: presumably some papers did it the other way round.

The ‘value-added’ score is represented by a single number. This, in itself, makes it difficult to understand. The statisticians have devised a way of weighting vocational and academic achievements against each other, and any such weighting is going to be subject to dispute. The use of a single number also masks within-school inequalities: a school with a lousy Maths department can still get a good score if it has an excellent English department. But for an individual parent choosing a school this difference might matter a great deal: my own daughter’s writing and reading skills will develop fine if she is taught English by gibbons; her math and science skills need teaching by a good teacher.

There are also more technical reasons for being skeptical about the scores. Harvey Goldstein of the Institute of Education, the world’s expert on value-added evaluation of schools, has finally posted his commentary on the new tables, and it is (like all his commentaries) essential reading. The central problem, as I read it, is the issue of pupil mobility — we know that the extent of pupil mobility affects learning, but we don’t know how much, and furthermore we have no way of evaluating the extent to which schools themselves are responsible for pupil mobility. The DfES tables simply ignore the problem.

Why does this matter for Americans?

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A plucky gang of writing chums thwarts the plots of nefarious vanity publisher – and a few others besides. Plots, that is. It’s A Nest of Ninnies meets Carl Hiassen and John Grisham and they all drink each other under the table together. Here’s how it all happened. Here are links to supporting documentation. It’s "certain to resonate with an audience." A selection from chapter 2:

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HRW on the meatpacking industry

by Henry Farrell on January 25, 2005

There was a minor kerfuffle among left-bloggers a couple of days ago about the dearth of blogging on trade union issues. “Nathan Newman”: suggested that it reflected the lack of interest of middle class liberals in trade unions. This is part of the story but only part. I suspect that the lack of media coverage of union issues, or, sometimes, of “good information from the unions themselves”:, are equally important in explaining why people don’t blog on this as much as they should. Bloggers tend to rely on their morning newspapers to find out about the world – when those newspapers don’t cover union issues, bloggers are unlikely to focus on them. Which is why I hope that this recent NYT “story”: describing a Human Rights Watch report on the US meatpacking industry gets the attention that it deserves from lefties, and indeed from “union-friendly conservatives”:

bq. The report also concluded that packing companies violated human and labor rights by suppressing their employees’ efforts to organize by, for example, often firing employees who support a union. The report asserted that slaughterhouse and packing plants also flouted international rules by taking advantage of workers’ immigration status – in some plants two-thirds of the workers are illegal immigrants – to subject them to inferior treatment.

Original Human Rights Watch report available “here”: (interested readers should also check out Eric Schlosser’s Fast Food Nation, which has a trenchant and detailed discussion of how meatpacking firms abuse immigrants).

Update: “Nathan Newman”: suggests that bloggers should sign up for email updates from “American Rights at Work”:, an organization which I hadn’t heard of, but which seems to be doing excellent work on union-related issues.

Lessig on the limits of copyright

by John Q on January 25, 2005

This is my second report on last week’s Creative Commons conference. Lessig’s closing lecture was given in the Banco court of the Queensland Supreme Court (very plush – those lawyers don’t stint themselves) and was focused on traditional copyright issues . For Brisbane readers, an interesting titbit was that we haven’t seen OUTFOXED: Rupert Murdoch’s War on Journalism because neither the Courier-Mail nor the national daily, the Australian, (both Murdoch-owned) would carry more than minimal ads for it. One of the costs of being in a one-newspaper town.

The main point of the lecture was a historical survey of the relentless extension of copyright, along with some discussions of a failed attempt to stop this in the case of Eldred vs Ashcroft. This case is notable for the fact that, as has happened before, the economics profession almost unanimously supported the losing side. As Lessig argued, copyright has been extended in length, scope and force to the extent that nowadays virtually everything is copyright, virtually forever.

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The Case for Medical Paternalism

by Henry Farrell on January 25, 2005

Matt Yglesias “mentioned”: a few days ago that he didn’t see anything that was morally wrong with paternalism, with the implication that paternalist policies ought to be evaluated on purely pragmatic grounds. The Washington Post has an interesting “test case”: today for those who might disagree with him. It describes how “aggressive direct-to-consumer advertising campaigns” for Celebrex and Vioxx persuaded consumers to take these drugs, even though they would predictably have been better off if they had taken other non-prescription drugs instead. As the article says, the US is highly unusual in allowing direct-to-consumer marketing of drugs – Western European countries typically only allow these drugs to be marketed to doctors through specialist publications etc.

None of this is to say that the European system is perfect – drug companies pour an awful lot of money into “seminars” in nice places, golf excursions etc where they try to persuade doctors to prescribe their drugs. But there is a strong pragmatic case to be made that doctors are going to be better informed as a rule than their patients over the benefits and drawbacks of particular courses of treatment (otherwise why use them in the first place?). Thus, they’ll be better able, most of the time, to figure out when pharmaceutical companies are trying to con them into prescribing expensive and potentially dangerous medications where off-the-shelf drugs would work as well or better. Of course, this is not to say that consumers shouldn’t be able to get their hands on relevant information (doctors aren’t infallible) – but it’s surely a bit of a stretch to argue that aggressive TV advertising campaigns provide such information. Thus, I’m pretty well convinced of the case for banning direct marketing of drugs to consumers – it’s a relatively mild form of paternalism, which seems to me to have quite substantial payoffs. Any dissenters out there?

Update: via “Bill Gardner”:, I see that “James Surowiecki”: is similarly critical of the marketing of Vioxx:

bq. But companies like Merck, which spend hundreds of millions on ads targeting consumers, have themselves to blame, too. Instead of getting people to think about drugs in terms of costs and benefits, these ads encourage people to think of medicine in the same way they think of other consumer goods. It would be one thing if Merck had marketed Vioxx only to people who really needed it—people who couldn’t take ibuprofen or aspirin safely. Instead, the company marketed it aggressively to everyone, so that some twenty million Americans had Vioxx prescriptions. That’s why the potential damages against Merck are so vast. If juries have a hard time accepting a risk-benefit trade-off when it comes to drugs, it’s in part because the drug companies have convinced them that no such trade-off has to be made.

Yeats, Higgins, Healy

by Ted on January 25, 2005

Imagine my delight last night when I opened my copy of Wired to find a “From the Blogs” column featuring a charming excerpt from Crooked Timber’s own Kieran Healy. (No, seriously- imagine it.)

As a Freeper hates a Camembert slice
And an OxBlogger hates a dove
As CalPundit hates a rainy day
That’s how much you I love.

Whole poem here, and many congratulations to Kieran. Now, there are some who would wonder how it happened that Wired would come to publish a short blog excerpt that’s two years old. Not me, though; I’m still waiting for my close-up…

Of Mice and Men

by Kieran Healy on January 24, 2005

“Carl Zimmer”: has a good discussion of the discovery that the embryonic stem-cell lines approved by the Bush administration appear to be “contaminated”: with sugars from the substrate they were originally grown in. He has a nice angle on whether the Intelligent Design types who disagree with stem cell research will try to rely on the paper describing the discovery, which demonstrates the problem with the the cell lines by drawing on evidence about molecular evolution.

The centrality of coffee

by John Q on January 23, 2005

Tony Judt illustrating the centrality of coffee as a metaphor (or maybe synecdoche) for civilisation. (thanks to Glenn Condell for the link)

Paul Feyerabend punks Francis Wheen

by Henry Farrell on January 23, 2005

I’ve been reading Francis Wheen’s How Mumbo-Jumbo Conquered The World, which is one of the most profoundly annoying books that I’ve read in the last few years. There’s nothing more frustrating than to read a book by someone who shares several of your pet aversions (trickle down economics, Deepak Chopra, obscurantist literary theory), but who isn’t bright enough to say anything interesting or non-trivial about them. It’s a rambling, shallow book which aspires to, and occasionally even attains, the intellectual level of a middling Sunday-supplement broadside.

There’s one unintentionally hilarious bit, where Wheen vigorously excoriates literary theorists for having been taken in by the “Sokal hoax”: and then goes on a few pages later to deliver an extended harrumph attacking Paul Feyerabend’s Against Method. Wheen cites a passage where Feyerabend attacks the teaching of science in schools as a form of tyranny (in Wheen’s reading, Feyerabend is saying that we shouldn’t be teaching children that the earth moves around the sun; we should be teaching them that _some people believe_ that the earth moves around the sun). What makes this delicious is that Wheen, like the literary theorists whom he’s been fulminating against a few pages previously, has been taken in by a provocation. If he’d bothered to read the preface of _Against Method_ properly, he’d know that Feyerabend is deliberately and consciously putting forward as outrageous a set of examples as he can in support of a serious argument. The essay was originally planned as one half of a twofer, in which Imre Lakatos would try to top Feyerabend with an equally vigorous set of arguments on behalf of a somewhat more orthodox account of the sources of scientific progress. Sadly, Lakatos died before the project could be completed. Unlike the postmodernists (Irigaray, Kristeva) whom Wheen lumps him in with, Feyerabend was a trained scientist who knew what he was talking about, and was engaged in a very serious debate about the scientific method and its merits as a process of generating new discoveries. As an aside, Feyerabend also wrote one of the most entertaining autobiographies, Killing Time that I’ve ever read.