Author Archive | Kenneth Anderson

PS Further Thoughts to the Berkowitz Post, on Sports:

This is a post script to the post below on conservatism and the curriculum, only this is specifically about what I said there concerning sports and politcs:

So. Okay. I have to make An Important Confession.

I don’t know anything about sports. It seems kinda strange to admit, but since my childhood sport was … fencing … I somehow barely played basketball, baseball, and never played football. I don’t actually know how football is scored.

So when I say in the post, “I understand it if it’s sports …” what I mean is, understand in a completely abstract sense.

Experiencing a general existential unease at, I don’t know, dying without ever having known anything about sports, professional or collegiate, I’ve been thinking in my dotage that maybe I should take up sports the way I once took up wine as a non-drinker who did all the winebuying for my wife (she figured out I’d buy better quality wine for her than she would). That is, take up wine as a quasi-Wittgensteinean exercise in seeing if I could accurately use the language of wine (shades of mushroom, hints of blueberry, and, heck, squiggles of LSD and rivets of meth) in a more than plausible way without ever having experienced the actual sensation.

It turns out this is not very hard with wine.

It might be some kind of alternative Turing test.

(Update: When I say alternative Turing test, I mean a test to determine whether I might not be a machine, perhaps engaged by the Senior Conspirator. but in fact not a human at all, but instead one of those academic phrase-paper generators. A highly advanced phrase generator, naturally. Have you seen through the deception yet??!) [...]

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Peter Bernstein, Risk-Management Pioneer, Passes Away at 90

I report with sorrow that Peter L. Bernstein, all of whose books I have on my shelf, has passed away at the age of 90. The WSJ has a lovely obituary by Jason Zweig today.

Investing has yielded a few stars so famous they are known by first name. Warren Buffett is one. Peter L. Bernstein — the economist, investment consultant and prolific author who died on June 5 at 90 — was another ….

In his almost 70-year career, he taught economics at Williams College, worked as a portfolio manager at Amalgamated Bank and ran the investment-counseling firm of Bernstein-Macaulay, co-founded by his father and Frederick Macaulay, who invented the modern discipline of bond investing.

In 1974, as Wall Street was suffering its worst market decline since 1929, Mr. Bernstein co-founded the Journal of Portfolio Management to improve risk management with insights from academic research.

His introduction to the maiden issue reads as if it were written yesterday: “How could so many have failed to see that all the known parameters were bursting apart?…It was precisely our massive inputs and intimate intercommunication that made it impossible for most of us to get to the exits before it was too late.”

He was the author of 10 books, five of which he published after the age of 75. Two of them, “Capital Ideas,” a history of modern finance, and “Against the Gods,” a dazzling survey of probability and risk, were international best sellers. With his wife and business partner, Barbara Soskin Bernstein, Mr. Bernstein also published “Economics & Portfolio Strategy,” a biweekly newsletter.

Bernstein was one of those gifted finance economists who effortlessly bridged the divides of Wall Street, government service at the Fed, the academy – but was best known to the broader reading public as the author of [...]

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“If They Can Find Time for Feminist Theory, They Can Find Time for Edmund Burke”:

Peter Berkowitz, a political philosopher who is a senior fellow at the Hoover Institution, has an excellent short opinion piece in the Wall Street Journal, “Conservatism and the University Curriculum,” for which the title of this post is the subtitle. Berkowitz is an extraordinarily gifted thinker and writer, and this short piece is well worth reading by academics of any political persuasion, in thinking about the proper formation of the university curriculum:

Political science departments are generally divided into the subfields of American politics, comparative politics, international relations, and political theory. Conservative ideas are relevant in all four, but the obvious areas within the political science discipline to teach about the great tradition of conservative ideas and thinkers are American politics and political theory. That rarely happens today.

To be sure, a political science department may feature a course on American political thought that includes a few papers from “The Federalist” and some chapters from Alexis de Tocqueville’s “Democracy in America.”

But most students will hear next to nothing about the conservative tradition in American politics that stretches from John Adams to Theodore Roosevelt to William F. Buckley Jr. to Milton Friedman to Ronald Reagan. This tradition emphasizes moral and intellectual excellence, worries that democratic practices and egalitarian norms will threaten individual liberty, attends to the claims of religion and the role it can play in educating citizens for liberty, and provides both a vigorous defense of free-market capitalism and a powerful critique of capitalism’s relentless overturning of established ways. It also recognized early that communism represented an implacable enemy of freedom. And for 30 years it has been animated by a fascinating quarrel between traditionalists, libertarians and neoconservatives.

While ignoring the intricacies – no doubt not all of them debates for the ages – of the debates within conservative [...]

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Blogging from the Hoover Institution:

Blogging will be light for me over the next few days, as I am in Palo Alto at the Hoover Institution for a meeting of the Hoover Task Force on National Security and Law. We will workshop some papers over the next day and a half.

But I will also add that this is the institution that just recently published economist John Taylor’s Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis. It’s a short, barely 90 pages essay focused mostly on the monetary issues in the financial crisis. It is also one of the handful of books crucial to understanding the financial crisis and how it came about – I can’t recommend it highly enough. I got it and read it in a single late night sitting, then read it again, this time going carefully through the numbers, which tell a remarkable story.

I’ll be back to a more regular schedule when I’m done here. By the way, when academics die and go to heaven, it looks like the Hoover Institution. Really great place, and I am very grateful to have its support. [...]

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Financial Regulatory Overhaul

to be pared back? As fault lines emerge among private and public players? Two good articles today on the pace and direction of the regulatory reform of financial services and financial markets. I’m light-blogging the next couple of days, as I’m traveling to Palo Alto for a meeting of the Hoover Task Force on National Security and Law, and so mostly thinking about things like counterterrorism, direct part in hostilities, predators and targeted killing … but these are articles are timely, well-reported, and useful to those of us keeping track of regulatory reform.

The first, by Zacharay Goldfarb in the Washington Post, Tuesday, June 9, 2009, gives an excellent overview of the “fault lines” developing over the direction of financial services overhaul. The result of the lobbying battles is

likely to shape how much profit banks will make, who can get a mortgage, which federal regulators oversee different corners of the economy — and, ideally, whether the government is prepared for future financial threats.

With so much money and power on the line, interests inside the government and out are not waiting for the administration to reveal its plan, which sources say will be detailed next week. Lobbyists for financial firms and consumer activists, among others, have been meeting privately with the Treasury Department and the White House to press their views, according to people briefed on the discussions.

So who is on what side of what? What are the fault lines that are forming – fluid, as Goldfarb notes – but coalitions joining and shifting:

— Financial firms, for instance, have closed ranks in vigorously opposing a proposal for how mortgage lending, credit cards and mutual funds will be regulated.

— Big banks are squaring off against smaller ones over proposals for consolidating regulatory powers in a few

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Congrats to my dear friend Scott Malcomson

on his article in yesterday’s New York Times Magazine on Shakira and her nonprofit educational mission in Latin America; it occurs to me, however, that this was probably not the most disagreeable assignment in third world journalism that Scott has ever undertaken. Scott is the foreign affairs editor of the Magazine, and the author of a couple of splendid books – particularly One Drop of Blood: The American Misadventure of Race. Apart from being a journalist, he was also a senior advisor at the UN to the late Sergio Vieira de Mello on complex humanitarian emergencies in the 1990s. [...]

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Opinionification = Commodification:

That’s my take, anyway. Michael Kinsley looks at the business and editorial model of the new Newsweek. Characteristically amusing piece in TNR.

Kinsley walks through the many problems of the new, revamped Newsweek. How much of it looks like the old Newsweek, to start with.

But the essence of the critique is one that bedevils these kinds of magazines, as well as newspapers. Gathering news that consists of facts that are (a) facts someone wants badly enough to be willing, in principle, to pay for; and (b) facts that are sufficiently current and new that they have not already been priced into the information and so discounted in pricing power is expensive. And figuring out these days if there any hard facts that someone is willing to pay for, even if it does involve people getting out of the internet echo chamber and doing some hard research that might involve shoe leather – that’s risky and expensive. About the only facts that fit those categories these days are in the areas of business and finance and economics, where people have money at stake.

So media organizations try to do two things at once.

First, they gravitate away from the high risk fact gathering activities – activities that are costly on the front end, and move toward the cheap business of writing opinion. It involves the exquisitely self-indulgent belief that professional journalists are good writers and that people will therefore want to read them over blogs and stuff like that. The business model problem with this is that opinion is cheap to produce – but it’s widely available, easily produced, and frankly there are a lot of people out there who, if someone else supplies the facts, can produce pretty decent insights and prose, and will do it for free, [...]

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Targeted Killing in US Counterterrorism Strategy and Law:

In the last couple of years, much of my research and writing has been devoted to the law and ethics of war, and with particular focus on targeted killing, the concept of who may be targeted on the battlefield for taking “direct part in hostilities,” and robotics on the battlefield. These issues come together in the Predator drone campaign in Pakistan – a centerpiece of the counterterrorism and counterinsurgency campaign that Candidate Obama ran on and his administration has embraced as the ‘smaller footprint’ of warfare.

I am in favor of targeted killing, the drone campaign in Pakistan, and these forms of increasingly targeted warfare. The Obama administration was right to emphasize them in the campaign and right to see them as a means of more discriminating warfare. It is a tragedy when a dozen innocents are killed in a drone missile attack – but much, much more of one when a military undertakes its activities using artillery. I spent a chunk of my NGO career urging the United States to give up landmines as indiscriminate weapons and to focus its military R&D on coming up not with more destructive weapons, but more discriminating ones. Well, to a considerable extent, it is doing so through robotics, and I find it churlish at best for the humanitarian and human rights groups to turn around and denounce these weapons in their turn. There is a principle behind it – but the principle is merely functional pacifism, the denunciation of the US using force that does not quite have the courage to speak its name.

That said, I have grave concerns that the Obama administration does not take sufficient account that even as its appreciation of its strategic, including humanitarian, use grows, the space of its legal rationale shrinks. We are potentially seeing [...]

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The Five Films and the Five Non-American Works of Fiction

that best explain the 20th century. Acceding to popular demand for a film list, and I’m also interested in non-US fiction. Some commenters pointed to several – The Man Without Qualities, The Tin Drum, etc. – but I would be interested in other suggestions from around the world. Apologies for tying up VC with something unserious, but I actually need to compose a list for some high schoolers. [...]

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What Five Works of Fiction Best Explain the 20th Century?

Name in the comments the five works of fiction that you believe best explain – not define or symbolize or exemplify, precisely – but in some way explain the past century to (in Brecht’s phrase) ‘those who come after. I have been asked this question by some high school students and before responding I thought I would consult the Wider Conspiracy. Particularly if the book is not something super well-known to an American audience, give a bit of description about when it was written, by whom, what it’s about, and why it’s on your list.

To give the full Brecht quote (from memory so might be slightly wrong and anyway a free translation), from the Three Elegies, written in Santa Monica and set to music by Hans Eisler:

“To those who come after,
When man is no longer wolf to man,
Remember us with forbearance.”

Forbearance is a deeply under-appreciated moral virtue. [...]

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Tiananmen Twenty Years On:

The day it happened in 1989, I was at a human rights retreat organized by Henry Steiner and Philip Alston, a remarkable private meeting of human rights organizations, from north and south, on the island of Crete. Remarkable in that it was one of the first times that anyone had tried to sit down a bunch of human rights NGOs and discuss a set of important and simultaneously practical and abstract themes. Not everyone attended – Human Rights Watch rather snootily said that it had better things to do than attend academic conferences. The horror! But it was the loser; the exchanges, particularly between north and south, were frank and pointed and one of the first such occasions within the human rights NGO movement.

I was there as the young conference administrator person, dealing with things like rooms and planes and meals and all that, seconded, I am pleased to say, as a pro bono gift of Sullivan & Cromwell. Tiananmen took place while all of us were there; it was discussed at length, but the conference declined to make a joint statement, if I recall correctly. I think that was the right decision – no one at the meeting was authorized to speak on behalf of their organizations, to start with.

Somewhat more disturbing was that not everyone at the conference appeared to think that the Chinese protestors had a defensible cause, even if they were not eager to see Tank Man flattened. The fault lines of the human rights movement and its internal contradictions run deep, from its ideological development in the 1980s down to today. But I recall watching the protests on the small TV that was in the monastery on a remote stretch of beach on the island, hoping that it would turn out like [...]

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How Offshore Corporate Income Tax Savings Works:

A quick practical example responding unfortunately belatedly to a student who, congrats, graduated a week or so ago and who asked, what was what with proposals from the Obama administration to tax US corporate income parked offshore? I ran across a short Bloomberg article giving a practical example of what’s at issue with respect to Microsoft. The issue is this:

Obama on May 4 proposed outlawing or restricting about $190 billion in tax breaks for offshore companies over the next decade. Such business groups as the National Foreign Trade Council, the U.S. Chamber of Commerce and the Business Roundtable have denounced the proposed overhaul.

U.S. tax rules let companies defer paying corporate rates as high as 35 percent on most types of foreign profits as long as that money remains invested overseas. Obama says he wants to end such incentives to keep foreign profits tax-deferred so that companies would invest them in the U.S.

Here’s how the current tax arrangements function for Microsoft:

Barry Bosworth, an economist in Washington at the Brookings Institution research center, said many software companies such as Microsoft have exploited tax and trade rules in the U.S. and other countries to achieve a low overall tax rate.

Typically, he said, a company like Microsoft develops a product like Windows in the United States and deducts those costs against U.S. income. It then transfers the technology to a subsidiary in Ireland, where corporate tax rates are lower, without charging licensing fees. The company then assigns its foreign sales to the Irish subsidiary so it doesn

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Surplus of Males and Runaway (with the Bride-Price) Brides:

The WSJ has a story today that we are increasingly likely to hear in some version. The one-child policy and preference for boys has led to a well-documented shortages of marriageable women in China, particularly in some parts. In this story, brides marry rural men, extracting a bride-price, and then running away with the money. There are other things that happen too – abductions of women in rural villages, the renting out of a farmer’s wife to other farmers who cannot find wives. It is a social issue that is only now beginning to hit adult Chinese society in full force. There is an extremely important and good book on the implications of this surplus of males in China, Bare Branches: The Security Implications of Asia’s Surplus Male Population, by Valerie Hudson and Andre den Boer (2004). (Demographer Nicholas Eberstadt has written on the economic implications of this for regions of China and India, as well as a superb series – published in Spanish, as it happens – on European health and retirement, in the Madrid Revista de Libros.) As the WSJ article notes:

Thanks to its 30-year-old population-planning policy and customary preference for boys, China has one of the largest male-to-female ratios in the world. Using data from the 2005 China census — the most recent — a study published in last month’s British Journal of Medicine estimates there was a surplus of 32 million males under the age of 20 at the time the census was taken. That’s roughly the size of Canada’s population.

Now some of these men have reached marriageable age, resulting in intense competition for spouses, especially in rural areas. It also appears to have caused a sharp spike in bride prices and betrothal gifts. The higher prices are even found in big cities

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Special Purpose Entities and Off-Balance Sheet Accounting:

The WSJ reports today that financial services industry groups are pressuring Congress and the administration to delay or weaken the effects of an accounting rule change slated for next year that would force banks and other financial services firms to keep, or take back, on their balance sheets assets shifted into special purpose entities (SPEs or SPVs):

[T]he group of financial organizations is trying to put the brakes on the off-balance-sheet accounting measure, which would force banks to bring hundreds of billions in assets back onto their balance sheets at the beginning of 2010, effectively forcing them to set aside more capital. Some accounting experts say they aren’t surprised by the banking industry’s latest effort. “Here we go again. They will get out their checkbooks and go to the Hill,” says Lynn Turner, the Securities and Exchange Commission’s former chief accountant.

The rule would apply to existing off-balance-sheet entities, known as qualifying special purpose entities, which were generally used by banks to package and sell off to investors loans they had made.

In general, I favor the rule change, as I also favor the earlier mark-to-market rule relaxation – although each with important reservations and caveats. The well-known accounting expert Robert Willens commented in the Journal article:

The rule “includes securitization vehicles that played a large role in the bubble and allowed banks to operate with low levels of capital even though they had exposure to these assets that weren’t on the balance sheet,” says accounting analyst Robert Willens.

I partly agree and partly disagree with that characterization, which explains my cautious, caveated view of the rule requiring that SPEs be consolidated. I don’t think, on what I’ve seen so far at least, that it was securitization as such (including asset securitization that goes beyond simply the basic concept of [...]

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Chrysler Bankruptcy Case to Be Heard by Second Circuit Friday:

Bankruptcy judge Arthur Gonzalez has permitted an appeal by Indiana pension funds to the Second Circuit on his ruling allowing a sale of the company to Fiat. According to the NYT:

The judge, Arthur J. Gonzalez, said that an appeal that sought to block the sale to Fiat could be heard directly by the United States Court of Appeals for the Second Circuit, a move that the American carmaker had wanted. Normally, appeals to bankruptcy court decisions are heard in federal district court, which sits directly above bankruptcy court in the judicial hierarchy. But cases may be moved directly to the appeals court if a judge finds it necessary.

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