Group items tagged

the US government wants to boost internet freedom to give voices to citizens living in societies regarded as 'closed' and questions those governments' control over information flow, although within its borders the US government tries to create a legal frame to fight the challenge posed by WikiLeaks

China also sees hypocrisy in American discussions of Internet freedom. China comes in regularly for criticism over its "Great Firewall," but it suggests that the US government also restricts the Internet. While advocating Internet freedom, the US in fact imposes fairly strict restriction on cyberspace. On June 24, 2010, the US Senate Committee on Homeland Security and Governmental Affairs approved the Protecting Cyberspace as a National Asset Act, which will give the federal government "absolute power" to shut down the Internet under a declared national emergency. Handing government the power to control the Internet will only be the first step towards a greatly restricted Internet system, whereby individual IDs and government permission would be required to operate a website. The United States applies double standards on Internet freedom by requesting unrestricted "Internet freedom" in other countries, which becomes an important diplomatic tool for the United States to impose pressure and seek hegemony, and imposing strict restriction within its territory. An article on BBC on February 16, 2011 noted the US government wants to boost Internet freedom to give voices to citizens living in societies regarded as "closed" and questions those governments' control over information flow, although within its borders the US government tries to create a legal frame to fight the challenge posed by WikiLeaks. The US government might be sensitive to the impact of the free flow of electronic information on its territory for which it advocates, but it wants to practice diplomacy by other means, including the Internet, particularly the social networks. (The cyberspace bill never became law, and a revised version is still pending in Congress.)

Finally, there's pornography, which China bans. Pornographic content is rampant on the Internet and severely harms American children. Statistics show that seven in 10 children have accidentally accessed pornography on the Internet and one in three has done so intentionally. And the average age of exposure is 11 years old - some start at eight years old (The Washington Times, June 16, 2010). According to a survey commissioned by the National Campaign to Prevent Teen and Unplanned Pregnancy, 20 percent of American teens have sent or posted nude or seminude pictures or videos of themselves. (www.co.jefferson.co.us, March 23, 2010). At least 500 profit-oriented nude chat websites were set up by teens in the United States, involving tens of thousands of pornographic pictures.

This is why, for example, large numbers of Americans oppose the idea of an estate tax even though the current form of the tax, slated to return in 2011, is very unlikely to affect them or their estates. In narrowly self-interested terms, that view may be irrational, but most Americans are unwilling to frame national issues in terms of rich versus poor. There’s a great deal of hostility toward various government bailouts, but the idea of “undeserving” recipients is the key factor in those feelings. Resentment against Wall Street gamesters hasn’t spilled over much into resentment against the wealthy more generally. The bailout for General Motors’ labor unions wasn’t so popular either—again, obviously not because of any bias against the wealthy but because a basic sense of fairness was violated. As of November 2010, congressional Democrats are of a mixed mind as to whether the Bush tax cuts should expire for those whose annual income exceeds $250,000; that is in large part because their constituents bear no animus toward rich people, only toward undeservedly rich people.

envy is usually local. At least in the United States, most economic resentment is not directed toward billionaires or high-roller financiers—not even corrupt ones. It’s directed at the guy down the hall who got a bigger raise. It’s directed at the husband of your wife’s sister, because the brand of beer he stocks costs $3 a case more than yours, and so on. That’s another reason why a lot of people aren’t so bothered by income or wealth inequality at the macro level. Most of us don’t compare ourselves to billionaires. Gore Vidal put it honestly: “Whenever a friend succeeds, a little something in me dies.”

Occasionally the cynic in me wonders why so many relatively well-off intellectuals lead the egalitarian charge against the privileges of the wealthy. One group has the status currency of money and the other has the status currency of intellect, so might they be competing for overall social regard? The high status of the wealthy in America, or for that matter the high status of celebrities, seems to bother our intellectual class most. That class composes a very small group, however, so the upshot is that growing income inequality won’t necessarily have major political implications at the macro level.

All that said, income inequality does matter—for both politics and the economy.

The numbers are clear: Income inequality has been rising in the United States, especially at the very top. The data show a big difference between two quite separate issues, namely income growth at the very top of the distribution and greater inequality throughout the distribution. The first trend is much more pronounced than the second, although the two are often confused.

When it comes to the first trend, the share of pre-tax income earned by the richest 1 percent of earners has increased from about 8 percent in 1974 to more than 18 percent in 2007. Furthermore, the richest 0.01 percent (the 15,000 or so richest families) had a share of less than 1 percent in 1974 but more than 6 percent of national income in 2007. As noted, those figures are from pre-tax income, so don’t look to the George W. Bush tax cuts to explain the pattern. Furthermore, these gains have been sustained and have evolved over many years, rather than coming in one or two small bursts between 1974 and today.1

At the same time, wage growth for the median earner has slowed since 1973. But that slower wage growth has afflicted large numbers of Americans, and it is conceptually distinct from the higher relative share of top income earners. For instance, if you take the 1979–2005 period, the average incomes of the bottom fifth of households increased only 6 percent while the incomes of the middle quintile rose by 21 percent. That’s a widening of the spread of incomes, but it’s not so drastic compared to the explosive gains at the very top.

The broader change in income distribution, the one occurring beneath the very top earners, can be deconstructed in a manner that makes nearly all of it look harmless. For instance, there is usually greater inequality of income among both older people and the more highly educated, if only because there is more time and more room for fortunes to vary. Since America is becoming both older and more highly educated, our measured income inequality will increase pretty much by demographic fiat. Economist Thomas Lemieux at the University of British Columbia estimates that these demographic effects explain three-quarters of the observed rise in income inequality for men, and even more for women.2

Attacking the problem from a different angle, other economists are challenging whether there is much growth in inequality at all below the super-rich. For instance, real incomes are measured using a common price index, yet poorer people are more likely to shop at discount outlets like Wal-Mart, which have seen big price drops over the past twenty years.3 Once we take this behavior into account, it is unclear whether the real income gaps between the poor and middle class have been widening much at all. Robert J. Gordon, an economist from Northwestern University who is hardly known as a right-wing apologist, wrote in a recent paper that “there was no increase of inequality after 1993 in the bottom 99 percent of the population”, and that whatever overall change there was “can be entirely explained by the behavior of income in the top 1 percent.”4

And so we come again to the gains of the top earners, clearly the big story told by the data. It’s worth noting that over this same period of time, inequality of work hours increased too. The top earners worked a lot more and most other Americans worked somewhat less. That’s another reason why high earners don’t occasion more resentment: Many people understand how hard they have to work to get there. It also seems that most of the income gains of the top earners were related to performance pay—bonuses, in other words—and not wildly out-of-whack yearly salaries.5

It is also the case that any society with a lot of “threshold earners” is likely to experience growing income inequality. A threshold earner is someone who seeks to earn a certain amount of money and no more. If wages go up, that person will respond by seeking less work or by working less hard or less often. That person simply wants to “get by” in terms of absolute earning power in order to experience other gains in the form of leisure—whether spending time with friends and family, walking in the woods and so on. Luck aside, that person’s income will never rise much above the threshold.

The funny thing is this: For years, many cultural critics in and of the United States have been telling us that Americans should behave more like threshold earners. We should be less harried, more interested in nurturing friendships, and more interested in the non-commercial sphere of life. That may well be good advice. Many studies suggest that above a certain level more money brings only marginal increments of happiness. What isn’t so widely advertised is that those same critics have basically been telling us, without realizing it, that we should be acting in such a manner as to increase measured income inequality. Not only is high inequality an inevitable concomitant of human diversity, but growing income inequality may be, too, if lots of us take the kind of advice that will make us happier.

Why is the top 1 percent doing so well?

Steven N. Kaplan and Joshua Rauh have recently provided a detailed estimation of particular American incomes.6 Their data do not comprise the entire U.S. population, but from partial financial records they find a very strong role for the financial sector in driving the trend toward income concentration at the top. For instance, for 2004, nonfinancial executives of publicly traded companies accounted for less than 6 percent of the top 0.01 percent income bracket. In that same year, the top 25 hedge fund managers combined appear to have earned more than all of the CEOs from the entire S&P 500. The number of Wall Street investors earning more than $100 million a year was nine times higher than the public company executives earning that amount. The authors also relate that they shared their estimates with a former U.S. Secretary of the Treasury, one who also has a Wall Street background. He thought their estimates of earnings in the financial sector were, if anything, understated.

Many of the other high earners are also connected to finance. After Wall Street, Kaplan and Rauh identify the legal sector as a contributor to the growing spread in earnings at the top. Yet many high-earning lawyers are doing financial deals, so a lot of the income generated through legal activity is rooted in finance. Other lawyers are defending corporations against lawsuits, filing lawsuits or helping corporations deal with complex regulations. The returns to these activities are an artifact of the growing complexity of the law and government growth rather than a tale of markets per se. Finance aside, there isn’t much of a story of market failure here, even if we don’t find the results aesthetically appealing.

When it comes to professional athletes and celebrities, there isn’t much of a mystery as to what has happened. Tiger Woods earns much more, even adjusting for inflation, than Arnold Palmer ever did. J.K. Rowling, the first billionaire author, earns much more than did Charles Dickens. These high incomes come, on balance, from the greater reach of modern communications and marketing. Kids all over the world read about Harry Potter. There is more purchasing power to spend on children’s books and, indeed, on culture and celebrities more generally. For high-earning celebrities, hardly anyone finds these earnings so morally objectionable as to suggest that they be politically actionable. Cultural critics can complain that good schoolteachers earn too little, and they may be right, but that does not make celebrities into political targets. They’re too popular. It’s also pretty clear that most of them work hard to earn their money, by persuading fans to buy or otherwise support their product. Most of these individuals do not come from elite or extremely privileged backgrounds, either. They worked their way to the top, and even if Rowling is not an author for the ages, her books tapped into the spirit of their time in a special way. We may or may not wish to tax the wealthy, including wealthy celebrities, at higher rates, but there is no need to “cure” the structural causes of higher celebrity incomes.

to be sure, the high incomes in finance should give us all pause.

The first factor driving high returns is sometimes called by practitioners “going short on volatility.” Sometimes it is called “negative skewness.” In plain English, this means that some investors opt for a strategy of betting against big, unexpected moves in market prices. Most of the time investors will do well by this strategy, since big, unexpected moves are outliers by definition. Traders will earn above-average returns in good times. In bad times they won’t suffer fully when catastrophic returns come in, as sooner or later is bound to happen, because the downside of these bets is partly socialized onto the Treasury, the Federal Reserve and, of course, the taxpayers and the unemployed.

if you bet against unlikely events, most of the time you will look smart and have the money to validate the appearance. Periodically, however, you will look very bad. Does that kind of pattern sound familiar? It happens in finance, too. Betting against a big decline in home prices is analogous to betting against the Wizards. Every now and then such a bet will blow up in your face, though in most years that trading activity will generate above-average profits and big bonuses for the traders and CEOs.

To this mix we can add the fact that many money managers are investing other people’s money. If you plan to stay with an investment bank for ten years or less, most of the people playing this investing strategy will make out very well most of the time. Everyone’s time horizon is a bit limited and you will bring in some nice years of extra returns and reap nice bonuses. And let’s say the whole thing does blow up in your face? What’s the worst that can happen? Your bosses fire you, but you will still have millions in the bank and that MBA from Harvard or Wharton. For the people actually investing the money, there’s barely any downside risk other than having to quit the party early. Furthermore, if everyone else made more or less the same mistake (very surprising major events, such as a busted housing market, affect virtually everybody), you’re hardly disgraced. You might even get rehired at another investment bank, or maybe a hedge fund, within months or even weeks.

Moreover, smart shareholders will acquiesce to or even encourage these gambles. They gain on the upside, while the downside, past the point of bankruptcy, is borne by the firm’s creditors. And will the bondholders object? Well, they might have a difficult time monitoring the internal trading operations of financial institutions. Of course, the firm’s trading book cannot be open to competitors, and that means it cannot be open to bondholders (or even most shareholders) either. So what, exactly, will they have in hand to object to?

Perhaps more important, government bailouts minimize the damage to creditors on the downside. Neither the Treasury nor the Fed allowed creditors to take any losses from the collapse of the major banks during the financial crisis. The U.S. government guaranteed these loans, either explicitly or implicitly. Guaranteeing the debt also encourages equity holders to take more risk. While current bailouts have not in general maintained equity values, and while share prices have often fallen to near zero following the bust of a major bank, the bailouts still give the bank a lifeline. Instead of the bank being destroyed, sometimes those equity prices do climb back out of the hole. This is true of the major surviving banks in the United States, and even AIG is paying back its bailout. For better or worse, we’re handing out free options on recovery, and that encourages banks to take more risk in the first place.

there is an unholy dynamic of short-term trading and investing, backed up by bailouts and risk reduction from the government and the Federal Reserve. This is not good. “Going short on volatility” is a dangerous strategy from a social point of view. For one thing, in so-called normal times, the finance sector attracts a big chunk of the smartest, most hard-working and most talented individuals. That represents a huge human capital opportunity cost to society and the economy at large. But more immediate and more important, it means that banks take far too many risks and go way out on a limb, often in correlated fashion. When their bets turn sour, as they did in 2007–09, everyone else pays the price.

And it’s not just the taxpayer cost of the bailout that stings. The financial disruption ends up throwing a lot of people out of work down the economic food chain, often for long periods. Furthermore, the Federal Reserve System has recapitalized major U.S. banks by paying interest on bank reserves and by keeping an unusually high interest rate spread, which allows banks to borrow short from Treasury at near-zero rates and invest in other higher-yielding assets and earn back lots of money rather quickly. In essence, we’re allowing banks to earn their way back by arbitraging interest rate spreads against the U.S. government. This is rarely called a bailout and it doesn’t count as a normal budget item, but it is a bailout nonetheless. This type of implicit bailout brings high social costs by slowing down economic recovery (the interest rate spreads require tight monetary policy) and by redistributing income from the Treasury to the major banks.

the “going short on volatility” strategy increases income inequality. In normal years the financial sector is flush with cash and high earnings. In implosion years a lot of the losses are borne by other sectors of society. In other words, financial crisis begets income inequality. Despite being conceptually distinct phenomena, the political economy of income inequality is, in part, the political economy of finance. Simon Johnson tabulates the numbers nicely: From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.7

There’s a second reason why the financial sector abets income inequality: the “moving first” issue. Let’s say that some news hits the market and that traders interpret this news at different speeds. One trader figures out what the news means in a second, while the other traders require five seconds. Still other traders require an entire day or maybe even a month to figure things out. The early traders earn the extra money. They buy the proper assets early, at the lower prices, and reap most of the gains when the other, later traders pile on. Similarly, if you buy into a successful tech company in the early stages, you are “moving first” in a very effective manner, and you will capture most of the gains if that company hits it big.

The moving-first phenomenon sums to a “winner-take-all” market. Only some relatively small number of traders, sometimes just one trader, can be first. Those who are first will make far more than those who are fourth or fifth. This difference will persist, even if those who are fourth come pretty close to competing with those who are first. In this context, first is first and it doesn’t matter much whether those who come in fourth pile on a month, a minute or a fraction of a second later. Those who bought (or sold, as the case may be) first have captured and locked in most of the available gains. Since gains are concentrated among the early winners, and the closeness of the runner-ups doesn’t so much matter for income distribution, asset-market trading thus encourages the ongoing concentration of wealth. Many investors make lots of mistakes and lose their money, but each year brings a new bunch of projects that can turn the early investors and traders into very wealthy individuals.

These two features of the problem—“going short on volatility” and “getting there first”—are related. Let’s say that Goldman Sachs regularly secures a lot of the best and quickest trades, whether because of its quality analysis, inside connections or high-frequency trading apparatus (it has all three). It builds up a treasure chest of profits and continues to hire very sharp traders and to receive valuable information. Those profits allow it to make “short on volatility” bets faster than anyone else, because if it messes up, it still has a large enough buffer to pad losses. This increases the odds that Goldman will repeatedly pull in spectacular profits.

Still, every now and then Goldman will go bust, or would go bust if not for government bailouts. But the odds are in any given year that it won’t because of the advantages it and other big banks have. It’s as if the major banks have tapped a hole in the social till and they are drinking from it with a straw. In any given year, this practice may seem tolerable—didn’t the bank earn the money fair and square by a series of fairly normal looking trades? Yet over time this situation will corrode productivity, because what the banks do bears almost no resemblance to a process of getting capital into the hands of those who can make most efficient use of it. And it leads to periodic financial explosions. That, in short, is the real problem of income inequality we face today. It’s what causes the inequality at the very top of the earning pyramid that has dangerous implications for the economy as a whole.

What about controlling bank risk-taking directly with tight government oversight? That is not practical. There are more ways for banks to take risks than even knowledgeable regulators can possibly control; it just isn’t that easy to oversee a balance sheet with hundreds of billions of dollars on it, especially when short-term positions are wound down before quarterly inspections. It’s also not clear how well regulators can identify risky assets. Some of the worst excesses of the financial crisis were grounded in mortgage-backed assets—a very traditional function of banks—not exotic derivatives trading strategies. Virtually any asset position can be used to bet long odds, one way or another. It is naive to think that underpaid, undertrained regulators can keep up with financial traders, especially when the latter stand to earn billions by circumventing the intent of regulations while remaining within the letter of the law.

For the time being, we need to accept the possibility that the financial sector has learned how to game the American (and UK-based) system of state capitalism. It’s no longer obvious that the system is stable at a macro level, and extreme income inequality at the top has been one result of that imbalance. Income inequality is a symptom, however, rather than a cause of the real problem. The root cause of income inequality, viewed in the most general terms, is extreme human ingenuity, albeit of a perverse kind. That is why it is so hard to control.

Another root cause of growing inequality is that the modern world, by so limiting our downside risk, makes extreme risk-taking all too comfortable and easy. More risk-taking will mean more inequality, sooner or later, because winners always emerge from risk-taking. Yet bankers who take bad risks (provided those risks are legal) simply do not end up with bad outcomes in any absolute sense. They still have millions in the bank, lots of human capital and plenty of social status. We’re not going to bring back torture, trial by ordeal or debtors’ prisons, nor should we. Yet the threat of impoverishment and disgrace no longer looms the way it once did, so we no longer can constrain excess financial risk-taking. It’s too soft and cushy a world.

Why don’t we simply eliminate the safety net for clueless or unlucky risk-takers so that losses equal gains overall? That’s a good idea in principle, but it is hard to put into practice. Once a financial crisis arrives, politicians will seek to limit the damage, and that means they will bail out major financial institutions. Had we not passed TARP and related policies, the United States probably would have faced unemployment rates of 25 percent of higher, as in the Great Depression. The political consequences would not have been pretty. Bank bailouts may sound quite interventionist, and indeed they are, but in relative terms they probably were the most libertarian policy we had on tap. It meant big one-time expenses, but, for the most part, it kept government out of the real economy (the General Motors bailout aside).

We probably don’t have any solution to the hazards created by our financial sector, not because plutocrats are preventing our political system from adopting appropriate remedies, but because we don’t know what those remedies are. Yet neither is another crisis immediately upon us. The underlying dynamic favors excess risk-taking, but banks at the current moment fear the scrutiny of regulators and the public and so are playing it fairly safe. They are sitting on money rather than lending it out. The biggest risk today is how few parties will take risks, and, in part, the caution of banks is driving our current protracted economic slowdown. According to this view, the long run will bring another financial crisis once moods pick up and external scrutiny weakens, but that day of reckoning is still some ways off.

Is the overall picture a shame? Yes. Is it distorting resource distribution and productivity in the meantime? Yes. Will it again bring our economy to its knees? Probably. Maybe that’s simply the price of modern society. Income inequality will likely continue to rise and we will search in vain for the appropriate political remedies for our underlying problems.

Just as a robust economic system is one that encourages early failures (the concepts of "fail small" and "fail fast"), the U.S. government should stop supporting dictatorial regimes for the sake of pseudostability and instead allow political noise to rise to the surface. Making an economy robust in the face of business swings requires allowing risk to be visible; the same is true in politics.

Both the recent financial crisis and the current political crisis in the Middle East are grounded in the rise of complexity, interdependence, and unpredictability. Policymakers in the United Kingdom and the United States have long promoted policies aimed at eliminating fluctuation -- no more booms and busts in the economy, no more "Iranian surprises" in foreign policy. These policies have almost always produced undesirable outcomes. For example, the U.S. banking system became very fragile following a succession of progressively larger bailouts and government interventions, particularly after the 1983 rescue of major banks (ironically, by the same Reagan administration that trumpeted free markets). In the United States, promoting these bad policies has been a bipartisan effort throughout. Republicans have been good at fragilizing large corporations through bailouts, and Democrats have been good at fragilizing the government. At the same time, the financial system as a whole exhibited little volatility; it kept getting weaker while providing policymakers with the illusion of stability, illustrated most notably when Ben Bernanke, who was then a member of the Board of Governors of the U.S. Federal Reserve, declared the era of "the great moderation" in 2004.

Washington stabilized the market with bailouts and by allowing certain companies to grow "too big to fail." Because policymakers believed it was better to do something than to do nothing, they felt obligated to heal the economy rather than wait and see if it healed on its own.

The foreign policy equivalent is to support the incumbent no matter what. And just as banks took wild risks thanks to Greenspan's implicit insurance policy, client governments such as Hosni Mubarak's in Egypt for years engaged in overt plunder thanks to similarly reliable U.S. support.

Those who seek to prevent volatility on the grounds that any and all bumps in the road must be avoided paradoxically increase the probability that a tail risk will cause a major explosion.

In the realm of economics, price controls are designed to constrain volatility on the grounds that stable prices are a good thing. But although these controls might work in some rare situations, the long-term effect of any such system is an eventual and extremely costly blowup whose cleanup costs can far exceed the benefits accrued. The risks of a dictatorship, no matter how seemingly stable, are no different, in the long run, from those of an artificially controlled price.

Such attempts to institutionally engineer the world come in two types: those that conform to the world as it is and those that attempt to reform the world. The nature of humans, quite reasonably, is to intervene in an effort to alter their world and the outcomes it produces. But government interventions are laden with unintended -- and unforeseen -- consequences, particularly in complex systems, so humans must work with nature by tolerating systems that absorb human imperfections rather than seek to change them.

What is needed is a system that can prevent the harm done to citizens by the dishonesty of business elites; the limited competence of forecasters, economists, and statisticians; and the imperfections of regulation, not one that aims to eliminate these flaws. Humans must try to resist the illusion of control: just as foreign policy should be intelligence-proof (it should minimize its reliance on the competence of information-gathering organizations and the predictions of "experts" in what are inherently unpredictable domains), the economy should be regulator-proof, given that some regulations simply make the system itself more fragile. Due to the complexity of markets, intricate regulations simply serve to generate fees for lawyers and profits for sophisticated derivatives traders who can build complicated financial products that skirt those regulations.

The life of a turkey before Thanksgiving is illustrative: the turkey is fed for 1,000 days and every day seems to confirm that the farmer cares for it -- until the last day, when confidence is maximal. The "turkey problem" occurs when a naive analysis of stability is derived from the absence of past variations. Likewise, confidence in stability was maximal at the onset of the financial crisis in 2007.

The turkey problem for humans is the result of mistaking one environment for another. Humans simultaneously inhabit two systems: the linear and the complex. The linear domain is characterized by its predictability and the low degree of interaction among its components, which allows the use of mathematical methods that make forecasts reliable. In complex systems, there is an absence of visible causal links between the elements, masking a high degree of interdependence and extremely low predictability. Nonlinear elements are also present, such as those commonly known, and generally misunderstood, as "tipping points." Imagine someone who keeps adding sand to a sand pile without any visible consequence, until suddenly the entire pile crumbles. It would be foolish to blame the collapse on the last grain of sand rather than the structure of the pile, but that is what people do consistently, and that is the policy error.

Engineering, architecture, astronomy, most of physics, and much of common science are linear domains. The complex domain is the realm of the social world, epidemics, and economics. Crucially, the linear domain delivers mild variations without large shocks, whereas the complex domain delivers massive jumps and gaps. Complex systems are misunderstood, mostly because humans' sophistication, obtained over the history of human knowledge in the linear domain, does not transfer properly to the complex domain. Humans can predict a solar eclipse and the trajectory of a space vessel, but not the stock market or Egyptian political events. All man-made complex systems have commonalities and even universalities. Sadly, deceptive calm (followed by Black Swan surprises) seems to be one of those properties.

The system is responsible, not the components. But after the financial crisis of 2007-8, many people thought that predicting the subprime meltdown would have helped. It would not have, since it was a symptom of the crisis, not its underlying cause. Likewise, Obama's blaming "bad intelligence" for his administration's failure to predict the crisis in Egypt is symptomatic of both the misunderstanding of complex systems and the bad policies involved.

Obama's mistake illustrates the illusion of local causal chains -- that is, confusing catalysts for causes and assuming that one can know which catalyst will produce which effect. The final episode of the upheaval in Egypt was unpredictable for all observers, especially those involved. As such, blaming the CIA is as foolish as funding it to forecast such events. Governments are wasting billions of dollars on attempting to predict events that are produced by interdependent systems and are therefore not statistically understandable at the individual level.

Political and economic "tail events" are unpredictable, and their probabilities are not scientifically measurable. No matter how many dollars are spent on research, predicting revolutions is not the same as counting cards; humans will never be able to turn politics into the tractable randomness of blackjack.

Most explanations being offered for the current turmoil in the Middle East follow the "catalysts as causes" confusion. The riots in Tunisia and Egypt were initially attributed to rising commodity prices, not to stifling and unpopular dictatorships. But Bahrain and Libya are countries with high gdps that can afford to import grain and other commodities. Again, the focus is wrong even if the logic is comforting. It is the system and its fragility, not events, that must be studied -- what physicists call "percolation theory," in which the properties of the terrain are studied rather than those of a single element of the terrain.

When dealing with a system that is inherently unpredictable, what should be done? Differentiating between two types of countries is useful. In the first, changes in government do not lead to meaningful differences in political outcomes (since political tensions are out in the open). In the second type, changes in government lead to both drastic and deeply unpredictable changes.

Humans fear randomness -- a healthy ancestral trait inherited from a different environment. Whereas in the past, which was a more linear world, this trait enhanced fitness and increased chances of survival, it can have the reverse effect in today's complex world, making volatility take the shape of nasty Black Swans hiding behind deceptive periods of "great moderation." This is not to say that any and all volatility should be embraced. Insurance should not be banned, for example.

But alongside the "catalysts as causes" confusion sit two mental biases: the illusion of control and the action bias (the illusion that doing something is always better than doing nothing). This leads to the desire to impose man-made solutions

Variation is information. When there is no variation, there is no information. This explains the CIA's failure to predict the Egyptian revolution and, a generation before, the Iranian Revolution -- in both cases, the revolutionaries themselves did not have a clear idea of their relative strength with respect to the regime they were hoping to topple. So rather than subsidize and praise as a "force for stability" every tin-pot potentate on the planet, the U.S. government should encourage countries to let information flow upward through the transparency that comes with political agitation. It should not fear fluctuations per se, since allowing them to be in the open, as Italy and Lebanon both show in different ways, creates the stability of small jumps.

As Seneca wrote in De clementia, "Repeated punishment, while it crushes the hatred of a few, stirs the hatred of all . . . just as trees that have been trimmed throw out again countless branches." The imposition of peace through repeated punishment lies at the heart of many seemingly intractable conflicts, including the Israeli-Palestinian stalemate. Furthermore, dealing with seemingly reliable high-level officials rather than the people themselves prevents any peace treaty signed from being robust. The Romans were wise enough to know that only a free man under Roman law could be trusted to engage in a contract; by extension, only a free people can be trusted to abide by a treaty. Treaties that are negotiated with the consent of a broad swath of the populations on both sides of a conflict tend to survive. Just as no central bank is powerful enough to dictate stability, no superpower can be powerful enough to guarantee solid peace alone.

As Jean-Jacques Rousseau put it, "A little bit of agitation gives motivation to the soul, and what really makes the species prosper is not peace so much as freedom." With freedom comes some unpredictable fluctuation. This is one of life's packages: there is no freedom without noise -- and no stability without volatility.∂

nhofe's battle against climate science kicked into overdrive when a series of illegally obtained emails surfaced from the Climatic Research Unit at East Anglia University. 

When the dubious reports surfaced about flawed science, manipulated data, and unsubstantiated studies, Inhofe was ecstatic.  In March, he viciously attacked former Vice President Al Gore for defending the science behind climate change

Unfortunately for Senator Inhofe, none of those things are true.  One by one, the pillars of evidence supporting the alleged "scandals" have shattered, causing the entire "Climategate" storyline to come crashing down. 

a panel established by the University of East Anglia to investigate the integrity of the research of the Climatic Research Unit wrote: "We saw no evidence of any deliberate scientific malpractice in any of the work of the Climatic Research Unit and had it been there we believe that it is likely that we would have detected it."

Responding to allegations that Dr. Michael Mann tampered with scientific evidence, Pennsylvania State University conducted a thorough investigation. It concluded: "The Investigatory Committee, after careful review of all available evidence, determined that there is no substance to the allegation against Dr. Michael E. Mann, Professor, Department of Meteorology, The Pennsylvania State University.  More specifically, the Investigatory Committee determined that Dr. Michael E. Mann did not engage in, nor did he participate in, directly or indirectly, any actions that seriously deviated from accepted practices within the academic community for proposing, conducting, or reporting research, or other scholarly activities."

London's Sunday Times retracted its story, echoed by dozens of outlets, that an IPCC issued an unsubstantiated report claiming 40% of the Amazon rainforest was endangered due to changing rainfall patterns.  The Times wrote: "In fact, the IPCC's Amazon statement is supported by peer-reviewed scientific evidence. In the case of the WWF report, the figure had, in error, not been referenced, but was based on research by the respected Amazon Environmental Research Institute (IPAM) which did relate to the impact of climate change."

The Times also admitted it misrepresented the views of Dr. Simon Lewis, a Royal Society research fellow at the University of Leeds, implying he agreed with the article's false premise and believed the IPCC should not utilize reports issued by outside organizations.  In its retraction, the Times was forced to admit: "Dr Lewis does not dispute the scientific basis for both the IPCC and the WWF reports," and, "We accept that Dr Lewis holds no such view... A version of our article that had been checked with Dr Lewis underwent significant late editing and so did not give a fair or accurate account of his views on these points. We apologise for this."

The “Asian Values” hypothesis is equally suspect. The UDHR recognises the universal applicability of human rights and any nation party to this treaty is not permitted to restrict rights purely on cultural, religious or political grounds.

“Asian governments are justified in restricting civil and political rights in some circumstances in favour of social stability and economic growth. Civil and political rights are immaterial when people are destitute and society is unstable.  Accordingly, as luxuries to be enjoyed once there is social order, civil and political liberties must be temporarily suspended so as to not inhibit the government’s delivery of economic and social necessities and so as to not threaten or destroy future development plans.” Whilst this argument may have been slightly more palatable if Singapore’s citizens were, in fact destitute, the reality is that Singapore is ranked as one of the world’s wealthiest countries and boasts a high life expectancy. Thus in Singapore’s case, arguments made in favour of a “liberty trade-off” are rendered completely untenable.

these cultural and religious justifications for violating rights are as unacceptable as Singapore’s purported assertion of an “Asian Values” conception of human rights. Even though the Singapore government’s language is more subtle, their arguments amount to same basic tenet: the purported justification of the denial of fundamental human rights, by reference to cultural, religious or political specific norms. Speaking recently in New York, the UN Secretary-General, Ban Ki Moon warned against such an interpretation of human rights:

“Yes, we recognize that social attitudes run deep.  Yes, social change often comes only with time.  Yet, let there be no confusion: where there is tension between cultural attitudes and universal human rights, universal human rights must carry the day. ” The universal and fundamental nature of human rights is the founding principle on which the United Nations was built: the right to freedom of expression must be guaranteed, “Asian Values” notwithstanding.

Some European leaders, including Angela Merkel, may be backtracking fast on their commitment to nuclear power, but despite yesterday's escalation of the ongoing crisis in Fukushima, Japan, there appear to be no signs that India, China and other emerging economies will succumb to a similar backlash. For the emerging economies, overcoming poverty and insecurity of supply remain the overriding priorities of energy policy.

thanks to Wikileaks, the world has been enlightened to the fact that the Obama administration not only refused to prosecute these individuals itself, it also exerted pressure on the governments of Germany and Spain not to prosecute, or even indict, any of the torturers or war criminals from the Bush dictatorship.

we see many right-wing commentators demanding that Assange be hunted down, with some even calling for his murder, on the grounds that he may have endangered lives by releasing confidential government documents. Yet, for the right-wing, this apparently was not a concern when the late columnist Robert Novak "outed" CIA agent Valerie Plame after her husband Joseph Wilson authored an OP-ED piece in The New York Times criticizing the motivations for waging war against Iraq. Even though there was evidence of involvement within the highest echelons of the Bush dictatorship, only one person, Lewis "Scooter" Libby, was indicted and convicted of "outing" Plame to Novak. And, despite the fact that this "outing" potentially endangered the lives of Plame's overseas contacts, Bush commuted Libby's thirty-month prison sentence, calling it "excessive."

Why the disparity? The answer is simple: The Plame "outing" served the interests of the military-industrial complex and helped to conceal the Bush dictatorship's lies, tortures and war crimes, while Wikileaks not only exposed such evils, but also revealed how Obama's administration, and Obama himself, are little more than "snake oil" merchants pontificating about government accountability while undermining it at every turn.

When the United States Constitution was being created, a conflict emerged between delegates who wanted a strong federal government (the Federalists) and those who wanted a weak federal government (the anti-Federalists). Although the Federalists won the day, one of the most distinguished anti-Federalists, George Mason, refused to sign the new Constitution, sacrificing in the process, some historians say, a revered place amongst America's founding fathers. Two of Mason's concerns were that the Constitution did not contain a Bill of Rights, and that the presidential pardon powers would allow corrupt presidents to pardon people who had committed crimes on presidential orders.

Mason's concerns about the abuse of the pardon powers were eventually proven right when Gerald Ford pardoned Richard Nixon, when Ronald Reagan pardoned FBI agents convicted of authorizing illegal break-ins, and when George H.W. Bush pardoned six individuals involved in the Iran-Contra Affair.

Mason was also proven right after the Federalists realized that the States would not ratify the Constitution unless a Bill of Rights was added. But this was done begrudgingly, as demonstrated by America's second president, Federalist John Adams, who essentially destroyed the right to freedom of speech via the Alien and Sedition Acts, which made it a crime to say, write or publish anything critical of the United States government.

Most criminals break laws that others have created, and people who assist in exposing or apprehending them are usually lauded as heroes. But with the "espionage" acts, the criminals themselves have actually created laws to conceal their crimes, and exploit these laws to penalize people who expose them.

The problem with America's system of government is that it has become too easy, and too convenient, to simply stamp "classified" on documents that reveal acts of government corruption, cover-up, mendacity and malfeasance, or to withhold them "in the interest of national security." Given this web of secrecy, is it any wonder why so many Americans are still skeptical about the "official" versions of the John F. Kennedy or Martin Luther King Jr. assassinations, or the events surrounding the attacks of September 11, 2001?

I want to believe that the Wikileaks documents will change America for the better. But what undoubtedly will happen is a repetition of the past: those who expose government crimes and cover-ups will be prosecuted or branded as criminals; new laws will be passed to silence dissent; new Liebermans will arise to intimidate the corporate-controlled media; and new ways will be found to conceal the truth.

What Wikileaks has done is make people understand why so many Americans are politically apathetic and content to lose themselves in one or more of the addictions American culture offers, be it drugs, alcohol, the Internet, video games, celebrity gossip, text-messaging-in essence anything that serves to divert attention from the harshness of reality.

the evils committed by those in power can be suffocating, and the sense of powerlessness that erupts from being aware of these evils can be paralyzing, especially when accentuated by the knowledge that government evildoers almost always get away with their crimes

But other researchers, both with and without Templeton grants, say that they find the foundation remarkably open and non-dogmatic. "The Templeton Foundation has never in my experience pressured, suggested or hinted at any kind of ideological slant," says Michael Shermer, editor of Skeptic, a magazine that debunks pseudoscience, who was hired by the foundation to edit an essay series entitled 'Does science make belief in God obsolete?'

The debate highlights some of the challenges facing the Templeton Foundation after the death of its founder in July 2008, at the age of 95.

With the help of a $528-million bequest from Templeton, the foundation has been radically reframing its research programme. As part of that effort, it is reducing its emphasis on religion to make its programmes more palatable to the broader scientific community. Like many of his generation, Templeton was a great believer in progress, learning, initiative and the power of human imagination — not to mention the free-enterprise system that allowed him, a middle-class boy from Winchester, Tennessee, to earn billions of dollars on Wall Street. The foundation accordingly allocates 40% of its annual grants to programmes with names such as 'character development', 'freedom and free enterprise' and 'exceptional cognitive talent and genius'.

Unlike most of his peers, however, Templeton thought that the principles of progress should also apply to religion. He described himself as "an enthusiastic Christian" — but was also open to learning from Hinduism, Islam and other religious traditions. Why, he wondered, couldn't religious ideas be open to the type of constructive competition that had produced so many advances in science and the free market?

That question sparked Templeton's mission to make religion "just as progressive as medicine or astronomy".

Early Templeton prizes had nothing to do with science: the first went to the Catholic missionary Mother Theresa of Calcutta in 1973.

By the 1980s, however, Templeton had begun to realize that fields such as neuroscience, psychology and physics could advance understanding of topics that are usually considered spiritual matters — among them forgiveness, morality and even the nature of reality. So he started to appoint scientists to the prize panel, and in 1985 the award went to a research scientist for the first time: Alister Hardy, a marine biologist who also investigated religious experience. Since then, scientists have won with increasing frequency.

"There's a distinct feeling in the research community that Templeton just gives the award to the most senior scientist they can find who's willing to say something nice about religion," says Harold Kroto, a chemist at Florida State University in Tallahassee, who was co-recipient of the 1996 Nobel Prize in Chemistry and describes himself as a devout atheist.

Yet Templeton saw scientists as allies. They had what he called "the humble approach" to knowledge, as opposed to the dogmatic approach. "Almost every scientist will agree that they know so little and they need to learn," he once said.

Templeton wasn't interested in funding mainstream research, says Barnaby Marsh, the foundation's executive vice-president. Templeton wanted to explore areas — such as kindness and hatred — that were not well known and did not attract major funding agencies. Marsh says Templeton wondered, "Why is it that some conflicts go on for centuries, yet some groups are able to move on?"

Templeton's interests gave the resulting list of grants a certain New Age quality (See Table 1). For example, in 1999 the foundation gave $4.6 million for forgiveness research at the Virginia Commonwealth University in Richmond, and in 2001 it donated $8.2 million to create an Institute for Research on Unlimited Love (that is, altruism and compassion) at Case Western Reserve University in Cleveland, Ohio. "A lot of money wasted on nonsensical ideas," says Kroto. Worse, says Coyne, these projects are profoundly corrupting to science, because the money tempts researchers into wasting time and effort on topics that aren't worth it. If someone is willing to sell out for a million dollars, he says, "Templeton is there to oblige him".

At the same time, says Marsh, the 'dean of value investing', as Templeton was known on Wall Street, had no intention of wasting his money on junk science or unanswerables such as whether God exists. So before pursuing a scientific topic he would ask his staff to get an assessment from appropriate scholars — a practice that soon evolved into a peer-review process drawing on experts from across the scientific community.

Because Templeton didn't like bureaucracy, adds Marsh, the foundation outsourced much of its peer review and grant giving. In 1996, for example, it gave $5.3 million to the American Association for the Advancement of Science (AAAS) in Washington DC, to fund efforts that work with evangelical groups to find common ground on issues such as the environment, and to get more science into seminary curricula. In 2006, Templeton gave $8.8 million towards the creation of the Foundational Questions Institute (FQXi), which funds research on the origins of the Universe and other fundamental issues in physics, under the leadership of Anthony Aguirre, an astrophysicist at the University of California, Santa Cruz, and Max Tegmark, a cosmologist at the Massachusetts Institute of Technology in Cambridge.

But external peer review hasn't always kept the foundation out of trouble. In the 1990s, for example, Templeton-funded organizations gave book-writing grants to Guillermo Gonzalez, an astrophysicist now at Grove City College in Pennsylvania, and William Dembski, a philosopher now at the Southwestern Baptist Theological Seminary in Fort Worth, Texas. After obtaining the grants, both later joined the Discovery Institute — a think-tank based in Seattle, Washington, that promotes intelligent design. Other Templeton grants supported a number of college courses in which intelligent design was discussed. Then, in 1999, the foundation funded a conference at Concordia University in Mequon, Wisconsin, in which intelligent-design proponents confronted critics. Those awards became a major embarrassment in late 2005, during a highly publicized court fight over the teaching of intelligent design in schools in Dover, Pennsylvania. A number of media accounts of the intelligent design movement described the Templeton Foundation as a major supporter — a charge that Charles Harper, then senior vice-president, was at pains to deny.

Some foundation officials were initially intrigued by intelligent design, Harper told The New York Times. But disillusionment set in — and Templeton funding stopped — when it became clear that the theory was part of a political movement from the Christian right wing, not science. Today, the foundation website explicitly warns intelligent-design researchers not to bother submitting proposals: they will not be considered.

Avowedly antireligious scientists such as Coyne and Kroto see the intelligent-design imbroglio as a symptom of their fundamental complaint that religion and science should not mix at all. "Religion is based on dogma and belief, whereas science is based on doubt and questioning," says Coyne, echoing an argument made by many others. "In religion, faith is a virtue. In science, faith is a vice." The purpose of the Templeton Foundation is to break down that wall, he says — to reconcile the irreconcilable and give religion scholarly legitimacy.

Foundation officials insist that this is backwards: questioning is their reason for being. Religious dogma is what they are fighting. That does seem to be the experience of many scientists who have taken Templeton money. During the launch of FQXi, says Aguirre, "Max and I were very suspicious at first. So we said, 'We'll try this out, and the minute something smells, we'll cut and run.' It never happened. The grants we've given have not been connected with religion in any way, and they seem perfectly happy about that."

John Cacioppo, a psychologist at the University of Chicago, also had concerns when he started a Templeton-funded project in 2007. He had just published a paper with survey data showing that religious affiliation had a negative correlation with health among African-Americans — the opposite of what he assumed the foundation wanted to hear. He was bracing for a protest when someone told him to look at the foundation's website. They had displayed his finding on the front page. "That made me relax a bit," says Cacioppo.

Yet, even scientists who give the foundation high marks for openness often find it hard to shake their unease. Sean Carroll, a physicist at the California Institute of Technology in Pasadena, is willing to participate in Templeton-funded events — but worries about the foundation's emphasis on research into 'spiritual' matters. "The act of doing science means that you accept a purely material explanation of the Universe, that no spiritual dimension is required," he says.

It hasn't helped that Jack Templeton is much more politically and religiously conservative than his father was. The foundation shows no obvious rightwards trend in its grant-giving and other activities since John Templeton's death — and it is barred from supporting political activities by its legal status as a not-for-profit corporation. Still, many scientists find it hard to trust an organization whose president has used his personal fortune to support right-leaning candidates and causes such as the 2008 ballot initiative that outlawed gay marriage in California.

Scientists' discomfort with the foundation is probably inevitable in the current political climate, says Scott Atran, an anthropologist at the University of Michigan in Ann Arbor. The past 30 years have seen the growing power of the Christian religious right in the United States, the rise of radical Islam around the world, and religiously motivated terrorist attacks such as those in the United States on 11 September 2001. Given all that, says Atran, many scientists find it almost impossible to think of religion as anything but fundamentalism at war with reason.

the foundation has embraced the theme of 'science and the big questions' — an open-ended list that includes topics such as 'Does the Universe have a purpose?'

Towards the end of Templeton's life, says Marsh, he became increasingly concerned that this reaction was getting in the way of the foundation's mission: that the word 'religion' was alienating too many good scientists.

The peer-review and grant-making system has also been revamped: whereas in the past the foundation ran an informal mix of projects generated by Templeton and outside grant seekers, the system is now organized around an annual list of explicit funding priorities.

The foundation is still a work in progress, says Jack Templeton — and it always will be. "My father believed," he says, "we were all called to be part of an ongoing creative process. He was always trying to make people think differently." "And he always said, 'If you're still doing today what you tried to do two years ago, then you're not making progress.'" 

As Tom Slee puts it, “Your answer to ‘what data should the government make public?’ depends not so much on what you think about data, but what you think about the government.”* My personal view is that there is too much secrecy in the current system, and that a corrective towards transparency is a good idea. I don’t, however, believe in total transparency, and even more importantly, I don’t think that independent actors who are subject to no checks or balances is a good idea in the long haul.

The practical history of politics, however, suggests that the periodic appearance of such unconstrained actors in the short haul is essential to increased democratization, not just of politics but of thought. We celebrate the printers of 16th century Amsterdam for making it impossible for the Catholic Church to constrain the output of the printing press to Church-approved books*, a challenge that helped usher in, among other things, the decentralization of scientific inquiry and the spread of politically seditious writings advocating democracy. This intellectual and political victory didn’t, however, mean that the printing press was then free of all constraints. Over time, a set of legal limitations around printing rose up, including restrictions on libel, the publication of trade secrets, and sedition. I don’t agree with all of these laws, but they were at least produced by some legal process.

I am conflicted about the right balance between the visibility required for counter-democracy and the need for private speech among international actors. Here’s what I’m not conflicted about: When authorities can’t get what they want by working within the law, the right answer is not to work outside the law. The right answer is that they can’t get what they want.

The Unites States is — or should be — subject to the rule of law, which makes the extra-judicial pursuit of Wikileaks especially nauseating. (Calls for Julian’s assassination are even more nauseating.) It may be that what Julian has done is a crime. (I know him casually, but not well enough to vouch for his motivations, nor am I a lawyer.) In that case, the right answer is to bring the case to a trial.

Over the long haul, we will need new checks and balances for newly increased transparency — Wikileaks shouldn’t be able to operate as a law unto itself anymore than the US should be able to. In the short haul, though, Wikileaks is our Amsterdam. Whatever restrictions we eventually end up enacting, we need to keep Wikileaks alive today, while we work through the process democracies always go through to react to change. If it’s OK for a democracy to just decide to run someone off the internet for doing something they wouldn’t prosecute a newspaper for doing, the idea of an internet that further democratizes the public sphere will have taken a mortal blow.

s it a proper mission of the State to demand that its citizens not think these thoughts? Is it the proper use of State power to deny or severely limit access to such ideas? It is all the more ridiculous when this film The Kids Are All Right has been nominated for four Oscars this year — for Best Picture, Best Original Screenplay, Best Actress and Best Supporting Actor. Much of the world is talking about the film and the issues it raises, and the Singapore government is determined to make up our minds about the matter and give Singaporeans as little opportunity as possible to see the film for ourselves. All the while, the propaganda goes on: We are a world-class global city.

The root problem, as I have argued many times before, is the failure of our government to respect the constitution, which mandates freedom of expression. Instead, their guiding policy is to allow majoritarian views to ride roughshod over other points of view. Worse yet, sometimes it is even arguable whether the view being defended has majority support, since in the matter of film classification, the government appoints its own nominees as the “public”  consultation body. How do we know whether they represent the public?

As the press report above indicates, the government is waving, in this instance, the film classification guidelines because somewhere there is the clause that ‘Films that promote or normalise a homosexual lifestyle cannot be allowed’, words that the government itself penned. The exact words, not that I agree with them, in the current Guidelines are: Films should not promote or normalise a homosexual lifestyle. However, nonexploitative and non-explicit depictions of sexual activity between two persons of the same gender may be considered for R21. – http://www.mda.gov.sg/Documents/PDF/FilmClassificationGuidelines_Final2010.pdf, accessed 17 Feb 2011.

By the example of the treatment of this film, we now shine new light on the censorship impulse:  gay sex can be suggested in non-explicit ways in film, but gay people living ordinary, respectable lives, doing non-sexual things, (e.g. raising a family and looking after children) cannot. It really boils down to reinforcing a policy that has been in effect for a long time, and which I have found extremely insulting: Gay people can be depicted as deviants that come to tragic ends, but any positive portrayal must be cut out.

You would also notice that nowhere in this episode is reference made to the 2009/2010 Censorship Review Committee’s Report. This Committee I have already lambasted as timid and unprincipled. Yet, its (gutless) words are these: It is also not surprising that the CRC received many submissions calling for a lighter hand in the classification of films and plays which contain homosexual themes.  Homosexuality and other nontraditional lifestyles remain contentious issues for Singapore. While the MDA’s content regulators have to calibrate their decisions on ratings according to the majority, the CRC agrees that minority interests should also be considered and that a flexible and contextual approach should be taken for content depicting homosexuality. At the same time, clear and specific audience advisories should accompany the ratings so that the content issues will warn away those who think they may be offended by such content. – http://www.crc2009.sg/images/pdf/CRC%202010%20Report%20%28website%29.pdf, accessed 17 Feb 2011, para 24.

The government, in its Response to the CRC’s Report, said 63. Recommendation: A flexible and contextual approach for homosexual content should be adopted. Govt’s response: Agree. The current practice is already sufficiently flexible. Industry and artists must also be prepared to be more explicit in advising consumers on homosexual content. – http://www.crc2009.sg/images/pdf/Govt%27s%20Response%20to%20CRC%20Recommendations.pdf, accessed 17 Feb 2011.

And what do the civil servants do? They tighten up. They seize up like frigid vaginas and assholes at the very introduction of an Other. These civil servants create a new rule that limits the classified film to just one copy. They violate their own name and mission — “Film Classification” — by doing more than classification, branching into distribution limitation. To serve whose agenda?

Strict constructionists argue that their analyses should confine themselves strictly to positive (that is, descriptive) analysis: identify who wins and who loses from a public policy, and how much, but leave judgments about the social merits of the policy to politicians.

a researcher’s political ideology or vested interest in a particular theory can still enter even ostensibly descriptive analysis by the data set chosen for the research; the mathematical transformations of raw data and the exclusion of so-called outlier data; the specific form of the mathematical equations posited for estimation; the estimation method used; the number of retrials in estimation to get what strikes the researcher as “plausible” results, and the manner in which final research findings are presented. This is so even among natural scientists discussing global warming. As the late medical journalist Victor Cohn once quoted a scientist, “I would not have seen it if I did not believe it.”

anyone who sincerely believes that seemingly scientific, positive research in the sciences — especially the social sciences — is invariably free of the researcher’s own predilections is a Panglossian optimist.

majority of economists have been unhappy for more than a century with the limits that the strict constructionist school would place upon their professional purview. They routinely do enter the forum in which public policy is debated

The problem with welfare analysis is not so much that ethical dimensions typically enter into it, but that economists pretend that is not so. They do so by justifying their normative dicta with appeal to the seemly scientific but actually value-laden concept of efficiency.

economics is not a science that only describes, measures, explains and predicts human interests, values and policies — it also evaluates, promotes, endorses or rejects them. The predicament of economics and all other social sciences consists in their failure to acknowledge honestly their value orientation in their pathetic and inauthentic pretension to emulate the natural sciences they presume to be value free.

By the Kaldor-Hicks criterion, a public policy is judged to enhance economic efficiency and overall social welfare — and therefore is to be recommended by economists to decision-makers — if those who gain from the policy could potentially bribe those who lose from it into accepting it and still be better off (Kaldor), or those who lose from it were unable to bribe the gainers into forgoing the policy (Hicks). That the bribe was not paid merely underscores the point.

In applications, the Kaldor-Hicks criterion and the efficiency criterion amount to the same thing. When Jack gains $10 and Jill loses $5, social gains increase by $5, so the policy is a good one. When Jack gains $10 and Jill loses $15, there is a deadweight loss of $5, so the policy is bad. Evidently, on the Kaldor-Hicks criterion one need not know who Jack and Jill are, nor anything about their economic circumstances. Furthermore, a truly stunning implication of the criterion is that if a public policy takes $X away from one citizen and gives it to another, and nothing else changes, then such a policy is welfare neutral. Would any non-economist buy that proposition?

Virtually all modern textbooks in economics base their treatment of efficiency on Kaldor-Hicks, usually without acknowledging the ethical dimensions of the concept. I use these texts in my economics courses as, I suppose, do most my colleagues around the world. But I explicitly alert my students to the ethical pitfalls in normative welfare economics, with commentaries such as “How Economists Bastardized Benthamite Utilitarianism” and “The Welfare Economics of Health Insurance,” or with assignments that force students to think about this issue. My advice to students and readers is: When you hear us economists wax eloquent on the virtue of greater efficiency — beware!

US citizens face economic problems that are all too real, and the country's future crucially depends on education, science and technology as it faces increasing competition from China and other emerging science powers.

this truth, which economists hold self-evident: Relative to a status quo of no or limited international trade, permitting full free trade across borders will leave in its wake some immediate losers, but citizens who gain from such trade gain much more than the losers lose. On a net basis, therefore, each nation gains over all from such trade.

In their work, economists are typically are not nationalistic. National boundaries mean little to them, other than that much data happen to be collected on a national basis. Whether a fellow American gains from a trade or someone in Shanghai does not make any difference to most economists, nor does it matter to them where the losers from global competition live, in America or elsewhere.

I say most economists, because here and there one can find some who do seem to worry about how fellow Americans fare in the matter of free trade. In a widely noted column in The Washington Post, “Free Trade’s Great, but Offshoring Rattles Me,” for example, my Princeton colleague Alan Blinder wrote: I’m a free trader down to my toes. Always have been. Yet lately, I’m being treated as a heretic by many of my fellow economists. Why? Because I have stuck my neck out and predicted that the offshoring of service jobs from rich countries such as the United States to poor countries such as India may pose major problems for tens of millions of American workers over the coming decades. In fact, I think offshoring may be the biggest political issue in economics for a generation. When I say this, many of my fellow free traders react with a mixture of disbelief, pity and hostility. Blinder, have you lost your mind? Professor Blinder has estimated that 30 million to 40 million jobs in the United States are potentially offshorable — including those of scientists, mathematicians, radiologists and editors on the high end of the market, and those of telephone operators, clerks and typists on the low end. He says he is rattled by the question of how our country will cope with this phenomenon, especially in view of our tattered social safety net. “That is why I am going public with my concerns now,” he concludes. “If we economists stubbornly insist on chanting ‘free trade is good for you’ to people who know that it is not, we will quickly become irrelevant to the public debate. Compared with that, a little apostasy should be welcome.

Some markets have local firms that compete on price to offer legitimate content (think the US, which has companies like Hulu, Netflix, Apple, and Microsoft that compete to offer legal video content). But the authors conclude that, in most of the world, legitimate copyrighted goods are only distributed by huge multinational corporations whose dominant goals are not to service a large part of local markets but to “protect the pricing structure in the high-income countries that generate most of their profits.”

This might increase profits globally, but it has led to disaster in many developing economies, where piracy may run north of 90 percent. Given access to cheap digital tools, but charged terrific amounts of money for legitimate versions of content, users choose piracy.

In Russia, for instance, researchers noted that legal versions of the film The Dark Knight went for $15. That price, akin to what a US buyer would pay, might sound reasonable until you realize that Russians make less money in a year than US workers. As a percentage of their wages, that $15 price is actually equivalent to a US consumer dropping $75 on the film. Pirate versions can be had for one-third the price.

Simple crackdowns on pirate behavior won't work in the absence of pricing and other reforms, say the report's authors (who also note that even "developed" economies routinely pirate TV shows and movies that are not made legally available to them for days, weeks, or months after they originally appear elsewhere).

The "strong moralization of the debate” makes it difficult to discuss issues beyond enforcement, however, and the authors slam the content companies for lacking any credible "endgame" to their constant requests for more civil and police powers in the War on Piracy.

piracy is a “signal of unmet consumer demand.

Our studies raise concerns that it may be a long time before such accommodations to reality reach the international policy arena. Hardline enforcement positions may be futile at stemming the tide of piracy, but the United States bears few of the costs of such efforts, and US companies reap most of the modest benefits. This is a recipe for continued US pressure on developing countries, very possibly long after media business models in the United States and other high-income countries have changed.