• Black Swans and Swine Flus

    David Rothkopf critiques the media:

    Swine flu! World Health Organization at alert level 4! Markets rocked by sell-offs! Howie Mandel was right! Never shake hands! Bathe in Purell! See if you can borrow a face mask from Michael Jackson! Or hold your breath whenever you are near a ham sandwich! Armies of pigs in uniform marching on Washington! Orwell was right: the animals have turned on us, become more dangerous than us! Four legs bad, two legs good! Head for the hills!

    Once again, the media is reacting to a potential threat with its usual calm, responsibly recognizing that sensational coverage of diseases can have far worse consequences than the diseases themselves. Or not.

    “Moderation in all things” isn’t exactly the motto of cable news, is it?  To be fair, though, figuring out the right reaction isn’t easy.  Sure, swine flu 1.0 was a bust, avian flu was a bust, and SARS was a bust, so maybe SF 2.0 will be a bust too.  Then again, this might be The One, and we might never know.  After all, if all the hype manages to keep the current strain from mutating into the Andromeda Strain and destroying humanity, we’ll never know, will we?  It’ll just look like another bust.

    (Sort of like the Y2K bug, which is one of my favorite pet peeves.  Here’s a heads-up to everyone who thinks Y2K was all just a bunch of hooey: the reason nothing much happened is because everyone went bonkers and spent tens of billions of dollars rewriting their software.  It’s true that in the end the world’s computers didn’t freeze up and die, but that’s because we fixed them.  Ask my wife if you don’t believe me.)

    So will we ever know if SF 2.0 was The Big One?  If it kills a billion people, yes.  If it doesn’t, no.  We’ll just have to keep wondering.  Which, to my surprise (and to change the subject completely), turns out to be a big chunk of what Nassim Nicholas Taleb writes about in The Black Swan.  After I was (properly) smacked down over my airy dismissal of Taleb a few days ago, I finally decided that maybe I ought to actually read his book instead of relying on the odd blog post about it, and I have to say that it’s not at all what I expected.  So far, anyway.  It’s a real mishmash of odd potted historical anecdotes that go nowhere, interesting insights about human nature, opinions about historical contingency that are strangely unmoored from even an acknowledgment that lots of other people have thought about this subject before, and conventional observations about things like confirmation bias and the limits of induction.  However, Taleb swears that he’s a doer, not an idle idea spinner, and by the time I’m finished I’ll get some genuinely concrete advice about how to deal with uncertainty and the limits of knowledge in real life.

    We’ll see.  I’m a little skeptical based on the first few chapters, but I suppose Taleb himself would warn me that even a long string of mediocre chapters doesn’t mean there won’t be a phenomenal one that will rock my world when I least expect it.  If I finish it this weekend, I’ll report back.

  • Chart of the Day – 4.30.2009

    Ezra Klein points to an intriguing bit of opinion polling from the Kaiser Family Foundation today: 61% of Americans say that in order to fund healthcare reform they’d support higher taxes on “items that are thought to be unhealthy, such as soda, alcohol, junk food, and cigarettes”:

    Problematically, the poll question lumps a lot of different policies together. Paying for health care by taxing cigarettes is actually a common strategy. It’s how we funded S-CHIP, for one. Taxing soda is rather further from the center of the consensus. But there’s no evidence, in this poll at least, that the public instinctually recoils from the idea.

    In a sense, I’m not too surprised by this.  I suspect that most people know that soda and junk food really are a scourge and would like to cut back.  So either through guilt, or maybe a sense that they need someone else to prod them into doing the right thing, they support higher taxes on this stuff.

    Further down, however, there’s a followup question:

    This is a fascinating example of just how thin opinion polling like this is.  The real lesson here is that most people haven’t given this issue even a few seconds thought, and their response to the poll question is practically meaningless.  Faced with even the slightest pushback, large majorities of both supporters and opponents flipped their views almost instantly.

    So the real question isn’t how people feel about taxing junk food now, it’s how they’re likely to feel about taxing junk food after hearing both sides screech about it for a few days or weeks or months.  This is true of most other opinion polling too.  Caveat emptor.

  • Gambling on Fiat

    The Chrysler bankruptcy is now official:

    Once Chrysler restructures, the company would receive $4.5 billion in financing to restart its operations….That is $2 billion more than Mr. Obama initially said the company would receive if it successfully reached a deal with Fiat.

    Chrysler has already received $4.5 billion from the government, under a bailout plan put into effect by the Bush administration in late December….The Canadian government also is expected to provide $1 for every $3 in American support, the official said, meaning Chrysler could receive another $2.6 billion.

    So that’s nearly $12 billion in total assistance.  All to prop up a company that, I’ll bet, won’t last two years.  Compared to the vast sums of taxpayer cash we’re handing over to the banking industry practically for free, I suppose this isn’t really all that much, but it’s still pretty hard to swallow since it seems almost vanishingly unlikely that Chrysler will survive in the end.  I mean, does anyone really think that the management genius of Fiat is going to save them?  Fiat?

     

     

  • Quotes of the Day – 4.30.09


    #1 comes from entertaining Republican loon Michele Bachmann, who apparently doesn’t know that Herbert Hoover was president in 1930:

    FDR applied just the opposite formula — the Hoot-Smalley Act….That’s what we saw happen under FDR. That took a recession and blew it into a full-scale depression. The American people suffered for almost 10 years under that kind of thinking.

    #2 comes from Democratic Senator Dick Durbin, explaining the facts of life:

    And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.

    We’ve noticed.  #3 comes from Megan McArdle:

    If my husband sacrificed our child to save thousands of people, I might recognize, at some abstract level, that he had done the right thing.  But we wouldn’t stay married.

    Discuss.  Would you stay married?

  • The Party of No

    Mark Schmitt thinks that Barack Obama’s bipartisan tone has worked pretty well, defining the landscape and marginalizing a Republican Party that’s gotten steadily crazier in opposition.  Matt Yglesias isn’t so sure:

    To take just one example, climate change. The administration and the congressional leadership have ruled out the use of the reconciliation process to pass their energy/climate agenda. Since it’s completely inconceivable that you could get 60 votes in the Senate for the sort of cap-and-trade proposal that Barack Obama outlined during the campaign, this means they’ve preemptively surrendered on an agenda that they ran and won on during the course of a two-year presidential campaign.

    ….So you can say that congressional obstruction has succeeded in derailing Obama’s efforts on the most important short-term issue that congress has jurisdiction over, and also derailing his efforts on the most important long-term issue that he’s facing. That’s pretty impressive for a small and unpopular minority!

    I’d sort of agree with this except for one thing: Obama never really campaigned on cap-and-trade in the first place.  Sure, it was part of his energy proposal if you dug down into his website and looked for it, but during the debates, on TV ads, and in speeches, he barely even mentioned it.  It was all windmills and blue skies and green jobs.  He did virtually nothing to build any public support for the tougher parts of his energy plan.

    Now, maybe that was the right thing to do.  Presidential campaigns aren’t notable for going out of their way to highlight tough choices for the electorate.  Still, the result is that there’s essentially no organic public support for cap-and-trade right now, which means it’s wide open to demagoging by Republicans.  This in turn makes it scarier to on-the-fence Dems, which is why a really solid cap-and-trade bill not only can’t get 60 votes in the Senate, it might not even be able to get 50.  Partisan gridlock may be responsible for some of that, but Obama’s unwillingness to risk selling it during the campaign deserves some of the blame too.

  • Swine Flu Update

    It turns out the swine flu outbreak may be a little bit less deadly than we thought.  Here’s the latest from the Los Angeles Times:

    As the World Health Organization raised its infectious disease alert level Wednesday and health officials confirmed the first death linked to swine flu inside U.S. borders, scientists studying the virus are coming to the consensus that this hybrid strain of influenza — at least in its current form — isn’t shaping up to be as fatal as the strains that caused some previous pandemics.

    ….When the current virus was first identified, the similarities between it and the 1918 flu seemed ominous.

    Both arose in the spring at the tail end of the flu season. Both seemed to strike people who were young and healthy instead of the elderly and infants. Both were H1N1 strains, so called because they had the same types of two key proteins that are largely responsible for a virus’ ability to infect and spread.

    Richard Webby, an influenza virologist at St. Jude Children’s Research Hospital in Memphis, told the Times, “This virus doesn’t have anywhere near the capacity to kill like the 1918 virus,” which claimed an estimated 50 million victims worldwide.

    Among those 50 million were my grandmother’s two sisters.  So this is good to hear.  But wash your hands anyway, OK?

  • Obama on Torture


    Interesting comment from Obama right now about why he opposes waterboarding:

    Not because there might not have been information that was yielded by these various detainees who were subjected to this treatment, but because we could have gotten this information in other ways.

    Obama has obviously seen all the internal reports by now, and he’s carefully not saying that waterboarding didn’t work.  This suggests that it may indeed have produced useful information.

    Now there’s a followup question directly asking whether waterboarding produced anything useful.  He’s dodging a little bit (reports are classified, can’t discuss it, etc. etc.), but making it sound as if it probably did.  On the other hand, after a bit of throat clearing toward the end of his answer, he says he’s seen nothing that “would make me second-guess the decision that I’ve made” to ban waterboarding.  Which might suggest either that waterboarding produced only moderate amounts of useful information, or that he’s convinced we could have gotten the same information with other methods.

    Not sure what to make of all that, or even if I’m interpreting it correctly.  Just passing it along.

  • Volcker on Stimulus

    Most liberal economists seem to think that we need a much bigger stimulus package than the one we passed in February.  However, most liberal economists also seem to think that Barack Obama ought to listen to Paul Volcker more than he does.  So now what do they think?

    The U.S. economy is “leveling off at a low level” and doesn’t need a second fiscal stimulus package, said former Federal Reserve Chairman Paul Volcker, one of President Barack Obama’s top economic advisers.

    Volcker, head of Obama’s Economic Recovery Advisory Board, said the 6.1 percent decline in first-quarter gross domestic product reported by the government today was “expected.” More recent data show the contraction in housing, business spending and inventories has slowed, and stimulus spending is only just beginning to hit the economy, he said.

    That’s from Bloomberg Television’s “Conversations with Judy Woodruff,” which will air this weekend. There was also this about regulatory reform:

    Volcker said he and National Economic Council Chairman Lawrence Summers have disagreed about how heavily regulated the financial industry should be.

    “We’ve had a little talk about this,” Volcker said. “I’m sure he’ll recognize the wisdom of my views sooner or later.”

    That’s a conversation it would be interesting to hear more about, wouldn’t it?

  • Are Canadian Banks the Answer?

    David Leonhardt’s interview with President Obama includes a fair amount of conversation about the economy, including a question about whether big banks need to be split up:

    THE PRESIDENT: You know, I’ve looked at the evidence so far that indicates that other countries that have not seen some of the problems in their financial markets that we have nevertheless don’t separate between investment banks and commercial banks, for example. They have a “supermarket” model that they’ve got strong regulation of.

    Like Canada?

    THE PRESIDENT: Canada being a good example….So — that doesn’t mean that, for example, an insurance company like A.I.G. grafting a hedge fund on top of it is something that is optimal….And in that sense I think you can make an argument that there may be a breaking point in which functions are so different that you don’t want a single company doing everything.

    But when it comes to something like investment banking versus commercial banking, the experience in a country like Canada would indicate that good, strong regulation that focuses less on the legal form of the institution and more on the functions that they’re carrying out is probably the right approach to take.

    I’m sort of waffly on the whole question of limiting bank size, but this isn’t an especially persuasive answer.  The experience of Canada is, I suppose, an existence proof that big banks can be regulated effectively, but when Obama says “other countries” he sure seems to be suggesting more than just Canada.  And frankly, I think he’d run out of examples pretty quickly.  After all, big banks Europe are in pretty bad shape.  Ditto for big banks in Japan following their property crash.  And big banks in Russia.  And big banks in Asia following their 1997 meltdown.

    In some sense, I guess this comes down to a belt and suspenders issue.  I suspect Obama is basically right: regulating leverage is more crucial than regulating bank size.  A big bank with reasonable gearing is pretty safe.  But if you really want to be safe, you’ll have a fallback: not only will you regulate leverage, but you’ll limit bank size and complexity as well, so that even if a bank manages to evade the leverage rules it still can’t do too much damage.  It can only do that if it manages to evade two separate sets of rules.

    More to the point, though, I wish Leonhardt hadn’t let Obama off the hook by feeding him the Canada example.  I would have have been curious to hear what Obama had to say without prompting.  Does he really think the banking system in the rest of the world is doing well because it’s better regulated than ours?  I’m not sure the evidence supports that.