The ten biggest Wall Street lies of 2009

Author Les Leopold sums it up nicely, including the fact that TARP is only the tip of iceberg regarding taxpayer money being poured into Wall Street coffers. Merry Christmas to the big Wall Street banks, who work hard to . . . someone please remind me how these big banks to make the world a better place--what do they do for the economy or for productivity? Please tell me something more convincing than free market fundamentalism.

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Population Tetris

A few years ago, in a post called "Oil Tetris," I used the game of Tetris to illustrate the dangers of being dependent on petroleum and the fact that the United States consumes 5,000 gallons of gasoline per second. Today, I am offering a similar set of images to illustrate my concerns regarding the dangers of overpopulation (and its attendant degradation and depletion of natural resources). As one who has pledged to support the 2010 GPSO effort, I am advocating that we directly and unflinchingly address the issue of whether we have overloaded our planet, our little lifeboat in outer space, with people. Here's the general idea: If there were still only 2.5 billion people in the world (as there were as recent as 1950), it starved_girlwould be monumentally easier to sustainably tap into the world's resources to feed, house and clothe them. In 1950, it was not an empty world; 2.5 billion is a hell of a lot of people. Admittedly, it was not a peaceful world--it never has been a peaceful world, but it wasn't a world where so many basic critical resources were being stressed and exhausted (including water, oil, phosphates for fertilizer, food supply, ocean fishing and soil). So here is the illustration. Back in 1950, the baseline for providing for 2.5 people was much lower than it currently is. There was room for error--room to make changes in the way the world was being run while still giving access for most people regarding most resources. Here is the world in 1950: tetris-lowThe falling pieces represent societal needs, and there was more ability to meet those needs in 1950. But now the world is a different place, where 2 billion people live on less than $2/day. It's a world where huge numbers of people are without water and sanitation. It's a world were valiant efforts are necessary to keep the food supply even stable, much less to increase it. Back in 1950, we could increase the food supply significantly, because we hadn't yet filled the world with 6.7 billion people and we hadn't yet planted virtually every square mile that could be planted. Now, many emergencies regarding resources require desperate responses that aren't often publicized by the Western media; knowing that there are billions of hungry people throws a damper on our annual Christmas-time consumerist orgy. That's how difficult it is for affluent Westerners to give a damn about the big picture, making it naive to suggest that we simply need to redistribute existing resources and continue packing greater numbers of people onto the planet. Nor is it easy to reason with many religions that find it utterly inconvenient to limit the ability of their members to "go forth and multiply." There is little room for error these days, as represented by the following Tetris board: tetris-highThe question, then, is whether it is responsible to run our world like a highly stacked Tetris board, where starvation already affects one billion people and yet we continue to add 1.5 million more people to our resource-challenged world every week. Is it wise to live so dangerously? And for those who are tempted to comment that I should focus on things other than population, such as new technologies and social justice, by all means. I do that almost every week in my posts. But let's consider whether we would be better off also having the courage to address the basic issue of the carrying capacity of the planet.

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Training people to quantify risks

In the October 29, 2009 edition of Nature (available online only to subscribers), writer Michael Bond considered whether members of the general public could benefit from specialized training so that they could better appreciate risks. Believe it or not, there's a controversy in this field. According to Bond, many specialists think that the public "will never really be capable of making the best decision on the basis of the available scientific information." This pessimistic position advocates that risk-related decision-making should be conducted by paternalistic expert agencies, which should nudge people into making better decisions without educating them deeply as to why they should make the choices they are being encouraged to make. A classic example is changing the default on one's driver's license with regard to whether one would like to donate one's organs after death. Making the default that one will donate one's organs unless the box is checked dramatically increases those who participate in the program. The optimistic camp is represented by a variety of experts, including psychologist Gerd Gigerenzer, who advocates that "people can be taught to improve their decision make and skills." As the Nature article points out, poor decision-making is ubiquitous and it seriously undermines the well-being of people. When faced with unfamiliar emotion-fraud situations, "most people suspend their powers of reasoning and go with an instinctive reaction that will often lead them astray." Bond gives the examples of people refusing to get vaccinations for measles-mumps-rubella, and the unjustified fear many people have with regard to genetically modified crops. He also mentions the statistical deficiencies of healthcare providers, an issue I discussed in an earlier post. We still get all exercised about snakes, even though we rarely encounter them, but we ignore such things as peak oil and the danger of getting into automobiles. Why do people have such a hard time evaluating risks?

The problem, as many researchers in cognitive neuroscience and psychology have concluded, is that people use two main brain systems to make decisions. One is instinctive--it operates below the level of conscious control and is often driven by emotions. The other is conscious and rational. The first system is automatic, quick and highly effective in situations such as walking along a crowded pavement, which requires the near-instantaneous integration of complex information and the carrying out of well-practiced action. The second system is more useful and novel situations such as deciding on the savings plan, which calls for deliberate analysis. Unfortunately, the first system has a way of kicking in even when deliberation would serve best.
Gigerenzer argues that proper education and training could assist people to put the rational system in charge of the instinctive one. He claims that even one half-hour of training in statistics significantly improves people's ability to quantify risk. Bond lists several promising methods for improving critical thinking. One method is to train people to look at problems from an outsiders’ perspective. Another is training them to weigh multiple options simultaneously rather than looking at options one at a time. Another trick is to use "actively open-minded thinking," which requires people to intentionally consider more than the first conclusion that comes to their mind. How important is it that people learn better how to evaluate risks? In addition to the examples cited at the top of this article, research suggests that people who suffer from innumeracy overestimate the likelihood of terrorist attacks. They "tend to have a high body-mass index and tend to be poor at managing their own health." Those who believe that people can be trained to better appreciate statistics believe that people need to be taught to better "feel the numbers." They need to use real-life situations to illustrate the statistics. Many students don’t receive any training in statistics at all. In fact, your article mentions that only one law school in the United States requires a course in statistical thinking. This means that many judges and lawyers are not properly prepared to assess risks in our modern world. Younger students are neglected too. They are only taught the mathematics of certainty (such as geometry and trigonometry), not the mathematics of uncertainty. Bond’s article concludes with the suggestion that we now have a society of people who don't understand that they don't understand. He argues that society would see long-term benefits if we would only stress the need for a rigorous education in the statistics of risk.

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Why bailouts might not be long-term solutions for distressed homeowners

Well-founded criticism abounds that we shouldn't be bailing out large banks that have profited by providing imprudent (and oftentimes scandalous and even criminal) sub-prime loans to homeowners. One oft-mentioned alternative to bailing out the banks is to bail out the homeowners. One might justify this move on the ground that many recipients of sub-prime loans were invited to take out loans with exploding ARMS (adjustable rate mortgages). These are not the ARM's from decades past, mind you. Rather, these are loans that, within a few years of the loan closing, are guaranteed to require monthly payments that the homeowners couldn't afford, regardless of market fluctuations. Imagine, for example, a loan requiring payments of $1,000/month that would rise to $1,800/month within a few years, even when the cost of money stays relatively stable. The mortgage companies offering these types of refinances would be long gone by the time that this kind of loan explodes, forcing many of these homeowners into foreclosure or bankruptcy. In addition to the exploding ARMS, many distressed homeowners were victimized by hidden fees and penalties, including substantial pre-payment penalties, as well as "yield spread premiums," which are essentially under-the-table bribes paid to brokers. But why did so many homeowners sign up for loans they wouldn't be able to afford? Many of them were lied to by the mortgage companies (disclosure: In my law practice, I've represented many of these folks). Other borrowers were clearly irresponsible. Most of of the borrowers suffer from a condition mathematician John Paulos calls “innumeracy”: the “inability to deal comfortably with the fundamental notions of number and chance.” I'm not accusing the borrows of stupidity; rather, they tend to lack a specific skill set, the origin of which often extends all the way back to the grade school struggles with mathematics. The above observations serve as context to a discussion of a potential plan of action. The simple question are these: Should we bail out distressed homeowners? [more . . . ]

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Climate and Conspiracy

Climate Change--Those Hacked Emails It's been a week or more since a gentleman hacker stole a bunch of private emails from the University of East Anglia in an attempt to liberate supposedly secret evidence that the entire climate change crowd is in on a conspiracy to defraud the public. I haven't yet heard if anyone is filing charges against the man, but evidently some folks, especially the Limbaugh-Beck screaming meme crowd, feel this is the new Pentagon Papers and the hacker in question is their Daniel Elsberg. It is an unfortunate fact that some things---like this issue---are so complex that most people cannot follow all the data to the conclusions. They haven't the time, the resources, or, frankly, the inclination. But then if anybody could parse evidence at this level, what would need scientists for? Why would anyone devote an entire life to researching one thing? If Joe the Plumber could actually understand the science behind the Large Hadron Collider, Paleontology, Evolution, and Climate Change, what do we need specialists for? I'm sure someone has an answer along the lines of "We don't! They just sponge off taxpayers and study stuff no one gives a damn about!" I'd like to think most people are not so easily gulled, but I've been disappointed before and probably will be again.

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