The “tragedy of the commons”, corporate style

The "tragedy of the commons" is an old reference to the inherent problem of communal resources and interactions.   It plays itself out with every resource.  If there is, say, a rich fishing ground, it is to your personal advantage to fish it.  But if everybody fishes it, the fish stock becomes extinct and everybody loses.  It is something like a large scale form of the "prisoner’s dilemma" scenario in game theory.  And the dismal reality of it is if there is no kind of regulation, even if you do not participate in the farce you don’t ultimately make a difference.   The fish stock would become extinct and the only difference would be that you wouldn’t get yours.
 
That is why there must always be some form of regulation.  In the example of fish, who gets to fish? Whichever way you go, there will be an inherent arbitrariness to it.  There is also an inherent arbitrariness to which side of the road we drive on.   That doesn’t mean that we should leave it to individual discretion in order to preserve liberty.   Some decisions are just arbitrary and that isn’t inherently authoritarian.   Fairness is an ideal that should be strived for but which is never perfectly achieved.
 
Now look at the structure of the mortgage problems.  Probably in excess of 80% of the homes out there in the United States have mortgages far in excess of any objective value of their worth.  I spent a couple of summers building homes and I know the work that goes in to building one. 
 
In a lot of places, home prices have doubled in a few years without any justification other than there was lots of cheap money available at the time driving up the market.
 
That type of surge in the market puts banks in a difficult position.  If they do what the other banks are doing, and finance some vastly overpriced purchase, the risk is that when the market returns to sanity they will be stuck with massive unsecured debt when the nominal equity in the home drops below the outstanding mortgage. 
 
When other banks are willing to take that risk, any bank that wants to opt out of the whole program has to pretty much get out of the mortgage business.  Then they risk being a lesser player in the markets, get bitterly complained about by shareholders because the nominal value of the company isn’t increasing as fast as that of competitors, etc.   They risk being eaten by another entity that is bigger and more aggressive.
 
This competition puts all the parties to it further and further out on a limb.  The end process is much like a Malthusian Catastrophe: http://en.wikipedia.org/wiki/Thomas_Malthus.
 
Think of the corporations like predators and money like the food supply.  Eventually the corporations consume all of their food supply between them.  How far can it go? An average home priced at $2 million? Eventually there had to be a crash.  When 95% of the people in San Diego couldn’t afford to own their own home in their own city, didn’t anybody clue in that this was unsustainable?
 
Another parallel here with natural selection processes is that there is a tendency for a species to grow in size when the times are good, with the large and brazen being favoured over the small and clever.  Then when the starvation phase of the cycle kicks in the small are favoured. 
 
This is a point about how in some ways regulation can improve freedom.  There are cases where corporations by following a dangerous path in order to seek an advantage can commit others to follow that dangerous path in order to compete.   Appropriate controls could help free them from this mutually destructive process.
 
But should corporations be unduly worried about the present potential for unsecured mortgages as they are already in an exposed position at this time?  I don’t think those that have been reasonable in taking on risk should be too worried about exposure.  There may be a number of cases in which people just walk away from their homes because they can’t afford them and have no more equity.  But, unless there are going to be 300 million Americans living on the street in protest, where would they go?  The reality is that even if an enormous number of the homes wind up imperfectly security for the mortgages, a mass exodus away from homes would not be possible. 
 
There are also other options for banks than mechanically foreclosing on people.  Every time a bank forecloses it damages the value of its’ collaterol for every other mortgage.  Smarter in most cases would be to say, what can you pay?   Just because foreclosure is an option doesn’t mean they have to use it.  Like every business decision, cost benefit analysis should be used and insisting on one’s strict legal rights is not always in one’s best interests, particularly in that case. 
 
They can also get creative.  If an owner walks away from a home in which they have no equity, you can use lateral thinking.  It could be used as part of the compensation package for an employee that just moved into town.   It’s business.  People that think outside the box while maintaining their realism are the next Rockefellers and Carnagies.  Those that don’t, wind up in the garbage bin of history.  Put business thinking to something more creative and useful than the next derivative scam.   I don’t see any hidden hand of the market with what has been going on recently, it looks more like a buffalo stampede.   Thinking has become stunted in the years of easy money.   Unless there is a scam or an angle or a political connection, today’s pseudo-capitalists don’t know what to do.  Start thinking like real entrepreneurs again and most of the problem will probably go away.  Have the government act as something of a referee to avoid similar destructive cycles in the future. 
 
One thing that Marx was right about is that there are certain situations that capitalists themselves wind up trapped in.  Marx has often been misunderstood- his sponsor, Engles, was a factory owner.  Obviously he didn’t want Engels to burn in hell.   Capitalists can be trapped in the internal logic of a system just as the working class is.  But there is no inevitability to this, only the lack of will to deal with it.
 

Earmarks vs. Porkbarrel

We hear a lot of trash talking about these so-called earmarks.
 
Earmarks like any tool can be used for a good or a bad purpose.   The good thing about earmarks is that they represent accountability.  Money is spent on the record.  That is why it is important for democracy.   Most of the money going to government more or less vanishes into the ether and unless attention is drawn to it by a later audit or whistleblower there will be no accountability for it.
 
Earmarking is one of the few ways that the congress has to reign in the executive and make sure that things get done.   That should be combined with a line veto power of the president, but the Supreme Court of the United States has ruled in a dubious decision that a line veto is unconstitutional. 
 
The point remains though that earmarking actually gives more control over the pork barrel.   I remember reading about how a few years ago an audit showed that around $70 billion in defence money that was supposedly used in the war on Iraq had vanished without any explanation of how it was spent.   The only thing I can be really sure of there is that most of it is now lining Republican-connected pockets.
 
In the absence of political meddling, the situation can get even worse with bureaucratic incompetence.   There was a time when building up infrastructure such as bridges was a sexy issue, when America was on the rise.   Now bridges and other infrastructure issues are unsexy issues unless a bridge collapses with lots of cars on it. 
 
Since politicians focus on politics instead of administration the unsexy issues tend to fall by the wayside.  With the Minnesota bridge collapse an inventory of bridges was done and hundreds of bridges were miscategorized.  Many were way behind in safety inspections.  The overall national approach to bridges was revealed to be amateurish. 
 
It is important for public safety and logistics that someone at least have an accurate inventory of bridges and their state of repair.
 
In assessing earmarks we must also assess what the opposite of an earmark is, what might be called a negative earmark.   A negative earmark is something that is earmarked to not be dealt with in open debate.  That can lead to thievery on the one hand or tragedy on the other. 

Clay who?

Various momentus things that may affect the future of the world happened yesterday…and some guy called something like Clay Aiken came out of the closet.  I saw something posted about a response by that idiot Simon Cowell so I guess this Clay person, whoever he is, must have something to do with that singing show.  Whoever the hell he is, he’s now most famous for being gay. 
 
Considering that the published photo of the guy looks gay I doubt if many people are very surprised. 
 
The incident reminds me vaguely of that one last year where what’s-his-name the bit player who nobody really heard of tried to get more fame and fortune when he blew some anti-homosexual comment by Isaiah Washington out of proportion to get a real star fired from a T.V. show and to advance the homsexual’s otherwise irrelevent career in the process.
 
In my view the only thing lamer than being famous for being famous is being famous for being gay. 
 
"Coming out" used to be courageous where it was done in a situation where it could risk a career.  Now it is being used as a tactic by non-entities as a publicity stunt to draw attention to somebody that nobody is very interested in.   There was an article also about a lack of A-listers coming out.    That gets back to what the tactic is supposed to accomplish.   That is probably because any A-listers would be taking a real career risk if they came out.   The D-listers would do anything to draw attention.
 
This shouldn’t be understood as an anti-gay piece.   My favorite philosopher, Ludwig Wittgenstein, whose work has led to a good portion of whatever brain power I may have, was notoriously homosexual.  But that is irrelevent.  That wouldn’t make him more right or more wrong. 
 
As far as A-listers are concerned, the off-screen sexuality of the actors or anchors isn’t one of the factors that I think about when I’m deciding whether to change the channel.  It’s irrelevent.   Most people can get a pretty good idea anyways.   That Anderson Cooper guy, the number one news guy in America right now, doesn’t look very straight to me.   I doubt if I’m the only person that has had that thought.  But nobody cares, so he’s the number one news guy in America.
 
I think that Clay what’s-his-face is doing actually hurts the gay movements.   Imagine if Barack Obama made his skin color the dominant issue in the campaign.  His campaign would have been done early in the primaries and he would have set movements for black equality back 20 years.  Expecting to be treated differently because of sexuality, skin color or any like issue sends the wrong message.  If you present your sexuality or skin color as if it were a disability you are entrenching the wrong message.
 
Where we are going as a culture?  On at least the entertainment side there seems to be a race among the mediocrities to see who can be the most sordid and thereby get more attention.   Tryng to be famous for being gay is worse than being famous for being famous.  It’s sad and pathetic.
 
 

Bailout frame trap

The US has gotten into an interesting frame trap in dealing with the bailout or fixing of the financial system.   The belief that it is the job of the US to run the world is so entrenched in the US psyche that it crosses party lines and nobody even raised the issue in debate, it was implicitly assumed. 
 
Regulatory incompetence and deliberate malfeasance in the US was definitely a major contributing factor.   However, most of the corporations that have gotten into trouble had multinational interests and when you look at all of the various groups that should have slammed on the brakes a long time ago who didn’t do it or sound the alarm, this really was a group failure.   Contrary to the general US philosophy that the US has jurisdiction everywhere, many of these mistakes occurred out of the jurisdiction and the US has no jurisdiction to fix those.
 
If that isn’t fixed the problem may endure.  Stop Wall Street from being a casino and the big players may just take their casino elsewhere.  They have to be told that there is no place for that conduct anywhere. 
 
Further, if the proposed fix makes the problem even worse, the interests of other countries will be adversely affected and for that reason others should be included in the discussion, not just the US government personnel.
 
The flip side of other countries having a right to be represented in these type of discussions- and the need to be since the US can’t fix them- is that they should have to pony up some of the cash for whatever the solution to the problem may be.  The US government isn’t the only one that looked the other way.
 
If this sounds difficult to do on short notice, blame the Republicans.  They can’t expect to get a $700 billion dollar slush fund with no safeguards on two days notice.  This is a completely artificial emergency, not just in the markets but also in Washington and the creators of the emergency want to prevent anybody else from doing their due diligence.  They should do their diligence anyways. 
 
Some have suggested having the New York Reserve Bank run the rescue operation, but remember that the reserve banks are not technically government agencies, although they are connected.  Many of the appointees that run these are appointed by the very groups that created the crisis.  To let any bank including the Federal Reserve have anything to do with a bailout would be a grave error.  The persons in charge of that would be placed in an immediate conflict of interest even if they were trustworthy.  Paulson I wouldn’t trust to run a McDonald’s franchise and one of the strings attached to any bailout should be that he has nothing further to do with the process. 
 
One solution that has not yet been looked at which ought to be: seizing the assets of those that created the crisis- not the wiser investors, not the short-sellers who are just correcting the market, but the people who contributed through wrongful acts. 
 
 

Availability bias and junk science

Two good recent discoveries:
 
Availability bias is where one puts too much weight on the information that happens to be available without considering what kinds of information are not available and how they are likely to skew the outcome.
 
Bad science is often a combination of the wrong type of simplicity and the wrong type of complexity.  This has its roots in part in language.  We speak of "the cause" of an event, which is grammatically correct but empirically misleading because it linguistically tends to suggest that an event has one cause, which is almost never true.  This leads to more complicated theories about the one cause in order to explain away the defects.  The classic of this kind of problem was when some people were determined to prove that the earth was the center of the solar system and the universe.   The math calculating from this perspective got extremely difficult which is one reason why the model with the sun at the center became more popular in time.
 
Most of the heat that comes to the earth’s surface comes from the sun.   It stands to reason that anything that affects the sun’s output of energy is going to affect the earth’s climate.  Without the sun, the earth would be cold and lifeless like Pluto. 
 
The sun is presently at its’ lowest level of output since recording started.  Coincidentally, I know of climate cycle models based on past history that would suggest that without the global warming contaminants we would now be declining into the next ice age. 
 
Many theories have been postulated about how ice ages start, the earth wiggling this way and that, changes in orbit, little fiddly stuff and only semi convincing, while the most disingenuous explanation, that the heat supply diminished, hasn’t gotten much press because there was no data on which to build a model.  We were able to build models based on standard physics of wigglings in the earth’s orbit, precession and other things, none of which quite fit the historical record of the ice ages or was particularly close.  Yet these were the focus, because these were things that we could easily get data on.   The most obvious explanation fell by the wayside due to a lack of easily available data. Availability bias. 
 
It is irrelevent that it is unfair that the most important data is not easily available.  One issue that makes this more difficult is that it can be hard to sort out what is the problem vs. what is the data to solve it.   If you were trying to solve the sun’s longer term cycles, the most readily available data would be the earth’s patterns of climate change.   The universe is just filled with stuff.  It is we who define what the problem is and what is to be treated as the evidence, when these actually interact.
 
Following a business model with science and expecting instant and conclusive results is going to result in errors and perversely have the opposite effect of slowing science down as people get too wedded to pet theories that are arrived at too quickly and then those striving for the truth have to fight the establishment.   That being said, many people would find it irritating if you tell them that we will have a pretty good idea if a given theory is right, in a thousand years or so.
 
About the other article, I am quite pleased with the finding that there is something colossal beyond the boundaries of the known universe that is dragging things in ways not consistent with the Big Bang theory, very quickly.  Another group of researchers had found a similar anomoly some years ago, which must be different since the present finding is regarded as new. 
 
The extreme of availability bias is a philosophical theory that is long discredited in philosophy but still the dominant philosophy of scientists, called phenominalism or in a more limited form instrumentalism, with the thrust being that if we can’t see it or if we can’t measure it, then it doesn’t exist. 
 
This is not a moot point- just because we can’t perceive or measure something now doesn’t mean that we never will be able to, but if we think that it can’t exist then we won’t be looking for it.    If Democritus 2400 years ago had never made the theory that there was an atom, would we have looked for one?
 
There is a tendency with availability bias to discount information that is not presently available even if it is likely to be the most relevant information, and not to seek that information.  It is a form of laziness and lazy thinking.
 
And so we have in physics certain problems with how far away objects can be perceived.  Beyond a certain point only the highest energy objects can be perceived, and so of course the theory is that beyond that point the standard stars etc. that exist everywhere else that we know of don’t exist beyond that point because we don’t see them.  The more natural hypothesis is actually quite the contrary- all the information that we have about the places that we can see in detail is that they have certain typical characteristics and so the natural default explanation should be that whatever is going on in places that we can’t see is probably the same as what goes on in the places that we can see, since that is the information that we have.   That doesn’t mean that is necessarily true, but that is Oakham’s Razor. 
 
The big bang theory is a perverse creation, an attempt to blend religion and science in a manner that doesn’t do justice to either.   It is an attempt to show a creation.  In response to that, I would ask if it in any way diminishes your God if he has been running the place for a literal eternity rather than a much shorter period.  And what would he have done before that when there was nothing?  That would have been pretty boring.
 
So now there is more evidence that there must be something outside the big bang horizon- something which presumably was not part of the big bang.    I’m not surprised, because I already knew that was true.
 
If you look at this from a logical point of view, what are the odds that all of the stuff in existance got compressed into a little tiny space before the big explosion and that not even a speck of sand was outside of it?   That is an almost infinite improbability.   Whatever instability led to the explosion, the idea that it could not have happened unless every bit of mass everywhere was included in it, that in spite of the near infinite mass, but for that one last speck of sand it would not have been pushed over the edge- absurd.  Whatever the local bang was, it hit a kind of critical mass, had a critical reaction and went boom [if it happened at all].   The idea that this could not have happened without the last speck of matter is about as scientifically respectable as hypothesizing that the universe rests on the back of a giant turtle.   And if is about some critical mass being reached, then the rest of the mass of the universe, whether that be a speck or masses of a million times that contained in the bang, it is free to be anywhere else since it is not essential to the theory that it be there at the time of the bang.  
 
There is also a "more than one bang" issue.  It is assumed that there must be a mass somewhere dragging certain clusters away at enormous speed, but what if they are going away from something rather than going to something?  For all we know there could be a much larger bang somewhere outside the bubble of the local bang (assuming there was one) and some of that wreckage could be cutting across.   There could be many such bangs. 
 
The new information that suggests an enormous amount of matter somewhere that we can’t see exposes the existing availability bias and the way in which this bias tends to put blinkers on us and stall scientific progress.   There may be a lot of information out there that is indirectly inconsistent with the big bang theory but, as in this case, most people are only stumbling on it by accident because they aren’t looking for it.
 
 
 
 
 
 
 
 

Inconsistency on the Bush bailout

Paulson wants 700 billion dollars for a two year project, right now on the basis that it is an emergency.
 
Again we are given an obvious inconsistency.  If the money was supposed to last two years, why does he insist on getting all of it right now?
 
One defect of the American system is that it has less of a mindset of the politicians seeking a mandate, like in other systems where the leader calls an election to seek a mandate to do something. 
 
Here the politicians that are in favor of a package can mimic the mandate seeking systems.   They can prorate that 700 billion dollars for two years to around 120 billion for 4 months and seek a mandate from their constituents for the full amount. 
 
That is, unless what is really being sought is $700 billion for 4 months and the two year horizon is just a smokescreen.
 
I wouldn’t vote for anything that either Paulson or the Federal Reserve had a say in because I don’t trust the judgment of either of them. 
 
And again, if that $700 billion is just used to prop up the housing bubble, which isn’t even close to a full correction yet, it is just money out the window.   That was the original Paulson plan and it was idiotic. 

Addition to previous

One way in which the housing market is destroying other markets over the long term is by eating up money that is thereby not available to other sectors.  Long term economic success will involve getting home prices down. 
 
Instead of the government providing social housing at hundreds of thousands of dollars per unit by picking up bad mortgages, if the government wants to get into the social housing business spending the same $700 billion on producing housing at a more sane $50,000 per unit with restrictions on resale at inflated prices as suggested previously would free up a lot more cash to keep other economic areas going.