Watched Pots and Quantum Cats

They say a watched pot never boils. This is, obviously, just an Olde Wyfes' Tayle, but it demonstrates that old wives had a surprisingly sophisticated anticipation of the Copenhagen interpretation of quantum mechanics. Still, there are tayles and then there are tailes. So what if it's a feline observer doing the watching? The theoretical mystery of Schrödinger's Cat provides no clear answer, so more empirical evidence is needed. We had pasta for dinner last night, which provided us with an ideal test bed to answer this question once and for all.

Here's the answer: as long as Inkblot was watching our pot last night, it didn't boil. A little later he got distracted by some Cosmic Catnip, and the pot boiled. So even if you have a brain the size of a peanut, you count as a quantum mechanical observer of the universal wave function. Science marches on.

Should experts be required to disclose conflicts of interest? Sure. But Courtney Humphries writes in the Boston Globe that it doesn't actually do any good:

Cain, Loewenstein, and Moore conducted a series of experiments meant to mimic a situation in which a person in authority — such as a doctor, consultant, or real estate broker — is giving advice that influences another person’s decision. Certain study participants were required to make an estimate — evaluating the prices of houses, for instance. Meanwhile, other participants were selected to serve as experts: They were given additional information with which to advise the estimators. When these experts were put in a conflicted situation —  they were paid according to how high the estimator guessed — they gave worse advice than if they were paid according to the accuracy of the estimate.

No surprise there: People with a conflict gave biased advice to benefit themselves. But the twist came when the researchers required the experts to disclose this conflict to the people they were advising. Instead of the transparency encouraging more responsible behavior in the experts, it actually caused them to inflate their numbers even more. In other words, disclosing the conflict of interest — far from being a solution — actually made advisers act in a more self-serving way.

“We call it moral licensing,” Moore says. “After having behaved honestly and virtuously, you then feel licensed to indulge in being a little bit bad.”

And what about the other side of the relationship? Do the people receiving information act more skeptically when they know about conflicts of interest? Not really. It turns out that sometimes they actually act less skeptically because they don't want to make it seem as if they now distrust the person sitting across the table from them.

Bottom line: disclosure may be a good thing, but by itself it doesn't do much good. We need regulations that change incentives, not merely disclose them.

Kafka and Credit Bureaus

Tara Siegel Bernard of the New York Times reports on the abominable way that credit reporting bureaus treat consumers — unless those consumers happen to be rich and well connected:

The three major agencies, Equifax, Experian and TransUnion, keep a V.I.P. list of sorts, according to consumer lawyers and legal documents, consisting of celebrities, politicians, judges and other influential people....For everyone else, disputes are herded into a largely automated system. Their complaints are often electronically ferried to a subcontractor overseas, where a worker spends, on average, about two minutes figuring out the gist of the matter, boiling it down to a one-to-three-digit computer code that signifies the problem — “account not his/hers,” for example — and sending a dispute form to the creditor to investigate.

....Consumers who have trouble fixing errors through the dispute process can quickly find themselves trapped in a Kafkaesque no man’s land, where the only escape is through the court system. “You are guilty before you are proven innocent in a situation like this,” said Catherine Taylor, 45, of Benton, Ark., who said she had been denied employment and credit because her filing was mixed up with a felon who had the same name and birthday.

....The bureaus, meanwhile, do not have an economic incentive to improve the system, consumer advocates say, because their main customers are the creditors, not consumers.

That last sentence is true: credit reporting bureaus have very little incentive to keep their records straight. If there's a problem, it's up to you to notice it and it's up to you to beg them to fix it. It's also up to you to prove that their information is wrong. The credit reporting industry has probably done more to promote use of the adjective "Kafkaesque" than Kafka himself.

The core reason that the process is so often Kafkaesque is that credit reporting bureaus don't care. If they make a mistake, it doesn't cost them anything. If a member bank or credit card issuer passes along bogus information to them, it doesn't cost either the bank or the bureau anything. They simply don't have much incentive to get things right. (In fact, they actually make money by selling special credit protection packages to protect consumers from the mistakes that bureaus make in the first place.) That's why, a few years ago, I wrote a piece for the Washington Monthly suggesting that we should give them an incentive:

There's no need to create mountains of regulations, which are uniformly despised by the credit industry. Instead, simply make the industry itself — and any institution that handles personal data — liable for the losses in both time and money currently borne by consumers. The responsible parties will do the rest themselves.

How would this work? Congress could assign specific minimum values — statutory damages — for each of the acts associated with identity theft. Extending credit without conducting adequate background checks, or issuing a faulty credit report thanks to undiscovered theft of identity, might be worth $10,000 per incident. Losing someone's personal information in the first place might be worth less — perhaps around $1,000 — since only a small percentage of cases of information loss ultimately lead to a full-fledged theft of identity.

The establishment of statutory damages would allow consumers to bring personal or class-action lawsuits for any of these transgressions. (Currently, such suits are difficult to win because breaches of privacy are extremely hard to value — some courts even flirt with the notion that privacy has no value at all.) And consumers would not need to show that those responsible for the theft acted negligently. When your money is stolen from a bank, the bank is liable no matter how diligently it tried to protect it. That's why banks take care of your deposits. If the credit industry and other data-handlers knew that the legal system would hold them responsible for extending credit to impostors, issuing inaccurate credit reports, or losing data, you can bet they'd figure out better ways to stop those things from happening.

The beauty of this solution is that by giving the credit industry a financial stake in solving the problem, it uses market-based self-interest rather than top-down federal mandates....On a more basic level, the plan relocates the burden of responsibility for identity theft in a way that makes intuitive sense. If a company makes a mistake — by neglecting to conduct adequate background checks before extending credit, by issuing inaccurate credit reports or by failing to safeguard sensitive information — that company pays the price.

Alternatively, we could ratchet up the regulatory regime surrounding credit reporting bureaus, and that appears to be the path we're going to eventually take. Roughly speaking, that's how it's already done in Europe, and it works OK. But it's not the only option.

Oil and Finance

Why are oil prices so high and volatile? McClatchy's Kevin Hall and Robert Rankin take a look at the evidence and say that neither supply problems, demand levels, nor Middle East turmoil really seem to explain it. The answer, rather, is a huge growth in Wall Street speculation:

Some 70 percent of contracts for future oil delivery are now bought by financial speculators — largely big investment banks and hedge funds — who never take control of the oil. They just flip the contract for a quick profit.

....Exxon Mobil Chief Executive Rex Tillerson noted Thursday in testimony before the Senate Finance Committee that this year's oil prices don't make any economic sense, though that's not quite how he put it. He said that current fundamentals and production costs would dictate oil in the range of $60 to $70 a barrel. That's at least $43 cheaper than this year's highs of $113 a barrel reached on April 29 and May 2.

....Prior to the 1990s, speculators made up about 30 percent of the futures market. In the latest reporting period, the ratio on May 3 stood at 68 percent speculators to 32 percent users of oil. Meanwhile, the volume of total reported trades has grown five-fold since 1995, underscoring the impact of speculation on futures markets.

"It tells me that there are more speculative positions than there has ever been in history, particularly in the energy sector, I don't mean only crude oil," said Bart Chilton, a CFTC commissioner who thinks excessive speculation is at least part of the cause of soaring oil prices. "In all of the energy sector, we've seen a 64 percent increase in speculative positions since the (oil price) high of 2008."

This explanation for high and gyrating oil prices is — well, still speculative, I guess. There's no smoking gun. But cheap money has to flow somewhere, and with housing in the dumps and the real economy still sluggish, there are a limited number of markets big enough to absorb huge quantities of short-term speculative investment. Oil is one of them, so it's an obvious place to look.

DVD Bleg

I have a question for y'all. I want to play European DVDs on my computer, but as you know, Windows 7 allows you to do this only a limited number of times. So what's the answer? Is there a way to tweak Windows? Or some kind of freeware that will play DVDs with any region code? Any advice appreciated.

Newt Gingrich and the Hospital Room

Newt Gingrich's daughter, Jackie Gingrich Cushman, has decided to "set the record straight" about the story that Newt confronted his then-wife (also named Jackie) about the terms of their divorce while she was in the hospital recovering from surgery in 1980. It's a very odd piece. Cushman says she's gong to "correct the record," but then recounts the bare fact of the hospital visit and provides no details at all of what happened. So what did happen? It was Mother Jones that originally broke this story in a profile of Gingrich in 1984, so for the record, here's what David Osborne wrote about this incident. The story picks up shortly after Gingrich's first election victory in 1978:

Despite the solid family-man advertising pitch, however, some of Gingrich's associates could sense what was coming. On election night, several of them took bets on how long his marriage would last...."Jackie was kind of frumpy," explains Lee Howell, who asked Gingrich to be his best man in 1979 but pulls no punches about his friend's divorce. "She's lost a lot of weight now, but she was kind of frumpy in Washington, and she was seven years older than he was. And I guess Newt thought, well, it doesn't look good for an articulate, young, aggressive, attractive congressman to have a frumpy old wife."

The winning bet, as it turned out, was 18 months. In April of 1980, the candidate who had promised to "keep his family together" told his wife he was filing for divorce. According to sources in whom Gingrich confided at the time, he was already having an affair with the woman he later married.

When I asked Gingrich about this, he did not deny it. "I'm not going to get into those details or the questions about 1974. I think there is a level of personal life that is personal....I don't think it's relevant."

Private behavior becomes relevant, I suggested, when it contradicts the rhetoric on which a public official has been elected. "Looking back, do you feel your private life and what you'd been saying in public were consistent?"

"No," Gingrich answered. "In fact I think they were sufficiently inconsistent that at one point in 1979 and 1980, I began to quit saying them in public."....The divorce turned much of Carrollton against Gingrich. Jackie was well loved by the townspeople, who knew how hard she had worked to get him elected-as she had worked before to put him through college and raise his children. To make matters worse, Jackie had undergone surgery for cancer of the uterus during the 1978 campaign, a fact Gingrich was not loath to use in conversations or speeches that year. After the separation in 1980, she had to be operated on again, to remove another tumor. While she was still in the hospital, according to Howell, "Newt came up there with his yellow legal pad, and he had a list of things on how the divorce was going to be handled. He wanted her to sign it. She was still recovering from surgery, still sort of out of it, and he comes in with a yellow sheet of paper, handwritten, and wants her to sign it."

Now, I've heard this story retailed in different ways since then. Sometimes the story goes that Newt sprung the divorce on his wife in the hospital. Other stories say she was recovering from cancer surgery. Neither is true. As Osborne's profile makes clear, the divorce was already in progress, and Jackie was recovering from followup surgery two years after her cancer. (The tumor that was removed in 1980 turned out to be benign.) This is pretty gruesome stuff and hardly needs to be sensationalized.

Justin Elliott has more details here, including the fact that Gingrich has long denied that he brought a yellow legal pad to this hospital visit. But that's about it. His wife was recovering from surgery. The Gingrich daughters were visiting her. Newt did come up and demand that she discuss the divorce. The visit did turn heated. Legal pad or not, nothing in Cushman's account really changes anything we originally reported.

And by the way: if you've never read Osborne's profile before, you really should now. It was quite famous in 1984 for obvious reasons, and it's got a ton of fascinating details, including a few that make the hospital story look positively tame. Gingrich is basically a pretty loathsome opportunist, and everyone knew it even back then. Check it out.

Friday Cat Blogging - 13 May 2011

It's Friday the 13th! To commemorate the occasion, here's a picture of a black cat looking....unlucky. Or something. And anyway, Domino is only mostly black. Can a cat with white paws really be unlucky? On the right, we have Inkblot pushing his luck as he climbs up the rose bush in our backyard. There was something on the sidewalk outside our house that attracted his attention, but I don't know what. Whatever it was, he got bored quickly and hopped down. Hopefully without stepping on a thorn first.

Growth and Taxes

Reihan Salam wants to persuade us that raising tax rates on the rich is bad for growth:

How can we possibly believe that low marginal tax rates are good for growth if we’ve had lackluster growth and relatively low marginal tax rates! The relevant question is this: would growth performance have been even worse under higher marginal tax rates? The problem, of course, is that this question is extremely difficult if not impossible answer. The folk response to this question is, “Well, growth was spectacular in the 1990s, after an increase in MTRs!” Which is true! But one can again argue that growth would have been stronger had MTRs been lower.

But this isn't an argument. It's just idle speculation. Top marginal rates went down under Reagan and growth was good. They went up under Clinton and growth was good. They went down again under Bush and growth was sluggish. That's not a slam dunk case, but it's at least actual evidence suggesting a pretty weak relationship between growth and taxes. Of course you can say that maybe growth would have been better in all three cases if tax rates had been even lower, but that's only because you can say anything. But where's the evidence?

Later there's this:

My basic view is that, for the reasons Alan Viard and others have carefully explained, high marginal tax rates have negative incentive effects that outweigh the potential revenue gains....

So I clicked the link. And Viard, again, doesn't present any evidence at all, careful or otherwise. Go ahead and see for yourself. There's a section titled "The Harm from High Marginal Tax Rates," but all it does is explain in general terms that taxes on income reduce the returns to work. This is so obviously true that I'm pretty sure no one has ever disputed it. The question is whether, in the real world, higher tax rates actually reduce the amount of work people are willing to do. As it happens, there's some evidence in both directions, and there's evidence suggesting different answers for different groups of people. Beyond that, we'd also like to know how big the effect is. How it compares to other ways of raising revenue. What the distributional impacts are. Etc.

So I guess what I'd like to know from Reihan is why he thinks that raising the top marginal rate from 35% to 39.6% would be so disastrous. What actual evidence is there that it impeded growth in the 90s? How big does he think the impact would be? Why would more regressive options be so obviously better? There's a real lack of serious evidence linking modest changes in the top marginal income tax rate to lower economic growth, but it's become practically a religious obsession on the right regardless. It needs something better than that.

Fox News as a Social Movement

Here's an intriguing chart from Vanessa Williamson, Theda Skocpol and John Coggin, via the Monkey Cage. It shows coverage of the tax day rallies put on by the tea party movement in 2009 on both CNN and Fox. The nickel version is that CNN gave the rallies a lot of coverage on the day of the events plus a little bit of followup the next day. In other words, they treated the rallies as a news event. But Fox's approach was a wee bit different:

In telling contrast, Fox News shows significant and growing coverage in the lead-up to the April rallies. … FoxNews has explicitly mobilized its viewers by connecting the Tea Party to their own brand identity. … Rather than serving a journalistic, or even a propagandistic function, Fox News in effect acts as a “national social movement organization,” as described by sociologist Debra Minkoff in studies of liberal identity movements. For a scattered set of people who might feel isolated or marginalized (like gays and lesbians, in Minkoff’s original example), a resourceful national organization can help to provide “an infrastructure for collective action” by promoting “the diffusion of collective identities” and fostering “at least a minimal degree of solidarity and integration.”

Fox News and its audience are all one big happy family, and Fox views its job as rallying its base, not as simply providing them with news. I don't think anyone will be especially surprised to hear that, but this is an interesting lens for understanding the difference between how a news organization covers the news and how an activist organization like Fox covers the news.

Mitt Romney and the Al Gore Problem

Dana Milbank says Mitt Romney has an "Al Gore problem." The problem, he says, is that Romney always seems phony. At his healthcare speech yesterday, "His very appearance — a suit worn without a necktie — shouted equivocation." Jon Chait comments:

This is a perfect demonstration of an Al Gore problem, but I'd define the problem differently. An Al Gore problem is what happens when the media forms an impression of your character and decides to cram every irrelevant detail of your appearance and behavior into that frame, regardless of whether or not it means anything. Thus Romney's hair and lack of tie are now evidence of a character flaw, as is his decision to give a detailed policy lecture in a university town without being officially sponsored by a University. An Al Gore problem results in the media ganging up on a candidate like cool kids mocking a geek, with literally everything he's doing serving as more evidence for the predetermined narrative.

I'm glad that reporters are paying attention to the Al Gore problem. But I wish reporters would understand what the problem is — namely, a media pathology. After all, John McCain spent the years leading up to the 2008 campaign madly dissembling about and frantically reversing his record, but his mannerisms or appearance were never deemed to be a metaphor for a character flaw.

Mitt Romney is a panderer who's shifted his positions repeatedly as the sweet spot for the Republican nomination has shifted. But that was never Al Gore's problem. Gore's problem was that, as politicians go, he was a perfectly decent but not especially sociable guy. So the press didn't care for him much. But instead of simply reporting occasionally that he was a serious but not especially sociable guy, they turned on him like a pack of hyenas and insisted that every word out of his mouth, every stitch of clothing he wore, and every story told about him was part of a carefully calculated, meticulously constructed political persona. It was a feeding frenzy. See Bob Somerby for several million more words on this.

However, although Chait is right about this, I'm not happy about having to acknowledge something non-negative about Romney. Or even about the media's coverage of Romney. So let's make up for that. I wrote last night about Romney's bottomless desire to say and do anything to get himself elected president, and this morning I got this from a friend who grew up in Romney's hometown:

When people speak of Romney really, really wanting to be president, they probably don't know just how true that is. Over the years, and more recently, I've spoken to some of the Romneys' close family friends who served with him in the Belmont church. And they all say the same thing: Mitt Romney has always wanted to be president. Always. I mean, we're talking about statements like, "As long as we've known him, it's been clear that Mitt wanted to be president." And they're talking about 30 years ago or more.

So there you have it. Nothing to do with his clothes or his hair or his dog. Just the candid recollections of friends who have known Romney for a long time. And who knows? Maybe there's nothing wrong with wanting to be president since your 20s and relentlessly working toward that goal. Romney would hardly be the first. Still, that's who he is. A guy who wants to be president desperately and, by all accounts, will pretty much take whatever position is most likely to get him there at any given moment.

Even from a broader perspective, this is Romney's biggest problem: he's merely ambitious, not insane. If he gets the nomination and loses, he'll simply be dismissed by the faithful as a RINO and nothing will change. What the Republican Party really needs right now is a Goldwater moment. They need to nominate a true believer and then get their asses handed to them in a landslide that leaves no doubt about what direction they need to go if they ever want to inhabit the Oval Office again. Romney wouldn't get them there. For the long-term health of the party, Michele Bachmann is probably their best choice to run against Obama next year.

UPDATE: Brendan Nyhan was on the "Romney as Gore" beat a couple of months ago.