openDemocracy

Fake Steve Here, Fake Steve There

Economists distinguish between “Risk” and “Uncertainty”: the former can be priced by financial markets while the latter cannot. The distinction between the two was made by the famous economist Frank H. Knight in his seminal book, Risk, Uncertainty, and Profit (1921). In brief, “Risk is present when future events occur with measurable probability” while “Uncertainty is present when the likelihood of future events is indefinite or incalculable”.    This distinction between risk and uncertainty helps to explain the recent market panic and turmoil. Today, the FT cites a market economist at Lehman who said: “We are in a minefield. No one knows where the mines are planted and we are just trying to stumble through it”. A few days ago another market participant put it this way: “It is not the corpses at the surface that are scary; it is the unknown corpses below the surface that may pop up unexpectedly”.   Unknown minefield; unexpected corpses: this is “uncertainty” rather than “risk”. Risk can be measured and priced because it depends on know distributions of events to which investors can assign probabilities. Uncertainty cannot be priced by markets because it relates to “fat tail” distributions and extreme events that cannot be easily predicted or measured.

A few days ago the CFO of Goldman Sachs justified the massive – 30% plus  - losses of the two Goldman Sachs hedge funds by arguing that these were unpredictable “25 standard deviation events” that should occur only once in a million years. The same thing was said by the LTCM “masters of the universe” when their highly leveraged hedge fund went belly up in 1998.

The proliferation of such products, as I have often noted before, carries many benefits for the financial system (most notably that they disperse risk across a much wider pool of investors). But this trend also carries at least one downside; it is adding to the opacity of the financial world. For although many corners of the structured credit universe are becoming more transparent, almost as soon as one chink of light emerges, another shadowy wave of activity emerges that is far more opaque.

The one element clear right through representative democracy’s advance across the world has been the centrality of popular rejection of autocratic effrontery, often exhilarating at the time but in retrospect a transitory pleasure. The structure of modern representative democracy (the form of state now called by that name) does not provide a clear model for any community to rule itself in freedom, let alone in reliable serenity and prosperity. What it provides is a practical basis through which to refuse to be ruled unaccountably and indefinitely against your will. Less steadily and on far less egalitarian terms, it also provides a framework through which to explore together what people should and should not attempt to do as a community. Virtually none of the elements of an answer to that question can come from democracy as an idea. Almost all have to be pieced together arduously from somewhere else.

Crudely speaking, the political appeal of democracy lies in its claim to realise political equality. (So, soberly speaking, does its potential political menace.)

All of the countries that do this are better off than they would be without international trade. But even though it is possible to prove mathematically that this is true for nations, it is not true for every group of people within nations.

The global imbalances created by this dynamic of American borrowing and foreign lending appear stable for now, but if they slip suddenly, that could pose serious dangers for middle- and working-class Americans through soaring interest rates, a crash in the housing market, and sharply higher prices for anything no longer made domestically.

was a run on the pound sterling and he blocked the International Monetary Fund (IMF) from stabilizing the currency. With sterling on the verge of collapse, says Frankel, “Eisenhower told them, ‘We are not going to bail out the pound unless you pull out of Suez.’” Facing bankruptcy, the British withdrew. This incident, notes Frankel, “marked the end of Great Britain’s ability to conduct an independent foreign policy.”

Consider the evidence uncovered by Paul Oyer, a Stanford Business School economist, in his recent paper, "The Making of an Investment Banker: Macroeconomic Shocks, Career Choice and Lifetime Income" (National Bureau of Economic Research Working Paper 12059, February 2006). Dr. Oyer tracked the careers of Stanford Business School graduates in the classes of 1960 to 1997.He found that the performance of the stock market in the two years the students were in business school played a major role in whether they took an investment banking job upon graduating and, because such jobs pay extremely well, upon the average salary of the class. That is no surprise. The startling thing about the data was his finding that the relative income differences among classes remained, even as much as 20 years later.

n July, The Post reported that insiders were lobbying to shut down the service. After two years, however, the move to do away with TimesSelect may have more to do with growth than grumbling inside the paper. The number of Web-only subscribers who pay $7.95 a month or $49.95 a year fell to just over 221,000 in June, down from more than 224,000 in April.

While the Left pursues environmentalism to advance its global agenda, conservation is best entrusted to local stewardship.

A point arrives in the growth of a big institution...at which the owners of the capital, i.e. the shareholders, are almost entirely dissociated from the management, with the result that the direct personal interest of the latter in the making of great profit becomes quite secondary. When this stage is reached, the general stability and reputation of the institution are more considered by the management than the maximum of profit for the shareholders. The shareholders must be satisfied by conventionally adequate dividends; but once this is secured, the direct interest of the management often consists in avoiding criticism from the public and from the customers of the concern....They are, as time goes on, socializing themselves.

Insurgents Muster Their Forces OnlineRadio Free Europe Report Describes Iraq Fighters' New Media Versatility

The makers of Web-based propaganda may not be easy to track down, but their work isn't hard to find. As the report, titled "The War of Images and Ideas," makes clear, there is an astonishing array of media product feeding the worldwide appetite for news from the other side of the war in Iraq.

US-funded Radio Free Europe/Radio Liberty have said that Web-based propaganda from Iraq is far more complex and sophisticated than Western media give insurgents credit for. Very "fast-paced and clearly aimed at the video game generation", there is a vast myriad - primarily Sunni - of perspectives from the other side of the Iraq War available on the Web, catering to a wide variety of media consumption habits.   

We are the crowdsourcing black market. We pay social media website users for their votes, and sell them to advertisers who want to boost their exposure on these sites.

Subvertandprofit.com “operates a black market for votes on social networking sites,” in the words of its 19-year-old founder, who goes by the pseudonym Ragnar Danneskjold. Ragnar told AZ contributor Derek Powazek that while some users of Digg.com “cling to democracy as the final ideal,” others “understand that their community is a wild anarchy...and I believe they like it that way.”

Welcome to NewAssignment.Net by Jay Rosen on August 19, 2006 - 10:41pm. What is NewAssignment.Net? New Assignment.Net is a non-profit site that tries to spark innovation in journalism by showing that open collaboration over the Internet among reporters, editors and large groups of users can produce high-quality work that serves the public interest, holds up under scrutiny, and builds trust.

Edelman Trust Barometer 2007

People who read the newspaper online have a far less favorable opinion of network and local TV news programming than do people who read the print version, and also have a somewhat less favorable view of the daily newspaper they are most familiar with. But consumers of online newspapers feel far more favorably toward large nationally influential newspapers, such as the New York Times and the Washington Post.

And by more than three-to-one (73%-21%), the public feels that news organizations are "often influenced by powerful people and organizations," rather than "pretty independent."

However, even two-thirds of liberal Democrats (67%) say the news media is more motivated by a desire to expand audience than informing the public. People who have attended college are more likely than high school graduates to say that the press mostly seeks to attract the biggest audience. And 85% of those who cite the internet as a main source believe that news organizations are mostly motivated by a desire to expand their audience, rather than to inform the public.

Nearly four-in-ten people (37%) regularly use at least one type of internet news source, either the news pages of major search engines such as Google or Yahoo (25%), the websites of the television news organizations (22%), or the websites of major national newspapers such as the New York Times or USA Today (12%). Additionally, about one-in-ten (11%) read online blogs where people discuss events in the news.

Which Audiences Know the Most?