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Archive for the ‘Ethics and Morals’ Category

The term “black swan” refers to an event that has enormous impact and is rare and difficult to predict. The prime example used by Taleb is 9/11 — an event of outsize importance that typical risk analyses would have been unable to predict or identify. There’s a fair amount of focus now on black swans, how to predict and control for them.

Sometimes, though, we are looking for black swans when we should be looking for white ones — events that have enormous impact, but that are neither rare nor particularly difficult to predict. An event like the Newtown murders may feel like a black swan — who could have predicted? But the preconditions for the event make it more of a white swan than a black one. For one, mass gun violence is relatively common in America; about 80 people die every day from gun violence. Although it is tragic that 27 murders and 1 suicide occurred in one place, and that many of the dead are children, it is not extraordinary in a world where gun violence occurs with regularity.

As long as it is easier for a mentally disturbed young man to get a handgun than mental health treatment, President Obama’s exhortations that we will do more to protect children strike me as hollow. Gun control laws have been eviscerated by the Supreme Court, and the gun lobby’s loud voice in the public conversation make movement on that front almost unimaginable. Mental health treatment is only slightly more likely, and my guess is that such laws would be targeted at committing people to quasi-incarceration rather than actually providing therapeutic treatment.

We cannot predict mass murder with precision, of course, but we can say with some probability that murders with guns will occur regularly through the day, week, month, year, etc. Without concerted efforts to either reduce the availability of firearms or increase the availability and reduce the stigma of mental health services, mass murder will continue to be a white swan rather than a black one.

(On the gun control topic for a second, I get all the 2nd Amendment stuff — we need to have firearms in case we need to overthrow the government. Sure. But a state monopoly on violence goes a long way to reducing violence among the populace. If this is an explicit trade-off being made, then fine, but I don’t think we have properly costed in the price of lost lives and mental/physical trauma.)

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Missouri U.S. Senate candidate Rep. Todd Akin’s awful suggestion that women rarely get pregnant from “legitimate rape” is awful for many reasons — a mind-blowing lack of knowledge of basic human biology, the suggestion that many rape victims who ask for abortions must be lying, etc.

The real problem with his comments, however, is that they are essentially part of the Republican orthodoxy on being adequately “pro-life.” For example, VP nominee Paul Ryan has said that he does not support abortion even in cases of rape or incest — only when the mother’s life is at risk. Five Republican presidential candidates — Gingrich, Bachmann, Santorum, Paul, and Perry — all supported a pledge that only permitted abortion in cases where the mother’s life is at risk (and even then, “every effort should be made to save the baby’s life as well”). As much triangulation as the Romney campaign attempts, the “abortion is always murder” crowd is the core of the Republican base.

In the meantime, Todd Akin will still probably win in Missouri, regardless of his ignorant and offensive comment. The Missouri Republican Party’s official platform supports overturning Roe v. Wade, forced anti-abortion counseling, preventing public money from going to abortions, preventing public employees from referring abortions, etc. Much as Republicans may pretend, Akin’s comments aren’t shocking or surprising at all — they are part and parcel of Republican anti-abortion extremism.

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With each financial scam/hoax/fraud, we hear people decry capitalists not acting as they once did — with honor and so forth. David Rhode has a new short piece for the Atlantic about this topic regarding the Libor scandal. In summary, bankers are behaving unethically and their lack of ethics hurts all of us. And I basically agree with that.

I do take issue, however, with the idea that somehow the past was better. Remember that time when Jay Gould tried to corner the gold market? Remember that time when rampant speculation and poorly regulated credit markets led to the Great Depression? (Oh yeah, did I mention that a bunch of financial wizards tried to overthrow the government?) The amorality of the S&L is on par with the amorality of today.

Capitalists have always pursued profit above all. That’s the point. It would be folly to expect them to do otherwise. That’s exactly why blunt, dumb regulations, rather than public scoldings, are needed to hold the line.

 

David Rohde

David Rohde – David Rohde is a columnist for Reuters, two-time winner of the Pulitzer Prize, and a former reporter for The New York Times. His forthcoming book, Beyond War: Technology, Economic Growth and American Influence in the New Middle East will be published in March 2013. More

The Libor Scandal and Capitalism’s Moral Decay

By David Rohde

Jul 13 2012, 2:45 PM ET 181

The scandal engulfing the financial industry is yet another sign that our business leaders no longer respect the rule of law. 

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Reuters

Maybe the acronym at the heart of the scandal is too confusing. Or Americans are simply tired of hearing about greedy bankers. By any measure, though, the Libor bank scandal is an extraordinary example of the 1 percent stealing from the 99 percent – and our crumbling ethics.

If an organized crime group was accused of breaking into the Nassau County Treasurer’s Office on New York’s Long Island and stealing $13 million, outrage would be widespread. And if the same group was accused of stealing millions from the City of Baltimore and other struggling municipalities, they would emerge as an issue in the presidential campaign.

Instead, the Libor scandal is emerging in dribs and drabs and drawing little public attention. The middle class is being victimized, and there is little protest.

Last month, the British bank Barclays agreed to pay $453 million to American and British authorities to settle allegations that it manipulated key interest rates for profit between 2005 and 2009, specifically the London Interbank Offered Rate, or Libor. American and British investigators are now examining whether traders at a dozen other banks — including the “too-big-to-fail” U.S. banks JPMorgan, Citibank and Bank of America — also manipulated rates.

It is hard to overstate the impact of the Libor benchmark, which is used to value some $360 trillion in loans and financial contracts worldwide. It affects lending to governments, businesses and consumers, and even student loan and credit card rates.

So Barclays’ victims weren’t just other banks and traders. They included taxpayers in dozens of communities who are believed to have paid millions more in interest than they should have at the height of the financial crisis. Teachers and other public servants may have been laid off because of bankers’ pursuit of ever-higher profits.

Lawsuits filed by the City of Baltimore and dozens of other parties against Barclays, JP Morgan, Bank of America, Citibank and Deutsche Bank have been consolidated into a single case in a New York federal court. Banks are denying any wrongdoing, and the true scope of the losses — and the role of American banks — is expected to emerge in the complex legal battles ahead.

I do not believe all bankers are evil. I admire business owners who innovate, create jobs and strengthen communities. But theft — whether the perpetrator is clad in a business suit or blue jeans — is theft.

And let’s not kid ourselves. Our ethical decay stretches beyond Wall Street. It spans industries, political parties and groups. In April, systematic bribery by executives of the U.S.’s second-largest company – Walmart – was reported across Mexico. In June, American sports officials accused cyclist Lance Armstrong of engaging in a massive doping conspiracy. And Jesse Jackson Jr. appears to be the fifth member of Congress to be embroiled in an ethics scandal in two years.

Around the world, a globalized economy is creating planetary-sized profits — and relentless pressure. A May survey by Ernst & Young of 400 chief financial officers around the world found that a growing number of them were willing to pay bribes and falsify their firm’s financial performance to survive the financial downturn.

The number of chief financial officers who said they would engage in bribery to stay in business grew from 9 percent in 2011 to 15 percent in 2012. And the number who said they would misstate their company’s financial health to get though a downturn rose from 3 percent in 2011 to 5 percent in 2012.

“One of the most troubling findings of the survey is the widespread acceptance of unethical business practices,” Ernst & Young said in a statement. “It is particularly alarming that respondents are increasingly willing to make cash payments.”

Corporate boards and other overseers, meanwhile, appear to be looking the other way. Eighty-one percent of those surveyed worldwide by Ernst & Young said anti-bribery and anti-corruption codes of conduct were in place in their companies. But nearly half said they did not believe employees had been punished for violating those polices.

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One thing bugs the shit out of me is the conventional wisdom that two-person opposite-sex biological parents represent the best environment for raising children. David Brooks raised the old chestnut again in his wacky piece about the decline in opportunities for the lower classes:

A long series of cultural, economic and social trends have merged to create this sad state of affairs. Traditional social norms were abandoned, meaning more children are born out of wedlock. Their single parents simply have less time and resources to prepare them for a more competitive world.

First, this may be true and it may not be. Research has been inconclusive, and difficult to extricate from simple socioeconomic trends. Additionally, some research has shown that high-conflict marriages are as bad if not worse than single-parent households, and that stability may be a better indicator than number of parents.

Second, even assuming the argument is correct and two parents are better than one, why wouldn’t three parents or four parents be better than two? As California prepares to address this with possible legislation to open the door to more greater-than-two-parent households, it’s not surprising that the usual suspects have crawled out to voice their opposition:

“This bill is a Trojan horse for the same-sex-marriage agenda,” Peter Sprigg, a senior fellow at the Family Research Council, said.

“Advocates for same-sex marriage are very interested in separating parentage and marriage from biological parentage, because that’s the one thing same-sex couples can never achieve,” he added.

I mean, sure, but part of the core conservative argument against same-sex marriage is that two-biological-parent households are better than two-nonbiological-parent households. Why wouldn’t the introduction of more adults, including the biological parents not be better? In fact, we have been doing this for some time, with villages, tribes, and relatives often taking on the responsibility of childcare. Like, oh, I don’t know, this family.

If stability is the goal, why not include as many stable adults as we can find?

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Like the saying goes, “It’s hard to make predictions, especially about the future.”

I am in the minority view here, but I think the Court still upholds the whole law in a quite narrow opinion in a 6-3 decision authored by Chief Justice Roberts. Maybe I am naive in my belief that laws matter, but I just don’t believe that the Court is willing to limit the Commerce Clause on some made-up wacky distinction like “action” vs. “inaction.”

I’d also give about 20% odds that the Court punts entirely, either by ruling on the Anti-Injunction Act provision (rendering all the lawsuits invalid) or by delaying the decision entirely by another year.

Predicting the Supreme Court is tough, but the ones who would know think it’s looking rough for the individual mandate. I’m hoping that the judges remember that law matters.

We’ll find out Thursday, along with everyone else.

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William Saletan atSlate always has these big pseudo-scientific questions that he thinks are deeply thought-provoking but are actually pretty schmeh.

For example, he has a long-standing (and probably wrong) hypothesis about race-linked intelligence. (I have previously noted the goofiness of this “scientific” discovery here.)

Now Slate has two stories about a study finding that children of gay parents at a time when being gay and having children was/is maligned can be stressful and difficult. That’s pretty understandable. Saletan’s take is probably more line with mine in that he thinks it still proves gay marriage is a good outcome (two parents, loving household, financial support, etc.). Still, he takes the study as methodologically sound (some criticisms here).

That said, let’s presume, for the sake of argument, that the study is right and two same-sex parents are actually in fact worse for the child than two opposite-parent biological parents. So what? Lots of children are raised in households without two opposite-sex biological parents; couldn’t a two-parent same-sex household still be better than, say, single parents? Couldn’t some alternate arrangement (let’s say, oh I don’t know, three parents in a household, or a two-parent biological household with grandparents in the home to provide childcare) provide even better results than the two-parent biological household? Should the government or society encourage such behaviors? Maybe, but maybe not. Attacking the “worst” child-rearing environments probably yields the most returns for society; certainly two-parent same-sex households are better than, say, institutional housing or constantly shifting foster care. Since there is high demand for same-sex households to have children, maybe we should be encouraging lots of adoption by any combination of two-parent households.

My point is that much like any presumed difference in intelligence between races (which, as I’ve noted, is probably wrong on its face anyways), the difference between a two-parent same-sex financially-supported household and a two-parent opposite-sex financially-supported household is probably so marginal that the policy implications are nil compared to the differences between a two-parent household and a no-parent household, or a two-parent household and an institutional care facility, or the difference between a poor family and a rich family.

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Do they need our charity?

President Obama has released his tax returns–that ever-strange feature of American politics. Yet, the tax return gives us an interesting view into one bit of our tax law that needs substantial reform: the charitable donation. As you’ll note from my shoddy circling, President Obama donated $5,000 to Sidwell Friends School. If that name sounds familiar, it’s because the President’s daughters attend that school.

Now, Sidwell Friends School is a private school with high tuition ($31,960 a year). Do they really need additional funding? Or perhaps, put differently, do they deserve tax-deductible charitable giving?

Furthermore, to what extent can this really be considered charitable giving? Presumably, this is much closer to a quid pro quo relationship — the school, I imagine, strongly encourages parents to donate additional money to the school. Might those parents donate expecting special or different teacher? Might the school have incentives for treating the students of donors differently than those who merely pay tuition?

I’m not impugning the President’s motives here, but his public tax returns give us an opportunity to take a magnifying glass to someone’s tax returns other than our own. Consider that the President and First Lady gave as much money to Sidwell Friends as to any other charity, save the Fisher House Foundation (an excellent organization that runs comfort homes for military and VA hospitals). Does an elite private school really deserve an extra $5,000? Does an Ivy League university? And more importantly, should the American taxpayer be partially financing these types of donations?

We have a system that encourages charitable giving, but does not interrogate closely the reasons or purposes of the charities themselves. As a result, non-profit organizations and charities can easily serve as tax shelters to fund trips, meals, and other expenses for their operators.

The charitable deduction is not necessarily a way of funding charities; it is definitely a way to subsidize (mostly) the rich to make decisions about investments they wish to make. After all, only the rich benefit substantially from the itemized deduction; those of us taking the standard deduction (about 70% of taxpayers) don’t deduct much for our charitable donations. Should we really allow people to deduct for donating to, say, the opera (an organization that overwhelmingly benefits the rich)? The Center for American Progress or the Federalist Society (essentially political advocacy organizations)? Churches and other religious organizations? A private dinner club?

Again, I’m not saying that giving to charity is bad; I myself donate to charities. But, we do need to think more about why we subsidize charities and the outcomes that those subsidies create. Are we OK with subsidizing the ability of the rich to give money to organizations they like? Are the bad outcomes (such as non-profit bloat, fraudulent organizations, tax shelters, and charities that benefit the rich and privileged, etc.) worth the good ones (such as civic participation, communitarian values, market-driven donations, and charities that benefit the poor and underprivileged)? Like I said, I don’t know the answer to these questions, but it’s important that we ask them rather than act as if the charitable deduction must be a universal positive.

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