As should’ve been expected and according to all recent news, having a Treasury Department position of paymaster isn’t working out so well for the free market.

Earlier this year, against all basic free market principles the Obama Administration through the Treasury Department started setting up compensation boards (CNN):

WASHINGTON (CNN) — An amendment in the $787 billion economic stimulus package passed by Congress Friday would severely restrict bonuses and other forms of compensation for top executives at companies receiving federal bailout money….

Due to all the negative publicity surrounding the government’s handing over billions of dollars in tax payer dollars to corporations which deserved to fell, Senator Dodd explains:

…”The decisions of certain Wall Street executives to enrich themselves at the expense of taxpayers have seriously undermined public confidence in efforts to stabilize the economy. American taxpayers deserve better,” Dodd said….

Now it might just be me, but I’m not sure Wall Street executives are allowed to vote on appropriations bills and then force the treasury to distribute the funds as they see fit.  It seems Mr. Dodd is blaming Wall Street for the government’s failure to handle the crisis correctly.

With all logic aside though, they went forward.  Not only did they seek to limit overall compensation of the highest paid, but asked for refunds from bonuses already given – one provision in the bill:

…The secretary of the Treasury must review past compensation paid to the top 25 employees of TARP recipients and seek reimbursements “if those payments were contrary to the public interest or inconsistent with the purposes of the [stimulus package] or the TARP,” according to Dodd’s statement….

& People everywhere rejoiced…. I mean complained.  In what was an obviously anti-capitalist move sure to do more damage than any political good it might bring about, people everywhere spoke up (examples here, here, & here), including NBER (abstract here – paper costs $5):

…Important facts about compensation are that: the compensation distribution is highly skewed; each year, a sizeable fraction of chief executives lose money; the use of equity grants has increased; the income accruing to CEOs from the sale of stock has increased; regardless of the measure we adopt, compensation responds strongly to innovations in shareholder wealth; measured as dollar changes in compensation, incentives have strengthened over time, measured as percentage changes in wealth, they have not changed in any appreciable way….

Even little ole me could see this as a negative and wrote about this here just a month or so ago (here):

…Even without bothering with the fact that the government is not in any position to understand what kind of compensation any single employee should have, this is still a radical and arbitrary move that if continued can work to destabilize the economy.

…this decision is an anathema to a free society breaking not only the contract rights of ordinary citizens, but also violating all individuals by pushing a blatant ex  post facto punishment….

& now we have exactly what was shown through economic analysis and basic logic to be true (@Bloomberg):

Nov. 23 (Bloomberg) — Bank of America Corp.’s board may extend its search for a permanent new chief executive officer into 2010 if directors can’t settle on a candidate in the next three days, according to people familiar with the matter….

…At least four external candidates, including Citigroup Inc. director Michael O’Neill, rebuffed approaches….

…That’s narrowing the field and giving the board “an incredibly tough job,” said Michael Holland, who oversees more than $4 billion as chairman of Holland & Co. in New York. “For people who have choices, it’s hard to figure out why someone would take this job.”…

Is it now time to stop calling obvious results  (Un)?intended Consequences…

Over @ The Economist’s new-ish debate section, they are currently debating the proposition This house believes that China is showing more leadership than America in the fight against climate change and currently, 74% believe in this proposition.

I know I’m unlikely to change many minds, but it’s always seemed to me that when trying to evaluate one country’s international progress on any one specific ideal, we end up narrowing the debate to such an extent as to make the question irrelevant.

In what seems to be a strong desire to answer questions objectively without respect to questions of ethics or other governmental policies, the intelligent ones among us miss the forest for the trees.

Towards that end – my two cents:

Dear Sir,

It seems maybe we should define leadership to an extent that either includes ethical behavior or can exist without ethics. For as long as the term leadership includes some notion of ethics, “ability to move fast” or the ability to put up light rail for the Olympics, simply can not matter in light of governmental policies designed specifically to limit the freedom of the individual and make the peasant serf work for the state.

Even *if* one wants to make the argument that ethics aren’t integral to the question, it’s still useful in evaluating “leadership”. For instance, when China starts implementing new green policies and initiatives, what’s the likely source of technology they will use? American? German? British? Swedish?

& Why? Because when people are allowed opportunities to flourish through a system that protects them with basic contract rights, innovation will flow much more easily. This is why China might manufacture most of the toys and basic electronic gadgets in the world, but the design process certainly came from someplace else.

An an example, they only recently successfully launched a satellite into orbit.  Prior to 1996, 2 out of 3 attempts ended in massive failures, meanwhile those freer countries had hundreds of them for various purposes including GPS, with even private companies using the technology successfully as well.

& lastly – it’s unlikely China would even admit a problem at all if they still retained the control that was possible just a few short decades ago. Today, they try to control press from earthquakes, the forceful removing of millions to make Olympic Village, their crime rate, and any number of other things they consider “bad” press.

Due to the explosion in the sharing of global information however, China finds it difficult to hide as much as they used to. Even the very closed off North Korea is finding this difficult as well.

So long as they continue to hide bad press, there’s no reason to think this “leadership” is anything other than a play at international recognition while hopefully strengthening their core domestic support.

In strategic thinking, this is known as a two-fer.

Either way – both goals have only one thing in common – staying in power and retaining as much control over the population as possible.

Removing ethics and the results of their standard operating procedure seems the only way to think of China as leading the world in anything.

For Veteran’s Day today, we honor the warrior.  That person willing to sacrifice so that others can live in peace, even though some of our greatest thinkers only view war as complete folly.

Let’s start with a very short sighted and simplistic quote from Mahatma Gandhi (1869 – 1948), “Non-Violence in Peace and War”:

What difference does it make to the dead, the orphans and the homeless, whether the mad destruction is wrought under the name of totalitarianism or the holy name of liberty or democracy?

According to this logic – if a totalitarian regime invades a free country, the free country should just take it, because war will be worse regardless of the victor…  Not only that, but from just a strict critical thinking view, you never limit your options even in your speech as it constrains the possible outcomes.

Irregardless, for more sense on the subject, John Stuart Mill:

War is an ugly thing, but not the ugliest of things. The decayed and degraded state of moral and patriotic feeling which thinks that nothing is worth war is much worse. The person who has nothing for which he is willing to fight, nothing which is more important than his own personal safety, is a miserable creature and has no chance of being free unless made and kept so by the exertions of better men than himself.

& in some ways, there you have the debate still raging today between those who think all war can just go away and those who understand the true hell of war, but are able to sometimes see the necessity.

For those brave enough to see the necessity, take some time out to thank a vet today.

For those unwilling to see, I feel sorry for you.

Weeks ago in a discussion with some colleagues, someone posed an interesting question:  “Do talk shows like Oprah’s have any real negative impacts?”

At first thought, I thought no.  Her ideas are mostly superficial and without critical thought, but is she really changing minds?  What we do know is that most of the people who watch these shows, or any other talk/political show, are generally seeking out information for which their beliefs already align.  Our tendency as humans is to do this – to seek out others who are similar in thought and background – to keep us comfortable with our thoughts & beliefs.

However, I don’t watch Oprah so I’m not familiar  with the consistency of her programming.  From that conversation I went to see what exactly Oprah does after book clubs and working out and found her anti-science stance can and does indeed harm others.

In a great article detailed by Newsweek, they demonstrated Oprah’s movement into the pseudo-medical realm with shows providing powerful anecdotes, while ignoring true scientific study to the contrary (whole thing here).  With the sub-headline of Wish Away Cancer! Get A Lunchtime Face-Lift! Eradicate Autism! Turn Back The Clock! Thin Your Thighs! Cure Menopause! Harness Positive Energy! Erase Wrinkles! Banish Obesity! Live Your Best Life Ever!, the document Oprah’s true harm to her audience.  First Suzanne Somers:

…Each morning, the 62-year-old actress and self-help author rubs a potent estrogen cream into the skin on her arm. She smears progesterone on her other arm two weeks a month.

…According to Somers, the hormones, which are synthesized from plants instead of the usual mare’s urine (disgusting but true), are all natural and, unlike conventional hormones, virtually risk-free (not even close to true, but we’ll get to that in a minute).

Next come the pills. She swallows 60 vitamins and other preparations every day….

…In addition, she wears “nanotechnology patches” to help her sleep, lose weight and promote “overall detoxification.” If she drinks wine, she goes to her doctor to rejuvenate her liver with an intravenous drip of vitamin C. If she’s exposed to cigarette smoke, she has her blood chemically cleaned with chelation therapy. In the time that’s left over, she eats right and exercises, and relieves stress by standing on her head. Somers makes astounding claims about the ability of hormones to treat almost anything that ails the female body. She believes they block disease and will double her life span. “I know I look like some kind of freak and fanatic,” she said. “But I want to be there until I’m 110, and I’m going to do what I have to do to get there.”…

For Oprah’s part, she did allow some doctors into the discussion, but severely limited their ability to affect the discussion:

That was apparently good enough for Oprah. “Many people write Suzanne off as a quackadoo,” she said. “But she just might be a pioneer.” Oprah acknowledged that Somers’s claims “have been met with relentless criticism” from doctors. Several times during the show she gave physicians an opportunity to dispute what Somers was saying. But it wasn’t quite a fair fight. The doctors who raised these concerns were seated down in the audience and had to wait to be called on. Somers sat onstage next to Oprah, who defended her from attack. “Suzanne swears by bioidenticals and refuses to keep quiet. She’ll take on anyone, including any doctor who questions her.”…

As with many of Oprah’s crusades, the anti-science crusade wasn’t just about hormone treatments which are proven harmful, but to give Jenny McCarthy a voice to go after vaccines, which are truly helpful:

…In 2007, Oprah invited Jenny McCarthy, the Playboy model and actress, to describe her struggle to find help for her young son. When he was 2½, Evan suffered a series of seizures. A neurologist told McCarthy he was autistic. “So what do you think triggered the autism?” Oprah asked McCarthy. “I know you have a theory.”

McCarthy is certain that her son contracted autism from the measles, mumps and rubella (MMR) vaccination he received as a baby. She told Oprah that the morning he went in for his checkup, her instincts told her not to allow the doctor to give him the vaccine. “I said to the doctor, I have a very bad feeling about this shot. This is the autism shot, isn’t it? And he said no, that is ridiculous; it is a mother’s desperate attempt to blame something on autism. And he swore at me.” The nurse gave Evan the shot. “And not soon thereafter,” McCarthy said, “boom, soul gone from his eyes.”…

Again, she’s follows the same modus operandi, lots of targeted emotional and anecdotal discussions (read: propaganda), followed up with very little in the way of scientific evidence:

…But back on the Oprah show, McCarthy’s charges went virtually unchallenged. Oprah praised McCarthy’s bravery and plugged her book, but did not invite a physician or scientist to explain to her audience the many studies that contradict the vaccines-autism link. Instead, Oprah read a brief statement from the Centers for Disease Control saying there was no science to prove a connection and that the government was continuing to study the problem. But McCarthy got the last word. “My science is named Evan, and he’s at home. That’s my science.”…

The question I think all this raises, is have we gone to a point where civility is seen as more important that truths.  You see, I think most of us would have a hard time going against Ms. McCarthy.  Due to her tragic circumstances, we can easily see in ourselves the need to find the answer which others can’t seem to find.  We want things to make sense, in a world with more randomness that we are willing to admit.

But should this civility prevent us from saying what’s true?  You might have strong beliefs about something, and you might even be able to bring self-serving anecdotal evidence to bear, but none of that matters.  In the long run, Ms. McCarthy’s beliefs are not only irrelevant, but should be generally dismissed as they come from an uneducated (on her topic of choice anyway) and grief stricken celebrity.

Instead of reason winning out however, the power of celebrity, combined with the power of wanting more concrete answers to life’s questions the crusade against life saving vaccinations continues forward.  From Wired:

To hear his enemies talk, you might think Paul Offit is the most hated man in America. A pediatrician in Philadelphia, he is the coinventor of a rotavirus vaccine that could save tens of thousands of lives every year. Yet environmental activist Robert F. Kennedy Jr. slams Offit as a “biostitute” who whores for the pharmaceutical industry. Actor Jim Carrey calls him a profiteer and distills the doctor’s attitude toward childhood vaccination down to this chilling mantra: “Grab ‘em and stab ‘em.” Recently, Carrey and his girlfriend, Jenny McCarthy, went on CNN’s Larry King Live and singled out Offit’s vaccine, RotaTeq, as one of many unnecessary vaccines, all administered, they said, for just one reason: “Greed.”

…So what has this award-winning 58-year-old scientist done to elicit such venom? He boldly states — in speeches, in journal articles, and in his 2008 book Autism’s False Prophets — that vaccines do not cause autism or autoimmune disease or any of the other chronic conditions that have been blamed on them. He supports this assertion with meticulous evidence. And he calls to account those who promote bogus treatments for autism — treatments that he says not only don’t work but often cause harm….

When reality demonstrates that many people ignore scientific evidence and their facts are replaced with celebrity hubris and propaganda, it should be a sign that all of us should take the time to understand where our true beliefs emanate.

Because please know, while many might read this and think, “that’s not me”, they mean that in a narrow sense as this is part of the human condition which we all share.  Only the truly arrogant among us can believe they can escape the human condition.

For those brave souls willing to go beyond our tendencies, I suggest we should all truly question our deepest beliefs in the face of new or competing information.  Anything less does a disservice to you, your family, and society at large.

In a story that might have more than it appears, GM announced it will not go through with a deal it announced in early summer to sell their German division Opel.

The story really first appears as the auto company bail-out was in full swing in the US.  GM had pushed a reorganization plan that cut jobs in all countries.  With German Chancellor Angela Merkel getting pressure due to the global economic crisis and facing a re-election, Opel became more important than first assumed (@BusinessWeek):

….On Tuesday, though, German Chancellor Angela Merkel said Opel was not a “system-critical” corporation. “There are system-critical financial institutions,” she told her conservative party’s parliamentary group, according to the Rheinische Post newspaper. “But there are no system-critical industrial firms.” It was Merkel’s indirect way of saying that Opel is less important to Germany than its crisis-stricken banks. Her statements were intended to counter earlier comments made by the head of the left-leaning Social Democratic Party that Opel was indeed “system relevant.” She added, however, that Opel should be given a chance to survive and that like all companies, it has the “right to apply for state aid.”…

It not only became more important, but Chancellor Merkel started treating it as imperative to re-election (@France24.c0m):

With the recession ending (@MSNBC):

WASHINGTON – More than 90 percent of economists predict the recession will end this year, although the recovery is likely to be bumpy….

Or maybe a double-dip (@Politico.com):

…All that’s enough to convince some observers that the economic recovery is faltering and could be heading for a “double dip” recession. And that would mean the recent green shoots of recovery turn out to be just a pause in a much longer economic slide….

& a stimulus which has saved jobs (@USA Today):

WASHINGTON — States have reported using stimulus money to create or save more than 388,000 jobs so far this year, buttressing the Obama administration’s claim that the $787 billion plan has had a significant impact on the economy….

Or maybe not (@WashingtonExaminer):

…Even if we take at face value the White House claim that it created or saved all these jobs with approximately $150 billion of the economic stimulus money, a little simple math shows the taxpayers aren’t getting any bargains here: $150 billion divided by 650,000 jobs equals $230,000 per job saved or created. Instead of taking all that time required to write the 1,588-page stimulus bill, Congress could have passed a one-pager saying the first 650,000 jobless persons to report for work at the White House will receive a voucher worth $230,000 redeemable at the university, community college or trade school of their choice. That would have been enough for a degree plus a hefty down payment on a mortgage….

Maybe some perspective is needed.  To truly put it in context, let’s look at the Great Depression (@Cato):

…According to most accounts, the stock market crash of October 1929 was the spark that sent the economy spiraling downward.

How could this be? After all, by November 1929, the stock market had started to recover, and by mid-April 1930, it had reached its pre-crash level. Contrary to the received wisdom, massive government failure — not the stock market crash — pushed the United States into the Great Depression….

As written here before (here, here & here), economic predictions are inherently tricky and the government does a very poor job because politics always gets in the way of objective truths.  NBER who is usually the group society follows for when a recession starts and ends told us in December of 2008 that December 2007 was the beginning of the dive demonstrating that most “objective” economic truths are only found in hindsight.

In fact, some brilliant legal minds have made just this point to contemplate delaying financial regulations intended to mitigate similar future scenarios in which we might find ourselves (here).  Richard Posner’s analysis:

The Report is premature in two respects. The first is that it advocates a specific course of treatment for a disease the cause or causes of which have not been determined. Now it is not always necessary to understand the cause of something you don’t like in order to be able to eliminate the effect. If you have typical allergy symptoms you may get complete relief by taking an antihistamine; it is not necessary to find out what you’re allergic to. But generally, and in the case of the current economic crisis, unless the causes of a problem are understood, it will be impossible to come up with a good solution. The causes of the crisis have not been studied systematically, and are not obvious though they are treated as such in the Report. (Remember, the Great Depression of the 1930s ended 68 years ago and economists are still debating its causes.)…

Note – this doesn’t mean that we don’t understand basic incentives and most likely results.  Like chaotic systems in which minor changes in the beginning state of a system can show drastic changes in the end results, our economic system is so complex as to defy attempts to model very specific changes.  Though with hindsight and true analysis, we can get to a point where we know with probabilities what has happened and what will likely happen given specific policies.

For instance, if we make houses cost less by giving tax breaks or whatever, sales will increase for the time that incentive exists.  If the incentive is timed, then some sales will just be premature sales and show corresponding decreases in future quarters.

Meaning, we can use a basic understanding of incentives in order to gauge most likely results, but today only with hindsight can we show real numbers on very specific things such as the stimulus bill’s impact on house sales or jobs.

& even then, given the inherent difficulty in defining a “saved” job and politicians willingness to ignore any data contrary to any rosy picture they wish to present, any economic predictions or numbers coming from politicians should be suspect by default.