As you may have gathered from my post on reciprocity bias, I do not have any Christmas traditions because I have traditionally not celebrated the holiday. This year is different, but amusingly I find myself in the position of the odd man out, desiring to celebrate the holiday but with all my acquaintances celebrating with family.
I find myself, therefore, contemplating on the creation of traditions. As I have none of my own for the day, I might as well do something fun on Christmas that lends itself to continuation in perpetuity (well, not perpetuity, but for at least my lifespan). So I'll take the day and ski at a resort near DC (for future years it'll probably be a resort near a city in which I reside). Then in the evening, I'll humor the Anglophile in myself with British Christmas television specials (QI and Doctor Who, anyone?). Yes, be amused at my shenanigans for the holidays. But if I am only taking care of myself for the holidays and not attending any Christmas dinners this year, I might as well enjoy some of the things I love most about winter.
"At any rate, that is what we are going to try to do." I couldn't have said it any better.
Happy Christmas to you!
Thursday, December 23, 2010
Sunday, December 12, 2010
Whose Bread I Eat, His Song I Sing
I thought I'd leave the last post as a fun one, but then I went back to reading economics articles and couldn't resist when I saw this little blurb:
Another study, released in February 2010 by Navigant Consulting, was prepared for the RES Alliance for Jobs, a group whose members primarily include renewable generation manufacturers. The study examines the economic effects of adopting a mandatory national renewable portfolio standard of 25 percent of total generation by the year 2025. The report concluded that such a standard would “lead to job growth in all states, especially those currently without state-level renewable electricity standards,” and that it would create 274,000 new jobs in the renewables industry. (Gresham's Law of Green Energy, Jonathan A Lesser, Regulation, p.16)
To fully understand the cynical nature with which I view this paragraph, you need to understand that those subsidies may make no sense from an economics viewpoint (the net benefit may be slightly positive in the best case, and quite negative in the worst case). But let's just say that it would be odd that a consultancy, hired by a group of renewable generation manufacturers, would not produce a conclusion favorable to their business. Would you think the consultancy would endanger potential future work with a negative conclusion? Or would you think they'd put the best case they could think of forward, and maybe not account for all the costs?
At any rate, this really feels like a case of "Whose Bread I Eat, His Song I Sing," another one of those behavioral biases I like to know about. It's one of the more cynical ones, and I admit it doesn't hurt to have it if it helps you approach something with more skepticism than you otherwise might have. I also thought I saw hints of it when reading an article in an OB-GYN newspaper, but there's no need for me to publish my thoughts on that here.
I'll write brief blurbs about behavioral biases that I notice ad-hoc, as I notice them. I sincerely hope that in doing so, 1) I'll recognize them more often; and 2) you'll derive some benefit from reading about them and allow your curiosity to lead you to learn more about them. If there's one thing I want this blog to result in (for the very small audience), it's intellectual stimulation. And to that end, I try to keep myself abreast of my scholarly interests to keep things moving forward.
Well wishes to those whose eyes grace this page.
NB: I agree with the economic argument of the article, incidentally. Enough that I think it the clever response to every single bloody email I've been receiving from environmental groups asking me to email my senator to support renewal of green energy subsidies. And no, I don't support those subsidies, not just because of the distortions and the likelihood that the costs exceed the benefits, but also on the general principle that government is not the solution to everything, and I highly doubt the government's ability to pick winners (which it is doing with subsidies). If green energy can't be produced on a competitive cost right now, we should not have to pay for it, because we'll be paying more for it than we would for current energy resources, and have less capital available for other pursuits.
The more we pay for necessities, the less we have for enjoyment of life, in my book at least. One of the great stories of the past two centuries is how we have needed to devote less and less a proportion of our incomes to necessities because of economic growth. Green energy, as stated at present, represents a step backward from that trend, until it becomes efficient enough to compete. And I do not believe we need subsidies to encourage that, especially since the solution may come from a field no one is thinking of and hence not subsidizing. Which is why the article's reference to Gresham's Law (originating from the field of banking on the principle that bad underwriting drives out good underwriting, which we witnessed with our recent financial crisis) was quite clever. Bad energy policy potentially driving out good energy policy.
Another study, released in February 2010 by Navigant Consulting, was prepared for the RES Alliance for Jobs, a group whose members primarily include renewable generation manufacturers. The study examines the economic effects of adopting a mandatory national renewable portfolio standard of 25 percent of total generation by the year 2025. The report concluded that such a standard would “lead to job growth in all states, especially those currently without state-level renewable electricity standards,” and that it would create 274,000 new jobs in the renewables industry. (Gresham's Law of Green Energy, Jonathan A Lesser, Regulation, p.16)
To fully understand the cynical nature with which I view this paragraph, you need to understand that those subsidies may make no sense from an economics viewpoint (the net benefit may be slightly positive in the best case, and quite negative in the worst case). But let's just say that it would be odd that a consultancy, hired by a group of renewable generation manufacturers, would not produce a conclusion favorable to their business. Would you think the consultancy would endanger potential future work with a negative conclusion? Or would you think they'd put the best case they could think of forward, and maybe not account for all the costs?
At any rate, this really feels like a case of "Whose Bread I Eat, His Song I Sing," another one of those behavioral biases I like to know about. It's one of the more cynical ones, and I admit it doesn't hurt to have it if it helps you approach something with more skepticism than you otherwise might have. I also thought I saw hints of it when reading an article in an OB-GYN newspaper, but there's no need for me to publish my thoughts on that here.
I'll write brief blurbs about behavioral biases that I notice ad-hoc, as I notice them. I sincerely hope that in doing so, 1) I'll recognize them more often; and 2) you'll derive some benefit from reading about them and allow your curiosity to lead you to learn more about them. If there's one thing I want this blog to result in (for the very small audience), it's intellectual stimulation. And to that end, I try to keep myself abreast of my scholarly interests to keep things moving forward.
Well wishes to those whose eyes grace this page.
NB: I agree with the economic argument of the article, incidentally. Enough that I think it the clever response to every single bloody email I've been receiving from environmental groups asking me to email my senator to support renewal of green energy subsidies. And no, I don't support those subsidies, not just because of the distortions and the likelihood that the costs exceed the benefits, but also on the general principle that government is not the solution to everything, and I highly doubt the government's ability to pick winners (which it is doing with subsidies). If green energy can't be produced on a competitive cost right now, we should not have to pay for it, because we'll be paying more for it than we would for current energy resources, and have less capital available for other pursuits.
The more we pay for necessities, the less we have for enjoyment of life, in my book at least. One of the great stories of the past two centuries is how we have needed to devote less and less a proportion of our incomes to necessities because of economic growth. Green energy, as stated at present, represents a step backward from that trend, until it becomes efficient enough to compete. And I do not believe we need subsidies to encourage that, especially since the solution may come from a field no one is thinking of and hence not subsidizing. Which is why the article's reference to Gresham's Law (originating from the field of banking on the principle that bad underwriting drives out good underwriting, which we witnessed with our recent financial crisis) was quite clever. Bad energy policy potentially driving out good energy policy.
Skiing to Holst's "Mars"
Finally! After buying skis some months back (July? August?), I finally went skiing yesterday. And I thoroughly loved it, bruises and all. Never mind that each fall was hard thanks to the snow being machine made (I'm guessing that's typical). I enjoyed zooming down the slopes, though I couldn't listen to music easily until the end of the day, when I was falling a lot less often, though still saying "bloody hell!" when going too fast for my taste.
Which brings me to the post title. Given the dramatic moments in Holst's Mars, I quite liked how it accompanied those "bloody hell" moments.
And I don't know if it was a fluke, but I paid a very cheap price for a ski lesson yesterday. Ridiculously cheap. At the lesson desk they said it was because I was a season pass holder, but I could not find that price listed on the resort's website. So either I had a piece of good luck (double because when I went for the lesson, I was the only one for my level, so I got a private lesson for an hour and forty minutes) or that is the actual price. Either way, I was very glad for the lesson since I fell less as a result of it. And I'll probably get a few more before the end of the season, no doubt.
Anyway, I'll definitely next be skiing on the 18th (will have to end early to get back for a holiday party I'm hosting) and then Christmas Day. After that, we'll see.
Back to reading economics articles and Churchill's WWII memoirs.
Which brings me to the post title. Given the dramatic moments in Holst's Mars, I quite liked how it accompanied those "bloody hell" moments.
And I don't know if it was a fluke, but I paid a very cheap price for a ski lesson yesterday. Ridiculously cheap. At the lesson desk they said it was because I was a season pass holder, but I could not find that price listed on the resort's website. So either I had a piece of good luck (double because when I went for the lesson, I was the only one for my level, so I got a private lesson for an hour and forty minutes) or that is the actual price. Either way, I was very glad for the lesson since I fell less as a result of it. And I'll probably get a few more before the end of the season, no doubt.
Anyway, I'll definitely next be skiing on the 18th (will have to end early to get back for a holiday party I'm hosting) and then Christmas Day. After that, we'll see.
Back to reading economics articles and Churchill's WWII memoirs.
Wednesday, December 8, 2010
Pearl Harbor
Yesterday was the 59th anniversary of attack on Pearl Harbor. In keeping with the recent theme of publishing quotes in this blog, here are a few in remembrance of that day:
"Praise the Lord and pass the ammunition." - Chaplain Howell Forgy of the New Orleans, encouraging the gun crews firing back at the Japanese Zeroes.
"Real planes, real bombs. This is no ***** drill." - Voice on the PA of the Oklahoma.
"Yesterday, December 7, 1941 - a date which will live in infamy - The United States of America was suddenly and deliberately attacked by naval and air forces of the Empire of Japan....No matter how long it may take us to overcome this premeditated invasion, the American people, in their righteous might, will win through to absolute victory....With confidence in our armed forces, with the unbounding determination of our people, we will gain the inevitable triumph. So help us God.... I ask that the Congress declare that since the unprovoked and dastardly attack by Japan on Sunday, December 7th, 1941, a state of war has existed between the United States and the Japanese Empire." - FDR, speech to Congress on Dec 8, 1941 requesting a declaration of war against Japan.
"Many people have been astonished that Japan should in a single day have plunged into war against the United States and the British Empire. We all wonder why, if this dark design, with all its laborious and intricate preparations, had been so long filling their secret minds, they did not choose our moment of weakness eighteen months ago. Viewed quite dispassionately, in spite of the losses we have suffered and the further punishment we shall have to take, it certainly appears to be an irrational act.... For after the outrages they have committed upon us at Pearl Harbour, in the Pacific Islands, in the Philippines, in Malaya, and in the Dutch East Indies, they must now know that the stakes for which they have decided to play are mortal." Churchill, Dec 26, 1941, Address to Joint Session of Congress, Washington, D.C.
"Praise the Lord and pass the ammunition." - Chaplain Howell Forgy of the New Orleans, encouraging the gun crews firing back at the Japanese Zeroes.
"Real planes, real bombs. This is no ***** drill." - Voice on the PA of the Oklahoma.
"Yesterday, December 7, 1941 - a date which will live in infamy - The United States of America was suddenly and deliberately attacked by naval and air forces of the Empire of Japan....No matter how long it may take us to overcome this premeditated invasion, the American people, in their righteous might, will win through to absolute victory....With confidence in our armed forces, with the unbounding determination of our people, we will gain the inevitable triumph. So help us God.... I ask that the Congress declare that since the unprovoked and dastardly attack by Japan on Sunday, December 7th, 1941, a state of war has existed between the United States and the Japanese Empire." - FDR, speech to Congress on Dec 8, 1941 requesting a declaration of war against Japan.
"Many people have been astonished that Japan should in a single day have plunged into war against the United States and the British Empire. We all wonder why, if this dark design, with all its laborious and intricate preparations, had been so long filling their secret minds, they did not choose our moment of weakness eighteen months ago. Viewed quite dispassionately, in spite of the losses we have suffered and the further punishment we shall have to take, it certainly appears to be an irrational act.... For after the outrages they have committed upon us at Pearl Harbour, in the Pacific Islands, in the Philippines, in Malaya, and in the Dutch East Indies, they must now know that the stakes for which they have decided to play are mortal." Churchill, Dec 26, 1941, Address to Joint Session of Congress, Washington, D.C.
Tuesday, December 7, 2010
Churchill on Confirmation Bias
As I'm reading The Gathering Storm, I can not help but notice occasions of psychological biases that hindered important decision-making, much to the detriment of Europe and the world. The main one (and easiest one) I've noticed is confirmation bias. Below are two examples I thought particularly illustrating.
Churchill made some comments on Hitler's violation of the Munich Pact, on the belief that the British Intelligence Service had collected good intelligence but it was somehow neglected by the government:
How was it that on the eve of the Bohemian outrage [the splitting up of Czechkoslovakia after the Munich Pact] Ministers were indulging in what was called "sunshine talk" and predicting "the dawn of a Golden Age"? How was it that last week's holiday routine was observed at a time when clearly something of a quite exceptional character, the consequences of which could not be measured, was imminent?... It seems to me that Ministers run the most tremendous risks if they allow the information collected by the Intelligence Department, and sent to them, I am sure, in good time, to be sifted and coloured and reduced in consequence and importance, and if they ever get themselves into a mood of attaching weight only to those pieces of information which accord with their earnest and honourable desire that the peace of the world should remain unbroken. [Emphasis mine] (Location 5987 to 6000, Kindle Edition)
And Mr. Duff Cooper, First Lord of the Admiralty who resigned after the Munich Pact (where Britain and France decided allow Hitler Czechoslovakia rather than honor France's guarantee of Czechoslovakia's defense against invasion), from his resignation speech given in the House of Commons (incidentally for 40 minutes and without needing to refer to any notes):
The Prime Minister [Neville Chamberlain, of the Conservative Party, which is curious, because today would you ever expect a Conservative in Britain or America to be in favour of appeasement over the mailed fist?] has confidence in the goodwill and in the word of Herr Hitler, although when Herr Hitler broke the Treaty of Versailles, he undertook to keep the Treaty of Locarno, and when he broke the Treaty of Locarno he undertook not to interfere further, or to have further territorial claims in Europe. When he entered Austria by force, he authorised his henchmen to give an authoritative assurance that he would not interfere with Czechoslovakia. That was less than six months ago. Still the Prime Minister believes he can rely upon the good faith of Hitler. (Location 5518-5544, Kindle Edition)
This also seems to be confirmation bias, because Chamberlain felt he could trust Hitler (eerily similar to Bush's words about trusting Putin by looking into his eyes) and hence ignored the abundance of evidence to the contrary. That's a key point of confirmation bias, only using evidence that supports your thesis. Though I have to wonder what evidence Chamberlain had for his viewpoint in the first place, given that a good number of Hitler's transgressions occurred during the prior Prime Minister's (Baldwin) tenure.
A further comment: confirmation bias is the bane of any thinking person. Regardless of the field where intelligence needs to be applied, be it medicine, science, economics, banking, scholarly research, etc, one of the worst dangers is to only read articles, opinions, and research that accords with your worldview. To not know the Opposition's viewpoint is to avoid subjecting your thoughts to arguments that may illustrate weaknesses in your thoughts which may need to be rethought and may have some wrong points only discovered by looking at the other side's arguments. Or you may have avoided addressing certain subjects that need to be addressed, even though your argument may overall be correct. Regardless, I would argue that confirmation bias is a terrible risk, one worth addressing.
Sometimes the consequences of not addressing potential bias are minimal. But other times, like 1938, the consequences were terrible.
Churchill made some comments on Hitler's violation of the Munich Pact, on the belief that the British Intelligence Service had collected good intelligence but it was somehow neglected by the government:
How was it that on the eve of the Bohemian outrage [the splitting up of Czechkoslovakia after the Munich Pact] Ministers were indulging in what was called "sunshine talk" and predicting "the dawn of a Golden Age"? How was it that last week's holiday routine was observed at a time when clearly something of a quite exceptional character, the consequences of which could not be measured, was imminent?... It seems to me that Ministers run the most tremendous risks if they allow the information collected by the Intelligence Department, and sent to them, I am sure, in good time, to be sifted and coloured and reduced in consequence and importance, and if they ever get themselves into a mood of attaching weight only to those pieces of information which accord with their earnest and honourable desire that the peace of the world should remain unbroken. [Emphasis mine] (Location 5987 to 6000, Kindle Edition)
And Mr. Duff Cooper, First Lord of the Admiralty who resigned after the Munich Pact (where Britain and France decided allow Hitler Czechoslovakia rather than honor France's guarantee of Czechoslovakia's defense against invasion), from his resignation speech given in the House of Commons (incidentally for 40 minutes and without needing to refer to any notes):
The Prime Minister [Neville Chamberlain, of the Conservative Party, which is curious, because today would you ever expect a Conservative in Britain or America to be in favour of appeasement over the mailed fist?] has confidence in the goodwill and in the word of Herr Hitler, although when Herr Hitler broke the Treaty of Versailles, he undertook to keep the Treaty of Locarno, and when he broke the Treaty of Locarno he undertook not to interfere further, or to have further territorial claims in Europe. When he entered Austria by force, he authorised his henchmen to give an authoritative assurance that he would not interfere with Czechoslovakia. That was less than six months ago. Still the Prime Minister believes he can rely upon the good faith of Hitler. (Location 5518-5544, Kindle Edition)
This also seems to be confirmation bias, because Chamberlain felt he could trust Hitler (eerily similar to Bush's words about trusting Putin by looking into his eyes) and hence ignored the abundance of evidence to the contrary. That's a key point of confirmation bias, only using evidence that supports your thesis. Though I have to wonder what evidence Chamberlain had for his viewpoint in the first place, given that a good number of Hitler's transgressions occurred during the prior Prime Minister's (Baldwin) tenure.
A further comment: confirmation bias is the bane of any thinking person. Regardless of the field where intelligence needs to be applied, be it medicine, science, economics, banking, scholarly research, etc, one of the worst dangers is to only read articles, opinions, and research that accords with your worldview. To not know the Opposition's viewpoint is to avoid subjecting your thoughts to arguments that may illustrate weaknesses in your thoughts which may need to be rethought and may have some wrong points only discovered by looking at the other side's arguments. Or you may have avoided addressing certain subjects that need to be addressed, even though your argument may overall be correct. Regardless, I would argue that confirmation bias is a terrible risk, one worth addressing.
Sometimes the consequences of not addressing potential bias are minimal. But other times, like 1938, the consequences were terrible.
Sunday, December 5, 2010
An ounce of prevention is worth a pound of cure
For some inscrutable reason, I've been reading "The Gathering Storm" recently. Not the 11th volume of the Wheel of Time. Rather, I've been reading the first volume of six by Winston Churchill on the second World War.
While I have not completed reading it yet (nor have I made any progress on This Time is Different, which if I recall correctly has some interesting statistics for that period of time), one very common theme in that volume is that the war was preventable. That was Churchill's view. Geopolitically, Germany rising again was not preventable. However, the war could have been prevented.
Another way to put it would be that Germany rebuilding itself as a powerhouse was geopolitically inevitable. Whether it would be a military powerhouse desiring war or an economic powerhouse was what could have been influenced by the UK and France, but unfortunately was not.
Keeping in mind the bias that "to understand is to believe," I think I could subscribe to Churchill's view.
I'll let some of his words speak for themselves on the preventability of that war, or if not preventability, at least being able to avoid the disastrous need to be evacuated from Dunkirk for inadequate training of the BEF and statistical inferiority of the RAF to the Luftwaffe:
While remaining sufficiently armed themselves, they must enforce with tireless vigilance and authority the clauses of the treaty which forbid the revival of their late antagonist's military power. Secondly, they should do all that is possible to reconcile the defeated nation to its lot by acts of benevolence designed to procure the greatest amount of prosperity in the beaten country, and labour by every means to create a basis of true friendship and of common interests, so that the incentive to appeal again to arms will be continually diminished. In these years I coined the maxim, "The redress of the grievances of the vanquished should precede the disarmament of the victors." As will be seen, the reverse process was, to a large extent, followed by Britain, the United States, and France. And thereby hangs the tale. [Location 798-801 in Kindle edition]
On March, 16, 1933, the MacDonald Plan was introduced, suggesting that the French army be reduced from 500,000 to 200,000 men and the German army allowed to reach parity with the French one. Churchill commented:
The Germans demand equality in weapons and equality in the organisation of armies and fleets, and we have been told, "You cannot keep so great a nation in an inferior position. What others have, they must have." I have never agreed. It is a most dangerous demand to make. Nothing in life is eternal, but as surely as Germany acquires full military equality with her neighbours while her own grievances are still unredressed and while she is in the temper which we have unhappily seen, so surely shall we see ourselves within a measurable distance of the renewal of general European war.
... One of the things which we were told after the Great War would be a security to us was that Germany would be a democracy with Parliamentary institutions. All that has been swept away. You have the most grim dictatorship. You have militarism and appeals to every form of fighting spirit, from the reintroduction of duelling in the colleges to the Minister of Education advising the plentiful use of the cane in elementary schools. You have these martial or pugnacious manifestations, and also the persecution of the Jews of which so many members have spoken.... [Location 1,313-24 Kindle edition]
[Hitler] did not even trouble to accept the quixotic offers pressed upon him. With a gesture of disdain he directed the German Government to withdraw both from the Conference and from the League of Nations. Such was the fate of the MacDonald plan. [Location 1,388 Kindle edition]
All this time [up until 1934] the Allies possessed the strength, and the right, to prevent any visible or tangible German rearmament, and Germany must have obeyed a strong united demand from Britain, France, and Italy to bring her actions into conformity with what the Peace Treaties had prescribed. In reviewing again the history of the eight years from 1930 to 1938 we can see how much time we had. Up till 1934 at least German rearmament could have been prevented without the loss of a single life. It was not time that was lacking. [Location 933 Kindle edition]
On March 14, 1933, a statement of Churchill's:
I regretted to hear the Under-Secretary say that we were only the fifth Air Power, and that the ten-year programme was suspended for another year. I was sorry to hear him boast that the Air Ministry had not laid down a single new unit this year. All these ideas are being increasingly stultified by the march of events, and we should be well advised to concentrate upon our air defences with greater vigour. [Location 1266 in Kindle edition]
Mr. Baldwin, on Nov 28, 1934, refuting a statement by Churchill on German air force rearmament:
It is not the case that Germany is rapidly approaching equality with us. I pointed out that the German figures are total figures, not first-line strength figures [...] Germany is actively engaged in the production of service aircraft, but her real strength is not 50 per cent of our strength in Europe to-day. As for the position this time next year, if she continues to execute her air programme without acceleration, and if we continue to carry out at the present approved rate the expansion announced to Parliament in July, so far from the German military Air Force being at least as strong as, and probably stronger than, our own, we estimate that we shall still have a margin in Europe alone of nearly 50 per cent. [Locations 2,032-42 in Kindle edition]
And yet, either the Air Ministry had poor forecasters or intelligence about Germany (people in general are poor forecasters though), for:
[A]t the end of March the Foreign Secretary and Mr. Eden paid a visit to Herr Hitler in Germany, and in the course of an important conversation, the text of which is on record, they were told personally by him that the German Air Force had already reached parity with Great Britain. [...] We had indeed fallen into an ambush. [Locations 2064-68 in Kindle edition]
Henceforward all the unknown, immeasurable threats which overhung London from air attack would be a definite and compelling factor in all our decisions. Moreover, we could never catch up; or at any rate the Government never did catch up. Credit is due to them and the Air Ministry for the high efficiency of the Royal Air Force. But the pledge that air parity would be maintained was irretrievably broken. [...] Very considerable efforts were made by the British Government in the next four years, and there is no doubt that we excelled in air quality; but quantity was henceforth beyond us. The outbreak of the war found us with barely half the German numbers. [Locations 2,200-6 in Kindle edition]
During the Battle of Britain, the RAF took down three to four enemy planes for one British loss, which is a quantitative statement on quality, but no one in their right mind would want to enter a war against a foe with as good technology as oneself with statistically inferior numbers. And yet the British were forced to do so, in large part because of a policy of disarmament in the MacDonald-Baldwin Government which could not be rectified after 1934. If the RAF had that hit rate, but as good numbers or better than the Germans, it would be a good probability that the shortcomings of the BEF in 1940 could have been overcome.
Or maybe not. For in deployment in Europe in 1939, its commanders had frittered away the months that passed between the declaration of war (over Hitler's invasion of Poland) and the arrival of blitzkrieg close to the Channel and Britain itself. [...] The 3rd Division's commander, Major General Bernard Montgomery, had not been idle, though. His formation had been honed during five major exercises that had emphasized all of the operations it was about to carry out.[...] As events unfolded, Montgomery's staff were struck by his prescience, one reflecting 'Although Monty made no predictions about the course of the battle, it followed almost exactly the way he had anticipated in his exercises.' Unfortunately for the army, the 3rd Division was the only part of the BEF that had rehearsed to this degree. [Mark Urban, Generals, p. 269]
Even if the RAF had statistical parity or superiority to the Luftwaffe, the BEF's apparent lack of professionalism and practice would probably have resulted in a land rout, and hence an overall rout. It just may not have been as hideous and dire as it was during Operation Dynamo, the evacuation of Dunkirk.
What would the world be like if Churchill, instead of being an ignored MP, was listened to and such prevention was effected? Would we never have had a second World War? Would Britain and France have been able to hold their own against Germany, effecting a repeat of the first World War with German advances being halted in France but not pushed back? Would Dunkirk still have happened, but with fewer casualties and little to none of the war materiel abandoned on the beaches because of enough RAF fighters to repel the Luftwaffe's bombing runs and allow the evacuation to occur in a less haphazard manner? Who knows? But we can guess, and at the minimum, "The Gathering Storm" to me is a persuasive account of the tragedy of lack of prevention.
While I have not completed reading it yet (nor have I made any progress on This Time is Different, which if I recall correctly has some interesting statistics for that period of time), one very common theme in that volume is that the war was preventable. That was Churchill's view. Geopolitically, Germany rising again was not preventable. However, the war could have been prevented.
Another way to put it would be that Germany rebuilding itself as a powerhouse was geopolitically inevitable. Whether it would be a military powerhouse desiring war or an economic powerhouse was what could have been influenced by the UK and France, but unfortunately was not.
Keeping in mind the bias that "to understand is to believe," I think I could subscribe to Churchill's view.
I'll let some of his words speak for themselves on the preventability of that war, or if not preventability, at least being able to avoid the disastrous need to be evacuated from Dunkirk for inadequate training of the BEF and statistical inferiority of the RAF to the Luftwaffe:
While remaining sufficiently armed themselves, they must enforce with tireless vigilance and authority the clauses of the treaty which forbid the revival of their late antagonist's military power. Secondly, they should do all that is possible to reconcile the defeated nation to its lot by acts of benevolence designed to procure the greatest amount of prosperity in the beaten country, and labour by every means to create a basis of true friendship and of common interests, so that the incentive to appeal again to arms will be continually diminished. In these years I coined the maxim, "The redress of the grievances of the vanquished should precede the disarmament of the victors." As will be seen, the reverse process was, to a large extent, followed by Britain, the United States, and France. And thereby hangs the tale. [Location 798-801 in Kindle edition]
On March, 16, 1933, the MacDonald Plan was introduced, suggesting that the French army be reduced from 500,000 to 200,000 men and the German army allowed to reach parity with the French one. Churchill commented:
The Germans demand equality in weapons and equality in the organisation of armies and fleets, and we have been told, "You cannot keep so great a nation in an inferior position. What others have, they must have." I have never agreed. It is a most dangerous demand to make. Nothing in life is eternal, but as surely as Germany acquires full military equality with her neighbours while her own grievances are still unredressed and while she is in the temper which we have unhappily seen, so surely shall we see ourselves within a measurable distance of the renewal of general European war.
... One of the things which we were told after the Great War would be a security to us was that Germany would be a democracy with Parliamentary institutions. All that has been swept away. You have the most grim dictatorship. You have militarism and appeals to every form of fighting spirit, from the reintroduction of duelling in the colleges to the Minister of Education advising the plentiful use of the cane in elementary schools. You have these martial or pugnacious manifestations, and also the persecution of the Jews of which so many members have spoken.... [Location 1,313-24 Kindle edition]
[Hitler] did not even trouble to accept the quixotic offers pressed upon him. With a gesture of disdain he directed the German Government to withdraw both from the Conference and from the League of Nations. Such was the fate of the MacDonald plan. [Location 1,388 Kindle edition]
All this time [up until 1934] the Allies possessed the strength, and the right, to prevent any visible or tangible German rearmament, and Germany must have obeyed a strong united demand from Britain, France, and Italy to bring her actions into conformity with what the Peace Treaties had prescribed. In reviewing again the history of the eight years from 1930 to 1938 we can see how much time we had. Up till 1934 at least German rearmament could have been prevented without the loss of a single life. It was not time that was lacking. [Location 933 Kindle edition]
On March 14, 1933, a statement of Churchill's:
I regretted to hear the Under-Secretary say that we were only the fifth Air Power, and that the ten-year programme was suspended for another year. I was sorry to hear him boast that the Air Ministry had not laid down a single new unit this year. All these ideas are being increasingly stultified by the march of events, and we should be well advised to concentrate upon our air defences with greater vigour. [Location 1266 in Kindle edition]
Mr. Baldwin, on Nov 28, 1934, refuting a statement by Churchill on German air force rearmament:
It is not the case that Germany is rapidly approaching equality with us. I pointed out that the German figures are total figures, not first-line strength figures [...] Germany is actively engaged in the production of service aircraft, but her real strength is not 50 per cent of our strength in Europe to-day. As for the position this time next year, if she continues to execute her air programme without acceleration, and if we continue to carry out at the present approved rate the expansion announced to Parliament in July, so far from the German military Air Force being at least as strong as, and probably stronger than, our own, we estimate that we shall still have a margin in Europe alone of nearly 50 per cent. [Locations 2,032-42 in Kindle edition]
And yet, either the Air Ministry had poor forecasters or intelligence about Germany (people in general are poor forecasters though), for:
[A]t the end of March the Foreign Secretary and Mr. Eden paid a visit to Herr Hitler in Germany, and in the course of an important conversation, the text of which is on record, they were told personally by him that the German Air Force had already reached parity with Great Britain. [...] We had indeed fallen into an ambush. [Locations 2064-68 in Kindle edition]
Henceforward all the unknown, immeasurable threats which overhung London from air attack would be a definite and compelling factor in all our decisions. Moreover, we could never catch up; or at any rate the Government never did catch up. Credit is due to them and the Air Ministry for the high efficiency of the Royal Air Force. But the pledge that air parity would be maintained was irretrievably broken. [...] Very considerable efforts were made by the British Government in the next four years, and there is no doubt that we excelled in air quality; but quantity was henceforth beyond us. The outbreak of the war found us with barely half the German numbers. [Locations 2,200-6 in Kindle edition]
During the Battle of Britain, the RAF took down three to four enemy planes for one British loss, which is a quantitative statement on quality, but no one in their right mind would want to enter a war against a foe with as good technology as oneself with statistically inferior numbers. And yet the British were forced to do so, in large part because of a policy of disarmament in the MacDonald-Baldwin Government which could not be rectified after 1934. If the RAF had that hit rate, but as good numbers or better than the Germans, it would be a good probability that the shortcomings of the BEF in 1940 could have been overcome.
Or maybe not. For in deployment in Europe in 1939, its commanders had frittered away the months that passed between the declaration of war (over Hitler's invasion of Poland) and the arrival of blitzkrieg close to the Channel and Britain itself. [...] The 3rd Division's commander, Major General Bernard Montgomery, had not been idle, though. His formation had been honed during five major exercises that had emphasized all of the operations it was about to carry out.[...] As events unfolded, Montgomery's staff were struck by his prescience, one reflecting 'Although Monty made no predictions about the course of the battle, it followed almost exactly the way he had anticipated in his exercises.' Unfortunately for the army, the 3rd Division was the only part of the BEF that had rehearsed to this degree. [Mark Urban, Generals, p. 269]
Even if the RAF had statistical parity or superiority to the Luftwaffe, the BEF's apparent lack of professionalism and practice would probably have resulted in a land rout, and hence an overall rout. It just may not have been as hideous and dire as it was during Operation Dynamo, the evacuation of Dunkirk.
What would the world be like if Churchill, instead of being an ignored MP, was listened to and such prevention was effected? Would we never have had a second World War? Would Britain and France have been able to hold their own against Germany, effecting a repeat of the first World War with German advances being halted in France but not pushed back? Would Dunkirk still have happened, but with fewer casualties and little to none of the war materiel abandoned on the beaches because of enough RAF fighters to repel the Luftwaffe's bombing runs and allow the evacuation to occur in a less haphazard manner? Who knows? But we can guess, and at the minimum, "The Gathering Storm" to me is a persuasive account of the tragedy of lack of prevention.
Tuesday, November 30, 2010
Saturday, November 27, 2010
Coming upon Christmas
With less than a month to go until Christmas, I thought I'd touch, very briefly, on the more materialistic aspect of it - namely, gifts. I used to have the notion that Christmas had become corrupted by the capitalistic urge to make money, with retailers utilizing the holidays as an excuse to sell you many things you didn't necessarily need, for yourself and others. Those people would be influenced by all those advertisements, like puppets on strings, giving their dollars to whoever pulled their strings the best. And then to alleviate their buying binge, they'd give some of the purchases to friends and family, expecting them to do likewise so they'd feel somewhat better (reciprocity bias). Then I realized that I am a capitalist, and my viewpoint changed.
Well, it didn't really change, per se. At least, not my cynical view that people might purchase things they didn't need. However, I no longer thought of the holiday as "corrupted" and people being played like puppets on strings. And so, I felt no guilt at retailers and everyone using the holidays as an excuse to sell things. If people wanted to buy things (choosing to enter into a transaction as responsible adults), regardless of need or not, then who was I to judge them for buying them, and who was I to judge retailers for taking advantage of that desire and discounting merchandise in competition for those people's dollars/pounds/euros/whatever? After all, if they didn't want to participate in Christmas from a gift-giving view, they did not need to. Sure, there is the social proof bias that everyone else in your family is doing it, and so you should too. Then there's the reciprocity bias that everyone will give you a gift, and so you should return the favor too (even if the gift given is not the same dollar value as the gift received). So opting out of the holiday could be hard. But people didn't seem to want to opt out - why opt out of receiving gifts, even if it means you have to buy gifts yourself?
The view in the first paragraph is a Galbraithian inspired view, incidentally. The view in the second paragraph is more Hayekian in influence. My viewpoint has shifted in general from a Galbraithian viewpoint to a Hayekian one, and I thought the example above might be a nice illustration of how those two economic schools of thoughts see the world. We are puppets on strings in a Galbraithian world, and the person who understands our bias can easily manipulate us into doing whatever they want, via advertisements, speeches, or whatever. There is some truth in this, I think.
However, there is also truth in a Hayekian point of view that we are not mere computers who will do things if the proper line of code is written. To extend the metaphor, we are computers who can reject the line of code no matter how it is written. We can be influenced, but we can choose what to be influenced by. There are many lines of code written by different programmers, but we can choose which one to accept. And we often do. This is very easy to do for a person aware of the psychological biases in our mind, but I think that any person can do this, and people do this more often than we realize. So I think there is some truth in this too.
My perspective, ultimately? I think the truth lies somewhere in between. We are rational creatures who can be manipulated some of the time, but other times we pause to reflect and make the choice to transact or not, to listen or not. We are Galbraithian and Hayekian in our behaviour.
(Greg Mankiw does a much better job of explaining this than I do. To see his little summary, go here where he discusses the little box of information he put into his Economics textbook on Galbraith and Hayek.)
One more thing. After 24 years of opting out of Christmas each year, I've decided that I might as well opt in this year. I partially opted in last year, but copped out by getting boxes of chocolate for people. This year I've decided to have some fun by thinking of what book or object a friend of mine would like. Of course, a wishlist by that person would also be good, though part of the pleasure of giving a gift finding something that the person doesn't know about but would want it if he or she knew about it. As I've signalled over the majority of my life that I do not participate in Christmas though, I am curious if this contradictory signal will be properly interpreted by friends and colleagues. In other words, I wonder if reciprocity bias will assert itself in time. I don't think so if people receive their presents on Christmas day. But before, giving ample warning? I think that would give enough time for reciprocity bias to do its work (I have a wishlist, incidentally, but I think anyone reading this is smart enough to figure out where to look if they happen to receive a gift from me and choose to listen to their reciprocity bias). Though I might end up with a bunch of chocolate as a result, which would be a hilarious turn. (If so, I'll have to host loads of wine and champagne tasting parties to get rid of them, which some people no doubt would like.)
Why books, by the way? Because I consider my friends erudite enough that I think each of them would enjoy a book that broadens his or her horizons. Though I may give wine or champagne/sparkling wine (to satisfy the aparatchiks of the EU) to some in lieu of books.
Well, it didn't really change, per se. At least, not my cynical view that people might purchase things they didn't need. However, I no longer thought of the holiday as "corrupted" and people being played like puppets on strings. And so, I felt no guilt at retailers and everyone using the holidays as an excuse to sell things. If people wanted to buy things (choosing to enter into a transaction as responsible adults), regardless of need or not, then who was I to judge them for buying them, and who was I to judge retailers for taking advantage of that desire and discounting merchandise in competition for those people's dollars/pounds/euros/whatever? After all, if they didn't want to participate in Christmas from a gift-giving view, they did not need to. Sure, there is the social proof bias that everyone else in your family is doing it, and so you should too. Then there's the reciprocity bias that everyone will give you a gift, and so you should return the favor too (even if the gift given is not the same dollar value as the gift received). So opting out of the holiday could be hard. But people didn't seem to want to opt out - why opt out of receiving gifts, even if it means you have to buy gifts yourself?
The view in the first paragraph is a Galbraithian inspired view, incidentally. The view in the second paragraph is more Hayekian in influence. My viewpoint has shifted in general from a Galbraithian viewpoint to a Hayekian one, and I thought the example above might be a nice illustration of how those two economic schools of thoughts see the world. We are puppets on strings in a Galbraithian world, and the person who understands our bias can easily manipulate us into doing whatever they want, via advertisements, speeches, or whatever. There is some truth in this, I think.
However, there is also truth in a Hayekian point of view that we are not mere computers who will do things if the proper line of code is written. To extend the metaphor, we are computers who can reject the line of code no matter how it is written. We can be influenced, but we can choose what to be influenced by. There are many lines of code written by different programmers, but we can choose which one to accept. And we often do. This is very easy to do for a person aware of the psychological biases in our mind, but I think that any person can do this, and people do this more often than we realize. So I think there is some truth in this too.
My perspective, ultimately? I think the truth lies somewhere in between. We are rational creatures who can be manipulated some of the time, but other times we pause to reflect and make the choice to transact or not, to listen or not. We are Galbraithian and Hayekian in our behaviour.
(Greg Mankiw does a much better job of explaining this than I do. To see his little summary, go here where he discusses the little box of information he put into his Economics textbook on Galbraith and Hayek.)
One more thing. After 24 years of opting out of Christmas each year, I've decided that I might as well opt in this year. I partially opted in last year, but copped out by getting boxes of chocolate for people. This year I've decided to have some fun by thinking of what book or object a friend of mine would like. Of course, a wishlist by that person would also be good, though part of the pleasure of giving a gift finding something that the person doesn't know about but would want it if he or she knew about it. As I've signalled over the majority of my life that I do not participate in Christmas though, I am curious if this contradictory signal will be properly interpreted by friends and colleagues. In other words, I wonder if reciprocity bias will assert itself in time. I don't think so if people receive their presents on Christmas day. But before, giving ample warning? I think that would give enough time for reciprocity bias to do its work (I have a wishlist, incidentally, but I think anyone reading this is smart enough to figure out where to look if they happen to receive a gift from me and choose to listen to their reciprocity bias). Though I might end up with a bunch of chocolate as a result, which would be a hilarious turn. (If so, I'll have to host loads of wine and champagne tasting parties to get rid of them, which some people no doubt would like.)
Why books, by the way? Because I consider my friends erudite enough that I think each of them would enjoy a book that broadens his or her horizons. Though I may give wine or champagne/sparkling wine (to satisfy the aparatchiks of the EU) to some in lieu of books.
Sunday, November 14, 2010
While I'm in London...
I'm going on holiday in London for about a week, from tomorrow to the 23rd. I'm quite excited about it, because I don't know quite what I'm going to do. Oh, I know that in the first hour of my trip, after customs, after dropping my luggage off at my flat, I'll get on the Underground (Bakerloo line, I believe), get off at Trafalgar Square, walk to the National Gallery and go up a flight of stairs to the room with two Turner paintings, and stare at them, allowing the matrix of what those paintings mean to me to come to my mind. That's a whole other post, what I see when I look at certain art, because I like to think of a piece of art from the point of where it is in history - what was occurring in the era in which it was painted, does it reference anything in that era, etc. One of Turner's paintings, Rain, Steam and Speed, is particularly evocative to me because of its historical context, Industrial Revolution era Britain. But again, a post for another time.
No doubt I'll go to some other museums while in London, such as the V&A. I'll try to go to a play, concert or the opera too. And I'll be running outside a lot too - I bought some Vibram Five Fingers specifically for the purpose. I'll also be enjoying coffee shops too - I found this insight about coffee houses to be rather delightful, so while I will probably not notice it (and how applicable would it be to Britain?), I thought it would be fun to attempt it:
In the cafes where men meet, are they older men, retired? Or are they young men? Are the cafes crowded with men in their forties drinking tea or coffee, going nowhere? Are they laughing and talking or sitting quietly as if they have nothing left to say? Official figures on unemployment can be off a number of ways. But when large numbers of 40-year-old men have nothing to do, then the black economy — the one that pays no taxes and isn’t counted by the government but is always there and important — isn’t pulling the train. (George Friedman, Stratfor, A Geopolitical Journey, Part 1: The Traveler).
I'll also write a decent amount if I am bored or having such a good time thinking and debating that I simply must write down my thoughts. For example I had a brilliant debate with my sister regarding the merits of consumer choice in the area of obstretics, specifically the delivery method. (I have some sensitive readers, I think, otherwise I would write like I would talk at a party about this.) I was of the notion that if the patient is informed of the risks, and wants to go with the surgical method even though it is riskier and an invasive abnominal surgery, rather than waiting and waiting, then damn the torpedos. The patient's choice should be respected. The doctor has fulfilled his/her ethical obligation to inform the patient of the risks, and now the doctor, in my mind, has an ethical obligation to fulfill the patient's choice or direct the patient to a doctor who will. (I realize I must have made some lawyer happy with those words too.)
My sister was of the other opinion, that if the patient is told the risks but wants the surgery anyway versus waiting (if after a week you're still waiting, surgery is appropriate, apparently, but not before then), the patient is making ill-judged decision and the doctor ethically should refuse to provide the surgery. (She also was offended by my comment then that the patient would then shop around for a doctor who would respect her choice.) If the doctor decides to not be a supplier then, fine by me, but to say that the patient should not make that choice for surgery unless nature has been given time and is too tardy is to fundamentally ignore the fact that the patient is a consumer and making a choice. (Of course, if the system is not a free market, consumer choice driven system, but a nationalized single payer system, then such bias that are anti-consumer while purporting to serve the consumer are incorporated into the system, usually for the worse in my opinion. We're adults, thank you very much.) A choice that is informed by the risks.
I was coming at the argument from one mental model, that of economics and choice, and my sister was coming at it with another. I shall be quite amused to see if I can understand her mental model and then see if her point of view is the right one. I don't quite think it is. But nevertheless, I shall enjoy stretching my mind with a different mental model of my sister's. After all, if I bemoan the fact that people do not utilize the mental models that economics offers, then I should take the opportunity to understand a non-economics mental model and incorporate it into my referential frameworks to use in conjunction with my other mental models as necessary.
Whoever thought that vacation would be so taxing on the mind? :)
No doubt I'll go to some other museums while in London, such as the V&A. I'll try to go to a play, concert or the opera too. And I'll be running outside a lot too - I bought some Vibram Five Fingers specifically for the purpose. I'll also be enjoying coffee shops too - I found this insight about coffee houses to be rather delightful, so while I will probably not notice it (and how applicable would it be to Britain?), I thought it would be fun to attempt it:
In the cafes where men meet, are they older men, retired? Or are they young men? Are the cafes crowded with men in their forties drinking tea or coffee, going nowhere? Are they laughing and talking or sitting quietly as if they have nothing left to say? Official figures on unemployment can be off a number of ways. But when large numbers of 40-year-old men have nothing to do, then the black economy — the one that pays no taxes and isn’t counted by the government but is always there and important — isn’t pulling the train. (George Friedman, Stratfor, A Geopolitical Journey, Part 1: The Traveler).
I'll also write a decent amount if I am bored or having such a good time thinking and debating that I simply must write down my thoughts. For example I had a brilliant debate with my sister regarding the merits of consumer choice in the area of obstretics, specifically the delivery method. (I have some sensitive readers, I think, otherwise I would write like I would talk at a party about this.) I was of the notion that if the patient is informed of the risks, and wants to go with the surgical method even though it is riskier and an invasive abnominal surgery, rather than waiting and waiting, then damn the torpedos. The patient's choice should be respected. The doctor has fulfilled his/her ethical obligation to inform the patient of the risks, and now the doctor, in my mind, has an ethical obligation to fulfill the patient's choice or direct the patient to a doctor who will. (I realize I must have made some lawyer happy with those words too.)
My sister was of the other opinion, that if the patient is told the risks but wants the surgery anyway versus waiting (if after a week you're still waiting, surgery is appropriate, apparently, but not before then), the patient is making ill-judged decision and the doctor ethically should refuse to provide the surgery. (She also was offended by my comment then that the patient would then shop around for a doctor who would respect her choice.) If the doctor decides to not be a supplier then, fine by me, but to say that the patient should not make that choice for surgery unless nature has been given time and is too tardy is to fundamentally ignore the fact that the patient is a consumer and making a choice. (Of course, if the system is not a free market, consumer choice driven system, but a nationalized single payer system, then such bias that are anti-consumer while purporting to serve the consumer are incorporated into the system, usually for the worse in my opinion. We're adults, thank you very much.) A choice that is informed by the risks.
I was coming at the argument from one mental model, that of economics and choice, and my sister was coming at it with another. I shall be quite amused to see if I can understand her mental model and then see if her point of view is the right one. I don't quite think it is. But nevertheless, I shall enjoy stretching my mind with a different mental model of my sister's. After all, if I bemoan the fact that people do not utilize the mental models that economics offers, then I should take the opportunity to understand a non-economics mental model and incorporate it into my referential frameworks to use in conjunction with my other mental models as necessary.
Whoever thought that vacation would be so taxing on the mind? :)
Monday, November 1, 2010
Classical Music...
All I can say is that I'm rediscovering my love for classical music. I used to listen to Beethoven's 2nd, 5th and 7th symphonies often on my drives to and from Richmond. Or the 8th symphony, with the 2nd movement of the 2nd symphony replacing the 2nd movement of the 8th.
Classical Music that I've enjoyed recently:
Classical Music that I've enjoyed recently:
- Sinfonia in D Minor (W.F. Bach)
- The Planets - Mars (Holst)
- Short Ride in a Fast Machine (John Adams)
- Overture 'Coriolan', and Piano Concertos 1 through 5 (Beethoven)
And since the Phillips Collection in DC has Sunday classical music concerts, I'll probably make time for a few of them, particularly one on Dec 12 featuring Brahm's Variations on a Theme by Paganini. I've heard Rachmaninov's Rhapsody on a Theme by Paganini, so I'm curious about Brahm's piece.
Monday, October 11, 2010
Quick Thought on the 11th October
I mentioned in a prior post my suspicion that we are becoming lazier in research, probably on average. Anyone willing and able to fight this will probably be at an informational advantage in whatever field he or she chooses, unless that field disproportionately has people who have avoided that laziness (hard to believe given the prevalence of Google and the like) or that field has practically all information available online and easily findable.
I have a suspicion that in one of the fields I follow that the majority of the people do not reading the filings available for free online at a government commission's website; and furthermore, that those who do mostly focus on certain bits, not all of the reporting and therefore may miss something utterly relevant tucked into a footnote towards the end of a 200 page document. So while those people are at an informational advantage compared to the majority, they themselves are at an informational disadvantage compared to the people who read all of the reporting (though only if those people reading all of the reporting are able to interpret it).
Right now I am slogging through This Time is Different. Unfortunately, this means that I do not have the time to read Christina Romer's paper "The Macroeconomic Changes of Tax Changes" where purportly the argument is that tax cuts result in increases in GDP.
Funnily though, or maybe displaying a case of "whose bread I eat, his song I sing," in a blog post on the White House's site and a farewell speech given upon her resigning from Obama's economic team, she makes the case that extending the high-income tax cuts will provide very little in terms of short term job creation. (This blog entry was from July 28, 2010, so as you can see, I am rather late in my criticism. Then again, since I'm not a blogger for a conservative, libertarian or liberal institution, I have the liberty of writing about what I want when I want. And my small readership hasn't complained...yet.) Romer also notes that:
"Since most postwar tax changes have been broad-based, our evidence indicates that broad-based tax cuts have large effects. But it’s important to note that our study did not distinguish among tax cuts for different groups and did not focus on high-income earners. Thus, it provides no basis for doubting the compelling evidence that tax cuts for high-income earners are less effective than broad-based tax cuts focused on the middle class."
Now, here's where the laziness mentioned above comes in play, for me at least. If I read those remarks correctly, Romer says that the paper does not focus on high-income tax cuts. However, since she looks at broad-based tax cuts, presumably the effects include tax cuts for the rich since she did not focus on tax cuts for any one socioeconomic class but any tax cut package. Since I have not had the chance to read Romer's paper, I can only make that remark based on my reading of her blog post, not the primary source, her paper. That, my friends, is intellectual laziness on my part.
May I note this though? If her paper included effects of the tax cuts on the rich, not separating them on, then Romer has no basis to say that tax cuts to the rich will have little effect. Her paper focused on broad tax cuts, which included tax cuts for the rich. It did not do an analysis of which tax cut to which group had the most effect, so how does she have a basis to say that tax cuts for the rich will provide little benefit when her research did not disaggregate the effects? (She quotes the CBO and a Goldman Sachs study, Goldman Sachs Global ECS US Research, “US Daily: Extending the Expiring Tax Cuts: What, How, When and Why (Phillips),” July 26, 2010.) Dare I say that this could be intellectual laziness on her part? Or a case of "whose bread I eat, his song I sing," since this administration seems to love to target the rich whenever possible? I'm not sure if it is a case of laziness, but unless that Goldman study is econometrically rigorous (again, laziness on my part for not reading it), I think it's more a case of "whose bread I eat, his song I sing."
Continuing on the theme of "whose bread I eat, his song I sing," let's run a thought experiment about the CBO. The CBO is a part of the government. In my skeptical mind, that means that it is biased towards anything that increases government revenues (and size), since those revenues form the basis of what can be spent and help fund the CBO's existence. (Sorry, not going to discuss the deficit.) So, while the CBO may not be biased towards either political party, it probably is biased towards government, since that is the system it is part of. And rationally, it would want to increase its revenues wherever possible. Hence, why they think high-income bracket tax cuts will be ineffective. Or maybe it's just that they want that additional revenue, eh?
Finally, let me level another criticism at Romer, again from her lovely blog post:
"Likewise, estimates by the Council of Economic Advisers suggest that spending $10 billion to prevent the layoffs of teachers, firefighters, and police would lead to nearly twice as many jobs as the estimated $30 billion of high-income tax cuts—that’s twice as many jobs for one-third the cost."
While I have nothing to say on the police, I must note that a paragraph like this seems to be terribly short-run biased. Actually, all economic discussions seem to be very short-term biased, not medium-term biased on the necessary structural reforms to government spending to prevent the day when my generation pays the bill for the excesses and irresponsibility of prior generations if we continue on this path. In this case, Romer's assumption is that it is good to preserve any job possible, the kind of logic that leads to a bailout of GM rather than asking the hard question of if those jobs are truly necessary, if it is good resource allocation to bailout an ailing motor company with structural woes (labor unions) rather than cyclical woes.
That same question applies to teachers and firefighters (and probably police). The unfortunate thing about teachers is that seniority overrules performance, the exact opposite of a rational employment system. And so when cuts need to be made, the teachers fired are likely the ones you want to keep, probably being young, ununionized, and not disenchanted with education yet; the ones retained are the ones you want to fire. So is it the right thing to spend money to save teacher jobs who would otherwise be fired? Keeping the teachers who would otherwise be fired, as long as they are the outperformers, is not bad; except that patches like that delay any necessary structural reform. Better would be to demand structural reform before handing out some money to teachers. But instead such $10 billion (part for the teachers) inefficiently allocates scarce government resources inefficiently by supporting a system that needs to be revamped if it is to actually serve the customers it purports to serve - the students. Shame on an economist for not thinking about that - or again, is it a case of "whose bread I eat, his song I sing?"
And while I have not seen anything statistical on firefighters, let me provide an anecdote from Merseyside (read it in The Economist), with a sentiment from the fire chief there that reflects part of my gloomy opinion about government in general - "the trouble with the public sector is bone-idle staff":
In 1999-2000 there were 2,140 fires in the Merseyside area and 15 fire-related deaths; last year (2009-10), there were 1,299 and 8. Meanwhile, the number of traditional fire officers has fallen from 1,400 to 850, saving money. [Better results with less staff and money - what's not to like?]
Mr McGuirk saw that speedy response wasn’t enough: prevention was the key.[...]
All this involved cutting the number of fire officers, who, Mr McGuirk realised, were underemployed for long periods during their shifts. Anyway, fewer fires required fewer rescuers. Although no one was made redundant involuntarily, in 2006 the fire-brigade union called a strike. Protesters dubbed the fire chief “McJerk”; 2,000 of them walked through Liverpool carrying banners with slogans such as “I hate McGuirk”. [When you're part of a system, even if that system is part of a problem, the fact that you're in that system and that it puts the bread on your table means that you will fight for it no matter that it may need reform to fix the problem.]
Ironically, it was soon clear that the 200 officers who stayed at work could run the service at full capacity. [Emphasis mine]“I told the local press they would never notice there was a strike,” says Mr McGuirk. “It’s not my job to be popular, it’s to deliver.” The strike was defeated in a month.
Dare I say that the $10 billion comment from Romer represents intellectual laziness? A distressingly short-sighted viewpoint from an economist, who should look longer term than the next year, two or three? Someone failing to realize that preservation of a job is not the same thing as efficiently allocating resources where needed for the most return? Someone failing to question whether those jobs are truly needed, or whether those departments can run more efficiently with less or whether something structural, such as teachers unions, are the problem with dealing with budget shortfalls for education (if you could fire your worst performers during a cyclical downturn, instead of having to retain them and fire your best performers who are not unionised, wouldn't that make more budgetary sense than just doling out money to keep all the jobs and perpetuate a system in need of reform)?
My ending conclusion is that a constant focus on the short term means that you will always be in the short term, losing sight of the long view and avoiding problems that will come in the medium term until it is too late. Short term pain seems like it will be long term gain, in this case; or as Ben Franklin put it, "An ounce of prevention is worth a pound of cure." But a focus on the short term at the cost of the medium and long term means that we will continue to emphasis that pound of cure (and therefore waste resources) over that ounce of prevention.
N.B. Politics is something that is quite incendiary. Economics is something that can bore many people. While I have a small readership, no doubt I have said something that may have incensed or bored you. Please bear in mind that these are my opinions, and that I can be quite arrogant. If you disagree with me, either politely comment or impolitely send me an angry email - I would rather have any comments with inflamatory remarks, including any four letter words, to be in my mailbox. Besides, you'll have a higher chance of me reading it than if you put it in a comment. And if you're commenting, didn't you want me to read it in the first place? Hence why it is logical for you to send inflamatory remarks (and maybe all of them) to my inbox rather than posting a comment.
N.B. #2 Psychologically speaking, confirmation bias exists. And most people are susceptible to it. Broadly speaking, once I've come to a conclusion about it, I will tend to seek out data that confirms my view rather than data that disagrees with my view. This is probably one of the reasons for the joke "Science advances by the funeral." Replace science with "society" and you probably still are accurate in describing societal mores. (Another post for another day, about J.S. Mill's quote about conservatives.) Anyway, I know I am susceptible to confirmation bias (I also suspect that to be true of writers for think tanks and newspaper blogs of all political stripes). And hence, I promise myself and anyone reading this that I will not let this post lie like this. I've noted above that I've not had a chance to read Romer's paper, the Goldman Sachs or CBO studies. Since those potentially contain views and data disagreeing with my opinion, it is intellectually incumbent upon me to read those when I can and further decide if I am wrong or if the opposition's arguments have enough flaws to render their conclusions suspect. So once I'm done with This Time is Different, I shall read the literature mentioned above and revisit this post (though I'll probably preserve this post as is for my own humor in seeing the potential evolution of the argument).
I have a suspicion that in one of the fields I follow that the majority of the people do not reading the filings available for free online at a government commission's website; and furthermore, that those who do mostly focus on certain bits, not all of the reporting and therefore may miss something utterly relevant tucked into a footnote towards the end of a 200 page document. So while those people are at an informational advantage compared to the majority, they themselves are at an informational disadvantage compared to the people who read all of the reporting (though only if those people reading all of the reporting are able to interpret it).
Right now I am slogging through This Time is Different. Unfortunately, this means that I do not have the time to read Christina Romer's paper "The Macroeconomic Changes of Tax Changes" where purportly the argument is that tax cuts result in increases in GDP.
Funnily though, or maybe displaying a case of "whose bread I eat, his song I sing," in a blog post on the White House's site and a farewell speech given upon her resigning from Obama's economic team, she makes the case that extending the high-income tax cuts will provide very little in terms of short term job creation. (This blog entry was from July 28, 2010, so as you can see, I am rather late in my criticism. Then again, since I'm not a blogger for a conservative, libertarian or liberal institution, I have the liberty of writing about what I want when I want. And my small readership hasn't complained...yet.) Romer also notes that:
"Since most postwar tax changes have been broad-based, our evidence indicates that broad-based tax cuts have large effects. But it’s important to note that our study did not distinguish among tax cuts for different groups and did not focus on high-income earners. Thus, it provides no basis for doubting the compelling evidence that tax cuts for high-income earners are less effective than broad-based tax cuts focused on the middle class."
Now, here's where the laziness mentioned above comes in play, for me at least. If I read those remarks correctly, Romer says that the paper does not focus on high-income tax cuts. However, since she looks at broad-based tax cuts, presumably the effects include tax cuts for the rich since she did not focus on tax cuts for any one socioeconomic class but any tax cut package. Since I have not had the chance to read Romer's paper, I can only make that remark based on my reading of her blog post, not the primary source, her paper. That, my friends, is intellectual laziness on my part.
May I note this though? If her paper included effects of the tax cuts on the rich, not separating them on, then Romer has no basis to say that tax cuts to the rich will have little effect. Her paper focused on broad tax cuts, which included tax cuts for the rich. It did not do an analysis of which tax cut to which group had the most effect, so how does she have a basis to say that tax cuts for the rich will provide little benefit when her research did not disaggregate the effects? (She quotes the CBO and a Goldman Sachs study, Goldman Sachs Global ECS US Research, “US Daily: Extending the Expiring Tax Cuts: What, How, When and Why (Phillips),” July 26, 2010.) Dare I say that this could be intellectual laziness on her part? Or a case of "whose bread I eat, his song I sing," since this administration seems to love to target the rich whenever possible? I'm not sure if it is a case of laziness, but unless that Goldman study is econometrically rigorous (again, laziness on my part for not reading it), I think it's more a case of "whose bread I eat, his song I sing."
Continuing on the theme of "whose bread I eat, his song I sing," let's run a thought experiment about the CBO. The CBO is a part of the government. In my skeptical mind, that means that it is biased towards anything that increases government revenues (and size), since those revenues form the basis of what can be spent and help fund the CBO's existence. (Sorry, not going to discuss the deficit.) So, while the CBO may not be biased towards either political party, it probably is biased towards government, since that is the system it is part of. And rationally, it would want to increase its revenues wherever possible. Hence, why they think high-income bracket tax cuts will be ineffective. Or maybe it's just that they want that additional revenue, eh?
Finally, let me level another criticism at Romer, again from her lovely blog post:
"Likewise, estimates by the Council of Economic Advisers suggest that spending $10 billion to prevent the layoffs of teachers, firefighters, and police would lead to nearly twice as many jobs as the estimated $30 billion of high-income tax cuts—that’s twice as many jobs for one-third the cost."
While I have nothing to say on the police, I must note that a paragraph like this seems to be terribly short-run biased. Actually, all economic discussions seem to be very short-term biased, not medium-term biased on the necessary structural reforms to government spending to prevent the day when my generation pays the bill for the excesses and irresponsibility of prior generations if we continue on this path. In this case, Romer's assumption is that it is good to preserve any job possible, the kind of logic that leads to a bailout of GM rather than asking the hard question of if those jobs are truly necessary, if it is good resource allocation to bailout an ailing motor company with structural woes (labor unions) rather than cyclical woes.
That same question applies to teachers and firefighters (and probably police). The unfortunate thing about teachers is that seniority overrules performance, the exact opposite of a rational employment system. And so when cuts need to be made, the teachers fired are likely the ones you want to keep, probably being young, ununionized, and not disenchanted with education yet; the ones retained are the ones you want to fire. So is it the right thing to spend money to save teacher jobs who would otherwise be fired? Keeping the teachers who would otherwise be fired, as long as they are the outperformers, is not bad; except that patches like that delay any necessary structural reform. Better would be to demand structural reform before handing out some money to teachers. But instead such $10 billion (part for the teachers) inefficiently allocates scarce government resources inefficiently by supporting a system that needs to be revamped if it is to actually serve the customers it purports to serve - the students. Shame on an economist for not thinking about that - or again, is it a case of "whose bread I eat, his song I sing?"
And while I have not seen anything statistical on firefighters, let me provide an anecdote from Merseyside (read it in The Economist), with a sentiment from the fire chief there that reflects part of my gloomy opinion about government in general - "the trouble with the public sector is bone-idle staff":
In 1999-2000 there were 2,140 fires in the Merseyside area and 15 fire-related deaths; last year (2009-10), there were 1,299 and 8. Meanwhile, the number of traditional fire officers has fallen from 1,400 to 850, saving money. [Better results with less staff and money - what's not to like?]
Mr McGuirk saw that speedy response wasn’t enough: prevention was the key.[...]
All this involved cutting the number of fire officers, who, Mr McGuirk realised, were underemployed for long periods during their shifts. Anyway, fewer fires required fewer rescuers. Although no one was made redundant involuntarily, in 2006 the fire-brigade union called a strike. Protesters dubbed the fire chief “McJerk”; 2,000 of them walked through Liverpool carrying banners with slogans such as “I hate McGuirk”. [When you're part of a system, even if that system is part of a problem, the fact that you're in that system and that it puts the bread on your table means that you will fight for it no matter that it may need reform to fix the problem.]
Ironically, it was soon clear that the 200 officers who stayed at work could run the service at full capacity. [Emphasis mine]“I told the local press they would never notice there was a strike,” says Mr McGuirk. “It’s not my job to be popular, it’s to deliver.” The strike was defeated in a month.
Dare I say that the $10 billion comment from Romer represents intellectual laziness? A distressingly short-sighted viewpoint from an economist, who should look longer term than the next year, two or three? Someone failing to realize that preservation of a job is not the same thing as efficiently allocating resources where needed for the most return? Someone failing to question whether those jobs are truly needed, or whether those departments can run more efficiently with less or whether something structural, such as teachers unions, are the problem with dealing with budget shortfalls for education (if you could fire your worst performers during a cyclical downturn, instead of having to retain them and fire your best performers who are not unionised, wouldn't that make more budgetary sense than just doling out money to keep all the jobs and perpetuate a system in need of reform)?
My ending conclusion is that a constant focus on the short term means that you will always be in the short term, losing sight of the long view and avoiding problems that will come in the medium term until it is too late. Short term pain seems like it will be long term gain, in this case; or as Ben Franklin put it, "An ounce of prevention is worth a pound of cure." But a focus on the short term at the cost of the medium and long term means that we will continue to emphasis that pound of cure (and therefore waste resources) over that ounce of prevention.
N.B. Politics is something that is quite incendiary. Economics is something that can bore many people. While I have a small readership, no doubt I have said something that may have incensed or bored you. Please bear in mind that these are my opinions, and that I can be quite arrogant. If you disagree with me, either politely comment or impolitely send me an angry email - I would rather have any comments with inflamatory remarks, including any four letter words, to be in my mailbox. Besides, you'll have a higher chance of me reading it than if you put it in a comment. And if you're commenting, didn't you want me to read it in the first place? Hence why it is logical for you to send inflamatory remarks (and maybe all of them) to my inbox rather than posting a comment.
N.B. #2 Psychologically speaking, confirmation bias exists. And most people are susceptible to it. Broadly speaking, once I've come to a conclusion about it, I will tend to seek out data that confirms my view rather than data that disagrees with my view. This is probably one of the reasons for the joke "Science advances by the funeral." Replace science with "society" and you probably still are accurate in describing societal mores. (Another post for another day, about J.S. Mill's quote about conservatives.) Anyway, I know I am susceptible to confirmation bias (I also suspect that to be true of writers for think tanks and newspaper blogs of all political stripes). And hence, I promise myself and anyone reading this that I will not let this post lie like this. I've noted above that I've not had a chance to read Romer's paper, the Goldman Sachs or CBO studies. Since those potentially contain views and data disagreeing with my opinion, it is intellectually incumbent upon me to read those when I can and further decide if I am wrong or if the opposition's arguments have enough flaws to render their conclusions suspect. So once I'm done with This Time is Different, I shall read the literature mentioned above and revisit this post (though I'll probably preserve this post as is for my own humor in seeing the potential evolution of the argument).
Sunday, October 10, 2010
Thoughts so far on "This Time is Different"
There are two financial history/economics books which I have found very rewarding to read, even if a tiring slog to get through. One is Kindleberger's Manias, Panics and Crashes, particularly the discussion of credit creation and contraction with the Minsky model (the financial instability hypothesis).
The other, though I'm still working through it, is This Time is Different. Part of the reason it is a slog is the very reason is it so rewarding - the loads of quantitative data and segways discovered, such as India's share of world GDP declining between 1913 and 1990 (though why that table didn't have 2007 figures is unknown to me). Debt intolerance though seems to be a main part of the book, the notion that certain governments have higher debt intolerance than others, and hence while one government can withstand a certain amount of debt to GDP, another can not withstand that same amount. Mental-model wise, it is very interesting to discover this in the quantitative data; and even more interesting to connect it qualitatively to the narrative of history in Walter Russell Mead's God and Gold, which offers a pretty good explanation of the rise of Anglo-Saxon institutions that have resulted in those countries having very strong financial systems that are debt tolerant (it may not seem like we have a strong financial system, on an absolute basis, based on the past crisis, but relatively speaking we do compared to non Anglo-Saxon countries). One of Reinhart and Rogoff's tables show that none of the colonial (as opposed to imperialist era holdings like India, South Africa and Zimbabwe) Anglo-Saxon spinoffs (Canada, Australia, New Zealand, and the United States) have explicitly defaulted on debt - we're very debt tolerant, a blessing for people needing to buy fixed income securities. (Covert defaults, including inflation, is another story, though we still fare pretty well on a relative basis.) Mead's analysis provides a good explanation of that quantitative anomaly revealed on Reinhart and Rogoff's analysis.
From a research perspective, This Time is Different reveals another curiosity - due to the lack of transparency regarding domestic debt of countries, most economic analysis of default and inflation episodes do not incorporate a discussion of domestic debt. As a result, Reinhart and Rogoff find that most analysis is seriously deficient in explanatory power of why a government would choose to default or inflate because most researchers are looking at a very incomplete picture (only external debt, which usually is less than half of the total debt of the average nation) with incorrect assumptions (that domestic debt is usually paid off in full, at face value, with no overt or covert defaults). The simple reason for this deficiency is partially that governments do not want to reveal their knickers (unfortunate because government ultimately should be accountable to their citizens) and partially that researchers might be becoming lazier. (For more on this, see Farnam Street's blog article: Does the Internet Make You Smarter or Dumber?)
And if we take a moment to engage in a thought experiment, we may be becoming even lazier as we become used to instantaneous access to information via our computers, mobile search and more. If that is the case, then any information that is not easy to find via online sources at all or online only if digging deeply (i.e page 200 of a 201 page document) will progressively become more and more ignored. Any decisions we make then will be based on even more incomplete and erroneous analysis. This is important - for example, if I remember correctly (key because I do not have the book in front of me at the moment), Reinhart and Rogoff go so far as to say that institutions advising on debt restructuring for nations are giving inadequate recommendations because of the propensity of research to improperly ignore domestic debt levels and the lack of transparency around a nation's domestic debt.
Combining the two books, I distinctly remember Kindleberger talking about capital levels throughout the 19th and 20th century at banks in the United States. Reinhart and Rogoff have a time-series analysis, I believe, of banking crises in the U.S. I think it would be quite interesting to overlay that analysis with the trend of bank capital levels from the 1800s to the present. I think it would make the case that whatever reform we're getting through Dodd-Frank and Basel III, it will only mitigate (at best ) future crises, not prevent them.
I'm including systemic risk in that assumption, by the way - I highly doubt that systemic risk buildup will be prevented by the regulators created and empowered in the legislation, since I wonder if they (or anyone) will know what the next systemic risk is. They might be fighting the last war when the next crisis comes. I'm not asserting that the systemic risk of the prior crisis was hard to discern, since investors like Jeremy Grantham, Mike Burry and others happened upon that risk, analysed it, and profited from it; I'm asserting that I find it hard to believe that the regulators will notice the systemic risk, given the prior track record, such as this remark from Bernanke in Oct 2005: "House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals."
After all, if you recall, the Bank of Scotland (now part of Lloyds Banking Group) on average had an equity capital ratio of 25% during the 1700s (i.e. every $4 of loans made by the Bank of Scotland were fund by $3 of deposits or bonds sold to investors and $1 of the Bank of Scotland's money). This, shall we say, is a rather high common equity ratio, especially compared to banks today where you may see 3% common equity ratios (a lot of European banks back in 2008). And yet, when the Royal Bank of Scotland was competing against the Bank of Scotland in the early 1700s, it pretty much caused a liquidity crisis for the Bank of Scotland by buying Bank of Scotland notes and then marching into a Bank of Scotland branch to redeem those notes for payment (in gold or coinage, I think). The Bank of Scotland was forced to call loans early and suspend payments in coinage from March 1728 to September 1728. Bear in mind that there was nothing wrong with the Bank of Scotland's book of loans. They just had an inadequate supply of coinage to cover redemption of all of their currency notes in circulation (a situation the Royal Bank of Scotland probably was in too). A high equity capital ratio did not prevent a liquidity crisis, a crisis of confidence. Even a 100% equity capital ratio (meaning that the bank is not a bank, but an investment vehicle) would not prevent a liquidity crisis if the assets are not easily salable. And legislation would probably not prevent a liquidity crisis in the future. (I realize that such a liquidity crisis for a bank, as opposed to a capital markets dependent financial company, would not happen now because of the Federal Reserve, the Bank of England, and the European Central Bank each offering banks access to liquidity at need, but I think the example still relevant if only to illustrate that there are more to financial crises than just bad loans eating away at a bank's capital. Also, I felt like bragging about what I learned when touring the old Bank of Scotland headquarters in Edinburgh last summer.)
As for a quality crisis (while I do not remember the exact nomenclature, what I mean by this is that the quality of assets/loans on the bank's books are a lot more suspect than stated), a higher capital ratio means that there is more of a buffer provided by the bank's money to absorb losses on loan writedowns before impacting depositors. But if a bank is stupidly underwriting, no capital ratio will ultimately prevent it from going under. Legislation does not prevent stupidity, herding, or a race to the lowest common denominator (and lowest quality) in lending. And when banks did not have federal backstops, there were still banking crises despite the incentive of the bank owners to ensure that the bank underwrote well because if it made a bad decision, they lost their net worth. So why does anyone think that the current legislation will prevent a future crisis? Any rational person willing to take the time (i.e. not be lazy) and look at the historical record will find that to be a delusion.
I realize this post is a bit incoherent - I hope not only to come back and edit it, but to provide some data, such as that time-series analysis of banking crises with capital levels if only to underscore that Basel III capital levels will not prevent a future crisis. In the mean time, I hope you enjoy these off the cuff thoughts (and email me with any thoughts on the deficiencies).
The other, though I'm still working through it, is This Time is Different. Part of the reason it is a slog is the very reason is it so rewarding - the loads of quantitative data and segways discovered, such as India's share of world GDP declining between 1913 and 1990 (though why that table didn't have 2007 figures is unknown to me). Debt intolerance though seems to be a main part of the book, the notion that certain governments have higher debt intolerance than others, and hence while one government can withstand a certain amount of debt to GDP, another can not withstand that same amount. Mental-model wise, it is very interesting to discover this in the quantitative data; and even more interesting to connect it qualitatively to the narrative of history in Walter Russell Mead's God and Gold, which offers a pretty good explanation of the rise of Anglo-Saxon institutions that have resulted in those countries having very strong financial systems that are debt tolerant (it may not seem like we have a strong financial system, on an absolute basis, based on the past crisis, but relatively speaking we do compared to non Anglo-Saxon countries). One of Reinhart and Rogoff's tables show that none of the colonial (as opposed to imperialist era holdings like India, South Africa and Zimbabwe) Anglo-Saxon spinoffs (Canada, Australia, New Zealand, and the United States) have explicitly defaulted on debt - we're very debt tolerant, a blessing for people needing to buy fixed income securities. (Covert defaults, including inflation, is another story, though we still fare pretty well on a relative basis.) Mead's analysis provides a good explanation of that quantitative anomaly revealed on Reinhart and Rogoff's analysis.
From a research perspective, This Time is Different reveals another curiosity - due to the lack of transparency regarding domestic debt of countries, most economic analysis of default and inflation episodes do not incorporate a discussion of domestic debt. As a result, Reinhart and Rogoff find that most analysis is seriously deficient in explanatory power of why a government would choose to default or inflate because most researchers are looking at a very incomplete picture (only external debt, which usually is less than half of the total debt of the average nation) with incorrect assumptions (that domestic debt is usually paid off in full, at face value, with no overt or covert defaults). The simple reason for this deficiency is partially that governments do not want to reveal their knickers (unfortunate because government ultimately should be accountable to their citizens) and partially that researchers might be becoming lazier. (For more on this, see Farnam Street's blog article: Does the Internet Make You Smarter or Dumber?)
And if we take a moment to engage in a thought experiment, we may be becoming even lazier as we become used to instantaneous access to information via our computers, mobile search and more. If that is the case, then any information that is not easy to find via online sources at all or online only if digging deeply (i.e page 200 of a 201 page document) will progressively become more and more ignored. Any decisions we make then will be based on even more incomplete and erroneous analysis. This is important - for example, if I remember correctly (key because I do not have the book in front of me at the moment), Reinhart and Rogoff go so far as to say that institutions advising on debt restructuring for nations are giving inadequate recommendations because of the propensity of research to improperly ignore domestic debt levels and the lack of transparency around a nation's domestic debt.
Combining the two books, I distinctly remember Kindleberger talking about capital levels throughout the 19th and 20th century at banks in the United States. Reinhart and Rogoff have a time-series analysis, I believe, of banking crises in the U.S. I think it would be quite interesting to overlay that analysis with the trend of bank capital levels from the 1800s to the present. I think it would make the case that whatever reform we're getting through Dodd-Frank and Basel III, it will only mitigate (at best ) future crises, not prevent them.
I'm including systemic risk in that assumption, by the way - I highly doubt that systemic risk buildup will be prevented by the regulators created and empowered in the legislation, since I wonder if they (or anyone) will know what the next systemic risk is. They might be fighting the last war when the next crisis comes. I'm not asserting that the systemic risk of the prior crisis was hard to discern, since investors like Jeremy Grantham, Mike Burry and others happened upon that risk, analysed it, and profited from it; I'm asserting that I find it hard to believe that the regulators will notice the systemic risk, given the prior track record, such as this remark from Bernanke in Oct 2005: "House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals."
After all, if you recall, the Bank of Scotland (now part of Lloyds Banking Group) on average had an equity capital ratio of 25% during the 1700s (i.e. every $4 of loans made by the Bank of Scotland were fund by $3 of deposits or bonds sold to investors and $1 of the Bank of Scotland's money). This, shall we say, is a rather high common equity ratio, especially compared to banks today where you may see 3% common equity ratios (a lot of European banks back in 2008). And yet, when the Royal Bank of Scotland was competing against the Bank of Scotland in the early 1700s, it pretty much caused a liquidity crisis for the Bank of Scotland by buying Bank of Scotland notes and then marching into a Bank of Scotland branch to redeem those notes for payment (in gold or coinage, I think). The Bank of Scotland was forced to call loans early and suspend payments in coinage from March 1728 to September 1728. Bear in mind that there was nothing wrong with the Bank of Scotland's book of loans. They just had an inadequate supply of coinage to cover redemption of all of their currency notes in circulation (a situation the Royal Bank of Scotland probably was in too). A high equity capital ratio did not prevent a liquidity crisis, a crisis of confidence. Even a 100% equity capital ratio (meaning that the bank is not a bank, but an investment vehicle) would not prevent a liquidity crisis if the assets are not easily salable. And legislation would probably not prevent a liquidity crisis in the future. (I realize that such a liquidity crisis for a bank, as opposed to a capital markets dependent financial company, would not happen now because of the Federal Reserve, the Bank of England, and the European Central Bank each offering banks access to liquidity at need, but I think the example still relevant if only to illustrate that there are more to financial crises than just bad loans eating away at a bank's capital. Also, I felt like bragging about what I learned when touring the old Bank of Scotland headquarters in Edinburgh last summer.)
As for a quality crisis (while I do not remember the exact nomenclature, what I mean by this is that the quality of assets/loans on the bank's books are a lot more suspect than stated), a higher capital ratio means that there is more of a buffer provided by the bank's money to absorb losses on loan writedowns before impacting depositors. But if a bank is stupidly underwriting, no capital ratio will ultimately prevent it from going under. Legislation does not prevent stupidity, herding, or a race to the lowest common denominator (and lowest quality) in lending. And when banks did not have federal backstops, there were still banking crises despite the incentive of the bank owners to ensure that the bank underwrote well because if it made a bad decision, they lost their net worth. So why does anyone think that the current legislation will prevent a future crisis? Any rational person willing to take the time (i.e. not be lazy) and look at the historical record will find that to be a delusion.
I realize this post is a bit incoherent - I hope not only to come back and edit it, but to provide some data, such as that time-series analysis of banking crises with capital levels if only to underscore that Basel III capital levels will not prevent a future crisis. In the mean time, I hope you enjoy these off the cuff thoughts (and email me with any thoughts on the deficiencies).
Tuesday, September 28, 2010
Quick, Vapid Thoughts
I've joked about the size of my readership in previous posts - I am 95% confident that my readership is between 2 and 10 people (for those statisticians out there). Consequently I feel no compunction about the posting my vapid thoughts occurring late in the night.
I'm still a bit disappointed that I have not gotten around to writing an intelligent post yet. I haven't had a chance to look at Indian GDP data from 1913 to 2010 (and from 1913 to 1947, I presume that data aggregates Pakistan and Bangladesh too). I'm very curious to see when India and rest of the subcontinent slowed down in economic development - was it during the Raj, or after the Raj, or somewhat more muddled than that?
I'm also a bit disappointed with my post on socca in Nice - it could have been a much better story. Maybe someday I'll rewrite it.
I have a post in my draft box about my efforts to bake proper socca once back in DC - I'll have it up maybe next week. Who knows, it may not even be boring!
For those very few people wanting to satisfy the 'smart' quotient of this blog, for now all I can offer are the blogs I regularly read. I'm crunching numbers in my spare time, but will not be blogging about the results of that (I'd say the results are shared only on a 'need to know' basis, but that would be a lie). You're welcome to ask, but you'd probably be bored with the answer.
Finally, I tried a version of this lime & peanut coleslaw for dinner tonight, using red onions and avocados in place of the cherry tomatoes. I thought I should have added more of the lime dressing to the dish, but otherwise it was very tasty with the peanuts. I might want to slather the peanuts directly in the dressing too before adding both to the dish, since even after the roasting they seemed a bit bland.
I'm still a bit disappointed that I have not gotten around to writing an intelligent post yet. I haven't had a chance to look at Indian GDP data from 1913 to 2010 (and from 1913 to 1947, I presume that data aggregates Pakistan and Bangladesh too). I'm very curious to see when India and rest of the subcontinent slowed down in economic development - was it during the Raj, or after the Raj, or somewhat more muddled than that?
I'm also a bit disappointed with my post on socca in Nice - it could have been a much better story. Maybe someday I'll rewrite it.
I have a post in my draft box about my efforts to bake proper socca once back in DC - I'll have it up maybe next week. Who knows, it may not even be boring!
For those very few people wanting to satisfy the 'smart' quotient of this blog, for now all I can offer are the blogs I regularly read. I'm crunching numbers in my spare time, but will not be blogging about the results of that (I'd say the results are shared only on a 'need to know' basis, but that would be a lie). You're welcome to ask, but you'd probably be bored with the answer.
Finally, I tried a version of this lime & peanut coleslaw for dinner tonight, using red onions and avocados in place of the cherry tomatoes. I thought I should have added more of the lime dressing to the dish, but otherwise it was very tasty with the peanuts. I might want to slather the peanuts directly in the dressing too before adding both to the dish, since even after the roasting they seemed a bit bland.
Thursday, September 23, 2010
One of my favorite suits
I present below myself in one of my favorite suits. I first wore it on a tour of the Houses of Parliament in 2008 (very fun, incidentally). I also wore it at Tom's wedding (rather appropriate, as he made the suit!), and then at James and Darya's too. I have to say that though my waistline as expanded and contracted since 2008, the suit has not failed me yet. And with it's pinstripes and peak lapel, I think it'll be a stylish favorite of mine until my waist is too big for the trousers.
Hopefully by Christmas I'll have a new picture of me in another favorite suit of mine. That, however, is contingent on me actually losing weight. I had that suit made in 2006 at Maurice Sedwell, during the month that I lived in London after graduation from Georgetown. (I rented a flat for a month, so from my point of view, that's living in a place.) When I tried it on recently, I strained the trouser waistline enough that I did not want to risk wearing it. I guess my waistline has expanded quite a bit since 2006. Must be because I'm not dancing anymore. (And if I wanted any more proof that it must be because I'm not dancing, I barely fit into my black tie trousers that I used for dancing in the past.)
In the mean time though, here's me in that suit back in May 2007 in Blackpool, England. If you look closely, you can see the purple horizontal pinstripes on the navy blue cloth. The jacket is a single button only and with peak lapels. It's definitely not run of the mill, which is why I want to fit in it again.
 |
| After James and Darya's wedding |
Hopefully by Christmas I'll have a new picture of me in another favorite suit of mine. That, however, is contingent on me actually losing weight. I had that suit made in 2006 at Maurice Sedwell, during the month that I lived in London after graduation from Georgetown. (I rented a flat for a month, so from my point of view, that's living in a place.) When I tried it on recently, I strained the trouser waistline enough that I did not want to risk wearing it. I guess my waistline has expanded quite a bit since 2006. Must be because I'm not dancing anymore. (And if I wanted any more proof that it must be because I'm not dancing, I barely fit into my black tie trousers that I used for dancing in the past.)
In the mean time though, here's me in that suit back in May 2007 in Blackpool, England. If you look closely, you can see the purple horizontal pinstripes on the navy blue cloth. The jacket is a single button only and with peak lapels. It's definitely not run of the mill, which is why I want to fit in it again.
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| Balancing on the railing in Blackpool, England (also the first image I put on my credit card) |
Favorite Doctor Who episode (season 5)
I'm venturing outside of my circle of competence here. Then again, I've been doing that for all of my blog thus far. I'm no expert on cooking, after all. Nor am I a writer for a travel magazine. Nor am I an expert on history. And when I write anything regarding my thoughts on economics, well, despite the degree in Economics and Mathematics, I would definitely state that I am not an expert there. Well, not in Macroeconomics - I have some working understanding of Microeconomics, such as perfect competition, barriers to entry, and an inclination to look at the world from a more quantitative, economics point of view than a wishy/washy type of view that I seem to see among environmentalists, organic farmers, champions of local produce and urban/suburban passenger rail, and the like. (Am I setting myself up for some flames from my very, very small readership? Well, why not? Force me to defend my opinions!).
Anyway, I now happily go outside my circle of competence by stating that the duo Time of Angels/Flesh and Stone from the fifth season of Doctor Who are the best episodes of that season. However, I'm not outside of my circle of competence when I state that they're my favorite episodes in Season 5.
All of my favorite episodes of Doctor Who were written by Steven Moffat (Season 3: Blink; Season 4: Silence in the Library/Forest of the Dead; Season 5: The Eleventh Hour, The Pandorica Opens/The Big Bang, and the above mentioned episodes). Maybe I'm not discerning?
I like these two episodes because they continue a few narrative elements from Doctor Who. They are part of a larger story, not a mere episode. We see the Weeping Angels again, who we first met in Blink (incidentally, not a bad viewing for Friday the 13th based on reactions I observed when doing so).
We also join up with River Song again, who we first met in Season 4 in Silence in the Library/Forest of the Dead. I was very intrigued by River's story in those episodes - her past is the Doctor's future - so I loved how we learned some more about River in Season 5 overall and in these two episodes. As long as Steven Moffat is showrunner for Doctor Who, I'm guessing that we're going to have River Song around to tease and worry the Doctor. The beginning sequence of The Time of Angels was brilliant, with River sending a message to the Doctor from the past overlaid with the Doctor and Amy receiving the message in a museum. And the Doctor's reaction when River piloted the TARDIS better than he during the chase of the Byzantium was hilarious (when the Doctor asked about the noise the TARDIS ordinarily makes when landing but did not when River landed, she said 'It's not supposed to make that noise. You leave the brakes on.').
Also, there are the quotes from The Time of Angels:
"Two things always guaranteed to turn up in a museum: the home box of a category four starliner and, sooner or later, him." - River Song
"What if we had ideas that could think for themselves? What if one day our dreams no longer needed us? When these things occur and are held to be true, the time will be upon us. The time of angels." - River Song reading from the book about the Weeping Angels
And finally, the cliffhanger (spoilers, yes, but fun nevertheless):
Anyway, that's my opinion. You may be a fan of the old Doctor Who series rather than the new, or may not even have heard of the series. But given the quality of what Steven Moffat has written, besides some Doctor Who episodes (the new Sherlock series on the BBC, Coupling, and Jekyll, for instance), I think that watching these episodes of Doctor Who would be quite rewarding
Anyway, I now happily go outside my circle of competence by stating that the duo Time of Angels/Flesh and Stone from the fifth season of Doctor Who are the best episodes of that season. However, I'm not outside of my circle of competence when I state that they're my favorite episodes in Season 5.
All of my favorite episodes of Doctor Who were written by Steven Moffat (Season 3: Blink; Season 4: Silence in the Library/Forest of the Dead; Season 5: The Eleventh Hour, The Pandorica Opens/The Big Bang, and the above mentioned episodes). Maybe I'm not discerning?
I like these two episodes because they continue a few narrative elements from Doctor Who. They are part of a larger story, not a mere episode. We see the Weeping Angels again, who we first met in Blink (incidentally, not a bad viewing for Friday the 13th based on reactions I observed when doing so).
We also join up with River Song again, who we first met in Season 4 in Silence in the Library/Forest of the Dead. I was very intrigued by River's story in those episodes - her past is the Doctor's future - so I loved how we learned some more about River in Season 5 overall and in these two episodes. As long as Steven Moffat is showrunner for Doctor Who, I'm guessing that we're going to have River Song around to tease and worry the Doctor. The beginning sequence of The Time of Angels was brilliant, with River sending a message to the Doctor from the past overlaid with the Doctor and Amy receiving the message in a museum. And the Doctor's reaction when River piloted the TARDIS better than he during the chase of the Byzantium was hilarious (when the Doctor asked about the noise the TARDIS ordinarily makes when landing but did not when River landed, she said 'It's not supposed to make that noise. You leave the brakes on.').
Also, there are the quotes from The Time of Angels:
"Two things always guaranteed to turn up in a museum: the home box of a category four starliner and, sooner or later, him." - River Song
"What if we had ideas that could think for themselves? What if one day our dreams no longer needed us? When these things occur and are held to be true, the time will be upon us. The time of angels." - River Song reading from the book about the Weeping Angels
And finally, the cliffhanger (spoilers, yes, but fun nevertheless):
Anyway, that's my opinion. You may be a fan of the old Doctor Who series rather than the new, or may not even have heard of the series. But given the quality of what Steven Moffat has written, besides some Doctor Who episodes (the new Sherlock series on the BBC, Coupling, and Jekyll, for instance), I think that watching these episodes of Doctor Who would be quite rewarding
Monday, September 13, 2010
Books on the reading list
Surprisingly, I didn't get through much reading in Nice. I finished both God and Gold: Britain, America, and the Making of the Modern World by Walter Russell Mead (worth reading along with To Rule the Waves) and Eat, Pray, Love. Quite a juxtaposition of themes, don't you think? Well, it was lighter reading than The God Delusion, the book I was reading the last time I was in Nice.
I didn't finish Kitchen Confidential, though the parts I read I loved. And I started The Way of Kings, just because I am a sucker for door-stopper fantasy novels.
So where am I on my reading list, my extracurricular reading, if you will? Doing quite poorly. Last I checked, I still had these books to go through:
I didn't finish Kitchen Confidential, though the parts I read I loved. And I started The Way of Kings, just because I am a sucker for door-stopper fantasy novels.
So where am I on my reading list, my extracurricular reading, if you will? Doing quite poorly. Last I checked, I still had these books to go through:
- The Ascent of Money - Niall Ferguson
- On Liberty - John Stuart Mill
- Utilitarianism - John Stuart Mill (optional)
- Considerations on Representative Government - John Stuart Mill (optional)
- The Subjection of Women - John Stuart Mill (optional)
- The Contest in America - John Stuart Mill (optional)
- Essays on some unsettled Questions of Political Economy - John Stuart Mill (optional)
- The Flight of the Intellectuals - Paul Berman
- Leviathan - Thomas Hobbes
- The Theory of Moral Sentiments - Adam Smith
- Wealth of Nations - Adam Smith
- This Time is Different - Reinhart and Rogoff
- Works of Edmund Burke
On a related note, I love the site FiveBooks - a lot of my extracurricular reading is from there.
What's my curricular reading? You're probably bored by the extracurricular list already, but this list is shorter, significantly.
- More Money than God - Sebastian Mallaby
- Liar's Poker - Michael Lewis
Given the size of the extracurricular list, I'm not adding any more to it. However, I'm happy to add to the curricular list should anyone be able to toss anything my way - the curriculum includes diverting fiction and business/investing reading. Extracurricular is typically history, economics, and political/philosophical commentary, with a dash of popular science, though I usually am tempted to have the economics in the curricular section too.
I leave you with a quote from John Stuart Mills that may make it clear why On Liberty is on my reading list:
‘In politics, again, it is almost a commonplace, that a party of order or stability, and a party of progress or reform, are both necessary elements of a healthy state of political life; until the one or the other shall have so enlarged its mental grasp as to be a party equally of order and of progress, knowing and distinguishing what is fit to be preserved from what ought to be swept away. Each of these modes of thinking derives its utility from the deficiencies of the other; but it is in a great measure the opposition of the other that keeps each within the limits of reason and sanity.’
For those who slip into the "us versus them" mindset whenever considering the political party opposed to what you think is right (and because you think it's right, of course it's correct!), maybe they should read this and pause, breathe, and let the emotions out.
Spontaneous breakfast thought
In France, I love a simple breakfast of croissants or a tartine with espresso and orange juice. Back home in the US, I enjoy a relatively hearty breakfast of oatmeal with almonds and flaxseed along with fruit and espresso. When in India, I seek out a breakfast that is also hearty and probably unhealthy - samosas or pakoras with chutney, fruit and tea (it seems to me that in Indian culture, breakfast foods for the well-off were the appetizers you'd have for dinner, and if you've been to an Indian restaurant, you know how unhealthy they are).
Point being, with the exception of my stateside breakfast, which has hints of Scotland in it with the oatmeal, I typically try to eat a breakfast that is local to the locale I am visiting when abroad. That simple sort of pleasure is one of the highlights of any trip I take, and adds significantly to my joie de vivre when abroad.
One more spontaneous thought that occurred to me during breakfast:
I've noticed that my blog is not living up to either the boring (unless you're bored by self-absorbed travelogue) or smart portions of the title. My apologies to you for messing with your expectations! I have some more travel entries to deal with, so please bear with me.
Point being, with the exception of my stateside breakfast, which has hints of Scotland in it with the oatmeal, I typically try to eat a breakfast that is local to the locale I am visiting when abroad. That simple sort of pleasure is one of the highlights of any trip I take, and adds significantly to my joie de vivre when abroad.
One more spontaneous thought that occurred to me during breakfast:
I've noticed that my blog is not living up to either the boring (unless you're bored by self-absorbed travelogue) or smart portions of the title. My apologies to you for messing with your expectations! I have some more travel entries to deal with, so please bear with me.
Socca and Beignets de Fleurs de Courgettes
If you'd a fan of chickpeas, I think you'll love Nice. Two of the regionals specialities of Nice are chickpea related - socca and a variety of beignets (I like the ones of fleurs de courgettes, or squash blossoms) Socca is a type of flatbread made from chickpeas flour, water, olive oil, salt and pepper, at least in Nice. In Genoa it's called farinata and also has onions and rosemary in it. I'm a fan of both, though unfortunately I've not tried the Italian version yet except for making it at home (and making it at home is not the same...). The beignets are chickpea batter fritters of a variety of vegetables and fish. I'm vegetarian, so I've avoided the ones with fish.
Back to socca - I've been cooking a version of socca, a very thin crepe made in a cast-iron pan on the stovetop, back in DC. Or at least I thought I was cooking socca. I was not. I was making something inspired by socca, but definitely not socca. Socca is apparently baked in an oven (wood-fired if you're authentic, apparently, and whatever that means in this day and age!). It's not cooked on a stove-top. So to all my friends who enjoyed my stovetop version, sorry!
The first version of Socca I tried in Nice was a thick (compared to the crepes I was making back in DC), flatbread baked on a huge (5 ft in diameter) cast-iron pan in an oven. I procured this version at Chez Rene Socca at 1 Rue Pairoliere, a few doors down from my apartment (13 Rue Pairoliere). I absolutely loved how soft and moist the socca was, and how simple it was too - just chickpea flour, water, olive oil and salt. It's soft enough that instead of cutting slices, the server just made slashes and scraped pieces of socca up in a scooping motion, serving a heaping plate of socca strips/scraps.
In some ways it's too soft though. I was lucky to get the first or second serving of socca the first time around at Chez Rene. The second time, I was fourth or fifth in line, and hence got the middle of the pan. That was pretty much soft, semi-gooey socca. Too soft for my taste. According to some of the locals I befriended at Distillations Ideales though, that's what socca is like closer to the middle (except at Chez Pipo).
That is also how they do it at Chez Theresa at their stand in the Cours Saleya - a tourist trap of a socca place, since they make the socca at an oven in the old town and then motor it over to the Cours Saleya (5 min drive), charging 3 € (It's 2.5 € at Rene Socca). After trying Chez Theresa twice, I think it's the same quality as Rene Socca, but with longer wait times because the oven baking the socca is not in the Cours Saleya where they serve it.
Socca at Chez Pipo (highlighted by David Lebovitz here, including good photos) is also delightful, at 2.5€ an order. Like Rene Socca, it's served fresh from the oven - mine came to me piping hot. It also as thick as at Rene Socca. However it has a crispier top than Rene Socca, and looks like it baked and cut easier without sticking to the Pan, unlike Rene Socca. So Chez Pipo has better socca than Rene Socca in my opinion, because of that crispy crust that it has while also maintaining the moist interior. And the flavor is still simple, just chickpea batter and salt!
In fact, said locals I was chatting with at Distillations Ideales (another story, I swear, involving plenty of smoke and wishing that I had a pipe) also thought that Chez Pipo has the best socca in Nice, in part because of that crispy crust all over the socca rather than just being crispy at the edges like everyone else is.
I've been experimenting with socca now that I'm back in DC, and while I can not get it as good as Pipo, not having the oven they do, I've managed to make a respectable socca with a moist interior and crispy crust thanks to my broiler.
As for those delightful beignets, my favorite is the beignets de fleurs de courgettes, or squash blossom fritters. They're usually seasoned with salt, though I think they could use more. They're also very simple and something I think that can be found also at any Nicoise restaurant as an appetizer. Of course they are fried, which is what makes them taste so good. And since they're available for 3 € at Rene Socca, they're cheap enough that I'll probably gorge on them every day.
2 Amys in DC occasionally serves squash blossom fritters as a summer special. Having tasted them in Nice and seeing them regularly available, I wish 2 Amys made them available more often because they're so tasty! (It could be the psychology of being in a foreign locale tasting a regional dish that is enhancing my memory of the taste beyond reason though...).
At any rate, when I was planning my trip to Nice, a culinary tour was not the main reason I was going there. But once I found out about socca, and actually tried it while there, socca and beignets de fleurs de courgettes became an obsession of mine. I ate both whenever I could. And while I'll probably not make the beignets back here in DC, the version of socca that I make is better for me having gone to Nice and trying it there. Socca was not the only reason I enjoyed Nice, but it definitely was a good one.
Back to socca - I've been cooking a version of socca, a very thin crepe made in a cast-iron pan on the stovetop, back in DC. Or at least I thought I was cooking socca. I was not. I was making something inspired by socca, but definitely not socca. Socca is apparently baked in an oven (wood-fired if you're authentic, apparently, and whatever that means in this day and age!). It's not cooked on a stove-top. So to all my friends who enjoyed my stovetop version, sorry!
The first version of Socca I tried in Nice was a thick (compared to the crepes I was making back in DC), flatbread baked on a huge (5 ft in diameter) cast-iron pan in an oven. I procured this version at Chez Rene Socca at 1 Rue Pairoliere, a few doors down from my apartment (13 Rue Pairoliere). I absolutely loved how soft and moist the socca was, and how simple it was too - just chickpea flour, water, olive oil and salt. It's soft enough that instead of cutting slices, the server just made slashes and scraped pieces of socca up in a scooping motion, serving a heaping plate of socca strips/scraps.
In some ways it's too soft though. I was lucky to get the first or second serving of socca the first time around at Chez Rene. The second time, I was fourth or fifth in line, and hence got the middle of the pan. That was pretty much soft, semi-gooey socca. Too soft for my taste. According to some of the locals I befriended at Distillations Ideales though, that's what socca is like closer to the middle (except at Chez Pipo).
That is also how they do it at Chez Theresa at their stand in the Cours Saleya - a tourist trap of a socca place, since they make the socca at an oven in the old town and then motor it over to the Cours Saleya (5 min drive), charging 3 € (It's 2.5 € at Rene Socca). After trying Chez Theresa twice, I think it's the same quality as Rene Socca, but with longer wait times because the oven baking the socca is not in the Cours Saleya where they serve it.
Socca at Chez Pipo (highlighted by David Lebovitz here, including good photos) is also delightful, at 2.5€ an order. Like Rene Socca, it's served fresh from the oven - mine came to me piping hot. It also as thick as at Rene Socca. However it has a crispier top than Rene Socca, and looks like it baked and cut easier without sticking to the Pan, unlike Rene Socca. So Chez Pipo has better socca than Rene Socca in my opinion, because of that crispy crust that it has while also maintaining the moist interior. And the flavor is still simple, just chickpea batter and salt!
In fact, said locals I was chatting with at Distillations Ideales (another story, I swear, involving plenty of smoke and wishing that I had a pipe) also thought that Chez Pipo has the best socca in Nice, in part because of that crispy crust all over the socca rather than just being crispy at the edges like everyone else is.
I've been experimenting with socca now that I'm back in DC, and while I can not get it as good as Pipo, not having the oven they do, I've managed to make a respectable socca with a moist interior and crispy crust thanks to my broiler.
As for those delightful beignets, my favorite is the beignets de fleurs de courgettes, or squash blossom fritters. They're usually seasoned with salt, though I think they could use more. They're also very simple and something I think that can be found also at any Nicoise restaurant as an appetizer. Of course they are fried, which is what makes them taste so good. And since they're available for 3 € at Rene Socca, they're cheap enough that I'll probably gorge on them every day.
2 Amys in DC occasionally serves squash blossom fritters as a summer special. Having tasted them in Nice and seeing them regularly available, I wish 2 Amys made them available more often because they're so tasty! (It could be the psychology of being in a foreign locale tasting a regional dish that is enhancing my memory of the taste beyond reason though...).
At any rate, when I was planning my trip to Nice, a culinary tour was not the main reason I was going there. But once I found out about socca, and actually tried it while there, socca and beignets de fleurs de courgettes became an obsession of mine. I ate both whenever I could. And while I'll probably not make the beignets back here in DC, the version of socca that I make is better for me having gone to Nice and trying it there. Socca was not the only reason I enjoyed Nice, but it definitely was a good one.
Saturday, September 4, 2010
Addendum
[I've editted this post to include pictures from my last day.]
I just love a simple relaxing petit dejeuner. I took the time, at the ungodly early hour to stop by the boulangerie and cafe near my flat and enjoy a petit dejeuner of two croissants, orange juice, and an espresso. I normally don't do this at home, so this really was a nice, simple luxury for me.
Bear in mind, there are plenty of small boulangeries and cafes serving croissants, espresso, and whatnot in the morning, and for the undiscerning American, you'll probably not be able to tell the difference between any of them in quality (I wasn't). Or maybe they all are quite good. Anyway, this was the one closest to me, so that's what I chose. When I was at the Place Massena last time, I visited another small boulangerie for this same sort of simple decadent morning. And when I was at a studio on the Promenade des Anglais, I procured fresh croissants or olive bread from the Cours Saleya and treated myself to a fresh omelette, fruit and fresh croissants or olive bread out on my balcony after my morning swim.
The view might not strike some as romantic, but whatever. I don't mind the smell of fish market in the morning.
It's time to board [at the time I originally wrote this], so I've reached the end of this fluffy post. But still, this is a simple pleasure that I will probably indulge in at home, while reading a novel or the FT.
Au revoir, Nice! And until next time.
I just love a simple relaxing petit dejeuner. I took the time, at the ungodly early hour to stop by the boulangerie and cafe near my flat and enjoy a petit dejeuner of two croissants, orange juice, and an espresso. I normally don't do this at home, so this really was a nice, simple luxury for me.
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| From Nice, France |
Bear in mind, there are plenty of small boulangeries and cafes serving croissants, espresso, and whatnot in the morning, and for the undiscerning American, you'll probably not be able to tell the difference between any of them in quality (I wasn't). Or maybe they all are quite good. Anyway, this was the one closest to me, so that's what I chose. When I was at the Place Massena last time, I visited another small boulangerie for this same sort of simple decadent morning. And when I was at a studio on the Promenade des Anglais, I procured fresh croissants or olive bread from the Cours Saleya and treated myself to a fresh omelette, fruit and fresh croissants or olive bread out on my balcony after my morning swim.
The view might not strike some as romantic, but whatever. I don't mind the smell of fish market in the morning.
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| From Nice, France |
It's time to board [at the time I originally wrote this], so I've reached the end of this fluffy post. But still, this is a simple pleasure that I will probably indulge in at home, while reading a novel or the FT.
Au revoir, Nice! And until next time.
Friday, September 3, 2010
Last Day in Nice
Today was my last full day in Nice - my flight departs tomorrow morning at 10.30 am, and I expect to be back in DC a little before 6 pm. After which I have some errands to run for a friend requesting something from me that I could not get to him until back in DC (another story, another time).
My day here was simple - I woke up in that lovely flat with the sea view that I had a link to in my prior post. Tom and I went on a sort of pub crawl last night, drinking glass after glass of rosé, before I walked with Tom home. Once I did that, I really didn't feel like braving the streets to get back to my flat, so I slept over on the couch (it's really very comfy).
Tom, Claire and I met up around 1 pm to enjoy the beach. We went to the beach near the Castel private beach, relaxing until 3 pm. We met up again at 4 pm after showering, and I showed them my flat before we started looking for food. Since most restaurants in Nice are only open for lunch (12 to 2.30 pm) and dinner (7 to 11 pm), this was a problem. We attempted two places in the Place Garibaldi before ending up in the Cours Saleya at a touristy restaurant. They served decent quality food, though I am consistently disappointed that restaurants in Nice seem to use ordinary mozzarella rather than buffalo mozzarella for their pizzas. This close to Italy there really is no excuse! The crusts have never disappointed though.
We later popped by Paul's place for a small party. Paul is the proprietor of Go-Nice, which we used for our flat rentals. Paul became good friends with Tom over the course of a few vacations Tom took in Nice. No pictures from the party, but I will say that the terrace Paul has for his flat is beautiful - it's at the top level of his building, and has a potted plant garden.
Incidentally, one of Paul's friends, Ben, loves to explore the off the beaten path places in the area, since Nice in July and August is intolerably crowded to anyone who's a local (for someone from DC or NYC, Nice is not that crowded at all even in the high season - I dare say it would feel normal for NYC people). He gave a great idea for a day trip the next time I'm here: if I take the train from Nice to Ventimiglia in Italy, and then transfer to a Genoa bound train and de-train at Imperia at the Porto Maurizio stop, I can walk along the coastal area for 20 some minutes to get to some isolated fisherman's area called La Foce. Besides the local flavour of such a town, apparently the place is very relaxing and the beaches cheap. Add to that that I can get cheap coffee (cappuccino for €1.30 anyone?), and I'm sold on that. I think it sounds like a great day trip, ironic as it is to take the train from Nice and its beachs to Italy and its beaches. But I've never been to Italy, and I think a day trip like this would be fantastic for dipping my toes in the water, especially if I wanted to get away from the crowds in Nice for a day.
Anyway, around 10 pm we said our farewells to Paul and walked back to our flats in the old town. I said my farewells to Claire and Tom, though of course it won't be for long. I might see them again this year, either when Tom's in New York or if I am able to go to Cumbria after the baby's born.
And now, it's off to bed before my flight tomorrow.
A few words though before I do so. So far this blog's posts have kept in order with when events happened, more or less. However, I still have not written or posted photos from my day trips to Monaco (after which I saw Tom and Claire, and had all that champagne on the balcony of their flat), Marseilles and the Chateau D'If, Grasse (and its luxury perfume industry), or my explorations of Nissarde cuisine (mainly on the front of socca) and how they will influence some of my cooking when back in the States. I did write up my observations in chronological order, but all of these still need editting, and since the purpose of a vacation is to relax rather than post blog entries, I deemed it reasonable to go to the beach and swim in the Baie des Anges rather than finish my blog post for Grasse and post it.
Hence, over the next week these entries will appear, even though I'm not on vacation. But I hope people will enjoy them, particularly since it may give you some ideas of where and what to do when in the Riviera. There's more to the Riviera than just the beaches, after all, and while I did not go to nearly all the places you could go in Nice and the nearby Riviera, seeing some of the places I went may influence you one way or another and may make an excursion of yours to the Riviera more rewarding.
More importantly, this blog is not ending with the vacation posts. I wrote in my first post that I invited you to come along in my pursuit of joie de vivre. Needless to say, it doesn't end once back from vacation. And while some of what I may write (i.e. views on investing) may seem very far from what you may view as joie de vivre, they're not for me. At the minimum, you may learn something from those posts.
Au revoir, Nice!
My day here was simple - I woke up in that lovely flat with the sea view that I had a link to in my prior post. Tom and I went on a sort of pub crawl last night, drinking glass after glass of rosé, before I walked with Tom home. Once I did that, I really didn't feel like braving the streets to get back to my flat, so I slept over on the couch (it's really very comfy).
Tom, Claire and I met up around 1 pm to enjoy the beach. We went to the beach near the Castel private beach, relaxing until 3 pm. We met up again at 4 pm after showering, and I showed them my flat before we started looking for food. Since most restaurants in Nice are only open for lunch (12 to 2.30 pm) and dinner (7 to 11 pm), this was a problem. We attempted two places in the Place Garibaldi before ending up in the Cours Saleya at a touristy restaurant. They served decent quality food, though I am consistently disappointed that restaurants in Nice seem to use ordinary mozzarella rather than buffalo mozzarella for their pizzas. This close to Italy there really is no excuse! The crusts have never disappointed though.
We later popped by Paul's place for a small party. Paul is the proprietor of Go-Nice, which we used for our flat rentals. Paul became good friends with Tom over the course of a few vacations Tom took in Nice. No pictures from the party, but I will say that the terrace Paul has for his flat is beautiful - it's at the top level of his building, and has a potted plant garden.
Incidentally, one of Paul's friends, Ben, loves to explore the off the beaten path places in the area, since Nice in July and August is intolerably crowded to anyone who's a local (for someone from DC or NYC, Nice is not that crowded at all even in the high season - I dare say it would feel normal for NYC people). He gave a great idea for a day trip the next time I'm here: if I take the train from Nice to Ventimiglia in Italy, and then transfer to a Genoa bound train and de-train at Imperia at the Porto Maurizio stop, I can walk along the coastal area for 20 some minutes to get to some isolated fisherman's area called La Foce. Besides the local flavour of such a town, apparently the place is very relaxing and the beaches cheap. Add to that that I can get cheap coffee (cappuccino for €1.30 anyone?), and I'm sold on that. I think it sounds like a great day trip, ironic as it is to take the train from Nice and its beachs to Italy and its beaches. But I've never been to Italy, and I think a day trip like this would be fantastic for dipping my toes in the water, especially if I wanted to get away from the crowds in Nice for a day.
Anyway, around 10 pm we said our farewells to Paul and walked back to our flats in the old town. I said my farewells to Claire and Tom, though of course it won't be for long. I might see them again this year, either when Tom's in New York or if I am able to go to Cumbria after the baby's born.
And now, it's off to bed before my flight tomorrow.
A few words though before I do so. So far this blog's posts have kept in order with when events happened, more or less. However, I still have not written or posted photos from my day trips to Monaco (after which I saw Tom and Claire, and had all that champagne on the balcony of their flat), Marseilles and the Chateau D'If, Grasse (and its luxury perfume industry), or my explorations of Nissarde cuisine (mainly on the front of socca) and how they will influence some of my cooking when back in the States. I did write up my observations in chronological order, but all of these still need editting, and since the purpose of a vacation is to relax rather than post blog entries, I deemed it reasonable to go to the beach and swim in the Baie des Anges rather than finish my blog post for Grasse and post it.
Hence, over the next week these entries will appear, even though I'm not on vacation. But I hope people will enjoy them, particularly since it may give you some ideas of where and what to do when in the Riviera. There's more to the Riviera than just the beaches, after all, and while I did not go to nearly all the places you could go in Nice and the nearby Riviera, seeing some of the places I went may influence you one way or another and may make an excursion of yours to the Riviera more rewarding.
More importantly, this blog is not ending with the vacation posts. I wrote in my first post that I invited you to come along in my pursuit of joie de vivre. Needless to say, it doesn't end once back from vacation. And while some of what I may write (i.e. views on investing) may seem very far from what you may view as joie de vivre, they're not for me. At the minimum, you may learn something from those posts.
Au revoir, Nice!
Various Photos of Nice
The first time I came to Nice, back in 2008, there was a light drizzle, which was unusual. I stayed at an apartment on the Place Massena: http://www.go-nice.com/3_place_massena_property_details.aspx
I can't say that I fell in love with Nice, per se, but I might well have. Why else would I be back here for a vacation, when I usually try to visit new places when on vacation. For crying out loud, the Place Massena is featured on one of my credit cards. While not the picture on my card, here's one of Place Massena:
And then here's a picture of the Place Massena at 7 am in the morning, the ungodly early hour (for a vacation) that I was awake in order to catch a train for a day trip to Marseilles.
Anyway, I'm staying at this charming one bedroom apartment, sans air conditioning.
http://www.go-nice.com/13_rue_pairoliere_property_details.aspx
The next time I'm in Nice though, I'm going to go for one of these two flats. Advantages? Both have air-conditioning. One is very charming, a flat in a former monastery with an excellent sea view.
The other is a studio on the Promenade des Anglais, which is perfect for a daily jaunt to the beach (I stayed here briefly in 2008 also after a jaunt in Bulgaria that left me a little jaded about that portion of the EU).
At any rate, here's a view of the beach from the Chateau park in Nice. Perhaps it'll give you an idea of why I find Nice so charming.
Here's a view of the old town and the Cours Saleya, where there is a farmers market every morning and sellers of bric-a-brac all day.
And here's the entrance to the Port in Nice:
So I'm enjoying my vacation here; I hope you enjoy my amateurish pictures of Nice:
http://picasaweb.google.com/108276142989315006949/NiceFrance?feat=directlink
Cheers to everyone!
I can't say that I fell in love with Nice, per se, but I might well have. Why else would I be back here for a vacation, when I usually try to visit new places when on vacation. For crying out loud, the Place Massena is featured on one of my credit cards. While not the picture on my card, here's one of Place Massena:
 |
| From Nice, France |
 |
| From Nice, France |
 |
| From Nice, France |
And then here's a picture of the Place Massena at 7 am in the morning, the ungodly early hour (for a vacation) that I was awake in order to catch a train for a day trip to Marseilles.
 |
| From Nice, France |
Anyway, I'm staying at this charming one bedroom apartment, sans air conditioning.
http://www.go-nice.com/13_rue_pairoliere_property_details.aspx
The next time I'm in Nice though, I'm going to go for one of these two flats. Advantages? Both have air-conditioning. One is very charming, a flat in a former monastery with an excellent sea view.
 |
| From Nice, France |
The other is a studio on the Promenade des Anglais, which is perfect for a daily jaunt to the beach (I stayed here briefly in 2008 also after a jaunt in Bulgaria that left me a little jaded about that portion of the EU).
At any rate, here's a view of the beach from the Chateau park in Nice. Perhaps it'll give you an idea of why I find Nice so charming.
 |
| From Nice, France |
Here's a view of the old town and the Cours Saleya, where there is a farmers market every morning and sellers of bric-a-brac all day.
 |
| From Nice, France |
And here's the entrance to the Port in Nice:
 |
| From Nice, France |
So I'm enjoying my vacation here; I hope you enjoy my amateurish pictures of Nice:
http://picasaweb.google.com/108276142989315006949/NiceFrance?feat=directlink
Cheers to everyone!
St Paul de Vence
I went to visit St Paul de Vence on the 27th of August, I believe, because I wanted to see this tiny mountain town. I also ended up going to a modern art museum there (Foundation Maeght) which I thought overpriced. Perhaps that's just my neutral attitude towards modern art.
I'll let the pictures of St Paul de Vence speak for themselves, for the most part. I found the town to be really beautiful, a town so tiny that there pretty much is one road that you can drive on in there, and it's not that much of a drive.
I also visited La Petite Cave de Saint-Paul, a small, basement wine shop selling a lovely selection of wines (some were quite exclusive, including wine from the vineyards of the modern art museum, which I disdained to buy because of the cost). I ended up buying rosé and two wines from Languedoc.
Anyway, here are some of my pictures from St. Paul de Vence, starting with a picture of St Paul de Vence from the outside:
I'll let the pictures of St Paul de Vence speak for themselves, for the most part. I found the town to be really beautiful, a town so tiny that there pretty much is one road that you can drive on in there, and it's not that much of a drive.
I also visited La Petite Cave de Saint-Paul, a small, basement wine shop selling a lovely selection of wines (some were quite exclusive, including wine from the vineyards of the modern art museum, which I disdained to buy because of the cost). I ended up buying rosé and two wines from Languedoc.
Anyway, here are some of my pictures from St. Paul de Vence, starting with a picture of St Paul de Vence from the outside:
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| St Paul de Vence |
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| The vineyards below St Paul de Vence |
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| The cat's hiding from me! Good to know, since I have allergies to them! |
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| A series of steps from the perimeter of the town, where the defensive wall is, to the center. |
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| La Petite Cave de Saint-Paul |
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| The Church Tower |
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| Lucy's Diner! Complete with hamburgers, french fries, and Coca Cola. |
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| The street outside the town, where the bus stop and La Columbe D'Or (restaurant worth visiting) are |
Tuesday, August 31, 2010
Rejected at La Zucca Magica
Now for a bitter post...
Never have I been turned away from a restaurant before unless I have been inappropriately dressed. And yet, at La Zucca Magica, where it was only half full, the host claimed a policy of "Reservations Only" and turned me away. Now, may haps they had reservations for the evening and the restaurant would be full in half an hour. But somehow, given the underwhelming amount of people in Nice this week (we're at the tail end of the high season, and the beaches are not nearly as crowded as I would have expected - they're just as crowded as they were in June 2008 when I visited, and June is early to mid season), I doubt that.
Dare I say they are either arrogant or inflexible?
Either way, a restaurant like that does not deserve my custom, no matter how good. I can understand a reservations only policy if you're absolutely booked every day of the season. But otherwise I think flexibility is the order of the day, unless you're not interested in making money. In a business with a 60% failure rate (Kitchen Confidential) I would expect that making money is a priority. Perhaps not for La Zucca Magica.
I ended up going to Chez Pipo and gorging on their amazing, crisp strips of socca (more on that in another post, including some pictures). Suffice to say that my trip to Nice has been worth it thus far purely for the amazing weather and the local cuisine, mainly the socca.
Never have I been turned away from a restaurant before unless I have been inappropriately dressed. And yet, at La Zucca Magica, where it was only half full, the host claimed a policy of "Reservations Only" and turned me away. Now, may haps they had reservations for the evening and the restaurant would be full in half an hour. But somehow, given the underwhelming amount of people in Nice this week (we're at the tail end of the high season, and the beaches are not nearly as crowded as I would have expected - they're just as crowded as they were in June 2008 when I visited, and June is early to mid season), I doubt that.
Dare I say they are either arrogant or inflexible?
Either way, a restaurant like that does not deserve my custom, no matter how good. I can understand a reservations only policy if you're absolutely booked every day of the season. But otherwise I think flexibility is the order of the day, unless you're not interested in making money. In a business with a 60% failure rate (Kitchen Confidential) I would expect that making money is a priority. Perhaps not for La Zucca Magica.
I ended up going to Chez Pipo and gorging on their amazing, crisp strips of socca (more on that in another post, including some pictures). Suffice to say that my trip to Nice has been worth it thus far purely for the amazing weather and the local cuisine, mainly the socca.
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