From the monthly archives:

March 2008

Riddles Wrapped in Mysteries Inside Enigmas

by Bruce Carruthers on March 31, 2008

In the greatest sea battle of World War I, British Admiral David Beatty watched with uncomprehending dismay as his battlecruisers got blown out of the water, and famously remarked that: “… there seems to be something wrong with our bloody ships today.” Ninety years after Jutland, there seems to be something wrong with our bloody financial system. A big reputable investment bank like Bear, Stearns wasn’t supposed to get into such trouble that it had to be bailed out by the Federal Reserve before it blew up. One of the legacies of the last systemic American financial crisis, in the 1930s, was a regulatory system intended to ensure greater transparency for investors, some measure of confidence for bank depositors, and prudential requirements for financial institutions. Recent events suggest that this system is no longer adequate to the task. The savings-and-loan crisis of the 1980s could have slowed down the push to deregulate, but in the 1990s the Asian Financial Crisis provided a moment for self-congratulatory triumphalism about the superiority of Anglo-Saxon finance and the perils of crony capitalism. With rigorous accounting standards, regulatory oversight, and a quantitatively-based credit culture that kept lenders honest, surely the U.S. wouldn’t be vulnerable to the real estate bubbles that plagued Indonesian, Thai and South Korean banks. Or so we fervently hoped. Thus, financial deregulation and innovation proceeded apace. Today’s sub-prime mortgage crisis wasn’t supposed to happen, and now investors are haunted by the fear that financial portfolios are filled with near-worthless paper. And the baleful effects of the credit crunch are now felt widely by both individuals and firms.
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CT Guestblogger: Bruce Carruthers

by Henry on March 31, 2008

This post is to announce that “Bruce Carruthers”:http://www.sociology.northwestern.edu/faculty/carruthers/home.html has very kindly agreed to join _Crooked Timber_ as a guestblogger for a week. Bruce is professor of sociology at Northwestern; while both Eszter and Kieran have known him for a while, I first got to know him at a Russell Sage workshop last May, where he presented some of his work on risk and financial markets. I was fascinated by the paper that he gave – it looked at the different ways in which US financial markets have tried to deal with uncertainty over the last century – and more to the point, it turned out to be in some respects prophetic of the kinds of trouble that US financial markets are finding themselves in today. Bruce will be posting on whatever he wants as do all our guest bloggers, but I imagine that he’ll have a lot to say about the current situation of markets, how we got to where we are, and, perhaps, where it is likely to end up.

Peace offers are for losers

by John Quiggin on March 31, 2008

The pro-war blogosphere is full of the news of Sadr’s defeat in the battle for Basra, manifested in his call for a truce, an end to government raids and the release of all prisoners. Here’s a roundup of the links from Glenn Reynolds. Reynolds, who has chronicled Sadr’s decline into irrelevance from 2004 to the present, is a bit more circumspect than he has been in the past, saying “it’s likely a blink, not a major defeat.”, but most of the bloggers he links to are unrestrained in their triumph.

Among the points I’ve picked up, illustrating the magnitude of the victory

* The number of Iraqi police and military who have defected to Sadr has been much exaggerated, and most of them were bad lots anyway

* The body count ratio looks really good

* Attacks on the Green Zone are a desperate fling, easily countered by staying indoors and wearing full body armor at all times

* The proportion of Basra controlled by the Mehdi Army has not increased much since the conflict began

* The proportion of Basra controlled by militias and criminal gangs (approximately 100 per cent) has not increased at all since the conflict began

* Much of the ground lost by the government elsewhere in Iraq in the first few days of the conflict has been recaptured

* The fact that the purported basis of the government’s action (an attack on criminal elements peripherally associated with various militias), endorsed by the US, is a transparent fiction, covering an attempt by one set of militias to weaken another, hasn’t worried anyone too much

* Allowing for the necessity of air attacks on densely populated areas, civilian casualties have been modest, ensuring that the popularity of the US and British forces will increase still further

* Maliki is still in Basra, proving the failure of Sadr’s attempts to oust him

But the crucial point underlying all of the argument is, that, simply by offering a truce, Sadr has proved he isn’t winning. After all, peace offers are for losers.

I’m just back from a trip to the American Society for Eighteenth-Century Studies conference in Portland, Oregon. On the way my partner and I stopped off for a few days chez Maria in LA (and a very good time we had too). But all this scholarship, tourism and partying comes at a price, of course. I’ve flown a very long way indeed (and I know many of my fellow bloggers also clock up extensive miles). So what to do about all that carbon I’ve just burnt? One option would be to pay into a carbon offsetting scheme, but I’ve become convinced that many of them are either not very good, or are simply scams. There may be some good ones (commenters please …) but I’m sure I can’t tell which are worth supporting. So here’s another idea: I could just buy energy saving light bulbs and give them away to friends, students, neighbours, thereby generating sufficient carbon savings to purge my sin. But how many (at what rating) would I have to buy and give away per hundred or thousand airmiles?

Verbing the adjectivised abstraction

by John Quiggin on March 29, 2008

I’ve been reading William Dalrymple’s The Last Mughal: Fall of a Dynasty about the Indian Rebellion of 1857 with great interest. The complacent reports of the British commanders as they went about destroying the last remnants of independent Indian power are startlingly reminiscent of the “Good News from Iraq” we got so much of in 2003, and which was briefly revived during the now collapsing surge/awakening/truce. More generally, Dalrymple gives an evocative account of the Mughal court on the eve of destruction.

But I was, perhaps unfairly, amused by Dalrymple’s introduction where he extols the merits of archival research, as against the kind of “subaltern history” that pads out existing secondary sources with large dollops of theory to produce more or less interchangeable articles with titles of the general form “Othering the Imagined Construct” (feel free to permute the parts of speech to derive your own). I’ll leave it to others to decide whether this is better or worse than the old standby “Nonsensical Phrase Drawn From Primary Source: Random Word, Random Word, and the Actual Topic of this Book,” or the generic economic article of the form “Hot Current Idea, Established Field and Putative Application”.

Bad news from Basra

by Daniel on March 28, 2008

My assessment of the battle for Basra has changed significantly. I still think that, in the subjunctive conditional tense, it was a reasonable piece of analysis – al-Maliki needed to do something[1] to start to establish his monopoly on violence within Iraq and I put material weight on his own seeming subjective assessment that he was politically and militarily strong enough to pull it off. But in the actual present tense, things are going the other way. (A disclaimer should certainly be appended at this point that this is all rather toward the punditry end of the spectrum rather than analysis so if that winds you up then skip it, but having picked that ball up I’m sort of committed to running with it).
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Motoparrot

by Kieran Healy on March 27, 2008

This picture is presently on the reddit front page under the byline, “The Coolest Guy Ever.” Some people in the comments thread are skeptical that such a person (and his parrot) could really exist, but I see him and the macaw pretty regularly as they drive around Tucson.

Forced to fight renegades

by John Quiggin on March 27, 2008

The Maliki government’s offensive in Basra seems to have taken most observers by surprise. Possibly as a result, reporting of the event has been unusually revealing about the implicit presumptions that guide the news we get to read. The New York Times, for example, leads with a photo of “Fighters loyal to renegade Shiite cleric Moktada al-Sadr”, taking up positions in Basra. Later on, the article notes

If the cease-fire were to unravel, there is little doubt about the mayhem that could be stirred up by Mr. Sadr, who forced the United States military to mount two bloody offensives against his fighters in 2004

Like most of the other militia leaders in Iraq (including the leaders of mercenary militias like Blackwater), Sadr is not a particularly attractive character. But in what possible sense can he be described as a “renegade”? He was a consistent opponent of Saddam and became a consistent opponent of the US occupation. This might justify descriptions like “rebel” or “recalcitrant”, but Sadr is one of the few Iraqi figures who hasn’t switched sides, in many cases more than once.

More important though, is the second paragraph. The US was not, in any sense, forced to launch the 2004 offensives. These were miniature wars of choice within the broader war of choice in Iraq. The assumption was that Sadr’s supporters could be crushed by military force, leaving the way open for the US occupation government to reshape Iraq along the lines it wanted. In the end, after much bloodshed, nothing was achieved. Arrest warrants for Sadr, the pretext for the first offensive, quietly disappeared when they became inconvenient, and much the same happened the second time around.

We are now seeing a repeat of the same strategy, adopted by the Maliki government. On past performance, the likely pattern will be one of initial success, followed by a lot of tough talk, and then a bloody stalemate, ending in a patched-up compromise.

They know they were right

by Henry on March 25, 2008

“Alex Tabarrok”:http://www.marginalrevolution.com/marginalrevolution/2008/03/why-anti-cassan.html puts forward an explanation for why people who were against the Iraq war (and who predicted a housing crisis) haven’t gotten more of a public hearing.

The answer is media incentives. It wasn’t just the experts who were wrong, the majority of the American people got Iraq and housing wrong. The war was popular in the beginning and people continued to buy houses even as prices rose ever higher. So what does the American public want to hear now? The public wants to hear why they weren’t idiots. And who better to explain to the public why they weren’t idiots than experts who also got it wrong?

It’s an interesting argument, but one that I’m highly skeptical about. One of the golden rules of survey research is that questions that ask about the political views that respondents held in the past are likely to get highly inaccurate replies. The reason is that people’s memories are quite malleable, so that they often reshape their recollections of what views they held in the past so that they accord better with the views that they hold today. I’d be prepared to bet a significant amount of money that the number of people who _believe_ that they supported the war back in 2003 is far lower than the number of people who actually _did_ support the war back in 2003. Indeed, I suspect that the number of people who believe that they supported the war back in 2003 is a minority of the US public. Since the Cassandra-backlash effect that Tabarrok is talking about is contemporaneous, and presumably depends on people’s current beliefs about what they thought in the past, this makes me think that something else is going here (and that this something else has to do with the desire of elite actors in the commentariat to hold onto their privileged position in the public discourse).

For your Paranoia vs Incompetence Files

by Kieran Healy on March 25, 2008

U.S. says missile parts mistakenly sent to Taiwan:

bq. The U.S. Defense Department accidentally shipped ballistic missile components to Taiwan, the Pentagon said Tuesday. Four nose-cone fuses for intercontinental ballistic missiles were shipped instead of the helicopter batteries that Taiwan had requested, Air Force Secretary Michael Wynne said.

I suppose the line is that Part No. DSS234SG0-BNO02O235230C93-Z1 is really quite different from Part No. DSS234SG0-BNO020235230C93-Z1.

Two quotes; one from “Wolfgang Munchau”:http://www.ft.com/cms/s/0/5fe5773a-f8eb-11dc-bcf3-000077b07658.html?nclick_check=1, the other from “Steve Clemons”:http://www.thewashingtonnote.com/archives/2008/03/america_exporte/, seem to me to resonate in interesting ways. First, Munchau:

Another factor that pushes in the same direction is the weakening of the US financial sector. This has been a crisis of Anglo-Saxon transaction-based capitalism. Not too long ago, it was considered to be vastly superior to the eurozone’s old-fashioned relationship finance. I doubt that in a few years’ time people will continue to assess the relative strengths of the Anglo-Saxon and continental European financial systems in quite the same way. I would also expect the eurozone economy to withstand the economic shocks of the credit crisis in relatively better shape.

Then Clemons:

As TWN readers know, I have been on a lot of international travel lately — to Beijing, Mumbain, Tokyo, Berlin, London, Brussels, and Tel Aviv. In all of these places, I met angry and frustrated finance ministry bureaucrats, central bankers, retail bankers, investment bankers, and other fund managers. All of them had a single message that rang a bit like the US accusing China of shipping out poisoned pet food and lead-paint covered toys. They said American regulators failed. “You exported poisoned financial products.” Most Americans have no idea how low American prestige had fallen in the world before the financial crisis — but for the mother ship of modern day capitalism to fail so badly in managing the social contract between economic stakeholders and the finance industry is yet another enormous blow to America’s ability to compel other nations to do as we do, or as we want.

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Big battle for Basra?

by Daniel on March 25, 2008

From the armchair general department … Back when the surge began, I suggested that one of the ways in which things could go wrong (and of course, there are loads of ways things can go wrong and only one way they can go right) would be:

d) Al-Sadr demonstrates his political nous once more, and calms down his operations, carrying out only enough hit-and-run attacks on US troops to keep his popularity up. Then he forms a nationalist bloc with one or more of the Sunni parties. Political collapse of the Maliki government.

Which was looking rather awfully close to how things were shaping up; while the level of violence was falling, the Maliki government was going nowhere fast politically and the anti-government forces were gathering strength. Furthermore, nobody seemed to really be doing much about this, apart from sitting round congratulating themselves that “the surge is working”.

Now, (and I would be very glad to be proved wrong on this one, as I have very little personal credibility at stake having been right on nearly every other important point about Iraq, and contrary to supposition I would very much like to see a world in which far fewer innocent people were in danger of horrible death on a daily basis), it’s all kicking off, apparently (via Chicken Yoghurt).

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Of course, one can’t be certain but …

by Kieran Healy on March 24, 2008

Obama Most Likely Not the Antichrist

A letter from the Notre Dame Observer in response to an Op-Ed in the paper.

The perquisites of office

by Henry on March 24, 2008

Andy Gelman “links to”:http://www.stat.columbia.edu/~cook/movabletype/archives/2008/03/mps_for_sale.html a “new paper”:http://polmeth.wustl.edu/retrieve.php?id=740 on money and UK politics. The abstract speaks for itself.

While the role of money in policymaking is a central question in political economy research, surprisingly little attention has been given to the rents politicians actually derive from politics. We use both matching and a regression discontinuity design to analyze an original dataset on the estates of recently deceased British politicians. We find that serving in Parliament roughly doubled the wealth at death of Conservative MPs but had no discernible effect on the wealth of Labour MPs. We argue that Conservative MPs profited from office in a lax regulatory environment by using their political positions to obtain outside work as directors, consultants, and lobbyists, both while in office and after retirement. Our results are consistent with anecdotal evidence on MPs’ outside financial dealings but suggest that the magnitude of Conservatives’ financial gains from office was larger than has been appreciated.

Andy isn’t sure about the substantive impact that this has for political science, given the disparities between the amounts of money that flows through politicians’ hands in functioning democracies and the amounts of money that they may personally derive from office. I’m not so sure about that, as the monies sticking to politicians’ hands do likely help shape their incentives (e.g. one can plausibly speculate that Tories who rock the boat too much aren’t going to have much luck cashing in on those directorships), but, in any event, the fact that Andy doesn’t spot any obvious methodological problems makes me at least think that the observed effect is likely real.

Rawls Bleg

by Jon Mandle on March 23, 2008

As some of you may know, David Reidy (Philosophy, University of Tennessee) is working on an intellectual biography of John Rawls. He has done research in the Rawls archive at Harvard which contains much, but not all, of his correspondence. He asks of anyone who might be willing to share with him their correspondence with Rawls – baseball-related or otherwise – to please contact him directly at: “dreidy [at] utk [dot] edu”.