« November 2015 | Main | January 2016 »

December 2015 posts

A Strangeness in My Mind

By Jonathan B. Wight

A Strangeness in My Mind is Orhan Pamuk’s latest novel (2015), set in Istanbul over the decades of the 1970s to the present time. It is a love story wrapped around a cultural artifact—the selling of boza, an old-Turk fermented wheat beverage.

PamukThe book is a biography of a simple boza street seller, his extended family, and friends. The twist is that this young man, who emigrates from his village to work with his father on the street, elopes with a girl from a neighboring village—but [spoiler alert!] in the dark she turns out to be a different girl from his intended love! What to do?

The story is delightful, charming and moving, even as the hard life of a street vendor is grueling and depressing. Somehow he ekes out an existence, but there is nothing simple about his life’s journey. There is plenty of intrigue, from both families and in-laws, and plenty of angst from moral and economic conflicts.

Istanbul, growing these decades like a petri dish full of mold, expands and smothers everything. Cultural and economic changes are at the forefront of the story, particularly the rise of the Islamic Party and an urban society that is increasingly modern (and to some eyes corrupt). Bribes to officials and local mafia bosses are required, and a person of virtue like our protagonist is loath to pay. Our hero for a while becomes an electric utility inspector after the industry is privatized, and the electric company seeks to reign-in the ubiquitous practice of illegally tapping into the lines.

Part of the economic lesson has to do with property rights, or in this case the mishmash of arbitrary and informal property rights created by squatters and politicians, that give rise to cloudy titles. With developers scrambling for land to build high rises, the slums of the poor street vendors take on significance.  Learning about Istanbul's gigantic property rights mess through the eyes of a poor person is enlivening. 

One of the wonderful things about this novel is the way the voices of other characters take over to tell the story from their own first-person views. The author offers subtle insights into love, the human condition, and the “progress” of a big urban city in a developing country. Highly recommended.


A Suffering Dog

By Jonathan B. Wight

Researching something else I happened upon Sam Hollander’s autobiography. Hollander is the greatest living expert on classical economics—Smith, Ricardo, Malthus, Mill, and Marx. After a long career at University of Toronto he emigrated to Israel.

One Sabbath morning he confronted an injured dog on his property. What is he to do?

Hollander’s account (below) demonstrates pluralism in ethics, namely, when deciding right from wrong we are often pulled between the force of religious tradition or norms, utilitarian theory, and gut intuition (his “small inner voice” that I ascribe to Adam Smith’s moral sentiments or impartial spectator). In this case, Hollander follows his gut:

[Paragraph breaks added for readability.]

“One fine Sabbath day I was attracted by a noise in the garden and upon investigation discovered a dog with a gaping wound in his side, that had found his way on to my property or perhaps been abandoned there by his owner. A visiting grandson checked a standard religious-law book to confirm that it is forbidden to desecrate the Sabbath for an animal though one is permitted to offer it food and water. The dog was unable to drink let alone eat.

 

Continue reading "A Suffering Dog" »


Jumbalaya

By Jonathan B. Wight

“The first thing an academic learns when he leaves his ivory tower is that the real world isn’t anything like what he’s been teaching.”

                --Nat Segaloff

SegaloffNat Segaloff is a sharp Hollywood writer and a long-time friend. He is famous for his Bah-Humbug Christmas letters, now extinct, but so very bitingly funny.

A new short story, “Jumbalaya” tackles the mentality of Hollywood corporate conglomerate executives, no longer in love with films as a product but only with turning out money. This is best done with trashy movies, which gives rise to the story’s sharp opening line.

Segaloff’s protagonist, a film professor on sabbatical, seeks to overturn the Hollywood trash with a brilliant twist. He will take all the “wasted” actors and scripts that are currently tossed aside in the messy process of making a film, and use them to make a “free” movie for the studio. Now that is economic efficiency!

Along the way, the story reminds us how love of craft is always an important element in entrepreneurship. If that is snuffed out during the MBA or PhD gristmill, the end result for society will be worse.

Treat yourself to a half hour of fun with Segaloff’s latest.


Movie – The Big Short

By Jonathan B. Wight

The ethics and economics of the financial crisis of 2008 created a cottage industry of books and movies. It is an important story and needs to be understood.

Of course, plenty of cranks are at work, trying to tell this history from a particular ideological perspective. It’s all the Fed’s fault! It’s all Fannie and Freddy’s fault! It’s the rating agencies! Buy gold!

In The Big Short, a clever movie adaptation of Michael Lewis’ book, the spin seems to be the moral corruption of the entire financial industry and the government that was supposed to regulate it. It’s not that everybody is greedy (many are), it is that they are also asleep, intellectually corrupt and unable to think for themselves. The king has clothes—because he is supposed to! They see what they want (or expect) to see. Photo

Australian actress Margot Robbie has a tiny but memorable role explaining mortgage-backed securities from a bubble bath overlooking the sea (get it? -- the "bubble"). Everyone in the audience was riveted—which goes to demonstrate the role of emotions in teaching.

Speaking of the audience—it was sparse. In the movie choice between a true and educational account of the greatest financial boondoggle in the past half-century and a fictional saga about space heroes and cute robots, you can guess who won.

This movie was about teaching, in a clever way. It had some unusual and effective props. One was a jenga tower made of wooden blocks, each representing a mortgage-backed security of a particular rating. The effective lesson was to show that collateralized debt obligations made of such mortgages were not as safe as advertised by slick financial dealers. Another was the analogy of how a great chef makes fish stew from inedible leftovers.

Richard Thaler makes a cameo appearance at a Vegas blackjack table, explaining points of behavioral economics and the exuberance and overconfidence of the bubble years.

Like any moral tale there were heroes, in this case the hodgepodge of misfits that independently and sometimes collectively came to understand the seamy side of CDOs and began betting against them (hence the “short”). There was plenty of pain and anxiety along the way, and plenty of chances for weaker mortals to back away from their heretical view that the market and its champions—Hank Paulson, Alan Greenspan, and other towering figures—got it all wrong. These brave and lucky souls ultimately won, at the bittersweet expense of all those who lost their jobs, pensions, and savings.

The Big Short is clever and entertaining and tells one side of the financial crisis. For a wider lens, I use in class the documentary, House of Cards.


Bernie and the Fed

By Jonathan B. Wight

Bernie Sanders wrote an op-ed in today’s New York Times that attacks the Fed, “To Rein In Wall Street, Fix the Fed.” He raises some valid issues:

The key complaint is that the structure of voting power within the Fed creates conflicts of interest, since bankers vote to elect each of the 12 regional Federal Reserve Bank presidents. And those presidents, on a rotating basis, vote on monetary policy that affects the profitability of their banks.

Sanders thus notes that:

“During the Wall Street crisis of 2007, Jamie Dimon, the chief executive and chairman of JPMorgan Chase, served on the New York Fed’s board of directors while his bank received more than $390 billion in financial assistance from the Fed. Next year, four of the 12 presidents at the regional Federal Reserve Banks will be former executives from one firm: Goldman Sachs.”

Bernie’s complaints about conflict of interest are important, especially when America is suffering from too much pandering to the rich—privatizing the gains on the upswings and the public bailing out the big banks on the downswings.

But the Fed was constructed to allow for—in fact, to create—an insider’s club.  What’s good for bankers was thought to be good for America. Hence, allowing bankers a strong say about policy seemed fair, even prudent. Who better to understand financial markets than financial market experts?

The complaint about the Fed not doing enough to reign in Wall Street relates mainly to the Chairmanship of Alan Greenspan, who let ideology blind him to the moral hazards and failings of enlightened self-interest in securities ratings. Recent Fed Board Chairs have been more pragmatic academics (Bernanke and Yellen). These Presidents have been alert to the nuances of policymaking and opposed to knee-jerk rules.

Yellen’s recent rate hike can be criticized for being inopportune, but she is certainly alert to the problem of discouraged workers and sagging markets overseas. In short, she’s taking a big picture view, but Bernie isn’t convinced that this will help small businesses.

Changing the Fed voting structure would be a messy task with many unintended consequences, particularly if you worry about those with already too much power and influence seeking more power and influence. As Douglass North famously noted, institutions generally change to suit the interests of elites.

The Fed is mentioned nowhere in the U.S. constitution and it has no self-determining authority other than that granted to it by the Congress. In short, the U.S. really does not have an independent central bank, which is a huge problem given the political winds of conspiracy theory and gold fever favored by some presidential candidates.

What Congress created, Congress can change. But reconfiguring the Fed would be akin (in my mind) to having a constitutional convention. You have no idea ahead of time what garbage will come out of it. The only things preventing destruction of our highly successful central bank are traditions and narrow vested interests.

There's more to say about Bernie’s critique and not the time or space to address it here.  His article raises legitimate questions about conflicts of interest, but his solution may present more problems than it solves.

[Thanks to Steve Gillispie for the link.]


Hijab Howler

By Jonathan B. Wight

An article of clothing can be important for signifying membership in a tribe, religion, gang, army, or corporation – recall that IBMers and Mormon missionaries always wore white shirts.

There can be confusion and contrived anger over moral rights and wrongs when someone doesn’t hew “proper” line on clothing. Wheaton political science professor Larycia Hawkins recently wore a hijab on campus to show solidarity with Muslims during the season of Advent.

She was suspended (and may lose her tenured job) for what she wrote on Facebook about it:

“I don't love my Muslim neighbor because s/he is American.

“I love my Muslim neighbor because s/he deserves love by virtue of her/his human dignity…. We worship the same God.”

The second line sounds like something Kant would say, isn’t it?

And, according to Christian tradition, it is a lot like what Jesus might say. He was concerned with breaking the barriers between insiders and outsiders. He sided with the marginalized, who tended to be sick, poor, and of different cultural groups.

(For example, Jews of that time hated Samaritans for, among other reasons, claiming that their God was the true God. Yet in the parable of the “Good Samaritan” Jesus asks his followers to find solidarity with them and others, despite religious differences.)

Speaking of differences, it boggles the mind to think of the semantic problems for Christians who reverently use the word “veil” to refer to the head coverings of Mary and Catholic nuns (above), and yet recoil in horror at the “hijab” worn by Professor Hawkins (above left). The latter term, of course, can imply religious doctrines that are imposed on women, rather than freely chosen, and raise other problematic issues.


Kid Moses

By Jonathan B. Wight

Mark Thornton, a former student, got the wanderlust and after graduation moved to Africa. There he created one of the top-rated safari companies, concerned with preservation of local cultures and natural habitats, as well as stunning photography.

Kid.mosesIn 2011 he wrote a charming short novel I only recently encountered. Kid Moses is the unnerving story of a street orphan from Dar es Salaam who winds up in the wild countryside.

The story weaves back and forth in time, and Moses confronts and overcomes dangers in the Tanzanian countryside far different from these he is accustomed to in the big city. Over-confidence is a persistent feature of human nature, and is exhibited here by some of Moses' choices. 

In this moving narrative we experience life from the perspective of a child who is given chances for success, and how circumstances, institutions, policies, and personalities interweave to create a unique life.

The book is highly recommended, especially for students contemplating a career in economic development.


ISIS and the Arts

By Jonathan B. Wight

How does art inspire our lives with meaning and inform our moral imaginations about the important issues of the day? These are essential questions about culture and civilization.

Adam Smith wrote at length about this and the importance of competition and freedom in the arts to stimulate thinking and feeling. My take on this can be found in “Adam Smith’s Ethics and the ‘Noble’ Arts,” Review of Social Economy (2006).

The relevance of Smith’s insights hit me all the time, such as contemplating the vibrant art scene in Havana as Cuba prepares for greater liberty, a presumably exuberant time except for knowing that uncertainty and inequality will introduce new problems (even as other problems are solved by the market).

But more importantly, a recent New York Times article struck me about “The Soft Power of Militant Jihad.” The enemies who seeks to destroy us do not mumble the night away hidden in caves, rather he and she participate in a vibrant culture of the arts, a rich and radical community of storytelling, hymns, poetry, movies, and blogs that is expanding by leaps.

The arts are a powerful device for creating emotional ties (ask anyone who grew up in the 60’s listening to Dylan, S&G, and PP&M). The arts validate and inspire values and choices that reflect those values. The author, Thomas Hegghammer, notes that:

“As the West comes to terms with a new and growing threat — horrifically evident in the recent attacks in Paris and San Bernardino, Calif. — we are not only confronting organizations and doctrines, but also a highly seductive subculture. This is bad news.”

Hence, defeating this enemy requires a lot more than guns and bombs, it requires changing hearts. But America’s modern culture and institutions have done a poor job of socializing young people into lives of meaning and participation, particularly but not limited to those who come from marginalized communities. The evidence for lack of meaning and wholeness in our society is in the statistics on suicides, murders, mental illness, and even rates of childhood asthma. In a word, we may suffer from love deprivation, with all the attendant symptoms.

To the extent that ISIS creates cultural communities of wholeness and belonging (in part through the arts), they are an enormous threat to the nihilist obsession with individualism and growing inequality that often passes for culture and ideology in the United States.

“The biggest disease today is not leprosy or tuberculosis, but rather the feeling of being unwanted.”

Mother Teresa


Price Gouging

By Jonathan B. Wight

What’s not to like about market pricing--allocating resources by willingness and ability to pay? It eliminates waiting lines and shortages, and in theory results in more output available than under price controls.

There’s plenty not to like, if the conditions and background circumstances of trade matter as issues of justice. People care about what is “right” given the circumstances. Such moral judgments often clash with neoclassical arguments of efficiency and freedom—moral sentiments be damned.

The irony is brought forth wonderfully by satirist Andy Borowitz in the New Yorker, who reports that:

“A criminal lawyer representing Turing Pharmaceuticals chief Martin Shkreli has informed his client that he is raising his hourly legal fees by five thousand per cent, the lawyer has confirmed.

“Minutes after Shkreli’s arrest on charges of securities fraud, the attorney, Harland Dorrinson, announced that he was hiking his fees from twelve hundred dollars an hour to sixty thousand dollars.

“Shkreli, who reportedly received the news about the price hike while he was being fingerprinted, cried foul and accused his attorney of ‘outrageous and inhumane price gouging. This is the behavior of a sociopath,’ Shkreli was heard screaming.”


The New York Times also reports today that Adele as taken steps to prevent ticket scalping at her sold out worldwide concert tour. Scalpers help consumers who are too lazy or too busy to stand in line. By cutting these people out of the loop, Adele is proclaiming that loyalty is more important than how much money you have to wave around to get to the front of the line.

In this age of hyper-inequality, the argument for non-pecuniary values as determinants of exchange may gain traction. Such non-pecuniary values often involve discrimination (allocation by favoritism toward the “right” kind of people—in Adele’s case toward fans who prove their loyalty be staking out ticket offices). I am in favor of this provided it is not mandated by the government, and provided it does not rely on characteristics that are out-of-bounds to today’s sensibilities (race, gender, sexual orientation, and so on).

It does make us recall why we like the market, which in theory (not in practice) treats everyone who has a dollar as a moral equal, no questions asked.

For a theoretical treatment, see Chapter 7: The Moral Limits to Markets.