Reminder that “struggle for existence” is a conceptual metaphor.

In the November, 2009 edition of Nature (available only to subscribers online) Daniel Todes has written an article entitled "Global Darwin: Contempt for Competition." Todes points out that although Darwin's idea of a "struggle for existence" made sense to his English peers, other biologists from other countries rejected this metaphor. Todes focuses on the alternative viewpoint embraced by many Russian biologists. In On the Origin of Species (1859), Darwin noted that "there must in every case be a struggle for existence, either one individual with another of the same species, or with the individuals of distinct species, or with the physical conditions of life. It is the doctrine of Malthus applied with manifold force to the whole animal and vegetable kingdoms." Through this quote, Darwin recognized that he was using "struggle for existence" in a metaphorical sense. Darwin had been urged to adopt this metaphor by Russel Wallace, who feared that natural selection "seemed to personify a perceptive and forward thinking selector, or god." Todes holds that Darwin's metaphor was common sense to those "who were living on a crowded island with a capitalist economy and highly individualist culture." Russian biologists lived in a very different place, however, which led them to "reject Darwin's Malthusian metaphor." Russians did not tend to explore densely populated tropical environments. Rather, they tended to investigate "a vast underpopulated continental plain . . . it was largely empty Siberian expanse in which overpopulation was rare and only the struggle of organisms against a harsh environment was dramatic." Todes points out the Russian political system also contrasted sharply with that of Darwin's England. In Russia, capitalism was only weakly developed, and the social classes stressed cooperation rather than individual struggle, one against the other. In fact, many Russian political commentators "reviled Malthus as an apologist for predatory capitalism and the soulless individualism." This context for the Russian research led to (many successful) studies in which the focus was "mutual aid" more than "struggle for existence." [more . . . ]

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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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So who wants to be a billionaire?

Clusterstock has detailed and easy-to-follow instructions to making ridiculous amounts of easy money. Start by forming a bank, hire all of your friends as bankers and raising some capital. After those preliminary steps, the hard part is done:

STEP 4: Borrow $9 billion from the Fed at an annual cost of 0.25%. STEP 5: Buy $10 billion of 30-year Treasuries paying 4.45% STEP 6: Sit back and watch the cash flow in. At this spread, you should be earning at least 4% per year on your $10 billion of capital, or $400 million. Sure, there's some risk that the Fed will grow a backbone and raise short rates, but there's not much risk. (They have an economy to fix and banks to secretly recapitalize). And in any event, if the Fed raises short rates, making your $1 billion will just take a bit longer. (And if they REALLY raise rates, causing you to actually lose money, it will be someone else's problem.)

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Illusions and personal decision-making

Behavioral economist Dan Ariely uses classic visual illusions and his own research to show that we are often not in personal control of our own-decision-making. Outside factors often compel our decisions, even though we always insist that we are always in control or our choices. The organ donation and ibuprophen examples are phenomenal. He also advocates a method for bar-hopping. Fun-filled and educational talk. The serious message is that we need to understand our vulnerabilities as "rational" people and then build our way around these vulnerabilities. This talk thus has implications for those who believe whole-heartedly in free will.

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