Daniel

This is extraordinarily good news for lovers of free valuable things. Due to extraordinary shortsightedness, Verso Books have allowed Doug Henwood’s “Wall Street” to go out of print, the rights thus reverting to the author. In an equally extraordinary act of generosity, Doug has decided to release it to the internet, gratis, under a Creative Commons Licence. Download it quick before he gets his marbles back is my advice.

Pretty much Wow. Wall Street is an ace book; in my professional opinion as a business school graduate it contains the clearest explanation you will find of how financial markets work, much better than the one in Principles of Corporate Finance, Modern Investment Theory or any similar MBA textbooks. There is also a lot of very good material on Keynesian economics[1], and a short essay on Social Security privatisation that is, despite having been written about ten years ago, much better, more quotable and freer of error than almost anything written in the last two years. There are also a number of good jokes and a couple of absolutely priceless footnotes on the sexual appetites of Wall Streeters. My suggestion to Doug was that he should have jacked the price up to $85 and gone after the textbook market, so getting it for nothing is a bargain to say the least.

In respect of which, the author apparently got quite royally screwed financially from writing the thing; less than $10,000 despite it selling 20,000 copies and taking six years to write. He’s put up a Paypal tipjar which I hope you will all use; otherwise (and perhaps more realistically) you could say thankyou by buying After the New Economy which is also a top book[2], or perhaps subscribe to the Left Business Observer newsletter, which also looks woefully underpriced at $22 for 11 issues given that along with the left-wing polemic it contains two pages of the sort of high quality flow-of-funds analysis that serious people pay serious money for. You don’t get any bonus Ginsu knives or anything, but net that, it’s probably the best bargain you’ll find on the internet today. Sorry to come over like a pitchman and all that but it really would be a shame if Doug ended up financially no better off for making Wall Street publicly available. I own or subscribe to all these products myself, by the way.

[1]Brad agrees with me that the economics is top-notch stuff. I tend toward Brad’s side of this particular argument; stock markets don’t produce nothing, they produce liquidity. It is true that there is no such thing as “liquidity” for the economy as a whole; we can’t all have the ability to buy or sell stock as we wish at the same time. But on the other hand, we can’t all stay in the Ritz Hotel at the same time either, but that doesn’t mean it’s fictitious. Doug’s main point, however – that the stock market is not either a material source of funds for industry or a “capital allocation mechanism” of any value whatever – is spot on and is a critique which is not made nearly enough. Anyway, RTFB. Maybe I’ll write something more about this at length later.
[2]If you do end up buying “After The New Economy”, perhaps you would be good enough to write a review essay and email it to me so I can put it up on CT like I’ve been promising to do for the last year.

Brad DeLong once wrote “Marty Weitzman is smarter than I am”. And he probably is; his paper on the equity risk premium was a gem, and in the couple of email exchanges I had with him he seemed like a hell of a nice bloke too. But it just goes to show that there are all sorts of different kinds of intelligence; I’d struggle horribly in any one of Weitzman’s economics seminars, but having grown up in the country, I’m pretty sure that if I wanted to nick a trailer load of horse manure I’d have been over the hills and far away with it, no trouble, before you could say “what a way to earn a living”. Nicking agricultural waste seems to me like one of those Hayekian “tacit knowledge” fields, where street-smarts and experience are probably a bigger driver of success than book-larnin’.

You wouldn’t have thought that someone who spent most of his working days in the Harvard Economics Faculty would be short of horseshit[1] but apparently so. On a more serious note, if there are any disciplinary consequences for Weitzman, at all, then I for one will be kicking up a hell of a fuss and encouraging him to sue. I mean, talk about a bloody double standard. Best of luck, Marty. Btw, what a pity it wasn’t Bullshit[2], or the rhetorical irony would have been complete.

[1]I plagiarised this from Doug Henwood
[2]Yes yes, fellow bumpkins, I know; nobody would bother to collect cow manure or steal it because cow manure isn’t all that good a fertiliser. Since I moved to the city I discovered these things called “jokes” and that was one of them.

Like Sisyphus in Camus’ essay, I have come to the conclusion that myself and Tim Lambert only get involved in tackling the neverending wave of idiots who suddenly believe themselves to be statistical savants when reading[1] the Lancet study, because of the pleasure we get when from time to time they stop. This isn’t one of those times.

I think that Patient Zero of the current outbreak is the appalling Reynolds, who has apparently learned statistics over the last year (or at least, I distinctly remember him claiming to be “unable to say” whether John Lott was a hack or not, but here he is, talking stats with the best of them[2]). But for sheer asininity and bombast, you can’t beat Shannon Love (you may remember him as the architect of the “cluster sampling critique”, and if you don’t know what that is, good luck for you), who appears to be claiming that the Lancet team told lies on purpose in order to create propaganda for the Ba’ath party. As Tim says, this would be libellous if it were not so obviously stupid. Mr Love has decided to up the ante and “fisk” the whole report. I’m afraid that I was rather rude to him in his comments thread.

The arbiters of American journalistic standards are on our side now, so I suspect that we are fucked.

[1] I jest, of course. “Reading the study”! I crack me up.
[2] The best of them, to be honest, is still pretty bad.

Any maiden aunts who read CT possibly ought to skip this post, as it contains, in the interests of plain speaking on an issue where squeamishness might cost lives, one use of the “v-word“. I’m back on an old pedantic hobby-horse; the epidemiology of MRSA and the British political culture’s dangerous and annoying refusal to understand it properly. But this time, I have an actual policy suggestion.
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I have no idea why people whose judgement I usually regard as sound consider Kevin MacNamara’s remarks to be in any way uncalled-for. As far as I can see, the Conservative Party’s new policy on gypsies is utterly odious; the Conservative Party themselves are not particularly similar to the Nazis, but their policy on Gypsy camps is sufficiently similar to be worthy of the analogy. Michael Howard (who created this problem in the first place by removing the obligation on local authorities to provide sites for Gypsies) has said, in public, that he intends to repeal or alter the “so-called” Human Rights Act in order to deprive Gypsies of their right to due legal process in challenging refusals to give planning consent for campsites on land that they have bought. This is scandalous. The Human Rights Act, among other things, guarantees due process for anyone who finds themselves having legal restrictions placed on their ability to do what they want with their property, or to have a home for themselves and their families in a community of their choice. In matters of planning disputes, Gypsies have rather more need for judicial review than most of us, because local authorities tend to racially discriminate against them. But what Michael Howard is saying is that he will alter the law so as to have the effect of removing this protection from Gypsies, because he wants non-Gypsies to be able to prevent Gypsies from living near them and regards this as more important than the public
policy issue.
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My favourite passage in Peter Griffiths’ book “The Economist’s Tale” is one where he ruminates on the nature of the job, and how it sometimes sends World Bank people a little bit batty.

“From time to time, I have to look a Minister in the eye and say something like; if you carry out this policy, I expect that 200,000 children will die in the city this year. However, as a result of the price mechanism put in place, I would expect that in four years’ time, 400,000 children of farmers will live who would otherwise have died. I do not have any conclusive evidence for this conclusion. The process by which I arrived at this estimate would
certainly not pass the peer review process of any Western economics journal. Nevertheless I strongly advise you to take this course of action. There is a kind of rush that comes with having this kind of power, and some people get addicted to it.

Since it would appear from this that the two insititutional hazards of the World Bank are a) arrogance and b) making big and important decisions based on not enough analysis, then you can sort of see how lots of people might think that Paul Wolfowitz, a man whose name does not exactly bring to mind the phrase “now there’s a humble chap who never makes absurdly optimistic projections with disastrous results”, would not be the right choice to lead it.

However, on careful consideration, I disagree (most of this already posted to the Progressive Economists’ Network, hullo lads, so subscribers to that list can stop reading and get on with finding more stuff for me to plagiarise on this blog).

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Juan Cole reports the bad news about the town of Fallujah. Forty per cent of the buildings were destroyed in the bombardment and the remaining buildings have either “major” or “significant” damage. The city has effectively no water or power. It is currently a tent city, composed of about 9,000 residents living in tents near the ruins of their homes. The other 290,000 residents are living with relatives in other cities, or in refugee camps, or dead. Presumably the refugees will be experiencing a mortality rate rather more than 1.5x its prewar level.

I suspect that the Fallujah residents might consider it an addition of insult to injury that the main importance of their town in Western political debate is as a trophy for statisticians like me to show how intellectually scrupulous we are and win arguments with morons, by discarding their suffering as an “outlier”. With real tears in my eyes, I apologise.

Congratulations to the team at King’s College London, who have managed to achieve the first claimed “cure” of Type 1 Diabetes via transplanted islet cells. Just to drive the point home, the technique that they used was originally developed in Canada, so it’s a double win for socialized medical research.

The temptation is almost overpowering to speculate that the reason this particular procedure was developed outside the USA might have something to do with the fact that curing a disease with a single operation doesn’t produce a lifelong dependence on patented pharmaceuticals. But this temptation probably ought to be resisted; it’s only a single case. But well done King’s College, and perhaps this will shame our government into funding London’s hospitals properly.

Lots of post ideas stacked up, so time to clear them by just publishing my notes:

Lessons from the Argentinean crisis and default, with applications to the current state of the US economy

• Massive devaluations work

(this could be part of a series including “Lessons from the UK experience, Lessons from the Asian crisis, the Mexican crisis etc etc etc)

Thoughts on current developments in Lebanon

• The important thing to note is that when the USA acts alone, a hundred thousand people die. When it stands together with France, putting the rogue state on notice that it can’t depend on its historic friends, we win without firing a shot. And this is a victory for unilateralism in foreign policy?

An introduction to Linear Algebra for Econometricians, pitched at a level which ought to allow you to read a graduate-level econometrics textbook

• X’X means a sum of squares
• (X’X)^-1X’Z is a linear regression of Z on X
• Most of the rest you can pick up from context.

That’ll do for the minute, cheers.

Just to note that the Ken Livingstone Nazi comparison apology scandal has now reached day fourteen and is therefore across the Campbell Threshold (Alastair Campbell’s rule of thumb that a story which stays in the headlines for more than thirteen days will begin to have some effect on the voters; usually used for deciding to sack Labour ministers). However, Red Ken currently has a Galbraith score (based on JK Galbraith’s observation that anyone who says four times that he will not resign, will) of zero. His Galbraith score with respect to refusing to apologise is four by my count, however, so I’m guessing that in the next couple of days he will do so.

Fans of the Hotelling/Downs Median Voter Model will be truly gratified by the latest two policy initiatives to be chucked in the general direction of the National Health Service. From the Conservatives (NB to non-UK readers: they are our right-wing capitalist party, which means that they are in favour of socialised medicine and abolishing university tuition fees).

” We will bring back matrons to take charge and deliver clean and infection-free wards”

And from the Labour Party (NB to non-UK readers: they are our left-wing socialist party, which means that they are in favour of privatisation of local government services and identity cards)

” Matrons will take the lead in setting standards for hospital cleanliness”

Three reasons why I find this particular piece of policy-by-Daily-Mail-editorial-page rubbish particularly disspiriting.

1. Some nurses are men; if I was one, then I think I would be pretty cross at the idea that a senior position was being created whose name came from the Latin for “mother”.
2. A “matron” in the NHS today is a ward sister with extra managerial responsibilities; ie a quite senior medical professional. If I was one, I think I would be quite cross that in the view of my political masters, my real role in life was to be a comedy battleaxe running a finger over the dusting.
3. This whole business is a response to a stream of tabloid hysteria about MRSA. MRSA is a bug which colonises the noses and skin of lots of human beings, and becomes a problem when transferred to burns or wounds patients through poor quarantine or lack of handwashing. It’s a problem completely unrelated to “dirty wards”, as anyone who ends up spending an hour or two reading the free leaflets in hospital waiting rooms can confirm. If you put every hospital in the UK into a big pot and boiled them, there would still be an MRSA problem as colonies of it are endemic in the population and it is spread by people, not wards. Apparently, the manifesto-writers for our two leading political parties either don’t know this, or do know it and have decided that what the Mail thinks (plus the opportunity to pander to the turn-back-the-clock tendency in British public life) is more important than the facts.

Like I say, democracy isn’t working.

Useful site of the year, and it’s only January. Chris Lightfoot has (I think with a couple of his mates) put together this extremely useful site which will allow you to send a communication to your MP, free gratis and for nothing (Americans, spammers, and loonies[1], you are out of luck I’m afraid and will need to wait for someone to invent a different service for you). It’s very useful for sending letters to MPs who don’t have readily available email addresses but (for example) helped sort out a parking ticket for you a couple of years ago and you want to say thank you. Or for that matter, if you want to ask them not to start any more wars, introduce ID card schemes. Or to suggest to them that the government is unlikely to do any better picking winners among immigrants than it did among nationalised industries. If your local MP (or MEP, MSP, etc) is a Tory or a LibDem, you can have a go at him or her too.

Personally, I think that democracy is basically doomed in the UK, but Chris still thinks it’s worth saving, so well done him for trying.

Footnote:
[1]Other than loonies who happen to live in the constituency of the MP they are trying to write to, I suppose.

I’ve mentioned Peter Griffiths and his book “An Economist’s Tale” before, and I’m going to mention it again in future, because it’s important. The book is a detailed case study of what Griffiths did when he was working for the government of Sierra Leone during a period when the World Bank suddenly got the free market religion. It’s a fantastic read, and by reading it you will get two valuable pieces of information; you’ll understand what economic consultants (those people whose jobs are advertised in the front bits of the Economist) actually do for a living, and you’ll understand the exact why and wherefore of what it is that people are complaining about when they protest against the Bretton Woods institutions and the Washington Consensus. Griffiths isn’t an “anti” in the normal sense; he makes clear at a number of points in the book that he’s actually in favour of free market reforms as the long term solution to a lot of development problems. But he is someone with very detailed, on-the-ground experience of the problem that Joe Stiglitz identified; the regrettable state of affairs that lets poor countries’ governments get bullied around by “third-rate students from first-rate universities”, with often disastrous results.

Below the fold is an article written by Peter, summarising some of the themes of the book; there are lots of good bits (including my favourite one-sentence summary of the moral dilemma of the economics profession, on which I will post anon) which aren’t mentioned there, so reading the article isn’t a substitute for buying the book. The book can be bought from Peter’s website; link above. Non-economists are not excused this one; if you can understand a Grisham novel you can understand this. It’s pacey, it’s exciting and it all really happened. It even has a happy ending (of a sort; given that the setting is the country of Sierra Leone, a genuinely happy ending was never on the cards).

(Full disclosure: I have no commercial or personal connection with Peter Griffiths other than through sending him an email to get this article. I bought the book with my own cash after seeing it advertised on the Zed Books website).

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Nick Barlow has the details on the new political party “Veritas”, launched by former TV presenter Robert Kilroy-Silk (Yanks; kind of like Jerry Springer meets Tucker Carlson, uptown!). I hope he will form some sort of bloc with the Ulster Unionists, simply because I’ve been saving up an “Orangeman” joke for that eventuality for the last three years.

Below the fold I reproduce (with minor editing) an old D-squared Digest post, explaining why these parties are doomed, and why it’s a big mistake for Kilroy et al to extrapolate from their strong showings in European and local council elections to any hope of not getting carted out at a General Election. This analysis generalises, by the way, and that is why (full disclosure time) I have a chunky bet on Oona King to keep her seat in a two-way fight against George Galloway. As and when a spread betting market opens up, I will be a seller of Kilroy-Silk’s chances, in reasonable size.

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