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April 6, 2008

Heads they win; tails we lose
Posted by Patrick at 07:33 PM *

Centrist economist Howard Gleckman is alarmed by what’s been happening to American capitalism:

[F]or the past three decades financial engineers have been playing a game with unlimited upside reward and, thanks to the Federal Reserve and the White House, limited downside risk.

The new rules: A $45 trillion market in immensely complex derivative securities, with no regulation, no capital requirements, no transparency, and a Federal Reserve that is so terrified of the consequences of this market blowing up that it seems prepared to bail out the losers at almost any cost.

The perfectly predictable result is a Wall Street willing to peddle increasingly dicey paper in return for the promise of ever-higher returns. Who wouldn’t, especially with the Fed prepared to cover your bad bets? The phenomenon has been around long enough to have a name: moral hazard.

Just since the 1970s, we have gone through Michael Milken’s junk bonds, the savings and loan crash, leveraged buyouts, Long-Term Capital Management and the hedge funds, venture firms and the dot-com bubble, the private equity craze, and the sub-prime mortgage mess. It’s all a variation on the same theme — smart guys take other people’s money, leverage it by as much as they can get away with, buy stuff, securitize it, and then flip the paper for a huge profit.

Unfortunately, the deals get riskier and riskier and finally crater. Eventually, someone gets caught holding the bag. If that someone is big enough — a bank or even an investment house — the Fed steps in to bail them out. Even more troubling, the central bank continues to pump liquidity through the whole financial system to keep things afloat. So, to ease the consequences of the bursting dot-com bubble, the Fed made plenty of money available for the mortgage market. That not only kept home prices up, it set off a housing boom, sub-prime and no down-payment mortgages, and finally, kersplat, here we all are.

As Gleckman observes, “we seem to be reverting to an era where recessions are caused by financial busts rather than downturns in the real economy…These Wall Street-driven busts used to happen all the time, until post-Depression regulation of commercial and investment banks leashed the speculators.” You know, that boring, interfering, big-government stuff that we had to get rid of in the ’80s and ’90s in order to unleash the throbbing engines of capitalism.

This would be a good moment to remember that the Clinton/Gore administration was every bit as much part of this march of folly as Reagan and both Bushes. They were merely nicer about (intermittently) thinking we ought to do something for the people dispossessed by it. (Also, arguably, less prone to getting us entangled in fiscally ruinous multi-trillion-dollar wars, but that’s another issue.)

What libertarians (and the softheaded quasi-libertarian burghers of science fiction fandom, most of whom think the Economist is a voice of reason) need to learn is that capitalism is never about free markets, or in fact “freedom” of any sort; it’s about using the power of the state in order to make it easy for large amounts of capital to get together and rearrange the rules for its own convenience. “Privatize the profits, socialize the losses” is the logical consequence of capitalism’s prime directive. What we wind up with is socialism for the powerful, and tough shit for everybody else.

Comments on Heads they win; tails we lose:
#1 ::: Patrick Nielsen Hayden ::: (view all by) ::: April 06, 2008, 08:01 PM:

Ezra Klein also blogged this article, making the sensible observation that "Capitalism, after all, isn't a state of nature. It's the system that happens when the economic rules and rewards are arranged in a certain way. One of its requirements is that those who gamble on reward also bear responsibility for risk. The question Gleckman asks is whether that rule is still in place, and if not, has anyone really thought through the implications of the change?"

In Ezra's comments, "DivGuy" says "I would suggest, in simple form, that capitalism is that system set up for the protection and expansion of capital, and as such very little real risk to capital has ever been a part of the system. I am, with extreme caution, hopeful that the particularly radical form of corporatism/capitalism practiced in the last two decades in America has lifted something of the mask off of the obfuscation of the protection of capital that has, just about always, been constitutive of the capitalist system."

Later, speaking for unreflective airheads everywhere, one "Anonymous" asserts that "Capitalism is what naturally occurs in modern societies when government is not involved. All other economic forms require the force of government to implement and maintain." Yeah, the concept of the limited-liability corporation and the legal doctrine of corporate personhood just spontaneously emerged from the deep places of the earth. Words fail.

#2 ::: joelfinkle ::: (view all by) ::: April 06, 2008, 08:40 PM:

What it really boils down to is that we don't know squat about economics. So each time there's a major f-up, we make a few more rules.

OK, I lied -- the regulators pretend they don't know squat, and the market (cough) forces, bend them as far as they can. To some degree, that's a good thing, because if we can make more money out of less money, everybody wins, right? Like you said, maximize upside.

What we need is to give the regulators weapons they can wield before it gets to crisis state, and go "no" and wap the market puppies with a figurative rolled up newspaper.

But that doesn't work so well because they're not puppies. If we had tens of thousands of small investment companies, we could let one fail, mop up the mess on the floor, and train them to not do it again. What we have is a dozen ten-ton rottweilers that bury their messes in the yard. That's theoretically a good thing too -- the yard is pretty big, and a few messes for each giant dog is "managed risk."

But you think that somebody would have noticed that the rosebushes, the tomatoes, the petunias and the cherry trees all have dead gophers buried under them, and put a stop to it before the subsidence collapses the garden walk.

I know I can't do much except keep paying my mortgage (with which I am not having a problem), and doing my best to stretch metaphors.

#3 ::: Stefan Jones ::: (view all by) ::: April 06, 2008, 08:42 PM:

Libertarians believe in crap like that the way communists believed in the inevitable triumph of dialectical materialism.

Back when California was resorting to rolling blackouts, a smug bastard on capitalism.com noted that some deluded people were blaming the power shortages on collusion by power companies, which was wrong wrong wrong because the iron law of the market would just not allow that, and it they did believe that then they probably believed that diseases were caused by demon.

Deluded wankers. It would almost be funny if so many of the pricks hadn't found their way into power the last few years.

#4 ::: B. Durbin ::: (view all by) ::: April 06, 2008, 08:42 PM:

I have what many people would consider to be very libertarian leanings, and unregulated capitalism scares me silly. After all, an unregulated capitalistic system is basically any black market in the world, given legitimacy, and one thing you'll notice about those is the level of graft and bribery necessary to get anything through.

I do, however, look on the Fed and people watching it with some amusement, because their regulation is not like steering a Titanic, it's like steering an island. And as I've gotten to experience firsthand how much delay there is in steering a 12-foot boat.

Basically, a lot of people exect the Fed to micromanage, when a lot of these folk barely understand what the economy is doing now. They only have a very big lever and they don't always know where to apply it.

(Of course, it also doesn't much surprise me that we're going into a recession; we're long overdue and recessions have been a fairly steady part of this economy since its inception. In fact, they've been part of any country's economy. And it REALLY doesn't surprise me about the credit crunch because there have been people accurately predicting it for years based on the housing loan stats. Numbers can tell you a lot. They may not be able to tell you when, but they can certainly tell you how.)

#5 ::: Patrick Nielsen Hayden ::: (view all by) ::: April 06, 2008, 08:52 PM:

"I have what many people would consider to be very libertarian leanings, and unregulated capitalism scares me silly" is a pretty good description of my outlook, in fact.

#6 ::: Stefan Jones ::: (view all by) ::: April 06, 2008, 08:56 PM:

You know what I wish even more than I wish that the nation's MBAs would concentrate on administering businesses rather than diddling with financial instruments?

I wish we, the people, weren't such goddamn suckers. I wish the lure of vacations and new cars wouldn't tempt otherwise solvent people into getting second mortgages. I wish college freshmen wouldn't let a free gym bag or t-shirt tempt them into getting a credit card that will land them (or their parents) into years of payment.

Wanting stuff, now, is like a sick codependency that empowers the bastards.

#7 ::: Keith ::: (view all by) ::: April 06, 2008, 08:58 PM:

As any paleontologist can tell you, in ancient times Corporations roamed the earth, regulating themselves by the natural forces of their homely and personable natures. Sure, they occasionally fed on small furry primates, but only the ones who deserved it. But the benefits far outweighed the odd destructive act, as they were also prone to shitting gold bars.

#8 ::: will shetterly ::: (view all by) ::: April 06, 2008, 08:59 PM:

B. Durbin, right-libertarians stole "libertarian" just as the steal anything else that's not locked down tight. But few political parties would pass truth in advertising laws.

#9 ::: Greg London ::: (view all by) ::: April 06, 2008, 09:03 PM:

Patrick@1 the concept of the limited-liability corporation and the legal doctrine of corporate personhood just spontaneously emerge from the deep places of the earth.

Actually, it was mined out by dwarves. But they dug too deep and awoke a terrible evil...

#10 ::: Lizzy L ::: (view all by) ::: April 06, 2008, 09:16 PM:

The final paragraph of your comment, Patrick, made me laugh out loud, in a bitter sort of way... These folks who believe in the "free" market, do they also believe in the Tooth Fairy? The Easter Bunny? The particular airhead Anonymous you quote has never, I would venture to guess, studied the economic history of his or her own country, let alone that of "free markets." Bleeah.

There's this elitist meme going around that derivatives, etc. are just too, too complex for anyone not a professional to understand. I think it's obvious that a) the professionals don't completely understand them either, and b) whether or not (a) is true, we non-professionals can understand the moral nature of what these activities and choices have led to. Compassion, charity, and the common good of the polis are not hard to recognize, and their absence isn't hard to see, either.

#11 ::: Allan Beatty ::: (view all by) ::: April 06, 2008, 09:38 PM:

One thing that makes reasoned discussion on these topics difficult is that people have hijacked various terms for their own ends (as Will Shetterly mentioned).

For example, free trade. Who could be against it? Economists have shown how everyone benefits from genuinely free trade, and it even has the word free in its name. So people with an axe to grind misapply the term to their own pet schemes which really mean, not free trade, but more of the specific kinds of trade that will benefit them and their cronies.

Or a friend of mine on a mailing list asked why the United States is bent on exporting capitalism to the rest of the world. I asked him what he meant by capitalism, as this term is used with various meanings and they wouldn't all fit in the context. I didn't get a real coherent reply. By capitalism he seems to mean anything that isn't socialism. And that left me none the wiser, because socialism is another of those terms that means many things to many people.

Now moral hazard is still a useful term, because the politicos and the scammers haven't managed to bleach all the meaning out of it yet.

#12 ::: Patrick Nielsen Hayden ::: (view all by) ::: April 06, 2008, 09:48 PM:

From, of all places, Bloomberg News: how Wall Street (J. P. Morgan; Morgan Stanley) fleeced Pennsylvania school districts for billions of dollars.

These people need to be dragged out of their offices and beaten to death.

Slowly.

#13 ::: CHip ::: (view all by) ::: April 06, 2008, 10:08 PM:

Allan: "moral hazard" was \born/ with half the meaning bleached out; the idea that it really does apply to the moguls as well as the masses is just starting to leak into the MSM.

#14 ::: lightning ::: (view all by) ::: April 06, 2008, 10:12 PM:

Just look at any stockbroker's report, and there'll be a line in there somewhere that says something like "These securities are not FDIC insured, are not bank guaranteed, and may lose value." Anybody who invests in the stock market should know that their investment can disappear at any time.

Mortgage crisis suggestion -- since the mortgage securities are essentially worthless, deed the properties over to the residents. After all, they are the real victims of this particular con game. All of the big funds would pay the penalty for loaning out money for lottery tickets.

Yeah, I know. Somebody mentioned the Tooth Fairy ...

#15 ::: mythago ::: (view all by) ::: April 06, 2008, 10:12 PM:

Well, what they actually believe in is karma - the actual, mystical sort. Bad things cannot happen for long because The Market will sort them out. It's interesting how many cracked rightish beliefs are mystical when you look at them: free market = God's will, Unitary Executive = king, class warfare = heresy...

#16 ::: CHip ::: (view all by) ::: April 06, 2008, 10:19 PM:

Patrick: the Bloomberg article isn't the only case, although as a school fleecing it may be the most atrocious; in Massachusetts it was the Turnpike Authority that got rooked this way, IIRC for rather more money. The interesting thing is that the Pike is still paying; when it was discovered that the city of Springfield had been sold grossly unsuitable financial instruments, the selling brokerage ended up replacing some of the lost money (IIRC the instruments dropped >75% of their value). Possibly the Pike is stuck because they bought from somebody in Switzerland, not based in the U.S. (IIRC the seller was also not a broker-to-the-general-public; Springfield had the possibility of making clear that all the broker's we-help-you claims were bull.)

#17 ::: Patrick Nielsen Hayden ::: (view all by) ::: April 06, 2008, 10:20 PM:

What CHip said. Historically, the concept of "moral hazard" has primarily been a tool by which monsters like Daniel Patrick Moynihan explain that if we let any brown people get a dollar of welfare more than that to which they're entitled, societal breakdown will immediately ensue.

The idea that there might be some hazard, "moral" or otherwise, in letting a bunch of well-connected shitheels get away with murder, seems to be creeping up on a few members of our elite media class, on little cat feet. In the long run, I have faith that they'll manage to shake it off.

#18 ::: Seth ::: (view all by) ::: April 06, 2008, 10:43 PM:

The extent to which a bailout today affected the likelihood of Bear Stearns taking risks two years ago is the extent to which Bear Stearns could predict the future. That appears to not be very much.

Personally, I put the blame for most of the subprime crisis on the rating agencies. They're the ones who claimed that 80% of a subprime mortgage was AAA credit. Had they been more accurate in their ratings, the securitization arbitrages would not have existed (at least, not to the extent they did).

There were a number of cases last century in which swap dealers got sued (and lost) for various abuses. In some cases, they should have; but when somebody is the Treasurer of a billion-dollar entity, he really shouldn't be doing deals he doesn't understand (or at least not without hiring people to understand them).

Patrick @1: Capitalism doesn't require limited-liability corporations. They're convenient.

B. Durbin @4: Black markets don't have bribery or corruption inherent; if you want to buy a counterfeit watch from a guy on a streetcorner in Manhattan, there's neither bribery nor corruption involved. You negotiate a price and pay it, or not.

Bribery and corruption occur when third parties force their involvement. If you need a license to sell watches, then the issuer of licenses is often corrupt and requires a bribe to issue one.

Lizzy L @10: You're right, most professionals don't understand derivatives. A few do.

Patrick @12: That reporter doesn't know what he's talking about. Interest Rate Swap rates are available on Bloomberg. What difference does it make what other school districts are paying? That's like saying I don't know what prices other computer programmers are paying for Dell stock.

lightning @14: The mortgages aren't worthless; what happened was that the securities were split up, with the first part going to one side, and the remainder to the other. The security that gets the second side is worthless.

#19 ::: Avram ::: (view all by) ::: April 06, 2008, 10:55 PM:

The phrase "free market anti-capitalism" is one that could probably use wider currency. Its primary promulgator seems to be Kevin Carson, of the Mutualist blog, and also of The Art of the Possible:

The problem with mainstream libertarianism is its almost total departure from its radical roots. Early classical liberalism was a revolutionary doctrine, which declared war on the most entrenched class interests of its day. [...] From a revolutionary ideology aimed at breaking down the powers of feudal and mercantilist ruling classes, mainstream libertarianism has evolved into a reflexive apology for the institutions today most nearly resembling a feudal ruling class: the giant corporations.

#20 ::: Robert Hutchinson ::: (view all by) ::: April 06, 2008, 11:01 PM:

Libertarian here, who promises that he's learned what "capitalism" currently consists of, particularly in the last several years. To shamelessly steal Gandhi's line, I think free markets would be a good idea.

(Of course, I could turn this completely around on the use of the word "regulation", which can cover anything from "make sure no one is getting defrauded" to "'regulate' out of business everyone not in bed with us".)

#21 ::: Stefan Jones ::: (view all by) ::: April 06, 2008, 11:28 PM:

Over on his blog, David Brin suggests that Paulson, et al, are "Preparing for the Next Big Scam"

"People should open their watchful eyes now to whatever deep preparations that are being made, for the Next Big Scam. After all, many of the regulatory cracks that were exploited by this latest wave of thieves were actually planted years ago, many of them as “reforms” in the wake of the last kleptocratic raid, the infamous Savings and Loan Scandal. (That took place largely under the aegis of our president’s father.) Now that the horses have been stolen, sure, we’ll see the barn doors closed and re latched... while subtle strings are left in place for other doors to be burgled, in times to come.

Let’s give the raiders their due. They think and plan long term. Preparations for our present Neocon Putsch go way back, including the creation of an entire corps of master rationalizers, from Gingrich to Wolfowitz, Perle, Adelman, Nitze and so on, whose agile surface blather covered the real agenda -- setting America up for a blood-draining of epic proportions. Okay, so now, at last, the steer has begun responding to the pain. A passel of engorged vampire bats are scuttling to avoid its hooves. They may even lay low for a while, their greed briefly slaked, while the livestock recover a bit.

But remember folks, that is how they think of us. Would be lords of the right and the left (remember communism?) Only, now and then, these sheep look up."

#22 ::: albatross ::: (view all by) ::: April 06, 2008, 11:45 PM:

The moral hazard here is created by having government willing to bail out either the investors or the markets. Otherwise, it might be unstable because people were monkeying around with financial instruments they fundamentally didn't understand (or *couldn't* understand, once they started interacting in a market), but there wouldn't be moral hazard. Bash people as you like, but there's nothing libertarian about government bailouts for business. That would be the Republicans and Democrats you want to talk to.

The great downside of free market ideas isn't their failures (though there certainly are some of those), it's their usefulness to justify socialism for the rich, which has nothing at all to do with free markets. Get people arguing about capitalism and freedom when they're think they're talking about Hank Rearden, and then slip in the subsidies and protective tarriffs for Jim Taggart.

Much the same can be said for ideas of basing political action on Christian teachings, which starts with the gospels, but somehow often ends up with bombing Arabs or bashing gays, but rarely with feeding the hungry or clothing the naked or any of that stuff that actually appears in the gospels. (And there are dozens more examples.)

#23 ::: P J Evans ::: (view all by) ::: April 07, 2008, 12:01 AM:

#21

Don't forget that one of the current wannabe-presidents was up to the ears in the S&L scandal. They aren't asking that one about a lot of things they should be questioning.

#24 ::: Randolph Fritz ::: (view all by) ::: April 07, 2008, 12:05 AM:

I tend to view capitalism somewhat differently; I think it's a system of social relations that's been worked out to make use of industrial production. Doesn't the "free market" rhetoric come from the dawn of the industrial age, when it was not possible to fund a business--or much of anything--without permission from the nobility? In that sense, and given industrialism, capitalism makes a lot of sense. Regulation also makes sense; the point is to produce stuff for human use, not let people siphon off wealth. I don't regard the abuses we've had since the 1980s as particularly good for capitalism; to me they seem a kind of anti-capitalism--trashing the system of production to feed egos and pocketbooks. And, fairly plainly, they can't be sustained; without regulation the whole system has turned septic, just like an unmoderated net forum.

To me, the best thing in libertarian idealism is its rejection of corruption in economic policy-making. But that seems to have been lost. And rulebook libertarianism has worked about as well as any other sort of rulebook policy or law--fine, until enough people figure out how to game the rules, and then you need to write new rules.

In the long term, production seems to be shifting from centralized and industrial to localized and information-based. I believe new social forms will be needed to make the best use of a localized information-based economy. But that is just beginning, and I do not expect to live to see that system.

#25 ::: lightning ::: (view all by) ::: April 07, 2008, 12:16 AM:

Seth @18:

The pea is, we are assured, under one of the shells. My understanding of this mess is that the securities are so mixed up that *nobody* knows who owns what.

Saw an article a while back about a guy in a US$1.5e6 house. When the "owner" tried to foreclose, he said "convince me (and a court) that you really own this house, and I'll leave". At last count, he was still there.

It'll be interesting to see if this meme spreads ...

#26 ::: A.R.Yngve ::: (view all by) ::: April 07, 2008, 12:25 AM:

Basil Exposition: Austin, the Cold War is over!

Austin Powers: Finally those capitalist pigs will pay for their crimes, eh? Eh comrades? Eh?

Basil Exposition: Austin... we won.

Austin Powers: Oh, smashing, groovy, yay capitalism!

Hmmm....

#27 ::: Stefan Jones ::: (view all by) ::: April 07, 2008, 12:28 AM:

Meanwhile, Rush Limbaugh is dusting off his "class warfare" and "lower class envy" rants, and trying to find a way to blame the recession on Mexicans and people who hate Wal-Mart.

#28 ::: mythago ::: (view all by) ::: April 07, 2008, 12:31 AM:

Now I'm a little puzzled, because when it comes to individual, non-institutional-type financial failures, the free-market line is that we must not help those people because a) they would have taken the benefits, so they have to suck up the risk and b) to offer government assistance would create perverse incentives to take risks, knowing there is a taxpayer safety net.

Why do those arguments become meaningless when we're talking about Bear Stearns? Are we supposed to assume that over-extended homeowners are better clairvoyants than the CEO of Bear Stearns?

The real answer, of course, is that the Fed has bailed out f'd-up institutions in the past and there's no reason for the Bear Stearns of the world to think it won't happen again. If BS's stockholders really are better off with a bankruptcy, then surely they'll vote against JP Morgan's acquisition. Any bets on that happening?

lightning - it's not a meme exactly. The existing laws more or less assume one entity holding the mortgage. When that mortgage's elements are split up into different entities, any that don't fit the current legal scheme of "who can foreclose?" are out of luck. Nursing homes are using similar tactics (in advance) to avoid being sued when they neglect the elderly people they care for.

#29 ::: Adrian Smith ::: (view all by) ::: April 07, 2008, 01:04 AM:

mythago@28: Why do those arguments become meaningless when we're talking about Bear Stearns? Are we supposed to assume that over-extended homeowners are better clairvoyants than the CEO of Bear Stearns?

I think it's because Bear Stearns thoughtfully interlinked itself with so many other holders of "bad paper" (love that phrase) that allowing it to fail might well lead to a whole bunch of things falling over. Figuring out ways to set things up so institutions can't hold a gun to the system's head in this way will have to come later.

#30 ::: Earl Cooley III ::: (view all by) ::: April 07, 2008, 01:19 AM:

I think the thing I liked most about the dot-com boom was the fact that I was able to continually find employment.

#31 ::: Shan ::: (view all by) ::: April 07, 2008, 01:27 AM:

"most of whom think the Economist is a voice of reason"

Not sure who, or what, this is sledging. The Economist? Libertarians? A variety of libertarians the author doesn't like?

Don't know anyone who thinks the Economist is a "voice of reason". Know plenty (including myself) who think it's a fine newspaper. Just like this is a fine blog...

...if you ignore the silly little ad-hom morons'n'megaphones stuff that creeps in from time to time.

#32 ::: Bruce Baugh ::: (view all by) ::: April 07, 2008, 02:54 AM:

Shan, for the extended critique of the Economist's failings with regard to both honesty and competency, see the archives of Crooked Timber, with economic, political, and sociological criticism available.

The quote from David Brin hits on something important, and so weird that I'm kind of embarrassed to talk about it. The exploiters do work on a long scale. What we're seeing right now is the culmination of seventy years of dedicated opposition to the New Deal, with the children and grandchildren of the inconvenienced privileged of that era getting their comeuppance. The organizational chains of connection are there. There is a stratum of our society that never did give up its conviction that its members are the rightful lords of all the rest, and they've been at it ever since. Teresa's motto goes here, darn it.

#33 ::: Kate Tinning ::: (view all by) ::: April 07, 2008, 03:44 AM:

Does anybody have any suggestions for more in-depth reading on this issue [books/blogs/journal articles etc]? About the reason why the 'free market' is a myth, and why we continue to have government regulation in capitalist economies [even when it isn't particularly useful regulation, such as the shadow banking industry appears to have today].

Is there an established economic tradition that is a counter-point to the constant 'free the market' whining of Zombie Friedman and the Neo-Classical economists?

#34 ::: Dave Bell ::: (view all by) ::: April 07, 2008, 04:38 AM:

As I posted to Usenet many years ago...

Assume a spherical free market of uniform desity and unit radius.

I suppose you can approximate that with a lot of players in the market, of approximately equal size, but that's now what we have. And, right back to the time of Blaise Pascal, we've known that the bigger players--the ones with more resources--have an advantage, even in a fair game. (BP was doing the math on gambling, and showed that in a fair game the player with more money can survive a longer run of losing plays.)

So government regulation is, to some extent, a counter to the advantage of size.

Another thing about economics which has changed since the classical days of such as Adan Smith is that there is far less friction. There are many mechanical systems, such as a vehicle suspension, where the correct amount of friction is essential. One source of friction in an economy--a slowing of the rate of change--is communication lag. Adam Smith didn't have the telegraph, but even with that it took a few minutes for a buy or sell decision to move from office to the market.

Let's say it takes ten minutes for a wodge of money to go around--a broker buying shares and selling them again--with a small profit. Now it might take ten seconds, with computers. What does that do to the apparent size of the market?

OK, Keynes was all for getting money to circulate. But his system was about getting money to circulate by exchanging it for goods and services.

And one of the things which Keynes knew was that the rich don't recycle their money as fast as the poor. If you only earn $200 a week, it's pretty well all going to have been spent by the end of the week. It's a little bit harder to spend $2000, and do things like mortgage repayments count as spending in the same way?

Not if they feed into the mad tail-chase of the derivatives markets.

"Trickle-down" is Keynes interpreted by a miser.

#35 ::: Shan ::: (view all by) ::: April 07, 2008, 04:50 AM:

Bruce, you talk about the Economist's 'failings' as if there is something endemic about them, and as if I should share your view.

Is the Economist wrong? Sure. Who isn't, from time to time, including your present interlocutor?

But their reportage on, for example, dengue fever in Latin America (April, 2007) or correctly putting the boot into the BNP (May, 2006), or their constant championing of externality charges, find few peers in the larger main-stream media.

I don't understand people who clearly want nothing more than to listen only to people they agree with -- a disease of the mind that is rife in Bloggerland -- and only to attack the weakest arguments of their opponents, or worse, straw men.

I'm not saying this describes you, but it does describe some of the features of the last paragraph of Patrick's post. I note with interest that he's already accepting certain criticisms and redefinitions, particularly wrt his use of "capitalism" to mean "a species of crony oligarchy", which is clearly a definition of limited use outside his own head.

#36 ::: Patrick Nielsen Hayden ::: (view all by) ::: April 07, 2008, 05:11 AM:

Randolph Fritz, #24:

"In the long term, production seems to be shifting from centralized and industrial to localized and information-based."

In the long term, production seems to be shifting to China. Are you under the impression that the world's "production" consists of fewer giant centralized industrial factories simply because you can no longer see them from your back yard?

#37 ::: Sam Dodsworth ::: (view all by) ::: April 07, 2008, 06:01 AM:

Does anybody have any suggestions for more in-depth reading on this issue [books/blogs/journal articles etc]? About the reason why the 'free market' is a myth, and why we continue to have government regulation in capitalist economies

Mike Huben's Critiques of Libertarianism has quite a lot of random mud-slinging but there's a lot of good stuff too, and the sheer amount of material makes it a decent starting-point. Ignore the top links and have a troll through the subject indexes.

#38 ::: Patrick Nielsen Hayden ::: (view all by) ::: April 07, 2008, 06:06 AM:

I don't know why Shan is accusing me of being one of the "people who clearly want nothing more than to listen only to people they agree with," or at any rate claiming that this "describe[s] some of the features of the last paragraph of Patrick's post." Having just re-read that paragraph, I don't see anything in it that addresses the question of who I do and don't want to listen to. The fact that I think the Economist is overrated is hardly evidence that I don't regularly take in material that challenges my beliefs and prejudices. (Including the Economist, to which I've been an intermittent subscriber for years.) With all due respect, I don't see where Shan, whoever he or she is, gets off levelling what is in fact a pretty nasty and personal accusation.

#39 ::: Patrick Nielsen Hayden ::: (view all by) ::: April 07, 2008, 06:43 AM:

To the larger question, some of the discussion so far has amounted to an argument over what is and isn't, in the words of Ezra Klein's commenter DivGuy, "constitutive of the capitalist system." Observing the tendency of capitalism-that-exists to become a system of oligarchy, some people conclude that the formation of oligarchic elites within capitalistic societies--which is to say, privileged investor and management classes, admission to which is based on factors remote from skill and merit; see also, exactly why do we need to make sure Bear Stearns investors are better-compensated than New Orleans flood victims?--is an emergent result of capitalistic first principles. Other people, like the old leftists who endlessly argued that "pure communism has never been tried," feel that these dysfunctions are the result of factors external to the fundamentals of capitalism: for instance, hangovers from the pre-industrial class system, ill-considered government intervention, or the moral hazards of extractive or monocrop local economies.

It's not actually a simple argument; it's been going on in recognizable form for over two centuries at this point, and large amounts of it are contained in detailed statistical analysis which I have neither the training nor the turn of mind to properly assess. (I may not always agree with, for instance, Brad de Long, but I'm deeply impressed by his ability to find a narrative thread in the thickets of complex numeric fact.)

My own inclination these days is to suspect that the more dire view of capitalism is correct after all--that, absent some kind of countervailing force, international capital really does become an out-of-control Vingean AI inimical to human liberty. But before discussing the matter any further I want to make it clear that I'm not animated by a grudge against "business" or "enterprise"; this would be silly, since I'm a businessman and an entrepreneur. I don't happen to think that the particular system of state guarantees and legal superstructures that we know as "capitalism" is the only model by which humans can build enterprises and thereby better their and others' lot in life, although I do note that a lot of the story capitalism tells itself is a tale of how this is the only world that could ever be. (In this, of course, it's much like every other crusading worldview, right on down to the "Juche" ideology of the DPRK.)

#40 ::: martyn44 ::: (view all by) ::: April 07, 2008, 06:57 AM:

Back when I worked in the City, a broker proudly told me that 'If God hadn't wanted them to be fleeced, he wouldn't have made them sheep.' 'Them?' Us. The other people whose insurance premiums and pension contributions oil the wheels of 'industry'.

Adam Smith is the lauded patron saint of these people. Among the many pithy comments he made was something along the lines of 'wheresoever are two or three suppliers gathered together, they will conspire to defraud the customer.'

The shysters are the regulators are the elected representatives - or their brothers and their cousins and their sisters and their aunts.

What we really need to remember is that, to Them, 'They' are not 'Us'. 'They' are 'We', and we are sheep, fit only to die to give them meat and wool. Comfortable thought, isn't it.

#41 ::: heresiarch ::: (view all by) ::: April 07, 2008, 07:07 AM:

Seth @ 18: "The extent to which a bailout today affected the likelihood of Bear Stearns taking risks two years ago is the extent to which Bear Stearns could predict the future. That appears to not be very much."

People base their predictions of the future on their experience of the past. What in the last thirty years of history would have suggested to Bear Stearns that they wouldn't be bailed out? The large financial institutions rely on the unconditional support of the federal government like a child relies on a mother's love.

#42 ::: Fragano Ledgister ::: (view all by) ::: April 07, 2008, 07:15 AM:

Well, what is a ruling class for except to make the rules? And what good is it to make the rules if you can't exempt yourself from them? As some dangerous un-American radical said "The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants."

#43 ::: Rob Rusick ::: (view all by) ::: April 07, 2008, 07:58 AM:

I don't know how it would be enforced, but just as a newly developed drug has to be tested and approved by the FDA, I would think that a newly developed financial technique (derivatives, for example) should be vetted* before getting released in the American marketplace.



* How, and by who? That's what I mean by 'I don't know...'

#44 ::: Bruce Baugh ::: (view all by) ::: April 07, 2008, 08:22 AM:

Shan, I don't know what you're reading in some of these messages. I answered your question about the Economist by pointing at the source of the most useful critiques of it I'm aware of. I am not expecting you to agree with me or Patrick or anyone else now, since (I presume) you haven't read them. Nor do I expect that you'll read those critiques and agree with them all. I am expecting that you may find informed commentary on the history of its management and recurring weaknesses (and strengths) within its story structuring and the like worth considering, and at at the least additional input into your own appraisal of it.

Patrick, I'm still pretty sure that every institution goes bad sooner or later. What's changed since my libertarian days is my sense of who's really got most concentrated power now, and what they're doing with it, and therefore what it takes to offset them with power elsewhere in the system. I've also become much stricter in what I will accept from people with histories of self-aggrandizing lying, even when they're saying things I'm tempted to believe.

#45 ::: Chris ::: (view all by) ::: April 07, 2008, 08:30 AM:

It's not so much that free markets or Marxism haven't been tried, as that they've never been *successfully* implemented. So we don't really know what would happen if they were, but there's reason to suspect any ostensible attempts to do so again (because it might turn out like the last time and the time before that).



It would take a lot of regulation to make a free market (busting trusts, for example; why is it that unions are sometimes busted today but trusts never are?) but then how do you keep the regulators from being corrupted by the people with gobs of money? Any system that relies on the existence of incorruptible and/or superintelligent people for its proper operation is doomed to operate improperly.

I wonder if anyone who pointed out flaws in the previous Gilded Age was also attacked as anti-capitalist. Probably. But *correctly* identifying the flaws in a system is a *good* thing - see the thread below.

#46 ::: Peter Erwin ::: (view all by) ::: April 07, 2008, 08:50 AM:

mythago @ 28:

The real answer, of course, is that the Fed has bailed out f'd-up institutions in the past and there's no reason for the Bear Stearns of the world to think it won't happen again. If BS's stockholders really are better off with a bankruptcy, then surely they'll vote against JP Morgan's acquisition. Any bets on that happening?



This article ("Interview with a Hedge Fund Manager") has some interesting comments on the Bear Stearns case. The HFM speculates that the shareholders of Bear Stearns -- many of them company insiders -- were forced to accept the JP Morgan takeover, even though they probably could have been better off with a bankruptcy:

... The reason the Fed didn’t want Bear to go through bankruptcy is that there are all kinds of interconnections between Bear and other banks. There’s counterparty risk, it could lead to panic, it could lead to a whole mess in the financial market, so the Fed just wants the problem to go away, the Treasury just wants the problem to go away. But if I am a shareholder it’s not my problem. "Let’s go bankrupt, let’s see, maybe we can do better than 2 dollars!" So everyone here was puzzled that Bear would agree to that kind of a deal.
Now Bear Stearns is unusual in that a lot of the shares are owned by insiders in the company, and the theory we had at the desk here is that the Treasury Department—not the Fed, the Fed’s not so tough, but the Treasury Department went to the top guys at Bear and said: "Either a deal gets done that saves Bear and calms the financial system by the end of this weekend, or we will find some reason to put you in jail." And I think one of the things that every officer of a public company is very sensitive to, post-Enron, is jail. There has been a criminalization of failure.

and

If you really look at what the Treasury and/or the Fed was doing, they know that they have to protect the financial system from grinding to a halt, but they don’t want to create a moral hazard as a result of people thinking they’re going to get bailed out no matter what. So yes, there was a bailout of the counterparties, but they needed to take Bear out and shoot it in front of everybody. So they took it out, at a 2-dollar offer, all the senior management is gone, and that’s the financial equivalent of taking the shareholders out and shooting them.
#47 ::: Jon Meltzer ::: (view all by) ::: April 07, 2008, 08:54 AM:

Most of the comments on the Glickman article are World of Warcraft spam. The next bubble, I guess.

#48 ::: Patrick Nielsen Hayden ::: (view all by) ::: April 07, 2008, 08:58 AM:

Except that, hasn't it now been increased to a $10-per-share offer? At least, last I heard.

I do recognize that sometimes it's more important to keep the world turning than to make sure everyone is perfectly punished for their failings. I do wish that this logic would occasionally occur to those who have conniptions over, for instance, the possibility of some poor person getting a smidgen of a handout to which they weren't perfectly entitled. But it doesn't.

#49 ::: heresiarch ::: (view all by) ::: April 07, 2008, 08:59 AM:

albatross @ 22: "The great downside of free market ideas isn't their failures (though there certainly are some of those), it's their usefulness to justify socialism for the rich, which has nothing at all to do with free markets. Get people arguing about capitalism and freedom when they're think they're talking about Hank Rearden, and then slip in the subsidies and protective tarriffs for Jim Taggart."

Free-market capitalism is, like pure anarchy, a logical impossibility to sustain. People, and markets, are self-organizing systems--some sort of order will emerge. The only question is what sort of order? I find that advocates of free-market capitalism fall into one of two categories: on one side are those who dislike the emergent complexity of evolutionary systems, preferring to fantasize about the elegant mathmatical purity of a supply curve and a demand curve intertwining, minus the messy complications of human innovation.* On the other side are those who get that free markets inevitably develop into complex systems, are really just trying to prevent markets from developing beyond the most primitive form of organization: rule by the strongest.** Much like anarchists who stockpile small arms, their version of "fair play" is skewed to their strengths.

*I call these the Auditors. Milton Friedman is the Auditor-General.

**I call them the Aristocrats.

Patrick Nielsen Hayden @ 39: "My own inclination these days is to suspect that the more dire view of capitalism is correct after all--that, absent some kind of countervailing force, international capital really does become an out-of-control Vingean AI inimical to human liberty."

Given the caveat "absent some kind of countervailing force," I'd agree with you. Capitalism, like any other great power source, works best when harnessed and closely monitored, not when exploding across your backyard. I'm happy to harness its power to generate wealth and progress for the human race; I'm less happy to enslave myself to its every whim--no more than I would be to do so for the internal combustion engine. It is a tool; tools must be used wisely.

(I'd also make the argument that capitalism is better for itself when harnessed. Left to its own devices, it tends to burn itself out in an orgy of destruction.)

#50 ::: Patrick Nielsen Hayden ::: (view all by) ::: April 07, 2008, 09:01 AM:

Not just World of Warcraft spam, but spam hawking WoW gold farmed by underpaid Third Worlders, as depicted in Cory Doctorow's "Anda's Game." Cory still gets people telling him what a brilliant invention that was, and who don't believe him when he says he didn't invent it.

#51 ::: Greg London ::: (view all by) ::: April 07, 2008, 09:08 AM:

Peter@46: "Either a deal gets done that saves Bear and calms the financial system by the end of this weekend, or we will find some reason to put you in jail."

Too bad this isn't the norm.

#52 ::: Dave Bell ::: (view all by) ::: April 07, 2008, 09:31 AM:

Peter@46: "Either a deal gets done that saves Bear and calms the financial system by the end of this weekend, or we will find some reason to put you in jail."

Plenty of skyscrapers.

No easy-to-open windows?

#53 ::: Peter Erwin ::: (view all by) ::: April 07, 2008, 09:33 AM:

Patrick @ 48:

Yes, I think the offer has been upped to $10/share. The "Interview with a Hedge Fund Manager" article I linked to actually mentions that change; it's not clear how much that weakens the "taking the shareholders out and shooting them" analogy (though apparently Bear Stearns stock used to trade up around $170/share, so even $10/share is still a relative pittance).

I do wish that this logic would occasionally occur to those who have conniptions over, for instance, the possibility of some poor person getting a smidgen of a handout to which they weren't perfectly entitled. But it doesn't.

Agreed. I sometimes think that this attitude is partly (though only partly) a holdover of the old Puritan mentality: if you're poor, it's somehow your fault, and it's God's will that you suffer the consequences of your failings.

#54 ::: don delny ::: (view all by) ::: April 07, 2008, 10:03 AM:

Speaking of adjustments to our captital-ist system AND being a tester, do check out today's patch notes for the World application.

Yes, this really is on topic.

Mostly.

#55 ::: David Harmon ::: (view all by) ::: April 07, 2008, 10:28 AM:

Patrick: some people conclude that the formation of oligarchic elites within capitalistic societies ... is an emergent result of capitalistic first principles.

It's not? Basic positive feedback!

#56 ::: mythago ::: (view all by) ::: April 07, 2008, 10:39 AM:

Peter, interesting link, but Hedge Fund Manager seems to reiterate the party line: okay, grumble, it is sort of a bailout but it doesn't count because Bear Stearns stock is now dirt-cheap, plus the whole system would have exploded.

(When that kind of system failure happens to consumers we call it "market correction" and go on reading our Wall Street Journal.)

Also, his quote about jail is really misplaced. The Enron guys didn't go to jail because they made bad investments; they went to jail because they committed crimes. HFM, being a Wall Street guy, displays the expected attitude about regulations (Sarbanes Oxley = Tool of Satan), and his exaggerated response is an enlightening preview as to exactly why we aren't going to get any better regulation anytime soon.

#57 ::: Ronit ::: (view all by) ::: April 07, 2008, 10:45 AM:

Peter @ 46 quotes "Interview From a Hedge Fund Manager", which contains this disturbing passage.

And I think one of the things that every officer of a public company is very sensitive to, post-Enron, is jail. There has been a criminalization of failure.

My understanding was that Enron was a criminalization of y'know, crime.

#58 ::: Randolph Fritz ::: (view all by) ::: April 07, 2008, 11:15 AM:

Patrick, #36: I've worked for a firm that designed LCD panel factories in China--huge buildings--, so I'm very well aware that China has become a major industrial nation. (We had a drawing up that showed 10 747s on the floor of one of those factories.) There's a huge revolution in manufacturing techniques, however, and it seems likely that, not in this generation or the next, but perhaps in three or four, much production is going to be local. And possibly very large products like transportation equipment or very difficult products like LCD panels will still be made by industrial techniques, but there seems every reason to believe there is going to be less industrial production as a percentage of overall production, rather than more, possibly much less.

#59 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: April 07, 2008, 11:17 AM:

unleash the throbbing engines of capitalism.

Yeah, it is a form of pron, isn't it? Some sort of sexual obsession on the part of the capitalists. If they'd only use a condom, we wouldn't all be getting social diseases when they screw us.

#60 ::: Randolph Fritz ::: (view all by) ::: April 07, 2008, 11:26 AM:

Tina, #33: Kuttner's Everything for Sale is a good place to start, though a bit dated.

#61 ::: Graydon ::: (view all by) ::: April 07, 2008, 11:32 AM:

With a billion dollars, anyone you can't bribe -- however decorously or indirectly, often by letting them in on the scam -- you can have killed.

This will inevitably and systemically produce an oligarchy.

Any system you want to have in the hopes of not doing that, you have to create so it doesn't matter who is bribed or killed. This is very tough. (Possible in principle, but very tough to implement against opposition.)

Is the economy a means of ensuring the general prosperity, or is it a means of protecting and enhancing existing wealth?

The latter position has the advantage of being very simple, and scaling very well when relying on simple, basic primate social mechanisms.

The former position has the advantage of producing orders of magnitude greater absolute wealth, and such a system can, under competent leadership, stomp an oligarchical system. The trick is keeping it despite human social hardwiring for hierarchy.

(Hierarchy being absolutely required to co-operate in a group of any size, of course we're hard wired for it.)

#62 ::: P J Evans ::: (view all by) ::: April 07, 2008, 11:36 AM:

I heard that one 'economist' was talking yesterday morning about manufacturing moving to other countries, suggesting that the workers who lose their jobs should move to one of those countries where the manufacturing jobs went and get a job thre. No apparent recognitions of the difficulties involved. Implied message: 'Of course everyone can afford to move halfway across the world, to a place where the local language is different and they stand out among the locals as outsiders, and just get a job doing whatever they did before.'

#63 ::: albatross ::: (view all by) ::: April 07, 2008, 11:55 AM:

Graydon #61:

ISTM that this is an underlying source of instability and tendency toward aristocracy of most economic/social systems.

a. If we have huge imbalances of wealth, which happen in free market economies, then we get some people with unbelievable amounts of money. If you've got the wealth of a transcontinental railroad in 1890, it's *hard* for that not to become corrupting; you've got so much money that you can buy anyone you want, and simultaneously, any regulators, legislators, judges, etc., with anything you want may try to demand some of that money to get it.

b. When we have government agencies with tremendous power and money to spend, again, we get a source of corruption. It's often a different kind of corruption, but look at how much money is available from the US government in terms of grants, Homeland Security funds, and defense funds. And look how that skews the marketplace, what is researched and taught in universities, etc.

And once we have people with great power in either sphere, human nature leads them to *use* that power. Eliot Spitzer was a bane to Wall Street, but he wasn't a nice guy.

#64 ::: Seth Gordon ::: (view all by) ::: April 07, 2008, 01:07 PM:

P J Evans @ 62: ...and of course, if, say, thousands of unemployed American steelworkers applied for work at Japanese steel mills, the Japanese immigration authorities would be unlikely to welcome them with open arms.

Isn't it great how the modern system of "free trade" lets capital flutter like Tinkerbell from one country to another, while labor is stuck holding the bag?

#65 ::: pat greene ::: (view all by) ::: April 07, 2008, 01:43 PM:

PJ Evans at @62, that was my big problem with NAFTA a few years ago, when people stated that the losses in things like textile mill production would be made up by increased production in other parts of the economy, completely ignoring the fact that many of those increases would occur geographically nowhere near the textile mills workers who were being made redundant. No one seemed to be addressing the social costs involved to persons and communities from industrial closings.

#66 ::: don delny ::: (view all by) ::: April 07, 2008, 01:49 PM:

The current housing crisis is a pretty good example of how unregulated free markets create crises: it was in large part due to simple interactions of supply and demand forces.

Cheap credit led to a moderate oversupply of buyers, so the sellers sold their houses at a moderate profit. Unlike other commodities that get used up, lose value, or are hard to sell, almost every single one of those sellers then turned buyer, who were willing to pay a slight premium compared to previous years sales, since they had a tidy profit, and access more cheap credit, partly based on the increased value of the asset they were buying.

So far, not much monkey business, and a fairly linear system. However, as you iterate this scenario, you notice that housing prices continue to inflate in a way that isn't connected to the other supply-demand cycles in the economy. Then it became obvious that the only way to stay in the game (where winning = getting to live where you want) was to keep playing, and keep making bigger gambles. People worried that they couldn't afford to live in SF, or the Valley, or NYC, so they were willing to take bigger risks. "Gee, I think I can stretch to afford this."

If the mortgage industry had toed the line, and stuck with 30% down, and 30 or 15 year loans, then housing prices would have hit a ceiling much sooner, and the differential would have been small enough that most gamblers homeowners wouldn't be automatically underwater.* I'm guessing the reason why they didn't was they were caught in their own supply-demand cycle, and the ridiculously low rates being set by the Fed weren't giving the banks the return they wanted? I recall a 3.75% ARM offer from the height of the mania. Can you even make money on that without a secondary market trading mortgages like poker chips?

Anyway I think the whole thing was doomed to go nonlinear once you had those two (mostly) linear supply-demand systems interacting. Could one of you math minded types confirm that this is so? (Bruce, Greg, Abi?)



*e.g.: if you bought a 100k house, with 30k down, and the market tops out at 120k, you can "afford" to drop the price on your house to 90k in order to move somewhere else for a better job. Yes, you lost 10k, but you don't have to pony up cash you don't have in order to move. If you placed a bet on buying a 200k house, with 20k down, and you can only sell for 175k, you are hosed. Part of it is the law of large numbers thing: a 15% loss on a very expensive house is a huge amount of dollars in absolute terms.

#67 ::: Nix ::: (view all by) ::: April 07, 2008, 01:50 PM:

Lightning @#25, you said 'a guy in a US$1.5e6 house'. That should be 'a stock-market kiter who got out of his company just before a prosecution would have been initiated, who is a past master at the use of the courts for delay and obfuscation'.

Small wonder he's managed to tie up the courts over the provenance of his mortgage. That's the only thing he's any good at!

#68 ::: guthrie ::: (view all by) ::: April 07, 2008, 02:05 PM:

Shan #35- the Economist is pretty good when it comes simply to news. It just has a tendency to be a cheerleader for free market capitalism (whatever that is) at every opportunity. Or rather, its unexamined world view is that more of its kind of free market capitalism would be great, and this gets in the way of some perfectly good stories and articles on all sorts of interesting subjects.

#69 ::: guthrie ::: (view all by) ::: April 07, 2008, 02:10 PM:

Albatross #63- which is why my general political outlook can be summed up in something along the lines of "SPlit up the power". Nobody should be able to gather so much power to themselves. Power has to be shared, and vulnerable. If the only way to do this is tax the multi-millionaires heavily and have regular nationwide plebiscites for the politicians and suchlike, then so be it. Of course the newspapers won't have quite such juicy scandals, but it will help prevent certain small sections of society taking the rest of us for rides every few years.

#70 ::: Neil in Chicago ::: (view all by) ::: April 07, 2008, 02:13 PM:

I submit a neologism of my own, which I was just about to submit to another list entirely: “cartoon economics”, analogous to cartoon physics.

(Responding to a person who insists, absolutely and completely, that in the "California energy crisis" of a couple of years ago, there was zero chicanery, manipulation, or dishonesty; only the pure workings of market forces . . . )

#71 ::: Neil in Chicago ::: (view all by) ::: April 07, 2008, 02:20 PM:

heresiarch @ 49

You are mis-applying the term "anarchy", using the propagandistic-fnord version.

Anarchy is exactly that self-organized order people create when they aren't under external pressures (political, brute-forceful, or psychologically-conditioned). "No boss" does not mean "no order" -- only the bosses would have you think otherwise.

The answer to the question "what sort of order?" is "many".

#72 ::: Avram ::: (view all by) ::: April 07, 2008, 03:23 PM:

Martyn44 #40: Adam Smith is the lauded patron saint of these people. Among the many pithy comments he made was something along the lines of 'wheresoever are two or three suppliers gathered together, they will conspire to defraud the customer.'

The exact wording is:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.


And he wasn't in favor of it. Though I've read some arguments that Smith was describing the actions of 18th century guilds, and that this quote is better interpreted as a criticism of modern labor unions than of capitalist bosses.

Looking at it in context, I can see some support for either reading. I think it's a mistake to apply 20th-century notions of the traditional roles of labor and management to a work written in the 18th century.

#73 ::: Jeremy Lassen ::: (view all by) ::: April 07, 2008, 03:26 PM:

As usual, your insights are dead on, and your rhetoric and tone are clear and concise. Thanks for the link to the article.

I wish I could be as clear headed, and clear tonged when I post about stuff like this. I usually end up peppering it with explicatives and the like, and sounding like a madman.

#74 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: April 07, 2008, 03:39 PM:

I have an occasional conversation with my friend the economics professor about the level of mathematical sophistication of economists in general (he's quite sophisticated for an economist). From what I've seen, few economists really understand feedback in linear systems, and there are very few who even realize the systems they talk about* are analytic nonlinear systems, or that there's an assortment of mathematical formalisms for describing these systems, and tools for analyzing their operation and predicting their behavior. And that completely ignores the fact that any analytic description will hold only as long as new structures and behavior haven't self-organized and emerged onto the playing field.

ITSM that much of what economists talk about is based on folklore and folk economics**, with a thin candy shell of mathematical rationalization. But by pretending to mathematical rigor they justify 6 impossible and contradictory things before breakfast to a public which hasn't the training to see behind the curtain.

Frankly, most of what's been said about the economy in the last few months reminds me of the patter that physicians used to use before the advent of the germ theory, asepsis, and mechanical theories of physiology: "Bleed the patient sufficiently and his humors will realign themselves."

* As opposed to the systems they see in the real world; I'm not at all convinced that their models bear much relationship to the real thing.

** Using the term in the same sense as "folk psychology": it may be a useful description for a limited range of application, but maybe not.

#75 ::: "Charles Dodgson" ::: (view all by) ::: April 07, 2008, 03:54 PM:

On Bear Stearns, a more relevant price comparison than the $170 peak is that the stock was still trading at about $70 a week before the forced merger with JPMorgan/Chase. The current $10/share offer is more than $2, but it's still not a lot.

The deal was in part a bail-out, not of Bear's stockholders, but of Bear's counterparties in its various option deals. (In addition to arranging the buy-out, the Fed seems to have put itself on the hook to keep up Bear's end of deals that constituted a lot of Bear's remaining portfolio.) But even at $10 a share, the shareholders got skinned. And most employees were shareholders --- including a lot of rank-and-file who weren't at all rich, at least by Manhattan standards. Like Enron before it, Bear encouraged employees to keep most of their retirement funds in the company's own stock; those guys are now out almost all of their nest egg, and quite likely a job on top of that.

#76 ::: "Charles Dodgson" ::: (view all by) ::: April 07, 2008, 04:06 PM:

Bruce, FWIW, I've got a couple of posts up on what look to me like naive mathematical modeling in finance over the last few years, and the consequences. For example, it's a lot easier to justify the AAA ratings that rating agencies (Standard and Poor's, etc.) were giving to pools of subprime mortgage payments if you assume that the default of each loan is an independent event, and don't bother to think about whether anything could make a lot of them fail all at once. A rise in interest rates, for example, on adjustable-rate mortgages that were issued at times of historically low rates...

#77 ::: Rozasharn ::: (view all by) ::: April 07, 2008, 04:35 PM:

Kate @33: I highly recommend The New Industrial State, by John Kenneth Galbraith. Brilliant economist, notable for observing the world as it actually works rather than beginning from ideology.

The New Industrial State was where he laid out the ways in which the American economy is in fact planned and regulated and not at all like Adam Smith's 'free markets'.

He writes in dry, formal academic prose, so it can be hard to adjust to at first. But there are some wonderful dry zingers as he skewers the accepted propaganda.

#78 ::: Earl Cooley III ::: (view all by) ::: April 07, 2008, 04:55 PM:

Shan@35: I'm not saying this describes you, but

That's a Flamer Bingo card for the big list.

Patrick Nielsen Hayden@17: monsters like Daniel Patrick Moynihan

I did a little light googling on DPM and discovered that fellow mongster Ralph Nader got his start in politics by being one of his staffers.

#79 ::: Lee ::: (view all by) ::: April 07, 2008, 04:56 PM:

Peter, #53: Yes, that's a very large part of it. And the corollary is that if you're rich, then it's God's will that you remain rich because you deserve it.

Mythago & Ronit, #56-57: I have a dark suspicion that the chain of reasoning here runs as follows:

1) The Enron guys were doing shady stuff and got caught.

2) A lot of other people are doing similar shady stuff, and could get caught at any time.

3) Ohshit, that could happen to ME!

4) So in order to keep people from thinking I'm a criminal if I get caught, it's important to reframe the Enron thing.

5) Okay, let's call Enron "a criminalization of failure". That way if I get caught, it doesn't mean I did something wrong, just that something happened to me that could have happened to anyone in the market.

IOW, this is not an over-reaction, but a deliberate attempt at obfuscation/redefinition in anticipation of potential future legal problems.

Bruce, #59: I'm glad I'm not the only one who caught that.

P.J., #62: AKA "Let them eat cake!"

Neil, #71: I think that's why heresiarch used the term "pure anarchy". This is a philosophical ideal, like a mathematical point or line; in the real world, anarchy inevitably reorganizes to some level of order, precisely because you can't have a social system without it. The most common type of reorganization is well-illustrated in The Lord of the Flies.

Charles, #75: This suggests (to me at least) that pressure from a company on its employees to hold most of their retirement money in company stock should be taken as a severe warning sign. The more pressure, the closer the company is to going glub.

#80 ::: P J Evans ::: (view all by) ::: April 07, 2008, 05:44 PM:

75, 79

This is why, even though I work for a stable, well-run company, one that (probably) won't be disappearing in the next dozen or so years, I have most of the 401K not in company stock. (The company matches that part of it, though, so I end up with a bigger proportion of stock every year. It's at least asymptotic.)

#81 ::: Randolph Fritz ::: (view all by) ::: April 07, 2008, 07:12 PM:

PJ Evans, #62: I wonder what the person you are citing thinks of Mexican immigrants?

#82 ::: Jon Meltzer ::: (view all by) ::: April 07, 2008, 07:41 PM:

#79: A less "oppressive" but still hierarchical (those who can manipulate the system, do) anarchical society is in LeGuin's Dispossessed.

#83 ::: Mycroft W ::: (view all by) ::: April 07, 2008, 07:45 PM:

As the old man said, "everyone's guilty of something". Tell me you can support a QA-like investigation into your business or personal affairs and not find a hole. Now raise it to the point where entire life savings' worth of money is being involved, and mistakes, even innocent ones, become fraud.

Enron, sure, they were deliberately falsifying information - sorry, rephrasing it so that it looked better on the stockholders' glossy that doesn't have all the information. Tell me that doesn't happen to one extent or another with a double-digit percentage of public companies. And remember, it was the Treasury Department that took down Capone.

"Do it our way, or we'll find something wrong", from them, probably means exactly that.

#84 ::: Lizzy L ::: (view all by) ::: April 07, 2008, 07:56 PM:

Remember Paul O'Neill? This Paul O'Neill?

Paul H. O'Neill was sworn in as the 72nd Secretary of the Treasury on January 20, 2001.

O'Neill was chairman and CEO of Alcoa from 1987 to 1999, and retired as chairman at the end of 2000. Prior to joining Alcoa, O'Neill was president of International Paper Company from 1985 to 1987, where he was vice president from 1977 to 1985.

O'Neill's unique experience transforming an old economy firm into a new economy success has been chronicled as a study by the Harvard Business School, and studied in business schools across the nation. O'Neill has gained valuable insights into international finance and the global economy as head of a major corporation with 140, 000 employees spread across 36 nations.

O'Neill's mastery of federal budget details and process stems from his tenure at the US Office of Management and Budget. He joined OMB in 1967, and was deputy director of OMB from 1974 to 1977. He began his public service as a computer systems analyst with the US Veterans Administration, where he served from 1961 to 1966.

He received a bachelor's degree in Economics from Fresno State College in California, and a master's degree in Public Administration from Indiana University. Mr. O'Neill was born in St. Louis, Missouri, on December 4, 1935.

He was fired in 2003 for disagreeing with Mr. Bush about the usefulness to the economy of tax cuts. He wrote a book, called "The Price of Loyalty," which I have not read. In it he discussed Bush's lack of understanding of economic issues, as well as exposing Mr. Bush's desire to invade Iraq eight months before 9/11.

After he was fired, he was asked if he feared some kind of (presumably political) retaliation for having told the truth. His response (I paraphrase) was: "What can they do to me? I'm old and I'm rich."

What does this have to do with capitalism, you ask?

Ah, you know...

It's a good story.

#85 ::: Iorwerth Thomas ::: (view all by) ::: April 07, 2008, 07:59 PM:

#82: But still better than the neighbouring planet, even though they're both (compromised) utopias...

#86 ::: Fred Moulton ::: (view all by) ::: April 07, 2008, 08:33 PM:

There is a longer version of the Smith quote:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is im-possible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and jus-tice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

http://www.adamsmith.org/smith/quotes.htm

And you can find the entire text of the book online. The questions of the nuances of what Smith meant and if he was correct or not are beyond the scope of this message.

#87 ::: Bruce Baugh ::: (view all by) ::: April 07, 2008, 08:39 PM:

Mycroft, Enron's executives got into a routine of transactions they knew couldn't work. Not just that were risky, but they knew in advance would not generate the necessary revenue. This is not a thing every business does. They also got into a variety of complicated speculative ventures they weren't qualified to evaluate the odds for, and when presented with knowledgeable evaluations, they set about suppressing both the information and the people involved. Kurt Eichenwald's Conspircy of Fools is one of several good books and documentaries about this. Insofar as anything major they did is routine, it's because people like their bosses forced changes in the regulatory and legal environment to make it so; nothing in the nature of their business required it or even benefitted very long from it.

#88 ::: Avram ::: (view all by) ::: April 07, 2008, 09:58 PM:

Fred #86 -- Yes, I know you can find the whole book online, because I linked to an online copy of the whole book. Specifically, to the chapter that contains the passage in question And I talked about "looking at in in context", which ought to imply to the careful reader that I knew the passage alone was inadequate.

Is there some weird Internet disease that causes people to adopt a corrective tone without actually, y'know, correcting?

#89 ::: Michael Weholt ::: (view all by) ::: April 07, 2008, 10:19 PM:

#84 Lizzy L: [Paul H. O'Neill] was fired in 2003 for disagreeing with Mr. Bush about the usefulness to the economy of tax cuts. He wrote a book, called "The Price of Loyalty," which I have not read.

I've read it. Read it at the time. It's quite good, and will be included in the many, many, many contemporaneous histories of the Bush administration that will constitute history's final damnation of this man (Bush) to the hell of America's Worst President Ever.

That would be "hell" in any reasonable person's mind, of course. As we can see from Feith's interview on "60 Minutes" last night, there's nothing in the Known Universe that could make these *ssh*l*s grasp what they've done to this country.

And on the subject of Capitalism, I am quite a committed Capitalist. Part of what I know about it, I've learned from Capitalists themselves. For example the right-wing, libertarian lawyer who listens to Rush Limbaugh and expresses contempt for anyone or anything (who) (that) strays from the guiding American principles of Traditional Values and Liberty... you know, the guy who smokes in his office even though Building Management has told him it's against the law, the same lawyer who smokes dope in his office after hours even though this strikes the rest of us as something he shouldn't even *need* to be told he oughtn't do, the same Committed Capitalist guy who uses the Women's Restroom after hours because it's closer even though this is another of those things he ought to have the grace to not do in a public building where the business of Capitalism is conducted.

He hates faggots and feminists because they don't get what America is all about.

Capitalism: Great idea. Hard to do.

#90 ::: mythago ::: (view all by) ::: April 07, 2008, 11:22 PM:

Mycroft, not following you here. Are you arguing that everybody does it, so it's OK? Or that we shouldn't expect much out of people who move large sums of money around, particularly if they are entrusted and empowered to do so?

Your argument is like saying that because a layperson probably doesn't have all their legal affairs (will, power of attorney, etc.) 100% in order, it's OK for me as a licensed attorney to commit malpractice.

#91 ::: Randolph Fritz ::: (view all by) ::: April 08, 2008, 01:16 AM:

"My own inclination these days is to suspect that the more dire view of capitalism is correct after all--that, absent some kind of countervailing force, international capital really does become an out-of-control Vingean AI inimical to human liberty."

What this, I think, is an indicator of a need for a world economic regulatory system, which implies a world government of some power.

#92 ::: albatross ::: (view all by) ::: April 08, 2008, 01:50 AM:

Randolph #91: ...which will then become an out-of-control Vingean AI inimical to human freedom....

#93 ::: Terry Karney ::: (view all by) ::: April 08, 2008, 01:56 AM:

re McCain: I'd like to see someone (say Obama) hammer him on how he'd make solve this mess, in such a way as to not lead to a reprise of the S&L meltdown; with reminders that, in light of his experience in it he ought to have a good understanding of what went wrong, and so some ideas on how to prevent a third instantiation.

I forget where I read it, but both Holland and England saw some interesting things happening when they fell from dominance.

1: The forms of energy they had mastered (and used to make things happen) were supplanted (wind for coal, coal for oil).

2: In the course of things they had switched from making/moving things in favor of moving money.

Oil is going. If nothing else the pressures of price will (finally) convince people to find ways to make solar/wind/geothermal/somthing, efficient enough to topple it from it's present position of dominance.

We've (as a nation) been using Oil to prop our economy. The value of the dollar has been related to oil for more than fifty years, so people were working to get dollars to spend on oil.

That's gonna change.

We aren't making things. Sooner, or later, people will decide they can back the deals themselves, and cut us out as the middlemen. How then will we make our money?

#94 ::: heresiarch ::: (view all by) ::: April 08, 2008, 02:05 AM:

Neil in Chicago @ 71: "Anarchy is exactly that self-organized order people create when they aren't under external pressures (political, brute-forceful, or psychologically-conditioned). "No boss" does not mean "no order" -- only the bosses would have you think otherwise."

I suspect this is a terminological dispute, so I'll just lay it right out. The definition I'm using for anarchy goes something like "Anarchy is the absence of any form of political authority." In my reading, "political authority" includes any sort of systematic, agreed-upon method of resolving disputes, be it trial by rock-paper-scissors, a jury of one's peers or asking Bob. Contrary to your assertion, it doesn't imply the existence of bosses--political systems can be perfectly non-hierarchical. Now, under that definition, "that self-organized order people create when they aren't under external pressures" is not anarchy. It's just an especially egalitarian political system. Real anarchy is only possible in a state of complete cooperation--the instant a dispute arises, a method of resolving that dispute is necessary, and anarchy collapses into some form of governance or another.

#95 ::: albatross ::: (view all by) ::: April 08, 2008, 02:18 AM:

Terry #93: I think at some point (maybe current prices, if sustained) we can economically switch over to converting coal into an efficient liquid fuel for cars, and we can certainly get power from coal. This is pretty much pessimal[1] in terms of CO2 emissions, but does resolve the issue of buying oil from potentially hostile countries, dependency on foreign energy supplies, etc.

The really hard problem is getting away from CO2 emitting energy sources. For stuff that's available now, I think nuclear plants are the only real choice[2], though coal+sequestration or some kind of (much more efficient and cheap than current technology) solar power would be other plausible options[3].

Of course, to the extent we're going through some kind of massive settling of accounts in the US in the next ten years, we sure as hell won't be doing anything about CO2 emissions. And to the extent that China's government is staying in power by being associated with a very quickly rising economy and standard of living, they're probably not going to be too interested in disrupting their economic growth for that, either. I have very little faith that we're going to stop running the open-ended experiment on our atmosphere to see how much CO2 we can dump in it before something irreversible and bad happens[4].

[1] If this isn't a word, it should be.

[2] Most of the commonly-proposed clean energy sources are at best a sideshow. You aren't going to make a noticeable impact on our CO2 emissions by putting up windmills or growing corn (fertilized with oil, more or less) to convert into ethanol.

[3] I believe the current solar collectors take quite a while to pay back the amount of energy used in their (also rather dirty) manufacture, and are inefficient enough to be pretty hard to scale up to likely energy requirements of the whole US.

[4] I'm thinking irreversible and bad like Mother of Storms bad or global mass die off of sea life bad, not small rises in average temperature. IMO, the small temperature changes aren't even remotely the thing to worry about, though they're potentially damaging enough.

#96 ::: Shan ::: (view all by) ::: April 08, 2008, 02:20 AM:

Where do I "get off"?

I was simply pointing out that what begins as a strong post degenerates into name-calling in the last paragraph. Worse, confusing name-calling that detracts from your main argument.

Pointing out characteristics of the current crisis w.r.t. a historical perspective is useful. Rants about capitalism "not being about free markets" -- which immediately beg the question of what you mean by "capitalism" and "market" -- less useful.

Me trying to make sense of those rantings, I freely admit, possibly not useful at all.

#97 ::: Linkmeister ::: (view all by) ::: April 08, 2008, 02:30 AM:

One of the troubles with ethanol, particularly as subsidized by the farm bill, is that farmers take their land out of other commodities in order to grow corn to be processed into ethanol. This means that the other commodities grow scarcer, which translates into food shortages and higher prices. There are several articles online already about this, and Paul Krugman mentions it in his column today.

Ethanol ain't a long-term solution. I dunno what is, but it ain't that.

#98 ::: Shan ::: (view all by) ::: April 08, 2008, 02:41 AM:

Back to the topic, I thought this was an ok primer (from today's Grauniad).

#99 ::: abi ::: (view all by) ::: April 08, 2008, 03:40 AM:

Shan @96:

I was simply pointing out that what begins as a strong post degenerates into name-calling in the last paragraph.

You were not "simply" pointing out anything. Simple pointing out doesn't require phrases like ...if you ignore the silly little ad-hom morons'n'megaphones stuff that creeps in from time to time and a disease of the mind that is rife in Bloggerland.

What you were doing was, ironically, best described as confusing name-calling that detracts from your main argument.

I think you have some interesting things to say here. Could you say them without quite so much vinegar?

#100 ::: Jeff Davis ::: (view all by) ::: April 08, 2008, 04:22 AM:

heresiarch @ 94: I suspect this is a terminological dispute...

Correct. Most anarchists (myself included) would agree that what you're calling "pure anarchy" is neither realistic nor desirable -- societies do need mechanisms for dispute resolution. Some people (David Graeber, for example) would even say that contemporary anarchism is all about developing non-oppressive forms of dispute resolution.

In other words, to quote Proudhon, "Anarchy is order."

#101 ::: Peter Erwin ::: (view all by) ::: April 08, 2008, 05:45 AM:

mythago @ 56:

Peter, interesting link, but Hedge Fund Manager seems to reiterate the party line: okay, grumble, it is sort of a bailout but it doesn't count because Bear Stearns stock is now dirt-cheap, plus the whole system would have exploded.

One of the things that's kind of useful about that article is that it's pretty clear you are getting something like a party line -- that is, you know this is a self-interested Wall Street person who's talking, rather than, say, a nominally disinterested journalist who's credulously passing on what his/her Wall Street contacts say. And it's also interesting as a (limited) window into how people like the HFM perceive things.

Part of the "Bear Stearns is being taken out and shot" argument that the HFM makes is that, in addition to low value of the stock buyout wiping out much of management's assets (he/she claimed that BS was unusual in the degree to which senior management owned stock in the company), most of the BS management will probably be fired by JP Morgan:

From time to time you have to kill a management team to encourage the others. So now Citibank and Merrill Lynch realize that it’s unlikely that they’ll be allowed to default. But at the same time the people who are actually taking risk, the senior managers at Merrill Lynch, know if a blow-up happens, regardless of the fact that the institutions may be saved, their shareholdings will be worth zero, and their job tenure will be—done.



It's a surprisingly entertaining article (well, for someone like me who's only occasionally interested in technical economic details); there's a nifty discussion of Japanese "zombie banks", for example.

(And there's a prior "interview with a Hedge Fund Manager" done in January, which has some interesting comments on things like the collective failure of "black box trading", and how the various investment banks and funds got entangled in the sub-prime mortgage mess.)

#102 ::: Dave Bell ::: (view all by) ::: April 08, 2008, 07:02 AM:

Banking and finance are a sort of business where single, relatively junior, idiots have taken down whole companies.

So there's some point in having some of the pension fund invested in the company, and in more immediate ties such as stock options.

At the same time, this is an industry which is based on spreading risk. The key idea is that people don't put all their eggs in opne basket. So a pension fund that puts such a high proportion of its funds in one company is, arguably, not being properly run.

This seems a strong indicator of what's wrong. Instead of spreading risk, and splitting it, so that the people who provide the money have a limited liability, we see them running high-risk, high-payoff, deals in ways which maximise the risk to the individual, at the same time as they maximise the fees paid to the people running the operation.

It would be nice if some vengeful ex-bankers were to sue the pants of the pension fund for incompetent management. But perhaps they had all the details to see what the risk was, and were just happily counting the income.

#103 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: April 08, 2008, 07:22 AM:

Peter Erwin @ 101

Just 'cause I'm a cynical old bear who really doesn't believe in show trials with show sentences, did that Hedge Fund Manager happen to mention the possibility that some of Bear-Sterns senior executives may be take out and shot with extremely lucrative separation packages?

#104 ::: Ingvar M ::: (view all by) ::: April 08, 2008, 08:34 AM:

P J Evans @ #62

Anyone who says "it's trivial to move to another country" has, probably, never done it. I've done it once (so far) and whiel it wasn't a super-horrible hassle (thanks to intra-EU work migration laws), I have also been a party to another inetrnational move (my wife) and that was a bit more of a hassle, since there were visas and what-have-you to be applied for, processed, defended and all sorts of intrusive documentation needed.

#105 ::: Greg London ::: (view all by) ::: April 08, 2008, 08:58 AM:

Bruce@103: the possibility that some of Bear-Sterns senior executives may be take out and shot with extremely lucrative separation packages?

My parser is offering two alternatives. One of them utilizing a very strange gun.

;)

#106 ::: Patrick Nielsen Hayden ::: (view all by) ::: April 08, 2008, 09:19 AM:

Shan, #96:

"Where do I 'get off'?

"I was simply pointing out that what begins as a strong post degenerates into name-calling in the last paragraph. Worse, confusing name-calling that detracts from your main argument."

You began, in #35, by accusing me of being someone who "clearly want[s] nothing more than to listen only to people they agree with."

You were called on this. It's not true, and you have no reason to believe it's true. My slighting comment about the Economist doesn't entitle you to make claims like that about me or anyone else.

Your response, in #96, is to try to shift the ground: now you were "simply" deploring my "namecalling." No you weren't. You were trying to slime me based on zero evidence, you got called on it, and now you're trying a little rhetorical sleight-of-hand to make the very plain evidence of your own dishonesty go away.

People who traffic in honest criticism are welcome here. (You don't see me trashing Seth Breidbardt for his remarks in this conversation, although we disagree far more than we agree.) People who behave dishonestly aren't. If you're willing to do this kind of thing to me, you'll be doing it to someone else around here next. You're no longer welcome on this site.

#107 ::: John L ::: (view all by) ::: April 08, 2008, 10:11 AM:

There are news articles out today saying that as many as half of Bear Stearns' employees (about 7000) could be laid off by JP Morgan (confirming earlier speculation in this thread about layoffs), but of course they didn't say if this would be the higher management or the rank and file workers.

#108 ::: Graydon ::: (view all by) ::: April 08, 2008, 10:16 AM:

Linkmeister --

The assumption that ethanol has to come from nice new fresh foodstuffs is dubious at best.

There are sewage-to-oil, sewage-to-methane (and methane-to-methanol), and probably sewage to ethanol projects going merrily along out there. It's all hydrocarbons; the question is how to best get the rest of the energy out of the sewage, of which there is no shortage whatsoever.

There are times where the conservative movement's religious taboo against making anyone else any better off goes from annoying to disgusting, and the "let's cause a food shortage in the name of green fuel" is for me such a moment.

#109 ::: John Mark Ockerbloom ::: (view all by) ::: April 08, 2008, 10:32 AM:

One of the more noticeable forms of the double standards in trade agreements described as "free trade agreements" is the insistence on tighter and tighter controls on "intellectual property" in many recent agreements, particularly those involving the US. This often by the same people who proclaim that insisting on standards for protecting workers and citizens' environment are against the spirit of free trade, while protecting Mickey Mouse and extending the scope of patent monopolies is crucial to it.

Trade agreements can be good things, but when I hear someone reduce their meaning to "free trade" vs. protectionism, I tend to trust them a lot less.

#110 ::: pat greene ::: (view all by) ::: April 08, 2008, 10:50 AM:

Mycroft, it is with great difficulty that I am restraining myself in my answer to you. I am assuming your statements about Enron stem from ignorance, nothing more.

Enron, sure, they were deliberately falsifying information - sorry, rephrasing it so that it looked better on the stockholders' glossy that doesn't have all the information. Tell me that doesn't happen to one extent or another with a double-digit percentage of public companies. And remember, it was the Treasury Department that took down Capone.

No, they were not -- or that was not all that they were doing. They were actively and fraudently taking steps to massively game the system of power production in the West for their own pecuniary advantage. Part of this scheme included inducing rolling blackouts in California *in summer*. There are audiotapes of Enron traders laughing about this.

People can die in blackouts. And these f***ers did not care. This quite aside from the billions they fleeced from consumers in California (on the tapes they laugh about forcing "Grandma Millie" to accept exorbitant power rates). Higher rates disproportionately effect the poor and those on fixed incomes.

There was political fallout, as well: the energy crisis was a major issue in the recall of Gray Davis, which ended up with Arnold Schwarzenneger as governor.

I was one of those California consumers. And I say there is a special circle in hell reserved for these guys.

I would suggest you watch Enron: The Smartest Guys in the Room for an overview.

#111 ::: pat greene ::: (view all by) ::: April 08, 2008, 11:06 AM:

Actually, as far as the purely financial aspects of what they were doing, Bruce Baugh's answer is better than mine. I would only add that it was clearly designed as a shell game, fleecing consumers and stockholders (which included many of their employees, and the employees of the small power companies they bought out) alike.

Enron raises my blood pressure and makes it hard for me to engage in rational discussion, unless it is about the need for regulation of energy markets or the law enforcement issues involved in prosecuting white collar criminals.

#112 ::: albatross ::: (view all by) ::: April 08, 2008, 11:09 AM:

Graydon #108:

Is corn-based ethanol a conservative policy? ISTM that it's at least as popular among Democrats as Republicans, frex. I've seen skeptical articles about it in the press, and those seem to come more commonly from a libertarian or conservative perspective. But the common MSM view (naturally) mirrors the common politicians' lines that say that corn-based ethanol is some important part of energy independence. I expect the journalists mostly say this because they can't do arithmetic, and the politicians because they care more about polling numbers than sensible energy policy.

#113 ::: Keith ::: (view all by) ::: April 08, 2008, 11:20 AM:

Graydon @108: There are times where the conservative movement's religious taboo against making anyone else any better off goes from annoying to disgusting, and the "let's cause a food shortage in the name of green fuel" is for me such a moment.

It's worse than that. It's "let's cause a food shortage and throw some fat subsidies to agribusiness and call it Green."

That way, when it fails in a few years, they can go back to bitching about how Environmentalism is bad for business (except agribusiness) and those silly Green Fuels just don't work like good ol' gasoline. Archer Danials makes some bucks, the public gets suckered into a scam that reinforces oil dependence, ensuring that Exxon makes some bucks, and everyone wins! Except for poor people, environmentalists and alternative energy groups. But it's not as if those are real people anyway.

#114 ::: Graydon ::: (view all by) ::: April 08, 2008, 11:21 AM:

Albatross @ 112 --

Subsidizing agribusiness to starve or displace poor people while making the energy situation worse strikes me as almost the perfect movement conservative policy.

One of the hopes I have for the 'local grown' food movement is that it will allow splitting the agriculture lobby away from the family farm image, which might result in the political will to tell it how great a height it can throw itself off, on to which collection of rusty, spikey, oozing things.

#115 ::: Lizzy L ::: (view all by) ::: April 08, 2008, 12:24 PM:

albatross, I had the same problem with the use of the word "policy" in Graydon's post as you did. But it is clearly current conservative practice to elevate short term greed over long term goals, including the goal of freeing us from oil dependence. "Apres nous le deluge" seems to be the conservative motto. Any suggestion that accumulating inordinate wealth might not be the focus and purpose of human life draws screams of "class warfare!"

In fact, I think conservatives don't have policies these days, if by policy one means supporting political actions designed to oh, help most people in this country live decent lives. They seem to have one policy: maximize profits for us.

There are two long term goals they seem to support: rape the earth, and perpetual war.

#116 ::: Bruce Baugh ::: (view all by) ::: April 08, 2008, 12:26 PM:

Pat Greene: Thanks for the compliment, seriously. When it comes to the California blackouts, and some of their India dealings and such, I really think that Enron executives should have been tried for conspiracy to commit murder. But then I take a pretty hard line on how far corporate protection ought to go when it comes to deaths and great suffering.

#117 ::: Peter Erwin ::: (view all by) ::: April 08, 2008, 12:49 PM:

Bruce Cohen @ 103:

... did that Hedge Fund Manager happen to mention the possibility that some of Bear-Sterns senior executives may be take out and shot with extremely lucrative separation packages?

Heh ;-). No, I don't think so; I don't remember there being any discussion of possible separation packages for senior BS management in that article. (That possiblity did occur to me.)

A little bit of Googling turned up this news report from last November, which mentions that the BS president who was ousted last fall got a "separation agreement" in the form of stock and options worth 23 million dollars.

But that "23 million" was based on the November stock price of $90/share, so it's worth considerably less now (assuming he held onto the stock), and his options are worthless.

#118 ::: Mycroft W ::: (view all by) ::: April 08, 2008, 01:17 PM:

Clearly, as three regular commentators here misunderstood me, I wasn't clear.

I was referring to HFM's comment about it being the Treasury and "criminalization of failure", and mythago 56 "Enron did criminal acts, not just failure", not in any way apologising for what was done.

When you're talking about acts that can cripple lives, and other people's money in the 7-figure range, failure frequently is criminal. And with the myriad of regulations and laws about money, I expect any C*O has done something criminal. I'm not saying they did it deliberately, of course.

Normally that doesn't matter; all of us have done something wrong, probably something wrong enough to criminalize; despite the current climate, we aren't all in jail. But when the Treasury Department needs a lever...

Having said that, I'm not sure that that's a good thing - basically it makes a police state very easy to implement; "do what the nice policeman says, or we'll find a way to put you in jail". But if, for your own massive gain, you do serious short-term things that are guaranteed, or almost guaranteed, to have devastating long-term consequences to many people, I'm not really sure that's "failure" - frankly, I think they succeeded in what they intended to do - but I think it should be criminal. How to do that without making everybody a criminal is an exercise for the reader. If the hedge fund manager wants to stop the "criminalization of failure", what needs to be done is to change what is considered success such that failure (even some values of success) isn't criminal.

All I'm saying is that with the warped personhood required by law of a public corporation, and the massive incentives currently built into senior executive contracts to sacrifice everything - customers, employees, the long-term survival of the company - to the altar of quarterly stock price, if there isn't equally massive threats backing "if you go too far,...", and laws and regulations that make what we don't want to happen illegal, they're going to be immoral. Heck, even with those laws-with-teeth, I expect that a double-digit percentage of companies' executives are doing something "borderline fraudulent" at least.

Mythago, you don't need to convince me of the immorality of current Management Ethos, and of the kinds of people attracted to and successful in it.

Pat, I live in Canada; people die in brownouts in winter here faster than in summer in California (and people in Chicago die in summer faster than in California, because the houses are built to make winter, not summer, in Chicago survivable).

None of that makes what Enron's management did any less criminal, but what they got nailed for was fraud. What Bear Stearns' management was threatened with, by the Treasury department, if the HFM's speculation is correct, was fraud. They probably could have made it stick, too - or at least make it so uncomfortable and expensive to get out from under as to be much worse than "let the Wookiee win".

I bet they could, if they wanted, get it to stick in 10+% of billion-dollar companies; make "do what the nice Treasury man says" more palatable than an investigation in 50+%, if not 80%; and in the case of a billion-dollar company that bollixed up this spectacularly, publicly, and potentially dangerously, probably 100%. That's all I was saying in my first comment. The ethics of anyone's behaviour - even the Treasury department - was out of scope (mostly because it makes me gag).

#119 ::: Zed ::: (view all by) ::: April 08, 2008, 02:01 PM:

And poor Cayne has finally sold his stock for just $61 million. Now he'll never have a proper small South Pacific island.

#120 ::: joann ::: (view all by) ::: April 08, 2008, 02:26 PM:

Mycroft #118:

I don't think Pat Greene was discussing dying from heatstroke in California black/brownouts; but rather was talking about what happens to people wired up to life-support machines when they don't have a functioning backup power supply. (Note: anything marketed as an uninterruptible power supply *will* fail in ways you'd never thought of, to tie into the QA thread.)

#121 ::: Stefan Jones ::: (view all by) ::: April 08, 2008, 02:51 PM:

Grrr. Enron.

Back when the blackouts were still rolling, an libertarian pundit posted an essay on (as I recall) capitalism.com suggesting that people who blamed the problem on collusion and gaming the system probably also believed that demons caused disease. Because the market would punish collusion and gaming and holding back capacity. (The whole essay was posted to a Boing Boing comment at the time, but I can't find it.)

Dickhead.

As noted above, they have tapes of traders gloating about shutting down plants. Executives have copped to it.

They screwed us over and the libertarian fan-boys clucked and gloated and blamed any problems on environmentalists and, maybe, the energy market system having too many regulations.

Dupes. Dickheads.

I wish they'd retire to their bedrooms with a box of kleenex and that special copy of Atlas Shrugged with the racy bits highlighted.

#122 ::: Terry Karney ::: (view all by) ::: April 08, 2008, 03:01 PM:

Mycroft W. Pat, I live in Canada; people die in brownouts in winter here faster than in summer in California (and people in Chicago die in summer faster than in California, because the houses are built to make winter, not summer, in Chicago survivable).

Not to be contentious (honestly), but I've lived in upstate Ohio, and in the Calif. Desert. I'm not sure I believe that. I might accept that they die as quickly, but I know that, even in the event of a blackout, my grandmothers house would have had at least one livable room; even after she converted the coal furnace to electric (she got tired, at 75, of shovelling the coal).

If one has a gas stove, then the oven will keep the kitchen above freezing, and blankets, soup and lots of clothes will help. Get enough people in the house (and keep them fed) and a closed room will heat up.

The reverse is not true. Even with thick walls, we didn't have shade on the house in the desert. The swamp-cooler kept the kitchen/dining area too cold for me, but the outer portions of the house (even with good circulation) were staying at 75-80F. Outside it could get to 125F.

A few hours of that, absent enough water, and you are dead. There's no way to "bundle-up" against it.

joann: I don't know what Pat was talking about. I do know the way the blackouts were structured was such that no place was supposed to get them for more than an hour, the scheduling of them was predicted, and hospitals has time to stock up on the needed fuel to keep the generators going.

The hospitals in which I worked always had, not less, than 90 minutes of power for everything, and had automatic cut-ins for the ORs and ICUs. I don't know if the generating capacity was such that they could have starved part of the place to keep the rest going. Were I designing it, I'd have multiple generators, and only use what I needed. E.g., run all three for ninety minutes, and no one has any problems, or run just one for 4.5 hours.

That way I have redundancy. If I was given a good budget I'd have batteries too, and keep them up from the grid, and only kick in the generators when they were running down.

#123 ::: guthrie ::: (view all by) ::: April 08, 2008, 03:14 PM:

I picked this url up at Eli rabbetts place:

http://bitworking.org/news/289/The-Free-Market-Fairy

Quote:

"It's time we stopped believing in the Free Market Fairy."

I think it is somewhat relevant.

#124 ::: mythago ::: (view all by) ::: April 08, 2008, 03:45 PM:

Mycroft, you're acting as though any noncompliance with, or violation of, any law or regulation is a crime. That's flatly wrong. Almost as wrong is breezily suggesting there are so many laws a body can't help himself but break a few. What logically follows is that fraud, careless risk-taking and breaches of trust are not all that big a deal since they're simply bigger versions of behavior you consider to be okay.

Again analogizing to the law: local court rules require me to two-hole punch certain pleadings filed with the Court. If I fail to do this, I am certainly violating a court regulation. I'm not committing a crime or a moral wrong. Does that mean if I rape a client, bribe a judge or commit malpractice, those are not really any different except in scale from failing to use a two-hole punch? After all, I broke one of the rules that applies to the practice of law, and really aren't plenty of lawyers forgetting to punch pleadings, so what's the biggie?

My parser is offering two alternatives. One of them utilizing a very strange gun.

The Fed is run by GLaDOS? Much is now explained.

#125 ::: P J Evans ::: (view all by) ::: April 08, 2008, 03:53 PM:

terry @ 122

Probably she was talking about non-hospital repirators, which have to pretty much be always-on and which may not have generators available. I wouldn't want to trust one to a UPS. (The UPS isn't really designed for that: it's intended to bridge a few minutes of outage, or to allow an orderly shutdown in case of sudden outages that last longer than a few minutes. But you know that already.)

#126 ::: Mycroft W ::: (view all by) ::: April 08, 2008, 04:10 PM:

In Chicago, people die in summer, because 125F in the desert ~= 90F on Lake Michigan, and instead of houses built for the heat, they're big brick boxes designed to keep out the 3 feet of snow and the -10F also with enough humidity to chill through whatever you bundle up with.

I grant people on life support, but that's the same anywhere. I also grant the lack of water, but that's a bigger problem than lack of power (even if, to an extent, lack of one implies lack of the other).

But as I said, I wasn't saying anything about Enron's morals; I was talking about what they went to jail for. And it wasn't "failure", it wasn't "murder", it was fraud. HFM's comment about the scary Treasury department rather than the Feds is true, because fraud is endemic to greed, and greed is at the heart of this kind of corporate "failure" (and of corporate success, as well).

On Another Site, there was a comment that the customers of public companies are not the people that use the product, it is the shareholders. The consumers of the product are simply one of the things being sold to those shareholders. Once that re-think has been completed, as the shareholders do well, you do well; it is simple to get to if you do well, shareholders do well (but that is not necessarily true); in both cases the welfare of the people on the demand end of the transaction are irrelevant. In private companies, maybe not so much; but the goal of many private companies seems to be at the moment IPO or getting bought out; again the customers are the eventual shareholders.

Until this stops being the case, this is going to continue to happen. Unless the gross miscarriages of justice (as opposed to lawbreaking) are reined in, by law or otherwise, this will continue to happen. But that's okay, if you're rich; you'll survive it. After all, Cayne "only" got $61 million for his shares.

#127 ::: Mycroft W ::: (view all by) ::: April 08, 2008, 05:54 PM:

Mythago: um, no. Read what I said, and only what I said. I said nothing about whether it is okay, or good or otherwise. I happen to find most of corporate culture disgustingly immoral.

What I'm saying is that it is quite possible that if you investigate, fully, anyone, it is quite likely that you could find something that it is possible to go to jail for. Not that it ever happens, mind you, but it's on the books, and if everybody from the public to the police to the judge's office wishes to make an example, that someone's going to jail. If you are the CEO of a billion-dollar+ company, and you get to face the full wrath of corporate tax law, lobbying law, and various countries' bribery regulations (never mind the fact that in some of those countries, the bribery that is technically illegal is essential to conduct business), that is even more likely. If you are the CEO of a company that is playing with the kind of fire that brings in the big rewards, or if you are the CEO of a company that could, if you did "this little thing", double your earnings for the year, that is even more likely - and once you do "this little thing", which is actually arguably legal, but you don't really want it getting out, the chance that someone will do something to cover it up is high, then someone covering that up, then - now you're in Enron territory.

If the Treasury department comes to the CEO of a billion-dollar company and says "you're an embarrassment. We're going to investigate your company and your collective behaviour, thoroughly and publicly, from the ground up, and if we find anything, we'll make it a point to make an example of you - and trust us, everybody will be cheering from the sidelines. Got anything on your conscience that might get you locked up for 10-20? Or that you don't really want public?

Or perhaps you could see your way to doing this little favour for us, and maybe we won't have to look so hard..." - you're not going to take it?

It's the IRS equivalent of "Nice store. Lots of pretty, breakable things. Pity if anything would happen to it...", sure. And I'm not discussing the morals of that, either. Effective, though.

#128 ::: P J Evans ::: (view all by) ::: April 08, 2008, 06:03 PM:

127

Enron was, plainly and simply, breaking the law, and doing it, at the decision-making levels, with full knowledge that they were breaking the law.

That isn't capitalism, it isn't serving the shareholders (many of whom were employees and none of whom will see that money again), and it isn't serving the actual customers.

I don't feel sorry for those executives (or their families). I don't think people should get bonuses for failing, or for breaking the businesses they were hired to manage.

#129 ::: Temporus Sudonomous ::: (view all by) ::: April 08, 2008, 06:44 PM:

Actual Enron story, with serial numbers scrubbed off:

A former employer was approached by Enron to help them set up a sideline business. They wanted to get into . . .

. . . well, let's say delivery of popcorn by high-speed pneumatic tubes. That, for the purpose of this post, was the business my employer was in.

Hey, it was a logical thing for them to get into, right? They had rights of way that they could run fiber . . . uh, pneumatic tubes along, right? And if they didn't, they could buy fiber op, SORRY, pneumatic tube capacity from someone else.

We lent them a popcorn server, and set up a trial home popcorn ordering system. I believe we even invested in the popcorn delivery subsidiary.

My managers of the time visited Enron and helped them set things up. They had a working system that let customers order, um, their favorite popcorn flavors from a menu.

After the big bust, my cow orkers were called in to testify. Some interesting stuff came out. Enron Popcorn Delivery had delivered, to what's called "friendlies" -- beta testers sitting at home but not actual paying customers -- about 5,000 servings of piping hot popcorn. For free, mind you. This was a trial program in progress, not a business in operation.

But the division reported millions of dollars in profit.

Righhhhht.

The only question is, did Enron actually think they could get into the popcorn delivery business, or was it part of the shell game from the beginning? Being into the hot dot-come age business of video-on- . . . sorry, popcorn-on-demand would sure make you look diversified.

Oh . . . our loaner popcorn system ended up on eBay, as I recall, and the buyer tried to get technical support on it.

#130 ::: albatross ::: (view all by) ::: April 08, 2008, 07:21 PM:

Lizzy L #115:

Well, to the extent we are referring to US politicians in positions of power (Democrats and Republicans), both seem quite content to play the ethanol game, so it's kind of hard for me to see how this is a right wing or conservative failing.

Similarly, aggressive interventionist foreign policy, taking the electoral benefits of policies today while pushing the budgeting problems off till some day far in the future, and use of various government powers to punish enemies and reward friends are not noticeably conservative or liberal policies. Those are policies that work for getting and keeping power in the US, and so they're followed by most Democrats and most Republicans.

ISTM that a lot of this is just pointing to things you don't like in the world and labeling them as "conservative," in the same way another person would name them "liberal." ("Damned liberals, taking up all the good parking places.")

#131 ::: Marc ::: (view all by) ::: April 08, 2008, 07:28 PM:

Terry@93: I believe you probably read that in the wonderful "American Theocracy" by Kevin Phillips.

I didn't quite expect the amount of economics in there when I started it, but was able to follow it quite well.

#132 ::: Earl Cooley III ::: (view all by) ::: April 08, 2008, 07:37 PM:

The main reason that Enron class war criminals got into any trouble at all was because they were too stingy to invest sufficient resources into the political favors hedge fund.

#133 ::: albatross ::: (view all by) ::: April 08, 2008, 07:55 PM:

Patrick #39:

My own inclination these days is to suspect that the more dire view of capitalism is correct after all--that, absent some kind of countervailing force, international capital really does become an out-of-control Vingean AI inimical to human liberty.

I think I was the one to propose that analogy, but I think it's more subtle than an evil AI. A global market is very much like an AI in the sense that it acts on its own initiative, in ways you can't predict, and that it offers such enormous benefits that it's very hard not to use when available. And attempts to build safeguards to prevent bad stuff happening from it make sense, but are likely to be really, really difficult to get right, for the same sort of SF-ish reasons you'd expect to see in a story about an independently-motivated AI being managed by nervous government officials or engineers or whatever. We can in principle shut down global capital markets, but then we'll very quickly become way, way poorer than we are, and the resulting economic chaos will likely lead to wars and revolutions and starvation. We can and should try to bound the damage done by bad turns of the global capital markets, but we have a hard job ahead of us, because in their domain, they're much smarter than a human. A human or bureaucracy or legislature or court could never come close to managing the global flows of capital as well as the market does. Maybe a Banks style AI Mind could manage it, but we can't.

This isn't us vs. an evil AI whose plug we need to pull. This is us riding a tiger we need to keep riding to survive, knowing it's capable of scary behavior and hoping to manage it reasonably well.

IMO, much of the free-market rhetoric surrounding this pushes us away from over-regulating that market, which will make us poorer and will sometimes also lead to disasters. (Frex, the S&L crisis was made bigger by FSLIC guarantees for insolvent S&Ls, and I think much of the damage started when outdated banking regulations ran up against inflation and new investment vehicles.) Much of the regulation-friendly rhetoric pushes us away from leaving the markets so unbound that we don't prevent preventable catastrophes. I think we pressure in both these directions, but that it would be a total disaster if either side were to permanently win.

#134 ::: albatross ::: (view all by) ::: April 08, 2008, 07:59 PM:

Earl #132: I think they invested quite a bit in that hedge fund. But politicians are fickle, and once you're enough of a scandal, they stop returning your calls or helping you out of jams. It's probably a good thing there is no such thing as an enforceable bribery contract.

#135 ::: Stefan Jones ::: (view all by) ::: April 08, 2008, 08:07 PM:

#134: It's probably a good thing there is no such thing as an enforceable bribery contract.

A few more years under the GOP and who knows . . . only they'll call it the "Consulting Fee Accountability Act".

#136 ::: Randolph Fritz ::: (view all by) ::: April 08, 2008, 09:48 PM:

Albatross, #133: "A human or bureaucracy or legislature or court could never come close to managing the global flows of capital as well as the market does."

Isn't that what we hear just before every bubble pops? After the bubble pops, it turns out that it is possible, after all, to regulate the system, and then immediately, people who want to scam the system all over again start deriding the fixes as unnecessary and beside they don't really work, they only seem to work.

Naah.

The way I look at it the international economy will be regulated--it can't reliably make money if it doesn't. Question is, is it going to be regulated by a network of shifting alliances of very wealthy businesses, which will inevitably lead to boom and bust cycles, and probably actual shooting wars, or do we go for some sort of somewhat democratic system? Me, I'm for democracy.

#137 ::: Terry Karney ::: (view all by) ::: April 08, 2008, 10:22 PM:

MycroftIn Chicago, people die in summer, because 125F in the desert ~= 90F on Lake Michigan, and instead of houses built for the heat, they're big brick boxes designed to keep out the 3 feet of snow and the -10F also with enough humidity to chill through whatever you bundle up with.

I'm well aware of the problems of relative humidity (that growing up in the Lake Effect area of Ohio, and doing Basic training in Missouri; June-August.

But the part which bothers me about the statement above is the assertion about the humidty. Because at 100 percent relative humidity (i.e. the air is holding the absolute maximum of water vapor it can sustain), -10F = .074645,

That's not going to saturate anyone's clothing.

There are some oddities about water vapor at that temperature (if the atmosphere is supercooling it can carry a RH of 148 percent). Generally what happens if the air is that cold is water vapor will nucleate into snowflakes; even at RH values as low at 60 percent.

Relative Humidity at sub-zero temps

Dew Point Info (contains a link to a dewpoint calulator, which works with F,C, or K).

And that same house designed to keep out the cold is going to be decent at keeping in the heat.

Marc: Yes, that was it. Trying (absent my books coming out of boxes) to keep track of things is getting harder; it was so dark, there were so many, they were so good.

#138 ::: Bruce Baugh ::: (view all by) ::: April 08, 2008, 10:35 PM:

Randolph @ 136: "The way I look at it the international economy will be regulated--it can't reliably make money if it doesn't. Question is, is it going to be regulated by a network of shifting alliances of very wealthy businesses, which will inevitably lead to boom and bust cycles, and probably actual shooting wars, or do we go for some sort of somewhat democratic system? Me, I'm for democracy." This is the way I'm leaning too. There are no unregulated markets. There are always people with authority of one sort or another, whether it's sheer personal brute force or something more sophisticated, there are always criteria of evidence and standards being applied.

Costco, for instance, is being fined every quarter. Investors who disapprove of its management's approach to labor and favor that of Wal-Mart seek to reduce its value. There simply isn't much public discussion of it, nor any process by which the underlying principles might be brought under independent scrutiny to assess them and their consequences. It's "just" people with control of a lot of money trying to discourage alternatives to the most ruthless exploiter available at the moment. But this is nonetheless a system of control in action.

#139 ::: mythago ::: (view all by) ::: April 08, 2008, 11:02 PM:

And *all* of what you said. Either you are presenting an inconsistent message or you do not really understand the nature of regulations and the law.

The notion that any federal agency could pull a shakedown because everybody has made minor mistakes works only if you assume that those little mistakes a) are violations of criminal law b) that call for jail time and c) are likely to be noticed and successfully prosecuted.

In your fictional example, the CEO of that company is going to release his pack of attack law firms on underfunded, government-run Treasury, as well as sending lobbyists scurrying to the sidelines. And when they attempt to prosecute garden-variety, ordinary, everyday errors as crimes, they'll be wasting a lot of time and effort, ending up with the company's promise to do better and implement policies that will make sure those minor oopses don't happen again, or--if there are more serious mistakes--the company pays a negligible fine and does not admit any misconduct.

#140 ::: P J Evans ::: (view all by) ::: April 08, 2008, 11:24 PM:

Good insulation should work both ways: keep you warmer in winter and cooler in summer.

What you really want to use for comparison here is the heat index, I think. Takes into account both temp and humidity. Or maybe PET - potential evapo-transpiration (a measure of how much water plants will use in that weather).

#141 ::: Greg London ::: (view all by) ::: April 08, 2008, 11:56 PM:

Mycroft@83: Enron, sure, they were deliberately falsifying information - sorry, rephrasing it so that it looked better on the stockholders' glossy that doesn't have all the information. Tell me that doesn't happen to one extent or another with a double-digit percentage of public companies.

Mycroft@127: What I'm saying is that it is quite possible that if you investigate, fully, anyone, it is quite likely that you could find something that it is possible to go to jail for.

The thing is I'm not sure why you're saying what you're saying. I've come up with two possible interpretations based on strict context parsing:

(1) The prosecution had a grudge against Enron. Enron had broken some law, but if you investigate anyone, you may find something criminal to prosecute them for. And that's what the prosecution did. They found something to nail Enron with. Enron's actions didn't specifically warrant a prosecution, but for some other reason, the prosecution decided to pursue criminal charges.

(2) You believe Enron did something worthy of prosecution, but for reasons I cannot understand you introduce a red herring argument about how you could investigate anyone and might find something criminal to prosecute them for.

If you think (2) Enron deserved prosecution, I cannot fathom why you made the "everybody's doing it" argument in #83, or the "everybody has a skeleton in their closet" argument in #127.

This (2) is like believing Al Capone belonged behind bars, but arguing that getting him for tax evasion wasn't the right way to go about it, because everyone evades taxes.

(and if you counter by arguing how Capone didn't deserve it, you're missing the forest for the trees, or the metaphor for the point, or something.)

The alternative is that (1) you don't believe Enron deserved prosecution and the prosecuters gamed the system to get a conviction.

I believe most folks are assuming that you are supporting (1) because (2) would mean you're using a red herring to weaken your own position for no apparent reason. i.e. You think Enron deserved prosecution, but, hey, look, shiny distraction about skeletons in everyone's closet. We could be next.

The other thing is that "everybody's doing it" and "everybody's got skeletons in their closet" arguments are irrelevant to folks who think Enron did something worthy of criminal prosecution. Yes, there are reasons that due process should be followed and reasons that the government should not abuse its law enforcement powers. But if a person believes that Enron was attempting to operate above the law, then any law that can convict them is sufficient.

More importantly, "everybody is doing it" and "everybody has skeletons" is patently unprovable even if true, and more than likely simply false. How do you prove everyone has skeletons if by definition those skeletons are hidden in a closet somewhere?

Energy wasted trying to prove the veracity of such statements only reinforces the benefit of a red herring, it draws attention away from the real issue of whether Enron deserved criminal prosecution.

#143 ::: Kate Tinning ::: (view all by) ::: April 09, 2008, 12:57 AM:

Thanks Sam (37), Randolph (60) and Rozasharn (77), I'll give those a go.

I read Galbraith's The Affluent Society in high school and really enjoyed it, and always meant to read more by him. He does have a great style.

#144 ::: albatross ::: (view all by) ::: April 09, 2008, 01:36 AM:

Randolph #136:

I thought I was pretty clear that I think some regulation is desirable. My point is, a regulator can't do the job the international capital markets do; he doesn't know enough. So, the regulator is going to be trying to control something that ultimately is, in its domain, smarter, faster, and even more powerful than the regulator. And the regulator isn't trying to defeat the capital markets most of the time, he's trying to channel them into reasonable directions and avoid the worst of the meltdowns that might occur.

Imagine you have an AI managing your space ship's life support. You have engineers you trust more than the AI, but all of them together aren't smart or fast enough to keep that life support system running. And yet, you recognize that the AI may, for reasons incomprehensible to you, decide to set the internal temperature to -20 C tomorrow, or to 45 C the next day. You end up giving your engineers some power over the AI (maybe they can cut off some of its peripherals, or shut it down temporarily and restart it) and some guidelines about when to shut it down, knowing that the life support system will run less well, in general, the more they use their power. You can't function without the AI running that life support system. This is more-or-less what a financial market regulator is doing.

The regulator can be given some guidance from political leadership. He may be told to try to keep the temperature a little warmer or cooler or something. But he can't step in and manage the life support. All he can do is tweak some parameters he has access to, which have a somewhat predictable effect on the AI's behavior or the function of the life support system.

You seem to be saying that we should replace or heavily govern these markets by some kind of democratically elected body. But the kinds of bodies we know how to build can't do what markets do. And, if we build a powerful bureaucracy to regulate these markets, damn, we've built a different larger-than-human, somewhat self-directed decisionmaking entity, which we need but can't fully control or trust. Because bureaucracies absolutely can and often do act in ways completely unintended by their designers, democratically elected leaders, even their written laws and charters.

The key here is that these are larger-than-human decisionmaking mechanisms that do things individual humans or small committees or kings or noblemen or whatever simply can't do. You can get a well-functioning bureaucracy to handle things that no single human, no matter how smart or well-intentioned or powerful, can manage. And yet, because of that fact, some of that bureaucracy's actions will be outside your understanding or control, and you (as the Czar, the president, etc.) will be somewhat at the mercy of the bureacracy. You may be able to fire (or send to Siberia) any one bureaucrat, but you can't fully control the bureaucracy without taking it over and running it yourself, and you're not smart enough to do that[1].

Now, that doesn't mean that either markets or bureaucracies are God, or must never be interfered with. It does mean that elections or mandates from the powerful can't take over for their functions, because human minds aren't that big and powerful, and don't have that distributed knowledge. So regulators are managing something they don't and can't and won't fully understand, something whose job they can't do.

[1] You can replace the old bureaucracy with one of your own, but it will still not be your creature once it is a functioning bureaucracy.

#145 ::: Earl Cooley III ::: (view all by) ::: April 09, 2008, 03:00 AM:

The Consulting Fee Accountability Act of 2008, An Executive Summary of Concepts

1. Registered Lobbyists.

Only lobbyists registered with the U. S. Office of Graft Administration will receive immunity to federal bribery prosecution. Funding for enforcement and administration of this legislation is solely from lobbyist registration fees, which constitute five percent of all bribes processed by all registered lobbyists.

2. Pressure Groups.

Registered lobbyists are not required to disclose the identities of the pressure groups they represent; nor are they required to disclose the identities of the recipients of their largesse to anyone except lawful delegates of the U. S. Office of Graft Administration. Any pressure group that attempts to bypass this legislation by not using the services of registered lobbyists to disburse bribes to public officials will be prosecuted as per the appropriate existing laws.

3. Allocation of Bribes.

3.a. General Considerations.

Thirty-three percent of all bribes (above and beyond the five percent lobbyist registration fees) are to be processed by the U. S. Office of Graft Administration for disbursement to appropriate offices of the federal government. Twenty-nine percent of all bribes are the tax-free property of the government official who is the negotiating partner of the registered lobbyist. The final thirty-three percent of all bribes is the tax-free fee given to the registered lobbyist for their valuable services.

3.b. Allocation Priority.

The U. S. Strategic Psyops Reserve has first claim to all pharmaceutical contraband included in the bribe in question. Likewise, the Department of Defense, in consultation with the Department of Energy, has first claim to all weapons of mass destruction included in the bribe or bribes. The Department of Homeland Security has equal claim with the Department of Defense for conventional weaponry and ammunition included in regulated bribes. The Food and Drug Administration has first claim to human chattels included in regulated bribes, to be disbursed as they see fit to corporations with human medical testing needs. Should the value of any of these Priority Allocations exceed thirty-three percent of the total value of the bribe, the receiving agency shall be responsible for reimbursing fair value to the registered lobbyist and the bribe target for their appropriate cut of the proceeds.

4. Contractual Obligations.

Government officials who receive properly registered bribes are under obligation to fulfill the requirements of their registered lobbyist, unless another registered lobbyist outbids them. If a registered lobbyist is outbid, they may call upon the U. S. Office of Graft Administration to hold a binding Auction of Favors to resolve the situation. Previous bribes on the issue in question prior to such binding auction will not be refunded.

5. Blanket Amnesty and Grace Period.

All ongoing federal bribery prosecutions are to be immediately dropped, and a sixty day grace period given to defendants of those prosecutions to allow them to come into compliance with this legislation. Anyone convicted under federal bribery prosecutions will be unconditionally pardoned and released from confinement as soon as they come into compliance with this legislation. Posthumous pardons may also be obtained in this manner.

6. Oversight.

Oversight of the administration and enforcement of this legislation shall be the joint responsibility of the Department of Justice and the U.S. Government Accountability Office.

#146 ::: Dave Bell ::: (view all by) ::: April 09, 2008, 03:09 AM:

Whether there is a formal regulator, or the regulation somehow comes from the market, it depends on people being honest about what they were doing.

Could the market, without regulation, cope with a liar such as Enron seems to have been?

How much did the liars lose when Enron collapsed? Was is enough to be a punishment, taking into account what they had left. If, to take a figure from upthread, you can still walk away with $61million, you can easily get enough return to play all the golf you want. If you want a Governor-priced callgirl every night, it's still enough money for over thirty years of depravity.

And the market represents the market. Not the people like us who lost their pensions.

#147 ::: heresiarch ::: (view all by) ::: April 09, 2008, 04:36 AM:

albatross @ 112: "Is corn-based ethanol a conservative policy? ISTM that it's at least as popular among Democrats as Republicans, frex. I've seen skeptical articles about it in the press, and those seem to come more commonly from a libertarian or conservative perspective. But the common MSM view (naturally) mirrors the common politicians' lines that say that corn-based ethanol is some important part of energy independence. I expect the journalists mostly say this because they can't do arithmetic, and the politicians because they care more about polling numbers than sensible energy policy."

Agreed. Support for corn-based ethanol seems to be strongest among people who need to poll well in Iowa, which includes just as many Democrats as Republicans. Interpretations do differ, though: Republicans are far more likely to execute this strategy as hand-outs for agro-business, and Democrats are more likely to subsidize development.

@ 130: "Similarly, aggressive interventionist foreign policy, taking the electoral benefits of policies today while pushing the budgeting problems off till some day far in the future, and use of various government powers to punish enemies and reward friends are not noticeably conservative or liberal policies."

Not agreed. There is a qualitative difference in liberal and conservative interpretations of American foreign policy. To over-simplify, Democrats tend to intervene over human rights issues (Somalia, Bosnia), whereas Republicans tend to intervene for financial considerations (First and second Gulf Wars). Clinton, let's recall, balanced the budget. Democrats may tax and spend, but Republicans do the spending without bothering with taxing. And I don't understand how you can claim that Democrats are as willing as Republicans to use the machinery of government to punish their enemies--have you forgotten the outing of Valerie Plame, the railroading of Governer Siegelman, and the firing of Justice Department attourneys? None of this is to say that Democrats are rosy innocents, but there is a qualitative (and significant) difference in their levels of immorality.

#148 ::: inge ::: (view all by) ::: April 09, 2008, 09:17 AM:

Terry @ 137: And that same house designed to keep out the cold is going to be decent at keeping in the heat.

Not automatically, IME.

Local sandstone is better in keeping out the heat than in keeping out the cold, because it eats up the heat generated in the rooms. We had tolerable 14°C in an old sandstone building during a winter SCA event, but the walls were still freezing.

I'm worried that the new "zero-energy" houses, are doing exactly the reverse. They all seem to be designed to catch as much heat as possible, which, in a temperate climate, is no fun at all from June to August, or May to September, in some years.

#149 ::: Ingvar M ::: (view all by) ::: April 09, 2008, 09:39 AM:

Terry Karney @ #122

When I worked for a hospital, many, many years ago, we had three classes of electric outlets.

"Uninterruptible power" - this is power that is fed into flywheels driving a generator. The grid also keeps a set of magnetic clutches, coupled to one diesel engine per gennie, open. On a grid power failure, the clutch closes, jump-starting the diesel. The weight of the fly-wheel keeps things in check, as the diesel spins up.

"Reserve power" - Inverter-based UPS system, kicked in usually within a second of the grid power failing. Batteries enough to support a while (I honestly cannot remember, I think the number we were quoted was "sixty minutes"). The inverter(s) could be recharged from portable generators, on an as-needed basis.

"Grid power" - No power protection, when the grid goes, these go black.

The important thing that was done (and should, I think, be done for ALL UPS installations) was a monthly testing, where the grid was intentionally disconnected from the hospital. First, it provided a good incentive to keep the UPS system working. Second, diesel that is stored long-term and diesel engines that don't get started for a while tends towards making it difficuult to start the engine as and when it is needed.

#150 ::: Seth Gordon ::: (view all by) ::: April 09, 2008, 10:59 AM:

NYT, today:

In a major shift of policy, the Justice Department, once known for taking down giant corporations, including the accounting firm Arthur Andersen, has put off prosecuting more than 50 companies suspected of wrongdoing over the last three years.

Instead, many companies, from boutique outfits to immense corporations like American Express, have avoided the cost and stigma of defending themselves against criminal charges with a so-called deferred prosecution agreement, which allows the government to collect fines and appoint an outside monitor to impose internal reforms without going through a trial. In many cases, the name of the monitor and the details of the agreement are kept secret....

Deferred prosecution agreements, or D.P.A.’s, have become controversial because of a medical supply company’s agreement to pay up to $52 million to the consulting firm of John Ashcroft, the former attorney general, as an outside monitor to avoid criminal prosecution.

#151 ::: guthrie ::: (view all by) ::: April 09, 2008, 11:01 AM:

Ah yes, monthly testing of generators. That fits in with the thread on quality etc.

Here at work, last year I saw the new maintenance guys running, for the first time ever. The reason was that the incomer had tripped, cutting grid power to half the building, including our high temperature (up to 2,200C) furnaces. These furnaces have emergency generators to keep the cooling water going, without which holes would melt in them and air would get in and set the lining on fire.

So the generator didn't start up automatically when the power went off.

After about 10 minutes of watching the managers and maintenance try to get the generator going, as well as water boiling off some of the other furnaces whose emergency generators were not up to the job, myself and some other office and technical staff decided we would be better off going up to the new site, which was far enough away to not hear what was going on at the old site.

The reason the generator didn't start? Insufficient diesel and water, and it hadn't been run for weeks. All because they got rid of the old maintenance people and got new ones in, without proper hand over and in a professional manner.

#152 ::: Nancy Lebovitz ::: (view all by) ::: April 09, 2008, 11:46 AM:

Graydon et al.: Why do you think biofuels from food crops are targeted at the poor? I would think agribusiness pressure for more income (from both biofuels and food crops) would be enough to explain the policy and the neglect of support for biofuels from non-food sources.

More generally, lobbying is going to favor existing enterprises over new possibilities.

*****

Why do people seem to generally favor regulations rather than laws?

#153 ::: Lance Weber ::: (view all by) ::: April 09, 2008, 12:23 PM:

I will gladly stipulate all the major points regarding the oligarchy oriented results of unfettered capitalism.

I'm someone who thinks strategically about systems so what I'm interested in is how do we fix it? I'm talking about identifying the desired strategic end state, the gaps between the current and end states, a map to close the gaps and the incremental milestones along that map.

I know this is a pie in the sky request and I'm committing Geek Social Sin #1 (Expecting the world to respond rationally to stimulus), but I've been through this exercise with healthcare and it turns out there is almost no way to incrementally decouple an entrenched oligarchy from the system it controls, and that was for one piece of the economy.

Show me a path and I'll gladly march down it with you...

#154 ::: Dave Bell ::: (view all by) ::: April 09, 2008, 01:05 PM:

Bio-ethanol is an established technology. It's been added to fuel in Brazil for years.

There are other bio-fuel processes that either are not established, or have never been a stable market. You can burn crop wastes to generate power, but the farmers have seen too many projects never get built, and are reluctant to be left with another huge stack of baled straw--the straw is a seasonal product, and the promoters of these schemes want a year-round supply.

This time last year, it was cheaper to burn wheat in a furnace than it was to burn coal.

#155 ::: fidelio ::: (view all by) ::: April 09, 2008, 01:10 PM:

#152--Nancy, speaking as someone who's worked at a government job for nearly 25 years, regulations are one way laws are implemented and enforced. Eliminating regulations sounds like it would simplify life, but handled properly, they are an important part of carrying out and enforcing the laws that have been passed.

Also, when a regulation has been shown to be defective (whether poorly worded, outdated, based on incorrect assumptions, or what-have-you), it's usually easier to change it than it is to get an entirely new law passed.

I will not disagree with someone who says that there are regulations that are irritating, regulations that are inconvenient, regulations that are not as well thought-out as they could be, regulations that are out of date and no longer have much to do with the world we now live in, and so on. But eliminating regulations altogether means that many laws that are impotant and useful will no longer function. In a lot of cases, this would be bad.

#156 ::: Rikibeth ::: (view all by) ::: April 09, 2008, 01:40 PM:

Dave Bell 154: does that mean that a ton of wheat was priced at less than a ton of coal (which I can believe without trouble), or that the amount of wheat you'd have to burn to get a fixed energy output cost less than the amount of coal needed for the same output?

I'm going mostly by guesswork here, but that guesswork suggests you'd need a larger mass of wheat than of coal for each kilowatt produced. How much of that wheat is water?

#157 ::: Melinda Snodgrass ::: (view all by) ::: April 09, 2008, 01:48 PM:

To take this down to a prosaic level -- I've been an investor in the market for years. I rode out the '87 crash and the Dot Com Bust, and I'm gritting my teeth and riding out the Subprime Mess.

Years ago I offered a simple rule to my broker -- I don't buy stocks in companies that don't make anything or provide a quantifiable service. Enron is a classic example of not making anything, as were many of the tech stocks.

I also will not allow my money to invest in companies that don't meet labor or environmental standards. I'm very leery of clothing manufacturers because most of the companies use child labor.

What I really fear is that China will call our debt, though folks tell me that would hurt them worse than it would hurt us. Economic MAD. I hope they are right.

#158 ::: C. Wingate ::: (view all by) ::: April 09, 2008, 01:55 PM:

re 147: As some at the Atlantic (I think it was James Fallows) said: "Democrats can't govern; Republicans can't govern without breaking the bank."

re 155: As someone whose job involves a system that has to implement state governmental rules, I come up against the "statutory or regulation?" issue all the time. Statutes might as well be carved in granite, for all the time it takes to change them; regulations can be changed by the right people talking it over among the cubicles.

#159 ::: Rob Rusick ::: (view all by) ::: April 09, 2008, 02:12 PM:

From Fantastic Fables, by Ambrose Bierce.

Uncalculating Zeal

A Man-Eating tiger was ravaging the Kingdom of Damnasia, and the King, greatly concerned for the lives and limbs of his Royal subjects, promised his daughter Zodroulra to any man who would kill the animal. After some days Camaraladdin appeared before the King and claimed the reward.

"But where is the tiger?" the King asked.

"May jackasses sing above my uncle's grave," replied Camaraladdin, "if I dared go within a league of him!"

"Wretch!" cried the King, unsheathing his consoler-under- disappointment; "how dare you claim my daughter when you have done nothing to earn her?"

"Thou art wiser, O King, than Solyman the Great, and thy servant is as dust in the tomb of thy dog, yet thou errest. I did not, it is true, kill the tiger, but behold! I have brought thee the scalp of the man who had accumulated five million pieces of gold and was after more."

The King drew his consoler-under-disappointment, and, flicking off Camaraladdin's head, said:

"Learn, caitiff, the expediency of uncalculating zeal. If the millionaire had been let alone he would have devoured the tiger."
#160 ::: Rob Landley ::: (view all by) ::: April 09, 2008, 02:55 PM:

Did nobody read the book Liar's Poker, by Michael Lewis, which described the invention of the mortgage bond and the resulting industry that sprang up around it? I reviewed this book for a website almost ten years ago:

http://www.fool.com/portfolios/rulemaker/1999/rulemaker990217.htm

#161 ::: Graydon ::: (view all by) ::: April 09, 2008, 03:50 PM:

Nancy --

Biofuels for food crops are targetted at the poor for the simple reason that the results of the diversion of food crops to fuel, in terms of food shortages, increased food costs, and, most importantly, displacement of rural populations, were completely predictable. (most importantly because it allows consolidation of land ownership in corporate hands.)

To desire the end is to desire the means, and all.

Food crop biofuels also fairly obviously a scam if you sit down and do yield numbers, and the agribusinesses are very good at that sort of number, so they more or less have to have secondary objectives to continue to push the idea.

#162 ::: Evan Goer ::: (view all by) ::: April 09, 2008, 04:23 PM:

Stefan Jones @121: I feel exactly the same way. I specifically remember an episode of NPR's Talk of the Nation in summer 2001 where they had a shill from industry on saying everything's fine, nothing nefarious going on, blah blah blah. I remember being enraged to hear this guy lying so smugly.

Of course this was a number of months before the those tapes leaked out with the traders sniggering about ripping off Grandma, and at least a year before state of California released its exhaustive 1200-page report detailing exactly how the plant shutdowns and other manipulations had worked. By then it was too late, every residence in the state (with the exception of some metro areas in Southern California) had been ripped off by hundreds of dollars, in some cases over a thousand. Meanwhile, the Republicans managed to leverage the crisis by putting a new governor in place, who (surprise!) promptly turned around and settled with the energy companies for pennies on the dollar.

What really pisses me off about Enron is that they didn't collapse because they were corrupt or evil, they collapsed because they were stupid. Enron was actually only tangentially involved in the California power ripoff, and their collapse had to do with unrelated Stupid Accounting Tricks. The companies that were responsible for the power ripoff are still in business. And if Enron hadn't engaged in said Stupid Accounting Tricks, they would still be in business too, and Enron's execs would still be busy getting lionized on the cover of Forbes, giving speeches at the American Enterprise Institute, receiving fellatio from expensive NYC sex workers, and otherwise engaging in various traditional rich white guy activities.

Enron got taken out by pure coincidence, and everybody else got a pass. I guess it all boils down to what my grandmother liked to say to her grandkids -- I think in all seriousness -- "If you're going to steal, steal big."

#163 ::: Dave Bell ::: (view all by) ::: April 09, 2008, 04:39 PM:

Wheat and coal: grain moisture content does have an effect, but the figures that were being thrown around on uk.business.agriculture took account of that.

#164 ::: Evan Goer ::: (view all by) ::: April 09, 2008, 04:39 PM:

Note that all the opprobrium sent Enron's way, and the media frenzy inflating Enron's role in the power ripoff, had the odd side effect of deflecting attention from the companies who were actually primarily responsible, and who are still happily doing business today. Of course only someone deeply cynical would suggest that there was any connection.

#165 ::: guthrie ::: (view all by) ::: April 09, 2008, 05:29 PM:

Nancy #152- I thought it was us plebs that liked laws rather than regulation, when it comes to economic stuff. But the owners prefer regulation, because that means they can capture the regulator as has pretty much happened here in the UK.

#166 ::: Earl Cooley III ::: (view all by) ::: April 09, 2008, 05:48 PM:

Perhaps a future effect of corncentric bio-fuel propagation could be the resurgence of the use of better tasting cane sugar in soda pop in place of corn sweeteners. True, it would knock the stuffing out of the Mexican Coca-Cola smuggling industry, but that's a relatively minor downside.

#167 ::: joann ::: (view all by) ::: April 09, 2008, 06:03 PM:

Earl #166:

Smuggled? How can it be smuggled and sold in Central Market?

#168 ::: albatross ::: (view all by) ::: April 09, 2008, 06:17 PM:

Graydon #161:

What rural populations have been displaced by improving the market for corn? Family farms have been dying a slow death for about 50 years for pure economic reasons, staved off by farm subsidies which probably benefit rich people more than poor people, but I don't see how ethanol has anything to do with that.

Surely the agribusinesses don't care very much about the total energy balance of corn-based ethanol. Getting government to require use of a product they're selling is a sensible business move for them, regardless of whehter it makes sensible energy policy. Indeed, one of the nice things about markets is that you, as the producer of some random commodity, do not need to know much about whether it's useful for some oddball purpose--that's the job of the guy buying it from you.

#169 ::: James Killus ::: (view all by) ::: April 09, 2008, 06:34 PM:

Patrick spoke the important phrases in his first follow-up message:

"concept of the limited-liability corporation and the legal doctrine of corporate personhood"

(I note with approval that Patrick has probably been reading Brad DeLong on this matter).

I then count the number of messages that appear to address the importance of the legal privileges granted to corporations, with the implied need for compensatory regulation. I count about 5 out of 168. I hope this is just an artifact of my browser's Find function, and my inability to see implicit rather than explicit arguments.

I will say that any person who self-labels as "libertarian" has no business having any opinions about economics and personal liberty until they know precisely the issues involved in limiting-liability and granting corporations "rights" under the 14th Amendment.

#170 ::: Terry Karney ::: (view all by) ::: April 09, 2008, 06:35 PM:

Inge: You flipped my propostion. I never said that a house meant to keep the heat out would be good at keeping the cold out as well, but rather one meant to keep the cold out would be decent at keeping the heat in (decent being defined as able to keep a group of people in a single room, with a small heat source from dying of hypothermia during a blackout of up to several days).

Ingvar M: I recall the separate outlets, but didn't know the mechanics.

#171 ::: don delny ::: (view all by) ::: April 09, 2008, 07:46 PM:

169, James Killus,

I will say that any person who self-labels as "libertarian" has no business having any opinions about economics and personal liberty until they know precisely the issues involved in limiting-liability and granting corporations "rights" under the 14th Amendment.

I will say that I will consider your foolish ultimatum when you phrase it clearly. If you have something to say, or a point to make, then make it. Otherwise don't waste your time posturing about what kinds of opinions I or anyone else should have.

#172 ::: Greg London ::: (view all by) ::: April 09, 2008, 07:59 PM:

James@169: I will say that any person who self-labels as "libertarian" has no business having any opinions about economics and personal liberty until they know precisely the issues involved in limiting-liability and granting corporations "rights" under the 14th Amendment.

And what test must a man pass to make such rules?

#173 ::: TomB ::: (view all by) ::: April 09, 2008, 08:45 PM:

I'm dubious of the wisdom of granting political rights to immortal entities that are also shielded from legal liability, but I don't get what is special about libertarians where they have to understand the issues before they may be allowed to participate in the discourse, and the rest of us are somehow free of that requirement.

#174 ::: Michael Weholt ::: (view all by) ::: April 09, 2008, 10:16 PM:

#157 Melinda Snodgrass: What I really fear is that China will call our debt, though folks tell me that would hurt them worse than it would hurt us. Economic MAD. I hope they are right.

Yeah, me too. I do have to say that the logic behind the contention has a certain amount of rigor. America is by far China's biggest trading partner and our dollars spent importing Chinese products are in large part responsible for China's rise as a world economic power. For the time being, at least, shooting us would be shooting the Golden Goose.

But as we have seen, logic doesn't alway prove reliable in matters such as this. And all of this describes the situation that pertains at this moment. Sh*t happens. Things change.

And I just want to take this opportunity to note, as others must surely have been doing lately, Maureen McHugh's amazing book, written like, what, 15 years ago, well before we all had witnessed The End of History, China Mountain Zhang.

#175 ::: pat greene ::: (view all by) ::: April 09, 2008, 10:43 PM:

Mycroft, I was going to answer your objections to my pointing out what Enron did, but Greg London @ 141 said what I would have said better than I could have, so I'll just refer back up to him.

As far as dying in blackouts, there are several ways to go: you can die from heat stroke or hypothermia, depending upon the temperature; you can die when you can no longer run your necessary home medical equipment (you either do not have a backup generator or it malfunctions/runs out of fuel)* and you are not able to get to a hospital; you can get in an accident due to lack of traffic lights/streetlights; or you can have a house fire from faulty wiring and power surges when the power comes back on.

Only the first of those requires an outage lasting a long time.

Terry, IIRC some of the rolling blackouts of 2001 where I am lasted longer than an hour or two. Of course, they weren't nearly as much fun as the cascading power failure of August 10, 1996. There's nothing quite like being just home (literally) from the hospital with a brand new baby when the power goes out in the middle of a very nasty heat wave. And the power was out for *hours.*

*Yes, I know, if you depend upon your home equipment that much you should have backup power sources, but there are people who don't. Like an elderly relative of mine last year. Lucky for him, they didn't have a power outage during the time he was dependent upon a respirator, and he got better.

#176 ::: j h woodyatt ::: (view all by) ::: April 09, 2008, 10:49 PM:

As a former Enron employee, let me offer this quip: even as a criminal enterprise, it was an utter failure.

#177 ::: j h woodyatt ::: (view all by) ::: April 09, 2008, 11:04 PM:

"Of course only someone deeply cynical would suggest that there was any connection."

Speaking of criminal enterprises that are notnot

#178 ::: Randolph Fritz ::: (view all by) ::: April 10, 2008, 01:10 AM:

albatross, #144: Oh, I see. That's a different point. I don't know that I agree, though. That may have been true 50 years ago; now that information technology has gotten so good, it may not be. The other problem is that there's such enormous corruption in the international capital markets that I'm not sure how much capitalism they are actually doing, as opposed to push-money-around-so-that-we-can-run-scams.

(If it's all going to Nigeria, I'm going to be vastly amused.)

#179 ::: Craig R. ::: (view all by) ::: April 10, 2008, 02:02 AM:

The NY Times Article that Seth quotes from in # 150 makes the very cogent point that the Cheney's administration few actual corporate prosecutions are the exception -- the DOJ under these bozos has been very cheerfully adapting an old Texas phrase to governance: "Dance with those what brung you"

#180 ::: albatross ::: (view all by) ::: April 10, 2008, 02:23 AM:

Randolph #178: But, that e-mail the stock exchange got from the widow of the deposed finance minister was so convincing....

don delny #171: I think there are two separate issues there--legal personhood of a corporation, and limiting the liability of its investors.

I don't know whether the first one makes sense or not, and I'm not even sure how I'd figure it out[1], other than looking at the old case law where it was decided, and how that's all worked out. Are there other first-world countries where corporations are treated in some radically different way?

Getting rid of the second is an immensely bad idea, IMO. This would mean that each owner of a share of stock in some company could be gone after for its debts, if the company folded. Thus, instead of Enron shareholders losing a lot of their retirement savings, under that system, they'd have also lost the rest of their savings and their homes. I'm missing how this would be a good thing. I'm all in favor of the managers who did criminal things going to prison, and being sued for as much as can be gotten from them for their fraudulent acts. But that doesn't have anything to do with the shareholders being held liable for the misdeeds of the company's management. (And Enron management people did get sued and did go to jail.)

[1] My lack of certainty apparently disqualifies me from having opinions on all sorts of other things.

#181 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: April 10, 2008, 02:25 AM:

Dave Bell @ 154

The difference between Brazil's biofuel program and the ones proposed here in the US is primarily what crop they're using. Brazil is using sugar cane, which requires less energy to process into ethanol than corn, which is what the US is planning on. And, whether planned or not, the effect on small farmers, cattle ranchers, and consumers of fresh foods in the US of paying high prices for corn to be turned into ethanol is higher fodder prices to the farmer, and higher food prices to the consumer. As I understand it, the farmers, ranchers and dairy owners are getting squeezed even harder because the price of their product has not kept pace with their costs, and international competition is preventing them from raising their prices enough to cover increases in fodder, fuel, and fertilizer prices.

#182 ::: heresiarch ::: (view all by) ::: April 10, 2008, 02:27 AM:

albatross @ 133: "I think I was the one to propose that analogy, but I think it's more subtle than an evil AI. A global market is very much like an AI in the sense that it acts on its own initiative, in ways you can't predict, and that it offers such enormous benefits that it's very hard not to use when available. And attempts to build safeguards to prevent bad stuff happening from it make sense, but are likely to be really, really difficult to get right, for the same sort of SF-ish reasons you'd expect to see in a story about an independently-motivated AI being managed by nervous government officials or engineers or whatever."

I don't think we need to go as abstract as "markets as a whole" to find malevolent, inhuman AIs: they are far more pedestrian and well-known than that. There is a book I wish someone would write called I, For One, Welcome Our New Overlords: How Giant Robots Made of Paper Took Over the World And We Didn't Even Notice. Which is to say: corporation are AIs with super-human capabilities--their programs are run on paper and human brains, but they are, both legally and functionally, artificial people.

There was a really good documentary about five years ago called the Corporation. It's thesis/conceit was that, well, if corporations are legally people, how do human standards of sanity apply to them? They got out the DSM IV checklist for sociopathy, and spent the next two hours checking boxes. It was quite the eye-opener for me. But then, when I was walking out of the theater, I couldn't figure out why it was so shocking. We programmed these artificial people, these robots, to obey not the Three Laws, but only one: Make as much profit as possible. How can we act shocked when that is precisely what they do? We didn't program them to protect human life; we didn't program them to respect the environment, we didn't tell them to do no damage.*

I'm ambivalent about whether capitalism is inherently destructive--I like to think not, though it will always push that direction. But corporations, at least of the sort we have now, are easy: they will, without any question, lead to horror and misery. And not because, as you argue, albatross, they are simply beyond us; they will do it because we ignored even the most rudimentary safety precautions when we were building them. We designed them to give cover to our worst impulses, rather than to reinforce our best, and that is exactly what they do.

*But, but, you say, won't the people running them still have their own moral principles to guide them? Even leaving Milgram and Sinclair out of it, it's very easy to get good people to unknowingly collaborate towards evil ends. Three steps to running a Baby-Killing Machine:

Step One: Get Alfred to build a euthanizer/incinerator (for the disposal of biologically hazardous test animals, of course)

Step Two: Ask Bill to place the babies into the incubator.

Step Three: Direct Charlie to press the button.

And all three sleep just fine at night.

#183 ::: Shan ::: (view all by) ::: April 10, 2008, 03:42 AM:

Ptrck @ 106 "...Y bgn, n #35..." n, ctlly, bgn n #31 --- bt bgnnng t #35 crtnly sssts y n cnstrctng th strw mn y prcd t bld.

Bck t th strt: yr cnmst cmmnt ws chp, yr "cptlsm" rnt n th rst f tht prgrph ws frnkly bfflng.

hv ttmptd t llstrt, twc, tht ntndd n "vngr" (t s th crtcl-yt-wlcmng wrd frm b @96 -- thnk y b) n pntng tht t, bt y nsst n sng nslt whr nn ws ntndd...

...whch msngly vldts vn n ncrrct rdng f my frst pst t #31.

*shrg*

ws plsd whn stmbld pn ths blg bcs t dscsss tpcs njy. wll cntn t lrk. My frst ttmpt t nggng n th fry sms t hv bn wsh, nd y'v xplctly sd 'm "nt wlcm" -- s wn't cmmnt gn.

Whch lvs y fr t cntn vwng m s th hrrbl d-hm trll y'v cnjrd frm yr mgntn. N hrd flngs.

#184 ::: Michael Weholt ::: (view all by) ::: April 10, 2008, 07:53 AM:

#183 Shan: ... so I won't comment again.

I think that's a good idea, at least for a while. There's something really creepy about your recent posts. Passive-aggressive, or something. Whatever it is, it's a tone I see in a lot of internet discussions and it's pretty poisonous.

Time passes. If you ever reach the point of recognizing and forsaking this tone in your posts, I'm sure you'd be welcome to post in here again, notwithstanding Patrick's disinvitation. But, hey, I don't have anything to do with the administration of this blog, so what do I know?

#185 ::: David Harmon ::: (view all by) ::: April 10, 2008, 08:40 AM:

Heresiarch @#182: Very right. <shudder>.

#186 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: April 10, 2008, 09:43 AM:

heresiarch @ 182

They got out the DSM IV checklist for sociopathy, and spent the next two hours checking boxes.

That's simply brilliant. I have to hunt down a a copy of that and find out how many boxes they checked. And maybe it's time for that documentary to be shown again; I think a lot of people are persuaded by recent events that something is wrong with the Holy Market economic theology, and the argument to insanity might be enlightening.

even leaving Milgram and Sinclair out of it, it's very easy to get good people to unknowingly collaborate towards evil ends.

It's far worse than that. The case law and regulation history that's grown up around corporate governance requires that executives of corporations aid and abet the sociopathic bent of the corporations they control, or be considered legally mis- or even malfeasant, and open to huge shareholder lawsuits, if not criminal prosecution. We as a society don't just allow evil behavior from corporations, we require it.

A few months ago, I wrote in another forum, somwhat flippantly, that the solution to out-of-control corporate behavior was to change the legal status of corporations from human-equivalent to something similar to that of domesticated animals, which have neither legal responsibility nor authority, but must have some human person or persons stsnd for them in all legal proceedings. If that person was the chairman of the board or CEO (who, these days, are often the same person, but that's another rant), and the laws were enforced even a fraction as well as the animal control laws are, I think we'd see an awful lot more moral and ethical behavior in the business world. As time goes on I think the remark was far less funny and more serious than I originally meant it to be.

#187 ::: Graydon ::: (view all by) ::: April 10, 2008, 09:57 AM:

Albatross --

Not so much in the US; significantly in Mexico and other parts of Central America. There's going to be a tequila shortage because less agave is getting planted.

Note that family farms are being killed more than quietly dying; very deliberate creation of policies to that end. (Poke around and you can find reports of startlingly violent reactions to attempts, generally successful, to sell direct to consumers on the part of individual farmers. This gets consumers better food for less, but isn't possessed of effective political protection.)

Papa Darwin's list -- born, dies, recognizably itself between those times, has descent, and the descent has the possibility of varying from the strict inheritance of its parent -- applies to every sort of organization; if all five things are true, that kind of organization will evolve.

Consider that we're collectively the environment in which corporations exist, rather than helpless individual food items, and the choice space starts to look very different. This is not a view that's accepted or encouraged, but consider how cows would feel about sophont, mobile grass with thumbs.

Also, find copies of Stafford Beer's Platform for Change and Designing Freedom and read them; the organizational problems presented by profit-maximizing corporations -- a choice about the nature of corporations in no way driven by inevitable natural law, but strictly a matter of human choice -- are pretty much solved. It's getting the political will in place to implement the solutions that's the trick.

#188 ::: P J Evans ::: (view all by) ::: April 10, 2008, 10:42 AM:

albatross @ 180

I understand that the corporate personhood bit isn't even from case law: it's apparently from the dicta or the stuff written (probably by the judge's clerk) at the beginning of the decision, before the actual decision. I understand also that they did it because there was no law saying what status a corporation had, and we've been stuck with it ever since.

#189 ::: R. M. Koske ::: (view all by) ::: April 10, 2008, 11:20 AM:

#166 - Earl Cooley III -

I was startled to spot imported Mexican Coca Cola (the classic glass bottles - don't recall if they're six ounces or eight) for sale in my local megamart. I thought the Coca Cola company was all kinds of opposed to it being sold in the states (possibly for fear that we'd prefer real sugar and start demanding it.) It was hidden away from the other sodas, in the imported food aisle, and pretty expensive, but still it surprised me to see it for sale in such a large chain store. I'd expected it to be the kind of thing you'd find in a single-owner mini-mart type setting, where the smuggling could have a smaller or nonexistent papertrail.

I live in Atlanta, home of the Coca Cola company. I'm not sure if that makes it more unlikely, or less.

#190 ::: Earl Cooley III ::: (view all by) ::: April 10, 2008, 11:40 AM:

Wow, buying imported Mexican Coca-Cola in Atlanta is on a par with buying an autographed Linux distro disc in Redmond. It's sweet, sweet revenge for the high-fructose corn syrup bait-and-switch heralded by the rise and fall of New Coke.

#191 ::: Chris Quinones ::: (view all by) ::: April 10, 2008, 12:51 PM:

The kosher for Passover Coke (sugar-sweetened) is now here, so we sugar fiends don't need to travel to Mexico, we just need to go to the Upper West Side of New York and snag our annual supply.

#192 ::: Dave Bell ::: (view all by) ::: April 10, 2008, 04:37 PM:

I am reminded of one of A.P. Herbert's Misleading Cases in which his ingenious plaintiff/defendant, Mr. Haddock, set up a limited-liability company, and wrote his books as the company. Well, in the same manner as a contract made by the company.

And the erudite judge realises immediately that a company does not die, and so the copyright never expires with the author.

#193 ::: Nancy C. Mittens ::: (view all by) ::: April 10, 2008, 04:56 PM:

Canada is also a source for sugar sweetened sodas; I vaguely recall that Canadian law requires sugar, and will not allow corn sweetener to be substituted.

#194 ::: James Killus ::: (view all by) ::: April 10, 2008, 08:36 PM:

Greg London:

And what test must a man pass to make such rules?

The possession of rights under the 1st and 14th Amendments would seem to cover someone's rights to speak his opinion about others' opinions.

You (and those of similar tenderness) certainly have exercised your rights to opine about my own standing in the matter. On the other hand, I have researched the doctrines of limited-liability and corporate personhood, while you have said nothing about it other than to imply that ignorance is as valid as knowledge.

Good luck with that.

#195 ::: albatross ::: (view all by) ::: April 10, 2008, 09:56 PM:

James #194:

Alas, one lifetime is simply insufficient to study all the things that may be important in forming opinions about political issues. So some people become genuine experts in the law, or history, or the study of political systems, or the study of the writings of history's deepest thinkers on issues of morality, or mathematics, or evolutionary biology, or medicine, or economics, or various flavors of engineering, or the study of how to organize and win wars, or.... The depth of available knowledge is amazing, and is increasing much faster than anyone could keep up, even if they knew a significant fraction of it.

If we are to have political discussions, maybe come to consensus as a nation on all kinds of important things, it's just not going to be possible to insist that everyone become expert in all the relevant things. You can, in fact, demand that everyone who hasn't studied what you've studied shut the hell up and listen to your wisdom, but I don't think you'll have much luck. Nor should you.

As an alternative, you could try explaining what you've learned about legal personhood and its implications in some relatively easy-to-grasp summary format. Maybe starting with a paragraph or two, and then suggesting directions for further reading?

That's not all that great at getting people to shut the hell up and listen to you, but honestly, that outcome is not in the cards. Most of us here are genuine experts in one or more fields, and are unlikely to be wowed by the fact that maybe you are, too. Even people who aren't will probably never accept "shut the hell up and listen to me, I am smarter/better informed/wiser than you" as an answer to a political debate. The world is full of folks who propose more-or-less that course of action, and their track record isn't all that good.

#196 ::: Bruce Baugh ::: (view all by) ::: April 10, 2008, 10:13 PM:

*cheers for Albatross and #195*

Yeah, the folks who end up really influencing me are almost always the ones who say, "Ah, it turns out that there's more to know, and here's some of it right now, and here's pointers to more. So you see, it's on this basis that experts say..." Then I learn something and can check more later, and feel improved to boot. It's why (for instance) my views on publishing so often end up sounding like *NH, or on interrogation resemble Terry Karney - because the desire to help others learn correlates strongly in my experience with a true and useful approach to the subject at hand.

#197 ::: Lizzy L ::: (view all by) ::: April 10, 2008, 10:40 PM:

Albatross at 180: Are there other first-world countries where corporations are treated in some radically different way?

I believe, most of them. This is not my area of expertise, but I dimly remember that while other nations treat corporations as persons for some legal issues, only the US holds that corporations have the same Constitutional rights as you or I, to the point that the Bill of Rights applies to corporations. But again, this is not my field.

#198 ::: Greg London ::: (view all by) ::: April 11, 2008, 01:01 AM:

me: And what test must a man pass to make such rules?

James@194: The possession of rights under the 1st and 14th Amendments would seem to cover someone's rights to speak his opinion about others' opinions.

you have said nothing about it other than to imply that ignorance is as valid as knowledge.

First, I asked a question. If I was implying anything, it was exactly what you replied about Freedom of Speech. But I sure as hell didn't imply any such nonsense as "ignorance is as valid as knowledge".

You start out with an Appeal to Authority and end up executing a badly botched Strawman.

If I were to opine about opining, I would simply say that my experience with the folks who hang on on this blog is that they got a zero-tolerance policy for logical fallacies. It's the sort of rigor that keeps drawing me back here, because I keep learning.

But to the heart of the matter, back at 169, you said: ... any person who self-labels as "libertarian" has no business having any opinions ...

You do realize how impossible that is, right? We are human. We are meaning-making machines. Five year olds have opinions. To proclaim by fiat that "none who meet such and such measure shall have an opinion about said topic" is just hell ass balls crazy. Don't think of an elephant.

You've been formulating opinions about me ever since your started reading this post. And you've never met me. I'm not going to assume that you're complete lack of qualifications in having near zero real experience with me is going to prevent you from having an opinion about me.

Not only do you prohibit, by fiat, the holding of opinions, you proclaim, by fiat, the measure by which the identified group will be allowed to hold such opinions again: until they know precisely the issues involved in limiting-liability and granting corporations "rights" under the 14th Amendment

I just have to ask, do you know, precisely, the issues in handing down such proclamations? Meritocracy is a nice concept, but turns out it only works if one handwaves away the test to determine who has merit to rule and who does not.

Which is more to the point of what I was implying with my question: What test must a man pass to make such rules? Devise me a political system of meritocracy whereby the writing and administering of said test is not gamable by whoever is in power at the time, and I promise you, your system will resort to smoke and mirrors somewhere in the area of determining who has "merit" and who does not. Whether to rule or to simply opine, doesn't matter. Same issue.

Perhaps it might highlight the problem if I were to point out some folks here might be skeptical of your proclamation for meritocracy if you hadn't gone and said how you have the qualifications to give said opinion while someone like me doesn't. If you still can't grasp the issue, then I would ask where was your test for me that allowed you to turn my single, simple question into an implication that "ignorance is the same as knowledge". I would opine that you pulled that meaning straight out of your tushy.

Which says to me, you don't know precisely the issues involved in demanding a meritocracy. I asked a single question, rather than go into a long shpeel, on the hope that you might notice the problem by answering my question. You answered by refering to some concepts around Freedom of Speech, which made me hopeful, but then turned around and launched a strawman. And so, this long winded shpeel.

#199 ::: abi ::: (view all by) ::: April 11, 2008, 02:56 AM:

James Killus,

I was surprised to find that you have a posting history here, looking at the way you've approached this thread.

As it happens, we don't have very high entry requirements to either the holding of opinions or the expressing of them. For instance, we don't require that people have a very good grasp of group dynamics, local conversational customs, or the psychology of persuasion to post here.

As someone who cares about those fields, can I offer a helpful hint? Instead of trying to kill a conversation that doesn't contain the ingredients you require, why not add them? We'll be much more likely to accept your expertise if you demonstrate it.

#200 ::: Ingvar M ::: (view all by) ::: April 11, 2008, 08:50 AM:

Terry Karney @ #170

I was running computers, off the uninterruptible power and tooke enough interest to ask the building people how it worked (my terminal and my PC were off the reserve power outlet, so I did notice the short brown-out before the inverters kicked in). I was quite surprised by how happy they were to describe all the little niggly details to someone who, strictly speaking, didn't actually need to know it.

#201 ::: Nancy Lebovitz ::: (view all by) ::: April 11, 2008, 10:30 AM:

#155 ::: fidelio :

I wasn't trying to argue that laws are necessarily better than regulations-- it was an honest question.

So you're saying that regulations are, or mostly are, a way of making laws about complicated matters specific enough to be useful?

#157 ::: Melinda Snodgrass :::

That's a very plausible investment strategy. Have all the big scandals and most of the big collapses been from companies that don't provide products or well-defined services?

#161 ::: Graydon :::

I can remember what it was like to be a much more normal middle class person than I am now-- ok, maybe not *very* normal-- and having a libertarian feeling that farm subsidies "to keep food prices up" were sleazy and unaesthetic and giving tax money to farmers for no good reason, but people who would be badly hurt by their food costing 5% more weren't on my radar at all. The folks who are lobbying for, paying out, or getting those subsidies are all a lot better off than I was, and it still isn't obvious that hurting the poor is one of their goals.

(I'm guessing on that 5%-- I'm assuming it isn't a very high proportion because the materials are a very small part of the cost of retail products.)

By the by, there was an interview on NPR today with the author of Free Lunch, and he mentioned that the Enron-favoring regulations haven't been changed.

#176 ::: j h woodyatt :::

I'd be fascinated by anything further you'd like to say about what was going on at Enron.

#187 ::: Graydon ::: (view all by) :::

www.nytimes.com/2008/04/04/world/europe/04poland.html is an article about traditional family farmsin Poland being destroyed by the EU.

****

Tentatively offered, but I think the flexibility and relative secrecy of regulation is part of the problem. It's at least plausible that it would help to have a few big, reasonably clear, stable rules (possibly amendments), though I'm not sure what they should be, and it's crucial that they be well chosen.

It just looks as though it helps a great deal to have a bill of rights so far as freedom of speech and religion goes. On the other hand, adequately defining "fraud" seems to be harder than it sounds.

#202 ::: heresiarch ::: (view all by) ::: April 11, 2008, 11:12 AM:

Bruce Cohen @ 186: "That's simply brilliant. I have to hunt down a a copy of that and find out how many boxes they checked."

As I recall, they checked all of them. Straight up text-book sociopaths.

"It's far worse than that. The case law and regulation history that's grown up around corporate governance requires that executives of corporations aid and abet the sociopathic bent of the corporations they control, or be considered legally mis- or even malfeasant, and open to huge shareholder lawsuits, if not criminal prosecution. We as a society don't just allow evil behavior from corporations, we require it."

That's a good point. Upthread you mentioned Costco--I remember reading with alarm that they are forced to explain every quarter how treating their workers well and paying them a decent wage actually makes more money, by reducing turnover and employee theft.

It's pure fallacy: the bedrock capitalist assumption is that of course treating people like shit makes more money, despite the very clear and reasonable arguments to the contrary. The very idea that "moral" behavior might actually make more money than amoral never even crosses their minds: the idea that long-run benefits may outweigh profits THIS QUARTER in importance is simply beyond them.

James Killus @ 194: "On the other hand, I have researched the doctrines of limited-liability and corporate personhood, while you have said nothing about it other than to imply that ignorance is as valid as knowledge."

Expertise is an important qualification, complete mastery of the subject isn't a prerequisite to holding an opinion on it, yes yes, and back and forth and back and forth. First principles are all well and good, but most cases are decided on the details, and you show no interest in those pesky things. What case have you made, exactly, that the legal personhood of corporations and expertise pertaining to it is so essential to the issue that those without such knowledge must refrain from speaking? I see no such argument; all I can find is your contemptuous disregard for anyone who doesn't share your specialty. If the subject is so important to you, why don't you engage in it, rather than sneering at everyone around you?

#203 ::: Terry Karney ::: (view all by) ::: April 11, 2008, 11:44 AM:

Ingvar: I was younger then, and working swing shift security. I didn't know whom to ask for the niggly details. I did know we had separate sorts of power, and a generator was involved.

This was also more than 20 years ago, so I don't know what changes have been made to those hospitals (and for some interesting niche-security work, hospitals are interesting. The war stories, if nothing else, tend to be of the, "no-shit, there I was" sort. Add a psych ward, and they get almost unbelievable).

Nancy Lebovitz: The problem is legally defining fraud (which is, usually, an intent crime), and of proving a non-human entity was engaged in it.

COmbine those two thing (a need for mens rea, and the proof that someone in the string of events for a corporate action had such intent) and it gets sticky, since most people are so foolish as to speak their intent when they know they are being taped.

#204 ::: fidelio ::: (view all by) ::: April 11, 2008, 12:11 PM:

#201--I'm sorry if that came across as testy--"Regulations are bad" is a meme I keep hearing from people who often have very little idea of how government systems operate, and who are more intersted in complaining about the system than they are in learning how it works so that they can figure what might be done about something that annoys them.

Regulations can be a lot of things, but one of the important, valuable functions they have is to make it easier to carry out legislation. I've had it explained to me that legislation is generally macro and regulations micro, partly because legislation needs to be fairly borad and general just to get passed, while regulations, which have to figure out how to make the legislation work, have to take in all the odd cases and peculiar circumstances involved. Also, regulations can be changed faster than laws, and so where laws need to be more general, regulations can keep up (ideally) with changing circumstances.

I've been working in government too long to pretend, though, that some regulations, just like some legislation, aren't drawn up for other purposes as well, including favoring certain interested parties.



JESR and others with more knowledge of current American agriculture than I have can say more useful things about farm subsidies, but while these were, originally, intended to help farmers generally by maintaining reasonable prices for farm commodities, and were supposed to help the small farmer (say, about the time of FDR, when my grandfather was still growing some cotton), they appear to have become in the current era much more of a favor given to Really Big Agribusiness, while the small farmers get the short end of the stick. Sugar and corn subsidies are both examples of this.

If you compare farm policy and government subsidies in places like France and Japan, they are often much more interested in assisting small producers than the US is. One of the reasons for protests against US efforts to limit other countries' farm subsidies in the name of free trade is that they're seen as efforts to aid large American companies at the expense of small local farmers.

#205 ::: Fragano Ledgister ::: (view all by) ::: April 11, 2008, 12:42 PM:

fidelio #204: Regulations (at the federal level) get written as a result of a process which involves both Congressional committees and federal agencies which deal with those committees. That means that the Congressfolk on those committees are often responding to the demands of their constituents (who may be big corporations writing the cheques that pay for the campaigns or may be voters in their districts). The staffers are often more savvy than the elected officials, and also more tuned in both to the demands of constituents and to the concerns of bureaucrats.

In addition, interest groups of various kinds are lobbying both Congress (specifically, the relevant committees and sub-committees) and the relevant agencies, often not about the laws but about the ways that the regulations are written and implemented.

#206 ::: abi ::: (view all by) ::: April 11, 2008, 12:50 PM:

For the record, I think we've said the same thing enough times to James Killus, considering that the preferred outcome is that he comes back and teaches us more about the implications of corporate personhood in this context.

#207 ::: fidelio ::: (view all by) ::: April 11, 2008, 01:21 PM:

#204--Fragano, thanks for the clarification--since I am well below the regulation-writing level, I know the process is there but I am not able to describe the process as clearly as I should be. I do know the regulations I work under have been changed several times in the past 25 years--sometimes as the result of legislation, sometimes as the result of judicial action, and sometimes after internal review (which would include response to lobbying.)

#208 ::: Fragano Ledgister ::: (view all by) ::: April 11, 2008, 01:24 PM:

Fidelio #207: I just teach this stuff (I swear I've taught the unit on bureaucracy in the intro American government class in my sleep).

#209 ::: C. Wingate ::: (view all by) ::: April 11, 2008, 01:34 PM:

A short form version: regulation is what makes the FDA flexible enough to say, "yeah, Claritin is safe enough to sell over-the-counter" without requiring an act of Congress to that effect.

#210 ::: Terry Karney ::: (view all by) ::: April 11, 2008, 02:02 PM:

C. Wingate: I would add that legislation is what makes it possible for the FDA to deny Pharma the right to make that same determination.

The two go (when well done) hand in glove, to keep the system operating well. Not perfectly, but well.

#211 ::: Teresa Nielsen Hayden ::: (view all by) ::: April 11, 2008, 02:29 PM:

Shan (183), let me introduce you to a local custom. You'll notice that the vowels are missing from your most recent comment. That's not because you came back after Patrick said you weren't welcome. If you'd come back and said something interesting, or informative, or engaged, your comment would have become part of the conversation, and your earlier gaucheries would have been forgotten.

You lost your vowels for being well-practiced at being a jerk. Do you imagine that none of us can read? Or that we've never seen your like before? We can, we have, and we're not interested.

You say you enjoy the topics we discuss, but you've wasted your time here taking cheap shots and playing junior-grade word games. If that's all you have to offer, you're a bore. Now go away.

#212 ::: Terry Karney ::: (view all by) ::: April 11, 2008, 02:53 PM:

Shan: I'm going to go out on a bit of a limb here.

I think you have a lot invested in your worldview, and that worldview is taking knocks from Patrick's entry (and some of the comments here).

I'm going to chalk your responses up to that. Teresa (and Patrick) will too, but not if you can't accept that this is their place. That playing games with parsing how you insulted them (and us; to be honest, as Teresa says, we can read, and this is a high traffic site, those who are here a lot, see a lot of things done in the name of "free and open debate") isn't going to get you brownie points for being clever; it certainly won't get you forgiven.

I think you are a smart fellow (forgive me if I have the gender wrong). I think, on lots of topics, you could be an interesting participant here.

I think you have a few options.

1: Pick up your marbles and go. If it were me, that would be a bitter pill to swallow (esp. if it was just clumsy phrasing and then a defensive reaction to being told off).

2: Ignore this topic, and take part in something else (as abi says, "do you write poetry", Serge would ask if you were up for punishing wordplay. I just wonder what interests you, but have no clever catch phrase to change the subject.

3: Step back, look at this afresh, and start over. It's the hardest course of action. I don't know if I could do it.

In defense of this place (and it can be a hard place to find one's initial footing, the rules aren't the same as they are elsewhere in the web), you haven't been deleted (though you've been edited, and censured). You haven't been banned. You've been told you aren't welcome.

I can't say that's not completely true (I didn't say it, and it ain't my place). I can say that people have been banned, and absent that, you can still stake a place in the ranks of the denizens here.

#213 ::: Serge ::: (view all by) ::: April 11, 2008, 03:05 PM:

Terry Karney @ 212... Or Shan could write pun-filled poetry.

#214 ::: Terry Karney ::: (view all by) ::: April 11, 2008, 03:17 PM:

I shan't venture to guess

the pun-filled poetic mess

Serge would like to see

coming from me

and the rest of the folks

versifing some yolks

in a shell game of points

chasing after the joint's

title as Punster, The Best

#215 ::: albatross ::: (view all by) ::: April 11, 2008, 03:24 PM:

fidelio #204:

I'll admit I can't see a good reason for having farm subsidies at all. I understand why it works politically, but I think you'd find it hard to make an argument for subsidizing small farmers (being pushed out of the market by economic forces) that didn't also apply to all kinds of other businesses. (For example, mom-and-pop hardware stores have been mostly pushed out of the market by impersonal economic forces, just like small farmers. Why weren't they deserving of subsidies to keep them in business?) I especially find it hard to see an argument for maintaining these subsidies for decades, thus keeping a large class of farmers permanently dependent on subsidies to keep farming, spending more money every year on keeping businesses that don't make enough money to support themselves afloat, and paying for that by taxing everyone.

Nancy #201:

Some kinds of farm support programs may lower food prices, but others raise prices. For example, I believe milk prices are kept artificially high as a method of supporting farmers, and tariffs on sugar are maintained to protect US sugar production from cheaper competition. Again, it's not too easy to see how this makes sense in terms of making the country better off, helping the poor, etc., but it's very easy to see why these policies pay off politically.

#216 ::: Serge ::: (view all by) ::: April 11, 2008, 03:51 PM:

Terry Karney @ 214... Omeletting that one pass.

#217 ::: Xopher ::: (view all by) ::: April 11, 2008, 03:52 PM:

As far as Shan goes, I just think a fit hit him.

#218 ::: Doctor Science ::: (view all by) ::: April 11, 2008, 04:05 PM:

More data, same thing: What’s $34 Billion on Wall Street?: (NY Times, Jan 27):

In any other industry, Mr. Kim and Mr. Maheras would be pariahs. But in the looking-glass world of Wall Street, they — and others like them — are hot properties. The two executives are well on their way to reviving their careers, even as global markets shudder at the prospect that Merrill and Citigroup may report further subprime losses in the coming months.
... The quick comebacks of these executives stand in stark contrast to the plight of the hundreds of investment bankers who have received pink slips in the last two weeks. They also illuminate a peculiar aspect of Wall Street’s own version of a class divide.
... To some extent, it is personal: Mr. Kim and Mr. Maheras have a web of relationships with Wall Street’s top executives.
It looks like one of the oldest games of all: It's Not What You Know, It's Who You Know. The complete decoupling of risk and reward is not a bug in this game, it's a *feature*. For the winners, at least.

I'm not sure what kind of -cracy this is. Plutocracy? Aristocracy? BigGuycracy? In any event, it's not "a peculiar version of a class divide", it's the same old class divide made especially stark.

#219 ::: P J Evans ::: (view all by) ::: April 11, 2008, 04:06 PM:

#215

Consider the saying that farmers are the only people who buy retail and sell wholesale ....

They spend months (or even years) in producing a crop, which may be wiped out by bad weather, or by disease or pests, or they may successfully reach harvest, and then have the price fall through the floor because every other farmer in the region has also done that, and they lose money that year. The banks push them to go for stuff that brings in money quickly - they want the money back for the loans they made to get the equipment and the seed. The farmer, if he's unlucky, ends up selling out to a corporation.

#220 ::: Dave Bell ::: (view all by) ::: April 11, 2008, 04:20 PM:

Farm subsidies make more sense when the politicians remember the effects of U-boats.

#221 ::: Doctor Science ::: (view all by) ::: April 11, 2008, 04:23 PM:

albatross @ 215:

I think you'd find it hard to make an argument for subsidizing small farmers (being pushed out of the market by economic forces) that didn't also apply to all kinds of other businesses

The traditional argument is that food is special because everyone needs food to *live*, so (a) monopolies are especially dangerous, and (b) letting the supply be controlled by other countries is especially dangerous.

In the case of France, at least, one can see an additional consequence of small-farm supports: French food. Most food ingredients just aren't as tasty when they've been mass-produced and travelled hundreds or thousands of miles. To get French food, you need local ingredients, and that's part of what French agricultural policy has gotten them.

Of course, this is doubly untrue in the US, where (a) people historically don't care how the food tastes, and (b) ag policy supports the food that travels best (grains, sugar, butter). But the local harvest idea really does mean something.

#222 ::: Terry Karney ::: (view all by) ::: April 11, 2008, 04:39 PM:

Doctor Science: It's not a ocy, it's an archy. The oligarchs decide who wins, and who loses.

They don't care about anyone else, because it's all about keeping score amongst themselves. After that, it's a case of FI, IGM.

That this could lead to a system failure isn't factored, because the game is seen as independent of the whole.

#223 ::: Michael Weholt ::: (view all by) ::: April 11, 2008, 04:55 PM:

#220 Dave Bell: Farm subsidies make more sense when the politicians remember the effects of U-boats.

Is this a secret message? Will it trigger an act of espionage? I know you are a gentle soul so at least I feel sure no one's going to get hurt.

#224 ::: C. Wingate ::: (view all by) ::: April 11, 2008, 05:19 PM:

re 147: Let us recall, Clinton balanced the budget with the help of a Republican-controlled congress. Divided government is your friend.

I suspect that there is some degree to which any upper-middle person with an IRA is to some (perhaps slight) degree complicit in the market's problems. Let's start with me. Back in the junk bond days, I made some nontrivial money off that market. I was a young unmarried programmer dude, and a friend sold me a high-yield bond fund. I held onto it even after that market was brutally contracted, and even then I still ended up making money, a large part of which went towards paying for a nice wedding reception and honeymoon.

Was I abetting the junk bond market? Well, yes, I was. Was I aware of it at the time? Not really. But all of us with IRA, 401-K, and Keogh plans are putting pressure on the market. Obviously we don't have the destructive powers of the big players, but we aren't utterly pure either.

I have to confess to being dismissive of the abstract criticisms of capitalism. Not that I think that highly of Objectivism, but if the Taggart Transcontinental is a family business in the hands of Jim Taggart, that doesn't make responsible action appear. Organizational size alone, regardless of structure, tends to produce the alienation that relieves people of what moral qualms they have, and allows the incompetent and unethical to hide to a greater degree.

#225 ::: C. Wingate ::: (view all by) ::: April 11, 2008, 05:29 PM:

re 214: I suspect part of the logic (which made more sense seventy years ago, to be sure) is that agricultural commodities (being commodities) tend to run at an extremely low margin, so it's very easy for a bad year to knock people out of business. Then the prices go up anyway, fueled by shortages instead of the government. Like any established program, it's going to get bent out of shape somewhat, but there you have it.

#226 ::: SamChevre ::: (view all by) ::: April 11, 2008, 05:32 PM:

One of the better arguments for subsidizing small farmers (or, more precisely, certain activities which small farmers usually engage in) is to maintain the countryside as desired. A lot of European farm subsidies go to ensuring that there are meadows with wildflowers in the Alps and Black Forest, and so forth.

#227 ::: Patrick Nielsen Hayden ::: (view all by) ::: April 11, 2008, 05:39 PM:

John Mark Ockerbloom, #109: "One of the more noticeable forms of the double standards in trade agreements described as "free trade agreements" is the insistence on tighter and tighter controls on "intellectual property" in many recent agreements, particularly those involving the US. This often by the same people who proclaim that insisting on standards for protecting workers and citizens' environment are against the spirit of free trade, while protecting Mickey Mouse and extending the scope of patent monopolies is crucial to it." Dean Baker is particularly good on this common hypocrisy. Also on the observation that the things we know about the bad effects of monopolies don't stop being true simply because we've decided we have good reasons to grant certain kinds of monopolies, such as patent and copyright. The dislocations and perverse incentives are still there; the people holding these specialized charters don't miraculously become immune to the corruptions and moral dangers to which monopolistic privilege tends.

Micheal Weholt, #174: "And I just want to take this opportunity to note, as others must surely have been doing lately, Maureen McHugh's amazing book, written like, what, 15 years ago, well before we all had witnessed The End of History, China Mountain Zhang." Definitely one of the best books I ever had the good luck to help publish.

heresiarch, #182: "I don't think we need to go as abstract as 'markets as a whole' to find malevolent, inhuman AIs: they are far more pedestrian and well-known than that. There is a book I wish someone would write called I, For One, Welcome Our New Overlords: How Giant Robots Made of Paper Took Over the World And We Didn't Even Notice. Which is to say: corporation are AIs with super-human capabilities--their programs are run on paper and human brains, but they are, both legally and functionally, artificial people." Kind of what I was trying to say.

Doctor Science, #218: "It looks like one of the oldest games of all: It's Not What You Know, It's Who You Know. The complete decoupling of risk and reward is not a bug in this game, it's a *feature*. For the winners, at least." Right, and this is why I wonder at people who complain that the criticisms of capitalism being batted around here are "abstract." When hundreds of millions of Americans increasingly suspect that the game is rigged in favor of a tiny elite, that's not abstract, that's a clear and present problem.

#228 ::: Doctor Science ::: (view all by) ::: April 11, 2008, 06:12 PM:

PJ Evans @219:

One of the great benefits of Community Supported Agriculture is that the farmer gets the money in the spring, when ze needs it, and then the risk that a particular crop will fail gets spread across all the members, not just dumped on the farmer. I've been a CSA member for about 15 years, and you really get an old-fashioned attitude toward the weather -- it's *personal* when an early frost means no more basil, or too much rain at the wrong time means no carrots this year.

I strongly recommend this directory to find a CSA near you -- though shares are mostly gone for the 2008 season as the popularity of "eating locally" increases.

#229 ::: don delny ::: (view all by) ::: April 11, 2008, 06:12 PM:

PNH at 227 wrote:

Right, and this is why I wonder at people who complain that the criticisms of capitalism being batted around here are "abstract." When hundreds of millions of Americans increasingly suspect that the game is rigged in favor of a tiny elite, that's not abstract, that's a clear and present problem.

Right. I happen to gain some ancillary privileges as the result of that elite, though. I think that it might be more accurate to say that there are multiple nested stacked (?) layers of elite, each smaller than the one supporting it (or parasitizing itself on it). This is why it's hard to disassemble the system: anyone with power enough to break off a piece usually has some assets tied up in it.*

For example, regular middle class and blue collar suburban folk ordinarily wouldn't touch the idea of 'leverage' with a ten foot pole. Buying something you can't afford to pay for isn't really the regular folk way to do things. However there is a class of property that can't be bought without leverage - houses. This is really, really convenient for those 'above' who are pushing paper. (And it's self-inflicted on multiple levels, since the folk selling the mortgages are in the same social class as those buying them.) Meanwhile, the lure of easy money, poorly understood tax write-offs, etc., keep people playing.

I suppose someone could object, and say that buying cars is the same kind of thing, but those can be had outright. (Though it was a neat trick that the oil & car companies pulled, getting municipalities to get rid of streetcars. That worked out really, really well for the financing divisions of the car companies.)

*or in my case, I know how to game the system**, but if I successfully convince everyone to do the same, it stops working. This is a moral quandry for me.

**okay, only parts of the system. And like everything else, it's easier to game if you already have some resources. So, it's totally not fair.

#230 ::: Michael Weholt ::: (view all by) ::: April 11, 2008, 06:15 PM:

#227 Patrick Nielsen Hayden: ...Micheal Weholt, #174:...

Ha! Nailed it! Caught Patrick Nielsen Hayden in a Common Misspelling! I want it added to your Spelling Reference! I'm amazed the number of times I see people spell Michael that way.

What's that? It was just a slip of the fingers? Like "teh" before it was teh? Damn...

#231 ::: Patrick Nielsen Hayden ::: (view all by) ::: April 11, 2008, 09:05 PM:

I misspell stuff all the time. This one I'm blaming on the unfamiliar keyboard of my new Macbook.

#232 ::: Michael Weholt ::: (view all by) ::: April 11, 2008, 09:34 PM:

Oh, well, nobody said anything about a MacBook. If it's a MacBook, then all is forgiven. My MacBook is the best piece of tech I ever bought. Lemme know if you need any advice on running Windows VMs.

#233 ::: P J Evans ::: (view all by) ::: April 11, 2008, 09:45 PM:

Dr Science, that might work well for farmers growing fruits and vegetables, but for cotton and field corn, or anything else intended for further processing (like, say, cucumbers or chilis or wine grapes), not so much. (These don't have to be 'Agribiz' corporate farms, but they won't be five or ten acres either.)

(Field corn is corn that's left to grow until it's fully developed. Gets turned into cornmeal, animal feed, and ethanol.)

#234 ::: Greg London ::: (view all by) ::: April 11, 2008, 11:59 PM:

Re: farm subsidies.

I'm not an economics professor. I'm not even slightly cognizant of the who economics process. I've tried to put money in a 401k when I can and pay down my credit cards when I can. I'm not even remotely qualified to tell you if the government paying a man not to grow corn or paying a man to milk cows is overall making things better or worser.

Which isn't to say I don't have an opinion, at least as it relates to farming. And having grown up on a farm, and having the bank foreclose on that farm, and having come from a farming community that is evaporating, I've got a few years of observations, in the field so to speak.

And if there is a pattern to be divined from those observations, it is these:

Those family farms folks keep wistfully talking about? They seem to be dying.

Those corporate farms, that people keep refering to, while playing evil sounding music on their pipe organ? They seem to be growing.

Economically, I can't even fathom if family farms are even sustainable today. This is one of those things where it feels to me like we may have moved into a different "Zone" like from A Fire Upon the Deep. Something is falling apart, and it may very well be that the algorithms that allowed family farms to sustain, just don't work anymore now. and the only way to survive is to change out the hardware and convert to corporate farms.

I don't know if that's the case or not. I'll let the experts worry about that.

But I can tell you one thing, with a fair amount of certainty. The total number of white collar folks with absolutely no farming experience, who then drop their day job, convince a bank to loan them the millions of dollars to buy a farm, buy the machinery, buy livestock, and take a stab at plowing fields and putting food on someone else's table, can be tallied up to a net null. If any of my coworkers decided to quit the cubicle and take up driving tractor, I'd seriously consider using a dart gun on them until I could get them into a straightjacket.

Which is to say that if the family farm dies, you can't undo it. It isn't a career that people choose to go into, it is a career that some people were born into and decide to stay. If that dies, you can never revive it. Ever again. And as parents die off, slowly but surely, the children are not taking up the plow.

If you happen to have the power to divine what's good and right and your crystal ball says corporate farming is the right way to go, then you should call for the end of subsidies.

But if some little voice in the back of your head is signaling a warning, if you happen to have the odd sense that a canary in some metaphorical mine has stopped singing, then ya damn well be supporting doing something about it.

Christ, people are wringing their hands over the idea of Rupert Murdoch's ever expanding borg-like media empire taking over the airwaves. What in hell do you think it will look like when McDonald's, Burger King, and Wendy's controls an ever expanding empire of farmable land? Is it possible? Again, I don't know. But it makes my spidey sense tingle.

Are subsidies the solution? Hell, I don't know. See my first paragraph regarding my lack of economic credentials. But I'm tired of hearing people who have zero gorram experience shoveling shit twice a day for a living, and zero experience plowing a field and hoping to hell it makes it through the droughts and makes it till fall harvest, make noises about the evils of corporate farming while knocking farm subsidies at the same time, and not bringing up any other solution to the obvious, albeit glacial, collapse of the family farm.

You're talking about a slow process by which people are born into the occupation, spend their childhood as their parents' apprentice, eventually work their way up, and take over the business when Mom and Dad either die or go to the retirement home. If subsidies is the only way to sustain that generational process spread over decades, and if family farms is your final goal, then guess what? You got subsidies.

Ah hell, I don't even know enough about the economics of it to give a decent rant.

#235 ::: Doctor Science ::: (view all by) ::: April 12, 2008, 12:37 AM:

Greg @ 234:

It really, really depends on what they're farming and where. I'm not far from Princeton, NJ, and I know a number of people who have successfully gone into "boutique" farming from a non-farm background. The CSA has interns and apprentices every year. A bunch of my middle-schoolers friends are in 4H, just like the farm kids were when I was growing up -- but these aren't farm kids, they're not born into farming -- they're learning it just as the kids on the robotics team are learning engineering, or the kids in woodworking classes are learning that trade.

It's definitely the organic farmers who are the real cutting edge, here: they're developing a model of farming as a *career*, not a birth right (or curse).

As PJ says, it works for unprocessed fruits & veg, and for high-value items like organic dairy products and wine. And it also works here because the land is so valuable that farming *has* to concentrate on high-value items -- though there's some talk about people experimenting with field corn this year.

#236 ::: Greg London ::: (view all by) ::: April 12, 2008, 01:24 AM:

I've never seen a botique farm. We had a few hundred acres and we were considered small. Maybe botique farming is the new algorithm that works in today's "Zone".

I do wonder if a botique farming era would produce enough wheat, oats, and barley for everyone's flour, enough corn for everyone's sweeteners, enough beef, pork, chicken, and turkey for everyone's meat.

I don't know the statistics, but I seem to recall that wheat farms in Kansas would not uncommonly be thousands of acres. These might be extended family farms. A guy in my grade school/high school class had an extended family that spread out over a couple thousand acres.

I suppose it is possible that by specializing in one crop or one kind of livestock, a person could learn enough to quit their day job and take on the troubles. Seems to amplify the risk a bit too, though. My dad was diversified. He had several different crops, rotated through the fields to keep the soil working, in addition to beef and hogs. It wasn't an all your eggs in one basket sort of thing. And although he got foreclosed on, I think it had to do with overinflated land prices combined with banks eager to loan out money followed by a land-price freefall that did my dad in, along with most other farmers, rather than one season of bad corn.

If botique farming can replace family farms, then go ahead and get rid of subsidies. I'm not entirely convinced it will work, but that's a gut opinion, not any sort of expert rendering.

But if botique farming isn't a full replacement for the family farm, then the corporate farm is the only way to pick up the slack. And if the Zone won't support family farms naturally, on a level that can produce enough wheat for everyone's daily bread, then it's either some artificial support, or acknowledge the inevitable extinction and deal with the consequences.

I'm having a bit of an issue with people wringing their hands about corporate farms, while at the same time cutting down the only artificial support that might have a chance of helping keep family farms in place. And offereing nothing to replace it.

The implication is that the Zone will support family farms just fine thank you. And that's not what I've been seeing over the years. The "midsized" family farms, a few hundred to maybe two thousand acres, doesn't work in today's Zone. When the parents die, the kids eitehr sell to housing developers or sell to a family-semi-corporate farm that expands into a full corporate operation with a couple to several thousand acres.

And I don't think botique farming will fill the country's breadbasket. I might be wrong about that, but that's how it looks to me.

So, if that's the case, then either welcome your new corporate farming overlords or acknowledge that some form of artificial support is needed to keep family farms in place and deal with it.

Look, it just so happens that for the last several hundred years or so, the "Zone" wouldn't really support professional writers who just wrote and made a living off their works. So an artificial support, called copyright was invented to alter the algorithm so that professional authors could still function in the Zone.

I've had the sinking feeling for some time now that the current Zone does not naturally support the Family Farm entity. If an artificial support called "Subsidies" is what is needed to keep them in operation, and if botique farming won't be enough, and corporate farming would be Rupert Murdoch but with Soylent Green, then gawdamnit, why the hell are people whinging so much about subsidies.

Copyright isn't "natural" either. It's an artificial support system that allows people to exttract money where market realities would normally not allow them to extract money. That doesn't make copyright bad.

Why the hell is farm subsidies so different that people get off making it "evil". Because it's making someone rich? To me, that's the welfare queen driving a cadillac myth, just in a different suit. I never saw no farmers rolling in the dough. I did see a number of them get out, or be forced out, of the business.

This burr's been under my saddle for a lot longer than I've been around Making Light, so I'm being more cranky than anyone here deserves. But, damn.

#237 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: April 12, 2008, 01:29 AM:

heresiarch @ 202

Credit where due: that was Bruce Baugh who mentioned CostCo. But I would have said the same thing; I've been a CostCo member for more than 10 years and I've shopped at Wal-Mart once in that time*. One of the reasons for staying a member at CostCo is that I really appreciate and respect their corporate culture and ethic, and I want to reward it as much as I can.

Maybe it's a bit extreme, but some of the stories I've heard about Wal-Mart make me feel the kind of frustrated rage I felt reading "The Dead" by Michael Swanwick.**

* an emergency situation: we were in Florida for my older son's wedding and needed to buy a lot of supplies for the reception and another memory card for my camera, and CostCo was nowhere to be found.

** A short story in which we see just how far down into hell uncontrolled corporate greed can force labor relations.

#238 ::: Terry Karney ::: (view all by) ::: April 12, 2008, 01:38 AM:

Greg: The "family farm" is dying because we are letting it die, even encouraging that death. Part of the reason it costs millions of dollars to buy farmland isn't the inherent value of it, but rahter that Archer Daniels Midland can outbid me.

I know a lot of "small" farmers on the Central Coast. I bought my carrots, and lettuce and artichokes, radishes and the like from them. The Hayashi's are hanging on (best celery in the state, so far as I can tell). I know, as well, that they have to work. That the farmers selling oranges to me in Pasadena are driving all night to get it to me.

I know a guy who raises cattle, and keeps grapes. He grows his own hay. Most years it's not fit for anything but the cows.

Why is it so hard? Because we've said bigger is better. Food ought to cost more (so should gas, and telephone service, because we all ought to be making more money; and we used to), that's all part and parcel of the same problem we've been talking about.

The rules are such that the corporations are in it for the short haul, and the rules favor big organisations which can shave ten cents off each bushel and accept a loss this year; because the banks will extend their loans.

So I buy meat (for more money) from locals. The same with my lamb and pork. If enough people are willing to pay the premium to the Hayashis for their celery, the family farm can make it.

But we don't. We have supermarkets and the cheaper veggies are "OK" and the better veggies are expensive (because a "vine ripened" tomato at most markets is still a pathetic excuse for the real thing.

And lots of us have no choice, because we aren't paid enough money to afford the good stuff.

#239 ::: Randolph Fritz ::: (view all by) ::: April 12, 2008, 01:48 AM:

"Those family farms folks keep wistfully talking about? They seem to be dying."

There's another failure of capitalism, if you like; it's a lousy way to run agriculture. I have seen no reason to believe that industrial agriculture is sustainable; it depends way too much on oil, monoculture, and risky genetic engineering practices. (Risky to the food supply, I mean; the direct risks to humans of genetically engineered foods seem to be low.)

#240 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: April 12, 2008, 02:00 AM:

We're in the final approaches to a new paradigm of industrial and energy production, in which some percentage is decentralized because that makes good economic sense. It's practical now, if not really cheap yet, for the average homeowner to generate from 25 to 50% of the electric power they use, either from solar power, geothermal energy, wind, or high-efficiency fossil fuel generators (fuel cells or small gas turbines forex). Manufacturing of some items as one-off prototypes with the same business model as POD is just starting to happen, and, because of long-tail economics is almost guaranteed to continue growing for quite some time. And computing is decentralizing faster than anything else.

My gut feeling for the last ten or twenty years has been that if we get time to do it*, that food production and waste disposal will follow a similar trend, just later on, because of the technological and economic obstacles. Biological engineers are finally starting to consider tissue-culture meat a viable technology for the medium-term, and much of the waste disposal and remediation techniques we're talking about for the future are biological in nature. I see no reason why food production for basic nutrition needs to depend on crop yields in the low tons-per-acre, when those techniques use less than 1% of the incident sunlight, and are so thoroughly open-loop in terms of scarce materials like phosphorus, sulfur, and even nitrogen.

The future may well be as decentralized as the family farm, but I think it will obsolesce both that and large-scale agribusiness.

* that is, if the world economy can just keep tottering along without falling over, and we can keep from killing ourselves off with climate change, pandemics, or war.

#241 ::: heresiarch ::: (view all by) ::: April 12, 2008, 02:13 AM:

C. Wingate @ 224: "re 147: Let us recall, Clinton balanced the budget with the help of a Republican-controlled congress. Divided government is your friend."

In principle, yes. It's a simple competitive model: if two people are competing to offer the consumer better service, the consumer benefits. However, in the case of U.S. government, one of the competitors is being dishonest: Republicans don't want to offer me better service; in fact, their philosophy is explicitly built on the idea of offering me as little service as possible. Thus competition between them and Democrats rarely if ever leads to better service. Arguments between advocates of cake and advocates of death rarely lead to better cake.

#242 ::: Greg London ::: (view all by) ::: April 12, 2008, 02:41 AM:

Terry@238, well, I'm specifically talking about folks who call for the end of farm subsidies (possibly making "welfare farmers driving cadilac" type comments) while simultaneously bemoaning corporate farms.

If you don't vote, you lose the right to complain. If you vote to invade Iraq, you lose the right to complain about the occupation. If you support the removal of all government subsidies to farms, then you lose the right to complain about the inevitable incorporation of america's breadbasket.

Randolph@239: I have seen no reason to believe that industrial agriculture is sustainable;

Yeah, neither is professional writing sustainable in a world without artificial props like copyright. The lack of natural sustainability does not mean artificial supports cannot be implemented.

Bruce@240: Biological engineers are finally starting to consider tissue-culture meat a viable technology for the medium-term

Well, it won't be in my lasagna tonight. And until we can realistically expect to produce the untold tons of meat this way, I'm not sure it really affects what we do about the real food production mechanisms we have now.

#243 ::: heresiarch ::: (view all by) ::: April 12, 2008, 02:44 AM:

On farm subsidies:

albatross @ 215: "I'll admit I can't see a good reason for having farm subsidies at all. I understand why it works politically, but I think you'd find it hard to make an argument for subsidizing small farmers (being pushed out of the market by economic forces) that didn't also apply to all kinds of other businesses."

I held a similar position for many years. If small farms can't compete with large corporate farms, I reasoned, then their era was simply over and it was time to kiss them goodbye. I've since changed my mind.

The thing is, a great part of the competitive edge that massive corporate farms have over family farms are pernicious, rather than beneficial. One advantage is raw size, of course. The deep pockets of corporate farms allow them to weather bad years, leverage production costs downwards, and otherwise remain financially solvent. This doesn't seem like a bad thing in and of itself, but, uniterrupted, it inevitably arcs towards monopoly, and all of its accompanying problems. (See also Greg London's 234)

The second big problem with corporate farms is that a great deal of how they make profit is by externalizing, in the economic sense, the costs of their production. Corporate farms tend to rely to a much greater extent on monoculture, which generally requires greater pesticide and fertilizer usage. The environmental degradation that results from those practices isn't paid by the corporation, creating a seemingly cheaper product that is, in the long run, far more expensive to society as a whole.

Now, plenty of family-owned farms engage in the same sort of environmentally destructive behavior. But corporations, due to their profit-obsessed programming, are unable to do anything else. Family farms at least offer the opportunity of creating eco-friendly farming techniques. A lot of these methods, like growing multiple, mutually-beneficial crops on the same plot, don't scale very well up to corporate sizes. Even assuming a moral revelation on the corporation's part, they require an attention to detail and intimate knowledge of the area that doesn't scale well. Simply put, the family(-size) farm offers far more potential for environmentally sound farming methods than the corporate model. That might change in the future, but I'm not holding my breath.

Greg London @ 234: "Economically, I can't even fathom if family farms are even sustainable today. This is one of those things where it feels to me like we may have moved into a different "Zone" like from A Fire Upon the Deep. Something is falling apart, and it may very well be that the algorithms that allowed family farms to sustain, just don't work anymore now. and the only way to survive is to change out the hardware and convert to corporate farms."

The equation I assume is something like this:

F*M=P

F=number of food-producers

M=number of people each food-producer can feed

P=total population

For the bulk of recorded history, M has been going up. (Observation bias: having a recorded history is heavily dependent of having an M value that is greater than one.) The growth of M has followed an exponential curve: M hovered just above 1 for most of prehistory (a tribe could support maybe one or two non-food producing specialists, but no more), exploded upwards with the invention of agriculture, stagnated for a bit, and then has increased rapidly for the last several centuries, as methods of industrial production have been applied to agriculture. This has lead to an assumption on the part of most people that food costs will always go down. I think we've come to a discontinuity in that curve: food production capacity has hit a limit. Most increases in food production in the past few decades have been illusory: we've just been unaware of the real costs. As those costs increasingly hit home--soil erosion and depletion, algal blooms from fertilizer run-off, etc.--food prices are going to bottom out, and maybe even rise. I think it's a similar case to the one Charles Stross discussed on his blog a while back, about the increases in transportation speed: everyone assumed exponential growth, and tried to force reality to fit that model, when in fact increases petered out.

I think the M we have been assuming is, taking externalities into account, too high. I think we may have to accept that as a result, F is going to have to increase.

#244 ::: Dave Bell ::: (view all by) ::: April 12, 2008, 04:18 AM:

Some of the increase in food per farmer has come simply from replacing men (and horses) with machines. My father tells me that if you farm with horses instead of tractors, you need half the farm to support the horses. And by that time farms were already importing fertiliser. By importing fuel for tractors, and producing food for humans instead of horses, there was a net saving on shipping space.

On-farm biofuel production for tractors might be less demanding than feeding horses. A horse needs feeding all year.

#245 ::: albatross ::: (view all by) ::: April 12, 2008, 04:21 AM:

Randolph #239: So, capitalist countries seem to have pretty low food prices, very little hunger[1], pretty much no famines. This doesn't really track well with the idea that capitalism[2] isn't consistent with running farms well.

[1] Poorer people in the US tend to be more overweight than wealthier people, which is not the historical pattern at all.

[2] By which I guess we mean private ownership of farmland, with supplies bought and products sold on a more-or-less free market, albeit in practice with various subsidies, price supports, restrictions, and tariffs.

#246 ::: albatross ::: (view all by) ::: April 12, 2008, 05:05 AM:

Terry #238: So, is it okay if most people make a different choice than you do about these things? I mean, I understand you'd rather have the really good but more expensive tomato. If I'd rather have the cheaper, just "okay" tomato most of the time, do I get to make that choice? Because it seems to me that an awful lot of people prefer the cheaper/more convenient food to the better food, as demonstrated by what they buy when they have the choice. And this seems like it drives a lot of the future of farming. If people mostly prefer the cheaper food, then farming will likely be optimized toward making cheap food.

I'm not sure whether I buy the idea that smaller farms will always produce higher quality food, though I'll admit I'm outside my competence here. Having food that came 30 miles by truck to the farmers market yesterday is almost certain to be tastier than food that came 3000 miles by train last week, but that has only a loose association with farm size.

More generally:

I'm also pretty skeptical that smaller farms will always be more environmentally friendly, as heresiarch suggests. I know there are issues of concentration with (in particular) pig farms, where when they scale above a certain size, the waste disposal gets a lot harder. But I think most farms leave a lot of pesticide[3] residue, and that farms with better equipment (like the high-tech sprayer thingy connected to GPS, which I think is much more likely to be available to a larger, richer farm) can be more efficient about spraying pesticides. To the extent that there are expensive measures needed to comply with environmental regulations, bigger farms (with lower costs otherwise) will almost certainly be better able to comply with those.

Maintaining the existence of small family farms looks to me to be independent of ensuring a future food supply, because the whole thing about the small farms is that they don't perform very well in terms of producing a lot of food cheaply. They spend more per bushel of wheat or whatever to produce it. If the goal is to ensure that we don't somehow run out of food, I don't think subsidizing small farms that are marginal is much of a solution. (There's also nothing like a prospect of running out of food at present.)

Similarly, my understanding is that a lot of farms are "corporate" in the sense that my grandfather's farm was corporate--he incorporated for (I think) tax and liability reasons. I don't think there's any risk at all, at present, of some kind of monopoly on soybeans or corn or wheat or whatever.

I think Greg is right that family farms are going away because they're not economical anymore, and that they probably won't come back anytime soon. But this seems like a part of life in a world with technological, economic, and social change, right? We honestly can't afford to maintain every way of life that has ever existed, or even been admirable and nice. Attempting to do so will either block progress or waste a lot of money, or both.

For example, my wife worked for years cleaning up superfund[1] sites in Missouri. One of the most common kinds of sites were coal gas sites, in which city gas (for gaslights and stoves and such) was made from coal. That's a whole industry, which was once surprisingly widespread, and has gone away. Lots of people had good jobs, a nice way of life, and it's all gone. And that is a good thing. She also worked on one site which had been an ice plant[2]. Again, a whole industry which is almost gone. To use a more current example, nearly all of the old mainframe computing industry went away. There's a huge computing industry, much bigger than existed in 1970, but it's quite different, most of the important companies from 1970 aren't important now, and the nature of computer jobs has changed pretty radically.

We don't (and can't) keep all those industries static, or subsidize a few coal gas/ice plant workers for old times' sake. It's hard to see why doing that for family farms makes more sense. This isn't a feature of capitalism or markets, so much as a feature of technological change.

[1] Typically, these are sites where the original polluting company is long since bankrupt, or maybe was bought a century ago by a completely different company, doing a different business.

[2] I have no idea how that led to toxic waste....

[3] Apparently, the common heavy-metal pesticides in common use until the 50s have left a lot of ground contaminated to this day; I know there have been cases where carrots grown on old orchard land had high levels of lead from the old lead arsenate pesticides used 50+ years ago.

#247 ::: heresiarch ::: (view all by) ::: April 12, 2008, 05:06 AM:

C. Wingate @ 224: "Was I abetting the junk bond market? Well, yes, I was. Was I aware of it at the time? Not really. But all of us with IRA, 401-K, and Keogh plans are putting pressure on the market. Obviously we don't have the destructive powers of the big players, but we aren't utterly pure either."

One of the strongest enforcement mechanisms of corporate amorality is the natural tendency of distant, uninformed investors to ignore any factors beyond the one that affects them personally: profitability. One of the most obvious forms this takes is minority shareholder lawsuits--companies are legally liable for not making every penny they can.

This suggests a simple fix to me: pass a law exempting companies from shareholder lawsuits when the reason for not sucking the market dry of every last cent is environmental, or humanitarian, or whatever. From the business owner's perspective, how hard would it be to write into the incorporation document "the goal of this company is to make money for its shareholders, except when doing so would conflict with the First Law have deleterious effects on human beings or the environment"? While Wall Street borkers wouldprobably avoid such a company like the plague, I think there is enough of an interest in investing ethically among actual human beings that it would be doable, if not the most profitable option (natch).

What frustrates me so much is that it's not that we couldn't create a morally sound capitalism, it's that we haven't ever tried.

#248 ::: Terry Karney ::: (view all by) ::: April 12, 2008, 05:08 AM:

heresiarch: The tribe could support a largish number of non-producers, until agriculture Even today, when the few hunting/gathering societies have been pushed to marginal lands, the spend less time per week "earning" their food than the "wealthier" people around them.

#249 ::: heresiarch ::: (view all by) ::: April 12, 2008, 07:38 AM:

Terry Karney @ 248: "The tribe could support a largish number of non-producers, until agriculture Even today, when the few hunting/gathering societies have been pushed to marginal lands, the spend less time per week "earning" their food than the "wealthier" people around them."

I would be very surprised to find that this is true. According to the various online sources, one American farmer currently produces enough food to feed 130 people. (The figure was 25 people per farmer at the 1950s, and 2.5 people at the turn of the century.) That yields food-producer to total population ratio of .0077. Less than one percent of society can produce enough food for the rest. What hunter-gatherer society can match that?

What is the source for your claim? I'd be very interested in seeing it. If you are right, I'll have to adjust a great deal of my understanding of the world.

If you meant "less time per week earning their income," I'd believe that. But that's a statement on the consumerist nature of modern* society, not on the efficiency of food production.

*"Modern" being widely defined here.

#250 ::: Greg London ::: (view all by) ::: April 12, 2008, 10:21 AM:

albatross@246: I think Greg is right that family farms are going away because they're not economical anymore, and that they probably won't come back anytime soon. But this seems like a part of life in a world with technological, economic, and social change, right? We honestly can't afford to maintain every way of life that has ever existed, or even been admirable and nice.

but again, the issue comes down to how we interpret it.

The first interpretation is that farmers are like monastic scribes and corporate farms are the printing press and subsidies are a pointless exercise. printing press is all good. scribes don't really provide any advantage over presses. And subsidies are simply attempts at economic nostolgia.

The second interpretation is that farmers are like professional authors and corporate farms are the natural state of affairs where copying works is easy and subsidies are like copyright. professional authors are a benefit, but can't make a living directly off their works if everyone can easily copy those works, and subsidies are like copyright law, a legal prop that allows authors to make a living where the natural conditions would discourage it.

If poeple bemoan corporate farms, then they're using the second view. If they bemoan subsidies, then they're using the first view. If they do both, then something isn't lining up.

#251 ::: Nancy Lebovitz ::: (view all by) ::: April 12, 2008, 10:55 AM:

A little libertarian theory here: The reason big farms are doing better with subsidies than small farms are is is that big farms have a huge advantage at getting subsidies.

This may be amplified by legislators (see my link at #201) who don't know or care how seemingly reasonable rules (no hand-milking) affect small farms.

Sidelight about how do we all get fed: See Michael Pollan's _The Omnivore's Dilemna_. It's a fascinating book, but even mass-produced organic (like you get at Whole Foods) isn't good enough for him. He wants everything to be grown on small organic farms. Who knows? It might be feasible, but what's interesting is that he doesn't consider whether it is or not. He just assumes that if he likes it, he doesn't have to think about whether it's possible. He certainly isn't thinking about people who are already having trouble affording mass-produced food.

#252 ::: P J Evans ::: (view all by) ::: April 12, 2008, 10:59 AM:

As far as I know - it isn't the small farmers who are being subsidized. They get some, yes - mostly things like keeping acreage unplowed to provide habitat for, say, the local pheasants, or tax breaks to keep them from selling to developers. I understand most of the subsidies really do go to big farmers, who have lobbyists and lawyers and can buy or maneuver their way around and through requirements. ('Agribiz' does things like breaking a 4000-acre farm into several official pieces, each with a different official owner, but all run by the same person. Legal, but not the intention of the guys who wrote the rules.) Then there are things like subsidies for the honey producers - there was a big fuss a few years ago about ending that, although it was something like $20 million/year for the travelling beekeepers, a drop in a very large bucket.

Greg, one of my uncles did just that, left a job as a business executive (VP and chief engineer, actually) to become a farmer. He did go broke, but not for lack of knowledge of farming. One of the reasons he did it was that he was tired of dealing with the MBAs and beancounters who were making his corporate life hell (they proceeded to run that business into the ground, although it still legally exists).

#253 ::: Nancy Lebovitz ::: (view all by) ::: April 12, 2008, 11:00 AM:

Copyright is a relatively simple rule. Subsidies and regulation aren't. This might suggest a reason why authors haven't been forced off the market the way small farmers have been.

Can you imagine what it would be like if it were considered urgent for the government to support and regulate small art producers? Not pretty, I suspect, though the idea might be good enough for some satirical sf.

#254 ::: P J Evans ::: (view all by) ::: April 12, 2008, 11:02 AM:

Oh yeah: I saw a headline this morning that Les Moonves, the head of CBS, is going to get $63 million this year, even though CBS is losing money. I hope some of the shareholders make a lot of noise about it.

#255 ::: Dave Bell ::: (view all by) ::: April 12, 2008, 11:03 AM:

albatross, pesticides are expensive. Anything that can cut their use seems to get carefully looked-at by farmers. But the pesticide manufacturers don't like that, and they're more than big enough to influence regulators so that the improvements are never quite legal.

For instance, CDA. Most pesticides are mixed with water and sprayed through hydraulic nozzles. Typically, 200 litres of water per hectare, with as little as 50 grammes of pesticide (and that isn't the pure active ingredient. And the hydraulic nozzle produces a range of droplet sizes. If the droplets are too small, they evaporate before they hit the target. Most pesticides are aimed at the plant leaf, and if they're too big they bounce off, while the nature of the leaf surface also makes a difference.

Controlled Droplet Application produces a much narrower range of droplet sizes, so more of the pesticide reaches the intended target. Which means you can use less per hectare. But the regulations say you can't use less than the manufacturer's trials have shown is neccesary. And the manufacturers didn't use CDA, and didn't want to spend more money on older pesticides.

And then you need a different qualification to use a CGA sprayer.

As for GPS control, which includes yield mapping, so that you know which places in the field will respond to higher inputs of fertiliser and pesticide, you could only get the yield mapping with a new combine harvester. Which is big money. GPB 100,000 the last time I looked. Then you need to figutr out whether the yield variations are because you're not using enough fertiliser, or whether there is some other reason, such as the wrong amount of rain.

My brother, the statistician, did explain how it could be done: it needs the field to be split up into smaller patches, given different treatment, and possible producing grain of such variable quality that it can't be mixed without the whole field being sold at the lowest price.

Oh, and you recall what I said about the importance of spray droplet size. If you have a tankful of premixed water and pesticide, you can only vary the application rate by varying either the sprayer ground speed or the pressure at the nozzle. Varying the pressure alters the droplet size. Varying the ground speed has a whole mess of new engineering problem, and without Continuously Variable Transmission affects the speed of the vehicle engine, and the spraying pump, so affecting nozzle pressure.

You can see how it's getting messy.

The idea was to use specially formulated, and packaged, pesticide concentrates which would be fed into the system by special precision pumps to be mixed with the water as the water was pumped to the spray nozzles. That way, speed and nozzle pressure don't have to change, but you have a certain lag in the pipework. You also have the metering pumps contaminated by full-strength pesticide, with EPA-style hassle on cleaning that part of the system.

Since spray application times are also constrained by the weather--things like wind speed--it's easy to think that, without actually making it illegal to reduce pesticide use, the manufacturers made it thoroughly impractical.

Been there, done that, worn the white overalls, wellington boots, and carbon-filter respirator.

You want cheap food, you bastards!

#256 ::: Randolph Fritz ::: (view all by) ::: April 12, 2008, 11:06 AM:

Greg, albatross: please read my second sentence; the one where I say that industrial farming "depends way too much on oil, monoculture, and risky genetic engineering practices." If you're very brave, you might even try for the parenthetical remark at the end. This is one of those "9/10s of the way down & nothing's happened yet" situations; everything works fine until it all falls apart.

Bruce Cohen, #240: I think we're just beginning, actually. See my #58. BTW, I really doubt those decentralized models at our current population levels; this is going to be the first century in which more people live in cities than in rural communities.

#257 ::: heresiarch ::: (view all by) ::: April 12, 2008, 11:34 AM:

Bruce Cohen @ 237: Well, if there was only one insightful, intelligent Bruce around here, it'd be a lot easier to keep track you know! /faux irritation

@ 240: "We're in the final approaches to a new paradigm of industrial and energy production, in which some percentage is decentralized because that makes good economic sense."

There was this incredibly neat proposal I read somewhere on the net a while back that I've been itching to mention, but I've held back since I can't for the life of me find it again. It proposed a multi-cycle reactor burning chaff and unusable plant material under high pressure and at high temperature to produce electricity and charcoal. The carbon waste gas was then filtered through an algal tank to make ethanol, which could either be burned for more gas, or used to run cars. The charcoal byproduct of the primary furnace could either be burned to produce more electricity, or simply buried in the ground to sequester the carbon. It was neat, if theoretical stuff. One of the key points the author made was that one of the major costs would be transporting the waste materials to the reactor in the first place, meaning the operation would perforce be very local in nature: each town--farm, even--producing its own electricity and fuel.

I wish I could find that article again.

#258 ::: Randolph Fritz ::: (view all by) ::: April 12, 2008, 11:57 AM:

Over at Kos we have Darksyde mentioning solar energy and biofuels.

Heresiarch, #257: there are a lot of good proposed designs. What we desperately need, though, is the funding for the engineering work to evaluate those designs and prototype some of them. This would be a good candidate for big-government-project style funding.

#259 ::: heresiarch ::: (view all by) ::: April 12, 2008, 12:17 PM:

albatross @ 246: "If I'd rather have the cheaper, just "okay" tomato most of the time, do I get to make that choice? Because it seems to me that an awful lot of people prefer the cheaper/more convenient food to the better food, as demonstrated by what they buy when they have the choice. And this seems like it drives a lot of the future of farming. If people mostly prefer the cheaper food, then farming will likely be optimized toward making cheap food."

The problem is that that cheap tomato isn't really as cheap as you think it is. Costs in environmental damage, human suffering (tomatoes are picked by hand), and resource consumption simply aren't factored into the price of modern farming. They don't show up under the bin in the supermarket, but we end up paying for all of those things eventually. If the cost of gasoline shoots up as much as it seems it will, you might find that locally grown tomato has become quite the bargain.

"I'm also pretty skeptical that smaller farms will always be more environmentally friendly, as heresiarch suggests. I know there are issues of concentration with (in particular) pig farms, where when they scale above a certain size, the waste disposal gets a lot harder. But I think most farms leave a lot of pesticide[3] residue, and that farms with better equipment (like the high-tech sprayer thingy connected to GPS, which I think is much more likely to be available to a larger, richer farm) can be more efficient about spraying pesticides."

There are two overlapping dichotomies here that I think are getting confused. One is between corporate farming (or agrobusiness) and small-scale (or family) farming. On the one hand, you have a philosophy of maximizing profit, of treating farming as an industrial process. On the other, you have people who farm as a life-style, who live on the land they farm. The second dichotomy is between uniform high-yield, high-pesticide, highly-fertilized farming methods on one side and lower yield, organic, individually managed farming methods. The axes are distinct, but related.

Personally, I am far more concerned about the second: the current, high-yield farming strategies aren't sustainable in the long run, whether practiced by corporations or by individuals. We've been trying to push M too high; modern farming's "efficiency" is largely the result of carefully externalizing the relevant costs to outside the farmer-buyer interaction. That doesn't mean the costs aren't there. Eventually, the costs will come due in a major way, and society as a whole will be left holding the bag. The thing is, though, that in order to get those sustainable farming going, you need the small, lifestyle-oriented farmers. Lower profit but sustainable farming methods may potentially be scalable up to the agribusiness size, but it is in no way compatible with the agribusiness mentality. So in order to get the sustainable farming, we need the small farms. It isn't that small is inherently good. It's that small is a necessary prerequisite for good.

"(There's also nothing like a prospect of running out of food at present.)"

Been reading the news lately?

#260 ::: albatross ::: (view all by) ::: April 12, 2008, 01:24 PM:

heresiarch #259: Yeah, I like the way you separated those. I don't believe the current subsidy/price support/etc. schemes at all minimize the environmental impact, risk of widespread famine from monocultures, etc. They're designed for a very different purpose. If we want to minimize environmental impact of farming, ISTM that we would do it rather like we have in other areas, where we've had a lot of success in reducing various kinds of pollutants. That hasn't been done, in general, by subsidizies, but rather by regulation.

The benefit of that is that we don't have to make a political decision about the right size for farms[1]. Instead, we can make clear what the requirements are for running a farm, in terms of environmental damage, required diversity of plants, whatever[2]. If it turns out that smaller farms can be more efficient when environmental damage and other externalities are taken into account, then let them win. If not, then let them lose.

A big point of all this is that, as Greg pointed out, I see farms as businesses, not as some kind of morally valuable entities to preserve for their own sake. Like mom and pop corner stores[3], or mainframe computer companies, or large steel mills. It's okay for businesses to close down because technology or the economy or the society change.

FWIW, I've grown up around farms and in communities with a lot of farms, my family is involved in farming, and I own some land with part of my family, which is farmed by a ridiculously high-tech, well-capitalized version of tenant farmer. I'm neither hostile to farmers nor inclined to romanticize them.

[1] I just can't imagine such a decision being made on any basis that you or I would like.

[2] I don't know enough to have much of an opinion on how much real risk there is in this. But I can imagine there being such risk, and it looks like an externality, and there are some fairly well established ways to handle externalities--like regulations to limit dumping your costs on others, or fees for doing so.

[3] Which have been pushed out of most of the country by a combination of zoning and competition from chains which are often still kind of mom-and-pop operations, but with a franchise.

#261 ::: R. M. Koske ::: (view all by) ::: April 12, 2008, 01:34 PM:

#258, heresiarch -

The problem is that that cheap tomato isn't really as cheap as you think it is. Costs in environmental damage, human suffering (tomatoes are picked by hand), and resource consumption simply aren't factored into the price of modern farming. They don't show up under the bin in the supermarket, but we end up paying for all of those things eventually. If the cost of gasoline shoots up as much as it seems it will, you might find that locally grown tomato has become quite the bargain.

I've been wondering about that. It seems to me that the price of food is likely to go up across the board, but I'm wondering if the organic/natural/local/etc.* produce that is currently the expensive option will go up less, so the gap will close or possibly vanish. My thinking is that many of these O/N/L businesses and products come closer to reflecting the actual costs of the food, so they'll only go up in relation to the cost of oil, where more subsidized foods may have to go up as other costs are reflected back on producers in addition to rising oil costs. Though I'm not entirely sure why I think the other costs might start hitting now.

I haven't decided that I believe it will happen this way, but I do see a possibility there. Or maybe heresiarch has the right of it, and it will be "local" that is the new cheapest choice, and the others will stay high.

*I stick the vague and mostly-meaningless "natural" in there because I'm thinking of not just organic food but also that food you see in the health-food stores which isn't full of crazy chemicals, usually produced by smaller businesses.

#262 ::: Doctor Science ::: (view all by) ::: April 12, 2008, 03:07 PM:

Koske @ 261:

My thinking is that many of these O/N/L businesses and products come closer to reflecting the actual costs of the food

That is certainly my observation. The organic vegetables I get from my CSA actually cost no more in $$ than buying the same thing in "non-organic" form at the grocery store, and are *much* cheaper than buying the organic equivalent at the natural food store.

Basically, I do not spend more money by getting food from the CSA, but the quality is enormously higher. They're not just tomatoes, they're a religious experience.

albatross @260:

As I said above, farming is not-just-a-business because we need food to *live*, in way that we don't need hardware stores.

I live literally next door to the CSA where I get my food. It is enormously easier for me to put up with the local externalities -- tractor noise at odd hours, some pretty organic smells from time to time -- because I know that I'm not living next to a mere business of which I happen to be a customer, but a source of my physical existence. Even so, I wouldn't be nearly as tolerant of a non-organic farm, because the externality of breathing pesticides & herbicides would be too high.

Greg @236:

One thing about "boutique" farms is that, to be viable, they need to grow an enormously greater range of crops than the farms you grew up with probably did. The CSA farm (less than 100 acres) where I get my veg grows 40 different crops, each in multiple varieties (there must be 30+ different kinds each of tomatoes and peppers). The orchard (200 acres) where I get most of my fruit grows 30 varieties each of apples and peaches, along with 20 other crops.

This is clearly enormously inefficient by agribusiness standards -- but it buffers the farmers against the random factors that always make agriculture precarious. That buffering is what agricultural subsidies are supposed to be *for*, so in many ways I'm paying the subsidies for my food upfront -- by getting only what they are able to grow despite their inefficiency.

The way I get my food has an "anti-capitalist" feel, because it involves actual human relationships, not just the exchange of money. But this discussion has made me see that a lot of what we see as part of capitalism is passing the buck on externalities. What I'm experiencing is not really romanticism, it's "not escaping the externalities".

#263 ::: Kathryn from Sunnyvale ::: (view all by) ::: April 12, 2008, 03:26 PM:

Ohhh, farm issues. A topic I like, but I have almost no time for a responsive post (away in Toronto).

Starches get tons of subsidies, fruits and veggies get none. That's one reason why only 9 percent of Californian farmers get any subsidies-- the rice and cotton farmers. 70% of Iowan farmers get them. Iowa has 30 million acres of farmland and 79,000 individual/family farms. California has 28 million acres of farmland and 65,000 individual/family farms.

The above article is a good summary of the problem as of last year: sadly, the Californian delegation was able to get nearly zero / zip /zilch of the goals through Congress in the latest farm bill.

If F&V got subsidies similar to the Starch family, or if neither had them, perhaps the fresh tomatoes would be (relatively or absolutely) cheaper.

The article mentions Environmental Working Group's database of subsidies shows subsidies by states.

Corn and sugar subsidies... Here's one take on why Corn is destroying America and Brazil (essay, plus has links to a larger set of essays on sugar policy in the states).

#264 ::: NelC ::: (view all by) ::: April 12, 2008, 03:27 PM:

An article by Alberto Manguel in the Guardian today has a certain resonance with this thread:

At the risk of stretching the comparison too far, I believe that the Assassination Bureau has enjoyed a modern reincarnation: we too have allowed for the construction of many such formidable social machineries whose purpose is - in their case - to attain for a handful of individuals the greatest possible financial profit, regardless of the cost to society and protected by a screen of countless anonymous shareholders. Unconcerned with the consequences, these machineries invade every area of human activity and look everywhere for financial gain, even at the cost of human life: of everyone's life, since, in the end, even the richest and the most powerful will not survive the plunder.

#265 ::: Greg London ::: (view all by) ::: April 12, 2008, 03:34 PM:

Nancy@253: Copyright is a relatively simple rule. Subsidies and regulation aren't.

They're both rather complex. You're only casting them as different in your mind.

Copyright law, including the DMCA, and including such special things as compulsorary licenses, anti-circumvention laws, database protection, safe harbor stuff, and so on, are anything but simple.

Can you imagine what it would be like if it were considered urgent for the government to support and regulate small art producers?

compulsory licenses are specific to music. Copyright law had to be ammended a few years back to say that ASIC masks are covered by copyright, rather than being purely functional. Anti circumvention laws were created specifically for the media industry.

I don't have to imagine it at all. I can see it right now. I find it slightly odd that you don't.

And yes, copyright law has been abused and misused and turned into a welfare system of its own right. But that doesn't mean the idea of copyright is unfair, or that the idea of copyright should be wiped out. Copyright is an artificial prop to solve a problem that the natural world does not solve on its own.

I don't deny that farm subsidies go to big farms who don't need it. But subsidies are an artificial prop that solves a problem that the current natural state doesn't seem able to solve, i.e. keeping family farms around.

And people who bemoan corporate farms and in the same breath bemoan farm subsidies are not terribly unlike a person who bemoans that the record industry is getting all the money, and the small artists aren't getting anything, and then suggesting to wipe out copyright altogether.

Wiping out copyright doesn't help the small artist. copyright allows the artist to make a living off his work. The abuses of the corporate art industry relates to the fact that copyright has been pushed and stretched so that they get terms are too long, fair use is dead, and so on.

The problems of copyright can be solved by reducing terms to something reasonable, getting rid of anti-circumvantion laws, and bringing back Fair Use.

The problems of subsidies aren't that family farms don't need them to stay afloat, it's that corproate farms cash in on them to make lots of money. And that too can be solved by rearranging the way subsidies work so they benefit the people who produce, not the poeple who simply accumulate.

#266 ::: P J Evans ::: (view all by) ::: April 12, 2008, 03:35 PM:

Correction to 254

COMPENSATION

CBS' Moonves gets a 28% raise as ratings, ad sales drop

The network CEO received $36.8 million last year, including an $18.5-million cash bonus.

By Meg James, Los Angeles Times Staff Writer

April 12, 2008

At a time when corporate chieftains are coming under fire for their outsize pay packages, here's another to add to the list: Leslie Moonves.

The CBS Corp. chief executive, whose network is suffering from ratings and ad declines, got a 28% boost in total compensation in 2007 to $36.8 million, outstripping peers at Time Warner, Walt Disney and News Corp., all of which are much bigger companies.

Needless to say, a lot of the employees are unhappy. They company says that it's okay, they've changed the pay package so that in the future he'll get more options and less money, and because they might lose money in the future, he didn't really get all that big a raise last year.

Say what?

#267 ::: P J Evans ::: (view all by) ::: April 12, 2008, 03:45 PM:

albatross @ 245

There might be more poor people in the US who are obese because high-caloric-density foods (starchy, sugary, fatty) are cheaper than fruits and veggies and other, healthier, foods. Guess which ones are subsidized and advertised most ....

#268 ::: Greg London ::: (view all by) ::: April 12, 2008, 03:50 PM:

DoctorScience@262 :One thing about "boutique" farms is that, to be viable, they need to grow an enormously greater range of crops than the farms you grew up with probably did.

Ah, I believe I have run into a boutique farm. some friends of ours pay into a CSA in the spring and get crates full of food over the summer/fall.

Well, it might be that subsidies might be designed to help small farms convert to boutique farms. People with sunk costs in a several hundred head dairy herd are going to have a bit of a problem making the conversion with all their equipment they can't use anymore, and is probably still mortgaged by the bank. The bank won't be too happy to hear the farmer is scrapping the operation they're financing, and might want their money back.



#269 ::: Terry Karney ::: (view all by) ::: April 12, 2008, 05:07 PM:

albatross: re choice: Depends on what you're trying to save. I went to an ag school. Maia went to an ag school. I studied journalism, at a school where the farm was becoming a relict, because all the farmland around was converted to homes. Folks came to the ag program because they liked horses, or were moving on to someplace else. As a result we covered a lot of farm issues.

Maia went to a school where there was ag all around, and the people were looking to make a living at it.

Are small farms better for the environment? Yes. Can a small farmer be as horrid as a big one, not so much. He doesn't have the advantage of being able to take a loss this year; on these 40,000 acres, and absorb it with the other 20 million he has in crops.

He also isn't as likely to be monoculturing his fields (and if he is, his neighbors aren't. If he has less monoculture, he has less pesticide. He gets better yields. Hell, he might be able to do a better rotation of green manure plants, and need less fertiliser.

That's good for the environment.

You want UC Davis tomatoes, Right now you have all the choice in the world. But not all choices are good ones, and letting "The Market" decide is often a way to let inertia keep the bad. Detroit, if it had it's way, would still have seatbelts and airbags as options, making more money on them; and leaving lots of people in the lurch.

The issue of size is directly related to the quality of the food. I mentioned UC Davis tomatoes, because without the need to 1: pick them mechanically because of the huge acreage involved (that or treat them even more harshly by hand to keep up with the schedule, and compete with the mechanical harvesters) and 2: ability to harvest them when they are hard as apples and have them, "ripened" with ehthylene gas in the market, there wouldn't be the early, late, and off season tomatoes (and peaches and cherries and plums and grapes).

Yes, fruits are less able to be early picked and force matured (save persimmons, which are still like rocks when ripe enough to begin harvesting), but that's how it works. A small farm will have fruit which stays on the vine/tree/ground longer.

I meant it when I said food (like cars with seatbelts and airbags) ought to cost more than it does. Part of why it doesn't is we are paying corporations to bring us bad food; because it's cheap and that keeps the other problems in the wage/tax system from being as obvious.

Bread riots topple states.

I think the nature of small incorporation is a dodge. Hayashi Farms, Inc. isn't ConAgra.

There's a difference between buggy-whip makers, and farmers. We still need farms. We might have better cars (to go back to that analogy) if all the makers weren't piled up in Detroit, and talking only one to the other. A bit of competition is good. Right now what we have is half a dozen huge firms selling the seed, planting the crops and taking it to market. The Gov't subsidises them, and lets them do things like create "terminator" crops, so the small farmer can't even grow his own seed corn.

It's not a good system.

Heresiarch: You are comparing modern farming (where one guy can harvest 4,000 acres in an afternoon) with the agriculture of scratch plows and sickles.

With a scythe (which was state of the art until McCormick invented the reaper), a skilled man can harvest a couple of acres a day. With a sickle, maybe one (and that only when someone else is tying stooks, so they can be cut into clean bundles; for someone else to collect).

So that 1-3 acres needs 2-6 people to harvest. (with a basket scythe one person is cutting, another is hauling away), and there isn't the reaping swath on the ground. Without a basket, the grain falls to the ground, and people have to follow along, collecting it).

Threshing comes later.

Contrary to lots of belief, in the rest of the year it's not: Plant the crops, take it easy to harvest. A farm is 10-14 hours a day of work, day in, day out. The livestock need tending, the gear needs fixing, the barn needs roofing, the drainage down by the water needs clearing (and the fishpond up the hill needs dredging, because the ducks have fouled the bottom, etc,. etc., etc.)

The Hunter Gatherer, however, can actually relax a bit when not collecting food. So a couple of hours a day for vegetables, and a few hours a week for meat. That's today, when the land they have is marginal.

I regret that my sources will be quick grabs from the web, because my reference works are in storage (or are facts stuck in my head from college readings, decades ago)

In Malaysia, 4,5 hours of yam harvesting produces sufficient quantities to feed a family for 2 days. (Nomad Hunter Gatherers)

On the Kalahari, "Generally speaking, the natives live well; in some districts there may be at particular seasons of the year a deficiency of food, but if such is the case, these tracts are, at those times, deserted.

It is, however, utterly impossible for a traveller or even for a strange native to judge. whether a district affords an abundance Of food, or the contrary... But in his own district a native is very differently situated; he knows exactly what it produces, the proper time at which the several articles are in season, and the readiest means of procuring them. According to these circumstances he regulates his visits to different portions of his hunting ground; and I can only say that l have always found the greatest abundance in their huts.

Eyre, Edward John. 1845. Journals of Expeditions of Discovery into Central Australia, and Overland from Adelalde to King George's Sound, in the Years 184041.2 vols. London: Boone.

Some ethnographers testify to the contrary that the food quest is so successful that half the time the people seem not to know what to do with themselves. (Neolithic hunter gatherers) From which most of the quotations in this section come)

The most obvious, immediate conclusion is that the people do not work hard. The average length of time per person per day put into the appropriation and preparation of food was four or five hours. Moreover, they do not work continuously. The subsistence quest was highly intermittent. It would stop for the time being when the people had procured enough for the time being. which left them plenty of time to spare. Clearly in subsistence as in other sectors of production, we have to do with an economy of specific, limited objectives. By hunting and gathering these objectives are apt to be irregularly accomplished, so the work pattern becomes correspondingly erratic. (this is an extrapolation from Herskovits, Melville J. 1952. Economic Anthropology. New York: Knopf. on the Australian Aborigines)

If we look to Gideon Ladizinsky, 1998 Springer,we are told the !Kung collect food every 2-3 days, with the women doing about 2-3 work, per week on vegetables, and the men doing most of their collecting as hunters; which provides 20-20 percent of the diet. Most of the year food is easy to come by, and they have a daily intake of about 1250 kCal, with 56 g of protein, about the enegy equivalent of a kilo of cooked rice,and a 1/3rd of a kilo of beef.

It's worth noting that both the !Kung/San peoples of the Kalihari, and the Australian Aborigines are aware of agriculture, and forego it as being too much work.

The Aché have a different model, with men doing about twice the hunting as the !Kung, and women about half the foraging. Food and Evolution: Toward a Theory of Human Food Habits Harris and Ross Temple 1987 Temple University Press

One of the things about all three of those people is that they had to do practically no work, from day to day, to meet material needs/desires, apart from food. So the 40-60 hours per week the modern, industrial, person has to put in, to keep the weather out, bring food to the table and ensure body and soul stay together is looking pretty shabby; in terms of absolute labor to be satisfied with his lot.

Many of them aren't managing to that very well.

The US is seeing a decline in height and mass (the Dutch are now the tallest people, on average, in the world). Farmers saw it a lot faster when they settled down. It's why "the barbarians" were always so big and strong.

What agriculture allows is a greater density of population (as much as 100/1 compared to hunter gathering societies, and that with "primitive" ag). The issue isn't ratios of unbusy people (the nomad herder, and the hunter gatherer can probably support more, "useless" mouths, if they want to), but the absolute number.

30 percent of 100 people is less than 10 percent of 30,000, so the raw numbers will be higher, but it's not because agriculture provides a greater amount of surplus per person's labor.

Thanks to Bruce(s), Kathryn from Sunnyvale, Doctor Science,and Greg (and if I missed anyone I'm sorry) for chiming in on the details (to include Greg's comparisons of subsidy distortions to copyright distortions, I think they are part of the same problem). R.M. Koske, I think you may be right about price points, which means those of us who are buying local may see less drastic a change in our cost of living as things are "corrected".

#270 ::: Matthew Austern ::: (view all by) ::: April 12, 2008, 05:30 PM:

I agree that family farms appear to be dying, and that industrial corporate agriculture is undesirable and possibly not sustainable. But the logic by which this means we should continue farm subsidies appears to be missing. After all: if it's true that family farms are dying (and I see no reason to doubt that it's true), then farm subsidies don't seem to be doing a good job of preventing that.

In the US, after all, most farm subsidies are for corporate agribusiness, and most of them go to crops grown for highly processed food where most of the profit goes to the processing industry. We have the farming and food processing industries that we designed over the last few decades, and subsidies are one of the main policy tools the government has been using to get there.

It's possible that farm subsidies are the only thing standing in the way of complete corporatization of farms, but we should also consider the possibility that our current subsidy regime is one of the reasons we have the kind of agribusiness that we do.

#271 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: April 12, 2008, 05:34 PM:

Randolph Fritz @ 256

I really doubt those decentralized models at our current population levels; this is going to be the first century in which more people live in cities than in rural communities.

I don't see how centralized models can support very much (more than, say, a factor of 2 to 4) more population, especially with centralized populations that aren't in the same place as the centralized food production. Transportation is already a large part of the cost of food, that's only going to go up, and the cost of increases in the carrying capacity of the transportation system are linear only over a certain range, which I think a much larger population would push us past.

#272 ::: Chameleon ::: (view all by) ::: April 12, 2008, 05:44 PM:

Small farms are all about producing a lot of crops and ensuring the food supply. Big agri-business puts all it's proverbial eggs in one basket, planting vast acres of one species of one type of crop. A few series of unfortunate events, and there could be a serious food shortage. Smaller farms are our insurance. If there's a transportation problem, or if a few mass farms in Cali or Florida go down, there will still be *some* food. Small farms operate differently too, you can sell the cherries from one cherry tree, that doesn't happen in big agribusiness. It leads to less wasted food and more diversity.

#273 ::: Dave Bell ::: (view all by) ::: April 12, 2008, 06:43 PM:

I'm not convinced that the small farm is ever going to be viable, short of a combination of high-value crops and cheap labour. The specialised harvesting machinery to support hand labour is fairly cheap. Replace the hand labour by machinery, and the machinery needs thousands of acres of crops to be a viable investment.

#274 ::: Lee ::: (view all by) ::: April 12, 2008, 06:55 PM:

P.J., #267: Exactly. Eating healthily is expensive; eating lots of empty calories is much cheaper. As a friend of mine who lived thru about a decade of being desperately poor -- and gained 100 pounds in the process -- puts it: "When you have $3 to buy groceries for the week, and that $3 will buy you 2 pounds of meat or 25 pounds of potatoes... you eat a lot of potatoes." (The prices quoted should tell you roughly how long ago that was; these days, $3 won't buy you one pound of meat that's not mostly fat and bone.)

#275 ::: Greg London ::: (view all by) ::: April 12, 2008, 08:18 PM:

Matthew@270: if it's true that family farms are dying, then farm subsidies don't seem to be doing a good job of preventing that.

Er, if you replace subsidies with copyright, maybe that will highlight the problem I'm seeing with your statement:

If it's true that small, independent artists can't make a living selling their art, then copyright doesn't seem to be doing a good job of helping them.

The problem I see is this: The fact that the system is being abused by one set of people doesn't mean the system doesn't help a different set of people. Scrapping the system will stop the abuse from one set, but might very well completely kill off the other set.

This is essentially a baby/bathwater argument.

#276 ::: Nancy Lebovitz ::: (view all by) ::: April 12, 2008, 08:50 PM:

#265 ::: Greg London :::

I wasn't arguing that copyright should be abolished.

I may have been wrong that copyright law is less of a problem than farm subsidies.

#277 ::: EClaire ::: (view all by) ::: April 12, 2008, 11:52 PM:

Except the problem is, Greg, that you're arguing to keep subsidies so that small family farms can stay in business, and it's always been my understanding that they're not the ones getting subsidies.

from here "• 67 percent of all farmers and ranchers do not collect government subsidy payments in United States, according to USDA.

• Among subsidy recipients, ten percent collected 73 percent of all subsidies amounting to $120.5 billion over 11 years."

That doesn't sound like small family farms are getting by on government subsidies. That sounds like big business getting rich on corporate socialism. I'm perfectly happy to support the local family farms (thanks for the link to Local Harvest, I found a farm just a few miles away where I can get fruit/veg and fresh eggs) but I'm less inclined to support Archer Daniels Midland. If they can't make it without government money, they've got no business being an multinational corporation.

I live in a county filled with corn fields. They used to alternate with soybeans to keep the soil healthier, but with so much corn going to ethanol, they don't seem to bother anymore. And still, the beautiful rich farmland is being swallowed up by ugly subdivisions. So while I don't farm, or know people that farm, I see the effects of our current agriculture policy, and I'm unimpressed.

#278 ::: Randolph Fritz ::: (view all by) ::: April 13, 2008, 02:23 AM:

Bruce Cohen, #271: "I don't see how centralized models can support very much more population,"

I think the population we now have is probably not sustainable at current levels of consumption. It may not be sustainable at any level of consumption. Unfortunately, the decentralized models of a green society that are so popular in the USA are probably even less energy efficient, less effective at feeding and clothing a population. I think any attempt to "return to the land" before we reduce our population is likely to result in a deadly failure, so in my view, the best solution for this century, and probably the next, is an urban culture.

In the long term, it seems plain to me that, if we are to have any reasonably quality of life, we are going to have to reduce our population. I have this radical idea that one of the best steps we could take to achieve this is educating women worldwide.

#279 ::: Lee ::: (view all by) ::: April 13, 2008, 02:52 AM:

Chameleon, #272: Yes. Irish Potato Famine, anyone? How'd you like to see something like that happen with our wheat or corn crop? And how long would it take, under the current monoculturing system, to recover if it did?

Randolph, #278: Yes, that would be an important step... which is exactly why it will be resisted tooth and nail by many segments of the societies that depend on optionless baby machines.

#280 ::: heresiarch ::: (view all by) ::: April 13, 2008, 04:35 AM:

albatross @ 260: "If we want to minimize environmental impact of farming, ISTM that we would do it rather like we have in other areas, where we've had a lot of success in reducing various kinds of pollutants. That hasn't been done, in general, by subsidizies, but rather by regulation."

Doctor Science makes a good point about this: "farming is not-just-a-business because we need food to *live*, in way that we don't need hardware stores." The importance of food production is much more pressing than our need for other industries. In this way, agriculture has a lot more in common with education than not: the costs of a market failure in agriculture, like in education, are simply too dire to risk. Regulation always raises costs over the short term, and small sustainable farms would be far less able to weather cost increases than agribusiness--minus, of course, support from the government.

The more I think about it, the more I think the analogy to education is an informative one: market forces will push agriculture in directions that are not beneficial to society's needs, and so government intervention is necessary. The government's role is not simply to prod them in the right direction, or to hand out cash, but to use both carrot (subsidies) and stick (regulation) to shape agriculture as is needed.

"A big point of all this is that, as Greg pointed out, I see farms as businesses, not as some kind of morally valuable entities to preserve for their own sake. Like mom and pop corner stores[3], or mainframe computer companies, or large steel mills. It's okay for businesses to close down because technology or the economy or the society change."

I don't think nostalgia is nearly as important factor in the drive to preserve family farms as you think it is. Rather, I see the movement of the last fifty years of agricultural advancement as speeding recklessly down a deadend path, and I support alternative, sustainable farming methods because I don't want to starve to death when we hit that deadend. There's no nostalgia here--as a young child, I looked forward to the day when all the world's food production could be done by one person. My concerns are purely utilitarian in nature.

FWIW, I grew up in old orchard country. The orchards, though still being worked, are slowly being replaced with residential housing; I passed hald a dozen orchards on my way to school every day. It was beautiful in the spring, and our county has the highest breast cancer rate in the state.

#281 ::: heresiarch ::: (view all by) ::: April 13, 2008, 04:48 AM:

R.M. Koske @ 261: "It seems to me that the price of food is likely to go up across the board, but I'm wondering if the organic/natural/local/etc.* produce that is currently the expensive option will go up less, so the gap will close or possibly vanish. My thinking is that many of these O/N/L businesses and products come closer to reflecting the actual costs of the food, so they'll only go up in relation to the cost of oil, where more subsidized foods may have to go up as other costs are reflected back on producers in addition to rising oil costs."

That's my (totally uninformed) gut impression too. I especially think that "local" will become a major factor in affordability, if oil prices increase as much as I suspect they might.

#282 ::: guthrie ::: (view all by) ::: April 13, 2008, 06:58 AM:

Heresiarch #280- brings up another important point- in the last 60 years, we've built on much of the fertile farmland that is available in the first place. One book of mine from the 60's complains of losing tens of square miles of fields around London. INdeed, reading some of the old gardening books I have bought or inherited makes it clear that modern intensive farming is an abomination which leads to destruction of the soil and poor quality produce. Yet it continually seems to win out.

#283 ::: heresiarch ::: (view all by) ::: April 13, 2008, 07:48 AM:

Terry Karney @ 269: That is very interesting. It seems that agriculture's advantage hasn't been in the number of people who can feed the whole population, but in the number of people who can be fed off a certain amount of land. Greater population densities drove agricultural civilization's conquests, not greater non-farming ratios. Neat. A few questions/quibbles:

"With a scythe (which was state of the art until McCormick invented the reaper), a skilled man can harvest a couple of acres a day. With a sickle, maybe one (and that only when someone else is tying stooks, so they can be cut into clean bundles; for someone else to collect)."

Is harvesting time an accurate metric of farming efficiency? Using your figures on harvesting speed, figures from here on average medieval grain yields, and data from here on the calories from grain, a medieval farmer could harvest enough food (from two acres) to feed one person for a year in two days. Harvesting time wouldn't be the limiting factor on how much land a farmer could farm, it seems: it would be how much land he could take care of during the whole year.

"In Malaysia, 4,5 hours of yam harvesting produces sufficient quantities to feed a family for 2 days."

You (and your sources) are operating under the assumption that modern hunter-gatherers have the same gathering efficiency as neolithic hunter-gatherers. This seems unlikely. Hunter-gatherers haven't stood still in the last several thousand years, and I have no doubt that their methods of non-cultivation are considerably advanced from those that were contemporaneous with the advent of agriculture. My experience is that sociologists tend to radically underestimate the technical sophistication of societies with unusual development patterns.

The key questions to ask are: "how did they find the yams so quickly?" and "why are yams so plentiful?" The answer to those questions, among many "non-agricultural" groups, is because they planted them there. They haven't been standing around making sure the yams survive and prosper, but the distinction between agriculture and gathering can be a bit fuzzy. It's quite possible that gathering food is so easy because they've spent the last several hundred years pruning their environment into a shape more suitable for their life style. There were some nomadic groups in the Amazon rainforest who did this, apparently replanting whole swathes of jungle to produce human-edible foodstuffs. The trees don't require a lot of hands-on care, and it isn't fields of wheat waving in the breeze, but it's certainly cultivation of some sort.

This is all somewhat tangential when discussing grain-based agricultural societies, but it's worth keeping in mind that there are other, more sustainable and efficient forms of agriculture out there.

"So the 40-60 hours per week the modern, industrial, person has to put in, to keep the weather out, bring food to the table and ensure body and soul stay together is looking pretty shabby; in terms of absolute labor to be satisfied with his lot."

That's going to be a measure with considerable variation between individuals, much less populations. As irritating as I find the expectation of a 40+ hour work-week, I'd still rather live in a society where I can get corrective lenses and dental surgery. Who knows, though: put me in ancient Rome, and I might give a different answer.

The other thing to keep in mind is that only a small percentage of the average American's income goes towards food: different measures put it somewhere between 10 and 15 percent. So your average 40-hour-a-week American only spends 4-6 hours each week earning his food. That stacks up pretty well against those hunter-gatherers spending 4 and a half hours every two days.

This is a fascinating conversation!

#284 ::: Nancy Lebovitz ::: (view all by) ::: April 13, 2008, 08:52 AM:

On reflection, there really are important differences between copyright and farm policy. While copyright has been gamed, at least there aren't for significant subsidies that affect most of the art market.

In the US, some traditional forms (classical music and such) get subsidized. Afaik, Canadian content means a requirement that the art is created by Canadians, but they don't have to do anything beyond that to make their art Canadian.

But there isn't "art policy" deciding that visual art is more important, or happy endings, or anything else in particular.

#285 ::: Greg London ::: (view all by) ::: April 13, 2008, 10:40 AM:

EClaire@277: And still, the beautiful rich farmland is being swallowed up by ugly subdivisions. So while I don't farm, or know people that farm, I see the effects of our current agriculture policy, and I'm unimpressed.

Wow. because farms are going out of business under our current agriculture policy, it must be agriculture policy that is causing it?

What if something else is causing small farms to go out of business and ag policy is propping some up, but is unable to keep all afloat? Might that also fit into your statistics and your observations?

I've made the comparison before, but since you seemed to have missed it: independent artists are failing to thrive under current copyright policy, therefore lets scrap copyright entirely.

To use a different metaphor, the symptoms are farms going out of business and you've identified the disease as ag policy? Ag policy is a treatment. it just may be an insufficient dose given the circumstances.

Your statistic, by the way, doesn't say anything about why a farmer might not take any subsidies. folks have already pointed out that a lot of subsidies are specific to certain crops or commodities. If you don't grow it, you don't qualify, and it isn't cheap to convert over. And some subsidies are either/or propositions, do this and get subsidy, or do anything else and get nothing. Some farmers get into land set aside programs, and then when the time frame is up, they decide the money isn't enough to sign up for the program again. A pittance for crop or half a pittance for subsidy doesn't mean the subsidy is driving them out of business.



#286 ::: abi ::: (view all by) ::: April 13, 2008, 11:01 AM:

General note: Please remember that this is a discussion, not a dispute.

#287 ::: Greg London ::: (view all by) ::: April 13, 2008, 11:12 AM:

Nancy@284: On reflection, there really are important differences between copyright and farm policy

You've proven the metaphor can't be extended to cover every corner case. I never said it did.

My point was that people make the argument against subsidies because its an artficial mechanism to allow someone to stay in business where the natural circumstances would not allow it.

The same argument could be used to argue that copyright should be wiped out. Copyright is an artificial legal mechanism to allow authors to stay in the business of selling copies of their works for money when the natural order of things (i.e. without copyright giving authors the exclusive rights to their works) most authors wouldn't be able to stay in business.

Just because it isn't "natural" doesn't mean it isn't beneficial to the public. It's a "Natural Law" fallacy.

I was also using the metaphor as a way to respond to people who argue that subsidies benefit the big corporate farms more than the small farms, so we should get rid of subsidies completely. Copyright benefits Disney with billions of dollars every year while small independent artists struggle to make a living. But no one would look at that and suggest, "well, the problem must be copyright, lets get rid of copyright". But they do that with subsidies.

This is a "hasty generalization" fallacy.

furthermore, I was using it as a counter to people who argue that we have farm subsidies and yet farms are still going out of business, therefore subsidies aren't working so we might as well ditch them.

That's like arguing that independent artists keep dropping out of the business, therefore copyright is no good, so lets just get rid of it completely.

This is a "Non causa pro causa" fallacy.



So, there's been "natural law" fallacies, "hasty generalization" fallacies, and "causation" fallacies made with regard to farm subsidies. I've pointed some out and others keep making the same argument. So I tried to use the copyright metaphor to point out the problem a bit more clearly.

No, copyright doesn't work as a perfect metaphor for subsidies. Yes, there are differences. That isn't the point. The point was to try and spotlight several arguments made about subsidies contain fallacies.



#288 ::: abi ::: (view all by) ::: April 13, 2008, 11:53 AM:

A missing area from this discussion is the international impact of domestic farm subsidies.

Farm subsidies, like any injection of money into the supply side of an economic bargain, tend to drive prices down. (This is because at least one supplier will use the cash for a competitive advantage, at which point others must follow suit, yadda, yadda, Tragedy of the Commons.)

One result of this has been a history of reduced prices on the world food market. It's often been cheaper, in countries without the money for modern farming methods, to buy food in rather than grow it locally. Just as in the US, this has priced many smaller farmers out of the business; sometimes they can sell their land for urban development, but sometimes they simply move to the cities for better wages*.

Many countries tried to tackle this problem with protectionist legislation, but that has its own downsides. Among other things, it's an approach frowned on by the countries seeking a market for their product (cf the Japanese rice trade war of the 1990's). But the attempt to meet subsidies in the First World with subsidies in the Third requires resources that the poorer countries simply can't muster.

So now food prices are on the rise for many reasons, and the African and Asian "family farm" is under more threat than the US has ever known. They've been eating their seed corn† for years, and now there's nothing to plant.

Do we have a responsibility here?

-----

* There is a particular pattern where the—usually male—breadwinner goes to the city, or abroad, to earn money while the rest of the family stays on the farm. This is a bad thing in many ways, from the spread of AIDS to the underproductiveness of the farmland left behind.

† Figuratively and literally.

#289 ::: Randolph Fritz ::: (view all by) ::: April 13, 2008, 01:17 PM:

abi, #288: part of the recent wave of migration from Mexico to the USA is driven by the collapse of Mexican village agriculture, and part of the reason for that (how big a part I don't know) is exports of subsidized agricultural production from the USA under NAFTA. Now, under NAFTA, the Mexican government has the right to protest such exports, but the federal government of Mexico has not done so; Mexican farmers are of no concern to the ruling party, and it's risky for any Mexican government to make protests to the USA.

#290 ::: Fragano Ledgister ::: (view all by) ::: April 13, 2008, 02:16 PM:

Randolph Fritz #289: It gets a bit more complex than that. The Mexican Revolution of was fought to end the takeover of communally-owned village lands (ejidos) by large landowners and corporations eager to sell winter vegetables and coffee to the US market. Under the presidency and later strong-man rule of P.E. Calles, and the presidency of Lázaro Cárdenas in the 1920s and 1930s, there was a revival of the ejido, and a guarantee of subsidised prices for Mexican-grown corn.

Since NAFTA, Mexican farmers, primarily ejidatarios have had to face the onslaught of cheaper corn from Nebraska and Iowa, and increasing pressure on ejidatarios to sell up their shares in their communal lands to corporations eager to grow winter vegetables, flowers, and coffee for export to the US (or, in some cases, to illegal organisations growing poppies for processing and sale to the US market). With, of course, a good part of the male population trekking to the US to look for work in construction and landscaping.

#291 ::: Michael Turyn ::: (view all by) ::: April 13, 2008, 03:13 PM:

With regard to the people super who 've described themselves as "libertarian" but not of the "Libertarian" Party sort: "libertarian", regardless of its USAmerican or European construal, is much better as an adjective than as a noun. It's far from unique in this.

(Me, I can't be L.P. libertarian because my early childhood religious training, despite my adult atheism and quite possibly leading to it, was to have a horror of Idolatry---worshipping as God something that isn't---as being worse than anything else. I can live with "far from perfect but the best deal possible" libertarians, but those tend not to be the sort I end up reading; eventually, I won't have to mentally supply the heavenly choir that sounds every time they mention The Free Market. [Substitute "The People" for that, especially in the mouth of someone who doesn't seem to like that many actual persons, and the effect is the same.])

#292 ::: Doctor Science ::: (view all by) ::: April 13, 2008, 03:41 PM:

Additional wrinkle of international connectedness and irony:

About 10-12 years ago, our CSA tried hiring native-born USans as field hands. They quit 2 weeks into the planting season -- insert horrified gasps from those of you with farm experience -- necessitating a desperate scramble to hire Mexicans in Texas who could travel to NJ before the planting window had passed.

Now some of those workers have become US citizens and their families are in Texas. But I don't know if it would be possible to grow food in this part of the country without work by people whose families live elsewhere, because the cost of housing around here is astronomical.

#293 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: April 13, 2008, 06:58 PM:

Randolph Fritz @ 278

I think the population we now have is probably not sustainable at current levels of consumption.

I agree with this statement, with the addition of the phrase "using current systems and technology." I'm not going to argue that better technology will solve all our problems because that's dependent on the better technology being implemented and used in the context of the right systems of distribution, waste disposal, etc., and in a timely manner. Even given the technology, none of the context is a sure thing; in fact, based on history, it may be a bad bet.

But, the population growth rate worldwide has gone down dramatically in the last 50 years (in 1950, the UN estimated the 2050 population would be 11 to 12 billion or more, current estimates vary from 6.5 billion to somewhat less than 8 IIRC), so maybe we have time after all.

By the way, I'm not suggesting that the classic decentralized small farm is the answer. I am pointing out that even large-scale monoculture farming is horribly inefficient in terms of conversion of sunlight to stored chemical energy per unit area of ground used*, and that photosynthesis is much more efficient than any solar cells we've been able to manufacture to date**.

The kind of decentralization I'm suggesting is the use of biotechnology that bypasses the use of entire plants with microbial or tissue culture techniques and allows making food in a factory rather than a farm. High-efficiency use of land like that would permit distributing food production in factories across areas of city or high-density suburbs.

I realize that many people in the industrial world would have aesthetic problems with this kind of food production***. But if they insist on maintaining a high population along with a high standard of living, they may not have much of a choice.

* As usual Arthur Clarke got there first. It was a line in Imperial Earth, that first started me on this subject, in which a character stated that never again would the world economy be dependent on anything as inefficient as growing plants for food.

** I haven't the citation to hand, but there's an excellent book by a researcher in Singapore, I think, which shows that photosynthesis has a quantum efficiency of better that 0.8, that is, each photon captured is converted to an electron energy that's 80% of the photon energy; for visible light, on the order of 1 electron volt.

*** At least half the people I've mentioned this idea to have had an immediate, visceral, very negative reaction.

#294 ::: Epacris ::: (view all by) ::: April 13, 2008, 08:30 PM:

Bruce @293, sounds like Earth's food manufacture in Asimov's The Caves of Steel and its related stories.

#295 ::: David Harmon ::: (view all by) ::: April 13, 2008, 08:31 PM:

Bruce Cohen @#293: My immediate reaction was: would that still work if you account for the industrial overhead? Not just the factories themselves, but the production and purification of nutrient supplies, protecting the culture vats from infection, quality control, and so on?

When I was a kid, I used to dream about synthetic food being churned out in factories. Eventually, I learned that the real reasons so many people were starving, were essentially political -- as, for that matter, is the current grain crisis triggered by the "food-to-fuel" scam.

Unless global warming hands us a total ecosystem collapse, I doubt that the world as a whole will be unable to produce enough food for its population. It's just that the places able to grow the most food won't be where they used to be, but most of the people still will be. (And the oil crisis will interfere with moving the food!) Then too, many governments (including the US) will continue to have an interest in screwing large segments of their population, and/or won't bother with the effort of adapting to changes, much less preparing for them.

(If I were the government of Canada, I'd be laying the groundwork for universal military service right about now....)

#296 ::: Randolph Fritz ::: (view all by) ::: April 13, 2008, 11:24 PM:

Bruce Cohen, #293: I think that's where we came in. The whole agricultural dependency on oil was intended as a temporary measure. It's become part of the problem. My guess is that synthetic foods, if they are even possible at a reasonable price, are likely also to become part of the problem. The research alone would take decades; it would be foolhardy to plan as if success was certain.

#297 ::: Lee ::: (view all by) ::: April 13, 2008, 11:26 PM:

Bruce, #293: I guess I've read too many stories in which tissue-culture farming was part of the background. The idea is familiar enough to me by now that I don't get that visceral negative reaction; instead, I wonder how fast we'd end up with the situation described in Clarke's "Food of the Gods". :-)

#298 ::: Randolph Fritz ::: (view all by) ::: April 13, 2008, 11:28 PM:

Fragano Ledgister, #290: thanks for the clarification and expansion!

#299 ::: heresiarch ::: (view all by) ::: April 14, 2008, 12:40 AM:

Nancy Lebovitz @ 284: "On reflection, there really are important differences between copyright and farm policy."

And I'm sure that Paul Simon would agree that, in many ways, he doesn't resemble a rock at all (much less an island). I don't doubt that he would freely concede that in terms of appearance, composition, and musical talent, there are significant differences! Yet I fail to see the relevance of those differences to the point he was trying to communicate.

Greg never claimed that copyright had a one to one resemblance to agriculture. Rather, he was just pointing out that in both cases letting the market function naturally doesn't actually benefit us much, and that putting some artificial strictures in place might lead the market in a more beneficial direction. Isn't that essentially the theory underlying this entire discussion? That we might want to critique and adjust the social mechanisms underlying market interactions?

#300 ::: Stefan Jones ::: (view all by) ::: April 14, 2008, 12:58 AM:

Whenever synthetic food gets mentioned, I think of a certain Jack Vance novel whose title escapes me at the moment (Alastor series, I think). It is set in a vast city. Synthetic foods are the norm; there are exactly three kinds, delivered to commissaries in the basement of each apartment building.

"Real" food is incredibly rare, and people obsess about it. To the point where it becomes a sexual fetish.

* * *

If we're looking to engineer a soft landing from petroleum-dependent agriculture, we might look into how to turn city sewage sludge into a safe fertilizer. Maybe more or less directly, maybe as a medium to nourish nitrogen-fixing microbes.

#301 ::: heresiarch ::: (view all by) ::: April 14, 2008, 01:17 AM:

abi @ 288: "So now food prices are on the rise for many reasons, and the African and Asian "family farm" is under more threat than the US has ever known. They've been eating their seed corn† for years, and now there's nothing to plant."

That feels counter-intuitive. It seems to me that the rising price of food would benefit farm families around the world far more than it would hurt them. Wouldn't it increase demand for their crops? The real problem isn't that the situation is bad; it's that that it has been bad and, as you say, the family farms that would have been able to take advantage of this situation have already moved to the city or eaten their seed corn.

Slightly more relevant to me than whether we are responsible is whether this will adversely affect us.* More relevant, because it seems far more likely to motivate action: our track record on fixing the damage we have caused is pretty sad compared to our track record on fixing damage with a strong likelihood of hurting us.

*"Us" being the developed world.

#302 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: April 14, 2008, 05:06 AM:

David Harmon @ 295

My immediate reaction was: would that still work if you account for the industrial overhead? Not just the factories themselves, but the production and purification of nutrient supplies, protecting the culture vats from infection, quality control, and so on?

Maybe it would work, maybe not. That's what I meant by the context the technology is used in. The system of support, distribution, maintenance, waste disposal, etc. usually has more to do with the success or failure of the technology as an attempt to solve some particular set of problems than the technology itself. For instance, the fact that it's "cheaper" for Tyson to let all that pigshit and chickenshit flow into the river than recycle it for the nitrogen and scarce nutrients it contains is one of the reasons that large-scale meat production is part of the agricultural problem rather than a part of a solution in the US. There's nothing about the technology of raising animals that requires that particular action.

Unless global warming hands us a total ecosystem collapse, I doubt that the world as a whole will be unable to produce enough food for its population.

I guess I wasn't clear enough. I see the distributed manufacture of synthetic food as a potential partial solution to the problems created by large-scale centralized agribusiness, not to world hunger. I agree completely that feeding people is a political, not a technical problem. On the other hand, feeding them in the context of an industrial society that uses its land very inefficiently* is, as we are discovering, fraught with highly-complex side-effects and unintended consequences. So this line of discussion is the result of asking myself, "If agribusiness doesn't work in the long term, and if family farms aren't sustainable in an industrial society, what alternatives are there?"

* Note that "efficient" use in this context probably requires the kind of benevolent attitude towards the citizens of a country that J. Stalin had towards the people he systematically starved.

#303 ::: Nancy Lebovitz ::: (view all by) ::: April 14, 2008, 07:01 AM:

#299 ::: heresiarch ::: (view all by) ::: April 14, 2008, 12:40 AM:

Greg never claimed that copyright had a one to one resemblance to agriculture. Rather, he was just pointing out that in both cases letting the market function naturally doesn't actually benefit us much, and that putting some artificial strictures in place might lead the market in a more beneficial direction. Isn't that essentially the theory underlying this entire discussion? That we might want to critique and adjust the social mechanisms underlying market interactions?

And I'm pointing out that trying to override the market with complex, flexible rules can lead to getting the opposite of what you want.

Perhaps we might also want to critique and adjust the social mechanisms underlying government interactions.

#304 ::: Greg London ::: (view all by) ::: April 14, 2008, 09:28 AM:

Nancy@303: trying to override the market with complex, flexible rules can lead to getting the opposite of what you want.

Yeah, I think that's another way of saying what I was trying to get at pointing out that movie and record industries have gotten too much power and have become anticompetitive due to the power that copyright gives them. DMCA, fair use, yada. And somewhere I know I acknowledged the problem that corporate farms are getting subsidies that they don't need.

But again, there's something about your "trying to override the market ... won't get you what you want" that has quite a bit of the natural law fallacy checkboxes in it. It's got major chunks of any sci-fi story that shows scientists dabbling with something they shouldn't and creating a monster. It's too complicated, and bad things might happen, we should just stay away from it. genetic enginneering might turn everyone into zombies. stay away from genetic engineering. Booga booga. Baby/bathwater.

The market forces that affect artists and farmers are complex. I started out way back when by saying that I wasn't even going to try to say I understand farming economics, at least not enough to make policy. But I'm pretty sure I have enough exposure to farming that I can smell some of the logical fallacies that have been thrown around regarding subsidies.

I admitted from the beginning that corporate farms get subsidies they don't deserve. But that doesn't mean subsidies don't help family farms stay afloat. I'd be the first to support the idea of restricting subsidies to family farms and not allowing corporate farms collect. I'd even support the idea of looking for ways to create incentives so that family farms could get out of the monocultures that they're tending towards and convert over to botique farming or some other form of farming that no longer needs subsidies.

If you have a 400 head dair herd, and you're just getting by, it's usually cheaper and easier to add a few more head of cows and expand your operating to try and make some more money than it is to sell everything and spend a year or two stumbling around trying to figure out how to do botique farming (or insert other farming method here).

Yes, it'll be a complex system. That doesn't mean it isn't worth it.

But I keep coming back to people making statements about subsidies that end up as absolute, no-subsidies at all, arguments.

#305 ::: Terry Karney ::: (view all by) ::: April 14, 2008, 11:26 AM:

Greg London: There's a website up called (IIRC) 1,000 fans, which explains that, should one manage to find 1,000 people who are really willing to buy your stuff (even to the point of just one piece a year) an artist can make a living.

The trick is, those fans have to be buying directly (which is, of course, work to find; one has to establish a relationship with them) or slightly comfortable (because galleries double the cost of art).

Al Stewart and Barry McGuire are doing this. They do small shows, but the people pack in to see them (the Stewart fans even going so far as to have a show, about once a year) in which they find a venue, and pay for the concert, arrange for a dinner with him, and generally have a convention... Festiv-Al).

We've got a skewed idea of what makes for a "successful" artist, and part of it comes from the warpage of copyright. Labels, have made it possible for people to get their art on the cheap (a disk for 15 dollars, and book of "print" or photos for 50). It gets hard to sell someone a real print for $200, because they are used to so much less/more for their $50.

At which point the economy of scale kicks in. Al Stewart isn't making the money of a Billy Joel, and he gets portrayed as someone making the best of a poor showing.

Which is nuts. He's doing what he wants, on, pretty much, his own terms.

Randolph Fitz: Want to fix the Maltusian problem (at least for the immediate future? Reduce meat consumption, and forget ethanol vehicles. Those two things eat up huge amounts of food use land. I heard this morning that the food used to make 25 gallons of ethanol fuel is enough to sustain a person for a year (I find that a trifle hard to believe, since the raw food ought to be the same as for whisk(e)y, and I didn't think it took that much grain to make a gallon of booze, but I've been wrong before).

The meat issue is a bit more complex, because careful use of pasturage, and a willingness to forgo marbled meats (which means a change in cooking methods, grass fed beef doesn't grill well) can reduce the effect, but as we do it now, with feedlot finishing, and pure corn feeding for those last couple of months (to get the fat up) uses huge amounts of food/land which could be raising more food for more people.

As countries with large populations (such as China) become more affluent, they are demanding more beef, which is taking grains out of the food supply.

heresiarch: The point about harvesting wasn't the time to collect the grain; per se, but that modern values are so different. That two days of harvest was the fruit of months of prepartory labor. I can make a fence in a few hours, but the total of labor (barring it being a quick lashing of deadfall poles) is a lot higher than just saying, "Oh, it took a couple of hours). The cutting of the tree, stripping of the bark, aging of the wood, sawyering of the rough lumber, finish cutting the rough lumber, moving to the place I bought it (probably Arroyo Hardwoods, keep the local suppliers in business), and then doing the actual work are all part of the equation.

As for the models efficiency: There are limits. I'd guess (because people haven't got notably smarter in the past 50,000 years, just done a better job of improving on methods of storing information in the past 5,000) that collection was easier in the past. A shad run (or salmon, or buffalo, or wildebeest) would allow a people who could figure out how to preserve the meat, to collect a large supply of food (protien for the year, in some cases) in a couple of days. A large part of the estimations of the "hard" lives of the "primitive" was based on seeing them in hardscrabble existence (just as some of the estimations of "stone age" man were based on the odd structures of the New Guinea highlands, which were isolated, and at the edge of pverpopulated, because they were geographically limited. Though there is some wonderful stuff about language development in there, as a result- the paucity of European languages is really interesting, but I digress).

As to satisfaction: Yeah, I palmed (sort of) a card. "Stuff" matters. Being stone blind, I don't know how well I'd like being in a non-tech society. But I also know that, absent knowledge of it, I'd be content. What one knows shapes what one likes (natto, perhaps, excepted). The gathering societies had/have all they needed/wanted. If we look at them in that context, the other stuff isn't material (which is why those people who refused to leave the "harder" way of life, for one of settled agriculture, even when they have the chance, is relevant/informative. I think it relates to things like my paying more for vegetables).

As to what we pay, well we are buying the whole package. We get that cheap food (of which the cause/cost of that cheapness is also being discussed) because we spend so much time supporting all the other stuff. That guy in the combine, harvesting, threshing and bagging his hundreds of acres a day, is able to do that because the people who wanted computers in the home, and GPS and all the attendent infrastructure are working to buy the things which made it possible. And some of that non-food work time is being done to pay the taxes to support the lower, visible, cost of that food, so he's probably working a bit more than that.

Something which hasn't been discussed is the productivity of carefully managed mixed agriculture (Randolph reminded me of it). With a milpa a complete diet could be grown. As I recall, the productivity was high, the damage to the soil was minor (and a couple of fallow years did a lot to refresh it). It is/was a form of sustainable slah and burn (because the fallow crop would be turned under). It was hard work (esp before the shading of the ground started to light starve the weeds), but it was more productive than the european system (in part because maize/beans is a better diet, add the squashes and peppers and you're set).

But, it's dying off, because it's not "competitive".

heresiarch: re family farms and the cost of doing business: Raising a monocultural crop takes being able to afford a huge, local, loss. The family farmer can't do that. A bad year (or at most three) and the bank forecloses. To grow one's one seed corn means have a large chunk of land which isn't showing immediate return. In a bad year, that's the difference between making the mortgage, and not. Add the downward pressures a company like ADM causes (and the evil that is "terminator" crops) and the little guy can't compete. A razor thin profit margin is murder on the little guy, and the present subsidy system (see abi on spillover effects of policy in the US) makes a razor thin margin (which ADM, ConAgra, etc. overcome with sheer mass) the order of the day.

The little guy can't compete.

general comment I think we are all in agreement the present system is borked, and that the subsidies have (as with copyright) been gamed so the big guys are getting the benefits of a system intended to help the little guys (and I am including the great mass of consumers in the phrase little guys; food to eat, as with health care and a host of other things ought be something a country as wealthy as ours can assure to the residents therein).

Bruce Cohen (StM) said that perhaps small farms aren't possible in an industrial society. I don't think this is correct, I just think the industrial society we have doesn't really allow for them.

It may be our downfall, as it was with the Anasazi. We may have built a system which demands resources it can't maintain.

#306 ::: heresiarch ::: (view all by) ::: April 14, 2008, 11:34 AM:

Nancy Lebovitz @ 303: "Perhaps we might also want to critique and adjust the social mechanisms underlying government interactions."

Perhaps I'm mistaken, but in my experience this is a pretty commonly accepted belief. No one really doubts that governmental actions are (or at least ought to be) open to criticisms and change. This is in stark contrast to the near-religious fervor that surrounds The Market in the minds of many--the merest suggestion of "interfering with the invisible hand" is apt to provoke a chorus of protest from just about the entire business world. They aren't wrong to point out that government interference can cause calamitous failure, but they usually fail to mention that the market is perfectly capable of delivering calamitous failure all by its lonesome. Which failure mode is worse isn't answerable from first principles; you need to examine each case individually to determine whether government or market failure is more dire.

#307 ::: Terry Karney ::: (view all by) ::: April 14, 2008, 11:35 AM:

er Randolph Fritz, not Fitz. Sorry.

#308 ::: Justin Hinkle ::: (view all by) ::: April 15, 2008, 05:07 PM:

The discussion of regulation is fascinating. It's interesting to me that the major cases of deregulation that have taken place in my lifetime, Phone, Energy, Mortgage to some extent, are always sold as a way for the free market to make things better for everyone. Consumers will have more, better, cheaper options. Corporations will make more money while providing services more cheaply, or taking over from governments and creating private ventures. What always seems to happen instead is the price goes up for the consumer, very small specific sets of people make huge sums and then for at least a period everyone else gets caught up short and loses money.

As socialist as it sounds I believe that some basic parts of the infrastructure, communication, roads, power and monetary policy actually require the regulation that only government can provide. Leaving it up to the free market seems to always end in messes that have to be cleaned up by government anyway.

#309 ::: Stefan Jones ::: (view all by) ::: April 15, 2008, 06:37 PM:

#308: "Leaving it up to the free market seems to always end in messes that have to be cleaned up by government anyway."

Yes, but those messes could be cleaned up faster and more efficiently by unregulated market forces!

This message brought to you by Halliburton. Stay out of our way, and no one gets hurt.

#310 ::: David Harmon ::: (view all by) ::: April 17, 2008, 12:59 PM:

Bruce Cohen @ #293, #297, (and me at #295) re: meat culture:

Hey, the same discussion seems to have broken out on Scienceblogs: Revere's suggesting Chicken McVat, with various commenters battering him along the lines of my arguments. But PZ Myers responded instead with Who Needs a Vat When You've Got a Chicken?.

#311 ::: pat greene ::: (view all by) ::: April 18, 2008, 08:11 PM:

Kathryn from Sunnyvale,

Maybe the produce farmers in California don't get direct subsidies, but agriculture in the Central Valley runs on heavily subsidized water (and power) provided by the Central Valley Project.

In fact, water subsidies are a very important part of this picture -- in that it warps not just the amounts of what we grow but where we grow it. It's nuts to grow rice (or many of the other crops grown in the Central Valley) in a near desert, and unless you have heavily subsidized water, it's not economically feasible.

Those costs are borne by taxpayers. So are many of the environmental costs. It would be much more honest to stop externalizing those costs and just support people who need help paying for food.

#312 ::: Kathryn from Sunnyvale ::: (view all by) ::: April 18, 2008, 09:03 PM:

Pat @311,

There is no such beast as a short discussion of water in California, but it is something I've studied, so I'll try.

For those who don't know--California's water laws have the fine advantage of

1.including two incompatible rule systems: Riparian (it goes through your land, it's yours) and Appropriations (you have a contract claim, it's yours, but never stop using it). Thus the death of Owens Lake.

2. taking the assumptions of a predictably drenched land with streams every 10 feet (UK law), and applying them to a wet/dry season climate with random 2-50 year droughts.

On Fruits and Veggies and who uses the water:

The biggest users of subsidized water are (iirc) in the Westlands Water District--technically a desert (>2 inches/year) in the rainshadow side of the southern Coastal Range. They're big farms--larger than the 500 acres that is supposed to limit certain types of "small family farm" subsidies. They grow cotton and similar water intensive crops, because they can. They get subsidies, because they can, and have for 100+years. They could replace crazy crops with water-efficient trees, but why should they?

Fruit and Veggie farmers tend to be frugal water users because they don't have the subsidies. They're much less likely to use flood irrigation: they can't afford to. Many of their crops are Mediterranean-sourced, so optimized for a Mediterranean climate and dryland farming.

On rice:

My family has a guidebook to visiting Yosemite Valley from 1870 (or so). It starts off "From San Francisco, head south to the eastern side of the Coast Range ( roughly here). Then hire a boat across the Sacramento Valley. Take a mule train up into the Sierra foothills."

The clay soil of the floodplains of the Sacramento River are well suited for rice. Rice elsewhere in California--no. But where you see the paddies--it's similar to what we'd be seeing anyways (or seeing in the natural state) in a land flooded for many months of the year.

Now creating a irrigation-flooded land in order to grow alfalfa, or cotton: dreadful. And I won't go into how Pyramid Lake's ecology and the Lahontan cuthroat trout are going to be killed by melons and alfalfa in Nevada. But rice--it's innocent (ignoring air pollution from burning, but that's another topic).

#313 ::: Terry Karney ::: (view all by) ::: April 18, 2008, 09:07 PM:

pat greene: It's more nuts to grow rice in paddies in the central valley when rice doesn't need to be wet. It's a cheap way (for certain values of cheap) to control weeds, but it's not efficient where water is so bloody precious, and when it's raising the salt table.

#314 ::: P J Evans ::: (view all by) ::: April 18, 2008, 09:11 PM:

#311

Actually, the rice isn't as nuts as it sounds. A lot of the places where rice is grown in the Central valley were marshes before the rivers were dammed and diked, and some of them are flooded in wet years now. Growing rice outside of river bottoms, without changing the type of rice to one with lower water requirements, is nuts.

Fruit trees need deep watering (which also means less frequent watering), but they don't need as much irrigation as corn and cotton - at least some farmers are going to drip systems and other water-conserving methods. (Pistachios, which are being grown in the southeren Jan Joaquin valley, are desert-adapted.)

Incidentally, there are extension-service researchers studying reduced water usage for this sort of thing. They're well aware of the problems.

My pet peeves are over-watered lawns and golf courses. There also are plants I'd restrict, because of heavy water use, or them going wild easily, or just simply being seriously wrong for the climate (why so many people think that Northern European gardens will do well in near-deserts is beyond me).

#315 ::: Kathryn from Sunnyvale ::: (view all by) ::: April 18, 2008, 09:20 PM:

Updating myself at 312,

"Smaller fruit and veggie farms tend to be frugal with water..." Larger ones can be, depending on what type of water and water-rights they have. Sometimes the large farms or corporate farms will still switch over to water-efficient crops because they can sell their 'excess' water to cities for a big profit.

No lawyer who specialized in water-law in California goes without work.

#316 ::: Terry Karney ::: (view all by) ::: April 18, 2008, 10:41 PM:

Kathryn from Sunnyvale: I was unaware that all the Calif. rice was in natural paddy-like areas.

Thanks for sharing.

#317 ::: Nancy C. Mittens ::: (view all by) ::: April 19, 2008, 09:40 AM:

I myself find the notion of green golf courses in places like Arizona and Nevada very, very weird. In my mind, those states are deserts, and deserts don't have lawns.

#318 ::: Xopher ::: (view all by) ::: April 19, 2008, 09:43 AM:

Yes, in those places a golf course can be "green" either literally or ecologically, but not both.

#319 ::: Kathryn from Sunnyvale ::: (view all by) ::: April 19, 2008, 02:44 PM:

Today's paper has an interesting article on how the new farm bill will help kill off honeybees. It'll also hurt duck hunting, and continue to shrink organic farming. Not too long of an article, and shows how interlinked and complex these issues are.

#320 ::: Bruce Cohen (SpeakerToManagers) ::: (view all by) ::: April 19, 2008, 07:11 PM:

Desert golf courses should let the grass go brown but import Canada geese; gooseshit is sort of green. Oh, wait, then they'd have to import slugs for the geese to eat, and that's never a good idea, even if you import large quantities of salt and garlic.

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