Archive for the ‘Economics’ Category

Must-Reads of the Week: Obama’s Accomplishments and Diplomatic Brand, Facebook, Epistemic Closure, Financial Reform, Our Long-Term Fiscal Crisis and Problem-Solving Capacity, and Mike Allen

Friday, April 23rd, 2010

1. Obama’s Accomplishments. Jonathan Bernstein explains how Obama has gotten so many of his legislative goals accomplished despite the GOP’s constant obstructionism: By loading up the major bills with many other smaller items. In fact, according to PolitiFact, Obama has accomplished almost a third of his campaign promises if compromises count (and a fifth if they don’t).

2. Facebook v. Google. Ian Schafer in the Advertising Age has a smart take on Facebook’s recent challenge to Google and how Facebook is trying to reorganize the web.

3. Epistemic Closure. Julian Sanchez follows up on his starting post on the epistemic closure of the right wing. Every single link he provides in the article is worth following as the conversation he started extended across many people and was full of insights all around.

4. Obama’s Diplomatic Brand. Marc Ambinder has an excellent post on “the essence of Obama’s diplomatic brand.” While Ambinder acknowledges it’s too early to assess how effective Obama’s diplomacy will be and has been, he does a good job of describing it — and little wonder it bears little resemblance to the weak, anti-American apologizing that the right sees as Obama’s trademark. Ambinder lists a few qualities, but let me focus on one:

Bush assumed a position of direct strength, not deference, when he met with leaders. Obama has been decidedly deferential, which, in the traditional binary way the media covers foreign policy, allegedly suggests weakness. From Obama’s perspective, deference is both strategic and is demanded by the goals he sets out. Treating countries as equals foists certain obligations upon them. It helps leaders deal with internal politics. Year one, Obama was the star, and wasn’t seen as a heavyweight, even by some allies. Year two is different: he’s charted a course on legacy problems (Iran, Iraq, Afghanistan, Middle East peace), so the world knows where he stands.

5. How Financial Reform is Playing. There was some disagreement around the opinionosphere about how financial reform is “playing.” Initially, there was concern that the Republicans would once again follow their tried and true strategy of: Make up stuff that’s really awful — and pretend the bill is about that. There was concern that the Obama administration didn’t have a plan for this contingency, presuming that Republicans would crack under public pressure. And then, the SEC filed suit against Goldman and Blanche Lincoln (who was expected to water down the bill) adopted the strongest language we’ve seen and the Republicans seem to be breaking ranks over this with Bob Corker critizing McConnell’s lies and Chuck Grassley voting for the bill in committee. Kevin Drum suggests McConnell crossed some line of absurdity:

[I]t turns out there really is a limit to just how baldly you can lie and get away with it…[W]e seem to have reached a limit of some kind, and McConnell crossed it. Maybe we should name this the McConnell Line or something so that we know when future politicians have crossed it.

I tend to think Matt Yglesias is more right when he observed:

This time around, though, it doesn’t seem to be working nearly as well, perhaps because people realize we’ve seen this movie before.

6. Our Long-Term Fiscal Crisis. Jonathan Chait observes what may prove to be a fatal flaw in the political strategy of the GOP on fiscal matters if they authentically do support a smaller government:

Distrust of government makes Americans distrust everything people in governemnt say or do, including cut spending, which — with the exception of a few programs seen to help “others,” like welfare and foreign aid — tends to be wildly unpopular.

Their current strategy has been to provoke a fiscal catastrophe and cut government spending in the aftermath. But Chait suggests that this strategy of starve-the-beast governance may not work. On a related note, William Galston has an astutely even-handed piece describing the fiscal problems we are facing and what the solution must realistically be. He quotes Donald B. Marron in National Affairs who explains an idea that is antithetical to ideological right wingers:

Policymakers should not always assume that a larger government will necessarily translate into weaker economic performance. As few years ago, Peter Lindert—an economist at the University of California, Davis—looked across countries and across time in an effort to answer the question, “Is the welfare state a free lunch?” He found that countries with high levels of government spending did not perform any worse, economically speaking, than countries with low levels of government spending. The result was surprising, given the usual intuition that a larger government would levy higher taxes and engage in more income redistribution—both of which would undermine economic growth.

Lindert found that the reason for this apparent paradox is that countries with large welfare states try to minimize the extent to which government actions undermine the economy. Thus, high-budget nations tend to adopt more efficient tax system—with flatter rates and a greater reliance on consumption taxes—than do countries with lower budget. High-budget countries also adopt more efficient benefits systems—taking care, for example, to minimize the degree to which subsidy programs discourage beneficiaries from working.”

Right wingers rarely acknowledge this even as they oppose measures that would improve the efficiency of government (like the VAT). They simply call it “European-style socialism” and move on with addressing why on the substance more efficient government measures shouldn’t be adopted.

7. Our Problem-Solving Capacity. Stephen Walt has a very long and very, very good post that attempts to balance optimism (global violence is at historic lows!) with some pessimism:

One way to think about the current state of world politics is as a ratio of the number of important problems to be solved and our overall “problem-solving capacity.” When the ratio of “emerging problems” to “problem-solving capacity” rises, challenges pile up faster than we can deal with them and we end up neglecting some important issues and mishandling others.  Something of this sort happened during the 1930s, for example, when a fatal combination of global economic depression, aggressive dictatorships, inadequate institutions, declining empires, and incomplete knowledge overwhelmed leaders around the world and led to a devastating world war…

[Today] Washington D.C. has become synonymous with the term “gridlock,” leading the Economist magazine to describe the U.S.  political system as “a study in paralysis.” Obama did get a health care reform package through, but it still took an enormous effort to pass a watered-down bill that pandered to insurance companies and other well-funded special interests. Meanwhile, decisive action to address climate change, the persistent U.S. budget deficit, or financial sector reform remain elusive, and it’s going to get a lot tougher if the GOP makes big gains in the 2010 midterms. Nor is it reassuring to realize that the Republican Party seems to be taking its marching orders from two entertainers — Rush Limbaugh and Glenn Beck — the latter of whom has made it clear that he’s interested in making money and doesn’t really care about public affairs at all…

Nor is this problem confined to the United States. Japan’s ossified political order remains incapable of either decisive action or meaningful reform; the Berlusconi-government in Italy is an exercise inopera bouffe rather than responsible leadership, French President Nicolas Sarkozy’s early flurry of reform efforts have stalled and Mexico remains beset by drug-fueled violence and endemic corruption. Britan’s ruling Labor Party is a spent force, but the rival Conservatives do not present a very appealing alternative and may even lose an election that once seemed in the bag. And so on.

There are some countries where decision leadership is not lacking, of course, such as China (at one end of the size scale) and Dubai (at the other). Yet in both these cases, a lack of genuine democratic accountability creates the opposite problem. These government can act quickly and launch (overly?) ambitious long-term plans, but they are also more likely to make big mistakes that are difficult to correct them in time…

In short, what I am suggesting is that our inability to cope with a rising number of global challenges is not due to a lack of knowledge or insufficient resources, but rather to the inability of existingpolitical institutions to address these problems in a timely and appropriate way.

8. Mike Allen. Mark Leibovitch in the New York Times Magazine has an excellent profile of Mike Allen of Politico and how that organization is changing the news business by covering it like some combination of ESPN and Facebook’s feed of data on the activity of your friends. As a character study, it succeeds given Mike Allen’s unique personality — and as a look at the changing media landscape in politics, it succeeds in raising many questions about where we’re headed. Marc Ambinder responds.

[Image by me.]

Miracles Can Happen!

Thursday, April 22nd, 2010

Jonathan Chait:

What’s happening with financial reform right now is unlike anything that’s happened since I’ve been following American politics. Look at the fundamentals of the issue. This is a matter where a massive industry — one that accounts for close to half of all corporate profits — is adamantly opposed to new regulation. The merits of the issue are so mind-numbingly complex that even economists and policy wonks sound distinctly fuzzy on the details. Throw in a Republican Party that had pursued, with evident political success, a policy of total obstruction. I’d tell you this was a formula either for defeat or a toothless reform.

And yet a substantial reform now appears close to inevitable. It’s not a toothless reform — a set of derivative regulations more hawkish than anybody could have dreamed possible a couple weeks ago just passed through the Agriculture Committee. It’s one of those strange moments when the normal laws of politics have been suspended.

Wall Street’s enormous profits are evidence of a poorly functioning market (cont.)

Wednesday, April 21st, 2010

This is something that really needs to get more attention. William Cohan in the New York Times:

The easiest and most profitable risk-adjusted trade available for the banks is to borrow billions from the Fed — at a cost of around half a percentage point — and then to lend the money back to the U.S. Treasury at yields of around 3 percent, or higher, a moment later. The imbedded profit — of some 2.5 percentage points — is an outright and ongoing gift from American taxpayers to Wall Street.

H/t Ezra Klein.

I also came across this from James Kwak at the Baseline Scenario:

[I]f you see a company that has very high profits over a sustained period, there are two possibilities: either it is benefiting from a non-competitive market (e.g., it is a monopoly), or it is simply exceptional at innovating and staying ahead of the competition for years on end. If you see a whole industry that has sustained high profits, however, the latter explanation cannot hold, and you should immediately suspect a lack of competition.

[T]he thing that we should celebrate is not high profits, but competition. The pursuit of high profits is what motivates competition; but if a whole industry achieves high profits, then what you are seeing is not competition, but its opposite.

Wall Street’s enormous profits are evidence of a poorly functioning market.

Wednesday, April 21st, 2010

Matt Yglesias and Ezra Klein had 2 complementary points in posts yesterday. (Damn you, JournoList!) Yglesias:

…[L]ooking at this chart I think it’s hard to avoid the conclusion that Wal-Mart is the last thing we should be worried about. The worrying trend is the domination of the corporate landscape by super-profitable firms in the heavily regulated energy, banking, and telecom sectors.

Yglesias is making a point most commonly associated with libertarians that large firms often use the government — through favorable regulation, tax breaks and incentives, etc. — to increase their profits. For example, increasing the barriers for new firms in the industry and restraining their indirect competitors from direct competition. This follows the well-known principle that any government policy whose costs are diffused and whose benefits are concentrated will be adopted more often than not. Thus highly regulated industries tend to be dominated by a small number of large firms that make very large profits — because thanks to government regulation, there isn’t much competition. However, Ezra Klein observed:

In a competitive market, there’s really no place to make 27 cents on the dollar. Some other firm will come in and offer the same services for 24 cents, and then someone will undercut them at 19 cents, and so it will go until the profit margin narrows. Wal-Mart, for instance, has a profit margin of around 3.5 percent. Ah, capitalism.

Not so in the financial sector, though, which ever since deregulation has been posting higher and higher profit margins.

So, the exception to this trend is Wall Street — where deregulation has lead to higher profits. All of this seems quite intuitively true — both from a libertarian and from a liberal perspective — and even from a liberaltarian one.

The enormous profits taken out of every dollar (as seen in much of the the financial industry) is a demonstration of a lack of competition and thus a poorly functioning market. Of course, Goldman Sachs didn’t manage to make it on the list above — but it had more than double the amount of profit out of every dollar it took in as compared to each of the companies here. Goldman managed to take $0.26 of every dollar they made as profit to their shareholders. (And that includes the massive bonuses given to employees as expenses.) I think I need to see more data though to draw the conclusion that Klein is hinting at — that the deregulation of Wall Street increased it’s profits as a percentage of revenues — while deregulation generally has the opposite effect (as in the case of Wal-Mart).

Annie Lowery drives the point home in analyzing the 1Q results from Wall Street:

This is not quite a picture of a healthy industry. In a competitive marketplace, prices and fees at Wall Street firms should fall and margins should become thinner. On the one hand, Wall Street firms like J.P. Morgan and Goldman Sachs have seen a number of their competitors die in the past two years, and have absorbed business from the failed Lehmans and Bear Sterns of the world. But on the other hand, Wall Street profit margins have remained sky high except for a short blip during the worst of the credit crunch. And, an economist would tell you, such sustained levels of high profitability point to anti-competitive behavior…

[T]he profits point to a lack of competition. That is one thing the Dodd bill — via derivatives regulation — attempts to fix. Right now, Wall Street firms do not bid for big derivatives contracts — they simply quote a price and work over-the-counter. For that reason, derivatives are wildly profitable for the companies. The Dodd bill will force derivatives pricing to become public to the market, driving down margins as companies compete.

There’s a whole lot to unpack within these points about the nature of American capitalism and the government’s role in it.

But one key takeaway seems to be a repudiation of the most ideological take of either the left or right — and an acknowledgment that free markets are not merely what happens when the government is out of the way — but are created and maintained by a complex balancing act in which government regulates and participates. What you end up with is something less than socialism or libertarianism and more like liberalism:

Contemporary liberals reject the doctrinaire distinction between the “market” and the government that animated so much of the conflict in the 20th century. The free market should not be treated as some theoretical utopian ideal or as a perpetually lost state of innocence. And the government is not some evil force which must be reduced until it is of a size that it “could be drowned in a bathtub.” Rather the government and the free market exist together – and in a capitalist republic such as ours, each is dependent on the other. The free market does not exist in a state of nature but must be created by and maintained by the society and the state which provide the values and the rules and other conditions without which a market cannot be free. In other words, a free market is a product of a just government.

Follow-up post here.

[Image by f-l-e-x licensed under Creative Commons.]

How Financial Innovation Causes Financial Crises

Monday, April 19th, 2010

Ezra Klein explains how financial innovation causes financial crises:

Investors want to make more money with less risk. Someone invents a financial product that appears to make investors more money with less risk — in this case, subprime securities. Demand for this new product explodes. But few understand this new product, and even the people who do understand the new product don’t know how it performs under stress (it’s a new product, after all). At the beginning, this actually helps the product: because its risks aren’t known, they’re ignored, and so it looks like a better deal than it is and sells more of itself than it should.

Then something bad happens. The new product shows its flaws. And precisely because no one really understands it, the market cracks. Investors all run away at once, as they don’t really have the tools to assess the situation. Where lack of knowledge about the product originally drove demand, now it accelerates flight.

The Beijing Consensus

Friday, April 16th, 2010

Gordon G. Chang, for World Affairs, explains his argument for why the Beijing consensus cannot last and its power will soon begin to wane. He acknowledges that many do not share this view:

Some scholars and China watchers nonetheless believe that Chinese authoritarianism, in the words of Andrew J. Nathan, may be “a viable regime form even under conditions of advanced modernization and integration with the global economy.” Recent Beijing leaders, Nathan tells us, have institutionalized themselves. “Regime theory holds that authoritarian systems are inherently fragile because of weak legitimacy, over-reliance on coercion, over-centralization of decision making, and the predominance of personal power over institutional norms. This particular authoritarian system, however, has proven resilient.”

As many have pointed out, the projections of China’s growth into the world’s largest economy presume it’s current pace of growth continues despite serious environmental, demographic, and other challenges. But, Chang argues, even the regime’s success at creating prosperity undermines it:

Senior Beijing officials now face the dilemma of all reform-minded authoritarians: the economic progress that legitimates their leadership endangers their continued control. As Samuel Huntington taught us, sustained modernization is the enemy of one-party systems. Revolutions occur under many conditions, but especially when political institutions do not keep up with the social forces unleashed by economic change.

Beijing’s policies are widening the gap between the people, who are making a “kinetic dash into the future,” and their government, thereby ensuring greater instability. So it should come as no surprise that as China has grown more prosperous in recent years, it has also become less stable. As a people, the Chinese are not particularly obedient these days; they incite as many as 127,000 disturbances a year—perhaps more. Whatever the exact number, the political system is obviously having increasing difficulty channeling discontent as the Chinese people, believing in their rights and fearing their leaders less and less, wrestle for control of their future. As a prominent businessman told me last spring—smiling broadly as he sat in his spacious office in a Shanghai skyscraper—“No one fears the government anymore.”

If prosperity undermines one-party rule, then the only thing that undermines it more is when rising expectations of more prosperity can no longer be met. And in Chang’s view, China’s leadership made a major miscalculation in basing their economy so heavily on exports:

China’s economic model, which allowed the Chinese to take maximum advantage of boom times, is particularly ill suited to current global conditions [of declining exports].

Chang concludes:

We may…soon witness in China revolution by spontaneous combustion. Despite his belief that revolutions must be minutely organized, Lenin’s own state was eventually brought down not by a network of plotters but by an impromptu crowd. What we witnessed in Moscow—the disintegration of a state in a matter of days—later replayed itself in Manila, Lima, Belgrade, Kiev, and Tbilisi. Chinese people today may not have revolutionary intentions, yet their acts of protest at this unsettling time have revolutionary implications nonetheless.

This is a similar argument to the one made by Yang Yao several weeks ago.

[Image by Stuck in Customs licensed under Creative Commons.]

Republicans have an absolutely brilliant strategy on financial reform. Too bad it’s evil.

Thursday, April 15th, 2010

How did the GOP oppose Obama during the campaign? They raised fears that he was a radical, Marxist, leftist, Communist, Socialist, Muslim, Arab who hates America.

How did the GOP oppose Obama’s stimulus plan? They claimed it didn’t include tax cuts (which it did) which are the most effective way of stimulating the economy (which most research doesn’t support) that it hasn’t helped the economy at all (something which virtually all mainstream economists disagree with), and that it was part of a socialist government takeover of the economy (which it’s not).

How did the GOP oppose Obama’s health care plan? They claimed there were death panels (nope), government mandated euthanasia and abortion (nope and nope), coverage for illegal immigrants (not at all), secret socialist indoctrination of children (huh?), and that it represented a government takeover of 1/6th of the economy (so far from being true) that would increase the deficit (when it actually reduces the deficit more than any bill in history).

How does the GOP oppose net neutrality? They claim it would enable the government to control political speech on the internet – likening it to the Fairness Doctrine for radio (which is so far from what it actually does).

How does the GOP oppose cap and trade legislation? They call it a massive redistribution of wealth (which it’s not) and based on thoroughly debunked lies (which is rather dangerous bullshit).

How does the GOP oppose Obama’s national security policies? They claim he is deliberately weakening America (when his focus has been on strengthening America), abandoning all of Bush’s policies (which he is not, to the disappointment of many progressives and libertarians), along with many other debunked claims.

How then does the GOP oppose financial reform? They are claiming that it “allow[s] endless taxpayer-funded bailouts for big Wall Street banks” and creates a “slush fund” for future bailouts. And here’s the brilliant part: while trashing Wall Street and the bailouts that saved the big firms, they are simultaneously promising Wall Street and the big firms that they will block the reforms Wall Street doesn’t want in return for massive campaign contributions.

They are following — almost to the letter — Republican pollster Frank Lutz’s proposed strategy to rake in the dollars from Wall Street for blocking any reform while railing against bailouts and how Democrats are too soft on the banks. The best way to oppose something is to pretend it’s something it’s not.

Absolutely brilliant strategy. Too bad it’s evil.

The policies they are attacking include a FDIC tax on the banks to create holdover money to allow regulators to go in and dismantle the company. Contrary to some cushy authority to bailout big firms, Senator Mark Warner describes the process being created by the financial reforms in an interview with Ezra Klein:

“Resolution,” Warner continued, “will be so painful for any company. No rational management team would ever choose resolution. It means shareholders wiped out. Management wiped out. Your firm is going away. At least in bankruptcy, there was some chance that some of your equity would’ve been retained and you could come out in some form on the other side of the process. The resolution that Corker and I have tried to create means the death of the company. The institution is gone.”

The financial reform bill is far from perfect — but it’s a good bill and nothing at all like what the Republicans are describing it as.

[Image by DonkeyHotey licensed under Creative Commons.]

Supply-side Theology

Friday, April 9th, 2010

Jonathan Chait:

A perceptive student of the supply-side theology might wonder: if revenue from higher taxes will simply be spent, why wouldn’t revenue from higher growth also be spent? But this question has never been asked, because there are no perceptive students of the supply-side theology. It’s just a series of talking points.

In any case, it’s worth keeping in mind that the entire conservative apparatus is already cranked up to insist that no tax hikes are acceptable in the pursuit of deficit reduction. I see no way around this problem unless and until the country actually begins to undergo a deficit-created economic calamity.

Must-Reads of the Week: Nukes, Inconsistencies, Graphing the Economic Crisis, Half-Hookers, Palin 2012, Mailer’s Wife, & Complex Business Models

Friday, April 9th, 2010

1. Nukes. Jon Stewart and Andrew Sullivan both make the same point: Obama’s nuclear policy is the fulfillment of Ronald Reagan’s vision:

The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
The Big Bang Treaty
www.thedailyshow.com

2. Inconsistencies. Matt Yglesias:

The main difference between left and right with regard to property rights is simply that the right is invested in a lot of rhetoric about markets and property rights and the left is invested in different historical and rhetorical tropes.

… Formally, the right is committed to ideas about free markets and the left is committed to ideas about economic equality. But in practice, political conflict much more commonly breaks down around “some stuff some businessmen want to do” vs “some stuff businessmen hate” rather than anything about markets or property rights per se…

Or if you look at the energy sector, you’ll see that businessmen want to push property rights for the stuff that’s in the ground (coal, oil, whatever) and a commons model for the stuff (particulates, CO2) that’s in the air. You can call that “inconsistent” if you like, but obviously it’s perfectly consistent with what coal and oil executives want! And those industries are the most loyal supporters of “right” politics around.

3. Graphing the Economic Crisis. Ezra Klein puts out some interesting graphs about the economic crisis and nascent recovery including this one:

Klein explains:

This graph is a political problem for the Obama administration (if not, in the short-term, an economic problem). But it is also necessary for all the other graphs. The bank rescue, which added temporarily to the deficit, stabilized the stock market and set the stage for its recovery. The stimulus, which also added to the deficit, helped moderate the job losses and and has contributed to recent gains. You could’ve made the lines on this graph better, but only by letting the lines on the other graphs get worse.

4. Half-hookers. Lisa Taddeo for New York magazine writes about the burgeoning half-hooker culture which exists in a bizarre alternate reality existing so close to our own where celebrities and finance guys get their women:

The general-admission crowds dance, and the table crowds dance a little more woodenly, a little more entitledly, with their finger pads on their tables. The promoters are dancing with the models and the waitresses are dancing with the bottles and everybody finds a place on the floor.

The floor people, they are just to fill the place up. The celebrities and the athletes and the tycoons are the ones for whom this world is zealously designed. A rung below in after-work pinstripes are the money guys, the Deutsche guys and the Goldman guys and the no-name hedge-fund guys—the “whales”—guys like that one over there in a Boss suit and John Lobb shoes, standing beside the table that cost him $3,000. Standing very close to it, like a Little Leaguer who wants to steal second but has never done it before. This gentleman’s not dancing, but he’s thinking about it.

There’s quite a lot to the article. A fascinating piece of reporting.

5. Palin 2012. Chris Bowers makes the argument for why Sarah will win if she runs.

6. Mailer’s Wife. Alex Witchell profiles Norris Church Mailer, Norman Mailer’s final wife, whose story moved me as I read of it:

John Buffalo Mailer [stepson of Norris:] “People are their best selves and worst selves intermittently,” he told me, “and the best marriages navigate that ride over the hurt, which I believe they did right to the end. They both had options, and at the end of the day the life they created together won out over infidelity, illness and hard times…”

7. Complex Business Models. Clay Shirsky:

One of the interesting questions about Tainter’s thesis is whether markets and democracy, the core mechanisms of the modern world, will let us avoid complexity-driven collapse, by keeping any one group of elites from seizing unbroken control. This is, as Tainter notes in his book, an open question. There is, however, one element of complex society into which neither markets nor democracy reach—bureaucracy.

Bureaucracies temporarily reverse the Second Law of Thermodynamics. In a bureaucracy, it’s easier to make a process more complex than to make it simpler, and easier to create a new burden than kill an old one.

Read the rest.

[Image by me.]

Must-Reads of the Week: Google/China, Liberal American Exceptionalism, The Failed War on Drugs, Defending the Individual Mandate, Counter Counter-Insurgency, Idiocrats, and Men Did It!

Friday, March 26th, 2010

1. Google v. China. I’ve refrained from posting on the Google v. China battle going on until now. So much of the praise for Google’s decision seemed overblown and I wasn’t sure what insight I had to offer, even as I read everything on the matter I could. But now, the wave of criticism of the company is pissing me off. I get the source of the criticism – that Google is so quickly criticizing other companies for staying in China after it left, and that Google’s partial exit may have made business as well as moral sense.  But motives are new pure – we’re human. Those who the critics accuse the company of merely using as a pretext for a business decision see the matter in other terms – according to Emily Parker of the Wall Street Journal, “Chinese twitterverse is alight with words like ‘justice’ and ‘courageous’ and ‘milestone’ “ and condolence flowers and cups being sent to Google’s offices in China.

What the Google/China conflict highlights though is the strategic incompatibility of a tech company like Google and an authoritarian state like China. One of James Fallows’ readers explains why Google and China could never get along:

Internet search and analytics companies today have more access to high quality, real-time information about people, places and events, and more ability to filter, aggregate, and analyze it than any government agency, anywhere ever.  Maybe the NSA can encrypt it better and process it faster but it lacks ability to collect the high value data – the stuff that satellites can’t see.  The things people think but don’t say.  The things people do but don’t say.  All documented in excruciating detail, each event tagged with location, precise time.  Every word you type, every click you make (how many sites do you visit have google ads, or analytics?), Google is watching you – and learning.  It’s their business to.  This fact has yet to sink in on the general public in the US, but it has not gone un-noticed by the Chinese government.

The Chinese government wants unfettered access to all of that information.  Google, defending its long-term brand equity, cannot give its data to the Chinese government.  Baidu, on the other hand, would and does…

The reader goes on to explain how China would slow down and otherwise disrupt Google services in China enough to ensure that Baidu would keep it’s dominant position. This, he explains is:

…just another example of the PRC’s brilliant take on authoritarian government: you don’t need total control, you just need effective control. [my emphasis]

Which is why it is so important that a country like China have constant access to search engine data. In a passage deleted at some point in the editing process from a New York Times story (which an internal Times search reveals to be this one), it was reported that:

One Western official who spoke on condition of anonymity said that China now speaks of Internet freedom in the context of one of its “core interests” — issues of sovereignty on which Beijing will brook no intervention. The most commonly cited core issues are Taiwan and Tibet. The addition of Internet freedom is an indication that the issue has taken on nationalistic overtones.

2. Liberal American Exceptionalism. Damon Linker of The New Republic responds to critics:

[T]he most distinctive and admirable of all [America’s] qualities is our liberalism. Now let me be clear: unlike Lowry and Ponnuru, who identify American exceptionalism with the laissez-faire capitalism favored by the libertarian wing of the Republican Party, I do not mean to equate the ideology that dominates one of our country’s political parties with the nation’s exemplary essence. On the contrary, the liberalism I have singled out is embraced by nearly every member of both of our political parties—and indeed by nearly every American citizen. Liberalism in this sense is a form of government—one in which political rule is mediated by a series of institutions that seek to limit the powers of the state and maximize individual freedom: constitutional government, an independent judiciary, multiparty elections, universal suffrage, a free press, civilian control of the military and police, a large middle class, a developed consumer economy, and rights to free assembly and worship. To be a liberal in this primary sense is to favor a political order with these institutions and to abide by the political rules they establish.

3. The War on Drugs Is Doomed. Mary Anastacia O’Grady of the Wall Street Journal echoes me saying: The War on Drugs is Doomed. (My previous posts on this topic here, here, here, here, here, here, here, here, here, here, here, here, and here.)

4. Defending the Individual Mandate. Ezra Klein explains why the individual mandate is actually a really good deal for American citizens:

The irony of the mandate is that it’s been presented as a terribly onerous tax on decent, hardworking people who don’t want to purchase insurance. In reality, it’s the best deal in the bill: A cynical consumer would be smart to pay the modest penalty rather than pay thousands of dollars a year for insurance. In the current system, that’s a bad idea because insurers won’t let them buy insurance if they get sick later. In the reformed system, there’s no consequence for that behavior. You could pay the penalty for five years and then buy insurance the day you felt a lump.

Klein also had this near-perfect post on our unhinged debate on health care reform and added his take to the projections of Matt Yglesias, Ross Douthat, Tyler Cowen on how health care law will evolve in the aftermath of this legislation.

5. Counter-Counter-Insurgency. Marc Lynch describes a document he recently unearthed which he calls AQ-Iraq’s Counter Counter-insurgency plan. Lynch describes the document as “pragmatic and analytical rather than bombastic, surprisingly frank about what went wrong, and alarmingly creative about the Iraqi jihad’s way forward.”

6. Idiocrats Won’t Change. Brendan Nyhan counters a point I (along with many other supporters of the health care bill) have been making (here and here for example) – that once the bill passes, the misperceptions about it will be corrected by reality. I fear he may be right, but I believe it will change opinions on the margins soon and more so over time.

7. Theories of the Financial Crisis: Men Did It. Sheelah Kolhatkar looks at one theory of the financial crisis some experts have been pushing: testosterone and men.

Another study Dreber has in the works will look at the effects of the hormones in the birth-control pill on women, because women having their periods have been shown to act more like men in terms of risk-taking behavior. “When I present that in seminars, I say men are like women menstruating,” she says, laughing…

Positioning himself as a sort of endocrine whisperer of the financial system, Coates argues that if women made up 50 percent of the financial world, “I don’t think you’d see the volatile swings that we’re seeing.” Bubbles, he believes, may be “a male phenomenon.”

His colleague, neuroscientist Joe Herbert, agrees. “The banking crisis was caused by doing what no society ever allows, permitting young males to behave in an unregulated way,” he says. “Anyone who studied neurobiology would have predicted disaster.”

A very interesting thesis. And one that strikes me as broadly true. I previously explored other theories of what caused the financial crisis:

[Image by me.]