Thursday, September 16, 2010

The frivolity of higher education

Many thoughtful critiques have been written on the effort and resources our society thoughtlessly expends on education. Still, I'd say The Onion does the best job yet of showing us the sheer stupidity in which our culture's young adults revels throughout their never-ending formative years.

Tuesday, September 14, 2010

Alternatives to Gold Remonetization

If you're the type that reads right-wing and libertarian blogs (And why wouldn't you be? Are you some kind of Muslim communist?) you've probably had sung to you the praises of the great yellow dog:, that sweet nectar of Midas and Yosemite Sam alike: Gold.

In case you haven't, here is the argument in a nutshell: The Anglo-American financial system is collapsing. The Euro-American empire that has bestrode the world since her victory in World War 2 is in her death throes, and like all Empires in such a condition, her near-final act will be a frenzied bout of hyper-inflationary currency dilution. This has already begun, as the myriad of T-bill issues, future entitlement obligations, personal-indebtedness-subsidizing, and implicit loan guarantees for the too-big-to-fail crowd, all represent various forms of dilutionist policy. Any savings currently held in T-bills or the like, will soon be worthless. When the house of cards finally collapses, market participants will spontaneously revert to 100% pure dilution-proof gold.

For the argument in a very large nutshell, see this this essay by John Law II, and this followup commentary by Mencius.

I am mostly sold on the main thrust of these arguments, and would lay my soon-to-be-worthless money on a hyper-inflationary episode in the United States before the end of the decade. I have in fact put some skin in the game via some meager investments in gold mining companies and precious metals ETFs. I do not regard the remonetization of gold as a certainty though, and this post seeks to explain why.

My gut feeling is that remonetization will not occur as the direct result of actions by the American government or her satellites. Rather, China, Iran, Saudi Arabia - or possibly a rogue Germany, breaking from this third iteration of Anglo-American attempts to tame her - will pick up on what's going on, renounce paper money, and declare itself to be the new financial capital of the world. A 100% fractional-reserve gold standard will reign, and the wise, gold-hoarding legions of the fringe blogosphere will live in palaces on hills.

That scenario is certainly possible, and it's the one I'm rooting for (and betting on), but it's not the only way this rodeo could play out. Think about like this: If you're running Chinese monetary policy, and you decide to pull a stunt like this, who says you necessarily have to use gold as the base for your metallic currency? Remember, the USA still has a shit-ton more gold in their vaults than anyone else. A decision by the Chinese central bank to adopt a gold standard would have many positive effects on their economy, but it would also constitute a massive one-time gift to the US of A. Given that such a move would also slice the value of their considerable T-bill holdings by 99%, they would be getting it both ways.

So why not - if you were the Chinese Alan Greenspan (Aaron Greenspan? nyuk nyuk) - monetize some other precious metal? Like Rhodium? Or Palladium? Or better yet, why not just create a legitimately frozen national currency supply. Freeze the number of Yuan in circulation at some Schelling Point (100T Yuan, perhaps), smash the metaphorical printing presses, and commit to never, ever, ever, ever, ever changing your mind.

Regarding this last option, one might object that an irresponsible government can always break a promise. Well, sure. An irresponsible government can also gradually wean itself off of the gold standard, as the Anglo-American experience so unfortunately shows.  A responsible government will not go off a fixed-fiat money system, or it will remain on the gold standard. An irresponsible government won't do either. In any case, the existence of a precious-metal backed currency presents only minor and easily-surmountable obstacles to a poorly-run government trying to get funky with the money supply.

Anyways goldbugs, I'm with ya on the important stuff. But keep in mind there are plenty of other ways to bet on sovereign failure - property with a fixed-rate mortgage, emerging market equities - and the gold bet, while a good one, is not sure enough to let the kids' entire braces fund ride on.

Crime and Punishment

"It isn't what we don't know that gives us trouble, it's what we know that ain't so."

- Will Rogers

Today, let's have a look at a glitch in the matrix. We'll consider a simple proposition which seems true, but is in complete disrepute among academics in the relevant field, and very much on the fringe of polite opinion. Then we'll demonstrate how contrary are official opinion and reality. Finally, we'll reflect on what implications the discrepancy has on the reputations of academia, our effective level of freedom of conscience, and the health of our nation.

The proposition is this: Increasing the length of sentences served by criminals necessarily results in fewer crimes being committed. To this, the layman says: Duh. Criminology professors disagree and will often claim that decreasing sentences is the true key to reducing crime. Many in the mainstream media are happy to echo this. Dan Gardner, who I harass today because he is often perceptive on other issues and really should know better, is a frequent champion of this belief. Sadly, most of his columns have been taken off-line, but here is a good example that I dredged up.

I'd like to offer a simple a priori proof that longer sentences reduce crime. There is a large and growing body of academic attempts to empirically answer this question, but in the absence of controlled experiments - as is so often the case in the social sciences - such studies are close to useless. Even if experiments did exist, one logical proof beats a thousand regression analyses - science, being a subset of reason, is trumped by it every time.

First, simply note that violent offenders have much, much higher average rates of subsequent violent crime than the people who have not been committed of a violent crime. In other words, violent criminal rates of recidivism are higher than the population average. This point is trivially obvious.

If we were to effectively imprison all violent offenders for life, they would have a zero percent recidivism rate. Since they would have a non-zero recidivism rate if we released them after, say, three years, it stands to reason that life imprisonment would reduce the number of violent crimes committed in subsequent years by the number that would have been committed by this set of previously-imprisoned violent offenders.

For it to be true that increasing their sentences would not reduce crime, it would be necessary to claim that new violent criminals arise to take the place of those that are imprisoned for life. This sort of behaviour is possible (and, IMO, likely) for certain crimes, such as the market-demanded crimes of drugs and flesh. But for muggings? For rapes? It is completely untenable to claim that extending sentences for such crimes would not result in a dramatic decline in their occurrence.

Also note that we have not mentioned the additional effects of deterrence. Criminologists generally scoff at the ability of stiff sentences to deter would-be criminals, dismissing such theories, as Gardner does, as a blind adherence to a "homo economicus" model of human behaviour. But the only escape from the logic presented above of recidivism-based crime reduction is to posit criminals that take up their dark trades as a result of a shortage, a response that strikes me as quite - wait for it - rational.

And really, if none of that convinces you, how about this? Crime in England, once the most civilized nation on Earth, has increased by several orders of magnitude over the past hundred years, despite increasing material wealth and improvements in law enforcement technology. Possibly these figures are biased by higher rates of reporting, new definitions of what is and is not a crime, and so on. The homicide rate however, surely the most consistent of crime-related statistics, has doubled since the 1950's.

So in conclusion: Putting criminals in jail results in fewer innocent victims of crime. A shocking result, unless you happen to live outside the American Empire between 1964 and 2010 (and counting), in which case it is painfully, blindingly obvious. I'm quite confident that the trustworthy history books of the 22nd century will devote a chapter or five to this odd phenomenon that beset the western democracies in the late 20th century, wherein they en masse reduced sentences, built and staffed endless appeal courts, and took away many of the powers police require to effectively do their jobs, and subsequently paid lots of smart men to sit around and wonder aloud why crime was such a problem.

Tuesday, September 7, 2010

The Krugman Test

A consequence of the internet age is that the duty of judging a writer's honesty falls to the reader. In light of Gonzalo Lira's fine take-down of Paul Krugman for some undeniable mendacity, I would like to propose the Krugman Test as a means of grading econ bloggers along a continuum of honesty.

Here is the article in question, and here is the test: Those who are worthy of trust will demonstrate their intolerance of such deception by loudly denouncing Mr. Krugman. Shills will ignore the offense, and continue to link to his columns. The silent will remain in limbo until they take a stand.

In my wildest of dreams, Paul himself passes the test by printing a correction. Subsequently he transfroms back into the fine economist he used to be, losing some prestigious inches in the NYT in the process, but likely improving his standing in the footnotes of history books read by his great-grandchildren. Ahh, hope.

Monday, September 6, 2010

City Life

Let's start off with a music video from French alt-rockers Phoenix. According to this Spin interview, the song is about how much the French capital has declined over the past century and a bit: "Paris in 1901 was better than it is now. So the song is a fantasy about Paris." Something isn't true just because it's said in the lyircs of a good song, but good art is usually produced by the perceptive.

Moving right along, here’s a fun headline from what may be the 21st century’s only successful newspaper.

84 Million New Yorkers Suddenly Realize New York a Horrible Place to Live

The Onion is a satirical newspaper, but successful humour needs to mix reality with absurdity. This article inadvertently reveals a small truth that you probably wouldn't come across in The New York Times.

For the joke to work, the reader must know that New York REALLY IS a wretched cesspool of filth, danger and alienation. All of the jokes in the article about garbage, rats, homeless drug addicts, rudeness, and the excuses New Yorkers make to justify "sticking it out" have at least a grain of truth to them.

What do these two little bits of pop culture have in common? The former hints at, and the latter confirms, a major yet unspoken trend in recent history: The 20th century has seen the decline of Europe and America’s great cities into burned-out husks of their former selves. This is partially masked by the steady progress of technology, but take away the iPads and what are we left with? Urine-soaked housing projects, decaying industries, hideous architecture, crime and disorder.

A reasonable person might ask if this outcome has anything to do with the actions of our governments, especially since the policies enacted throughout this era of decline are being pursued even more vigourously today than ever. Sadly we can only guess where the reasonable have been hiding, and when they might return.


In 1838, John George Lambton, 1st Earl of Durham, produced the Report on the Affairs of British North America, popularly called The Durham Report. It's goal was to advise the British Crown on the governance and constitution of her North American colonies.

The phrase "British North America" is out of style these days, but the entity that replaced it - Canada, my home and native land - is in even more dire need of advice than it was in Johnny's time.

My use of the title is not an endorsement of Durham or his republican screed. We just happen to share the same goals: To learn about the great nation of Canada, analyze her affairs, and recommend actions that will best improve her ability to deliver peace, order, and good government to her citizens.