Asymptosis

I’m devastated that Christian Rudder hasn’t posted to the OKTrends blog for more than a year.* He did statistical analysis of the monstrous database of OK Cupid — a dating site that asks participants hundreds of often odd and quirky questions about themselves — to draw out conclusions about various, sundry, and often fascinating topics.

I also can’t believe that I never posted about a finding in one of his posts that really caught my eye — from The Best Questions for a First Date:

If you want to know…

Do my date and I have the same politics?

Ask him or her…

Do you prefer the people in your life to be simple or complex?

Because…

We were very surprised to find that this one question very strongly predicts a person’s ideas on these divisive issues:

Should burning your country’s flag be illegal?

Should the death penalty be abolished?

Should gay marriage be legal?

Should Evolution and Creationism be taught side-by-side in schools?

In each case, complexity-preferrers are 65-70% likely to give the Liberal answer. And those who prefer simplicity in others are 65-70% likely to give the Conservative one.

This correlation is for a nationwide dataset; it won’t be as useful in places where one ideology is much more prevalent than the other. For example, in New York City there are lots of people who like simplicity and yet have Liberal politics.

This jives perfectly with my own anecdotal observations: that conservatives tend to like simple answers to everything: “Just cut taxes!” or “It all boils down to X.” (Scott Sumner deserves unlimited praise for acknowledging and battling that predilection in this link. That admission — along with the Rudder’s finding here — might also go a long way towards explaining why Steve Randy Waldmann thinks that professedly right-ish Market Monetarists have more in common with generally lefty MMTers and Post-Keynesians than they or others might suspect, or than any of those groups have in common with simplistically delusional freshwater neoclassicals.)

And I would also add: people aren’t simple. Ever. Especially when there’s more than one of them. (Can you name a single family that you know well that doesn’t have all sorts of odd and complicated stuff going on?) So this portrays conservatives wishing for things that don’t exist — like, for instance, prosperous, modern, high-productivity countries that don’t have massive doses of redistribution.

I’ll leave you with that. But I can’t resist sharing another beauty from the same post:

Okay, if you want to know…

Will my date have sex on the first date?

Ask…

Do you like the taste of beer?

Because…

Among all our casual topics, whether someone likes the taste of beer is the single best predictor of if he or she has sex on the first date.

This caused me some difficulty recently. I was out with a friend and his girlfriend. She took a big swallow from her glass, put it down firmly, and announced, “Damn I love the taste of beer.” I almost spewed mine across the room.

Finally, for those who’ve read this far: if you’re thinking that the title of this post is ironic…you’re right.

* Ah. He sold his shop to Match.com just over a year go — for $50 mil. Just six days ago a “rumored seven-figure” deal was announced for the book on big data that he’s writing/has written, titled Dataclysm. I’ll be buying it.

Cross-posted at Angry Bear.

You know things are weird when pretty strongly right-of-center economists are proposing ideas first touted by MMT econocranks (yes, beowulf, I’m talking about you) to bring about the Obama breakout moment that progressives (despairingly) dream of at night.

The world is a very strange place.

And people argue with Steve Randy Waldman when he says that MMTers, post-Keynesians, and Market Monetarists agree on lots of things… Sheesh.

Macro and Other Market Musings: Obama Needs His FDR Moment.

Cross-posted at Angry Bear.

Speaking of “extractive elites,” don’t miss Pete Kotz’s cover story in the Village Voice, Mitt Romney, American Parasite. (I read it in their subsidiary Seattle Weekly.)

It details a whole string of Bain purchases under Romney — thriving companies that were saddled with debt so Romney could extract cash in the form of “profits,” leaving the companies to devolve into bankruptcy and dissolution.

Just one example:

“When Bain Capital took over, it seemed like everything was being neglected in our plant,” says Sanderson. “Nothing was being invested in our plant. We didn’t have the necessary time to maintain our equipment. They had people here that didn’t know what they were doing. It was like they were taking money from us and putting it somewhere else.”

History would prove him correct. While Georgetown was beginning its descent to bankruptcy, Romney was helping himself to the company’s treasury.

Be very clear on this: that is the business model of private equity:

Charlie Hallac, a top deputy to Larry Fink at BlackRock and head of the firm’s analytical arm, BlackRock Solutions, distilled it down with precision: “Of every twenty deals, the large aggressive PE firm expects seventeen of the companies to fail under the added debt. Two have to survive and one has to hit big for the firm to have a fairly strong return on its PE fund. So that’s three out of twenty.”

The whole purpose of the private equity industry is to destroy the kind of mittelstand, long-lived, profitable, specialized, often family-owned and -operated companies that The Economist, Business Week, et al keep touting as the backbone of Germany’s remarkable success and resilience — its very “model of success.” Private equity’s model is to extract the expected future value of those companies in cash, while simultaneously, in most cases, destroying that value.

Is that what they mean by “creative destruction”?

But here’s the question that keeps nagging at me: who lends them the money? Presumably savvy financial-system lenders know that a large percentage of these companies are going to go bankrupt and walk away from their creditors. Why do they lend the money? I’m thinking it must be a principal-agent problem, where the individuals approving the loans make out well, while the companies they work for (and their shareholders, and taxpayers) take the hit.

Cross-posted at Angry Bear.

It’s pretty amazing to read a cover story in, and by the publisher of, The American Conservative that could have run in The Nation, Mother Jones, or on Daily Kos — almost.

Certainly America’s top engineers and entrepreneurs have created many of the world’s most important technologies, sometimes becoming enormously wealthy in the process. But these economic successes are not typical nor have their benefits been widely distributed. Over the last 40 years, a large majority of American workers have seen their real incomes stagnate or decline.

Ordinary Americans who work hard and seek to earn an honest living for themselves and their families appear to be suffering the ill effects of exactly this same sort of elite-driven economic pillage. The roots of our national decline will be found at the very top of our society, among the One Percent, or more likely the 0.1 percent.

This is in The American Conservative!

Strangely disguised under the title China’s Rise, America’s Fall, Ron Unz riffs like so many of late on Daron Acemoglu and James A. Robinson’s new Why Nations Fail, describing America over recent decades as a country plagued by “extractive elites” and “macro-corruption.”

Macro-corruption is a great coinage. Former S&L enforcer Bill Black should adopt it in place of his perhaps more descriptive but not very catchy “control fraud.”

Unz (emphasis mine):

although American micro-corruption is rare, we seem to suffer from appalling levels of macro-corruption, situations in which our various ruling elites squander or misappropriate tens or even hundreds of billions of dollars of our national wealth, sometimes doing so just barely on one side of technical legality and sometimes on the other.

Sweden is among the cleanest societies in Europe, while Sicily is perhaps the most corrupt. But suppose a large clan of ruthless Sicilian Mafiosi moved to Sweden and somehow managed to gain control of its government. On a day-to-day basis, little would change, with Swedish traffic policemen and building inspectors performing their duties with the same sort of incorruptible efficiency as before, and I suspect that Sweden’s Transparency International rankings would scarcely decline. But meanwhile, a large fraction of Sweden’s accumulated national wealth might gradually be stolen and transferred to secret Cayman Islands bank accounts, or invested in Latin American drug cartels, and eventually the entire plundered economy would collapse.

Does this sound like the American financial industry to you?

But is Unz talking about the financial industry and its government (particularly Republican) toadies? Of course not. That would be admitting that he and his movement are largely at fault for the problems he’s describing.

When parasitic elites govern a society along “extractive” lines, a central feature is the massive upward flow of extracted wealth, regardless of any contrary laws or regulations. Certainly America has experienced an enormous growth of officially tolerated corruption as our political system has increasingly consolidated into a one-party state controlled by a unified media-plutocracy.

What’s amazing here is the two bolded passages. What in the heck does he mean by “regardless of any contrary laws or regulations”? Perhaps that the institutions responsible for enforcing and writing those laws and regulations are defunded, defanged, and co-opted by the extractive elite? Sound familiar?

And the final passage is just breathtaking. The financial industry, empowered and unleashed by that defanging (with American conservatives cheering and pushing every step of the way), has captured 20-40% of corporate profits over the last decade or so. But it’s the media that’s doing the extracting?

All I can say is they’re not very damned good at it. Wouldn’t you expect the extractive elite to successfully . . . extract a lot of money into offshore bank accounts? Exactly which industry is doing that?

Some might find it significant that the word “banks” never appears in the article.

I don’t need to detail all the other ironies that pervade this piece. (Notably: an excellent extended and off-topic rant against Obama’s continuation and expansion of Bush-era conservative, authoritarian military, intelligence, and surveillance policies, and their popular glorification in shows like 24: “Throughout all of modern history, I am not aware of a single even semi-civilized country that publicly celebrated the activities of its professional government torturers in the popular media.“). They’re rife and manifest.

But I would highly recommend this piece to those seeking to understand and explicate the problems plaguing this country. “Extractive elites” and “macro-corruption” encapsulate it pretty perfectly. It’s also essential reading for those like me who can’t seem to look away from the decades-long train wreck of contorted, self-contradictory conservative “thinking.”

* Irresistible aside: I heard an NPR interview years back with a businessman from a South American country saying that his country is far more democratic than ours. In his country, anyone can bribe officials. In America, only the rich get to make bribes.

Hat tip: Beowulf

Cross-posted at Angry Bear.

Randall Wray highlights two great insights that arose at the annual Minsky conference last week in NYC.

First Joseph Stiglitz (Wray’s words, emphasis mine):

Recall that part of the reason for the creation and explosion of derivatives was to spread risk. For example, mortgage-backed securities were supposed to make the global financial system safer by spreading US real estate risks all over the world. He then compared that to, say, a deadly flu virus. Would you want to spread the virus all over the world, or quarantine it? Remember Warren Buffet’s statement that all these new financial products are “weapons of mass destruction”–like the 1914 flu virus. And, indeed, just as Stiglitz said, spreading those deadly weapons all over the world ensured that when problems hit, the whole world financial system was infected.

Next, Frank Partnoy:

He said that these innovations mostly exploit information asymmetries in order to:

a) dupe customers (think Goldman Sachs and John Paulson constructing synthetic CDOs sure to blow up, and betting against Goldman’s customers who bought them); and

b) engage in regulatory arbitrage (evade rules, laws, supervisors, etc; ie, move trash into SIVs to evade capital requirements).

But the financial industry and its Republican toadies would have you believe that regulating our outlawing these derivatives will destroy American “innovation.” Yeah: and we should also encourage innovation in suicide-vest technology.

21st Annual Hyman P. Minsky Conference: Debt, Deficits, and Financial Instability « Multiplier Effect.

Cross-posted at Angry Bear.