This site thinks so. 

If you hunt through the categories, you’ll see many ideas better than occupying Iraq while incurring tens of thousands of U.S. troop casualties.

Philosophy majors are not getting rich, but they’re able to buy enough food to allow them to sit around and ponder things.   Truth be told, philosophy majors are at the bottom of the list in starting salaries.  As someone who majored in philosophy, I found these statistics to be of interest.   In my junior year of undergrad, majoring in philosphy, I panicked. What was I going to do next?  My brother-in-law (a lawyer) suggested I go to law school.  This didn’t sound like a good idea at the time, because my self-image didn’t involve wearing a suit or carrying a briefcase. 

Nonetheless, I ended up going to law school, which is not uncommon for philosophy majors, according to this article. [I don't actually wear a suit or carry a briefcase as much as I worried I'd be doing.  Most work days, even for trial lawyers like me, occur back at the office, not in court.]  If you don’t want to go to law school, here are some other things you can do with a philosophy degree.

Despite the potential financial drawbacks, I’m glad I majored in philosophy.  To the extent that I’m able to think clearly, I attribute some of that ability to my training in philosophy.  There are many sites that describe the various benefits to studying the allegedly “worthless” subject of philosophy, including this page from the website of the University of South Dakota:

Philosophy is in a sense inescapable: life confronts every thoughtful person with some philosophical questions, and nearly everyone is guided by philosophical assumptions, even if unconsciously. One need not be unprepared. To a large extent one can choose how reflective one will be in clarifying and developing one’s philosophical assumptions, and how well prepared one is for the philosophical questions life presents. Philosophical training enhances our problem-solving capacities, our abilities to understand and express ideas, and our persuasive powers. It also develops understanding and enjoyment of things whose absence impoverishes many lives: such things as aesthetic experience, communication with many different kinds of people, lively discussion of current issues, the discerning observation of human behavior, and intellectual zest. In these and other ways the study of philosophy contributes immeasurably in both academic and other pursuits.

The long-range value of philosophical study goes far beyond its contribution to one’s livelihood. Philosophy broadens the range of things one can understand and enjoy. It can give one self-knowledge, foresight, and a sense of direction in life. It can provide, to one’s reading and conversation, special pleasures of insight. It can lead to self-discovery, expansion of consciousness, and self-renewal. Through all of this, and through its contribution to one’s expressive powers, it nurtures individuality and self-esteem. Its value for one’s private life can be incalculable; its benefits for one’s public life as a citizen can be immeasurable.

In spite of the above benefits, I must admit that articles in modern philosophy journals tend to drive me batty.  These authors too often publish for the sake of publishing rather than writing because he or she is passionate about the topic.  A clue that I am correct about this is to notice the incredible amount of esoteric hair-splitting characteristic of such articles.  And do we really need the 180,000th article about Immanuel Kant’s categorical imperative?  This is especially frustrating in that several professional philosophers have confessed to me that they don’t ever refer to the teachings of moral philosophers when deciding personal moral challenges.

For me, the challenge has been to learn to apply the critical thinking skills in practical ways to real world problems.  In short, I refuse to think that the study of philosophy itself is the end game.  My faith is that there are real-world applications and consequences for those classroom lessons.  Even if trying to apply one’s philosophy readings and writings to the real world is like emerging from the academic Cave and being blinded by the bright light of the real world. 

Dan Smolin writes some persuasive posts on the topic of investing.   I’m categorizing this post under “snake oil” because of a point that Smolin repeatedly makes:  that virtually every investment professional’s claim that he/she can help you beat the market is false.  Dan often does a Q&A.  Here’s a recent example:

Question: Can I beat the markets by buying low and selling high?

Answer: It would be great if you could. One study showed that someone with the ability to be in Treasury Bills during bad times in the market and in stocks during good times over a 52-year period would have seen her $1000 investment increase to a whopping $5.36 billion!  Do you know anyone who achieved these returns? Have you even read about any one who did?

Here is the bottom line: There is no evidence that anyone has the ability to predict highs and lows in the market. If they did, there would be a lot of billionaires out there who made their money market timing. They don’t exist.

Smolin doesn’t just look at the results.  He gives good analyses of why no one can consistently beat the market.  Yet there are huge numbers of intellectually sophisticated investors who want to believe, beyond all evidence, that there are special gurus out there who can work magic on their investments.  Smolin’s advice suggests that people avoid “stock-picking” (even by “professionals”) and that they buy broadbased index funds that have low maintanence fees. Don’t let any investment “expert” tell you otherwise.

One study looked at the performance of 71 mutual funds whose investment styles roughly paralleled the S & P 500 over a 10 year period. Only two of these funds beat the index.

In another study, Vanguard founder John Bogle found that only nine out of 355 equity funds beat their benchmark over a period of 30 years.

There are many similar studies.

Stock picking is a loser’s game for most investors.

There might not be a plausible way out of our country’s financial mess.  That’s the opinion of Kevin Phillips, a former republican strategist who works as an economics commentator.  What are the main problems? 

[P]hony Washington statistics and warped market measurements make it doubly hard to tell. The federal Consumer Price Index is already regarded by many Americans as a con job, and the press periodically quotes investors who state their belief that current U.S. inflation is really 6 to 9 percent a year, not the 2-4 percent the government alleges. I agree. On top of which, because the value of the dollar has dropped so far, the Dow Jones Industrial Average at the end of March was not really 12,200, a number barely up from its 11,700 peak in 2000. If you measure the Dow in Swiss francs or euros, two strong currencies, it has already lost some forty percent of its 2000 value. Too many Americans live in a dream-world of economic misinformation. . . . Today, the economic negligence of Washington and Wall Street, more than two decades in the making, has led to a multi-dimensional crisis in which this country faces an unprecedented convergence of problems: unprecedented debt, tumbling home prices, reckless money supply expansion, growing inflation, insufficient and expensive oil, and an eroding dollar. Sadly, there may no longer be a plausible way out.

Price Of Oil
Bob Englehart, The Hartford Courant

Our Saudi Friends
Keefe, The Denver Post

Tanking Economy
Nate Beeler, The Washington Examiner

Iraq Milestone 4000
Brian Fairrington, Cagle Cartoons

McCain and the Iraq War
Bob Englehart, The Hartford Courant

What is a meaningful way of understanding the immense amount of money the United States spends in Iraq each day? This simple video by American Friends Service Committee compellingly gets this point across.

How does one most fairly frame this issue of what the United States is spending in Iraq? It’s not only a matter of whether we should be in Iraq for strategic reasons (every reason presented by the Bush Administration has proven to be untrue). It’s also a matter of whether there are vastly superior ways of spending that immense amount of money (there are, as illustrated by the video below).

I’ve previously tried to illustrate the immense expense we are incurring in Iraq here , here , here and here.

Not all hookers are like “Kristen,” the gorgeous, high-living prostitute allegedly employed by Eliot Spitzer.  Not all prostitutes work for wealthy and powerful executives or politicians.   Not all prostitution is provided under the supervision of a sophisticated club like the Emperor VIP club.  

A friend of mine, Geri Dreiling, wrote a detailed article about the other kind of prostitute, the kind that will trade sex for “a sandwich from a nearby convenience store, even a bucket of chicken from KFC.”  Geri’s award-winning article was published by a St. Louis alternative newspaper, The Riverfront Times, in 2002.

Here are a few excerpts:

Like most prostitutes working the streets of St. Louis, Tammy Sue Curtner is a drug addict.

A 33-year-old mother with wavy brown hair and pale skin, Tammy traded her body for drugs, a blowjob for twenty bucks. She’d turn tricks in an alley, in a stranger’s car, on a dirty communal mattress in a vacant building littered with broken bottles and used needles.

Her johns were downtown businessmen on the way to work in the morning, construction workers on lunch breaks, married men bored with their subdivision lives.

“I’ve met all types of guys, straight down to the weirdest and the nastiest,” she says. “Lawyers, doctors, straight down to bums.”

. . . The four-hundred-plus women [Judge Jim Sullivan] sees are, on average, over the age of 31 and sexually abused drug addicts; some are mentally ill, dropouts with an eleventh-grade education and the mothers of two children. Some have HIV, and at least one study suggests that close to 30 percent of the women have hepatitis C, another deadly disease.

And no one resembles Julia Roberts.

Many are overweight, filthy from living on the streets, sick and desperate. They don’t wear seductive garb; instead, these women sport dirty T-shirts and shorts or discarded clothing thrown away in alley Dumpsters.

On Feb. 28, Rep. Earl Blumenauer, D-Ore. submitted House Congressional Resolution 305 for consideration to the House of Representatives: “Recognizing the importance of bicycling in transportation and recreation.” I assume that this resolution is a perfectly valid reaction to this boneheaded statement by one of Bush’s appointees.

I don’t think Blumenauer’s resolution has any chance of passing, because it suggests that some money now going for highways should actually be used to encourage people to use bicycles for their transportation needs.   God forbid that we actually encourage such a perfectly sensible mode of transportation.  You know the arguments, prevents obesity, uses no fossil fuel, cheap, is perfect for urban commutes.  I’ve previously posted on some of the many reasons to use a bicycle for commuting.  There are, indeed, many reasons for doing so, especially in an urban area where many commutes are fewer than five miles.  BTW, what would a bicycle-friendly city look like?  Here’s one version.

I learned of Bluemenauer’s resolution by reading Andrew Leonard’s article in Salon.com, “Life and death and bicycling.”  Just because you use a bicycle doesn’t mean you are “green.”  Leonard includes a Sierra Club test to see how “green” you are.  I am a rather cool 92 out of 100, a very green cyclist! 

I do want to publicly thank Representative Blumenauer for bringing some much-needed attention to bicycles as a serious mode of transportation.   His resolution is chock full of statistics that should (but likely won’t) wake up those who don’t yet take bicycling seriously.   I’m pasting in, below, the full text of Bluemauer’s resolution on the importance of bicycling (here’s another place to read the full resolution):

Mr. BLUMENAUER (for himself and Mr. OBERSTAR) submitted the following concurrent resolution; which was referred to the Committee on Transportation and Infrastructure

Whereas a national transportation system conducive to bicycling produces enriched health, reduced traffic congestion and air pollution, economic vitality, and an overall improved quality of living is valuable for the Nation;

Whereas by dramatically increasing levels of bicycling in United States cities tangible and intangible benefits to the quality of life for cities and towns across the country will be realized;

Whereas we now live in a Nation with 300 million people, and that number is expected to grow to 365 million by 2030 and to 420 million by 2050 with the vast majority of that growth occurring in urban areas with limited ability to accommodate increased motor vehicle travel;

Whereas since 1980, the number of miles Americans drive has grown 3 times faster than the United States population, and almost twice as fast as vehicle registrations;

Whereas one-third of the current population does not drive due to age, disability, ineligibility, economic circumstances, or personal choice;

Whereas the United States is challenged by an obesity epidemic, 65 percent of United States adults are either overweight or obese, and 13 percent of children and adolescents are overweight, due in large part to a lack of regular activity;

Whereas the Center for Disease Control estimates that if all physically inactive Americans became active, we would save $77 billion in annual medical costs;

Whereas over 753 of our Nation’s Mayors have signed onto the climate protection agreement of the United States Conference of Mayors urging the Federal Government to enact policies and programs to meet or exceed a greenhouse gas emission reduction target of a 7 percent reduction from 1990 levels by 2012;

Whereas the transportation sector contributes one-third of the greenhouse gas emissions in the United States and passenger automobiles and light trucks alone contribute 21 percent;

Whereas bicycle commuters annually save on average $1,825 in auto-related costs, reduce their carbon emissions by 128 pounds, conserve 145 gallons of gasoline, and avoid 50 hours of gridlock traffic; (more…)

In an earlier post, I argued that people need to better appreciate that dollars are fungible (see here  and here).  Why is it important to understand that dollars are fungible?  A case in point is the new American enthusiasm for turning food into fuel. Consider this report from Fortune Magazine:

The growing myth that corn is a cure-all for our energy woes is leading us toward a potentially dangerous global fight for food. While crop-based ethanol -the latest craze in alternative energy - promises a guilt-free way to keep our gas tanks full, the reality is that overuse of our agricultural resources could have consequences even more drastic than, say, being deprived of our SUVs. It could leave much of the world hungry.

We are facing an epic competition between the 800 million motorists who want to protect their mobility and the two billion poorest people in the world who simply want to survive. In effect, supermarkets and service stations are now competing for the same resources.
 
This year cars, not people, will claim most of the increase in world grain consumption. The problem is simple: It takes a whole lot of agricultural produce to create a modest amount of automotive fuel.

The grain required to fill a 25-gallon SUV gas tank with ethanol, for instance, could feed one person for a year.

And consider this additional bad news from Earth Policy Institute: 

We are witnessing the beginning of one of the great tragedies of history. The United States, in a misguided effort to reduce its oil insecurity by converting grain into fuel for cars, is generating global food insecurity on a scale never seen before.

The world is facing the most severe food price inflation in history as grain and soybean prices climb to all-time highs. Wheat trading on the Chicago Board of Trade on December 17th breached the $10 per bushel level for the first time ever. In mid-January, corn was trading over $5 per bushel, close to its historic high. And on January 11th, soybeans traded at $13.42 per bushel, the highest price ever recorded. All these prices are double those of a year or two ago.

As a result, prices of food products made directly from these commodities such as bread, pasta, and tortillas, and those made indirectly, such as pork, poultry, beef, milk, and eggs, are everywhere on the rise. In Mexico, corn meal prices are up 60 percent. In Pakistan, flour prices have doubled. China is facing rampant food price inflation, some of the worst in decades.

Here’s are a few rhetorical questions to consider:  Can Americans justify filling up any more of those big SUV fuel tanks now that there is solid evidence that doing so will cause families on the other side of the world to suffer and die?  Can we justify cranking up the heat in the winter to stay toasty warm?  Should we merrily take long trips without considering the effects of burning this extra fuel on food prices (and thus food availability) to those people who are living on the margin?  Can we justify building more houses in the exburbs? 

We are now witnessing a collision between A) our desire to have fun and feel prestige through the discretionary buring of fuel, versus B) our ability to honestly look in the mirror to see ourselves as kind, decent and caring people.

“The free market–the invisible hand–will take care of everything.”

I’ve addressed this topic of the free market as alleged panacea several times before.  I’ve referred to this blind faith in the market as unsubstantiated.  I’ve mockingly referred to the common belief in the wisdom of the invisible hand as a belief in the Fouth Person in the Holy Quartet.  Why mock?  Because stark shortages of critically important natural resources loom in every direction.   And yet we’re in denial. You deny the denial?  Then how is it that we tolerate, this year, big U.S. metropolitan areas like Raleigh-Durham and Atlanta had only a few weeks left of their municipal water supplies?  We tolerate that we are drawing down unreplenishable water sources throughout the desert southwest.  Intelligent civilizations don’t deny such dangers.  They consciously deal with their problems.

I’ve just read a well-phrased description of why the modern version of the free market can’t save us from our problems regarding impending shortages of essential natural resources.  The following quote is from a new book available free on-line from Population Connection: PLAN B 3.0: Mobilizing to Save Civilization, by environmental analyist, Lester R. Brown (2008).

Now with the economy as large as it is, the indirect costs of burning coal—the costs of air pollution, acid rain, devastated ecosystems, and climate change—can exceed the direct costs, those of mining the coal and transporting it to the power plant. As a result of neglecting to account for these indirect costs, the market is undervaluing many goods and services, creating economic distortions.

As economic decision-makers—whether consumers, corporate planners, government policymakers, or investment bankers—we all depend on the market for information to guide us. In order for markets to work and economic actors to make sound decisions, the markets must give us good information, including the full cost of the products we buy. But the market is giving us bad information, and as a result we are making bad decisions—so bad that they are threatening civilization.

The market is in many ways an incredible institution. It allocates resources with an efficiency that no central planning body can match and it easily balances supply and demand. The market has some fundamental weaknesses, however. It does not incorporate into prices the indirect costs of producing goods. It does not value nature’s services properly. And it does not respect the sustainable yield thresholds of natural systems. It also favors the near term over the long term, showing little concern for future generations.

Dick Cavett once said: “It’s a rare person who wants to hear what he doesn’t want to hear.”  Plan B 3.0 is the kind of information that those rare people ambivalently clamor to hear.    It’s clearly written and well documented.  There’s nothing shrill in Lester Brown’s book; just the facts—lots of facts that paint a dire picture.  Over and over, humans are overexploiting precious resources, and the situation is getting dangerous in many ways.  What’s at stake?  You name it.  Oil, food, water, forests, health, fisheries.   On the topic of fisheries, did you know that there are essentially no cod to be caught in the North Atlantic Ocean any more?   Gee, how did that happen?  Why didn’t the “free market” protect the North Atlantic Ocean?

Brown argues that we need to dramatically change the way we live and consume.   He argues that the “free market” is not a cure, unless we first make the true costs of over-exploitation visible and force purchasers to pay the full price.   We need to “Get the market to tell the ecological truth.” For example, the true cost of a gallon of gas is not $3/gallon, but more like $12/gallon. (more…)

A new Salon.com book review gives us the depressing and infuriating answers to how much the Iraq adventure is costing the citizens of the United States.   The book, written by Joseph Stiglitz and Linda J. Bilmes, is titled “The Three Trillion Dollar War:  The True Cost of the Iraq Conflict.”   In typical dyfunctional White House style, White House spokesman Tony Fratto has argued that the book is misguided because “One can’t even begin to put a price tag on the cost to this nation of the attacks of 9/11.”  As though the occupation of Iraq has anything to do with 9/11 . . .

The numbers presented by Stiglitz and Bilmes are truly staggering:

“The Three Trillion Dollar War” talks about two types of war-related expenses: budgetary and social. Budgetary costs include operational spending on Iraq and Afghanistan, which they estimate will total from $1.7 trillion to $2.7 trillion. (Throughout the book, the authors put forward two sets of figures: one based on a “best-case scenario” and one on a far more likely “realistic-moderate” scenario.) This figure includes the expense of keeping armies in the field, paying veteran-related costs, replacing equipment ($400 billion for this alone), and paying interest on the vast debt we have incurred to fight the war. So far, Congress has actually appropriated $645 billion for Iraq and Afghanistan since 2001, plus the $200 billion Bush asked for in 2008. As the authors point out, this is more than the U.S. spends annually on Medicare and Medicaid combined. And the monthly “burn rate” to pay for the wars has gone steadily up, from $4.4 billion in 2003 to $16 billion today. This means that every American household is spending $138 a month on the current operating expenses of the wars.

The additional “social” costs that are not borne by the government are harder to calculate — and more controversial.

As an aside, I find the neocon sleight of hand interesting.  The usual neocon line when it comes to taxes is that money paid as taxes really belongs to the people.   Fair enough.   Why then, don’t neocons emphasize that these wild, irresponsible, inefficient and often corrupt expenditures on the Iraq occupation (I don’t call it a “war”) are being paid with my money and your money, not “government” money?  If any of you American families out there have a better use for $138 each month than blowing up buildings and people in Iraq, raise your hand!

In an interview published by McClatchy Newspapers Feb 27, 2008, Stiglitz warns that the worst is yet to come regarding our military expenses in Iraq and Afghanistan:

In an interview, Stiglitz said that too much of the public debate had been over the wars’ operational costs while the real budget strains would show up only years from now.

“The peak expenditures are way out,” he said, noting that the peak expenditures for World War II vets came in 1993.

The McClatchy article reminds us of the rosy 2003 predictions of the Bush Administration:

When U.S. troops invaded Iraq in March 2003, the Bush administration predicted that the war would be self-financing and that rebuilding the nation would cost less than $2 billion.

Being off by a few decimal points in grade school gets a student a well-deserved “F.”  

I received this email from a regular reader in response to one of my responses to my Creationism in Florida Schools post:

“The real question that comes to my mind after reading this St. Petersburg Times poll is, should we allow popular demand to decide what is taught in science classes?”

How about for deciding what is taught in science, deciding tax policy, setting social programs, setting foreign policy, etc., etc., etc.? Should we allow popular demand to decide for these as well? I think we currently do, and I think it is with the same disastrous results. The next logical question is how should we pick the deciders? The problem is, we will never move to the next logical question.

What was considered ancient political wisdom at the time of the Caesars was: If the people can vote themselves bread and circuses, they will. Concentration of capital is the primary benefit of a taxation system. It allows big things to be done by a people of whom no individual member can afford. Government social programs (a form of insurance that used to be the province of churches, thus the tradition of tithing) are an example of dilution of capital. As is the Economic Stimulus Package that raced through our government checks and balances without much of either.

The examples of Ancient Greece, the Medici families (practically an empire unto themselves), the California legislature, and the Summerhill project (as described in the book by A.S. Neill) show that, once people get used to controlling their own disbursments as a group, they eventually regularly (but not always) behave in a responsible manner toward the group, and therefore unselfishly benefit themselves. Good things can, and usually do, come of it.

But a key word is “eventually”. They must vote themselves “pork” for long enough to see the damage done by not providing for the greater good. Our system would prevent sufficient damage to let people see how bad these decisions can be. So we are perpetually in the broad borderlands between doing something good, and fiscal collapse.

The Federal Government was set up as a coordinator between the States of the union, and to limit the power of States where it may interfere with rights of the people. Phrases like “Provide for the Common Defense” and “Insure domestic tranquility” come to mind. Early in the 20th century, legislators went hog wild amending the constitution.

Then we had a rash of arguably unconstitutional federal programs established, such as Income Tax and Social Security (technically, these are voluntary). But the federal income tax was set up to pay for the common defense (war debts). And with over 20 workers per retiree, who would mind 5% for retirement insurance, half paid by the employer? Rather than deal with charging the states that then pass the charges on to the residents as state taxes, it was more expedient to charge people directly, originally based on the ability to pay. The personal deduction was originally above the median family income. Now the deductible is well below the poverty level. Also there are now only 7 workers per retiree, and falling (14% to FICA).

(more…)

Bill Moyers recently interviewed Benjamin Barber, a renowned political theorist and a distinguished senior fellow at Demos — a public policy think tank here in New York City. Barber’s most recent book is Consumed: How Markets Corrupt Children, Infantilize Adults, and Swallow Citizens Whole (2007). What’s the focus of this book?

[T]he global economy produces too many goods we don’t need, too few of those we do need, and, to keep the racket going, targets children as consumers in a market where shopping is a twenty-four hour business. Capitalism, he says, “seems quite literally to be consuming itself, leaving democracy in peril and the fate of citizens uncertain.”

Barber argues that we now have “push capitalism”:

They’ve got to sell all this stuff, and they have to figure out how to get us to want it. So they take adults and they infantilize them. They dumb them down. They get us to want things. And then they start targeting children. Because it’s not enough just to sell to the adults.

One prominent example is bottled water, which is often actually bottled tap water. Was there ever really a demand for expensive bottled tap water?  Yet so many of us demand it and claim to need it. Barber argues that American adults are, indeed, infantilized.

What I mean is that grownups, part of being grown up is getting a hold of yourself and saying, “I don’t need this. I’ve got to be a gatekeeper for my kid. I want to live in a pluralistic world where, yes, I shop, but I also pray and play and do art and make love and make artwork and do lots of different things. And shopping’s one part of that.” As an adult, we know that. But if you live in a capitalist– society that needs to sell us all the time, they’ve got to turn that prudent, thoughtful adult back into a child who says, “Gimme, gimme, gimme. I want, I want, I want.” Just like the kid in the candy store. And is grasping and reaching.

Barber argues that push capitalism is threatening democracy.  It seduces us into thinking that being a consumer is being a citizen.

That a citizen is nothing more than a consumer. That voting means spending your dollars spreading around your private prejudices, your private preferences. Not reaching public judgments. Not finding common ground. Not making decisions about the social consequences of private judgments, but just making the private judgments. And letting it fall where it will.

How do we combat this threat of the hyper-consumption of un-needed goods and services that is driving us deeply into debt?  Barber makes three suggestions.

First of all we, as consumers, have to be tougher. We are the gatekeepers for our kids and our families. We have to be tougher. I mean, I ask anyone out there who needs to go out at 2:00 AM to go shopping? For God sakes, wait ’til Monday afternoon.

Second thing is capitalism has to begin to earn the profits to which it has a right, when it takes real risks. Inventing something that is needed. Folks working in alternative energy, some of them are going to make real money.

Barber’s third approach is a slap at those who disparage government and naively tell us that we should look to the “free market” to solve our problems.

We’ve got to retrieve our citizenship. We can’t buy the line that government is our enemy and the market is our friend. We used to say government can do everything, the market can do nothing. That was a mistake. But now we seem to say the market can do everything and government can do any– nothing. [But] Government is us. Government is our institutions. Government is how we make social and public choices working together. We’ve got to retrieve our citizenship.

Advertisement (almost a full page ad) for a huge new casino opening soon in St. Louis, published in the November 30, 2007 St. Louis Post-Dispatch. 

I didn’t know that happiness was so easily achieved.  And from this ad, it appears that everyone comes out ahead at the casino.

Adam Smith argued that everyone will ultimately benefit when each person acts out of self interest.  For a long time now, economists have now shown that Smith’s view was naïve, and that even rational people will act in ways that leave everyone worse off.  This dysfunctional process leads to an over-exploitation and destruction of common resources known as the Tragedy of the Commons:

Free access and unrestricted demand for a finite resource ultimately structurally dooms the resource through over-exploitation. This occurs because the benefits of exploitation accrue to individuals or groups, each of whom is motivated to maximize use of the resource to the point in which they become reliant on it, while the costs of the exploitation are distributed among all those to whom the resource is available (which may be a wider class of individuals than that which is exploiting it). This, in turn, causes demand for the resource to increase, which causes the problem to snowball to the point in which the resource is exhausted.

The October 19, 2007 issue of Science (available only to subscribers online) contains a short article about three economists (Leonid Hurwicz, Eric S. Maskin and Roger B. Myerson) who have recently been awarded a joint Nobel Prize in economics for their work regarding “mechanism design theory.”  This theory

aims to find schemes, or mechanisms that in sure that acting in self-interest will indeed lead to benefits for all.  Today, its applications range from how best to auction broadcast rights and other public resources to contract negotiations and elections.

How does mechanism design theory work?  It starts with the recognition

that unbridled self-interest doesn’t always lead to the greater good.  For example, if the people of the town were asked to chip in to build a bridge, each person would benefit by underestimating his or her share and letting others bear the cost.  So for lack of funds, the bridge would never get built.  That’s sort of a logically unavoidable lose-lose situation is known as a Nash equilibrium.

Hurwicz explored ways of tweaking the rules “so that the most beneficial state and the inevitable equilibrium state are one and the same.”  It seems undeniable that the free market, if allowed to run amok, is destructive to our long-term societal needs.  I was concerned about this issue in an earlier post, although I was perhaps melodramatic with my title.  What kind of tweaks does mechanism design theory offer to the markets?

“It’s a little Machiavellian,” says Gabriele Demange of the Paris school of economics.  “You design a game so that in the end the Nash equilibrium comes out to be what you want.”  For example, each person could be required to pay what others think the bridge is worth, thus eliminating the incentive to lie.

The article in Science suggests that mechanism design theory has promising applications in areas such as climate change.

Unrestricted free-markets are a proven method of depleting valuable resources.  It has happened over and over.  One of the most dramatic examples is the lack of commercial fishing in the North Atlantic Ocean, formerly teeming with fish.  Nonetheless, it is commonly argued among conservatives that government is incompetent and destructive whenever it intervenes in the economy, and that the freewheeling and unrestricted efforts of individual independent entrepreneurs are our only hope.  This blind faith in the “free market” often takes on a religious fervor.

I don’t dispute that entrepreneurs are great at some things, such as stocking the shelves with goods and services demanded by consumers. It is equally clear, however, that a society with long-term ambitions needs to somehow hook its energies to those long-term aims. 

The unregulated free market reminds me of the way natural selection works.  Neither unregulated markets nor natural selection “see” into the future or “try” to achieve any particular at long range end. That which ultimately evolves from either process is not necessarily “sought” by the real-time actors.  The result, again, is often the destruction of valuable resources upon which those short-term actors (and others) critically depend.

With notable and relatively few exceptions, corporations are short-term, shortsighted self-interested amoral entities seeking immediate high profit at the expense of preserving public resources.  When they are not regulated, corporations have repeatedly functioned to destroy valuable public resources.  They are especially pressured to run toward short term profit by the unregulated hedge funds that essentially run them.

I am not familiar with the nuts and bolts of “mechanism design theory” beyond the sketch presented in Science, but it sounds intuitively correct that free markets need to be tamed and tweaked in order to maintain some focus on critically important long-term needs.

Paul Krugman points his finger at the ever-more-visible source of the problem. Our economy is extremely fragile and we are all about to pay the price–we’ll not all of us . . .

Now the bill is coming due, and almost everyone - that is, almost everyone except the people responsible - is having to pay.

[The] people who should have been alert to the dangers, and taken precautionary measures, instead blithely assured Americans that everything was fine, and even encouraged them to take out risky mortgages. Yes, Alan Greenspan, that means you.

But another part of the answer lies in what hasn’t happened to the men on that Fortune cover — namely, they haven’t been forced to give back any of the huge paychecks they received before the folly of their decisions became apparent.

Around 25 years ago, American business — and the American political system — bought into the idea that greed is good. Executives are lavishly rewarded if the companies they run seem successful: last year the chief executives of Merrill and Citigroup were paid $48 million and $25.6 million, respectively.

Cartoons often communicate complex political ideas faster and better than prose.  For this reason, DI recently purchased a license from Cagle Cartoon Syndicate in order to reprint the cartoons of some of the best cartoonists in the business.  We are proud to support this work.  Today’s topic is oil. 

(more…)

If you think it’s difficult to read about the way America is wasting lives in Iraq, it’s just the beginning.  In an article entitled “The Economic Consequences of Mr. Bush,” Vanity Fair has examined the ways in which the Bush Administration has wrecked the American economy.  There is lots of bad news to share, including this:

Think of the interest we are paying, year after year, on the almost $4 trillion of increased debt burden—even at 5 percent, that’s an annual payment of $200 billion, two Iraq wars a year forever. Think of the taxes that future governments will have to levy to repay even a fraction of the debt we have accumulated. And think of the widening divide between rich and poor in America, a phenomenon that goes beyond economics and speaks to the very future of the American Dream.

Joseph Stiglitz, the author of this article, is the former chief economist of the World Bank and a Nobel laureate.  On the heels of this scathing report, consider this additional article reporting near-panic in light of recent Congressional testimony by Chairman of the Federal Reserve, Ben Bernanke.

Whenever we take the time, we are better able to see that all issues are anchored by deep issues.   That’s the kind of day it was for me today. 

I’m in Washington D.C., attending the Consumer Rights Litigation Conference sponsored by the National Consumer Law Center.   NCLC is an invaluable resource for those of us who advocate and litigate for consumer rights.  At one of the afternoon sessions today, I had a chance to hear a panel of consumer advocates discuss recent developments in federal law regarding consumer rights. 

It’s quite depressing, for the most part.  You see, well-monied corporate financial interests own Congress.   Consumer rights are on the ropes.   Many industries are free to lie, cheat, steal and to impose onerous terms on consumers, thanks to the best federal laws money can buy.  They do this through corporate immunity, preemption and the imposition of mandatory binding arbitration before biased arbitrators.  All of these were gifts from Congress in return for huge amounts of money contributed by lobbyists.

I’ve been to Washington D.C. several times before, and I’ve always reveled in the history and the architecture.  

Now, I can’t help but feel ambivalent.  It’s a city awash in immense amounts of corrupt money. 

We are a country that preaches that the People are the government, but that is less true than ever.  If you don’t believe me, just try to call your Congressional representative, mentioning that you are a concerned citizen.  See if you can get five minutes with him or her.  Then offer to contribute $100,000 to his or her next campaign and see what happens. Here’s more proof that our lawmakers have little or no conscience when it comes to bribes:  note last week’s revelation that the head of the Consumer Products Safety Commission sees no problems taking $60,000 in gifts and trips from businesses she is charged with regulating.

Back to NCLC.  Here’s what kind of work NCLC does.  NCLC members represent the interests of un-powerful people (which includes many middle class folks these days).  It provides consumer lawyers like me with information that we need to litigate cases against powerful corporate interests.  I’ve sued predatory lenders that include payday lenders, title lenders and sub-prime mortgage companies; for each of these suits, I’ve drawn upon the guidance of NCLC.  When big corporate interests break state laws, many of them are allowed to hide behind mandatory arbitration clauses that they unilaterally impose upon their customers.  The ability to do this was yet another gift from Congress. 

Before I go any further, let me make one thing clear.  Many consumers plunge themselves into debt irresponsibly and get exactly what they deserve when the debt collector comes calling.  When a people can’t afford medicine for their children, they should never go out and put a big-screen TV on the credit card.  Again, there are many (many) irresponsible consumers.  But not all consumers who struggle financially are irresponsible.  That is why consumer lawyers feel compelled to do the work they do.

NCLC helps me (and other consumer lawyers) by providing an excellent set of legal reference books, updated by practitioners.   They offer advice to those who are new to the consumer law field.   This information is invaluable.  (more…)

The theme is well focused here.  We laugh about this, though the topic (and therefore any reasonable solution) is off-limits to today’s savvy politicians.

Today, the following Associated Press article was run on page-19 of my local newspaper (the St. Louis Post-Dispatch):

An epic drought in Georgia threatens the water supply for millions. Florida doesn’t have nearly enough water for its expected population boom. The Great Lakes are shrinking. Upstate New York’s reservoirs have dropped to record lows. And in the West, the Sierra Nevada snowpack is melting faster each year.

Across America, the picture is critically clear — the nation’s freshwater supplies can no longer quench its thirst.

The government projects that at least 36 states will face water shortages within five years because of a combination of rising temperature, drought, population growth, urban sprawl, waste and excess.

“Is it a crisis? If we don’t do some decent water planning, it could be,” said Jack Hoffbuhr, executive director of the American Water Works Association, based in Denver.

Water managers will need to take bold steps to keep taps flowing, including conservation, recycling, desalination and stricter controls on development.

The price tag for ensuring a reliable water supply could be staggering. Experts estimate that just upgrading pipes to handle new supplies could cost the nation $300 billion over 30 years.

“Unfortunately, there’s just not going to be any more cheap water,” said Randy Brown, utilities director for Pompano Beach, Fla.

Truly, this is a major story; our country is running out of a critically important resource.  Combine that lack-of-water news, though with the equally unreported news that the world is running out of another critically important resource: oil. How bad is it?  I’ve previously reported on the issue of peak oil before (and see here).

Recently, I’ve read a book that, even if it is only partially accurate, should be front page news in every newspaper in America, day after day.  

The book is The Long Emergency: Surviving the End of Oil, Climate Change, and Other Converging Catastrophes of the 21st Century, by James Howard Kunstler (2005).   Kunstler writes that

America is still sleepwalking into the future.  We walked out of our burning house and we are now headed off the edge of a cliff.  Beyond that cliff is an abyss of economic and political disorder on a scale that no one has ever seen before.  I call this coming time The Long Emergency.

Kunstler writes that the main problem is the end of cheap oil and natural gas.  These resources

underlie everything we identify as a benefit of modern life.  All the necessities, comforts, luxuries and miracles of our time-central heating, air conditioning, cars, airplanes, electric lighting, cheap clothing, recorded music, movies, supermarkets, power tools, hip replacement surgery, the national defense, you name it-we owe their origins or continued existence in one way or another to cheap fossil fuel.

Kunstler argues that the steady technological progress we’ve experienced thanks to cheap oil has tricked us “into a kind of Jiminy Cricket syndrome, leading many Americans to believe that anything we wish for hard enough can come true.”

What are Kunstler’s facts?  Here are some of them (starting on page 66):

The total planetary endowment of conventional nonrenewable liquid oil was roughly 2 trillion barrels before humans started using it.  Since the mid-19th century, the world has burned through roughly one trillion barrels of oil, half the total there ever was, representing the easiest to get, highest-quality liquids.  The half that remains includes the hardest oil to get, lowest quality liquids, semi-solids, and solids.

Worldwide discovery of oil peaked in 1964 and has followed a firm trend line downward ever since. (more…)

Senator Bernie Sanders writes that the American Middle Class is being decimated.  He cites some interesting numbers.  Here’s a couple shockers:

Robert Frank, a Wall Street Journal reporter, has detailed the lives of the rich and famous in the book Richistan. He writes that households with a net worth of between $100 million and $1 billion last year spent an average of $182,000 on watches. Meanwhile, in the real world, 400,000 qualified students were unable to go to college because they lacked the funds.

Frank also details how during this one-year period the economically elite households spent $311,000 on cars, $397,000 on jewelry and $169,000 on spa services. At the same time, President Bush presented a budget in which he proposed cuts that would deny child care to 300,000 families and food stamps for 280,000 families.

Why fear the Invisible Hand?  Because the invisible hand is evil.  As construed by those conservatives currently in power, it is the economic equivalent of the Devil. 

This conclusion is going to come as a shock to many conservatives, because they give homage to the invisible hand as though it were the Fourth Person of the Holy Quartet. 

Before going further, let’s consider the literary origin of “the invisible hand.”  The phrase was coined by Adam Smith, as recounted by Wikipedia:

In The Wealth of Nations and other writings, Smith claims that, in capitalism, an individual pursuing his own self-interest tends to also promote the good of his community as a whole through a principle that he called “the invisible hand”. In detail, a free competitive market ensures that those goods and services perceived as most beneficial, efficient, or of highest quality will naturally be those that are most profitable. Thus, self-interest striving for profit has the side-effect of benefiting everyone by increasing standards. Smith saw the mechanism for this as being the free price system.

Conservatives have grabbed this metaphor of the invisible hand as though it were both descriptive and prescriptive.  The current use of the phrase by conservatives is admittedly more expanded than Adam Smith’s original use.  The modern conservative claim is not only that the invisible hand controls the economy.  They also claim that the invisible hand should be in charge.  They believe that millions of private purchasing decisions are automatically and deftly coordinated by the omniscient and omnipotent Invisible Hand. We do the bidding of the Hand.  We benefit “the good of the community as a whole” when we buy our whiskey, our triple cheeseburgers, our stacks of gambling chips, our Barbie Dolls and our Hummers. 

Conservatives are convinced that the Hand orchestrates all of our private local urges into decisions that are also “best” for our communities and our world. When we race out to buy anything at all, then, the Invisible Hand allegedly smiles Its approval. To violate the Will of the Invisible Hand would be to contravene the will of God, for conservatives.  Lucky for us, however, even our most impulsive seemingly-irresponsible purchases cannot, by definition, violate the Will of the Invisible Hand.  Everything we buy is pre-approved by the Invisible Hand.  Foolishness is the equivalent of intelligence, by the grace of the Invisible Hand.

To be socially responsible (according to conservatives), we don’t need to give any thought to our purchase decisions.  Nor does government need to regulate any industry.  It’s all taken care of by the Hand.  “The Free Market will take care of it,” conservatives assure me, “no matter what it is.”  It is the Government that screws up the economy; the remedy is to stay out of the way of the healing powers of lassie faire, they say, i.e., kill government spending.  When we stay out of the way (by not interfering with the Majesty of the Hand), the Invisible Hand watches out for us, takes care of us and solves all problems in an utterly perfect way.   That’s what conservatives claim, even though they dramatically and irresponsibly increase government spending.

I disagree.  It’s time to judge the Invisible Hand by the damage It has wrought. It’s time to be irreverent, even blasphemous.  It’s time to mock the Hand and then kill it.

Under the Hand’s reign, we have seen our forests, soil and air contaminated.  The Hand has repeatedly given Its approval when we frivolously waste non-renewable resources like oil and fresh water.  The Hand has is conspicuosly silent now, however, in light of the total loss of commercial quality fish from most of the North Atlantic. The Hand approves that we are spending big money on foolishly while many of our schools are desperate for funds.  The Hand has allowed pesticides and toxins spread far and wide, despite the fact that we have almost no idea how these chemicals are affecting the health of humans. Our individual spending decisions are making us fat and sick and stupid, but that’s all OK by the Hand. 

All of this can only lead to one conclusion. The Invisible Hand is not benevolent.  Based on the waste, pollution and reckless spending allowed by the Hand, it is clear that the Hand is evil.  It’s time to publicly acknowledge the Hand’s evil and destructive intent so that we can make some big changes.  What’s the biggest change? 

We’re going to have to start thinking for ourselves when we make purchases. 

We can’t depend on the Invisible Hand to keep us “helping” our communities in blissful ignorance anymore.  No purchase should any longer simply be presumed to be beneficial–many purchases are damaging to the community and to our environment. There needs to be a counter-weight to private decisions to consume and confiscate.  No purchase should any longer be considered completely local–many products have wide-ranging damaging effects.  Nor should purchases any longer be presumed, in the absence of evidence, to be community-enhancing or amoral.  Many private purchases are destructive and immoral. We need to acknowledge that dollars are not fungible and that every purchase has moral consequences.

We need to start thinking more when we make purchases, or else we will continue to crap up our planet to such an incredible extent that the next generation will curse us every day for our failure to think.   

It’s time to kick the fiction of the Benevolent Invisible Hand out of our lexicon.  But first, it is time to expose the Hand for what it has become for too many people who currently hold political power: The Invisible Hand is an excuse for our collective refusal to think, our failure to care about others and our failure to care about even our own future. 

The current version of the Invisible Hand amounts to a total abdication of responsibility. It is a license to hurt others and destroy our own future. It’s time to kill the Hand before it kills us.

This video and attached article is so incredibly depressing, to think that this man is the leader of our country. Did I say depressing. Maybe I meant embarrassing or horrifying.   Especially horrifying in light of the economic shipwreck that is going to happen under the not-very-learned command of George W. Bush.  So much of this was totally unnecessary. The next generation will be often wondering why we betrayed them.

This set of charts is shocking.   It’s part of a website entitled “Too Much.”   Here’s an excerpt from the “About” page:

Each and every week, Too Much explores excess and inequality, in the United States and throughout the world. We cover a wide swatch of economic and political territory, everything from executive pay and lifestyles of the rich and famous to the latest research insights on how staggering income and wealth divides are impacting our health and our happiness.