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May 22 2012

Capitalists and Other Psychopaths

A recent piece in the New York Times, “Capitalists and Other Psychopaths”, achieves lift-off from: “4% of a sample of corporate managers met a clinical threshold for being labeled psychopaths, compared with 1% for the overall population”.  Buried in this horse-shit are a pony the author points to and a horse he overlooks.

The horse-shit:  An earlier version of the piece said 10% of people who work on Wall Street are clinical psychopaths.  It also failed to note the study’s disclaimer that the sample, 203 corporate professionals, was not representative.  The writer had a conclusion and failed to respect the data.  The sample is both not representative and too small – 1% of 203 is only two people.  What he wanted to say is the statistics are unsurprising because “Wall Street is capitalism in its purest form, and capitalism is predicated on bad behavior”.  He offers a jumble of factual examples – accounting frauds, environmental damage and so on – that also fail to support his conclusion.  Frauds are crimes.  Crimes are not unique to capitalism but occur in every part of every society.  Environmental damages are market externalities (e.g. pollution costs the public not the polluter so it must be regulated).  Capitalism, like every other system, does not resolve every issue for any society.

The pony:  The writer’s anger about “so-called job creators who deserve our gratitude not our envy” leads him to some very important points for tax policy:

  • Entrepreneurs use wealth to create jobs for workers, workers use labor to create wealth for entrepreneurs
  • Neither party aims to benefit the other but both do gain from the exchange
  • Most of the rich are not entrepreneurs.  They are executives of established corporations or people who inherited money

The horse:  It may not be 1% but psychopaths are plentiful at every level of society.  This writer is angered by rich ones, others by poor ones.  This writer admires moms who single-handedly support themselves and raise good kids.  Others focus on successful entrepreneurs who become philanthropists or those born with nothing who never take a handout.  We see demons, “Fatcat CEOs”, “Welfare Queens” and such, and heroes, “Job-creating Investors”, “Fingers-Worked-To-The-Bone Grandparents” and so on.  Demons and heroes do manifest reality, that’s why they have power, but all they do is point out aspects of reality.  Our job is not to hate or worship them.  We must get past the entertainment they provide and take the indicated actions.

It really doesn’t matter if 4% or some other percentage of the 1% who have most of the wealth in our society are psychopaths, or if 1% or some other percentage of the other 99% are psychopaths.  Every society always has been sprinkled with psychopaths.  Cultures throughout the world and from the dawn of history have depended on an ethic of reciprocity expressed as a Golden Rule, “treat others as you would like to be treated” and Silver Rule, “do not treat others in ways you would not like to be treated”.  Behavior according to those rules is self-reinforcing.  It works automatically in all people blessed with empathy.  But societies must legislate and enforce the Silver Rule because it does not work for psychopaths who by definition lack empathy.

In the same way, while Adam Smith’s great insight that free markets work automatically means the “invisible hand” should be allowed to work its magic, regulation is necessary for market externalities and those regulations must be enforced.

May 16 2012

Nepal’s Constitution

Nepal’s Constituent Assembly (CA) just settled one of the remaining big issues for the new constitution.  There will be a directly elected President and a parliament-elected Prime Minister.  Unresolved issues include the most contentious of all, how the states should be structured.  The Maoist party, whose vice-chairman Baburam Bhatterai is currently Prime Minister, wants eleven federal states.  The other big parties, the Nepali Congress and CPN-UML, want eight.  The alliance of small Madhesi parties wants a single province for the Madhesis who make up around half of Nepal’s total population.

The fundamental issue is whether states should be based primarily on language/ethnicity, economics or geography.

The CA was elected on 10 April 2008 to establish a new constitution within two years.  Earlier election dates in June and November of 2007 had been missed.  When the CA failed to meet its April 2010 deadline they granted themselves another year.  With little progress made by then, they granted themselves a further year.  When they missed that deadline, too, they were given a hard one of May 27.

The Maoists had gotten a third of the seats in the CA in the 2008 election by promising representation to Nepal’s ethnic minorities.  Four years later, as the May 27 deadline draws near there are rallies, protests and strikes all across the country.  Hard deadlines usually don’t mean much in Nepal but the people are angry at long last.  There’s no electricity 14 hours a day, food and fuel prices are rising fast, unemployment is high and soaring.  Everything is hard and getting worse for almost everyone except the politicians.  They are getting richer and, Nepalis say, doing nothing.  There could be mass violence if the CA is still deadlocked on May 27.

The pressure is high enough it seems likely the CA can pass a constitution by May 27 with everything resolved except state structure.   They might defer that to a new commission, which would likely be acceptable to UN observers following the process and India, which would have to intervene if Nepal became overtly ungovernable.

Baburam Bhatterai is the only politician who commands any respect from Nepalis.  He surprised almost everyone by resolving the equally long-standing issue of reintegrating the Maoist “soldiers” into society and he may succeed in getting a compromise of this kind accepted.

May 2 2012

Tax Rates and Employment Rates

Many in Congress are pledged never to raise taxes.  They say we must, in fact, further cut the “tax wedge”, the difference between an employer’s cost for a worker and the employee’s after-tax reward.  The tax wedge grows when taxes go up so it costs more to employ workers at a given after-tax wage.  If taxes go down, it costs less to employ workers at the same after-tax wage.  That means to cut unemployment we should cut taxes, right?

New data from the Organization for Economic Cooperation and Development (OECD) show there is in fact no correlation between size of tax wedge and rate of employment.

The USA is a low-tax country with a tax wedge of 29.5%.  Three-quarters of OECD countries have a larger tax wedge on average workers.  The data in the last column is workers employed as a % of the working-age population, a better indicator of labor market health than unemployment rate, which fluctuates for many reasons and is counted in many ways.

Key take-aways:  Almost half the countries with a bigger tax wedge employ a larger percentage of their working-age populations than the USA.  More than half of those with a smaller tax wedge have lower employment ratios.

Hat-tip to Bruce Bartlett who held senior policy roles in the Reagan and George H.W. Bush administrations and served on the staffs of Representatives Jack Kemp and Ron Paul.  He concludes http://economix.blogs.nytimes.com/2012/05/01/taxes-and-employment/ by saying: “There is simply no evidence that cutting taxes at the present time will do anything to raise employment.”

 

May 2 2012

USA Government’s Topmost Challenges

The 2012 election is no more than a 24/7 entertainment program.  It distracts us from our government’s most important challenges:

  • Manage public spending
  • Manage the financial sector
  • Eliminate government corruption.

Manage public spending includes:

  • Ongoingly raise sufficient revenue to cover the cost of ongoing services, e.g. the military
  • Issue debt to fund infrastructure investments that can only be made by the public sector, e.g., the interstate highway system
  • Increase taxes to fund large unforseen expenses, e.g. wars

Fundamentally, it means MANAGING the top and bottom lines, not letting them drift.  It does not mean managing them to an ongoing level.  The electorate can change what services are publicly provided.  Infrastructure investment should vary as opportunities (and threats) arise.  Public spending must be managed in the context of national strategy, which will change. The mess we’re in now requires a turn-around plan.

Manage the financial sector includes:

  • Prevent private financial institutions from taking risks insured by the public, e.g. dismantle the TBTF banks
  • Prosecute finance executives who broke existing laws
  • Regulate the derivatives and other currently unregulated markets

Dodd-Frank etc will not prevent another collapse triggered by financial executives who will be made whole by a traumatized public.

Eliminate government corruption includes:

  • Eliminate political influence via campaign contributions

Arguably, this is the most important of all “to-do’s” because good governance is paramount no matter which direction we want to go.  Public spending is not being managed because our governing body is corrupt.  There has been no meaningful reform of our financial sector for the same reason.  Elected representatives should represent all constituents, not favor those who contribute to their election, i.e., we want the reality of one person one vote.

There will always be a spectrum of opinion about matters of culture.  I have opinions about those but they’re not on my list because I do not expect everyone to agree.  I do believe everyone will agree with the 3 “to-do’s” above although not necessarily their relative importance or even that they are the most important three.   What do you say?

Apr 25 2012

Getting Directions in Kathmandu

Sep 28, 2011 – D helps me find a place to stay during the Buddhist teachings.  I have a list of guest houses and the name of the subsidiary monastery where the teachings will be held.  All Kathmandu is a maze of narrow streets with no names.  With considerable difficulty we at last find the best-sounding one .  It has no free rooms.  I decide to go to the main monastery for help.  It, too, takes a very long time to find.

Most people are happy to provide directions.  What you cannot know is whether they have any relevant information.  We are directed with great precision to many wrong monasteries.  The right one turns out to have nobody in the office today and my contact is in any case out of the country.  So the man thinks.  He’s not sure.

I figure we deserve, or at the very least need, lunch.    After lunch we look for the second best sounding guest house.  Again, very difficult  but as it turns out, very close to Boudha stupa and a fine place.  I book an excllent $7/night room.  The man takes us to the roof to show us the monastery where the classes will be held.  He can’t be right but he is very certain.  The one he points out is at least 40 minutes away.  The right one is less than 5 minutes.  That’s a problem for another day.

Apr 25 2012

Truck Drivers’ Insurance in Nepal

Sep 24. 2011 – Today we went by buses to the western outskirts of Kathmandu on Nepal’s only east-west road.  Further from where we stopped is the road south into India.  It’s very busy because so much of Nepalis’ basic necessities come from India, rice, salt, oil and so on.  The crazy traffic prompted G to tell me about the system for road accidents.

Truck drivers all contribute to a fund that pays out if they have an accident.  We’d call that insurance.  Sounds normal so far.  But back when the Rana family operated the country as a tax farm (prior to 1951) and they were the only ones who could have trucks, they established that the penalty for killing someone on the road is just a fine.  That law remains in effect.  If you run over someone you pay a fine and that’s the end of the problem.

What this means is if a truck driver injures someone, the insurance fund may have to pay out large medical fees and compensation for the rest of the victim’s life whereas if the victim is killed there is only the fine to pay.  Consequently, if a driver hits and only injures someone they will normally go on to run over and kill them.

An American guy at the next restaurant table yesterday who has spent several months a year here for 17 years was chatting with three others and expressing surprise that an accident the previous day had resulted in the death of a man who was one of a large crowd of pedestrians.  How come nobody else was injured but this one guy was squashed?  Now we know.  This also explains why road accidents often result in locals blocking the road for a day or so.  They know there was not just an accident but also a mortal crime.

Apr 25 2012

Why Buffalo are Sacrificed

Sep 29, 2011 – Today is the first day of Dashain. Hindus start to do the ritually prescribed things.  Today they plant barley seeds.  Others will wait a few more days.

The part everyone looks forward to is feasting.  Huge numbers of animals will be ritually sacrificed then eaten. It is projected that only 15-20% of the necessary goats will be of Nepali origin this year.  The remaining 80%+ will be imported from India. Ideally one should sacrifice a buffalo but most people cannot afford that.  A goat is next best.  If you can’t afford a goat, a chicken is OK. For the last few days chicken trucks have been coming in to Kathmandu.  Men walk along the streets carrying a chicken casually suspended from where its wings are attached to its back.  Most of  the birds look alert and surprisingly calm.

The latest version I’ve read of why buffaloes should be sacrificed goes like this:  Once upon a time all the Gods and Goddesses were being bothered by demons.  None had enough power to defeat them.  At last all the deities began to dance.  They danced with such vigor that great clouds of dust arose.  At that moment Goddess Kali manifested from a lock of Lord Shiva’s hair (he is the member of the Hindu trinity who is responsible for destruction and creation; Kali handles just destruction).  Kali was immediately covered with dust particles energized by the deities’ dancing.  She gained all that power and had enough to kill the demons’ vehicles, which were buffaloes.  The demons fell to the ground where they were easier to kill.  Therefore, we should kill buffaloes on this date to commemorate Kali’s triumph.

Apr 25 2012

Nagas and Jewels in Kathmandu Valley

Sep 21, 2011 – Today G and I walk to another village where it’s probable no Westerner ever came before.  There’s no temple or historical site in this area, just very poor villages an hour-long slog through the “jungle”.

We stop at a tea shop where locals gather.  The proprietor is excited to find an American in his shop.  “America is the richest country in the world” he tells G then proposes to sell me a jewel he took from a snake deity, a naga that lives in rivers.  Nagas produce one jewel from their body during their entire incalculably long life.  It casts intense light 21 feet in every direction.  They need it to hunt for food at night.  If you can take such a jewel when the naga is not looking you can keep it, but if the naga sees you it will bite you and you will die, not after one minute or one second but instantaneously.  That’s why such jewels are so rare.

The man says I can see the jewel if I’m interested but to buy it will cost eighty thousand million rupees.  That’s a little over one billion dollars.  G admits I do not have so much money in my pocket today.  The man says he is sorry, in that case he cannot show us the jewel.  G says he has read about such jewels but never imagined he might meet someone who possessed one.

The man’s wife prepares tea for us.  It is exceptionally tasty but appears to lack magical properties.

Apr 25 2012

Zombies and Tara

Nov 7, 2011 – One of the manifestations of Tara, supreme goddess of compassion, subdues zombies.  She subdues all manner of other beings, too, including ones with horse heads and human bodies.  All such beings are ways to visualize negative emotions that lead to negative actions.  Lama who teaches us occasionally entertains us with stories about these imaginary but also real beings.  He has many tales about zombies.

Five manifestations of Tara

Zombies are bodies inhabited by a demon who replaced the original occupant.  There are none now because high lamas killed them all.  It’s unfortunate in a way because wherever there were zombies you could be sure a high lama would soon appear, too.  Those high lamas could make zombies work.  One took a long pilgrimage all across Tibet and needed to bring a lot of stuff with him.  He made a zombie carry it all.  At the end of each day he told the zombie to stop.  The zombie would crash to the ground and remain immobile ’til morning.  Toward the end of the pilgrimage it started making a funny noise as it walked.  That’s because its feet were almost worn through.

Another time the abbot of a monastery was nearing death.  He told his lamas they must at all costs cut up and burn his body within three days of his death.  When the time came, his lamas decided it wouldn’t be right to do that because even the lowest person is allowed to rest for a week.  They laid him to rest and respectfully slept where his body lay.  On the third night in that room one young lama was too scared to sleep.  At last he turned and placed his head where his feet should be so he could keep a close watch on the abbot’s body.  Suddenly, its eyes opened.  It blinked and sat up.  It rose to its feet and began touching each sleeping monk’s head.  They instantly became zombies.  Only the young monk escaped.  That’s because it was his feet that were touched.  He ran from the room, locked all the zombies in, and probably burned the monastery to the ground. Lama says he can’t attest to the veracity of that last point.  It’s just his assumption based on other such incidents.

The reason for sky burial, the Tibetan tradition of cutting bodies into small pieces and leaving them for vultures, was to avert zombies.  Since there are no zombies now, sky burial is no longer necessary.  The workers who cut up the bodies had to hide the heads because vultures, who are in fact special-purpose deities, like brains best.  If they got brains first, they wouldn’t finish the flesh and other organs.