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19 November 2008

The Child Trap Also Threatens Our Security

One reason for the rise of overparenting described in a collection of books reviewed by Joan Acocella in the November 17, 2008 New Yorker is that adults, the supposed victims of this “child trap”, have come to believe life is a zero-sum game. The “sheer selfishness” of these parents and the children they rear, which Hara Estroff Marano points out in “A Nation of Wimps: The High Cost of Invasive Parenting,” leads naturally to the decline of altruism in the motivations of college students that Madeline Levine describes in “The Price of Privilege.”

The teacher who tells Richard Arum, “It all depends on who you grab,” in “Judging School Discipline: The Crisis of Moral Authority,” has learned that the best way to achieve order in the classroom is by abandoning the middle class pupils and directing attention to the kids near or below the poverty line. Relying on the instinctively altruistic lower income classes may also be the best way to preserve society’s ability to benefit from positive collaboration. Is it really alarming, as Steven Mintz claims in “Huck’s Raft: A History of American Childhood,” that the percentage of poor children in America is greater today than thirty years ago? While the middle class, in its zero-sum game rat race, has limited the size of its families so they have more to share with each other, the lower classes split their more meager incomes among larger numbers of offspring who aren’t compelled to put the goal of material gain ahead of excellence for its own sake.

Our real worry should be that the selfishness of our wealthy society will not invite another impulsively violent reaction from a less advantaged corner of the world. And it will not necessarily come only from Islamic fundamentalists.

17 November 2008

Technorati Profile

The New Liberalism

In his article in the November 17, 2008 New Yorker, George Packer credited Obama’s election victory to the mobilization of a movement akin to those that carried Roosevelt, Johnson and Reagan to transformative presidencies. But he bemoaned the fact that Obama’s “social-network platform” does not have the clarity and coherence of previous movements like labor organizers, civil rights marchers, and the religious right. The platform won’t die without a political leader like Obama—Technorati, Google Blogger, Facebook, Twitter, Huffington Post, and other bulletin boards in the Blogosphere will continue to live on nonsense or inconsequential commentary.

It’s using the platform for managing social affairs beyond an election that would be truly transformative. President-elect Obama’s challenge will be to provide clear and coherent direction for converting a successful campaign vehicle into an effective tool of democratic government.

06 November 2008

When Does Life Begin?

Colorado voters rejected a 2008 referendum on amending their constitution that would have banned abortion from the moment of fertilization in the womb. The Supreme Court decided in Roe v. Wade that abortion is not unconstitutional until the fetus in the womb is a viable living organism, i.e. its third trimester of existence. These two events illustrate the difference between principles of morality and of law.

The Justices were correct in limiting their opinion on the issue, and on the relevance of the U.S. Constitution, to a condition that society can have a practical effect on. Arbiters of morality, like churches, are free to influence their followers’ behavior in those situations over which only they have control. But they cannot, under our Constitution’s establishment clause, rely on the government to enforce their doctrines.

The Colorado proposition would cross that boundary. It might as well prohibit masturbation or dying one’s hair.

05 November 2008

The Real Purpose of Risk Models

As Warren Buffett said, “Beware of geeks bearing formulas.” There is a discipline in the physical sciences that limits the credulity given to theories about how the world is organized. Those hypotheses are always subject to challenge by investigating peers, even when a consensus accepts them as workable models. It’s that humility of science that seems to have escaped the financial engineers who created the risk reduction technology on which the markets have learned to rely.

Quasi-scientific models developed by “quants” are really only tools of persuasion, the use of which is motivated by the rewards that come to successful salesmen. They don’t exist primarily for the purpose of better understanding reality. Credit-default swaps were not really “created to insure blue-chip bond investors against the risk of default,” as Steve Lohr wrote in the November 5, 2008 New York Times. Rather, they were put together in order to convince investors to buy those securities and thereby earn greater fees for the brokers who sold them. Counterparty risk and the housing bubble could be ignored because they did not fit into the model. The risk model’s mathematical elegance and persuasiveness would be compromised by their inclusion.

One difference between an engineer and a scientist is the distance to their time horizons. Long after the financial engineer has collected his reward for the sale of a fancy credit instrument using his model, the economist/social scientist will still be trying to anticipate the long-term consequences of human behavior according to its formulas.

04 November 2008

Lessons of the Financial Crisis

Stephen Schwarzman’s prescription for the ailing global financial system in the November 4, 2008 Wall Street Journal won’t work if its focus is on reforming regulatory agencies in the U.S. Just like Alan Greenspan, he mistakenly believes that American markets act in their own self interest and adopt his principles. That they don’t is shown by the incentives offered to their executives. Those markets do not reward their most effective controllers as much as they reward their most productive rainmakers. Other cultures value the prestige that comes with a regulator’s power over events more than ours does. We keep score in judging a person’s accomplishments by measuring the wealth he accumulates. Because that wealth is the product of the market, there is a conflict for the person who would excel by regulating the market.

What is needed is for a scale of rewards to be offered to regulators that is independent of the market and comparable to the rewards paid by the market to its biggest revenue producers—outsized income to regulators on the scale of successful hedge fund traders. Only then will the talent be found that is needed to counterbalance the ingenuity of the financial wizards who create securities and other credit products that generate great wealth but risk imploding the entire market.

03 November 2008

Helping Iranians Find a Way Out

A major tenet of the Bush Administration has been its assumption that the U.S. has a right to change the behavior or structure of foreign governments when they do not play by our rules. It has concluded that the welfare of Americans depends on all other peoples allowing the U.S. to act freely in its own interest, particularly those nations that are endowed with control over assets we deem critical to our welfare. That puts the Middle East in an especially vulnerable position given the importance of energy.

That policy is dangerously wrong when it postulates that an acceptable means for achieving its goal is military action. Combating the similar conclusions of the German and Japanese states in the 1930s and 1940s was our rationale for entering WWII. The fortunate resolution of the Cold War that left the U.S. as the world’s sole superpower allowed us to invade Iraq with no effective sanction from the rest of the conventionally organized world. Of course, there has been violent opposition to our occupation, but it has been attributed to an international non-state terrorist organization, Al-Qaeda, and not to rightfully incensed patriots.

The ability of the U.S. to persist in its domination of Iraq has led the Bush Administration and its cheerleaders, such as the Heritage Foundation, to consider taking a similar course in Iran. Adopting such a strategy, however, would find much more effective opposition--the Persian cultural community, which has existed for thousands of years, would resist steadfastly. The wiser strategy would be to employ methods of public diplomacy and strengthen civil liberties in Iran. It will eventually help eradicate the current religious regime in Tehran and the threats to our interests that regime conveys.

Examining the requirements for using force to overthrow the Iranian government, as the Heritage Foundation does (cf. “U.S. Policy and Iran’s Nuclear Challenge,” James Phillips, http://www.heritage.org/Research/Iran/hl942.cfm), is perhaps necessary in order to make the regime and the Iranian population consider seriously the ideas that we communicate to them through public diplomacy and non-violent sedition. But using military action to effect political change in Iran would be disastrous, and create an enemy out of a friendly nation caught in a theocratic trap out of which it has not yet found the way out.

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