Now that Lehman Bros and Merrill Lynch are gone, attention is turning to insurance company AIG. When the first big failure, that of Bear Stearns was coming up, the initial offer of $2 a share suggested that the company was worth less than the building it operated it (the deal was subsequently sweetened, courtesy of the US taxpayer[1]). Looking at AIG, this WSJ story says that, as of last quarter, assets exceeded liabilities by $78 billion, a number that has almost certainly declined since then, given that the $1 trillion asset book includes lots of toxic sludge. But the story also notes that the company’s aircraft leasing subsidiary (where did they get this?) owns planes worth more than $50 billion. So, it looks clear that, apart from the planes, AIG is worth little, nothing or (most likely) a large negative value.

Update Commenters object, correctly, that it isn’t legit to value the planes without taking account of the associated debt. However, after today’s debacles, it doesn’t matter too much. AIG is toast, the only question being whether the Fed will treat it as another Bear or another Lehman. Next cabs off the rank appear to be Washington Mutual and Wachovia, taking the FDIC with them. I even saw GE mentioned somewhere, but it seems too soon for that.

[1] Despite the tough talk and the refusal to bail out Lehman, the Fed has given yet further ground to the banks this time around, agreeing to lend public money against subprime trash.

In the comments to my last post, reader Peter Schaeffer provides exactly what I asked for: a breakdown of the discrepancy between 30 per cent growth in US household income over the last 40 years and 117 per cent growth in income per person. In addition to the factors I’d mentioned (falling household size and growing inequality) Schaeffer notes two more: the fact that GDP has grown faster than national income and the fact that prices faced by households (the CPI-U-RS) have risen faster than the GDP deflator. He provides the details to show that this fully explains the discrepancy.

What should we make of this. As far as the situation of the average American is concerned, the only correction we need to make to the household income figures is to correct for changes in household size. That makes the increase over the last 40 years about 63 per cent, or an annual growth rate of 1.2 per cent. By contrast, the 117 per cent growth in GDP per person implies a rate of just under 2.0 per cent. So, changes in GDP per person (let alone changes in total GDP) are essentially irrelevant as a guide to how the average household is doing.

And of course, the poor have done much worse. Household incomes for the bottom quintile have barely moved for decades. Growth in consumption has been driven largely by increasing access to debt, a process that now looks to have run out of road. That would seem to indicate a looming social crisis. But the coming election will still turn on whether Obama called Palin a pig.

I’m on leave this year and enjoying catching up with old colleagues and meeting new ones. I was at a reception the other day and was graciously introduced by a famous senior sociologist to a visiting senior sociologist as an “[insert some very kind words] scholar who studies the social aspects of Internet use”. The visitor laughed. No one else laughed though so quickly, smile wiped from his face, he said: “oh, you’re serious.”

Yup, seriously, there is this Internets thing and there are some interesting and important social science questions one can – and * gasp * I will even claim should – ask about it. As shocking as this may be, some places might go so far as to give you tenure if you do it well enough.

So a shoutout to all of my amazingly wonderful mentors and colleagues over the years who’ve supported me in this endeavor, I certainly don’t take that for granted.

I was at a seminar the other week on inequality in US household income, and I asked the speaker about something that’s puzzled me for a while. I didn’t really get an answer, so rather than do a lot of work myself, I thought I’d try this crowdsourcing all the cool kids are talking about. Here’s the puzzle.

Over the past 40 years or so, real median US household income has risen by about 30 per cent.

US Household income 1965-2005

but real US GDP per person has more than doubled. How can this be ?

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There’s much anger circulating around the blogosphere about “the comments of Michael Reiss, Director of Education at the Royal Society”:http://www.guardian.co.uk/science/blog/2008/sep/11/michael.reiss.creationism about how to deal with creationism and ID in school science classes. In fact, the whole thing could stand as an example of how on some issues (of which this is one) people only want to hear an unequivocal assertion of a party line and get unreasonably annoyed (and purport not to understand what they understand perfectly well) when someone says something nuanced or pragmatic.

Here’s the question Reiss asked:

bq. What should science teachers do when faced with students who are creationists?

To which he gave the answer that simply ignoring them is wrong and counterproductive. Rather, in his view, it is better pedagogical practice to engage with their doubts about evolution. He also adds that teachers have a duty to explain the scientific position but that they should not expect the doing so will displace creationist beliefs in students. His thought there is that explaining that evolutionary theory provides the best _scientific_ explanation is not necessarily going to cut ice with people who don’t accept the scientific way of looking at the world.

All reasonable enough, or so it seems to me. But then you get headlines like “Leading scientist urges teaching of creationism in schools”:http://www.timesonline.co.uk/tol/news/uk/science/article4734767.ece?token=null&offset=0&page=1 Of course, strictly speaking that’s true, since he advocated that teachers be open to the discussion of creationism with their students. But it gives the impression that he wanted creationism (and its ID variant) to be given house-room in the curriculum as “valid” alternative explanations of life. And that he didn’t say.

Incidentally, the Times also devoted “a leader to the controversy”:http://www.timesonline.co.uk/tol/comment/leading_article/article4735469.ece , comparing _inter alia_ Reiss to Sarah Palin:

bq. Sarah Palin, the Republican vice-presidential nominee, while not a creationist, has courted the support of those who want to teach biblical creationism alongside evolution in science classes by saying that schools should “let kids debate both sides”. Both Governor Palin’s populism and Professor Reiss’s well-meaning intervention are based on the same mistake – that it is acceptable to teach faith as if it were science.

Since Reiss’s clearly expressed view is that creationism is no part of the scientific world view, that is a gross distortion by their leader-writer who is clearly neither a careful nor a charitable reader.

Part of Alex Tabarrok’s “argument”:http://www.marginalrevolution.com/marginalrevolution/2008/09/why-libertarian.html for why libertarians should vote for Barack Obama:

The libertarian voice has not been listened to in Republican politics for a long time. The Republicans take the libertarian wing of the party for granted and with phony rhetoric and empty phrases have bought our support on the cheap. Thus – since voice has failed – it is time for exit. Remember that if a political party can count on you then you cannot count on it.

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I’m reposting this “Fiscal Conservative” cartoon with permission from Steve Greenberg, Ventura County Star, California:

Bob Herbert’s recent column summed up a lot of my sentiments:

Ignorance must really be bliss. How else, over so many years, could the G.O.P. get away with ridiculing all things liberal?

Or are some of us overreacting?

… But this is perhaps taking it a bit too far.

Kieran, would you mind popping down the corridor and telling Councillor Thompson that I’d like a word with him about the changes to residents’ parking at the end of my road? Thanks

(yes yes, I know he doesn’t work there any more, but that would have spoiled the joke, wouldn’t it?)

Her story will almost certainly be unfamiliar to non-Irish readers, but “it’s an important one”:http://www.irishtimes.com/newspaper/ireland/2008/0911/1221039067831.html?via=mr.

The death has taken place of Wexford school teacher Eileen Flynn, who became an important figure in the history of the separation between the Catholic Church and the State. In August 1982 Ms Flynn was dismissed from her job as an English and history teacher at the Holy Faith Convent in New Ross, Co Wexford. At the time she was sacked, Ms Flynn was unmarried with a baby son and was living with the baby’s father, a separated man, Richie Roche. Two months after Ms Flynn gave birth she received a letter from the school manager informing her that following her decision not to resign from the school her position was being terminated. The letter referred to complaints from parents about her lifestyle and of her open rejection of the “norms of behaviour” and the ideals the school existed to promote. It also reminded her of the “scandal” already caused. Ms Flynn sought to be reinstated in her post but lost her unfair dismissal case at the Employment Appeals Tribunal and at the Circuit Court. She finally lost her appeal to the High Court on March 8th, 1985.

A key piece of background information here is that she was sacked from what was, effectively, a state school. The Irish state had farmed out the larger part of the education system to the Catholic Church (albeit with separate schools for the Protestant minority), so that while the state paid teachers, the parish priest was typically the local school manager. This wasn’t all bad, but stories like Eileen Flynn’s remind me why I don’t particularly like efforts by some US religious groups to push the boundaries between church and state. The ability to deprive people who don’t conform to local mores of their livelihood is likely to become a dangerous and pernicious form of social control, as it did in Ireland for most of the last century.

Calling her ‘Lying Sarah‘ is all well and good. But we need something snappier. How about Sarah Prevaricuda? You know. Sung to the tune of Heart? (I know, I know. It’s got the same problem as that Savage Dragon endorsement. Too je ne sais quoi for flyover country.)

You lying so low in the weeds
I bet you gonna ambush me
You’d have me down down down down on my knees
Now wouldn’t you, Prevaricuda?

Come to think of it, what is that song even about?

No right no wrong, selling a song-
A name, whisper game.

If the real thing don’t do the trick
You better make up something quick
You gonna burn burn burn burn it to the wick
Ooooooh, Prevaricuda

OK, that part describes standard Republican operating procedure. What Henry calls ‘the mechanisms of Nixonland’. So I get why they play that part.

But what about this?

Back over time we were all
Trying for free
You met the porpoise and me

And:

Sell me sell you the porpoise said
Dive down deep down to save my head

So if she’s the barracuda (prevaricuda), then that makes … McCain the … porpoise? (Or is Obama the porpoise?) Either way: it’s ok to call McCain (or Obama) a porpoise, but not ok to call McCain an old fish? (I think I read something about that at the Corner today.)

Or maybe it’s some sort of commentary on Rick Warren, ‘the porpoise-driven life’? Is the song saying that, after Saddleback, McCain needs Palin?

Who writes this stuff? I mean: who gets paid to think it up? Not me, clearly.

The week before last, I chaired an APSA panel on Rick Perlstein’s “Nixonland”:http://www.amazon.com/gp/redirect.html?ie=UTF8&location=http%3A%2F%2Fwww.amazon.com%2FNixonland-Rise-President-Fracturing-America%2Fdp%2F0743243021%3Fie%3DUTF8%26s%3Dbooks%26qid%3D1221059642%26sr%3D8-1&tag=henryfarrell-20&linkCode=ur2&camp=1789&creative=9325, with responses from Paul Krugman, Nolan McCarty, Paul Pierson and Eric Rauchway. I can honestly say that this was the best APSA panel I’ve ever been at (and this isn’t self-promotion – my contributions were limited to the boring non-creative stuff like organizing questions from the audience); when I finish transcribing the audio of the panel and put it up on the WWW, you’ll be able to decide for yourself. Anyway, one of the key questions that panelists discussed was the extent to which it was true that Nixonland was still with us today, and if so, why? The last couple of days (and today’s nonsense from the McCain campaign about how Obama wants to give comprehensive sex education to kindergarten children, which maps almost perfectly onto similarly nonsensical political arguments that Rick documents in the 1960s) provide pretty good evidence that Nixonland is alive and well. But why?
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Hello again, crooked timber of humanity! I’m sorry I’ve been gone so long. It feels like I’m always saying that, but then, that’s what happens when you move to the once-every-Jovian-year posting schedule.

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My mother and I have a tacit agreement. It’s the same one she had with her father and that I, already, have with my elder daughter. I believe my grandfather had the same pact with his mother. It’s simply this – to alert the other to thriller and mystery writers that they may not have read.

The rule is that the writer has to be good enough for the other person to like. This does lead to some mistakes. Unlike my grandfather, who loved Ovid and Pope (in one of his many failed attempts to corrupt me — or at least loosen me up — he gave me a wonderful translation of Catullus’s dirty poems) but would read any old crap when it came to thrillers, my mother is moderately discerning. I am somewhere in between. But, of course, good mystery writers generally improve with age (examples abound, but especially striking is Julian Symons, who apparently wouldn’t allow his first effort to be republished but ended his career with several absolute blinders; the obvious counterexample being Colin Dexter, whose work is solid proof that the best TV is inspired by substandard fiction). So I was embarrassed when my mother told me about Peter Robinson, whose books I’ve been reading for years without telling her. I had a good reason – at first they just didn’t seem good enough for her (I know that she is a bit, though not much, more discerning than I am). I didn’t really notice the point at which he got good enough to mention, so didn’t do it, even though I think he is now in the top rank of mystery writers.

So it was funny when she visited the other week that she immediately asked if I had read Mark Mills’s The Savage Garden (UK). I had just ordered both that and Amagansett (UK title: The Whaleboat House — why do they do that, byt the way?) after amazon told me that he is favoured by people who read Robert Goddard (a page turner if ever there was one whose apparent lack of success in the States is baffling to me).

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Comics! That is to say, TopShelf is having their annual $3 sale! You can get some good books, man. I just loaded up. I’m especially looking forward to: Scott Morse, The Barefoot Serpent. (I really like Scott Morse’s art.) Tim Sievert, That Salty Air, and Dan James’ Mosquito (check out the preview.) I loved James’ The Octopi and the Ocean. You should pick that up, too, while you are at it. Hell, you might even buy stuff that’s not $3 but merely on sale! Like Jeffrey Brown’s Incredible Change-Bots.

In other news, the Savage Dragon has endorsed Barack Obama for President. Good for him! But maybe he’s too metrosexual for this to make a big difference.