Wednesday, December 31, 2008

Well, it's that time of year again. Here's my annual assessment of the previous year's predictions, and a futile attempt to do better this year:
  • Hillary Clinton will be elected president in November, by a solid margin, in an election with relatively light turnout by recent standards. The Democrats will retain control of both houses of Congress.

Well, she would have, if her staff had been competent enough to pay attention to those caucus states...

  • The US counterinsurgency effort in Iraq will suffer significant setbacks in Iraq this year, but the political reconciliation process there will in fact make progress. Iran's nuclear program will last another year without either a military strike or a successful nuclear test.

The very first part was off, but the rest was on target.

  • The Taliban insurgency in Afghanistan will grind on without resolution, aided by safe havens in Pakistan, where Pervez Musharraf will continue to rule, in one guise or another, replicating his neighbor's stalemate with its Islamists.

Again, on target with the exception of one key detail (Musharraf's fate).

  • Ehud Olmert will survive another year in office. The Winograd report will criticize him harshly for being too recklessly aggressive during the Lebanon war, thus providing him with cover against his more hawkish main rivals. He will also authorize at least one fairly large-scale incursion into the Gaza Strip, which will achieve little but will further shield him against charges of dovish, indecisive softness. Meanwhile, Hezbollah's position as the largest single power in Lebanon will be consolidated and officially enshrined in the country's political power structure.

It was touch and go there for much of the year, and he's of course on his way out, but darned if he isn't hanging on to the bitter end, and charging into Gaza--almost as if to validate my prediction with his last ounce of strength...

  • The US economy will narrowly avoid recession this year, but will experience very sluggish growth. Inflation will stubbornly refuse to fall, preventing the Fed from easing enough to really boost the economy. The stock market will have a down year, and oil prices will fall modestly. The housing market will not recover, but the US dollar will, somewhat, from its recent plunge.

Rather too optimistic about the economy, but I figure I'm in pretty good company on that one, and possibly more on target than most prognosticators. Also, correct on the direction (if not always the magnitude) of the movements of the stock market, oil, housing and the dollar.

  • "Product placement"--advertising embedded into content such as music, films and television shows--will become more widespread and conspicuous, to the point where it becomes a subject of pop-culture irony.

Not this year (that I noticed), but then, I'm always ahead of the curve on these things...

And now for this year's reckless forecasts:

  • Barack Obama's first year in office will go as badly as his mentor's, as the sluggish economy and unresolved conflicts between the moderates and progressives within his own party undermines his popularity, making his cool, detached persona seem weak and indecisive. Republicans will be somewhat rejuvenated by being able to take responsibility-free potshots from the sidelines, although no particularly prominent GOP leader will emerge. More Keynsian "stimulus" spending packages and bailouts will be enacted into law, but other government initiatives popular among Democrats, such as health care reform, will fall victim to the party's internal rifts, with some Republican help.

  • Some time during the year, a reputable source--perhaps an intelligence agency or a defense think tank--will declare that Iran most likely has already produced at least one nuclear weapon, and soon will produce more. Little attention will be paid. Likewise, Iraq will all but disappear from the news, as will Afghanistan and Pakistan, despite continuing unrest there. Domestic issues--particularly economic ones--will dominate public attention, and foreign news will focus on trade and economic matters, such as the fate of China's export industries and the Euro's troubles.

  • Stephen Harper will continue to hobble along with his minority government in Canada. Bibi Netanyahu will become prime minister of Israel, but in a coalition with Kadima and other parties of the center and right.

  • Hamas and Hezbollah will lay low following Netanyahu's election, quietly building up their military strength as they did during most of 2008. They will take advantage of the inconclusive outcome of the current Gaza operation, which will have included a limited ground invasion that damaged Hamas but failed to dislodge its de facto government, and will have ended with a ceasefire agreement that effectively restores the status quo ante. Netanyahu will thus lack a pretext--or support from an exhausted, cynical Israeli public--for a more decisive engagement, even as the long-term threat on both fronts quietly builds.

  • The US economy will remain in recession for most if not all of 2009. However, Japanese-style deflation will not set in, and the CPI will be positive by the end of the year. Oil prices will rebound, but only modestly. The stock market will bounce around its recent low levels and end little changed from the beginning of the year. Likewise, housing prices will stabilize. Interest rates will fall on risky assets and rise on risk-free ones, as depression-panic subsides. Unemployment will continue to rise.

  • Environmentalism will "jump the shark" this year, as the cost of being green in a lousy economy turns off enough otherwise sympathetic folks to make the movement's excesses a target of mainstream ridicule.

As always, past performance is no guarantee of future results, although it's pretty good evidence that this blog's name is no idle boast...

Sunday, December 14, 2008

I've already noted that the extraordinarily successful are a poor choice of model for those who would understand how to achieve more mundane varieties of success in life. Now, along comes Malcolm Gladwell to devote an entire book to this poor choice, studying a few off-the-charts-successful cases such as Mozart and Bill Gates in order to try to understand how people in general manage to succeed. And his conclusion, apparently, is that the most successful people may well have all been extraordinarily talented, but they have also all been extraordinarily lucky. Gladwell draws the standard luck egalitarian conclusions from this supposed insight.

Much discussion has ensued in the blogosphere, all of it completely missing the point. Of course the most extremely successful people have all been extremely lucky--just as they've all been extremely talented, and extremely hardworking. That's precisely why they've succeeded far beyond the ranks of competitors who only excelled in two or fewer of these three respects.

The far more interesting question is what proportions of luck, talent and work typically contribute to the kind of moderate success that sensible, realistic people aspire to achieve. In those cases, I strongly suspect, talent and dedication weigh far more heavily than luck. Then again, that's probably not the kind of study that would help make Malcolm Gladwell the spectacularly successful writer that he's become.
Yossi Klein Halevi and Matthew Wagner have both written lately about the remarkable relationship between Chabad/Lubavitch and secular Israelis. Unlike other ultra-Orthodox sects, which all coldly reject both the state of Israel and secular Israelis as betrayers of Jewish law and observance, Chabad considers itself a kind of internal missionary organization, winning over secular Jews to piety through good works and generosity.

Unfortunately, Chabad's missionary service is rooted in essentially the same messianism as Christian missionaries': they believe that winning Jews back to observance hastens the coming of the Messiah. Ultimately, that motive can't sustain a generic service ethic, because it inevitably draws the missionaries towards more susceptible recruitment targets, such as the poor and the distressed. (Christian missionaries, for example, certainly follow this pattern.)

It's possible, though, that Chabad (or perhaps an offshoot, or a rival sect) could gradually evolve its beliefs in a way capable of sustaining its passion for serving fellow Jews in general. All it would require is a subtle shift away from believing in the need to convert all Jews to its brand of piety, and towards believing in its members' need to maintain its own brand of piety--including its practice of helping all Jews--as an end in itself.

I believe that such a shift would be of enormous benefit to the Jewish people. For the truth is that the fanatically observant, the fanatically secular, and the broad spectrum in between are all parts of a far stronger whole than any single one of those groups would be on its own. Other religions have discovered this, and typically maintain a pious class--priests, monks, monastics, and so on--that is respected for its dedication and service to its correligionists, but understood to coexist with a more worldly majority, rather than rejecting it.

Already, ultra-Orthodox Jews in general act as a kind of priestly class among Jews, devoting themselves entirely to study and piety at the cost of living on charity, and typically in poverty. They also perform a number of purely religious services to the community, such as recovering bodies for ritual burial (most famously after terrorist attacks). Unfortunately, rather than consider themselves a kind of spiritual elite serving a larger Jewish nation, they tend to view other Jews as apostates doomed to drift away from Judaism towards paganism of one kind or another. And of course, they denounce the state of Israel as a secular travesty.

That's strange, because the Jewish religion itself provides an admirable model for a "spiritual elite", rejecting both militant proselytizing and cultish insularity in favor of the role of duty-bound "light unto the nations". If only the ultra-Orthodox were to embrace that role themselves, they could become as valuable a resource for the Jewish people as the Jewish people have proven, time and again, to be for the entire world.

Wednesday, November 05, 2008

Say you've just been elected President of the United States after campaigning on the themes of "hope" and "change". Your opponent, an aged former military pilot, had campaigned as an experienced statesman whose decisiveness contributed to a major military achievement in Iraq. But a sharp economic downturn shortly before the election made his foreign policy expertise seem somewhat irrelevant, and his Vice-Presidential choice became a national laughingstock. Meanwhile, your moderate, optimistic proposals to cut taxes for the middle class while making the rich pay their fair share, improve health care coverage, and create national service programs for young people, were attractive enough to voters to allay their doubts about your alleged radical past. (Fawning press coverage didn't hurt, either.) Now you have a solid electoral victory under your belt, as well as clear Democratic majorities in both houses of Congress. What do you do next?

Well, the future is always difficult to predict, of course. But experience suggests a few do's and don'ts:
  • DON'T expect the free ride from the media to continue. Given their irrationally stratospheric expectations, attack-dog mentality (possibly exacerbated by guilt over their previous obsequiousness) and lack of a suitable alternative powerful figure to tear down, your every scandal, misfortune or embarrassing incident, no matter how big or small, will be jumped on.
  • DON'T pander to your base with appointments and executive orders that alienate moderates and inflame conservatives. You'll only end up backing down under pressure to save your administration's tattered reputation.
  • DON'T attempt to create any grand, elaborate new social programs of breathtaking scope and complexity. You may think you have a mandate to do such things, but you don't.
  • DO go ahead and raise taxes at the high end of the income scale. If the economy hasn't recovered in a couple of years, your presidency is doomed anyway, and if it has, then the resulting improved fiscal condition of the government will more than compensate for the slight drag on spending, laying the foundation for a robust economic recovery.
  • DON'T get lured into expanding ill-defined foreign military missions. Your crisis manager and commander-in-chief cred is shaky enough already.
  • DO support free trade. Again, good economic fundamentals will come in handy once the current economic storm passes--and if it doesn't, then having pandered to unions years before won't do you much good.
  • DON'T expect your first midterm election to be a happy one.

If any of you readers happen to be in this situation, I hope this list has been helpful...

Thursday, October 30, 2008

In the aftermath of the Republican electoral wipeout, conservative intellectuals will no doubt continue to busily plug their thoughtful treatises on how to resuscitate the conservative movement. That's understandable--after all, if your stock in trade is formulating and marketing partisan ideas, then it's natural to believe that the cure for what ails your party is more and better ideas.

Unfortunately for these thought-peddlers, that's simply not the way politics works. Newt Gingrich, for example, will no doubt insist that it was the collection of policy ideas known as the "Contract for America" that led to his greatest political victory, the Republican congressional sweep of 1994. Anybody remember what was in the "Contract for America"? Which parts were actually enacted into law and which never made it? Which ones actually had their intended effect?

In fact, the 1994 Republican victory had nothing to do with the particular policy details of that year's Republican platform. Rather, after four decades in power, the Democrats' flaws and political missteps--corruption, arrogance, captivity to "special interests", and so on--were immediately conspicuous, whereas the party out of power had been away long enough for their roughly comparable flaws to be forgotten.

Needless to say, after twelve years of Congressional dominance and eight years in the presidency, the roles are at least somewhat reversed. Barack Obama and the Democrats aren't now ascending to power with an exciting agenda of new, innovative and popular ideas that the Republicans were somehow too hidebound or ideologically blindered to embrace. Rather, they have been elected to avoid repeating, and where possible to reverse, the political and policy blunders committed by their predecessors--and that is agenda enough for any party.

Of course, once they begin governing, they will accumulate their own set of missteps and unpopular actions. And astute Republicans will notice them, and add their reversal to the list of goals of the new Republican agenda. That--not the combined chin-tugging of a bunch of conservative policy wonks--is what will eventually rejuvenate the conservative movement.

Friday, July 04, 2008

Crooked Timberite and global warming zealot John Quiggin inadvertently asks a very important question: "I don’t see how AGW [anthropogenic global warming] differs [from] other examples like mainstream medicine v homeopathy and AIDS reappraisal, evolution vs creation." In other words, what is the difference between bucking the scientific consensus regarding global warming and, say, doubting that HIV causes AIDS?

The answer is quite simple, really, and has to do with the concept of parsimony in scientific theories. Pace Quiggin, what makes the HIV theory of AIDS compelling is not the overwhelming consensus of the scientific community--which is routinely wrong about all sorts of things, after all--but rather the difficulty of coming up with an alternative theory that explains the documented spectacular correlation between HIV infection and AIDS symptoms, as well as all the other evidence amassed in favor of the HIV theory. Similarly, the problem with homeopathy is not that mainstream medical opinion discounts it, but rather that accepting it requires reconciling its effectiveness with the entire body of physical, chemical and biological evidence which argues for its uselessness. (Creationism actually has the reverse problem: it's so parsimonious that it would easily "explain" anything--that is, absolutely any set of phenomena that might be observed--and therefore explains nothing.)

Now, I'm no expert on climatological research, but my impression is that the consensus predictions of global warming rely on elaborate computer models that incorporate and combine all sorts of influences on climate, whose likely effect and interaction are estimated using elaborate statistical methods applied to past data. Given the complexity of these models, I would be absolutely astonished if it weren't possible to introduce extra factors, or alter the behavior of existing ones, in a way that radically changes the predicted outcomes without creating any significant inconsistencies with the known inputs. In other words, the exceedingly complex theories embodied in the current models don't offer much parsimony, and hence one can likely embrace alternative models with significantly different outcomes that are very nearly as parsimonious as the widely accepted ones.

Now, perhaps I'm wrong, and the models are constructed so generally as to rule out any such alternatives. If so, though, then I would expect the claims for the models' predictions to be much stronger than I have seen--something along the lines of, "the predictions are scientifically irrefutable", or some such. More likely, they are nothing more than "best current guesses"--valuable, of course, but hardly conclusive. And skeptics of their predictions should certainly not be lumped together with doubters of various more established, more parsimony-generating scientific theories.

Wednesday, June 25, 2008

The Jerusalem Post's Caroline Glick, in typical sky-is-falling ultra-hawk fashion, has declared that defense minister Ehud Barak's enthusiasm for Israel's recent truce with Hamas has
two possible explanations. Either Barak is risking the lives of Israeli soldiers and civilians to pander to the most radical elements of Israeli society while seeking to win sympathy points from Cairo in a general election campaign, or he is gullible enough to believe that Israel's radical left and the Egyptian regime are moved by facts rather than interests.
There is in fact a third, far more plausible explanation, confirmed by the subsequent deal between Labor and Kadima: Barak knows full well that an Israeli invasion of the Gaza strip is necessary and inevitable, but prefers for personal political reasons to delay it until after PM Ehud Olmert has been ousted. More than anything else, Barak wants to return to the prime ministership, and this ordering of events maximizes his chances of doing so.

Consider the consequences for Barak of an immediate assault on Hamas: if the operation is a success, then Olmert will have repaired, to a large extent, one of the biggest stains on his reputation: his disastrous mismanagement of the Lebanon war in 2006, and its implications for his capacity as PM to command the nation's defenses. His credentials thus restored, he might well succeed in retaining his leadership of Kadima, and thus the prime ministership, until the next election, at which point voters favoring the current government are more likely to vote for his party than for a Labor party that has subordinated itself to his rule.

Of course, the Gaza operation could also go badly, whether as a result of Olmert's meddling, Barak's errors or IDF blunders. In that case, Barak will be at least as badly tarnished by the failure as Olmert. Indeed, the latter has already proven his skill at deflecting blame for military failures onto his subordinates, and Barak would be an ideal target. Either way, then, Barak's chances of succeeding Olmert as prime minister are poor.

Now consider his chances under the two new deals: after a summer of relative calm--probably punctuated by attacks from Gaza that inflame the public even more against the Olmert government--Kadima casts Olmert aside and replaces him with a relative novice, most probably Tzipi Livni. The newcomer will have to ensure the continued support of Kadima's coalition partners, of which Labor is the most important, and Barak can use this leverage to guarantee not only a Gaza invasion soon afterwards, but also plenty of freedom of action for both the IDF's military campaign and his own political campaign. If the military campaign goes well, he should be able to claim the lion's share of the credit--and if it goes badly, he's far better placed to scapegoat Olmert's more junior, less experienced successor than the wily Olmert himself.

Glick is of course quite correct in one respect: Barak appears to be willing to sacrifice the lives and safety of Israeli soldiers and civilians for the sake of politics. however, his political calculations are neither naive nor deluded. They're quite subtle and deep--and if all goes according to plan, I give him tolerably good odds of succeeding.
For some reason local Starbucks outlets are peddling copies of this novel, which is narrated by an unusually deep, insightful dog. (The advertising slogan is, "Narrator. Philosopher. Dog.") Without having read a single word, I can already write a summary review (or perhaps just a review headline): "Jonathan Livingston Beagle".

Wednesday, April 02, 2008

The subprime mortgage crisis (useful primer here) has provoked the usual partisan reactions, with the left griping about "corporate governance" and "transparency", and the right telling everyone to just "suck it up". I fear that both sides are underestimating the severe and fundamental nature of the problem.

First, some history: in the 1970s, Western economies all seemed to be going haywire simultaneously. Inflation was running rampant, governments were running huge deficits, unemployment was skyrocketing, and the world's major economies were lurching from crisis to crisis. In retrospect (most modern economists will tell you), the problem was that the old Keynsian approach to government intervention in the economy had reached its limits. Further government spending only seemed to exacerbate inflation and deficits, without providing much of a stimulus to the economy. The problem was fixed (again, most modern economists will tell you) by governments shifting to monetarism as the new, better way to guide the economy to prosperity.

What this story doesn't explain, however, is why Keynsianism, which had fueled two and a half decades of postwar prosperity, suddenly stopped working. Some economists will say that it was always too imprecise a tool, and its wielders were bound to lose control eventually. Others will say that it was "abused" by governments eager to keep the good times rolling. Like an antibiotic, the latter would explain, Keynsian pump-priming loses its effectiveness when overused unnecessarily during prosperous times, rendering it incapable of mitigating the inevitable downturn.

But economies aren't bacteria. How do they become immune to economic stimuli? Why wouldn't "overuse" of Keynsian stimulus, whatever its side effects, at least succeed in its basic purpose of warding off recessions?

The answer can be summed up in one word: expectations. Once enough people start assuming that the government's response to any economic slowdown will be more government borrowing and spending, they can place financial bets on that assumption. For example, they can bet that the government will ensure that lots of money remains available in the economy, and that they can therefore raise prices accordingly, or demand higher wages. As these bets pile up, they dampen the effect of the intervention they anticipate, forcing the government into an even more extreme intervention to achieve the same result--further heightening expectations for future interventions. Eventually, expectations match the government's maximum feasible effort, and all interventions fail. Only a completely new, unanticipated form of intervention can hope to work.

Let us return now to the subprime crisis. In 1987, Alan Greenspan massively expanded government credit and cut federal interest rates in response to a stock market crash. He was to do this multiple times over the course of his career--in 1998, and again in 2001--in response to similar economic crises. This maneuver--which came to be known as the "Greenspan put"--was remarkably effective at mitigating the effects of economic shocks. However, it has also been blamed for the stock bubble of the late 1999s and the real estate bubble of the early 2000s.

The connection between these bubbles, the policies that preceded them, and the lethal effect of expectations is nicely illustrated by the investor behavior that led to the subprime crisis. Why did so many sterling financial firms pour money into highly questionable investments based on mortgages of dubious quality? Were they fools or maniacs, caught up in some kind of frenzy? More likely, they were sensible people making a very reasonable bet: that when the bubble burst, the Federal Reserve would come to the rescue with a massive interest rate cut, and most if not all of their bubble profits would be preserved. And indeed, plenty of subprime mortgage investors, Bear Stearns notwithstanding, have ended up netting a hefty profit from this bet.

Unfortunately, the bet only increased the magnitude of the crisis, while dampening the government's capacity to resolve it. The subprime-driven real estate bubble was not only far bigger than previous bubbles, thus requiring a much bigger liquidity infusion than previous ones--it also juiced the economy enough to nudge inflation upward, limiting the government's leeway to cut interest rates without triggering an inflation spiral. As in the 1970s, the reigning paradigm for government management of the economic cycle has become too predictable, and has thus lost its curative power.

I don't know what the next paradigm will be, but it had better be pretty darn complicated. Financial firms have enormous analytical resources at their disposal these days, and are much better at predicting government policies than they used to be. It'll take an even more inscrutable policymaker than the famously Buddha-like Greenspan to keep them from catching on to the government's methods very quickly--and promptly undermining them.

Wednesday, February 06, 2008

The widely praised recent film Juno, which bills itself as an edgy comedy, would be more accurately described as a disturbing psychodrama. The story is ostensibly straightforward: a sixteen-year-old high school student gets pregnant, and decides to have the baby and give it up for adoption. The film simply tracks her relationship with her parents, the adopting couple, and the baby's father during her pregnancy.

The problem is that taken at face value, the interactions in the film make no sense. The girl is impossibly self-assured, clinically detached and jaded. She treats the adults around her as equals, if not as inferiors, and the adults, likewise, respond to her as they would a poised, assertive adult--which is what she seems to be, in all respects but her actual age. Moreover, these adults scarcely exist apart from her--their lives seem to revolve around her, as if populating her life were their only purpose. This solipsistic unrealism is quite reminiscent of the film Peggy Sue Got Married, in which a middle-aged woman suddenly wakes up (or perhaps falls into a dream) to find herself back in high school, taking advantage of her knowledge and experience to recognize and correct her youthful mistakes in dealing with various people.

In the latter film, though, the title character eventually reconciles herself to the life she embarked on as a naive youth. Juno, however, hints at a much darker reality: the girl's jaded detachment, as well as several plot elements I'll refrain from revealing, suggest a sexually traumatized twentysomething fantasizing about re-experiencing her vulnerable teen years with the protection afforded by her adult knowledge. And indeed, the film's screenwriter, who goes by the pen-name Diablo Cody, turns out to be (as I suspected while watching the film) a twentysomething woman with what one might describe as sexual "issues"--her major previous work was a diary recounting the aftermath of her decision, on a whim, to give up her secretarial job and become a stripper and peep-show performer.

Granted, I don't know exactly what demons drove Ms. Cody to choose to spend years as a sex-industry worker. But I'd guess that for most audiences, a dramatized depiction of her battle with those demons won't be quite as bracingly comic as Juno's trailer implicitly promises.

Tuesday, February 05, 2008

A quick you-read-it-here-first observation about the "Super Tuesday" results: Hillary Clinton's primary victories are concentrated largely in "blue" states (those that tend to vote Democratic), while Obama's are concentrated largely in "red" states (those that tend to vote Republican).

Off-the-top-of-my-head explanation: As the establishment candidate, Clinton wins over Democrats in states where being a Democrat means identifying with the establishment. As the insurgent outsider, Obama wins over Democrats in states where being a Democrat means thinking of oneself as a rebel outsider.

Quick prediction: Within a couple of days, this observation will be widely noticed, often talked about, and probed for deep meaning. But you read it here first!