Split Personality

I’ve made no secret of my skepticism about intellectual property, an Orwellian term if ever there was one, particularly in the notion that the creation of intellectual property as an alternative to making stuff and performing services that people are willing to pay for is a viable growth path for the United States. One of the things that makes me skeptical is the remarkable double talk and maybe even double its proponents deploy.

Consider this post at RealClearPolicy by Andreas G. Elterich. Its title alone is enough to set my teeth on edge: “Don’t Antagonize China Over IP Theft”. Can anyone imagine writing “Don’t Antagonize Dillinger About Bank Robbery” or “Don’t Antagonize Timothy McVeigh Over Mass Murder”? Either he believes that intellectual property is property or he doesn’t. If he does, its theft is a crime.

And predictably he hauls out what he presumably thinks are the big guns:

Instead of chancing a trade war and further eroding the reputation of the U.S., the administration should take steps toward trade liberalization, thereby spurring economic growth.

Here’s a suggestion for him. Instead of trying to use quiet diplomacy, why not use shame? The Chinese authorities need to come to understand that their actions are shameful and those who do them are not worthy of respect. I believe that’s more likely to change their actions than any amount of quiet diplomacy.

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The Thing With Feathers

If you’re looking for hope, you might, as I did, find a little in Jason D. Hill’s open letter to Ta-Nehisis Coates at Commentary. Here’s a snippet:

Mr. Coates, you write that the American Dream is the enemy of so much that is good: “The Dream thrives on generalizations, on limiting the number of possible questions, on privileging immediate answers. The Dream is the enemy of all art, courageous thinking, and honest writing.” The pursuit of this Dream saddens you and all the people in America you describe as being lost “in a specious hope.” The Dream, you say, was built on “the progress of those Americans who believe that they are white,” and that progress was built on looting and violence. You write: “‘White America’ is a syndicate arrayed to protect its exclusive power to dominate and control our bodies. However it appears, the power of domination and exclusion is central to the belief in being white, and without it, ‘white people’ would cease to exist for want of reasons.”

I am saddened by your conviction that white people wield such a great deal of metaphysical power over the exercise of your own agency. In making an enemy of the Dream that is a constitutive feature of American identity, you have irrevocably alienated yourself from the redemptive hope, the inclusive unity, and the faith and charity that are necessary for America to move ever closer to achieving moral excellence. Sadder still, you have condemned the unyielding confidence in self that the Dream inspires.

The portrait that he paints is a lot more like what I see around me than the picture of Dorian Gray that others are portraying.

As I’ve noted before, I’m an empirical sort of guy and I don’t expect you just to take my word for it. Look at the direction the canoes are paddling.

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Columnists Search for Meaning

There’s an odd sort of resonance between David Brooks’s New York Times column on two contrasting views of “human development”:

I’d like to offer you two models of human development.

The first is what you might call The Four Kinds of Happiness. The lowest kind of happiness is material pleasure, having nice food and clothing and a nice house. Then there is achievement, the pleasure we get from earned and recognized success. Third, there is generativity, the pleasure we get from giving back to others. Finally, the highest kind of happiness is moral joy, the glowing satisfaction we get when we have surrendered ourselves to some noble cause or unconditional love.

The second model is Maslow’s famous hierarchy of needs. In this conception, we start out trying to satisfy our physical needs, like hunger or thirst. Once those are satisfied we move up to safety needs, economic and physical security. Once those are satisfied we can move up to belonging and love. Then when those are satisfied we can move up to self-esteem. And when that is satisfied we can move up to the pinnacle of development, self-actualization, which is experiencing autonomy and living in a way that expresses our authentic self.

and Michael Gerson’s Washington Post riff on a recent essay of Andrew Sullivan’s:

A provocative new essay by Andrew Sullivan, “America Wasn’t Built for Humans,” describes the emergence of two American phyles. One is more racially diverse, urban, secular and globalist. The other is largely white, rural and exurban, religious and nationalist. Their conflict is the context of American politics. At stake is the idea that “American” describes a single people.

In Sullivan’s description, the “myths” that used to help unify the country — the ideal of assimilation, the idea of America’s founders as exemplars of constitutional values — have been weakened. “We dismantled many of our myths,” he argues, “but have not yet formed new ones to replace them.” The result is the dangerous triumph of cultural identification over unifying political ideals.

Both are in their own ways about the search for meaning in life. I found the discussion of Andrew Sullivan’s essay interesting, not interesting enough, however, to purchase a copy of the New Yorker, the only place, apparently, where the essay may be read.

Turning to Mr. Brooks’s observation, I think that as a society we’ve been stuck at the first stage of the “Four Kinds of Happiness” for decades and it isn’t working. Rising suicide rates and abuse of opioids, anger, high homicide rates in Chicago, Baltimore, and St. Louis all point in the same direction.

Imagine if the headlong push to erode every form of economic activity in this country until the only people who are employed are artists, teachers, politicians, and physicians is successful. Most people derive their sense of achievement from their jobs. If you don’t believe that, read Csikszentmihalyi’s Flow. Truly happy people, even those in the most menial and repetitious of jobs, find happiness in their work. What if that is foreclosed?

The notion that people will jump from hedonism directly to generativity is laughable. The rate of voluntarism has declined even as the rate of long-term unemployment has risen.

This passage from Mr. Gerson’s column caught my attention:

Sullivan also urges “mutual forgiveness” as the basis for genuine reconciliation. “No tribal conflict,” he says, “has ever been unwound without magnanimity.” We need the spirit of Abraham Lincoln and Nelson Mandela in our politics, which is essentially to call for a miracle.

It is not merely a miracle but unthinkable. The Blue Phyle’s conviction of their own rectitude, that they are, to use a favorite phrase, “on the right side of history”, and their belief in the utter vileness of any who disagree with them even as their own views turn on a dime all tell us that we should not expect forgiveness or reconciliation to emerge as a driving force any time soon.

I couldn’t care less whose fault it is. IMO assigning blame depends entirely on your horizon and how strongly you believe that you’re right. I care much more for what works and what we’re doing now isn’t working.

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What If…?

Bear with me on this and keep in mind that I’m no particular fan of Donald Trump’s.

What if it turns out that the Trump campaign was being wiretapped and he wasn’t “colluding” with Russia to fix the election? Go a step farther. What if there’s proof positive that there was massive vote fraud and he did actually win the popular vote?

My guess is that none of these would have any effect whatever. He’d still have the lowest approval rating at this stage of his presidency of any post-war president, the highest disapproval rating, and the tenor and tempo of agonistic criticisms would continue.

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The $100 Trillion Question

In their editorial on the Federal Reserve’s balance sheet this morning the editors of the Wall Street Journal ask what must now be the $100 trillion question (adjusted for inflation): what happens when the Fed “unwinds” its balance sheet, reverses its policy of the last nine years, and selling long duration Treasuries and mortgage securities?

This was supposed to lift asset prices and spur faster economic growth. The faster growth never arrived—despite Fed predictions for years that 3% annual GDP growth was right around the corner—in what has been the slowest modern expansion on record. But prices have risen in stocks, real estate, emerging-market plays and other assets.

If the Fed calls that a success on Mr. Bernanke’s terms, then shouldn’t the reverse happen as the Fed unwinds? That is, as the Fed unloads long-duration bonds, will investors sell some of those riskier assets to buy the Treasurys and mortgage debt the Fed won’t be buying? Will we see naked bodies if the tide recedes in some asset classes?

If we knew the answer, we’d be rich, but there’s certainly a chance for more financial volatility as investors react. This concern may explain the Fed’s slow unwinding, especially as it now pays such close attention to the stock market. The Fed seems to fear the effect of any stock correction on the “wealth effect,” even if corrections are useful in heading off investor manias that can become bubbles. (See the dot-com Nasdaq, year 2000.)

The effect on the real economy may be more sanguine, and in that sense the Fed’s timing is fortuitous. The world’s major economies are all growing at once for a change, and bank balance sheets in the U.S. are strong. The Trump Administration and Congress are moving toward what we hope is a pro-growth tax reform. The dollar has weakened considerably so there is little fear that monetary tightening will lead to an overvalued greenback. Inflation is contained, though it bears watching.

It might have no perceptible effects. It might cause a panick-stricken sell-off in the stock market. It might result in growth in the real economy. It might have some other unforeseen effect. Isn’t it fun being the mold in the world’s largest Petri dish?

My gut tells me it’s the first. I think the financial economy has become almost completely dissociated from the real economy. They’ve decided to divorce and go their own separate ways. I have a great instinct for numbers but my instinct for finance is much less.

Whatever happens each of the financial economy and the real one is bound to have its ups and downs, we’re sort of overdue for downs, and each is likely to blame the other which, if the past is any gauge, will result in the financial economy putting its hand out.

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Evidence

There’s at least a little evidence supporting my hypothesis that command and discipline problems in the Western Pacific area of operations are contributing factors to the ship collisions that have occurred there recently. Reuters reports:

WASHINGTON (Reuters) – The U.S. Navy dismissed two senior officers on Monday after a series of collisions involving Seventh Fleet warships in Asia, citing a loss of confidence in their ability to command.

Rear Admiral Charles Williams, commander of Task Force 70, and Captain Jeffrey Bennett, commander of Destroyer Squadron 15, were fired by Seventh Fleet commander Vice Admiral Phil Sawyer, the Navy said. In August, Sawyer replaced fleet commander Vice Admiral Joseph Aucoin, who was fired after the accidents.

“Both reliefs were due to a loss of confidence in their ability to command,” the Navy statement said.

Various actions have been taken with respect to other officers as well.

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Health Care System Face-Off

At the New York Times several contributors engage in a tournament-style face-off of the health care systems of the following countries: Canada, Britain, Singapore, Germany, Switzerland, France, Australia and the U.S. Although the U. S. health care system makes it into the semi-finals, it loses there to France.

The country whose system ultimately prevails is Switzerland:

AARON: Switzerland. This is a tough call. Switzerland does a good job of combining conservative and progressive beliefs about health care systems into a workable model providing top-notch access and quality at a reasonable cost. It doesn’t hurt that it does so through private (although heavily regulated) insurance.

CRAIG: France. Its system has more competition among providers than Switzerland’s does.

AUSTIN: Switzerland. The Swiss system is so close to the A.C.A.’s structure (which, to date, has survived all manner of political attacks) that something like it could work in the U.S.

ASHISH: Switzerland Both of these countries spend a lot on health care, outpacing the average among high-income countries, and both perform comparably on measures of access to care. However, in general, the Swiss health care system delivers a higher quality of care across a range of measures and invests more in innovation that fuels new knowledge and, ultimately, better treatments that we all benefit from.

UWE: France. It is cheaper, its financing is more equitable, and its system is simpler.

Not coincidentally, I believe, Switzerland’s per capita spending is second only to that in the United States.

The differences between Switzerland and the United States could hardly be more stark. Switzerland is small, compact, and has a high degree of national consensus and social cohesion. Nearly every matter of significance is subject to a popular vote. Per capita income is higher there than here. It is landlocked. It does not share a 1,500 mile land border with a country where the per capita income is a third of theirs with even worse income inequality. The list is practically endless.

The “tournament” is entertaining and informative but ultimately meaningless. The United States is an outlier and for a health care system to be workable here it will necessarily be an outlier, too.

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No Preventive War

At RealClearDefense Bonnie Kristian makes an argument that’s music to my ears. The United States must eschew preventive war:

Preventive war has not been the political or ethical norm for the great bulk of U.S. history, and it is a grave mistake to make it an option for responding to North Korea’s admittedly serious provocations.

First, an aside for definitions is in order, for confusion abounds (and is too often misused by modern Washington) over the nature of “preventive” war and its near-homophone, “preemptive” war. Preventive war is an attack launched to prevent the materialization of a potential future threat; preemptive war is a response to an imminent threat.

To attack North Korea right now because it has a nuclear arsenal would be preventive war. The threat is not imminent (and it is entirely possible, though the probability is debatable, that Kim would never use his weapons, but merely maintain his arsenal to deter regime change efforts).

Read the whole thing. Preventive war is immoral and, because of international accords to which the United States is signatory, illegal. It would not make us safer. It would be courting disaster;

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Ukraine’s Problem

At Globalist Kenneth Courtis explains that Ukraine’s biggest problem is Ukraine:

Ukraine’s President, 51-year old Petro Poroshenko – or Porky, as he is known to all Ukrainians – is at single digits in the polls. With elections scheduled for 2019 that cannot sit well with the oligarch-turned-president.

But in their assessment of him, Ukrainians are simply echoing the disdain that, all smooth-talking rhetoric aside, he has shown them. Remember that he promised to divest himself of certain assets – presumably acquired “legally” once he was elected.

What has happened is the opposite. His group has acquired more state assets at below rock-bottom prices. His firms are already lined up at the trough to gobble up all kinds of stuff in the coming wave of privatizations that the IMF has instructed the county to carry out.

Porky is pretty much the chocolate king of Eastern Europe and the CIS. People on the ground tell me that his three most profitable chocolate factories are in, yes, Russia…

All that sweet stuff can’t obscure the harsh realities. Real wages of workers have been chopped by more than half over the last three years. The emerging middle classes have been crushed.

Read the whole thing. It isn’t long.

What eludes me is why we should support the present kleptocratic government which overthrew the previous kleptocratic government which succeeded the kleptocratic government before that.

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Drawing the Battle Lines on Equifax

I have so many quibbles with this Bloomberg editorial on the Equifax data breach that it’s hard to know where to start. Let’s start at the beginning:

The three big U.S. credit reporting companies — Equifax, Experian and TransUnion — have an unusual combination of power and lack of accountability. They dominate the business of collecting information on consumers, influencing everything from who gets jobs to how much interest people pay on mortgages. But they’re not answerable to those consumers; they primarily serve the banks and other customers that buy their products. As a result, they lack strong incentives to invest in keeping sensitive data secure, or to fix mistakes that can ruin people’s lives.

The parallels how an old boss of mine characterized the perfect job: maximum impact, minimum accountability. But Equifax’s problems go beyond weak incentives. Weak incentives didn’t cause Equifax’s management to hold on to the news about the breach until after they’d sold their stock, for example. And it doesn’t absolve them from their responsibilities under Sarbanes-Oxley, which requires them to know what the heck is going on in their own companies.

They continue:

Granted, keeping data secure is difficult, and Equifax is hardly the first company to let people down in this fashion. Also, it’s too soon to know how the breach happened, whether the company was negligent, and what kinds of additional defenses could have made a difference.

Let’s stop right there. By definition if you’re robbed the controls you have in place were inadequate to prevent the robbery. You were negligent. What the editors of Bloomberg are talking about is criminal negligence.

That’s why I’ve been arguing for strict liability. Equifax should be held responsible for the consequences of their actions and inactions whatever its managers’ intent and whether or not they were reckless. It also explains the math I’ve been citing: if every individual whose data has been exposed due to Equifax’s heedlessness is compensated for a single hour of remedial action and/or worry about it, that alone would be enough to break the company.

The editors continue by arguing for the need for clarity:

Ideally, Congress would respond with new legislation to give the CFPB clearer authority to police the companies. It could even opt for a more utility-like approach, allowing the CFPB to cap profits until they meet benchmarks for accuracy and privacy. But the companies spend heavily on lobbying, and it would be unwise to rely on Congress: On the day Equifax announced the breach, the House Financial Services Committee was considering legislation to reduce their legal liability.

That, unfortunately, ignores the Congress’s core competency which is doing nothing and the editors recognize that:

Rather than waiting for new legislation, the regulators should do more with the powers they already have. Under FCRA, the CFPB can penalize companies for failing to make “reasonable” efforts to keep sensitive information out of the wrong hands. The bureau should thoroughly investigate whether such efforts were made in this case, and demand strong remedies for any transgressions. If it takes the lead in this, the CFPB can set a new standard for the firms’ protection of financial data.

IMO there are already plenty of laws on the books to deal with this situation. What is missing is the will to enforce them.

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