Posted 11:17 PM by Robert

And Now, A Word From The Bureau of Labor Statistics

Paul Krugman: Bear in mind that the payroll employment figure right now is down 2.6 million compared with what it was when George W. Bush took office. So Mr. Snow is predicting that his boss will be the first occupant of the White House since Herbert Hoover to end a term with fewer jobs available than when he started.

Is this even factually correct? And does Herr Doktorprofessor fail to include other facts whose inclusion is necessary to make the facts that are included not materially misleading? Herr Doktorprofessor fails to note the divergence between the two measures of unemployment (payroll and household) - and focuses exclusively on "payroll employment" as if the United States had yet to discover independent contracting and the like. The omission is all the more misleading because there is increasing evidence that the shift away from "payroll employment" is largely attributable to soaring costs of government imposed employee benefits, employment regulations and mandatory and quasi-mandatory government programs (such as workers comp). Under the second measure of employment (households), there has been no loss of employment under Bush - and there will almost certainly be a substantial increase in employment by this measure by the end of the president's first term. This divergence in the two measures has been discussed elsewhere.

[Possible evidence that employers find old-fashioned payroll employees to be just too expensive, so employers are using more machines in place of employees and using more independent contractors who can be paid more flexibly than employees: Hourly wages have already surprised most economists by growing more quickly than inflation since 2001 in spite of the worst decline in employment in 20 years.

If the "household" measure of employment is correct, and there has not been a decline in real employment in the United States over the past few years, one would not expect downward pressure on wages. Mandatory or quasi-mandatory government imposed costs on employee hires may also be causing employers to disfavor employee hiring in favor of technology - resulting in the remaining employees becoming highly productive, perhaps inefficiently highly productive (as is seen in much of Europe, especially Germany). That would be consistent with the recently observed acceleration in American worker productivity. It is interesting that much new third-world manufacturing (especially in China) substitutes human labor for machines relative to the US. That is, processes performed by machine in the US are performed by Chinese human labor when the manufactring is "moved" from the US to China.

Maybe the belief that we have suffered the worst decline in employment in 20 years based on "payroll employment" just isn't right, and one needs to look at the "households" indicator of employment and finer measures of employee productivity to get a better picture.]

Total non-farm employment data does show that since the end of the Depression every president's term has ended with "more jobs" than it began. But, as a preliminary matter, why focus on the absolute number of jobs? Doesn't one traditionally look at the unemployment rate for historical comparisons and political effect? (While in my opinion Herr Doktorprofessor's entire approach of looking at whether a president ends a term with "more jobs" than he began is not serious economics or political theory, I note that some people believe that the average unemployment rate for 1937, the first year of FDR's second term, was greater than the unemployment rate for 1941, the last year of that term.) For example, the recent attempt by Democrats and Herr Doktorprofessor to make California voters focus on the total number of jobs created under Gray Davis' administration was not exactly effective.

Consider Dwight D. Eisenhower: Thirty-Fourth President 1953-1961 and this data:

Bureau of Labor Statistics:
Series Id: LNS14000000Seasonal Adjusted
Series title: (Seas) Unemployment Rate
Labor force status: Unemployment rate
Type of data: PercentAge: 16 years and over

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual
1952 3.2 3.1 2.9 2.9 3.0 3.0 3.2 3.4 3.1 3.0 2.8 2.7
1953 2.9 2.6 2.6 2.7 2.5 2.5 2.6 2.7 2.9 3.1 3.5 4.5
1954 4.9 5.2 5.7 5.9 5.9 5.6 5.8 6.0 6.1 5.7 5.3 5.0
1955 4.9 4.7 4.6 4.7 4.3 4.2 4.0 4.2 4.1 4.3 4.2 4.2
1956 4.0 3.9 4.2 4.0 4.3 4.3 4.4 4.1 3.9 3.9 4.3 4.2
1957 4.2 3.9 3.7 3.9 4.1 4.3 4.2 4.1 4.4 4.5 5.1 5.2
1958 5.8 6.4 6.7 7.4 7.4 7.3 7.5 7.4 7.1 6.7 6.2 6.2
1959 6.0 5.9 5.6 5.2 5.1 5.0 5.1 5.2 5.5 5.7 5.8 5.3
1960 5.2 4.8 5.4 5.2 5.1 5.4 5.5 5.6 5.5 6.1 6.1 6.6
1961 6.6 6.9 6.9 7.0 7.1 6.9 7.0 6.6 6.7 6.5 6.1 6.0

It might be objected that Herr Doktorprofessor is discussing total jobs - not the unemployment rate, and that's that. He's entitled to discuss what he wants to discuss. But, then, what to make of odd comments like this from his column: And to have kept up with the population growth since Mr. Bush took office, the economy would have to add not two million, but seven million jobs by next November. What does keeping up with the population growth mean outside of the unemployment rate?

And consider this Eisenhower-era data:

Table B-1. Employees on nonfarm payrolls by industry sector
and selected industry detail (in thousands)

Series Id: CEU0500000001
Not Seasonally Adjusted
Super Sector: Total privateIndustry: Total private
Data Type: ALL EMPLOYEES, THOUSANDS

Year...Jan.......Feb.....Mar.....Apr......May.....Jun......Ju.......lAug.....Sep.....Oct.....Nov.....Dec...Annual
1952 41064 41109 41222 41557 41614 41637 41441 42574 43146 43312 43495 44008 42182
1953 42667 42736 43054 43266 43457 43877 43873 44098 44168 44008 43664 43757 43552
1954 42002 41752 41691 41956 41837 42177 42047 42305 42540 42581 42742 43187 42235
1955 41824 41829 42304 42835 43231 43939 44039 44476 44758 44873 45054 45507 43722
1956 44092 44030 44250 44590 44845 45414 44671 45596 45715 45855 45820 46169 45087
1957 44554 44483 44632 44976 45152 45600 45528 45830 45817 45605 45323 45320 45235
1958 43532 42732 42534 42568 42779 43277 43291 43736 44152 44060 44408 44689 43480
1959 43613 43497 43919 44591 45202 45903 45927 45746 45868 45674 45800 46441 45182
1960 45135 45060 44932 45711 45889 46344 46241 46446 46435 46214 45870 45702 45832
1961 44208 43785 44037 44464 44994 45771 45846 46221 46304 46283 46333 46542 45399


Series Id: CES0500000001
Seasonally Adjusted
Super Sector: Total privateIndustry: Total private
Data Type: ALL EMPLOYEES, THOUSANDS

Year.....Jan.....Feb......Mar.....Apr.....May.....Jun......Jul.......Aug....Sep......Oct.....Nov.....Dec....Annual
1953 43351 43542 43690 43662 43774 43788 43813 43733 43616 43478 43157 42959
1954 42707 42598 42362 42371 42136 42050 41966 41933 41987 42044 42215 42374
1955 42544 42721 43025 43287 43521 43770 43936 44089 44195 44313 44509 44673
1956 44808 44955 45043 45099 45139 45216 44549 45181 45119 45262 45269 45346
1957 45268 45452 45484 45537 45436 45364 45368 45371 45183 44997 44788 44539
1958 44256 43744 43452 43158 43019 42986 43065 43221 43490 43454 43915 43988
1959 44376 44571 44884 45178 45396 45535 45630 45156 45189 45094 45351 45807
1960 45967 46187 45933 46278 46040 45915 45861 45800 45734 45642 45446 45146
1961 45119 44969 45051 44997 45119 45289 45400 45535 45591 45716 45931 46035

The charts above show private sector employment. Herr Doktorprofessor Krugman doesn't indicate what measure he is using to determine his "payroll employment" figure. But he appears to include at least public civilian employment. The nation's bloated public sector is a symptom of the economic problem the nation and many localities face - including California. For example, here in California, there is widely understood a need to substantially reduce the size of public sector employment - and the Democratic controlled legislature has already authorized some such cuts.

Is Herr Doktorprofessor saying that the United States needs more government employees and a larger public sector - or that George Bush would have had a more successful term if more public employees had been hired since he took office? Both federal government and general public sector employment has grown during the Bush years. Does Herr Doktorprofessor want even more? That's not what the Democratic National Committee and Al Gore seem to think - they're all for reinventing and downsizing at least federal government:

To help create a federal government that works better and costs less, Vice President Gore headed the National Partnership for Reinventing Government. The initiative has ... reduced the size of the federal government to its smallest level since President John F. Kennedy's Administration.

The threat posed by the endless growth of the public sector to the United States economy was in it's infancy when the Depression began. The beast is now grown up and fearsome. Rhetorical tricks like Herr Doktorprofessor's obscure that particular difference, and many more. He would likely characterize such use of statistics as 'lying" if, for example, the Bush Treasury Department were to do it. Is Herr Doktorprofessor suggesting a new WPA program - or federal subsidies for new hiring? He does suggest: [T]he Bush tax cuts will account for almost $300 billion of a deficit expected to top $500 billion. (If that $300 billion had been used to employ workers directly - a new W.P.A., anyone? - it would have created six million jobs.) Putting his comment in parentheses suggests that it's a kind of joke or ironic observation - in any event, something for which Herr Doktorprofessor doesn't want to take full responsibility. But Herr Doktorprofessor's historical focus on total (not private sector) employment is no joke, since today's bloated public sector is a big burden on the economy.

Even Wesley Clark's $100 Billion employment plan tries hard to avoid direct public sector hires. It is curious that Herr Doktorprofessor has not seen fit to criticize, or even discuss publicly, the highly questionable Clark approach. For example, do we really want the government subsidizing new private sector hires with tax benefits? Is that an effective way to meet global competition?

And where in this column is there any mention of the particular nature of the drag on the economy caused by the over investment in capital goods that occurred during the Clinton administration - other than this pearl:

I know, I know, the usual suspects will roll out the usual explanations. It is, of course, Bill Clinton's fault. (Just for the record, the average rate of job creation during the whole of the Clinton administration was about 225,000 jobs a month. Mr. Clinton presided over the creation of 11 million jobs during each of his two terms.) ... But surely there must be a statute of limitations on these excuses.

Mr. Clinton did not create the over investment in capital goods of the late 1990's any more than his policies caused the recovery of the early 1990's. But it is widely and probably correctly believed that many jobs that would now exist in the capital goods sector don't exist because of that overinvestment binge of the late 1990's. In this sense, many of the jobs of the late Clinton era were pretty clearly "borrowed" from the early 21st Century. That doesn't explain all of the current job situation, but it is fairly clear that too much was invested in the late 1990's (resulting in low unemployment then) - which is causing a drag on employment now. The "statute of limitations" on that effect to a good economist not fixated on making a partisan argument will be exactly as long as it takes for the economy to work through the over investment - which takes a good while. (On a lighter note, perhaps Herr Doktorprofessor can enlighten us all as to the exact moment FDR ceased blaming everything wrong with the American economy on Herbert Hoover. That is: When did that "statute of limitations" expire?)

Herr Doktorprofessor's entire column seems an exercise in liberal economics nostalgia, pining for a day when almost everyone was a payroll employee, when employee benefit costs were minor compared to salaries, when few had to worry about capital investment binge hangovers. In short, he pines for a day when liberal New York Times columnists could make misleading political arguments tricked up as economic analysis that would be endorsed by intellectually dishonest economic academics - and not have to worry too much about being called out on it too sharply:

A very nice column indeed ... But I do have one complaint. Asking that Bush leave "the job market no worse than he found it" is setting the bar too high by perhaps 2 million jobs

But those days are gone.

UPDATE: For one thing, more intellectually honest economists like Steve Antler and Jim Glass pipe up when a columnist ("economist?") goes as far off the rails as Herr Doktorprofessor does here.

FURTHER UPDATE: Herr Doktorprofessor should be feeling more pressure to justify his constant pessimism, since more and more people see ...

...an economy - now described by even some experts as sizzling - is finally creating jobs faster than they are lost.

Economists expect that evidence of this change will start to show up over the coming months as up to 150,000 new jobs are created each month. Hiring appears to be happening across the board: from airlines who are recalling laid-off workers to manufacturers who can no longer meet orders simply by turning on new machines. Even Silicon Valley has "help wanted" signs.

"All signs are pointing to more jobs," says Sung Won Sohn, chief economist at Wells Fargo Banks in Minneapolis. "We are at the point where companies need more people to meet the increase in demand in their businesses."

This shift has important economic ramifications. More jobs will keep consumers spending instead of worrying about layoffs. It will also give businesses confidence that the long-anticipated economic recovery has some depth to it. And it comes at a time when the economy needs help sustaining the stimulative effect of both tax cuts and lower interest rates, which has been waning.

"A resumption of job gains more than adequately fills the gap," says Richard DeKaser, chief economist at National City Corp. in Cleveland. "When you have income realized through work, about 98 percent of it is out the door as soon as it's earned."

The hiring spurt could also have important political ramifications, particularly as the 2004 presidential race nears. A better employment picture could relieve some of the criticism directed at the Bush administration, and it could make Democrats rethink their campaign strategy.

But while the economy will be creating new jobs, economists warn that the improvement won't show up initially in the widely watched unemployment rate. In fact, the rate - currently at 6.1 percent - might rise over the coming months as discouraged workers start looking for work again. "The rise in the unemployment rate is actually a good sign in the early stages of a recovery," says Mr. Sohn. "The rate shouldn't start dropping in earnest until 2004."

Of course, if all these good things really happen in force, we can expect Herr Doktorprofessor to drop his emphasis on absolute job creation and refocus on the unemployment rate.

But such a tactical shift probably won't make any difference. The current unemployment rate - with or without discouraged workers added into the mix - is just not very high for political purposes, and will probably not have more than marginal negative effects.

STILL MORE: FORBES reports:

The bond market's buoyant performance this week would leave it vulnerable to any upside surprise in the advance estimate of third-quarter GDP (gross domestic product). The market expects that report, due on Thursday, to show that the economy grew a fast-paced 6.0 percent to 6.5 percent.

The advance GDP estimate, due on Thursday, always has the potential to shock the market, said William Sullivan, senior economist and executive director at Morgan Stanley.

Seven percent GDP growth or higher for the third quarter would be "a distinct negative" for bonds, Sullivan said, while third-quarter GDP around 5 would be positive for Treasuries.

A 7 percent third-quarter growth rate generated in part by strong investment spending would be particularly negative for Treasuries, economists said.

"It would suggest that we are now on a path of stronger growth than we had before," said Moran.

Until the job market begins to replenish some of the approximately 3 million jobs lost in the past three years, the Fed is unlikely to tinker with interest rates and jeopardize the recovery. For that reason, traders will pay attention to the weekly jobless claims numbers due on Thursday.

If the third-quarter numbers come in north of 6.5%, the official Man Without Qualities advance estimate of fourth-quarter HDP (Herr Doktorprofessor) trends is a distinct falling off in the number of HDP columns arguing that unemployment and a "jobless recovery" will be the big problems for the President's re-election, and a growing dominance of HDP clarion calls that the "collapse of the bond markets" will do him in - notwithstanding the employment growth previously considered all-important by a handful of economists.

Posted 11:33 AM by Robert

Goodbye, Senator Kerry

Dean Soars into Huge Lead in New Hampshire Now Leads Kerry 40-17 Among Likely Voters; Clark and Edwards in Distant 3rd --New Zogby Poll ... Dean earned 40%, compared to Massachusetts Senator John Kerry’s 17%. None of the other candidates have exceeded single digits in the polling. Retired General Wesley Clark and North Carolina Senator John Edwards are tied for third with 6% each.

And this is after Senator Kerry and other Democratic "contenders" have swung to the left to meet Dr. Dean's advance.

I suppose that in the aftermath of what seems to be the coming 2004 Democratic election disaster, there will be the usual moves within the Democratic Party for "reforms" in the primary, delegate, fund raising and convention structure to keep this kind of thing from happening again.

Of course, that would be better than the alternative: The even bigger Democratic disaster of a President Dean, followed by calls for even bigger reforms of the Democratic primary, delegate, fund raising and convention structure to keep that kind of thing from happening again.

Posted 10:52 AM by Robert

The Shape Of Stewart, Fastow And Kozlowski To Come?

A federal judge declared a mistrial today in the trial of Frank P. Quattrone, the former Credit Suisse First Boston investment banker, after jurors said they were hopelessly divided on his guilt or innocence.

There has been enormous political and media pressure on prosecutors to bring criminal actions against executives in the wake of the Enron mess. Sadly, the pressure has often been misdirected and the criminal actions ill conceived.

Consider the case against Mr. Quattrone, described this way by the New York Times:

The jury, which deliberated the case for six days in the four-week trial, tried to determine whether Mr. Quattrone intended to obstruct a government investigation when he sent an e-mail message on Dec. 5, 2000 endorsing a colleague's directions to "clean up those files" just days after learning of an inquiry into how the bank allocated initial stock offerings.

Seriously? Put that way, this particular charge against Mr. Quattrone seems all but Orwellian - and the fact that several members of the jury were inclined to convict him seems more an indication of gradually abating, media-aggravated public hysteria. Worse, the prosecutors did not do anything obviously wrong in this trial - so there's no obvious change of approach that would markedly improve the government's chances on re-trial.

The case against Mr. Quattrone was solid compared to what appears to be the government's case against Martha Stewart, which is threatening to develop into a seriously damaging political and legal disaster for the Justice Department.

The case against Mr. Kozlowski seems much stronger than some of the others - which is not without ironies, since Tyco itself is doing relatively well. relative to its past year (although not relative to its all-time highs).But now we're told that the Tyco board of directors may have had extensive knowledge of some the activities that Mr. Kozlowski allegedly engaged in without board consent. And there appear to be some key witness credibility issues. That trial has a long time to run - and it's too early for predictions. But will the Kozlowski prosecutors consider themselves to have won a great victory if Mr. Kozlowski is convicted only of taking money for earrings and has to serve time in prison for it - where his aggressive deal making skills turn out to have created billions of dollars in value for his shareholders? Is that a good result?

Contrary to much media and official pontification, corporate governance issues have correctly and traditionally been handled through civil actions - not criminal cases. After Enron, that largely changed. And the change is mostly for the worst. Corporate governance issues are generally complex even where they at first seem clear (Hey, he took the money - what's so complex about that?) and the individual motivations murky. All of that means that criminal law - with it's "beyond a reasonable doubt" standard and serious protections of the accused - is not generally appropriate or effective in this area. Too often these cases are resolved in settlements and plea baragins that too much resemble the results of medieval torture-time-on-the-rack, with the signing defendants doing so from the depths of serious nervous breakdowns and fractured marriages. Worse, the system places a perverse incentive on prosecutors to demonize the accused (see, eg, the campaign against Martha Stewart) in order to neutralize the advantage a well-regarded accused person such as Ms. Stewart has in criminal court. Yes, indictments can be brought. But an indictment absent a conviction too easily has the appearance of government harassment brought on by a public hysteria fueled by media opportunism. In the Enron aftermath, that appearance has often not been deceptive of substance. When the government case against Ms. Stewart fails - and it will almost certainly fail - what excuse will there be for savaging the reputation of one of the most successful, best-regarded women (an active Democrat!) in America?

It's time for the Attorney General of New York and the United States Attorney for the Southern District of New York to make long, hard re-evaluations of these post-Enron criminal cases and relegate these matters to the civil courts which are far better equipped to deal with them.

That is, it's time for the prosecutors to clean up those files.

Posted 2:27 PM by Robert

Mahathir Listens To Herr Doktorprofessor

Here's a terrific follow-up investigation by Don Luskin on Herr Doktorprofessor's increasingly questionable involvement and complicity in Mahathir Mohamad's policies.

Posted 8:19 PM by Robert

Is Herr Doktorprofessor A Good Hater?

Keith Burgess-Jackson, an Associate Professor of Philosophy at The University of Texas at Arlington, scribes an interesting article on "Bush hating" for Tech Central Station. I'm not completely convinced that I agree with his definition of "hate." It may be too broad, although he obtains it reasonably enough from a dictionary. But "hate" is used allusively, suggestively and broadly ("I hate chocolate ice cream," says the four year old) - and that's reflected in dictionary definitions. In any event, it's not an unreasonable definition. This is some of what he writes:

The most hated person in the United States today (dare I say the world?) may be our president, George W. Bush. I did not vote for President Bush -- I voted for Ralph Nader the past two times -- and hold no brief for him. On some issues I agree with him and on others I disagree. I like to think that I am a fair-minded and honest critic. How do I know that he is hated? I read newspapers and magazines (see, e.g., Jonathan Chait, "The Case for Bush Hatred," in a recent issue of The New Republic); I watch public-affairs programs on television (cable as well as network); I visit Internet websites (including blogs); and I talk to people (friends, colleagues, students, neighbors). The depth and breadth of animosity toward President Bush astounds me. It is also dismaying, for it distracts attention from matters of principle and policy in which all of us have a stake. ....

Paul Krugman writes a semiweekly column for The New York Times. I know little about Krugman except that he is an economist. I have been reading his columns (online) for about a year. At first I thought he was a run-of-the-mill liberal critic of a conservative administration. There is nothing whatsoever wrong with that. Indeed, such criticism (loyal opposition) is vital to our democracy. Politics at its best is about policy and principle: about collective goals and constraints on their pursuit. Reasonable, well-informed, well-meaning people can and should disagree about such things. But as the weeks and months went by, I began to detect a certain meanness and unfairness, even a touch of pathology, in Krugman's columns. I now think that he hates President Bush.

The signs of Krugman's hatred are there for all to see. First, he is obsessed. Nearly every column for the past year has been about the Bush administration, and often about the president personally. I assume that Krugman has free rein as far as column topics go (just as I do at TCS), so why he focuses almost exclusively on President Bush requires explanation. Hatred explains it. Second, I have never seen Krugman make a favorable comment, even grudgingly, about President Bush. Someone might say that there is nothing favorable to be said, but that is disingenuous. Nobody is perfectly bad (omnimalevolent) and nobody performs only evil deeds (omnimaleficence). Krugman could prove me wrong by writing an occasional favorable column about the president or his administration. I will not hold my breath waiting for it.

Third, he systematically questions President Bush's motives. If the president says he did X for reason Y, Krugman says it was really for reason Z. Awarding a contract to Halliburton cannot possibly be legitimate; it must be a case of cronyism. Reducing taxes cannot be based on principle (e.g., that people are entitled to the fruits of their labor; that self-sufficiency is intrinsically good); it is calculated to "secure a key part of the Republican party's base," namely, the wealthy. To read Krugman is to see only corruption and deceit on the part of the president and his staff. It's not that the president's good intentions go awry, mind you. That would be a legitimate criticism. The president has bad intentions. Fourth, Krugman gives every indication of wanting the Bush administration's policies to fail, even if this redounds to the detriment of the American people. Krugman's incessantly negative and increasingly shrill and virulent columns about the war in Iraq, for example, come across as positively gleeful. One senses a hope, on his part, that the American reconstruction of Iraq fails.

The entire article is worth reading.

POSTSCRIPT: All of this public professed animosity towards it threatens to give "hate" a bad name, which would certainly sell the human spirit short. "Hate" is no loner fashionable in the West, and now plays a role in polite discourse similar to that once occupied by "sex." Although any sophisticated modern person in the West will abjure hate in public, no intelligent person can be a general hate hater. Walt Whitman on John Burroughs, writing of Thoreau: “The world likes a good hater and refuser almost as well as it likes a good lover and accepter—only it likes him farther off.”

Posted 5:27 PM by Robert

End Run At Enron Update

The mainstream media - which once prattled on about how "obvious" and "egregious" the Enron frauds committed by its top management would surely turn out to have been - seem to be gradually pulling about, like an oil tanker changing course. The latest evidence, End Run at Enron: Why Ken Lay will likely stay out of jail, an article by Jeffrey Toobin from the current issue of the New Yorker, as summarized in this press release:

Almost two years after the fall of Enron, it appears increasingly likely that [Kenneth] Lay and [Jeffrey] Skilling will never face criminal charges," Jeffrey Toobin reports in "End Run at Enron." The Enron investigation, he suggests, "has been a demonstration of the limits of criminal law." Lay and Skilling have eluded prosecution because of "the complexity of the corporate enterprise they built; the overlapping and sometimes competing investigations of the company; and the reluctance of witnesses to come forward." One investigator tells Toobin, "Every other white-collar case in history is arithmetic. Enron is calculus." The trouble is that "first, we have to explain it to ourselves, so that we know what was going on. Then we have to figure out if it's illegal. Then we have to figure out how to persuade a jury that it's illegal. And then we have to figure out how to explain why it's illegal even though the accountants and the lawyers said it was O.K." Andrew Fastow, Enron's former chief financial officer and the highest-ranking company official to face indictment so far, is not co?perating with the government, although his wife has also been indicted. "In Prosecution 101, Fastow should have co?perated a long time ago," the investigator says. "But he hasn't." While the Enron task force "has made steady progress against mid-level players," Toobin writes, in the end, "prosecutors may be able to show only that Lay and Skilling presided over a culture where...pervasive dishonesty flourished—which is not, in any legal sense, a crime.....The sad truth of the criminal-justice system is that when everyone is guilty, no one is.

A culture where...pervasive dishonesty flourished? Isn't that the kind of thing people said about the New York Times newsroom after the Jason Blair affair, when Howell Raines ran it? Has that changed?

And, of course, that was the same Howell Raines who ran all those crusading Times articles about Enron.

Posted 12:27 PM by Robert

Indefinitely Renewable Copyright

The Man Without Qualities has often expressed skepticism over the supposedly pernicious economic consequences of indefinitely renewable copyright. Arguments based on such supposed consequences are often associated with Lawrence Lessig, who created a bit of local kerfluffle a few months ago in arguing Eldred v. Ashcroft before the United States Supreme Court.

It has my impression that the basic arguments - especially those of Mr. Lessig - tendered against copyright extensions such as those effected by the Bono Act are deeply flawed, both legally and as a matter of economics. Richard Posner and William Landes, two of the most powerful minds in law and economics, have also expressed themselves on the topic:

[W]e raise questions concerning the widely accepted proposition that economic efficiency requires that copyright protection be limited in its duration (often shorter than the current term). We show that just as an absence of property rights in tangible property would lead to inefficiencies, so intangible works that fall into the public domain may be inefficiently used because of congestion externalities and impaired incentives to invest in maintaining and exploiting these works. Although a system of indefinite renewals could lead to perpetual copyrights or very long terms, this is unlikely. Our empirical analysis indicates that (1) fewer than 11 percent of the copyrights registered between 1883 and 1964 were renewed at the end of their 28-year term, even though the cost of renewal was small; (2) copyrights are subject to significant depreciation and have an expected or average life of only about 15 years; and (3) copyright registration and renewals are highly responsive to economic incentives for the shorter the expected life of a copyright and the higher the registration and renewal fees, the less likely are both registration and renewal. This in turn suggests that a system of modestly higher registration and renewal fees than at present, a relatively short initial term (20 years or so), and a right of indefinite renewal (possibly subject to an overall maximum term of protection of say 100 years) would cause a large number of copyrighted works to be returned to the public domain quite soon after they were created. A further benefit of indefinite renewal is that it would largely eliminate the rent-seeking problem that is created by the fact that owners (and users) of valuable copyrights that are soon to expire will expend real resources on trying to persuade (dissuade) Congress to extend the term.

Nor is this the only paper on which these authors - or at least one of them - has taken an independent and probing economics-based approach to copyright questions.

Posted 12:37 AM by Robert

Herr Doktorprofessor Listens To Mahathir

Herr Doktorprofessor Paul von Krugman opens today's column: em>"The Europeans killed 6 million Jews out of 12 million. But today the Jews rule this world by proxy. They get others to fight and die for them." So said Mahathir Mohamad, the prime minister of Malaysia, at an Islamic summit meeting last week. The White House promptly denounced his "hate-filled remarks." Indeed, those remarks were inexcusable.

The learned Herr Doktorprofessor assures us that this man Mahathir is not "ignorant" or "foolish." No, we are told that the maker of these admittedly anti-Semitic comments is in many ways about as forward-looking a Muslim leader as we're likely to find.

Is that right?

For example, it's not hard to find Recep Tayyip Erdogan, the very Muslim Prime Minister of Turkey and leader of the Justice and Development Party, known as the AKP, because he's pretty visible these days sending 10,000 troops to Iraq to support the United States efforts there. Mr. Erdogan has had his own brush with anti-Semitism, and was banned for a while from political office by yet other Turkish leaders in part for such extremism. But he seems to be more forward-looking now. The Turkish Times reported that in December of last year:

Mr. Erdogan met with Jewish leaders in Washington to express gratitude for the support Turkey has received from the American Jewish community, and to emphasize the bond between Israel and Turkey. Erdogan's meeting with the Jews came just before his meeting with President Bush ... Erdogan ... said he favored continuing the relationship between Israel and Turkey that was begun by his political predecessors. He also said he would set no preconditions on that relationship and would support expanding it.

"I don't find it adequate, the current economic and trade relationship we have with Israel," Erdogan said to a group of some 10 Jewish officials at a meeting convened by the American Jewish Committee. Military relations between the countries were not discussed, but Jewish leaders say it has remained solid.

The news is welcomed by the Jewish world, initially concerned about the election of a party with Islamic roots in a country founded on democratic, secular principles.

"Those who say nothing has changed are wrong," said Barry Jacobs, director of strategic strategies for the American Jewish Committee, who attended the meeting. "He has an Islamist constituency, but nevertheless, he has a reason to preserve this relationship."

Details, details. A man with the enormous intellect of Herr Doktorprofessor cannot be constrained by a detail like a counterexample in the form of a forward looking Prime Minister of Turkey and many of his predecessors! Stand back! Herr Doktorprofessor needs room to conceptualize!

Mr. Mahathir has presided over much prosperity and largely secular policies in Malaysia, and I do not mean to deny him his accomplishments. But he nevertheless exhibits periodic wierdness and advocates persistent and serious racism - and both of these pernicious aspects of his approach are evident in this speech.

The Prime Minister's full remarks are indeed illuminating. Herr Doktorprofessor says this is a speech mostly about Muslim reform and that a lot of the speech sounds as if it had been written by Bernard Lewis, author of "What Went Wrong," the best-selling book about the Islamic decline. Herr Doktorprofessor carefully explains that all those "hateful words" were tossed in from political necessity brought on by - you guessed it - George Bush's policies. Yes, Herr Doktorprofessor says it is George Bush who is responsible for this anti-Semitic garbage, notwithstanding the President's condemnation. As Herr Doktorprofessor puts it: That tells you, more accurately than any poll, just how strong the rising tide of anti-Americanism and anti-Semitism among Muslims in Southeast Asia has become. Thanks to its war in Iraq and its unconditional support for Ariel Sharon, Washington has squandered post-9/11 sympathy and brought relations with the Muslim world to a new low.

The reader is invited to peruse the speech for herself. It should come as no surprise that it is not a speech mostly about "Muslim reform" in any constructive sense. It is a hate-filled rant against the 'enemies" of Islam of the sort typical of demagogues around the world - in this case infused with perversions of Islamic teaching and nasty historical revisionism. The strategic intent of the speech is summarized in these passages from it:

There must be a way. And we can only find a way if we stop to think, to assess our weaknesses and our strength, to plan, to strategise and then to counter attack. As Muslims we must seek guidance from the Al-Quran and the Sunnah of the Prophet. Surely the 23 years' struggle of the Prophet can provide us with some guidance as to what we can and should do. We know he and his early followers were oppressed by the Qhuraish. Did he launch retaliatory strikes? No. He was prepared to make strategic retreats. .... In any struggle, in any war, nothing is more important than concerted and coordinated action. A degree of discipline is all that is needed.

That is not a call or plan for "Muslim reform." Yes, the speech includes calls for Muslims to be more broadly educated and involved in science and business and to try harder not to be so abrasive in international affairs. But those suggestions are offered as merely strategic, even tactical, moves against the "enemy" - not as a "reform" of Muslim culture. Indeed, Herr Doktorprofessor writes that Mr. Mahathir's remarks are inconsistent with any American hope to obtain Malaysia as an important partner in the war on terror. Some "reform" speech.

But what explains Herr Doktorprofessor's eager apologies for Mr. Mahathir? Might the best clue be found in this passage from today's column:

[D]uring the Asian financial crisis of 1997-98 ... rather than accept the austerity programs recommended by the U.S. government and the I.M.F., [Mr. Mahathir] loudly blamed machinations by Western speculators, and imposed temporary controls on the outflow of capital ?— a step denounced by all but a handful of Western economists. As it turned out, his economic strategy was right ...

But, even setting aside Herr Doktorprofessor's silly "post hoc, ergo propter hoc" reasoning as to whether this "economic strategy" was good for Malaysia (Malaysia also imposed other tough reforms, including public spending cuts to reduce its balance of payments deficit), Mr. Mahathir didn't just blame "western speculators" at that time, he blamed the Jews. That has been a frequent trick of his, as the World Jewish Conference pointed out in 1997:

Mahathir has a long history of antipathy towards Jews, an attitude which he links to his domestic political agenda. The prime minister has frequently used Jews (there are almost none in Malaysia) as a scapegoat for political and economic setbacks. .... Mahathir repeated that Soros was culpable for the ringgit's plunge. Describing Soros, who is of Jewish origin, as a Jew, Mahathir went on to say that Jews were generally responsible for the currency's collapse:

"We do not want to say that this is a plot by the Jews, but in reality it is a Jew who triggered the currency plunge, and coincidentally Soros is a Jew. It is also a coincidence that Malaysians are mostly Moslem. Indeed, the Jews are not happy to see Moslems progress. If it were Palestine, the Jews would rob Palestinians. Thus this is what they are doing to our country."

But just who was in that handful of Western economists who realized that Mr. Mahathir economic strategy was "right" in 1997-98? Why, none other than Herr Doktorprofessor himself! Here's what he had to say in 1998:

Did I personally destroy the world capital market by arguing in Fortune that Asian countries need a temporary period of currency controls? Surely not. Prime Minister Mahathir Mohamad must already have been close to making such a decision.

Now, shame on the gentle reader! How can the gentle reader be so cynical as to think that Herr Doktorprofessor's willingness to defend a hate-filled rant by one of the world's looniest dictators slobbering in the depths of his typical, chronic anti-Semitism depends entirely on the dictator having agreed with some theory of Herr Doktorprofessor's during the 1997-98 Asian financial crisis? Yes, yes, the World Jewish Conference does explain that Mr. Mahathir serves up steaming heaps of nutty racial hate against Jews all the time, with no American actions needed to egg him on. But how can the gentle reader be so cynical as to suspect that Herr Doktorprofessor would attribute this particular heap to the urgent political necessity brought on by George Bush's anti-terrorism policies and over-fidelity to Israel just because Herr Doktorprofessor desperately wants to find some way, no matter how attenuated, to slam the President?

And why isn't the gentle reader more impressed with this passage:

To keep the economy growing, Mr. Mahathir must allow the Chinese minority to prosper, but to ward off ethnic tensions he must throw favors, real and rhetorical, to the Malays. Part of that balancing act involves reserving good jobs for Malay workers and giving special business opportunities to Malay entrepreneurs.

Doesn't Herr Doktorprofessor's elegant rhetoric conceal that the ethinic Chinese (26% of the population) are persecuted and deprived of vast opportunities to which any modern notion of economic justice and individual rights would entitle them access? Mr. Mahathir must allow the Chinese minority to prosper! Here's a sampling of what that means, just a tidbit:

This year, several hundred top-grade Chinese students ... received rejections from public universities. Yet, some 10,000 university seats allocated for Malays remained empty. ... Malays also have special privileges in business and property, and dominate the civil service. .... The Chinese have faced similar segregation policies and laws controlling property to the Jews...

Why isn't the gentle reader more swayed by Herr Doktorprofessor's reasoning that Mr. Mahathir is to be considered a "cagey"politician rather than a manipulative racist monster because - in addition to his evident anti-Semitism - he persistently persecutes Malaysia's ethnic Chinese minority from which the nation's business drive mainly comes in favor of the Muslim, ethnically Malay, majority? Is what the BBC terms a three-decade long policy to advance Malays at the expense of the ethnic Chinese supposed to also be laid at the feet of George Bush? Why not?

What does the reader think Herr Doktorprofessor is? - some kind political hack who'll polish the record of any politician who throws him a bone by agreeing with him once in a while?

UPDATE: The Wall Street Journal suggests a different way of viewing Mr. Mahathir's comments:

[R]ather than just putting his latest vile rhetoric down to Dr. Mahathir's obtuse personality, it's worth considering why even a leader who spent his whole career fighting to contain fundamentalism and modernize his country finds it impossible to give up the idea of Jews and Christians as implacable enemies trying to hold Muslims down.

The answer lies in the coercive methods the Malaysian prime minister has used over the years to maintain power. While his governing coalition has managed to win elections, it has mainly done so by establishing expensive patronage networks, intimidating its opponents and neutering democratic institutions.

Despite all his years in power, Dr. Mahathir's mandate has long been open to question. This is especially so since he split the Muslim community by deposing popular Deputy Prime Minister Anwar Ibrahim. In order to maintain his street credibility among Malays in the face of a stronger challenge from the Islamic party PAS, Dr. Mahathir cannot afford to be seen as soft on hot-button topics like the U.S. war in Iraq and Israel's treatment of Palestinians.

That's the real message of Dr. Mahathir's anti-Semitism: Without full democracies, the Muslim world will continue to lack true moderate leaders who can forge a path to peaceful coexistence with the rest of the world.

The Journal's approach, unlike Herr Doktorprofessor's screed, suggests why Mr. Erdogan, who heads an Islamic party, can be more rational, less racist and more pro-American than Dr. Mahathir, who heads the less-Islamic party in Malaysia: Turkey is a real democracy, Malaysia is not. That is, Dr. Mahathir is in many ways about as forward-looking a Muslim leader as we're likely to find in the absence of real democracy. That's all the more reason to get serious about encouraging Muslim democracies - and avoiding what amounts to a form of neo-isolationism, as advocated by Herr Doktorprofessor and the Times.

FURTHER UPDATE: David Hogberg and Scott Wrightson have more.

POSTSCRIPT: Dr. Mahathir's remarks do contain some passages that should be taken seriously by Herr Doktorprofessor and the whole burgeoning crowd of angry American liberals:

Our only reaction is to become more and more angry. Angry people cannot think properly. And so we find some of our people reacting irrationally.

So very true. For example, Herr Doktorprofessor might not have committed this embarrassing column if only he had listened to this bit of Dr. Mahathir's advice.

ANOTHER UPDATE: From QandO

STILL MORE: Taranto has lots of on-the-money insights.

Posted 11:18 AM by Robert

Legacy Envy

Who would have thought that traveling to Chicago for a wedding could cause one to forget that Woody Allen is President of the United States. But, of course, Woody Allen must be President of the United States, because Maureen Dowd is savaging his sex life and his effort to market same in the form of a $10 Million yet-to-be-written-maybe-never-to-be-written autobiography.

Few would dispute that Woody Allen has run relatively dry as a humorist and film maker, or that his his personal life is irregular, sad and not to the tastes of many, or that his reported $10 Million asking price for a hump-and-tell memoir is over the top. But none of that explains why today Big Mo is in a Big Huff about now-little, insignificant Woody, his sex life and his asking price.

Ms. Dowd was not a fan of Bill Clinton, either, but she left the impression that she was only writing about Mr. Clinton's sexapades because he was, after all the President, and he was using the power of the Presidency to make feminists into risible hypocrites, weakening his office for all time and so on and so forth and la-di-do-DAH. Mr. Clinton's greatest crime? Damaging the sacred American language!

Mr. Clinton's greatest sin is not sex or dissembling about sex, as the heavy-breathing Kenneth Starr believes. His greatest sin is swindling and perverting the American language. He is like the cursed girl in the fairy tale: Every time he opens his mouth, a toad jumps out.

Whatever one can say about Mr. Allen, he has definitely enriched - and not perverted - the "American language." One might even say about Mr. Allen that at least in his earlier efforts, and his New Yorker occasional pieces: Every time he opened his mouth, a hilarious and telling pearl fell out. Indeed, Big Mo's ultimate sentence in this column is one of Mr. Allen's own - one of his many wonderful quips.

Big Mo says she adores the old, funny Woody of Bananas but even at the height of her Pulitzer/Lewinsky run she took time off to tell us how much she detests the newer, weaselly, overcivilized, undermoralized, terminally psychoanalyzed terminator Woody. And her venom continues to run in his direction. But why? The current shenanigans of a washed up comedian now without influence in any sphere are hardly the stuff of a New York Times column.

Like the subject of her ire, Big Mo is widely considered to be washed up after a career whose high point came in the form of her Pulitzer-winning Clinton/Lewinsky/Starr columns aptly describable as political satire and screwball comedy all in one.

Yes, those columns might be aptly described as political satire and screwball comedy all in one. - but they weren't. Those words have instead been used to describe one of Mr. Allen's films, a film which is number 69 on the American Film Institute's list of America's 100 Funniest Movies:

Bananas holds a special place in many people's hearts. Released in 1971, the film was only the second film Woody Allen ever directed (following on the heels of Take the Money and Run) but it remains one of the funniest films of that entire decade. A political satire and screwball comedy all in one...

The old, pre-washed-up Maureen Dowd is a species of competitor of the old pre-washed up Woody Allen. But nobody has ever, nor will anybody ever, write something like the review quoted above about anything Ms. Dowd has ever created or ever will create.

Could it be that it's not the new, insignificant, weaselly, overcivilized, undermoralized, terminally psychoanalyzed terminator Woody that upsets Big Mo so much that she keeps returning to him in her columns.

Could we be seeing signs of legacy envy between two who now dwell in the land of the washed-up?