Full text of article in the extended entry.

The ongoing turmoil in the financial markets has diverted me from my usual tax academic pursuits, including this blog, for which I apologize. This post explores the causes of that turmoil. My next post will explore solutions currently under consideration, including aspects of the so-called “$700 billion bailout.”

The current financial crisis has many causes, some long-term and structural. I focus here, however, on three immediate aspects of the crisis: the trigger, how problems generated by that trigger spread through the markets, and how this produced the liquidity freeze that persuaded Mr. Paulson and Mr. Bush to act (unsuccessfully thus far).

The Trigger: Teaser-Rate Mortgages

The media talks about “sub prime mortgages” – by which it means mortgage loans to borrowers with less than stellar credit. The real problem, however, was the advent and widespread use of teaser-rate mortgages in both the prime and sub prime markets. A teaser-rate mortgage allows a borrower to make relatively small payments for several years. At some point, the rate jumps dramatically, and the borrower faces much higher monthly payment obligations.

Not surprisingly, borrowers loved this innovation. Teaser-rate loans allowed folks who otherwise could never have afforded to own a home to buy one, at least until the rate reset. But it wasn’t just sub prime borrowers who liked teasers. Teasers sold like hotcakes; loan originators made correspondingly fabulous profits.

(Some have tried to blame teaser-rates on the Community Reinvestment Act of 1977, which encouraged lending to minorities and lower income Americans. But that act only applied to commercial banks. A majority of this crisis’s teaser-rate loans were made by unregulated originators not subject to the act. More fundamentally, there is no evidence the present crisis started in 1977. Teaser-rate mortgages first became widespread after Mr. Bush took office in 2001.)

In any event, it’s not hard to predict what happens when rates reset. All of a sudden, buyers who have been paying $1,000 per month face monthly payments of $4,000. Many, perhaps most, go into default.

The possibility that this would become a major problem became apparent as early as 2005. (I actually wrote that fall predicting the current crash.) Mortgage economists began publishing reset schedules – schedules of how many billions or trillions of dollars of mortgages would reset and when. In effect, those tables offered a rough schedule of how many mortgages would go into default and when.

As defaults increased in number, lenders ended up holding large amounts of foreclosed property. When they tried to convert the property into cash, they put downward pressure on housing prices. And this, in turn, made financing and refinancing more difficult and further defaults more likely – even of non-teaser loans. (A perfect vicious cycle, and we’re not remotely near the end of it. In parts of the country, more half the homes offered for sale are now foreclosures. Banks are desperate to get those homes off their balance sheets and are dumping them much faster than the market can absorb them.)

The Spread: Securitization and Debt Chains

But why did Lehman Brothers and AIG go under? After all, they don’t make mortgage loans. I turn next to how the problem spread.

Assume that A borrows from B to buy a home, giving a mortgage on the home to secure her debt. B then borrows from C, using A’s mortgage as security. C in turn borrows from D, using B’s obligation as security. And so on.

Now assume that A’s mortgage goes bad. What happens to B, C, and D? Answer: all the loans up the chain go bad as well.

And this isn’t all. If the loan is secured (as mortgages and many other links in debt chains are), the lender is typically less interested in the creditworthiness of the borrower. The lender relies primarily on the collateral, not the borrower, for assurance of repayment.

As a result, each financial intermediary can be thinly capitalized. So a company with $10.1 billion in assets and $10 billion in debt may have a small amount of net equity. Indeed, the more thinly capitalized a company, the higher the return it can make on its capital.

Unfortunately, what this means is that when A’s mortgage goes bad, it’s not just the loans up the chain that go bad – financial intermediaries in the chain often go bust as well. A thinly capitalized intermediary cannot absorb many losses. And that is why teaser-rate mortgage defaults triggered and are still triggering defaults and failures across the entire financial sector. Almost everyone was in the debt-chain business and extended themselves to the max to take advantage of the extraordinary profit opportunities of that business.

I’ve explained the transmission mechanism in terms of debt because readers have an intuitive understanding of how debt works. In fact, however, many of the most important links in the chain were not technically “debt.” Some were shares in “mortgage pools”; some, “derivatives”; some, “credit default swaps.” What they all had in common was that each transferred some risk of default up the chain to someone else. Wall Street sometimes calls links in such debt chains “toxic waste,” because today no one wants them.

AIG, for example, held about $500 billion in “notional exposure” on credit default swaps. In English, it was at risk to the tune of about $500 billion if mortgages down the chain went bad. When mortgages began to go bad in large numbers, the market realized that AIG might not be able to cover its obligations and began to sell AIG stock seriously short. Lenders stopped lending. End of story.

What made this more than just a corporate problem was that AIG was a domino at the head of many long chains of dominoes. If AIG had gone, some believed the world would have faced immediate economic collapse. So the US government bought an 80% stake in AIG in exchange for enough money to allow AIG to dissolve gracefully – over a couple of years – instead of imploding overnight.

The Crisis: Liquidity Freeze

None of this, however, would by itself have led a free-market US administration to propose a $700 billion general “bail-out.” Real estate is important, yes, but there are many parts of the economy not dependent on the market for home mortgages. What happened?

In ordinary times, most businesses borrow on a short term basis to fund payroll, inventory, and other operating needs. There are two principal sources of short-term money: banks and money-market funds. In the past several weeks, each of these has substantially reduced the amounts they are willing to lend. This is what’s called a liquidity or credit freeze.

Why did banks and money-market funds stop lending?

Let’s start with money-market funds. Investors put money into money-market funds when they want absolute safety and the ability to pull their money out at will. Put in a dollar, get out a dollar, whenever you want. In return, they accept a very low return. What happened was that The Reserve, the oldest and most highly regarded money-market fund sponsor, “broke a buck” – which means it paid back only 97 cents for every dollar investors put in.

The reason was simple: The Reserve had loaned short-term money to Lehman Brothers, a major participant in the debt chain business. Lehman Brothers went belly up, and The Reserve’s short-term loans to Lehman became uncollectible. (Remember that the Treasury and the Federal Reserve Bank, having bailed out Bear Stearns, decided to let Lehman Brothers go bankrupt to teach the market a lesson. In retrospect, this was probably a mistake.)

As a result, investor confidence in money-market funds plummeted. Fortunately or unfortunately, investors always have a secure place to park money, Treasury bills – short term obligations issued by the U.S. government. When The Reserve broke a buck, everyone moved their money into Treasuries. Money-market funds dried up. And that was the end of one major source of business working capital.

Another major source is the banking system. Unfortunately, banks and other financial intermediaries became reluctant to loan to each other. As a result, money in one part of the banking system stopped flowing to where it was most needed.

Why did banks stop loaning money to each other? When lenders lend, they generally look at borrowers’ financial sheets to determine how creditworthy they are before giving out money. Unfortunately, most banks and other financial intermediaries have large amounts of toxic waste on their books.

In situations like this, accounting rules require companies to “mark assets to market.” If an asset with a face value of $100 appears to have a market value of $40, the company is supposed to record a loss of $60 immediately, even before the asset is sold, and to carry that asset on its books at a value of $40. So banks and other financial intermediaries began reporting enormous losses on the toxic waste they held, and their balance sheets crumbled. (The head of the Securities and Exchange Commission was pressured to waive this rule, but refused. It was for this reason that Sen. John McCain demanded that he be fired.)

But recognizing market losses isn’t the most serious problem. If a lender can be confident that the asset in question really has a value of $40, it may still conclude that the prospective borrower is likely to repay the loan – notwithstanding the reported loss. If no one knows how much the toxic waste is actually worth, however, lenders can’t assess the creditworthiness of any prospective borrower with significant amounts of toxic waste on its books. Almost all banks hold toxic waste. So banks stopped lending to other banks. (Waiving the mark-to-market rule would not have solved this problem; it would simply have hidden the accrued losses. Banks are sophisticated enough to worry when accounting rules do not correctly reflect what's going on in the market.)

But why is the unavailability of short-term money so bad?

Remember what businesses use short-term money for – to meet payroll and put inventory on their shelves. When businesses lose access to working capital, they stop operating, not because there is anything fundamentally wrong with their products or markets or business plans, but simply because they can’t get the cash they need on a daily basis.

You might think of short-term money as the lubricant that keeps the world’s economic engine turning over smoothly. If there’s no lubricant, the engine freezes. No paydays, no goods on the shelves. Seriously.

This was the possibility that persuaded Mr. Bush and Mr. Paulson to change course and support a general “bail-out.” And it remains a very real possibility.

The $700 Billion Bailout

I will discuss the details of possible solutions in my next post.

What is important to emphasize here is that current proposals are primarily intended to solve the liquidity freeze part of the problem – to prevent the world’s economic engine from seizing up.

Mr. Paulson’s original proposal hoped to accomplish this in two ways. First, by buying up toxic waste at fair market value, Mr. Paulson could take toxic waste off financial intermediaries’ balance sheets. This would allow lenders to assess borrowers’ creditworthiness with greater confidence and, hopefully, get banks to start lending to each other again.

Equally importantly, however, Mr. Paulson requested authority to buy up that waste at whatever price he thought best. By buying toxic waste at higher prices than private buyers were willing to pay, he hoped to bolster the financial intermediaries’ balance sheets – to make them more creditworthy.

This aspect of the proposal was what made it a “bail-out.” And this was part of what led to its defeat in the House.

Note that Mr. Paulson’s proposal was not intended to solve the teaser-rate mortgage problem, either now or in the future. In the transactions that created the teaser-rate mortgages in the first place, both parties made bad decisions – the lender and the borrower. Mr. Paulson’s proposal was not intended to help either. One of its unavoidable side effects, however, was to relieve lenders of the consequences of their bad decisions, while leaving borrowers to suffer the consequences of theirs. This made it politically less palatable.

In addition, at least $500 billion more of teaser-rate mortgages are scheduled to reset over the next several years. In all likelihood, they too will go into default and become toxic waste. Nothing in Mr. Paulson’s original proposal was intended to do anything about this next $500 billion installment – or, indeed, to prevent lenders from making more teaser-rate mortgages in the future.

Similarly, Mr. Paulson’s proposal was not intended as a general Wall Street bail-out, although to some extent it would have had that effect. Note that the outstanding overhang of credit default swaps alone is estimated to be between $45 and $60 trillion – three to four times the size of our annual gross domestic product. The requested $700 billion, although the single biggest appropriation request in U.S. history, was miniscule when compared with the toxic waste problem as a whole. Mr. Paulson’s proposed solution was to cost just 1% of the size of the problem and was aimed only at a small part of that problem. (It is unnerving to realize that the U.S. government – the “beast” we have been starving for so long – may now lack the borrowing capacity to solve the problem as a whole. We need to get our financial house in order.)

All Mr. Paulson’s proposal aimed to do was to put lubricant back into the engine, to get short-term money flowing again to prevent our economic engine from freezing up. Now that the proposal has gone down to defeat, we can only hope that Mr. Paulson was wrong.

(Hat tip to Marginal Revolution)

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A new scientific understanding of perception has emerged in the past few decades, and it has overturned classical, centuries-long beliefs about how our brains work—though it has apparently not penetrated the medical world yet. The old understanding of perception is what neuroscientists call “the naïve view,” and it is the view that most people, in or out of medicine, still have. We’re inclined to think that people normally perceive things in the world directly. We believe that the hardness of a rock, the coldness of an ice cube, the itchiness of a sweater are picked up by our nerve endings, transmitted through the spinal cord like a message through a wire, and decoded by the brain.

In a 1710 “Treatise Concerning the Principles of Human Knowledge,” the Irish philosopher George Berkeley objected to this view. We do not know the world of objects, he argued; we know only our mental ideas of objects. “Light and colours, heat and cold, extension and figures—in a word, the things we see and feel—what are they but so many sensations, notions, ideas?” Indeed, he concluded, the objects of the world are likely just inventions of the mind, put in there by God. To which Samuel Johnson famously responded by kicking a large stone and declaring, “I refute it thus!”

Still, Berkeley had recognized some serious flaws in the direct-perception theory—in the notion that when we see, hear, or feel we are just taking in the sights, sounds, and textures of the world. For one thing, it cannot explain how we experience things that seem physically real but aren’t: sensations of itching that arise from nothing more than itchy thoughts; dreams that can seem indistinguishable from reality; phantom sensations that amputees have in their missing limbs. And, the more we examine the actual nerve transmissions we receive from the world outside, the more inadequate they seem.

Our assumption had been that the sensory data we receive from our eyes, ears, nose, fingers, and so on contain all the information that we need for perception, and that perception must work something like a radio. It’s hard to conceive that a Boston Symphony Orchestra concert is in a radio wave. But it is. So you might think that it’s the same with the signals we receive—that if you hooked up someone’s nerves to a monitor you could watch what the person is experiencing as if it were a television show.

Yet, as scientists set about analyzing the signals, they found them to be radically impoverished. Suppose someone is viewing a tree in a clearing. Given simply the transmissions along the optic nerve from the light entering the eye, one would not be able to reconstruct the three-dimensionality, or the distance, or the detail of the bark—attributes that we perceive instantly.

Or consider what neuroscientists call “the binding problem.” Tracking a dog as it runs behind a picket fence, all that your eyes receive is separated vertical images of the dog, with large slices missing. Yet somehow you perceive the mutt to be whole, an intact entity travelling through space. Put two dogs together behind the fence and you don’t think they’ve morphed into one. Your mind now configures the slices as two independent creatures.

The images in our mind are extraordinarily rich. We can tell if something is liquid or solid, heavy or light, dead or alive. But the information we work from is poor—a distorted, two-dimensional transmission with entire spots missing. So the mind fills in most of the picture. You can get a sense of this from brain-anatomy studies. If visual sensations were primarily received rather than constructed by the brain, you’d expect that most of the fibres going to the brain’s primary visual cortex would come from the retina. Instead, scientists have found that only twenty per cent do; eighty per cent come downward from regions of the brain governing functions like memory. Richard Gregory, a prominent British neuropsychologist, estimates that visual perception is more than ninety per cent memory and less than ten per cent sensory nerve signals. When Oaklander theorized that M.’s itch was endogenous, rather than generated by peripheral nerve signals, she was onto something important.

The fallacy of reducing perception to reception is especially clear when it comes to phantom limbs. Doctors have often explained such sensations as a matter of inflamed or frayed nerve endings in the stump sending aberrant signals to the brain. But this explanation should long ago have been suspect. Efforts by surgeons to cut back on the nerve typically produce the same results that M. had when they cut the sensory nerve to her forehead: a brief period of relief followed by a return of the sensation.

Moreover, the feelings people experience in their phantom limbs are far too varied and rich to be explained by the random firings of a bruised nerve. People report not just pain but also sensations of sweatiness, heat, texture, and movement in a missing limb. There is no experience people have with real limbs that they do not experience with phantom limbs. They feel their phantom leg swinging, water trickling down a phantom arm, a phantom ring becoming too tight for a phantom digit. Children have used phantom fingers to count and solve arithmetic problems. V. S. Ramachandran, an eminent neuroscientist at the University of California, San Diego, has written up the case of a woman who was born with only stumps at her shoulders, and yet, as far back as she could remember, felt herself to have arms and hands; she even feels herself gesticulating when she speaks. And phantoms do not occur just in limbs. Around half of women who have undergone a mastectomy experience a phantom breast, with the nipple being the most vivid part. You’ve likely had an experience of phantom sensation yourself. When the dentist gives you a local anesthetic, and your lip goes numb, the nerves go dead. Yet you don’t feel your lip disappear. Quite the opposite: it feels larger and plumper than normal, even though you can see in a mirror that the size hasn’t changed.

The account of perception that’s starting to emerge is what we might call the “brain’s best guess” theory of perception: perception is the brain’s best guess about what is happening in the outside world. The mind integrates scattered, weak, rudimentary signals from a variety of sensory channels, information from past experiences, and hard-wired processes, and produces a sensory experience full of brain-provided color, sound, texture, and meaning. We see a friendly yellow Labrador bounding behind a picket fence not because that is the transmission we receive but because this is the perception our weaver-brain assembles as its best hypothesis of what is out there from the slivers of information we get. Perception is inference.

The theory—and a theory is all it is right now—has begun to make sense of some bewildering phenomena. Among them is an experiment that Ramachandran performed with volunteers who had phantom pain in an amputated arm. They put their surviving arm through a hole in the side of a box with a mirror inside, so that, peering through the open top, they would see their arm and its mirror image, as if they had two arms. Ramachandran then asked them to move both their intact arm and, in their mind, their phantom arm—to pretend that they were conducting an orchestra, say. The patients had the sense that they had two arms again. Even though they knew it was an illusion, it provided immediate relief. People who for years had been unable to unclench their phantom fist suddenly felt their hand open; phantom arms in painfully contorted positions could relax. With daily use of the mirror box over weeks, patients sensed their phantom limbs actually shrink into their stumps and, in several instances, completely vanish. Researchers at Walter Reed Army Medical Center recently published the results of a randomized trial of mirror therapy for soldiers with phantom-limb pain, showing dramatic success.

A lot about this phenomenon remains murky, but here’s what the new theory suggests is going on: when your arm is amputated, nerve transmissions are shut off, and the brain’s best guess often seems to be that the arm is still there, but paralyzed, or clenched, or beginning to cramp up. Things can stay like this for years. The mirror box, however, provides the brain with new visual input—however illusory—suggesting motion in the absent arm. The brain has to incorporate the new information into its sensory map of what’s happening. Therefore, it guesses again, and the pain goes away.

The rest of the article is about itching...

Welcome to the future, kind of like the Uncyclopedia but not so pointlessly silly.

I might do some work on this...

A major evolutionary innovation has unfurled right in front of researchers' eyes. It's the first time evolution has been caught in the act of making such a rare and complex new trait.

And because the species in question is a bacterium, scientists have been able to replay history to show how this evolutionary novelty grew from the accumulation of unpredictable, chance events.

Twenty years ago, evolutionary biologist Richard Lenski of Michigan State University in East Lansing, US, took a single Escherichia coli bacterium and used its descendants to found 12 laboratory populations.

The 12 have been growing ever since, gradually accumulating mutations and evolving for more than 44,000 generations, while Lenski watches what happens.
Profound change

Mostly, the patterns Lenski saw were similar in each separate population. All 12 evolved larger cells, for example, as well as faster growth rates on the glucose they were fed, and lower peak population densities.

But sometime around the 31,500th generation, something dramatic happened in just one of the populations – the bacteria suddenly acquired the ability to metabolise citrate, a second nutrient in their culture medium that E. coli normally cannot use.

Indeed, the inability to use citrate is one of the traits by which bacteriologists distinguish E. coli from other species. The citrate-using mutants increased in population size and diversity.

"It's the most profound change we have seen during the experiment. This was clearly something quite different for them, and it's outside what was normally considered the bounds of E. coli as a species, which makes it especially interesting," says Lenski.
Rare mutation?

By this time, Lenski calculated, enough bacterial cells had lived and died that all simple mutations must already have occurred several times over.

That meant the "citrate-plus" trait must have been something special – either it was a single mutation of an unusually improbable sort, a rare chromosome inversion, say, or else gaining the ability to use citrate required the accumulation of several mutations in sequence.

To find out which, Lenski turned to his freezer, where he had saved samples of each population every 500 generations. These allowed him to replay history from any starting point he chose, by reviving the bacteria and letting evolution "replay" again.

Would the same population evolve Cit+ again, he wondered, or would any of the 12 be equally likely to hit the jackpot?
Evidence of evolution

The replays showed that even when he looked at trillions of cells, only the original population re-evolved Cit+ – and only when he started the replay from generation 20,000 or greater. Something, he concluded, must have happened around generation 20,000 that laid the groundwork for Cit+ to later evolve.

Lenski and his colleagues are now working to identify just what that earlier change was, and how it made the Cit+ mutation possible more than 10,000 generations later.

In the meantime, the experiment stands as proof that evolution does not always lead to the best possible outcome. Instead, a chance event can sometimes open evolutionary doors for one population that remain forever closed to other populations with different histories.

Lenski's experiment is also yet another poke in the eye for anti-evolutionists, notes Jerry Coyne, an evolutionary biologist at the University of Chicago. "The thing I like most is it says you can get these complex traits evolving by a combination of unlikely events," he says. "That's just what creationists say can't happen."

Journal reference: Proceedings of the National Academy of Sciences (DOI: 10.1073/pnas.0803151105)

No rational person disputes that evolution takes place. The still unresolved problem is: how did life itself evolve? As I see it there are two things that must happen at the same time in the same "generation"

1) Proto-life must figure out how to harness external energy to "do things".

2) Proto-life must figure out how to make perfect copies of itself.

Its impossible for me to imagine proto-life forms sitting around and then one day, changing so that they start to harness energy from the sun so they can do things (like: move, store energy, grow in size, etc.).

Its equally impossible for me to imagine how, this same primitive life form not only "figured out" how to harness energy but also, before it died, figured out how to reproduce an exact copy of itself. So I'm completely unconvinced that there is a natural explanation for the origin of life. But as to evolution, no question. Its real.

Watch out for cars with bumper stickers. (Shankar Vedantam, Washington Post, Monday, June 16, 2008)

That's the surprising conclusion of a recent study by Colorado State University social psychologist William Szlemko. Drivers of cars with bumper stickers, window decals, personalized license plates and other "territorial markers" not only get mad when someone cuts in their lane or is slow to respond to a changed traffic light, but they are far more likely than those who do not personalize their cars to use their vehicles to express rage -- by honking, tailgating and other aggressive behavior.

It does not seem to matter whether the messages on the stickers are about peace and love -- "Visualize World Peace," "My Kid Is an Honor Student" -- or angry and in your face -- "Don't Mess With Texas," "My Kid Beat Up Your Honor Student."

Szlemko and his colleagues at Fort Collins found that people who personalize their cars acknowledge that they are aggressive drivers, but usually do not realize that they are reporting much higher levels of aggression than people whose cars do not have visible markers on their vehicles.

Drivers who do not personalize their cars get angry, too, Szlemko and his colleagues concluded in a paper they recently published in the Journal of Applied Social Psychology, but they don't act out their anger. They fume, mentally call the other driver a jerk, and move on.

"The more markers a car has, the more aggressively the person tends to drive when provoked," Szlemko said. "Just the presence of territory markers predicts the tendency to be an aggressive driver."

The key to the phenomenon apparently lies in the idea of territoriality. Drivers with road rage tend to think of public streets and highways as "my street" and "my lane" -- in other words, they think they "own the road."

Why would bumper stickers predict which people are likely to view public roadways as private property?

Social scientists such as Szlemko say that people carry around three kinds of territorial spaces in their heads. One is personal territory -- like a home, or a bedroom. The second kind involves space that is temporarily yours -- an office cubicle or a gym locker. The third kind is public territory: park benches, walking trails -- and roads.

Previous research has shown that these different territorial spaces evoke distinct emotional responses. People are willing to physically defend private territory in ways they would never do with public territory. And people personalize private territory with various kinds of markers -- in their homes, for example, they hang paintings, alter the decor and carry out renovations.

"Territoriality is hard-wired into our ancestors from tens of thousands of years ago," said Paul Bell, a co-author of the study at Colorado State. "Animals are territorial because it had survival value. If you could keep others away from your hunting groups, you had more game to spear . . . it becomes part of the biology."

Drivers who individualize their cars using bumper stickers, window decals and personalized license plates, the researchers hypothesized, see their cars in the same way as they see their homes and bedrooms -- as deeply personal space, or primary territory.

Unlike any environment our evolutionary ancestors might have confronted, driving a car simultaneously places people in both private territory -- their cars -- and public territory -- the road. Drivers who personalize their cars with bumper stickers and other markers of private territory, the researchers argue, forget when they are on the road that they are in public territory because the immediate cues surrounding them tell them that they are in a deeply private space.

"If you are in a vehicle that you identify as a primary territory, you would defend that against other people whom you perceive as being disrespectful of your space," Bell added. "What you ignore is that you are on a public roadway -- you lose sight of the fact you are in a public area and you don't own the road."

Szlemko said that, in an as-yet-unpublished experiment, he conducted tests of road rage in actual traffic. He had one researcher sit in a car in a left-turn lane. When the light turned green, the researcher simply stayed still, blocking the car behind.

Another researcher, meanwhile, examined whether the blocked car had bumper stickers and other markers of territoriality. The experimental question was how long it would take for the driver of the blocked car to honk in frustration.

Szlemko said that drivers of cars with decals, bumper stickers and personalized license plates honked at the offending vehicle nearly two full seconds faster than drivers of cars without any territorial markers.

Ah the joys of modern science.

What Do We Get From Prison?

We are frequently told that America should be ashamed of having sent so many people to prison. We are compared unfavorably to most of Europe. But these complaints rarely ask what benefits flow from prison.

The best scholars have estimated that between 25 and 30 percent of the recent decline in crime rates is the result of imprisonment. A comparison with England is helpful. At one time it imprisoned a higher fraction of offenders than did the US, but in the 1980s it changed by imprisoning fewer people. As a result (I think), the British crime rate soared while ours fell.

Between 1980 and 1985 the American prison population increased by more than half and between 1985 and 1990 it again increased by half. But from 1987 to 1992, the British prison population dropped by about five thousand inmates despite a sharp rise in the crime rate.

These different responses did not happen by accident. Americans, voting for district attorneys, mayors, and governors, chose people who would take crime seriously. In England hardly any of these offices are filled by local election; instead, the Parliament and the Home Office decide on crime policies.

Those decisions included a bill that urged judges not to send offenders to prison unless the crime was very serious, and in determining seriousness the judges were asked to ignore the prior record of the offenders.

In short, American policies were driven by public opinion while British ones were shaped by elite preferences. As a result, victim surveys show that by the late 1990s the British robbery rate was one-quarter higher and the burglary and assault rates twice as high as those in this country.

This raises the interesting question of why elite views should be so different from popular ones. Some possible explanations: Elites can more easily protect themselves from criminal attacks; elites tend to have a therapeutic rather than punitive view of crime; elites in parliamentary regimes are protected against sharp swings in public moods.

There are a lot of criticisms one can make of prisons, but sending offenders there, provided it is done correctly and without abuse, is an eminently democratic strategy: We deprive guilty people of liberty to make innocent people safer.

Now its true that much of we thought was true turned out to be wrong but this is hardly the fault of the Bush Administration. Saddam was good at lying to everyone around him and many, many people honestly thought Saddam really did have chemical, biological, even nuclear weapons ready and waiting in the event of an attack. But the Bush administration did not lie about what they knew.

--- From the Washington Post by Fred Hiatt, June 9 2008 ---
Search the Internet for "Bush Lied" products, and you will find sites that offer more than a thousand designs. The basic "Bush Lied, People Died" bumper sticker is only the beginning.

Sen. John D. Rockefeller IV (D-W.Va.), chairman of the Select Committee on Intelligence, set out to provide the official foundation for what has become not only a thriving business but, more important, an article of faith among millions of Americans. And in releasing a committee report Thursday, he claimed to have accomplished his mission, though he did not use the L-word.

"In making the case for war, the administration repeatedly presented intelligence as fact when it was unsubstantiated, contradicted or even nonexistent," he said.

There's no question that the administration, and particularly Vice President Cheney, spoke with too much certainty at times and failed to anticipate or prepare the American people for the enormous undertaking in Iraq.

But dive into Rockefeller's report, in search of where exactly President Bush lied about what his intelligence agencies were telling him about the threat posed by Saddam Hussein, and you may be surprised by what you find.

On Iraq's nuclear weapons program? The president's statements "were generally substantiated by intelligence community estimates."

On biological weapons, production capability and those infamous mobile laboratories? The president's statements "were substantiated by intelligence information."

On chemical weapons, then? "Substantiated by intelligence information."

On weapons of mass destruction overall (a separate section of the intelligence committee report)? "Generally substantiated by intelligence information." Delivery vehicles such as ballistic missiles? "Generally substantiated by available intelligence." Unmanned aerial vehicles that could be used to deliver WMDs? "Generally substantiated by intelligence information."

As you read through the report, you begin to think maybe you've mistakenly picked up the minority dissent. But, no, this is the Rockefeller indictment. So, you think, the smoking gun must appear in the section on Bush's claims about Saddam Hussein's alleged ties to terrorism.

But statements regarding Iraq's support for terrorist groups other than al-Qaeda "were substantiated by intelligence information." Statements that Iraq provided safe haven for Abu Musab al-Zarqawi and other terrorists with ties to al-Qaeda "were substantiated by the intelligence assessments," and statements regarding Iraq's contacts with al-Qaeda "were substantiated by intelligence information." The report is left to complain about "implications" and statements that "left the impression" that those contacts led to substantive Iraqi cooperation.

In the report's final section, the committee takes issue with Bush's statements about Saddam Hussein's intentions and what the future might have held. But was that really a question of misrepresenting intelligence, or was it a question of judgment that politicians are expected to make?

After all, it was not Bush, but Rockefeller, who said in October 2002: "There has been some debate over how 'imminent' a threat Iraq poses. I do believe Iraq poses an imminent threat. I also believe after September 11, that question is increasingly outdated. . . . To insist on further evidence could put some of our fellow Americans at risk. Can we afford to take that chance? I do not think we can."

Rockefeller was reminded of that statement by the committee's vice chairman, Sen. Christopher S. Bond (R-Mo.), who with three other Republican senators filed a minority dissent that includes many other such statements from Democratic senators who had access to the intelligence reports that Bush read. The dissenters assert that they were cut out of the report's preparation, allowing for a great deal of skewing and partisanship, but that even so, "the reports essentially validate what we have been saying all along: that policymakers' statements were substantiated by the intelligence."

Why does it matter, at this late date? The Rockefeller report will not cause a spike in "Bush Lied" mug sales, and the Bond dissent will not lead anyone to scrape the "Bush Lied" bumper sticker off his or her car.

But the phony "Bush lied" story line distracts from the biggest prewar failure: the fact that so much of the intelligence upon which Bush and Rockefeller and everyone else relied turned out to be tragically, catastrophically wrong.

And it trivializes a double dilemma that President Bill Clinton faced before Bush and that President Obama or McCain may well face after: when to act on a threat in the inevitable absence of perfect intelligence and how to mobilize popular support for such action, if deemed essential for national security, in a democracy that will always, and rightly, be reluctant.

For the next president, it may be Iran's nuclear program, or al-Qaeda sanctuaries in Pakistan, or, more likely, some potential horror that today no one even imagines. When that time comes, there will be plenty of warnings to heed from the Iraq experience, without the need to fictionalize more.

Very true. Presidents have to make decisions on the basis of available information, sometimes poor information. But there it is. Its a tough job and we live in an imperfect world. But can we please, please, please end this false assertion that the Bush administration lied about what they knew about Iraq? Please?

Welcome to Japanese TV

My irritating yet astounding new book Against the State argues that

(1) The political state or government rests on force and coercion.
(2) Force and coercion are always wrong if they can’t be morally justified. (That is, the use of force is wrong if it lacks a moral justification.)
(3) The arguments for the moral legitimacy of state - for example those of Hobbes, Locke, Rousseau, Hume, Hegel, Rawls, and Habermas - are unsound.
(4) Hence, state power has not been shown to be morally defensible.
Until you show me otherwise, I conclude that government power is in every case illegitimate.

Not only are the existing arguments for the legitimacy of state power unsound; they are pitiful. They are embarrassments to the Western intellectual tradition.

So I issue a challenge: Give a decent argument for the moral legitimacy of state power, or reconstruct one of the traditional arguments in the face of the refutations in Against the State.

If you can’t, I insist that you are rationally obliged to accept anarchism.

Henceforward, if you continue to support or observe the authority of government, you are an irrational cultist.

We’re all anarchists now, baby, until further notice.

Here is the response from Wilkinson:

I may agree with Sartwell about legitimacy, depending on what he means by it. But I detect a missing premise or two. For example, that in the absence of a decent argument for the legitimacy of state power, you are rationally obliged to accept anarchism. Aren’t you rationally obliged to accept the social system that does best relative to the values you care about? So what if human flourishing, not legitimacy, is your greatest concern. You can still accept that all states are illegitimate. But suppose the path to the best feasible anarchy leaves people worse off in terms of flourishing than in the best illegitimate states. It seems, in that case, you would be rationally obliged to support states that do better for people than anarchy, despite their illegitimacy. In which case, it would be irrational cultlike behavior to endorse anarchy just because it is not illegitimate.

Now, some people would say that doing better for people than the relevant non-state alternatives is all it means to say government is legitimate or coercion is justified in the relevant sense, but I don’t think so. It seems perfectly coherent to me to say both that an instance or pattern of coercion is morally unjustified and that it leaves its victims better off than they would be in the nearest anarchist possible worlds. In that case, you just have to choose between flourishing and legitimacy.

I think moral and political philosophers have a bad tendency to make all normative vocabulary line up. So you can retrofit all moral language so that “justified” just means “best for flourishing.” But I think that we in fact have multiple conventional moral vocabularies that are orthogonal to one another, which relate messily, and sometime incoherently. In the absence of a revisionist account of moral terms that gets them all to march in a single direction, you just have to accept that sometimes its best (according to one conventional moral conception) to do the wrong thing (according to another conventional moral conception) and there is nothing internal to reason or morality, as such, to tell you which conception generally carries overriding force.

Anyway… The point is: Showing that the state is not legitimate does not deliver anarchy because “If the state is not legitimate, then it is not morally defensible” is a false premise. The existence of a moral justification, in terms of flourishing, say, doesn’t entail final moral justification, since there is no fact of the matter about the final authoritative moral vocabulary. And the language of “legitimacy” may have its own internal logic that is at some level indifferent to flourishing. So showing that the state is not legitimate need not entail that it is morally indefensible.

I have some thoughts on this but I'm leaving this here for the future.

Story is by Desmond Warzel

11/15/2104
At 14:52:28, FreedomFighter69 wrote:
Reporting my first temporal excursion since joining IATT: have just returned from 1936 Berlin, having taken the place of one of Leni Riefenstahl's cameramen and assassinated Adolf Hitler during the opening of the Olympic Games. Let a free world rejoice!

At 14:57:44, SilverFox316 wrote:
Back from 1936 Berlin; incapacitated FreedomFighter69 before he could pull his little stunt. Freedomfighter69, as you are a new member, please read IATT Bulletin 1147 regarding the killing of Hitler before your next excursion. Failure to do so may result in your expulsion per Bylaw 223.

At 18:06:59, BigChill wrote:
Take it easy on the kid, SilverFox316; everybody kills Hitler on their first trip. I did. It always gets fixed within a few minutes, what's the harm?

At 18:33:10, SilverFox316 wrote:
Easy for you to say, BigChill, since to my recollection you've never volunteered to go back and fix it. You think I've got nothing better to do?

11/16/2104
At 10:15:44, JudgeDoom wrote:
Good news! I just left a French battlefield in October 1916, where I shot dead a young Bavarian Army messenger named Adolf Hitler! Not bad for my first time, no? Sic semper tyrannis!

At 10:22:53, SilverFox316 wrote:
Back from 1916 France I come, having at the last possible second prevented Hitler's early demise at the hands of JudgeDoom and, incredibly, restrained myself from shooting JudgeDoom and sparing us all years of correcting his misguided antics. READ BULLETIN 1147, PEOPLE!

At 15:41:18, BarracksRoomLawyer wrote:
Point of order: issues related to Hitler's service in the Bavarian Army ought to go in the World War I forum.

11/21/2104
At 02:21:30, SneakyPete wrote:
Vienna, 1907: after numerous attempts, have infiltrated the Academy of Fine Arts and facilitated Adolf Hitler's admission to that institution. Goodbye, Hitler the dictator; hello, Hitler the modestly successful landscape artist! Brought back a few of his paintings as well, any buyers?

At 02:29:17, SilverFox316 wrote:
All right; that's it. Having just returned from 1907 Vienna where I secured the expulsion of Hitler from the Academy by means of an elaborate prank involving the Prefect, a goat, and a substantial quantity of olive oil, I now turn my attention to our newer brethren, who, despite rules to the contrary, seem to have no intention of reading Bulletin 1147 (nor its Addendum, Alternate Means of Subverting the Hitlerian Destiny, and here I'm looking at you, SneakyPete). Permit me to sum it up and save you the trouble: no Hitler means no Third Reich, no World War II, no rocketry programs, no electronics, no computers, no time travel. Get the picture?

At 02:29:49, SilverFox316 wrote:
PS to SneakyPete: your Hitler paintings aren't worth anything, schmuck, since you probably brought them directly here from 1907, which means the paint's still fresh. Freaking n00b.

At 07:55:03, BarracksRoomLawyer wrote:
Amen, SilverFox316. Although, point of order, issues relating to early 1900s Vienna should really go in that forum, not here. This has been a recurring problem on this forum.

11/26/2104
At 18:26:18, Jason440953 wrote:
SilverFox316, you seem to know a lot about the rules; what are your thoughts on traveling to, say, Braunau, Austria, in 1875 and killing Alois Hitler before he has a chance to father Adolf? Mind you, I'm asking out of curiosity alone, since I already went and did it.

At 18:42:55, SilverFox316 wrote:
Jason440953, see Bylaw 7, which states that all IATT rulings regarding historical persons apply to ancestors as well. I post this for the benefit of others, as I already made this clear to young Jason in person as I was dragging him back from 1875 by his hair. Got that? No ancestors. (Though if anyone were to go back to, say, Moline, Illinois, in, say, 2080 or so, and intercede to prevent Jason440953's conception, I could be persuaded to look the other way.)

At 21:19:17, BarracksRoomLawyer wrote:
Point of order: discussions of nineteenth–century Austria and twenty–first–century Illinois should be confined to their respective forums.

12/01/2104
At 15:56:41, AsianAvenger wrote:
FreedomFighter69, JudgeDoom, SneakyPete, Jason440953, you're nothing but a pack of racists. Let the light of righteousness shine upon your squalid little viper's nest!

At 16:40:17, BigTom44 wrote:
Well, here we frickin' go.

At 16:58:42, FreedomFighter69 wrote:
Racist? For killing Hitler? WTF?

At 17:12:52, SaucyAussie wrote:
AsianAvenger, you're not rehashing that whole Nagasaki issue again, are you? We just got everyone calmed down from last time.

At 17:22:37, LadyJustice wrote:
I'm with SaucyAussie. AsianAvenger, you're making even less sense than usual. What gives?

At 18:56:09, AsianAvenger wrote:
What gives is everyone's repeated insistence on a course of action which, even if successful, would only save a few million Europeans. It would be no more trouble to travel to Fuyuanshui, China, in 1814 and kill Hong Xiuquan, thus preventing the Taiping Rebellion of the mid–nineteenth century and saving fifty million lives in the process. But, hey, what are fifty million yellow devils more or less, right, guys? We've got Poles and Frenchmen to worry about.

At 19:01:38, LadyJustice wrote:
Well, what's stopping you from killing him, AsianAvenger?

At 19:11:43, AsianAvenger wrote:
Only to have SilverFox316 undo my work? What's the point?

At 19:59:23, SilverFox316 wrote:
Actually, it seems like a pretty good idea to me, AsianAvenger. No complications that I can see.

At 20:07:25, Big Chill wrote:
Go for it, man.

At 20:11:31, AsianAvenger wrote:
Very well. I shall return in mere moments, the savior of millions!

At 20:14:17, LadyJustice wrote:
Just checked the timeline; congrats on your success, AsianAvenger!

12/02/2104
At 10:52:53, LadyJustice wrote:
AsianAvenger?

At 11:41:40, SilverFox316 wrote:
AsianAvenger, we need your report, buddy.

At 17:15:32, SilverFox316 wrote:
Okay, apparently AsianAvenger was descended from Hong Xiuquan. Any volunteers to go back and stop him from negating his own existence?

12/10/2104
At 09:14:44, SilverFox316 wrote:
Anyone?

At 09:47:13, BarracksRoomLawyer wrote:
Point of order: this discussion belongs in the Qing Dynasty forum. We're adults; can we keep sight of what's important around here?

Australian Military Book List

(see extended entry for some initial selections...)

Starship Troopers
Robert A Heinlein - Heinlein graduated from the US Naval Academy in 1928 and continued his involvement with the military right through the Second World War. His awardwinning book explores profound territory—what makes a citizen and what is the military’s responsibility to the state that supports it? A simple tale of a young man joining up and going to war against an alien race, ‘the Bugs’, hides layers of deep and complex moral and political philosophy, the core of which is the notion that social responsibility requires individual sacrifice.

Fight Club
Chuck Palahniuk - This book, which inspired the film of the same name, poses interesting questions about small-group dynamics, the nature of self-identity, the role of violence in the masculine imagination, and the dangers and benefits of loyalty and leadership. Intensely psychological, with barbs against consumerism and massmovements,
this book has many parallels with the way soldiers are inculcated
into the military.

Ender’s Game
Orson Scott Card - Ender Wiggin is six years old when he is taken from his family and sent to Battle School, where he is taught the art and science of war. Ender’s advantage is his creativity, and he rises to command all of the Earth’s military, but at the expense of his physical and mental health. The book investigates the use of simulation and networked forces to select leaders and manage combat, and has a sub-text about the burden of leadership and the importance in commanders of both compassion and ruthlessness.

Fear Drive My Feet
Peter Ryan - This classic Australian memoir of the Second World War has lost none of its power and emotion since its first publication in 1959. Ryan spent much of 1942 and 1943 patrolling forward of friendly lines in Japanese controlled territory around Lae in New Guinea. Often working only in the company of a handful of indigenous police and porters and under arduous and dangerous conditions, Ryan maintained
his coolness and resourcefulness as he kept watch on the Japanese. Fear Drive My Feet highlights the enduring soldierly virtues of courage, initiative and resilience to which every Australian soldier should aspire.

(There are many more...)

Does their terrible backwardness justify the invasion by Mao's Communist Army? From a utilitarian perspective, I believe it does. Over the last 58 years, the Tibetan people have gained on every standard of economic and personal well-being. They are living longer, they are richer, they are (by virtue of being part of China) much more a part of the world instead of living in the isolated mountain island kingdom that Tibet once was.

Now, clearly, the Tibetan people did not ask China to conquer them and they did not ask to have their way of life radically transformed. During the "cultural revolution" a great deal of priceless ancient objects and buildings were destroyed, both in Tibet and in the rest of China. Many Tibetans fled their country (and there is a small community here in Palo Alto). Their lives were transformed but was it for the worse? I submit that a significant percentage of the population of Tibet that is alive today outside of Tibet would be dead if the Chinese had never invaded, due to the poor quality of health care and high incidence of childhood diseases and the complete unlikelihood of meaningful change occurring "naturally" in Tibet (i.e. without the Chinese invasion).

What are the odds that the Dali Lama, a man with no education other than a complete immersion in Tibetan Buddhism, would have proposed any of the changes that in fact occurred? Now days he talks about what Tibet would be like if the Chinese gave up control and let him back in the country. He talks about democracy, and good government, human rights, the need for Tibet to be transformed. All these things he learned about after he fled Tibet in 1957.

Could the Chinese treat Tibet differently? Of course. Could they be nicer? Surely. We all know the Chinese government is ham-fisted, rather closed ideologically, and somewhat paranoid. However, China is a great power in the world today (meaning that no other power really has any influence over their government's decisions). It is not going to give up control of Tibet due to street protests in Lhasa nor will it be swayed by disruptions to the (remarkably egotistical) Olympic Torch runs China is holding around the world.

The Chinese government will be (in my opinion) increasingly amenable to carefully thought out moral arguments about letting the people choose (in every part of China) how they want to live their private lives. Religion is making a slow comeback in China and over the next 50 years I strongly suspect that China will allow the people in Tibet the freedom to follow more of Tibetan Buddhism than they allowed over the previous 50 years. I also strongly suspect that street protests will not accomplish anything. I don't think Tibet will be free of Chinese control in my lifetime and as a consequence, I think the Tibetan people, both in Tibet and outside it, would be well advised to follow a policy of careful, reasoned discourse with the Chinese government. The Chinese believe in reason and in virtue, but the Tibetans will have to think long and hard about exactly what arguments they are going to make for greater autonomy because history (in the sense of who has done the most good for the most Tibetans) is not on their side