Detailed Abstractions

It’s been a pretty busy week, with the anti-free speech stalwart Kagan nomination hearings, historic SCOTUS rulings, not so good economic news, that you might have completely missed the government’s latest attempt at taking away more of your economic freedom.  They have therefore entitled their effort, the Financial Crisis Inquiry Commission.

Well, some of you may have missed it, others like Mr. Gasparino is all over it.  What might he be writing about?  AIG testimony?  Goldman Sachs testimony?

No, he’s more concerned with one missing actor in this drama, JP Morgan.  While writing for the Huffington Post, Mr. Gasparino explains to us (here):

Of all the events that led up the great financial collapse of 2008, in my mind, one truly stands out: The decision by super-bank JP Morgan to demand billions of dollars in collateral from the troubled Lehman Brothers in mid-September of that year….

Now… if you want to talk about some laser like focus, this is truly amazing.  Mr. Gasparino doesn’t remember anything about houses going up in value for double digits for a decade?  Doesn’t remember Fannie & Freddie with strong political help encouraging this?  Doesn’t remember all those warnings about just these things?

No, he tells us, the real villain here, is JP Morgan:

…The move, according to senior Wall Street executives, was akin to a death knell for the firm, which was just about on life support already. JP Morgan demanded some $8 billion, it said, for clients that traded with Lehman….

Because….

….Once word went out that JP Morgan was nervous about Lehman’s ability to survive, a bank run ensued. Lenders pulled lines of credit; Lehman couldn’t trade with its counter-parties. In less than a week, Lehman had declared bankruptcy and the entire financial system began to implode…

To translate this tripe he seems to be stating that by merely asking a company who owes you money, but can’t pay and then goes bankrupt because they can’t pay money they owe, is the entire reason for the financial collapse.

Oh, and least we forget… the company which borrowed all that money and couldn’t pay it back and went bankrupt – it wasn’t their fault at all – it was those greedy bastards who wanted what was rightfully theirs.

Sometimes a more interesting way to find out how people truly view the world, is not to have them tell you where they stand on certain issues.  Another informative way to analyze someone’s critical thinking skills is how reflexive they are to disbelieve facts that counter their world view or agree with facts which confirms their world view.

Seeing their reactions to overly simplified answers which not only confirms their world view, but also their ego, you can use it to analyze that person’s tendency towards confirmation bias.

Before going further, a general disclaimer:  we all, every human falls for confirmation bias.  We want an ordered world and want to understand things and want to be right.  So patterns of random events become, after the fact of course, a series of events who destiny is their present state.

However, for those claiming to know more, claiming to impart important information to the masses, the truth as they see it – for those people, confirmation bias shouldn’t be as obvious.

For our example of people who lack critical thinking skills this time, we have Marcella Mroczkowski, a self described lawyer, activist, and Huffington Post Citizen Journalist.

Now I know – looking for critical thinking on a site like the Huffington Post is much more difficult than finding the proverbial needle in a haystack, but I still thinks it’s useful to remind us all of the tendency.

In her February 9th piece titled Why Americans Must Defeat the Right’s Culture of Hate: Understanding the Science And History of Demonizing Hate gives you a pretty good idea of her logical consistency, but for some reason, I read further.   To save you the trouble, I’ll summarize:

Using one poll, which she claims proves a large, but minority, percentage of Republicans are prone to believe things like Obama isn’t a natural citizen.  From there, she lumps the birther movement in with those who believe Barack is a socialist.  Tie that to the freedom-increasing destruction of the Fairness Doctrine, or in her parlance, the end of untainted free press and equality and an increase in corporate slavery.

Tie that to talk radio, through it, use nominal facts like people tend to get more fanatic during recessions and hate is a primal emotion.

Jump from there to leaders who can exploit man’s primal tendency to hate others through dehumanzing, such as Hitler!

& viola – people who don’t believe like Marcella are not just Republicans, but hate filled Republicans who are being exploited by Hitler’s reincarnation.

So with that said, I think objectively we can say that if this sample is her normal standards, then Ms. Mroczkowski’s skills in critical thinking are demonstrably lacking. We can also say, again, assuming this piece of hers is representative of her other writing & analysis, but with that assumption, she’s also a little full of herself.  Narcissistic even.

I mean even I try to assume the role of her – try to think, a liberal would agree – what do they see worth agreeing to?  Her non-familiarity with logic becomes apparent, as even if I agree with all her logical leaps, to believe the underlying assumption that her beliefs are perfectly right and her opponents are evil and full of hate is just too perfect to be believed by any nominally objective person.

I mean seriously – when the snake oil is packaged and marketed that it will grow your hair while shrinking your waistline and increasing your cognitive abilities – critical adults are naturally and rightfully and forcefully skeptical.

Or as others have said before, extraordinary claims require extraordinary evidence… or at least should for those pretending to provide “truthful” claims.

The interesting thing however is the polling data itself.  The data she uses to springboard her attempts to conflate Republicans and their mouth pieces with evil hate speech, is completely flawed.   First, it comes from Daily Kos, which should be an obvious sign to anyone approaching or attempting to approach objectivity.  They have an obvious bias and a quick check on their facts demonstrates it.

With simple math, we can take DailyKos’s own figures, 2008 voting records, and see if the percentages of respondents coincide with the actual percentages in the last election.

So in those states they label the NE, in the 2008 Presidential election, a total of 28,836,059 were cast for President, roughly 40% for McCain, or 11,458,616.

Those 11 million votes for McCain in that region, were out of the 59,948,240 votes cast for him nationally.  So the 11 million represents 19% of the total republican vote.  Not exactly a perfect measure of the percentage of Republicans living in the NorthEast, but likely more accurate than DailyKos’s attempts to minimize that part of country’s respondents to only 11%.  & my numbers were also two years ago – I think one can objectively say the Democrats aren’t doing as well as they could be and are in less favor now that prior to the election.

Regardless, they not only undervalue the opinions of those Republicans in the NE, but they also exaggerate the weight of the south, giving them 42% of the weight of the poll questions, whereas using the same basic analysis, those same states only made up 36% of the total Republican vote cast for McCain.

There are other signs in there as well, but ones I didn’t feel like researching… but to the eye, I’m not sure if 89% should be white or that 56% should be men, though I’ll admit both might be possible.  Using a full 70% of respondents aged 45 and up however, defies logic.  A cursory glance shows voter registration for that age group making up a little less than 50% of all registered voters and while I’ll be more than happy to concede the idea that the makeup of the Republican party isn’t a complete demographic mirror of the national population, I’m pretty sure we can safely say the 70% is exaggerated as well.

With all the inconsistencies, it’s hard to even subscribe to a benign notion such as incompetence.  It appears much more likely that they moved the numbers around until they could get results which showed what they wanted.

Of course to normal people, hearing or reading “A poll from the Daily Kos showed….” could be followed by “the Earth is round” and be right to be skeptical.

Using that poll as evidence of something however is another story entirely.  Here again, I’d like to think this is an innocent mistake, but I think hiding the poll through another link (she linked to Huffington Post site which discuss the poll, which linked to the poll), picking only two questions out of the litany asked and acted as if the rest of it was overwhelmingly convincing of her basic point, then logically stumbling about to equate Republicans with hateful, primitive thinkers who are just following Hitler’s rise to power…. well, that might say more about her motives than even her reflexive belief.

The problem is that only slightly off people like me will dig around for all those numbers to prove or disprove our assumptions.  & that percentage of people currently testing their assumptions versus those voting… well, let’s just say it’s probably pretty small.

Not that there’s anything wrong with that mind you – our marketplace of ideas is full of different people with different opinions and tripe like this will always be seen by objective people for the hollow and shallow self-confirmation it truly is.

The only real sad part is some people, probably more than I want to admit to, will read and blindingly believe.  Not because they don’t have an extra hour to research voting numbers and compare then to polling – they will believe it for the same reason it was written – it will confirm something for which they already believe.  Republicans are primitive & evil.

Yep, using a big dose of self-delusion for courage, they will believe completely in such a hateful point, without even noticing the hateful point is being stated in an article decrying hate.

Via Buzz.Yahoo.com (because I refuse to send people to the Huffington Post), the Huffington Post reports (here):

President Obama will unveil on Thursday a proposed levy on the nation’s biggest financial firms structured not just to repay taxpayers for the bank bailout, but to recoup some of the public subsidy that “too big to fail” banks have enjoyed on account of their implicit government backstop, a senior administration official tells the Huffington Post….

First, I honestly have a problem with senior administration officials lending their knowledge to such a highly partisan propaganda site as the Huffington Post.   They long ago stop pretending to care about being news or even being accurate and moved straight into MoveOn.org territory.

Now, I’m not saying the President or his staff must chose the outlets I would prefer, but they could definitely send out press statements or use seemingly “real” and more honest news organizations.  It’s not like the NY Times isn’t on the President’s side – why go to Huffington?

Either way – regardless of the merits (or lack thereof0) for this specific  marketing strategy – it seems quite obvious that Mr. Obama and his team lacks a fundamental understanding of economics.  Their continued reliance on government solutions to all economic problems, demonstrates a misunderstanding of the dynamics needed to keep this economic engine and society moving forward.

It seems they have an idea that they can model the economic behavior of institutions they define as “Too big to fail” as if this equilibrium is: A) possible to spot & B) static enough to allow the slow moving government the ability to legislate in a helpful way.

Indeed the current economic crisis itself lends credibility to the idea that the government is in no position to grasp the complexities that exist when dealing with so many interconnected businesses (here):

…”We are here to examine what happened in the public sector, what happened in regulatory agencies, what happened in enforcement agencies,” said Phil Angelides, the chairman of the Financial Crisis Inquiry Commission….

While investigating the public portion of the failure:

…Questions focused on failures around regulatory decisions to loosen bank leverage and capital limits, faulty credit rating agencies, a warning about epidemic of mortgage fraud and a decision by Congress and the FDIC to stop collecting vital insurance fees from ‘well capitalized” banks between 1996 and 2006….

They grilled DOJ:

…Panel members asked Attorney General Eric Holder to conduct an investigation into what, if anything the agency did after the Federal Bureau of Investigation in 2004 warned that mortgage fraud was so rampant that it was a potential “epidemic.”…

& the SEC:

…SEC Chairwoman Mary Schapiro was inundated with questions about the agency’s failure to oversee credit rating agencies, which provided overly rosy debt ratings for problematic mortgage securities….

The FDIC & Congress:

…Meanwhile, the FDIC and Congress were criticized for its decision not to collect deposit insurance premiums from well capitalized banks for roughly a decade between 1996 and 2006….

But it’s ok, because the FDIC agrees with them:

…Both Schapiro and FDIC Chairwoman Sheila Bair agreed that an SEC decision in 2004, under its chairman at the time, William Donaldson, to allow banks to identify how much capital and leverage they must have on hand, based on their own model-based formula, was a mistake that allowed banks to expand their leverage to problematic levels….

Where the lead to the obvious conclusion they were searching for the entire time – government help:

…Bair said. “I think the only place to tackle that on a system-wide basis for both banks and non-banks was through consumer protection rules that gave the Fed the authority to apply rules against abusive lending across the board to both banks and non-banks.”…

Now it might just be me, but thinking federal regulators with new powers over banks and abusive lending standards will get it right next time seems a tad optimistic…. you know, especially considering their massive failure with the current crisis.

Which is of course only a portion of the story.  The government, through various GSE’s, exacerbated the problems with global capital flows, by giving banks incentives to make riskier and riskier loans (here):

…The actual causes of our financial troubles were unusual monetary policy moves and novel federal regulatory interventions. Regulatory distortions intensified in the 1990s. Poorly chosen public policies distorted interest rates and asset prices, diverted loanable funds into the wrong investments, and twisted normally robust financial institutions into unsustainable positions.

We can group most of the unfortunate policies under two main headings: (1) Federal Reserve credit expansion that provided the means for unsustainable mortgage financing, and (2) mandates and subsidies to write riskier mortgages….

Please don’t misunderstand me – just because someone leaves their keys in their car doesn’t mean you should take it – so immoral actions on behalf of lenders, home buyers, and an inaccurate understanding of the true risks were also present in the prelude to this tragedy:

…There is no doubt that private miscalculation and imprudence made matters worse for more than a few lending institutions and individual borrowers….

& therein lies the true rub.  This imprudence is something for which the market should bear the price of their mistakes.  Only through bearing the true cost will their incentives ever line up with true moral behavior.  If you think a local bank or lender wasn’t able to sell every single loan to a GSE, they would’ve continued to allow bad loans to be made which they knew would sink themselves… well, that’s just not very likely and not very rational.

But don’t worry – I’m sure with these new and smarter people, this time they’ll figure out which banks are too big to fail, do it right, and only tax them in the amount they need to insure against the risk.

Over at the Huffington Post, Keli Goff wrote an interesting, yet disturbingly short sighted piece about particular health care costs which exist in large part due to personal private choices.

She begins the piece titled Mad at Greedy Insurers for This Health Care Mess? Then Why Aren’t You Mad at Your Greedy Neighbors discussing the government’s bail out of private businesses:

Raise your hand if you are still filled with anger when you hear the name AIG and picture the more than $100 million of your tax dollars that were delegated–without your consent–for employee bonuses there.

Now raise your hand if you were angry when you learned that Citigroup (which has received so much bailout money that American taxpayers have been dubbed “its major stockholder”) was planning to spend $50 million of your money on a luxury jet….

Even though the numbers she sights are a far cry from the actual tax dollars given to private business, she uses the anger over the bail outs to compare with the lack of anger of health care costs related to personal choice:

…There is something inherently distasteful about being expected to foot the tax bill for someone else’s personal choices–particularly bad ones–and not being given any choice of your own in the matter. Which is why I am so surprised that there has been so little anger expressed by leaders on either side of the health care debate when it comes to the issue of personal choice and responsibility in health care…

…According to the Centers for Disease Control, “obesity costs our nation as much as $147 billion per year in direct health care costs and lost productivity.” And according to the nation’s oldest anti-smoking organization smoking costs taxpayers a whopping $300 billion dollars annually, or 1,000 times the amount of the AIG bonuses….

Utilizing this ratio of anger levels contrasted with actual dollars, she follows through by discussing the trait both costs have in common, personal responsibility:

…Some health care reform advocates will argue these costs would be lower if there were government subsidized health care, but my question is why should the government, specifically taxpayers, subsidize health care costs for conditions that are not only preventable but essentially chosen by the patient? With all of the anger surrounding the health care debate, at town halls, in the House and Senate, where is the anger about personal responsibility?…

Like many before her, she perfectly frames the clear distinction between individual actions which don’t harm others and societal responsibility.  She uses our innate disgust of having to foot the bill for the negative consequences of others and sees the fundamental issue of both problems.

If only she had stopped there.  If only she understood clearly that when I hurt myself, I should be the only one liable for the resolution, we’d be in total agreement.  Instead, she illogically assumes that individual responsibility is shared among all citizens:

…To be clear, personal responsibility is not only up to consumers.  Mayor Bloomberg’s success in curbing smoking in New York is due to a multi-pronged strategy of aggressively fining bars and restaurants that allow patrons to flout the anti-smoking ban and raising the cost of cigarettes, in essence targeting the dealer as much as the addict….

Not only is responsibility shared in her view, but government force is also the solution.  Therefore since targeting these “bad smoking” behaviors has coincided with a decrease in the number of smokers , why not continue these policies to control other “bad” behaviors?

…A similar strategy should be undertaken federally against fatty foods and drinks (including many of the ones I love).  But as long as groups like the AFL-CIO oppose efforts to hold Americans financially accountable for their personal health choices, so that the system can afford to treat those who do not choose to be sick…

Thinking more critically though, this turns out to be very short sighted thinking devoid of any historical context and antithetical to fundamental human behavior.  Indeed, I think most people agree with her that when people make bad decisions that affect only themselves, they should be solely responsible for the consequences.

Where she fails is in properly analyzing government as the solution.  If one fully analyzes her solution, the lack of follow through in her thinking becomes easily spotted.

First, we know that human behaviors are heavily influenced by incentives.  It’s natural and obvious; we do things that benefit us.  For those willing to see reality for what it is, examples are all around us.  We can see it in the use of commission programs for corporate sales force.  We see it in TV commercials and marketing campaigns.  We even see it in the tax code.   Through denial or lack of contemplation though, some fail to see that this same fundamental human behavior also affects our decisions as they relate to health care.

In fact, one of the reasons for rising health care costs and bad personal choices is individual consumers have been moved further and further away from the actual cost.   In the US, part of rise in health care costs can be attributed to  government incentives which pushed health care plans away from individuals and towards employers.  For the same reason, others countries with socialized medicine also see rapidly rising costs of health care.

Second, we also know that historically, when governments are given the power continue to assume more and more control over individual lives, it ends in tyranny.  As we allow government to assume more responsibility for individual actions, we necessitate their ability to control those actions.

Assuming we still believe in a free society, one of the prices we pay is having the responsibility for the negative consequences brought about by our choices.

For instance, if you smoke – society doesn’t owe you CHEMO.  If I you eat 30K calories a day – society doesn’t owe you gastric bypass surgery.  If you drink a bottle of whiskey a day – society doesn’t owe you a liver.

However, by not of following the logic of her solutions and ignoring historical contexts, she can safely and happily assume government control is the answer:

…So the next time you are reminded of how angry you are at AIG or any other institution that was “bailed out” with your money, just remember that AIG may have mugged you once, but McDonald’s and your neighbor keeping them in business (and whoever invented the doughnut, bacon cheeseburger), will be sucking your wallet dry for decades to come….

Which only leaves us in the end with nothing more than a false dichotomy as if we only have two choices:  either we pay for it or we control it.

Really, due to faulty logic, she has unwittingly made a very cogent argument against government provided health care.  IE – we don’t need to control that behavior if we are not paying for it.

But I don’t know if she understands that by continuing to promote societal responsibility for individual choices, she is also logically promoting less freedom and more government intrusion.  I don’t know if she even believes in the value and morality of freedom.  I also don’t know that she doesn’t fully understands all of this, but due to value differences only, still believes government control to be the answer to health care problems.  And I really don’t know which is worse – being wrong based upon ignorance or understanding the full ramifications of increased government control, but not caring.

The truly concerning part should be that it doesn’t matter which is worse as the results are always the same.   For as long as we have enough people with these types of beliefs, we will continue to lose more and more individual freedoms.

As Hayek stated:

“We must show that liberty is not merely one particular value but that it is the source and condition of most moral values. What a free society offers to the individual is much more than what he would be able to do if only he were free.”