Economics and similar, for the sleep-deprived

A subtle change has been made to the comments links, so they no longer pop up. Does this in any way help with the problem about comments not appearing on permalinked posts, readers?

Update: seemingly not

Update: Oh yeah!

Friday, October 31, 2008

If not this, what? If not now, when? If not in Wigan, where? If not out of ignorance, why? If not while playing a one-string fiddle, how?

Strangely[1], as the prospects for Decent Left politics ever actually being enacted recede, the demands become ever more expansionary. Cf. Previously in Decent politics, the "responsibility to protect" has expanded from a criterion of "imminent humanitarian disaster" (Rwanda) to "ongoing humanitarian abuses" (Iraq), to "refusal to allow humanitarian aid to be distributed" (Burma). And now, we have this, where intervention is demanded in respect of a country which does co-operate with aid agencies, but where a journalist not living in the country believes, on the basis of anecdotal evidence, that the UN World Food Programme (which has averted two famines in Zimbabwe in the last ten years) is not doing its job.

I suppose I should recognise, however, that Michael Holman is not fully in the Eustonian tradition, as he does in fact have a practical proposal. Sadly, that proposal is for air-drops out of the back of Hercules transports, the least efficient and most dangerous method of aid distribution ever invented (sometimes, as in remote parts of Ethiopia, it's all you can do, but that's not true of Zimbabwe). As a substitute for a proper NGO relief effort, the numbers don't add up. All this suggestion really achieves is to make it clear that that mangled Hillel/Primo Levi quotation is a ripe candidate for addition to the category "rhetorical questions which invite blunt literal answers".

[1]Or at least, not strangely at all; I think it was Matthew Yglesias who noted in the context of all the belligerent gobshites demanding NATO membership for Georgia[2] that whole point of this particular piece of posturing was that it involved making an implicit threat (of war with Russia) that everyone, including the people making it, knew was impossible to carry out.

[2]("NATO Membership For All" is the title of my forthcoming Oliver Kamm/Melanie Phillips mashup album)
8 comments this item posted by the management 10/31/2008 06:25:00 AM
A great nation goes to the polls

One of the more irritating things about the credit crunch is that it has taken up nearly all of my spare time and energy during a period when I had hoped to be paying attention tothe Zambian elections, which have now as a result almost totally passed me by. Without breaking the "no-US elections" rule, I'll note that it really is no joke having a leader die unexpectedly in office without a proper succession plan - the question of a McCain administration is now probably academic, but if it weren't, I'm sure I'd be cannibalizing some posts about the current situation in post-Mwanawasa Zambia for use in the context of the USA; it's really not a productive situation.

Anyway - basically it's Rupiah Banda against Michael Sata, with Sata looking good in early returns. Banda is the "more of the same" candidate - as I said in my Mwanawasa obituary, this basically means stasis, favourable writeups in the Economist, painfully slow progress toward land reform etc. Although Banda's generally regarded as being a reasonably worthy successor to Mwanawasa's anti-corruption agenda, I suspect that this would basically be a destruction-test of the view that good governance alone can drive development.

Sata, who currently looks like the bookies' favourite, is a little more ... interesting. Basically a populist-loudmouthist, who looks to me like he'd fit in better in South American politics than African. Having run against Mwanawasa on a "kick out the Chinese" ticket in 2006, he is currently trying to soft-pedal this view and play nice with "international investors", and also proposing to privatise a lot of state-owned businesses. He's also made a few interesting-looking promises to traditional leaders in Barotse country, which rather runs against earlier one-Zambia-one-nation rhetoric. He's also got a fair old line in getting his retaliation in first on charges of vote-rigging.

I'm not sure what to make of this - as I said, I'm frustrated by the extent to which I haven't kept up with the campaign news. But in my guts, I'm worried by Sata. Resources booms tend to throw up these kinds of politicians - although the politics are different, I really do see a sort of line drawn through Sata, Chavez and Sarah Palin; the basic model of "chuck a load of resources windfall around and hope nobody notices the massive contradictions" is shared by all three. While I've tended toward a qualified and critical regard for Chavez (mainly because the alternative is so bloody horrible, which it isn't in Zambia), I worry a lot about how this sort of politics ends up when the wheels come off, and suspect that the answer is "not well".

So my guess is that the endgame is that Zambia ends up massively more dependent on China. If China ever gets interested in playing regional politics, Zambia makes a pretty good catspaw or client state in Southern Africa given its geography and history, so maybe that's how it ends up. But I doubt this; as I wrote earlier, as far as I can tell, China regards Africa as being not much more than a lump of copper, cobalt and hydrocarbons, with a thin layer of sand and grass on top and some more or less irrelevant people on top of the grass. How they deal with the election of a nationalist-populist President with a history of playing to anti-China sentiment will be interesting, and worrying, to watch.
3 comments this item posted by the management 10/31/2008 04:30:00 AM

Wednesday, October 22, 2008

Humiliating questions which I really ought to know the answer to, am 99% sure that I do know the answer, but which bug me out of all proportion, an occasional series

Is there really a Laboratoires Garnier? Like could you do a PhD there?


11 comments this item posted by the management 10/22/2008 04:08:00 PM

Friday, October 17, 2008

Blah blah Project Africa blah

I swear I will type in about 500 words of Kapelwa Musonda over the next weekend. I realise that ProZam is in serious trouble (like every other initially well-meaning attempt by OECD liberals to get involved in African politics, I note with irony), mainly due to the credit crumble and am hoping to get it back on the road soon. Meanwhile (and this is not a breach of my self-denying ordinance re: US election coverage as he absolutely does not endorse any candidates for the US presidency, I'll note that in the past I've had a few harsh words to say about Matthew Yglesias's blog, but he has nailed it on more than a few occasions over the last couple of weeks and this post in particular is really rather good.

In unrelated news, while I still fundamentally hate live music, Spiritualized at the Roundhouse yesterday really fucking rocked. I'm always impressed by Jason Spaceman's complete refusal to recognise the even existence of his audience; he's much more of a stereotype black-shades Sixties psychedelic rocker than anyone ever dared to be during the Sixties. Halfway through the concert, Ms Digest asked me "isn't he even going to say something like 'Hello London'?". All I could reply was "it's quite likely that he isn't aware that he's actually in London".
18 comments this item posted by the management 10/17/2008 02:55:00 PM

Tuesday, October 07, 2008

A few suggestions for journalists and bloggers

Now 'tis the season for writing pieces about "How we got into this crisis", apparently. Can I just suggest that the following two practices do not make you look as clever as you think they do? First, writing a laundry list of behavioural-economics tics and jargon terms, each followed by a speculative just-so story about how this might have made people create a bubble. Offenders on this one know who they are. And second, references to "naked puts", "short volatility" or worst of all, the appropriation of Andrew Lo's "Capital Decimation Partners" example.

At slightly more length on this one - Lo made good use of it in his book on hedge funds (which someone sent me a review copy of, but neglected to include a slip saying why they were sending me it or where I was meant to review it, so thanks but sorry). And his use of the example was sensible. But it was so damnably catchy that it's been appropriated by a lot of people who seem to think that it has much more explanatory value than it does, and particularly that it can be used to justify a whole lot of poor-man's-Nicholas-Taleb warblings about the nature of risk.

Look at it this way. An insurance policy is a put option and vice versa (viz; car insurance is the option to sell a wrecked car for the price of a new one; conversely a FTSE100 put with a strike of 5000 is an insurance policy against the FTSE falling below 5000). Any insurance company in the world is in the business of writing naked puts, and hoping to collect the premiums without having a catastrophic claims experience.

And every insurance company in the world (apart from a few oddball runoff situations which have more capital than total claims exposure) has a positive probability of ruin (which, via the gambler's ruin theorem, means a certainty of ruin in finite time). The Capital Decimation Partners example is just the rediscovery of the fact that an insurance portfolio has positive probability of ruin. Insurance is a very profitable business that sometimes blows up; ask Warren Buffet, who writes fucking loads of insurance (and particularly, more than a little bit of tail risk big ticket reinsurance).

I don't know what you think, but personally (and this is a criticism of Taleb's work too, on some occasions but not others) I think that if you've got a theory of finance which could be used to prove that all insurance everywhere is a mirage, a piece of financial charlatanry which can't possibly work, then you're not actually contributing much to the discussion. The point of Lo's CDP example was that he created a specific structure of put-writing which was reasonably well calibrated to some real-world hedge fund return series, and which blew up under particular conditions of interest. Stripping the example of its numbers and just using it as a general sermon on "oooh, those people, eh, they take risks they don't understaand!" is missing the point totally.

One can certainly argue about whether any particular risk-taking enterprise was under- or over- capitalised, under- or over-diversified, or for that matter whether its risks are usefully modelled by analogy to an insurance portfolio. But simply pointing out that an insurance office has positive probability of ruin, then sitting back stroking your chin and saying "see, that's what it's really all about! Time to ruin is finite! Why don't the policymakers do something about that!" is the sort of thing that will hurt your reputation with me for knowing what you're talking about. This is particularly irritating for me, as it's been used by a lot of people who should know better, as well as the usual run of suspects who had no credibility with me anyway.
14 comments this item posted by the management 10/07/2008 12:37:00 AM

Saturday, October 04, 2008

Running down the Champs Elysees, looking for the Mona Lisa

Great 80s Welsh punk track, here in a cover version by a somewhat younger band; the original Anhrefn looked more like this, ie frightening. Quite a lot to write about this sometime soon, as Anrhefn were an uncommonly thoughtful and interesting bunch by the standards of either punks or Welsh Nationalists (which they weren't, not in the Plaid sense anyway), but perhaps not right now as it is the back end of a veeerrrry long week.

What's that? You can't understand the lyrics? Oh, sorry; here they are.

Labels: ,

11 comments this item posted by the management 10/04/2008 04:38:00 PM

Thursday, October 02, 2008

Good ideas do not usually need lots of lies told about them

Old friend-o-the-blog Michael Pollak, in comments to the Krugmalanched post, questions whether this sonorous maxim is actually true. Specifically, I think we can all agree a) that Social Security in the USA is a good idea and b) that it's a pay-as-you-go scheme and the "trust fund", "lockbox" accounting for it is a heap of bullshit that has caused confusion without end ever since the inception of the scheme.

D^2D is currently in the market for weaselly explanations of how this isn't really a counterexample, properly construed, because at present the management is not really coming up with any. I'd note that the UK's National Insurance system more or less admitted many years ago that the "insurance" element was a pack of lies and that NI contributions were a tax, without terrible consequences. But the question at issue is; would it have been politically possible for these schemes to have been launched without the fund accounting fiction, and if so, why weren't they?
14 comments this item posted by the management 10/02/2008 03:42:00 AM

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