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This is Not Pretty June 24, 2010

Posted by Dwight Furrow in Dwight Furrow's Posts, Ethics, politics.
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Two columns by Robert Herbert in the NY Times get to the heart of our current dilemma:

If a bank is too big to fail, it’s way too big to exist. If an oil well is too far beneath the sea to be plugged when something goes wrong, it’s too deep to be drilled in the first place.When are we going to stop behaving so stupidly? We nearly wrecked the economy and we’re all but buried in debt. But we can’t break up the biggest banks, and we can’t raise taxes. Now we’re fouling the magnificent Gulf of Mexico and ruining entire communities along the southern Louisiana Coast.

And, by the way, we’re still fighting a futile war in Afghanistan that we’ve been fighting with nonstop futility for nearly a decade…

For a nation that can’t stop bragging about how great and powerful it is, we’ve become shockingly helpless in the face of the many challenges confronting us. Our can-do spirit was put on hold many moons ago, and here we are now unable to defeat the Taliban, or rein in the likes of BP and the biggest banks, or stop the oil gushing furiously from the bowels of earth like a warning from Hades about the hubris and ignorance that is threatening to destroy us

And Herbert doesn’t even mention global warming, which is the biggest threat to our well-being that we refuse to confront. It is quite stunning how in a few decades we have gone from a country with vast economic, technological, and military prowess to a country seemingly unable to tie its shoes.

Herbert diagnosed part of explanation for this condition  in an earlier Times Op-Ed piece:

“Where I was wrong,” said President Obama at his press conference on Thursday, “was in my belief that the oil companies had their act together when it came to worst-case scenarios.”

With all due respect to the president, who is a very smart man, how is it possible for anyone with any reasonable awareness of the nonstop carnage that has accompanied the entire history of giant corporations to believe that the oil companies, which are among the most rapacious players on the planet, somehow “had their act together” with regard to worst-case scenarios.

These are not Little Lord Fauntleroys who can be trusted to abide by some fanciful honor system. These are greedy merchant armies drilling blindly at depths a mile and more beneath the seas while at the same time doing all they can to stifle the government oversight that is necessary to protect human lives and preserve the integrity of the environment.

President Obama knows that. He knows — or should know — that the biggest, most powerful companies do not have the best interests of the American people in mind when they are closing in on the kinds of profits that ancient kingdoms could only envy. BP’s profits are counted in the billions annually. They are like stacks and stacks of gold glittering beneath a brilliant sun. You don’t want to know what people will do for that kind of money. […]

The oil companies and other giant corporations have a stranglehold on American policies and behavior, and are choking off the prospects of a viable social and economic future for working people and their families.

President Obama spoke critically a couple of weeks ago about the “cozy relationship” between the oil companies and the federal government. It’s not just a cozy relationship. It’s an unholy alliance. And that alliance includes not just the oil companies but the entire spectrum of giant corporations that have used vast wealth to turn democratically elected officials into handmaidens, thus undermining not just the day-to-day interests of the people but the very essence of democracy itself.

Our excessive reliance on big business to solve problems and self-regulate is beyond bizarre, when you think of the fundamental norms that govern our business class.

As economist Robert Reich writes:

1 Why hasn’t BP moved more of its rigs and tankers to the site? Because BP’s first responsibility is to maximize shareholder value, and moving more rigs and tankers would be too expensive. […]

2. Why isn’t BP leveling with the American people about how many barrels of oil is gushing into the Gulf? Because BP’s first responsibility is to its shareholders, and a bigger leak means more liability. […]

3 Why isn’t BP acknowledging a huge plume of oil developing deep under water? Ditto. On Tuesday, National Oceanic and Atmospheric Administration researchers reported subsurface oil as far as 142 miles from the leaking Gulf well, the first clear confirmation of such a plume. On Wednesday, BP rejected the report, insisting that it has not found any significant concentration of crude under the surface. “We haven’t found any large concentrations of oil under the sea. To my knowledge, no one has,” BP Chief Operating Officer Doug Suttles said on NBC’s TODAY show.

Notice the common theme here. It is a fundamental foundation of contemporary “business ethics” that corporations have no responsibility other than to maximize shareholder profit. What then is the basis for believing their actions will serve the community? To the extent the business community believes this (and they do, just ask them) they are entirely undeserving of our trust or support.

As Joel Bakin puts it in his legendary documentary The Corporation: The Pathological Pursuit of Profit and Power, according to the Diagnostic and Statistical Manual of Psychiatric Disorders, corporations are psychopaths: thoroughly self-interested, manipulative, shallow in their relationships, and incapable of remorse or empathy.

We have turned our well-being over to psychopaths. And then we are surprised when things turn out badly?

Corporations are psychopaths; Americans are delusional.  This is not a pretty sight.

book-section-book-cover2 Dwight Furrow is author of

Reviving the Left: The Need to Restore Liberal Values in America

For political commentary by Dwight Furrow visit: www.revivingliberalism.com

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Be Careful Who You Listen To May 16, 2010

Posted by Dwight Furrow in Current Events, Dwight Furrow's Posts, Education.
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Jamie Dimon, JPMorgan Chase & Co. Chief Executive Officer, gave words of wisdom to University of Syracuse graduates this week-end:

“Throughout my life, throughout this crisis, I’ve seen many people bury themselves by failing to stand up, being mealy mouthed and simply going along with the pack,” said Dimon at the university’s Carrier Dome, where more than 5,000 students received diplomas.

He told students to “do the right thing, not the easy thing” and not to become someone else’s “lap dog.”

Dimon, 54, who was the subject of student protests before the ceremony, was met at the end of his speech with loud applause by the audience of more than 17,000.

“Have the courage to speak the truth, even if it’s unpopular,” said Dimon. “Have the courage to put yourself on the line, strive for something meaningful, even to risk the embarrassment of failure.”

Although this speech by one of the “captains” of Wall St.  who got us into this financial mess provoked some protest, the demonstrations were tame. Perhaps they should have protested more vigorously when they had the opportunity.

As Digby wrote:

That’s the truly sickening thing about Dimon’s speech. Due to his cohort’s hideous professional malpractice, these kids are going into a workforce in which the worker is at a huge disadvantage. It’s not just that 10% workforce is out of a job ( a number which is undoubtedly understated.) The problem of high unemployment hits everyone who’s working as well.

These young college graduates are going to find that they are competing for jobs with people who have years of experience and are willing to take cuts in pay and benefits because they have a nut to crack every month or kids to support and they need a job very badly. But older people are at a disadvantage as well. They tend to require higher pay and expect their experience to count for more (plus employers just don’t like ‘e

Those in between are working in a world in which the competition is so stiff that they can’t afford to “put themselves on the line” or rock the boat in any way. They are doing the work that used to be done by three people (hence “productivity growth”) and they are stuck in whatever dead end job they found themselves in before the recession began because everyone knows you are daft to quit with 10% unemployment. Workers are at the mercy of their bosses, working as wage slaves, getting no raises, feeling trapped and at their mercy. Refusing to be a “lap dog” isn’t on the menu in an environment like this.

When there is 10% unemployment, the whole workforce is under stress. And the longer it goes on, the more frustrated, angry and depressed the average working stiff feels. Masters of the Universe can drone on about being brave and finding meaning and telling the truth even if it’s unpopular, but he might as well be speaking in tongues for how relevant it is to workers right now.

Those kids may not know it, but they soon will. And I hope they find it in themselves to look back on this day and wish they’d turned their backs on that bastard when they had the chance. It was probably their last opportunity for a good long while to follow his advice.

 

Why anyone still listens to these clowns is beyond me. Their claim to be some sort of paragon of independence and virtue is as delusional as their economic models that predicted endless wealth production based on perpetual ponzi schemes.

book-section-book-cover2 Dwight Furrow is author of

Reviving the Left: The Need to Restore Liberal Values in America

For political commentary by Dwight Furrow visit: www.revivingliberalism.com

Descartes Caused the Economic Collapse! April 29, 2009

Posted by Dwight Furrow in Current Events, Dwight Furrow's Posts, Philosophy.
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The economic meltdown was certainly caused by excessive greed and the absence of government regulation to contain it. But it is important to remember that there is a reason why few of the people trained to anticipate economic problems saw this coming.

John Kay in the Financial Times writes:

Since the 1970s economists have been engaged in a grand project. The project’s objective is that macroeconomics should have microeconomic foundations. In everyday language, that means that what we say about big policy issues – growth and inflation, boom and bust – should be grounded in the study of individual behaviour…

This sounds reasonable—if you want to develop a theory of how economic institutions function, look at how individuals make decisions about buying and selling. Kay continues:

Most economists would claim that the project has been a success. But the criteria are the self-referential criteria of modern academic life. The greatest compliment you can now pay an economic argument is to say it is rigorous. Today’s macroeconomic models are certainly that.

By “rigorous” Kay means that economic relationships can be described by algorithms which are amenable to logical proof. (Descartes was perhaps the first philosopher to argue that only such a system could count as genuine knowledge, and his insight has deeply influenced scientific and social scientific inquiry to this day.)

But here is the rub. If you are going to describe economic relationships using algorithms (i.e. rules) you will have to make generalizations about human behavior.

Economists, like physicists, have been searching for a theory of everything. If there were to be such an economic theory, there is really only one candidate, based on extreme rationality and market efficiency. Any other theory would have to account for the evolution of individual beliefs and the advance of human knowledge, and no one imagines that there could be a single theory of all human behaviour…

In other words, even though human beings are often rational and, in market transactions, we often get exactly what we want for exactly the right price, the myriad ways in which we can fail to be rational or efficient is just too complex to model, especially when you consider the value we place on non-market goods. No set of rules could describe every twist and turn in the history of the market behavior of individuals or account for our quirky, idiosyncratic, emotional, intuitive, and sometimes irrational behavior. Thus, economic models assume that human beings are always perfectly rational and markets perfectly efficient.

As Kay writes:

That people respond rationally to incentives, and that market prices incorporate information about the world, are not terrible assumptions. But they are not universal truths either. Much of what creates profit opportunities and causes instability in the global economy results from the failure of these assumptions. Herd behaviour, asset mispricing and grossly imperfect information have led us to where we are today.

It was irrational behavior, left out of the economic models because it was too messy to capture in a set of rules, that caused the economic crisis.

Descartes has not yet issued his mea culpa.

So why did these very smart people fail to realize that their generalizations were rough approximations rather than precise models of human behavior.

Kay appeals to the mid-20th Century economist John Maynard Keynes for the answer:

Keynes went on to explain that economic understanding required an amalgam of logic and intuition and a wide knowledge of facts, most of which are not precise: “a requirement overwhelmingly difficult for those whose gift mainly consists in the power to imagine and pursue to their furthest points the implications and prior conditions of comparatively simple facts which are known with a high degree of precision”. On this, as on much else, Keynes was right.

The moral of the story (to borrow a title from a famous book) is that you can have knowledge of lots of facts but they will be messy, imprecise, and very context dependent; or you can have knowledge of a few precisely-rendered facts that produce beautiful generalizations. What you cannot have is knowledge of lots of facts that produce beautiful generalizations.

In other words, beautiful generalizations will usually not fit the world well. (I said usually—I’m not making universal generalizations here). And intellectuals tend to strive for intellectual beauty.

What Kay leaves out is that lots of people thought they could get very rich by applying these economic models, and they of course had an incentive to ignore the facts that the models left out.

By the way, I have made a career out of arguing that moral theory is in exactly the same boat—broad generalizations captured by models or rules will leave out the messy details of moral reasoning that make it genuinely responsive to life’s complexity.

I guess the difference is that no one has figured out how to get rich off models of morality.

If you figure that out, let me know (and don’t tell anyone else).