The War on Islamic Banking?

Some considerations:

1. It’s pretty clear that the War Party in the U.S.—represented in both the Republican and Democratic parties—has been eyeing Iran for years. (See here.) They have been inventing and repeating claims about how dangerous Iran is almost non-stop. It’s not clear what the long-term goal is, but there must be some purpose served.

2. If one believes that the purpose of the American security apparatus is the protect the territorial integrity of the United States and the lives of its citizens, its behavior is frequently puzzling. However if one believes that its purpose is the protection and promotion of “American interests”, i.e. banks, oil companies, military contractors, the military brass, other multinationals, etc., this confusion disappears.

(I want to point out here that though this seems like a left-wing position, I am as firm a believer in private property and free markets as can be found anywhere. To right-wing critics I would ask if government promotion of these groups can really be counted as free-market activity in any intellectually honest sense.)

3. The theory and practice of Islamic banking dates far back in history, but its modern incarnation is a relatively recent phenomenon, dating (as I understand) from around the middle of the 20th century. Islamic banking is largely concentrated in Iran. (Link here.)

I’m no scholar of Islamic banking, but religious factors make it different from Western banking, mainly forbidding the taking of interest. Economic principles would tell us that it can’t be drastically different from Western banking if economic laws truly are universal, as I believe they are. The question is if Islamic banking is sufficiently different to be seen as a threat to Western banking.

Add to this that Islamic banking is a growing phenomenon. If it were contained to some island in Indonesia, “American interests” could probably ignore it. However it appears to be growing, and growing in an economically and geopolitically important area, the Middle East.

These three factors put together indicate that if “American interests” see Islamic banking as a threat, it could help explain the hostility towards Iran and the slow but dire buildup to war. As President Obama says, let me be clear: I believe the government of Iran is disrespectful of the liberty of its citizens, and I hope it disappears sooner rather than later. I’m not sticking up for it. But it is not developing nuclear weapons, and even if it were, that would hardly be grounds for attacking it. It is promoting Islamic banking institutions. To me this is also not grounds for attacking it, but I don’t make policy.

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Snowstorms in DC

Imagine a giant snowstorm shuts down Washington, D.C. for about a week. Essential services still struggle to function but most day-to-day activity is suspended. My instinct in this scenario would be to celebrate this gift from the Fates: the less activity goes on in D.C. the better, from a political economy standpoint. What goes on in Congress, Congressional offices, etc., is generally harmful to a free society, so its temporary suspension is a temporary reprieve.

But there is another angle to the story. If we consider that firms like KBR have so much more at stake in what goes on in Washington than, say, the American Association of Made-Up Nonsense (AAMUN), the picture gets a little hazier. KBR reps will fly in private planes, while AAMUN’s will fly business class if they’re lucky. KBR probably has standing accommodations for their reps, while AAMUN’s have to check in and out of hotels. We might think of AAMUN as a marginal lobbying group. For them, as lobbying activity becomes even slightly more difficult, they will drop off. KBR would stop lobbying in extreme cases as well, but I get the feeling the blizzard we’re imagining is far short of that.

KBR lobbies for things that are good for KBR, and these may not be things that are good for everybody else. AAMUN lobbies in its self-interest too, and the same caveat applies, but what it wants and what KBR wants might counteract each other. In the snowstorm, with AAMUN temporarily out of action there’s nobody there to counteract KBR. Thus we might actually be worse off in this case.

The JFK assassination, pt. 4: Report by Buddy Walthers

Today being the 48th anniversary of the assassination of John F. Kennedy, it would be a good time for another post. Rather than blowing the whole case right open—which will have to wait for the 50th anniversary—I’ll write just a little here.

In a supplementary investigation report dated Nov. 22, 1963, Officer Buddy Walthers wrote the following regarding the search of the house where Marina Oswald lived and where Lee Oswald kept personal effects:

Upon searching this house we found stacks of hand bills concerning “Cuba for Freedom” advertising, seeking publicity and support for Cuba. Also found was a set of metal file cabinets containing records that appeared to be names and activities of Cuban sympathizers.

I want to note that this is dated on the day of the assassination, before the all-consuming drive to sanitize the various statements made by law enforcement officers to fit the lone gunman theory.

While Walthers does not elaborate, it’s hard to imagine that a fellow sympathizer would keep these kinds of records. It’s a lot easier to imagine that a man with alleged connections to Guy Banister, anti-Castro coordinator and former FBI agent, would. And if this line of thinking has any merit, it leads to the FBI or CIA or both. Surely Guy Banister hardly had the ability to coordinate the assassination of the president.

It’s already a matter of public record that Oswald belonged to a pro-Castro group. But if he was the only member of the group, and if he was still in the company of Guy Banister, this looks like infiltration rather than activism per se.

Steve Jobs on Google’s artistry

Let me preface this post by saying that I think Steve Jobs was a genius. A really brilliant, far-seeing, hard-working creative master. Many of the things that I value in life owe a lot to him. But he made some bad calls, and the rest of this post is about one in particular. (I will have to resist referring to him as “Steve”, as I have usually done.)

According to news accounts of his authorized biography, Jobs was absolutely furious at Google for “stealing” Apple’s product when they produced their own smartphone. (I’ve been an elitist Mac user for years, but when it finally came time for me to buy a smartphone I bought an Android phone. I just like it better.) And indeed, the Google phone wouldn’t exist without the iPhone’s having created the standard for functionality and design. But “stealing”? Really?

While many observers had long assumed that Apple, riding high on the success of the iPhone, had a mostly dispassionate and detached view of Google’s smartphone operating system, Isaacson reveals that exactly the opposite was true. The book quotes Jobs as saying, “I will spend my last dying breath if I need to, and I will spend every penny of Apple’s $40 billion in the bank, to right this wrong… I’m going to destroy Android, because it’s a stolen product. I’m willing to go thermonuclear war on this.”

And when Jobs met with the executives at Google to discuss the matter directly, he apparently went even further in expressing his distaste for Android, telling them, “I don’t want your money. If you offer me $5 billion, I won’t want it. I’ve got plenty of money. I want you to stop using our ideas in Android, that’s all I want.” According to the author, the meeting did little to cool tensions between the two companies.

“Good artists copy, great artists steal.” That’s a quote from great artist…Steve Jobs. Apple is credited with the first GUI for personal computers, but this idea came from Xerox PARC. Several years later, Apple sued Microsoft for copyright violation for taking the “look and feel” of the Apple GUI for the Microsoft GUI. Interestingly, Xerox sued Apple on the same grounds in the middle of Apple’s lawsuit. (As it turns out, PARC’s claims were dismissed.) And not just the GUI, the mouse as well came from PARC.

So it seems a little hypocritical of Jobs to make this allegation. But with copyright the creator of an idea or product doesn’t always get to be the one with a legal right to it, and since Apple has legal rights maybe that’s what mattered to him. Not that Google was essentially following his own advice. And certainly not that “intellectual property” is a bad joke that leads precisely to these kinds of ridiculous disputes.

What got me thinking about this post in the first place was speculating about what would have happened if he hadn’t died early. He positively stated that he was willing “to go thermonuclear war” to destroy Google. As it is, I think we consumers are a lot better off having the system that prevails right now in smartphones when compared to any possible post-“thermonuclear war” scenario. Not to mention that—while copyright law has a lot of strange ins and outs that I’m not expert in—I have trouble believing Apple would have won a significant victory over Google in such a conflict. On top of that, both sides would be in much worse financial positions when the dust settled. I hate to think this way, but if Jobs had to die early, perhaps it’s better that he did before he tried to take down the Android.

Three kinds of colonialism

[Note: a lot of people find this post when searching “kinds of colonialism” on Google. This is only a small part of a much larger discussion. Also see the update posted below.]

It seems to me that the discussions of colonialism I’ve read paint with a broad brush over what are really different phenomena. There are:

1. English North American-style colonialism. In this case, the mother country and the colonies were largely the same culture (or, à la David Hackett Fischer, family of cultures). In the U.S. and Canada, each of the component cultures were originally under the dominion of Britain, and carried largely intact over the waters. In this case, switching affiliations would be a simple procedure, though the ramifications might be costly.

2. British and French Empire-style colonialism. In this case, a foreign culture imposed itself on top of existing cultures that were different. [I simplify, but not too much, by leaving American Indians out of this picture.] British India was ruled by Britons who were a distinct group from their numerous subjects. One could not simply switch affiliations. This may be largely due to race, but the cultural differences were vast as well. Even for those Indians who supported British rule, it was clear that they could never get to the top of the system.

3. Spanish-style colonialism. This third kind started out as the second kind but very quickly changed into its own unique form. In this case, the conquering culture and the conquered cultures merged to form a third category. In Mexico City this phenomenon was weak, with “pure” Spanish forming the ruling caste, but in the majority of the conquered territories the mestizo blend was preeminent. In an extreme case like New Mexico there was a statistically insignificant amount of “pure” Spanish people, and mestizos could become part of the ruling group at the stroke of a pen. The cultures ceased to be in conflict and melded together.

I know that these are oversimplifications—as for instance there was still a large number of genetically and culturally distinct American Indians in New Mexico—but this is a lot closer to the picture than covering these very different phenomena by the single word “colonialism”. Even among careful minds language can lead to sloppy thinking, especially when one word covers so much mental territory.

[Update 2014-07-30] This post was supposed to be just a short sketch trying to separate ideas that often get conflated. I realized recently that there’s another angle that’s missing: the economic/sociological interpretation of colonialism. While a lot of scholarly literature talks about colonialism, much of it is derived from Marxian analysis. However useful this segment of the literature is, Marxian economics, i.e. the part that Marx and his early followers thought to be the core of the entire project, is hopelessly flawed. The kernel of Marxism is the (incorrect) labor theory of value. It’s understandable that Marx conceived of value this way, as value was not well understood by any economic thinker until the Marginal Revolution in the 1870s—just like Ptolemy was not stupid in basing his astronomy on geocentric foundations, just wrong. Now that the state of knowledge has advanced we are able to tell that Marxian economics is a dead end. However, it’s since spread into other fields.

Other errors include:
(1) believing that the transition from feudalism to capitalism was a universal law. In fact, feudalism was rare worldwide, confined mainly to Europe, Japan, and possibly parts of India.
(2) conflating mercantilism with the market economy (and/or capitalism, which is a term filled with so many components as to be more misleading than helpful in most contexts). Most, possibly all, colonial projects, in the broadest sense of the word, were mercantilist. The classical economists that Marx opposed were thoroughly opposed to mercantilism on technical grounds.
(3) basing a whole lot of political and sociological analysis on top of a flawed theory of value, an underpants-gnome-style theory of prices, and a methodologically unsound explanation of group or “class” action.

It’s point (3) that leads into most discussions about colonialism, which I suspect is often why people arrive at this post from Google. Say what you have to say to get your A, but make sure you do not following Marx in these errors if you want to understand the world as it actually works.

The technocrats behind the curtain

Karl Smith has a very interesting point about technocracy:

As I recently told a correspondent: if we are doing our jobs right then people shouldn’t even know that technocrats exist. They should never think about us. They should think about the things they care about; their children, their friends, their love interests, their dreams. If they know about the technocracy then the technocracy has failed.

This implies the 1940s-era assumption that technocrats can run the economic system more or less neutrally. A lot of people who are smarter than I am still believe this, but I don’t.

David Friedman and organized crime

I went to an informal seminar of David Friedman’s tonight based on his academic workshop and developing book about Legal Systems Very Different from Ours. I encourage you to read the available material so far, as it’s very interesting law & economics. He mostly talked about the section on Amish law, with some comments also about Gypsy and Somali law. During the Q&A he solicited feedback about other possible areas to explore for the book, and somehow organized crime came up.

Friedman’s thinking about organized crime is that it’s not quite as organized as it’s made out to be. The optimal size of the firm is determined by economies and diseconomies of scale. One of the things larger organizations need is constant information flow between the different levels, and one problem with organized crime is that this information can put people in jail, so it would tend to flow less. This would be a minimizing tendency on the size of the firm. [I am paraphrasing his words here.] As he writes in Price Theory:

My own conjecture is that what the Mafia really is, at least in part, is a substitute for the court system; its function is to legitimize the use of force. To see how that might work, imagine that you are engaged in some criminal enterprise and one of your associates pockets your share of the take. Your obvious response is to have him killed–murder is one of the products sold on the market you are operating in. The problem with that is that if people who work with you get killed and it becomes known that you are responsible, other participants in the illegal marketplace will become reluctant to do business with you.

The solution is to go to some organization with a reputation, within the criminal market, for fairness. You present the evidence of your partner’s guilt, invite him to defend himself, and then ask the “court” to rule that he is the guilty party. If it does so–and he refuses to pay you appropriate damages–you hire someone to kill him; since everyone now knows that he was in the wrong, the only people afraid to do business with you will be those planning to swindle you.

That, I suspect, is one of the functions that the Mafia and similar organizations serve on the criminal market. This is a conjecture about organized crime, not something I can prove; but it is not, so far as I know, an implausible one.

This came up at the talk, and he suggested that organized crime, far from being a large group (or several) is more likely a lot of smaller “family businesses” that deal with each other as more-or-less independent groups.

All of this so far is very reasonable, and I wouldn’t dispute it entirely. But I brought up the Mexican drug cartels as a possible counterexample. It seems to me that these organizations actually might be fairly large. I think immediately of Amado Carrillo Fuentes, “the Lord of the skies”. Carrillo earned this nickname by having a fleet of 27 Boeing 727’s for drug distribution. This, of course, suggests a fairly large and somewhat hierarchical organization, even if the actual street-level distribution is carried about by smaller, related but separate groups.

Carrillo is dead—allegedly—but several cartels are still operating, shipping really massive amounts of drugs at this very moment. Based on what I know and have observed, I have no trouble believing that the organizations really can be quite large.

A cause of skepticism is that most of the information about these groups comes from various government agencies, and it’s in the best interests of these agencies to inflate the power and numbers of their opponents. That’s certainly true. But Mexican news agencies view this as more of a domestic issue and don’t fetishize the DEA and CIA in the way that American news agencies do. A lot of the ideas I’m suggesting here come from them, so it’s not obvious that I’m way off base here.

(Yet another reason is in considering the gruesome warnings that cartels routinely leave for others: hacked-up, tortured bodies with messages attached. These are always signed with the names of the large organizations, even if they happen over fairly large geographical areas. It could be that the Zetas, for instance, are more of a confederated franchise system, but I don’t see messages indicating subunits within the Zetas, just the Zetas. I haven’t thought this one out as much, but at first glance it seems ok.)

I briefly mentioned at the talk, and can expound here on another reason why his objection might not hold for the cartels, which is that the free flow of information dangerous to the organization is less of a problem in Mexico. The legal system is so corrupted by Prohibition, with so many members on the take or too intimidated to speak out, that loose lips don’t sink near as many ships there as they would here. (Note that this could also apply in other relatively corrupt legal systems like Russia’s, Colombia’s, or Afghanistan’s.)

This is perhaps a minor point, but one worth thinking about.

Intellectual Focus

A question I’ve been wrestling with lately, and one that surely has come up before, is what to think about in graduate school. On one hand, if there were ever a time to be single-mindedly devoted to one subject, this is the time. Every spare amount of intellectual energy, in this view, ought to be devoted to (in my case) economics. On the other hand, an intellectually curious person has trouble behaving this way. I think it’s good for the brain to have other pursuits to keep it in prime condition.

I can imagine the correct proportion is somewhere in the middle, I just haven’t figured out where yet.

Drug calculations

By now you’ve probably read the news that deaths from painkillers are rising. This is indeed bad news, but the story carries with it the same assumption made in illegal drug cases: the drug or drugs in question can’t be used responsibly except under the supervision of a doctor. With illegal drugs, all use is abuse; with semi-legal drugs, all use without a prescription is abuse.

Here’s a case to consider: you hurt yourself somehow and a doctor prescribes you Vicodin. You have, say, twenty, and you consume seventeen in the manner told to you by your doctor by the time the pain stops. Now you have three left. You noticed that in addition to helping with your pain, the drug also gave you a mighty pleasant feeling. A month goes by before one day you’re feeling less than 100%. You remember the precautions your doctor told you. You take one of your leftover Vicodins in a totally safe manner. Now, according to drug czar Gil Kerlikowske, you’re a drug abuser. You’re part of the “drug abuse epidemic”. You’re an accident waiting to happen. Take it a step further: you simply take one, safely, without any pain or other health-related motive. You just want to feel good for a while. Should that be a crime?

I know there’s a big difference between washing down a handful of pills with a 40 oz. and the scenario I just described. But in Kerlikowske’s statistics there isn’t.

These stories, when they pretend to be balanced, include the legitimate desire for patients with severe and/or chronic pain to counter it. And that’s one reason to avoid letting scary stories rush us to foolish action. But another is the desire, not generally recognized as legitimate, for people to get high. People like to feel good. People have been discovering and inventing ways to do this since prehistory. (It’s not my cup of tea, but there’s a very large and influential group of people who believe that when God Incarnate came to earth, the very first miracle he performed to show his divine nature was assisting people to this end.)

Balancing the needs of people who are in pain against accidental overdose deaths is one thing, but balancing the needs of people who are in pain and people with a legitimate desire to alter their biochemical state against accidental overdose deaths is the proper calculation if you must do one.

Food stamps

The WSJ blog Real Time Economics reports that about 15% of the US is on food stamps. David Hackett Fischer’s “backcountry” part of the US figures heavily, as do a few other states.

I’ve read that the Obama administration has sought to make it easier for people to get food stamps, and this of course has differing interpretations. One is that they genuinely want struggling people to get the extra help they need. The other is that expanding the program—making more people dependent on the government and on this administration specifically—bolsters their chances for the next election. Since the decision did not spring forth from Obama’s forehead alone we can fairly assume a mix of the two. But clearly, in an ideal world, nobody would be on food stamps. How can we get there from here?

Here I’m going to rely on some anecdotal evidence, but since I was the observer I trust it. I lived in New Mexico recently, and between finishing college, being underemployed, and partying probably a little too much I knew lots of people on food stamps. The impression that I got, overwhelmingly, was that very few people consider food stamps a temporary measure. People might not have thought about food stamps all that much, but when it occurred to them that they could qualify, many of them considered it free money for the taking. From what I could observe, it didn’t correlate with a change in anyone’s behavior all that much, and when it did, not for what an omnipotent but benevolent observer would consider the better. You were poor, you got food stamps, and then you were slightly less poor. End of story.

I don’t doubt that many people who get food stamps want to make their journey through those ranks as short as possible, or that many people actually do land that next job and leave the program. But I’m not sure at all that in the bulk of cases there’s a lot that can be done, policy-wise, to get people out of the program other than tightening the conditions of the program.