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Ron Paul endorses Chuck Baldwin

Sometimes people forget that the major strength of Bob Barr as a presidential candidate is that he is far less kooky than most libertarian politicians, less kooky than even Ron Paul. While we may get lost in dissecting the candidates' policy positions in search of the best libertarian match, we should periodically pause to remember how big of an asset non-kookiness is.

I am sure this recent action by Paul will remind people how awesome it is to have Bob Barr on our side. This libertarian is happy to have a candidate who hasn't published any race-baiting newsletters (Paul), isn't screaming about roads to Mexico and the New World Order (Baldwin and Paul), and has never advocated removing exercise equipment from prisons as a serious approach to crime control (Badnarik).

Plus, Bob's mustache is made of awesome.


The End of an Era

With Goldman Sachs and Morgan Stanley announcing yesterday that they would become Bank Holding Companies, we can say goodbye to the age of the independent Wall Street Investment Bank. The other players are already gone. Bear Stearns and Merrill Lynch were bought out by FDIC-regulated banks while Lehman Brothers kept its date in bankruptcy court.

The purpose of this most recent move is for these firms to adopt a lower risk and lower return business model. They will now be subject to strict risk-based capital requirements and gain two new regulators - the FDIC and the Federal Reserve. In exchange, they will have access to two stable sources of liquidity - bank deposits and permanent access to the Federal Reserve discount window. Rumor has it that Goldman will buy a retail bank soon and that Morgan is planning to sell out to Wachovia.

Neither firm likely needs the new source of funds so much as they need to convince their current lenders that they are not going anywhere. Lender perception is now more important than any tangible asset. A canceled credit line or a margin call is a kiss of death. That said, the shareholders of the new bank holding companies will appreciate having alternative funding sources rather than being held hostage to the whims of their lenders.

Wall Street's reorganization is a triumph of deregulation. Ten years ago, Glass-Steagall was in effect and it was illegal for the same company to conduct deposit-taking and investment banking activities. Since 1999, financial firms are allowed to diversify over several lines of business, making them less likely to fail. Deregulation has also increased the amount of private capital available to the financial industry in times of crisis by expanding the pool of potential buyers for troubled firms. Were the regulation still in effect, Morgan, Merrill, Bear, and likely Goldman would either join Lehman in bankruptcy court or wind up on the balance sheet of the US treasury. That particular piece of deregulation has increased the overall stability of the US financial system.

The only thing that concerns me about the trend of Investment Banks turning into diversified financial companies is that it might be an overreaction to the current crisis. They may be reducing their risk and return below a long-term optimum in response to extraordinary times, and the cost of going back will not be negligible.

Oh well, that's a problem for the shareholders to sort out. Right now they probably value company survival over return on investment.

I plan to get a debit card at the first Goldman Bank to open in my area. It would be pretty cool to have as a symbol of the new era.

Caveat: I'm not an expert, just an interested amateur. My view of the subject is colored by working for a firm that was hired to sell several troubled mortgage companies between 3rd quarter 2006 and 1st quarter 2008. The Wall Street firms currently in trouble are much more complicated than any mono-line mortgage issuer and my experience might be falsely generalized. Also, banking regulation is hopelessly complex and it's possible that I have mispoken somewhere.


An economically sound, morally just and free fix to the subprime crisis

While the subprime crisis should have best been avoided than solved, there is a simple way which could have solved it.

All the efforts of the government, no matter how you look at it, were targeted at pumping money into the financial system to inflate prices. Not only is this approach unsustainable - it tends to produce other similar crisis - it is also morally dubious.

Yet, I contend that there is a moral, simple, fast, effective, free, and economically sound way which would have solved the crisis.

Overall, the economic damage was the construction of too many houses. The fact that people with bad credit got to have mortgage is not a cost in itself. Instead of increasing the supply of money to match the supply of houses, it would have been far better to increase the demand for houses.

At the beginning of the crisis, in August 2007, the US government should have simply auctioned 20,000,000 green cards, and use the proceeds to fund the tax stimulus. Problem solved. Not only would this have stopped the crisis, it would have erased the cost... the error of building too many houses would have become, by chance, the correct economical choice for the increased demand.

It's a bit of a one shot, and doesn't address the systemic problems that lead to the crisis, but it's certainly much better than trillion of dollars of bailouts.

Why doing this is politically infeasible while using trillion of tax payer money is, frankly is beyond my comprehension.


Who Cares About Shoes?

Will Wilkinson bemoans the United States slipping in the Economic Freedom of the World rankings, with Canada moving ahead of us. He asks

Is it now possible to even half-credibly make the case that the United States, in the age of warrantless wiretaps and the shoeless airport security line, is a freer country than Canadia?

What is it with shoes at the airport that makes people so angry? I admit to hating wearing shoes and so maybe I just like the chance to take them off. But people (not just Will) act like it's the road to totalitarianism to be barefoot for two minutes. Is he really going to say that's a greater imposition on freedom than, say, Canada's Human Rights Commission? Personally, I'll take having to remove my shoes over being dragged in front of tribunals for "hate speech" any day of the week.

And, as for his first point, I don't want to defend warrentless wiretapping. I should point out, though, that the United States is hardly unique in this regard.

But I am reminded of this classic post from Stuart Buck:

Amidst all the civil libertarian furor over the Patriot Act I and II, no one has yet commented on the "citizen reporting" provision. By this provision, every adult in America will be required to file a yearly report on themselves, and send it to a new government office that is charged with tracking every person's whereabouts, living circumstances, etc. The yearly report required from each adult must contain:

* Name
* current address
* name of spouse (if any)
* names of children (if any)
* Social Security numbers for all the above
* title of job
* address of employer
* amount of income
* any significant expenditures during the year
* information about bank accounts or any investments
* information about loans, mortgages, and other obligations
* information about what charities the adult supports with his or her money
* information about medical bills
* Potentially much more.

It's pretty clear to me that having to file this information with the IRS every year is a vastly greater imposition on privacy than the theoretical concern that someday there is a minuscule chance that some government official may listen to my father complaining about the weather during our phone chats. And yet it gets almost zero attention. Why?


We're becoming mainstream...

Yet [Ron Paul's Campaign for Liberty] has tensions at the philosophical level. One activist observed that there seemed to be many “paleoconservatives” in the group’s leadership, while much of the grassroots were “anarcho-capitalists.” Paul recognizes the fault line. “I have many friends in the libertarian movement who look down on those of us who get involved in political activity,” he acknowledged, but “eventually, if you want to bring about changes … what you have to do is participate in political action.”

--The American Conservative


AnCap Products I'd Like to Buy #3

"Little Guy" hedge fund. If things don't go my way--high inflation, rising cost of credit, risk of unemployment, sons get conscripted, wife isn't allowed to re-enter at the border--make sure my portfolio compensates me accordingly.


URGENT: CONTACT YOUR CONGRESSMAN REGARDING H. RES. 1255!

My congressional staffer friend Kerri's facebook status wonders why the hell the highest legislature in the land is considering a bill to honor Toby Keith.

HRES 1255 IH

110th CONGRESS

2d Session

H. RES. 1255

Honoring Toby Keith’s commitment to members of the Armed Forces.

IN THE HOUSE OF REPRESENTATIVES

June 10, 2008

Mr. COLE of Oklahoma submitted the following resolution; which was referred to the Committee on Armed Services

RESOLUTION

Honoring Toby Keith’s commitment to members of the Armed Forces.

Whereas thousands of celebrities have donated their time to entertain members of the Armed Forces both in the United States and abroad through the United Service Organizations (hereafter known as the ‘USO’);

Whereas since the USO’s founding in 1941, country music personalities have been an essential element of the USO’s entertainment;

Whereas Oklahoma native Toby Keith made six USO tours around the world, performing in such locations as Cuba, Germany, Belgium, Kosovo, Italy, and Africa; and entertaining more than 135,000 members of the Armed Forces in Middle East Operations Iraqi Freedom and Enduring Freedom;

Whereas Toby Keith has volunteered to perform at some of the most dangerous and remote locations in the Persian Gulf, which require Apache escorts and include Forward Operating Bases with total populations of not more than 50 members of the Armed Forces;

Whereas, on April 24, 2008, while performing in Kandahar, Afghanistan mortar fire disrupted his concert;

Whereas few, if any, performers have traveled to such remote and dangerous military bases with Toby Keith’s frequency;

Whereas Toby Keith has acted as a valuable liaison between forward deployed troops, the USO, and the American public;

Whereas Toby Keith makes it a priority to give tickets to members of the Armed Forces here in the United States;

Whereas Toby Keith allows members of the Armed Forces to eat and drink for free in his restaurants; and

Whereas Toby Keith co-wrote and performed the hit song ‘American Solider’ honoring the sacrifices that America’s soldiers make on a daily basis: Now, therefore, be it

Resolved, That the House of Representatives--

(1) honors Toby Keith’s commitment to our country’s Armed Forces overseas;

(2) encourages other entertainers to take into consideration Toby Keith’s deep commitment to boosting the morale of our Nation’s Armed Forces when supporting USO operations; and

(3) a copy of this Resolution, suitably engrossed, be transmitted to Toby Keith.

As laughable as all this is, it is definitely par for the course. Congress routinely passes all sorts of silly resolutions. "Congress has saluted such milestones as the Idaho Potato Commission's 70th anniversary and recognized soil as an 'essential natural resource.' ... Congress has designated May 5-9 as National Substitute Teacher Recognition Week, and set July 28 as the Day of the American Cowboy."

Notwithstanding my friend's consternation, and the fact that nowhere in the the Constitution does it explicitly authorize the federal government to bestow honors upon, or for that matter, "engross" government documents for, jingoistic country music stars, I agree with other libertarian commentators that this phenomenon is by and large a good thing. The Wall Street Journal article where the previous quote comes from laments that such bills consume congress' time "as legislation on gasoline prices, tax fixes and predatory lending languish." Honoring the role puppets have played in our nation's history or recognizing Grapefruit Awareness Month seems like a small price to pay to keep that other sort of legislation languishing as long as possible.


The Path to Anarcho-Capitalism

John Robb maps it out at Global Guerrillas.


AnCap Products I'd Like to Buy #2--Insurance against Crime

This product occurred to me as I was listening to a podcast of Chapter 13, "Punishment and Proportionality", of Murray Rothbard's "The Ethics of Liberty". I was contrasting Rothbard's discussion of criminal punishments to Randy Barnett's examination of restitution. Why can't I simply use an insurance policy to determine whatever restitution I deem appropriate if I am the victim of a crime?

I would expect to have a list of crimes--robbery, kidnapping, assault, rape, embezzlement--each with a benefit payable that I determine. If I find the thought of being raped particularly heinous, I would choose a larger benefit (with a proportionately larger premium) if I were a victim of that crime. If being the victim of auto theft did not particularly bother me, I could insure for a smaller benefit.

The insurance company would have to base its premium on the risk of the crime occurring, its ability to investigate the crime, to apprehend and prosecute the criminal, and to receive compensation from a convicted criminal. The company would not make guarantees of conviction or punishment to me, in order that they can negotiate a plea bargain with the criminal to recover the maximum compensation from him. The company may be fortunate enough to recover my benefit from the criminal, or they may have to make up the difference from collected premiums.

My benefit should include a lump sum for "psychic damage" which included any desire I had to see the victim punished. The benefit should also include a varying payout related to the financial costs I incurred from the crime--damage to property and medical costs. An administrative cost could be added according to the number of hours I had to spend assisting the insurance company with investigation and prosecution (perhaps in the standard contract I have to provide "all assistance as required by the company" and I can purchase an optional rider to compensate my time above, say, six hours per claim).

I would expect the jurisdictions I was traveling in to also affect the premium. Premiums may be higher in New York State if they had a legal system that was uncooperative to insurance companies, focusing only on making criminals pay "debts to society" and may be lower in Florida if their judges were willing to enter arbitration with the insurance companies more readily. Premiums on the high seas would be related to the insurance company's ability to privately apprehend and recover compensation from criminals.

If insurance companies were motivated to prosecute crimes for the benefit of victims, would victimless crimes be crowded out of the courts? Would insurance companies provide competitive pressure to make government law more efficient?

Would insurance companies become powerful enough relative to governments that they could provide protection against crimes committed by governments?

Would such organizations become coercive? The easiest way to become coercive would be for the insurance company to lobby for licensure and a mandatory market from the government, then use a monopoly position to prosecute "criminals" in such a way as to maximize their profit. What safeguards could protect against this?

Are there laws today to prevent me from insuring myself against criminal injury? Or could insurance companies be a bridge from the punishment/rehabilitation model provided by governments today to a victim restitution model independent of government?


AnCap Products I'd Like to Buy #1--Medical Condition Insurance

I believe that the most lasting way to remove coercion from society is to replace government institutions with voluntary institutions. Because of this, I often speculate about what sort of institutions would emerge in a free society.

I test these institutions against several ideas:

  1. Do they involve coercion? If so, they simply don't count as a voluntary institution.
  2. Are they monopolistic? Do the institutions themselves have high barriers to entry?
  3. How viable is the business model? Would sellers be motivated to offer the product at a price I could afford?
  4. Most strategically, do current governments establish barriers to entry for my speculative institutions? In other words, could we begin institutions today that are ready to compete with government institutions today and operate without governments in the future?

The first product I would like to buy is insurance against developing a particular medical condition. I would like to pay a regular premium to be insured against the possibility of developing, say, melanoma. If the condition is diagnosed, I would like to receive a lump-sum benefit completely independent of the course of treatment I may (or may not) choose. I am willing to pay larger premiums for unquantified risk, or alternatively to undergo screening tests to quantify risk to secure a lower premium. I would also expect there to be optional riders that raised the premiums and benefits linked to medical inflation.

The main advantage to me as a customer is that I would be in charge of my treatment. I could use my benefit payout to buy treatment from any provider I choose, or to spend on living expenses if the condition interferes with my income.

How does this compare against the points above? In particular, is it possible to simply place a bet against the possibility that I develop melanoma, or is it outlawed through insurance regulation laws?


Left skewed financial bets


Most of the money invested can be traced back to people who want good return and little risk. Be it through hedge funds, pension funds, funds of funds, bank deposits, ultimately there's someone out there who wants his capital to grow, and there's a money manager with a different incentive.

Most money management involves asymmetric risk for the manager and symmetric risk for the client. This is a classical principal agent problem. The manager has an incentive to increase the risk taken to make the most money. Heads we both win, tails we both lose, but I don't really lose that much while you get the full hit. This can be mitigated by various tricks, risk management, watermarks, and countless other, but overall the asymmetry persists.

But "risk" is a crude measure of what really matters, the probabilistic distribution for the payoff of the bet. One can use for example historical standard deviation, but it vastly underestimates the risk of fat tail distribution.

The most beneficial distribution for a money manager is really a negatively skewed or left-skewed distribution. A left skewed bet will turn in a profit with high probability and a loss with low probability. However, the loss will be larger than the profit. Its historical mean is also very likely to overestimate its true mean, implying that analysis of past performance is likely to overestimate future performance. A typical left-skewed bet would be to bet that Hillary Clinton will not be elected in 2008. You can lay this on Intrade and I think you are pretty sure to make $3 dollar on this, but then you might lose $100 if it happens (most likely scenario, Obama is killed by a crazy white supremacist sniper)

Not only are left-skewed distribution good for a money manager, right-skewed distribution are really bad. You lose money most of the time, and the evaluation of your performance from your track record underestimate your true expected performance. Imagine a betting strategy that loses a dollar every month, and wins 36 every two year. It's actually a great strategy, but unless a money manager can prove it works, he's likely to lose his customer or get fired before he can even turn in a profit.

On financial markets, every product can be thought of as a bet, and every bet has its own implied distribution. Overall the price of the bets move so that supply and demand are matched. If most of the trading is done by money manager, then there should be good demand for left-skewed bets and good supply of right-skewed bits, as a result, the price of left-skewed bets fall, and the price of right-skewed bets (which are by the way just laying a left-skewed bet). This also mean that the price of financial assets does not reflect the market risk-adjusted expected return, but some other, skew-dependent value.

There are ways for a money manager to extract this value. One way to do it is to package as much negatively skewed bets as possible. The distributions should average out and produce a nice normal distribution with no skew... Well that's the central limit theorem, but in practice, if you're dealing with fat tails, it could take a lot of bets to average this out, if it's even possible. It could be infeasible for a money manager to extract this value.

However, a simple investor with symmetrical incentives can profit from this situation by making right-skewed bets. He will not "beat the market", he will be helping money managers get rid of unwanted risk profiles and get paid for that.

So what are the right-skewed bets?

Out of the money options are the obvious... a put struck very low bets that a stock will fall a lot, a call struck very high bets that a stock will rise a lot. Most of the time, the option will expire worthless, sometimes it will make money.
Generally you can bet that the distribution of return of assets will have fatter tails that assumed by the market. Nassim Taleb makes nice epistemological arguments for fat tails and how they are underestimated. This is not really the point I am making here. I am simply saying that money manager will bet that distributions have no fat tails because it's a left skewed bet. Therefore, taking the opposite side should bring profits. One of the most common skewed trade is the yen carry trade. From a trader's perspective it's a great trade: borrow yen at low low rates, invest it in New Zealand at high rates, pocket the differential as long as the yen doesn't appreciate to much. You get money every day, it's fantastic. Of course, if yen rates start to rise, the yen will appreciate, many traders will get squeezed, try to get out by buying yen, producing further appreciation and pushing more people out of the trade. If a money manager wants to bet on that scenario, he stands to make a lot of money, but how will he explain to his boss or his customers losing money every day on the trade? Even options involved regular money loss... every day that passes without the event that you're expecting happening is a day where the market value of the option diminished, out of the money option have negative carry. A call option on the yen/new Zealand dollar is a massively right-skewed trade that does not appeal to money managers.
Betting that debtors will default is also a typical right-skewed trade, which can be made by buying protection with a CDS... again it involves shedding money regularly. This works if things go wrong, if things go well a winning right-skewed trade is betting on the recovery of distressed companies.

So right-skewed trade are nice, and if economics are right they can make lot of money, what's not to like ? A good reason to hate right-skewed bets is the income tax, which really makes your incentive asymmetrical. Two month ago, I wanted to bet that oil would quickly go to $200 or $100. The way to make that bet are option on oil futures (keyword is quickly). The problem is, if by chance you actually win your bet, enjoy a 50% tax on your profit. If you lose, well you can sort of carry your losses over fiscal years, but it is very limited. You might get by if you make a lot of trades but it pretty much kills every edge you could possibly have. One (legal) way to do it is through an offshore company which does not pay corporate tax. You still get taxed when you get the money out, but it can be after a long time, after many trades, when hopefully your return isn't skewed.

Disclaimer : whatever you do don't ever blame me, this does not necessarily represent anyone's view, including my employer or even mine.


Secret Anti-Family Values Microsoft Agenda

The spellcheck in Outlook changes blonde to blond. After consulting a dictionary, I've learned that even in English the extra e can convey gender information. This means an e-mail I recently sent about a past night out on the town may read much differently than I had intended. I wonder if the version of Outlook I used has some sort of Google Chrome mindmeld technology. If Scott Scheule is, infact, fair haired, I would appreciate it if Microsoft would stay out of my subconscious.


Fundamental Economic Problems of Urbanized Society

The European leftists, the folks admired by the hard left in this country, oppose consumerism but offer no realistic alternative. Just do away with the economy, then life will be a perpetual vacation according to this group.
First a quote from Sixties radicals in France. See link for much more.

"Proposals to spread the work around by implementing a slightly shorter workweek seem at first sight to address the matter rationally. But such proposals do not face the fundamental irrationality of the whole social system based on market relations. While reacting to one manifestation of this irrationality (the fact that some people work long hours while others are jobless), they tend at the same time to reinforce the illusion that most present-day work is normal and necessary, as if the only problem were that for some strange reason it is divided up unequally. The absurdity of 90% of existing jobs is never mentioned.
It’s absurd to demand the “creation of jobs.” Enough riches already exist to take care of everyone’s basic needs; they only need to be shared around. As for all the production that serves no real purpose, a social revolution will close more factories and eliminate more stupid jobs in twelve hours than capitalism does in twelve years. We will no longer have any reason to produce such things as food colorings, aircraft carriers or insurance contracts. We don’t want “full employment,” we want full lives!
* * *
It is both morally and strategically justified to make particular demands, such as for higher unemployment benefits or free public services. But a social movement should not limit itself to such demands. To do so amounts to asking for justice from the very forces that are based on injustice---Whether we are workers, students or unemployed, what we all really need is the space and time to meet, to share dreams, to recreate our lives. We should demand full enjoyment, not full employment!"

Capitalism’s Headache
This economist gives the counter argument to the radical’s argument about the evils of consumerist capitalism by claiming that it is the only engine of long term prosperity, the other being massive investments in infrastructure, public works and exports which is ultimately unsustainable. Since economic development is the only known successful way out of poverty, what validity do anti-consumerists sentiments have?

Comparing Japan and China’s Economy

"The two countries have experienced similar cycles. A decade ago, a mainland investment boom led to a Chinese nonperforming loan crisis even bigger than Japan's 1990s bust. A massive, painful restructuring of China's debt-laden state-owned enterprises ensued. Now, China risks a repeat of that painful adjustment. The good news is that, in stark contrast to Tokyo's decade of denial, Premier Wen Jiabao and other leaders have publicly recognized that today's imbalances must be addressed.

As in Japan, consumer spending is too low to keep the economy motoring ahead. In China, consumption was only 50% of GDP in the 1980s and today an astonishingly low 37%. Typically, poor countries devote about 60% of GDP to personal consumption. The problem is not lack of desire to spend, but lack of money: Household disposable income has been shrinking as a share of GDP. The annual flow of 10 million workers from countryside to city has suppressed wage growth while regulated rates give consumers negligible returns on their savings deposits.

Up to a point, less consumption meant China could devote more resources to investment, and thereby grow faster. Back in 1980, most Chinese citizens lived on less than $2 a day, according to the World Bank. By 2015, only 13% of the population will do so. The issue is not that consumption is not rising fast enough on an absolute scale. Rather, as in Japan, a development strategy that brought enormous success has been taken to an unhealthy and unsustainable extreme. With consumption not growing as fast as GDP, China had to find other sources of demand.

Total investment -- residential, business and public works -- has been pushed to a sky-high 45% of GDP. Even that is still not enough to absorb all of China's output. To avoid recession, China lends money to foreigners to buy Chinese exports, giving China a trade surplus of 9% of GDP, way up from the 2-3% of GDP that prevailed during most of 1990-2004. As Japan's experience shows, this strategy is unsustainable. Excess investment is likely to be wasteful investment, which eventually ends up undermining growth while building up nonperforming loans.

Meanwhile, China can only keep increasing its trade surplus if other countries increase their deficits, but the main deficit country, the U.S., has been sharply decreasing its price-adjusted deficit."

See Link To Wall Street Journal


Mean Streets

I'm getting more chuckles watching the local news coverage of the RNC protests with more reporters broadcasting from my block (to see my block, click here and then the link for 1:40 PM). I'm glad I didn't have to try to sleep through the flashbangs used by the cops on said block yesterday.

The highlight of last night's local coverage was a clip of a couple totally radical anarchist banditos trying to rip up a few dividers used to corral folks waiting in line before shows at Minnesota Public Radio's Fitzgerald Theater. These are permanent fixtures, sunk into the concrete and not part of any police dividing line (picture of said dividers and the Fitz here). The Fitz is home to A Prairie Home Companion, and also, humorously enough, held a protest concert earlier this week.

The big surprise is that many of the organizers of the peaceful protests have been giving interviews to the local news here refusing to denounce or disassociate themselves from the violent element, saying that they welcome any expression of frustration caused by the Bush administration. I think that must be because the aforementioned dividers were firmly sunk into the concrete, and it's hard to build a lot of muscle mass on a vegan, locovore diet. Had the Fitz sustained any real damage, there might well have finally been some progressive backlash.

"Ms. Jensen-Olsen, did you hear the Wilco show has been postponed due to theater repairs!?!"

"Oh no! Well gosh darn these anarchists!"

Trying to explain to my boomer parents what the critical mass folks want to get out of their direct action! is difficult, given that, like every other leftist direct action free from oppressive hierarchy, it's drawn in so many different movements and sects there isn't a coherent voice anymore, even if the thing started as a means of highlighting how cities were unfriendly to massive cyclist gangs. I first started by saying that bike-lifting is when a participant raises his or her bicycle in the air, and that this occurs when an intersection is corked, when a cyclone is occurring, or at any point a participant desires to hold a bicycle in the air. But that drew an even blanker stare. So I told my old man that these are the same type of folks that don't find wearing a keffiyeh to a gay pride parade out of place, and he seemed to get the gist.

Only one more day, and I can move back home.


Take That, Bus Stop Bench!

The first day of the RNC has come and gone. The Macy's a block over from my pad has had it's display windows smashed. A near by bench at a bus stop was also destroyed by radical leftists (we all know how many puppet masters of hierarchy take public transit, so score one for the proletariat). Working third shift and needing to sleep during the day, I'm crashing at my folks' place in the burbs until the dust settles in St. Paul and any and all excitement returns to Minneapolis. I was also a little worried about my car, as the garage I've got contract parking in is open on two sides. I've got an unimpressive domestic, though. The guy in my building with the entry level beamer is probably my only neighbor with a real concern, lest anyone is rocking a Bush or McCain sticker.

In the run up to the convention, the community access stations in St. Paul had a steady stream of radical leftist programing. One show was a compilation of short clips put out by the Independent Media Center. In one of the clips, a totally radical anarchist bandito said that anarchists (at least the bandanna, Doc Martins, cuffed black jeans sect he rolled with) are peaceful and aren't out looking for violence, but that they will defend their own if police instigate violence.

It took me a moment to remember where I had heard that before. It's the same thing every member of an English soccer firm (hooligan gang) has said in all the interviews I've read. Obviously, if every soccer firm was just a group of fans with an interest in self defense, there wouldn't be any violence around soccer matches in Europe (ha). In Bill Buford's Among the Thugs, the American writer was fed the same line before traveling around Europe with a Manchester United firm and gaining their trust. He'd then see the same folks who had previously split open an innocent bystander's face with a piece of rebar as the bystander tried to rush his wife and children inside the relative safety of the family's car feed that same line about not looking for violence to other reporters that approached the hooligans for interview. You don't even have to go looking for this stuff in media about hooligans. The same, "we're not out looking for trouble," finds its way into print in collections of fans' voices like We Are Tottenham.

It's the same thing the cops say, too. To serve and protect is all well and good but you know there are several members of the force who got into the business in order to tune up trouble makers.

Watching the local news at my parent's house with reporters broadcasting in front of the building that houses my condo is weird. During one of last night's local news broadcasts, one of the peaceful protesters complained that the huge police presence downtown was intimidating. At that point, I realized I'd lost any and all sympathy for the protesters.

Partisan divides run deep, and no one really cares about civil rights unless they can be used as a cudgel against their political opponents. There were several attempts made to block the buses full of delegates from reaching the Excel Energy Center on the first day. I'm sure lots of folks would describe this as nonviolent resistance, and I'd agree, but doesn't restricting the movement of the delegates and trying to disrupt the convention sort of get in the way of that whole right to assembly nonsense the protesters were crying about when the government sanctioned protest route didn't run close enough to the Excel to allow them to stop Republicans from gaining access?

Then, when police step in to clear the road so the buses can pass, as long as protesters don't lash out, it's alright for them to continue to restrict the movement of the delegates? And the police are terrible people for dragging them to the sidewalk and using pepper spray?

There is no doubt a lot of abuse has been dished out by the police, and that more will still take place, and it is especially unfortunate that some of it will fall on the heads of the vast majority of protesters that aren't blocking traffic, aren't throwing urine and feces at cops and delegates (can any of you Democracy Now! viewers let me know if this qualifies as nonviolent, too?), aren't attempting to lay down spike strips to disrupt traffic, aren't busting shop and car windows, and aren't restricting anyone else's freedom of movement. But it doesn't seem avoidable to me.

The delegates have a right to attend the RNC, and the local business owners have a right to their property (and not to have it destroyed by folks who traveled here with that very thing in mind). The violent minority element involved with the protests, the anarchist banditos with their bullshit, "we're not looking for trouble" put ons look just like a lot of the peaceful protesters and use them for cover. The banditos and the cops are both looking for trouble, both saying they aren't, and both thrilled to find each other. The cops will get to crack a few skulls, the violent element will get to wear their "I've been arrested" badge of pride, and the only folks that'll suffer are the other 99% of the protesters who get in the way.

The big problem is that there are two sets of victims and the police can't protect them both. The violent minority element is going to make the police choose between the those who live, work and own property in St. Paul and the nonviolent protesters descending upon the downtown area. I wonder if the fact that the nonviolent protesters look just like the folks that are throwing piss and shit on the police will weigh into the cops' decision making process? (Or if Amy Goodman is really upset about being arrested?)


There's a $1000 Leaving Town Tax

This isn't really big news, since I seriously doubt even in California such a brainless referendum would ever pass. Nevertheless, here's the latest, craziest initiative proposal. The Taxprof summarizes nicely:

A California activist is trying to gather the 694,354 signatures needed to place a tax initiative on the ballot that would:

* Impose a new 35% income surtax (in addition to federal taxes and the existing 10.3% top state rate) -- 17.5% (on all of the taxpayer's income) when income exceeds $150,000 (single)/$250,000 (joint), and an additional 17.5% (again, on all of the taxpayer's income) when income exceeds $350,000 (single)/$500,000 (joint).
* Impose a one-time 55% wealth tax on assets exceeding $20 million held by a California resident or held in California by nonresident.
* Impose an exit tax of between 36.5% to 54.3% on both income and unrealized appreciation in asset values over $5 million when a resident dies or leaves California.

The last part (hilariously named the "Hasta La Vista Tax") is the wackiest provision, promising to take half of of the assets of someone for having the temerity to leave the state.

Or at least I would think this is crazy, but maybe not. After all, onerous exit taxes are official United States policy:

In 1996, Congress tried to address a wave of tax-driven expatriation by the wealthy by requiring former citizens to file tax returns for a decade and forbidding Americans who renounced their passports for tax reasons from visiting the United States.

That's right: Leave the United States, leave behind your citizenship, and you still pay taxes for ten years. Honestly, this makes me madder than just about anything the national government does. Upset about the drug war? You're free to leave (not that many countries are more accommodating, but in principle they could be). But don't want to pay over half your income to the government? Too bad. Not even leaving the country will allow you to escape.


Two Data Points are Probably Better than One

College admissions is not an area about which I have a great deal of knowledge, and I think its importance is probably exaggerated by overanxious parents. One thing I do care about, though, is using statistics properly, and this article, concerning a recent College Board study on the efficacy of the SAT, is thus exasperating:

Barmak Nassirian is associate executive director of the American Association of Collegiate Registrars and Admissions Officers and a noted critic of the SAT. He said he views the report as unsubstantial and contends that the SAT did not change enough to make a difference in its predictive quality.

He cites the validity studies to show that high school GPA is about as predictive as the SAT itself. Using the College Board's scale of minus 1 to 1, he notes that high school GPA alone gets a 0.54 while the full SAT gets a 0.53.

This is very strange statistical practice. Mathematically, you cannot do worse using two data points (in this case, high school GPA and SAT scores) to make predictions than you can with one. It makes no sense to decide that because one correlation coefficient is lower than another, you should just toss out what is presumably useful information. How useful it is, of course, depends on correlations. Looking at the College Board report , it appears that using the SAT and GPA together give a correlation of 0.62. (Actually, this is the "adjusted R-squared". The raw results are similar.)

So even if you have the accumulated high school grades representing dozens (hundreds?) of hours of testing, the SAT still adds substantially to the ability to make accurate predictions about college grades. That doesn't mean the SAT has to be used though. Maybe there are better predictors. Maybe colleges should be looking at things other than first year grades. But saying "X predicts better than Y, so let's forget about Y" is silliness.


College "Speech Code" Lose Out in Court Case

I am behind the curve on this one and not sure if it got much coverage. I just learned that earlier in the month Temple University lost a case in which their speech code was ruled unconstitutional.

Hopefully this ruling will be applied on other campuses.


An Extremely Depressing Onion Article

6-Year-Old Stares Down Bottomless Abyss Of Formal Schooling

Local first-grader Connor Bolduc, 6, experienced the first inkling of a coming lifetime of existential dread Monday upon recognizing his cruel destiny to participate in compulsory education for the better part of the next two decades, sources reported.
...
Shortly after his mommy, homemaker Ellen Bolduc, 31, assured him that he would be able to resume playtime "when school lets out," Connor's innocent brain only then began to work out the implication of that sentence to its inevitable, soul-crushing conclusion.

Although I'm always surprised by the number of otherwise "plumb-line" libertarians that support public schools, libertarians are well aware of the evils of compulsory education. On the other hand, libertarians are often hypocritical of the problems with schools as we know them and the concept of schooling itself. Schooling provides a good example of the importance of "thick libertarianism", the claim that libertarianism must incorporate contextual social and cultural values in its analysis.
We should not assume that education in a free market would look like our present private and public schools minus the hobbling regulatory restrictions.
Rad Geek explains how statism has a deeply pernicious effect on the internal culture and institutional structure of schools:

One of the worst things about so-called "public education," i.e. government-controlled schooling, is that students are forced into an institution that they consistently find unpleasant and boring, whether or not the individual student thinks that it's worth the trouble. That fact, combined with the fact that the victims are all young and many of them are poor or black or otherwise marked as "at-risk youth" in need of special surveillance and control, naturally and systematically corrupts the way that the school relates to its students. It leads administrators and political decision-makers to focus on restraining the unruly behavior of the coerced students, by making authority, control, "security," and "discipline" top priorities. In practice this means monitoring, intimidation, and coercion. These facts in turn result in attitudes and institutional practices throughout State schools that are often hard to distinguish from those prevailing in a prison camp.

The causal relationship also goes the other way. The hierarchical, authoritarian, and ultimately unproductive, structure of schools and the education they provide shapes political outcomes. Mencken writes,

The aim of public education is not to spread enlightenment at all, it is simply to reduce as many individuals as possible to the same safe level, to breed and train a standardized citizenry, to put down dissent and originality. That is its aim in the United States, whatever the pretensions of politicians, pedagogues and other such mountebanks, and that is its aim everywhere else.

A primary outcome of education as it is presently constituted is to turn naturally independent, self-sufficent, entrepreneurial, human beings into efficent wage slaves for the state monopoly capitalist system and obedient subjects for the total state. While private schools are usually less culpable than public schools in this regard, they still operate within the same environment and are conditioned to the demands and expectations of this system by the demands of employers, parents, and legislators.
In the absence of statism, we can only assume that schools would look completely different. In fact, I suspect that that schools would be unable to compete efficently with alternative forms of education in a liberated society. David Friedman appears to be at least one person who has been succesful "unschooling" some of his children. I highly recommend his posts on the subject:
The Case for Unschooling
Home Unschooling: Theory
Home Unschooling: Practice


Roger W. Garrison compares Keynes and Hayek on the Business Cycle

I really enjoyed Roger W. Garrison's lecture from the Mises University 2008 podcasts. He shows mathematically how Keynes' explanation of the business cycle is a simplification of the Austrian view, and thus Keynes' theory misunderstands the full relation between savings and consumption.

Unless you can perform phenomenal feats of mental visualization, it's also necessary to download the Microsoft PowerPointTM presentation "Sustainable and Unsustainable Growth; Keynes and Hayek: Head to Head" from here.