Man Without Qualities

Saturday, July 20, 2002

The Old Grey Lady Just Ain't What She Used to Be

John Ellis says the Old Grey Lady these days is acting and thinking more like Norma Desmond.

Jane Galt agrees.

Andrew Sullivan for the New York Sun lays some serious body blows.

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Friday, July 19, 2002

Harken Up The Wrong Tree II

As predicted here previously, entrepreneurial companies and business executives don't like the restrictions on options being proposed in Congress. And they're doing something about it.

If House Minority Leader Gephardt is successful in keeping the issue alive for the next few months, one can expect a fairly severe tear between the Democrats (and McCainiacs) and business generally. The Times says;

Leading the parade were two prominent venture capitalists, John Doerr and Floyd Kvamme, two Silicon Valley legends. Joining them were Alan Patricof, a well-known New York venture capitalist, and executives and lobbyists from Cisco Systems, Intel, Dell Computer, AOL Time Warner and Sun Microsystems. In addition, 126 biotechnology chief executives wrote an open letter to Congress on this issue. These companies are also enlisting rank-and-file employees in a Web-based grass-roots effort, as well. ... Mark Hesen, president of the National Venture Capital Association in Washington, said: "We have 14,000 emerging growth companies in our database. We've got venture capitalists all over the country who have been active."

The key disclosure here is the reference to the "venture capitalists." Those are the people who finance the companies who need executives. Venture capitalists are a kind of shareholder.

The Times and much of the media coverage of this entire affair is still missing the point that what it is shareholder value that needs to be be protected. And when once-Democrat-leaning, big risk-taking shareholders start telling Congress to back off in the face of politically charged public hysteria, that's a pretty good sign that something big is happening.

And it's not what the class-warriors at the Times think is happening.
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Saint John of Sedona

With his customary instinct for excess, Senator John McCain again proves that the awful price of purity is Puritans.

With his customary acuity, Mickey Kaus points out one obviously perverse incentive of one of Senator John McCain's current obsessions, an obsession described as follows:

Top executives should be precluded from selling their own holdings of company stock while serving in that company. Executives should be allowed to exercise their options, but their net gain after tax should be held in company stock until 90 days after they leave the company.

KausFiles notes that "this create a highly undesirable incentive for competent executives who've actually improved their companies, and hence their companies' stock prices, to immediately quit in order to exercise their options," which is obviously correct. Which means that if the company wants to retain its executives, it has to come up with some other way or rewarding them. Mark Salter, Senator McCain's aide had this to say to KausFiles:

[T]he senator consulted a number of people, (retired and currently serving CEOs) as he prepared the suggested reforms he identified in his speech last week. we tried to anticipate criticism for each one, and did discuss the criticism you made with his advisors. the thoughts below are typical of the rebuttals they offered. ...

That argument has always been fallacious. Typically, companies restrict grants of options and stock from becoming fully vested for 3-5 years after they're awarded. Because new grants are made annually, execs always have a sizeable amount of unvested awards that they will forfeit if they leave voluntarily before the vesting period’s end. Vesting may be automatic if the executive leaves after the normal retirement date but sales of stock may still be restricted for the remainder of the original vesting period. During that restriction period, some companies reserve the right to cancel vesting if the executive joins another company deemed to be a competitor.

You can be sure that companies will be creative in altering their compensation plans to retain desired execs if the Senator's proposal is enacted. For example, restriction periods on new grants could be extended to strengthen the retention element, and the mix of cash, stock and options awards could be adjusted to assure that the executive has ample current income and therefore little incentive to leave before normal retirement age.

Secondly, even if executives would like to leave their company in order to sell their stock, there aren't many other companies to which most top managers can go and have similar responsibilities. Most people won't voluntarily walk away from power, prestige, perks and pay just to sell their vested stock.

There are a substantial number of companies (see an article in Saturday's Times that cites BankOne, Citigroup and others as examples) that have already prohibited executives from selling stock before retirement. As Jamie Dimon, BankOne's CEO, said, "management should eat its own home cooking."

Issues of executive compensation and human incentives are complex and always a judgment call, but Senator McClain's approach seems particularly dicey.

First, Mr. Salter seems to be agreeing with KausFiles' point that the McCain proposal creates an increased incentive for executives to leave. What Mr. Salter is saying is that the Senator's proposal doesn't eliminate all incentives for the executives to stay. But he admits that there would be a serious weakening of those retentive incentives, which the company will have to find some way to counteract by paying the executive more in some other way. ("You can be sure that companies will be creative in altering their compensation plans to retain desired execs if the Senator's proposal is enacted.") So there is actually a rather tricky question here - even on the Senator's own terms - as to whether such extra costs will be more than compensated by whatever presumed extra benefits the shareholders get from the Senator's restricting their representatives' (i.e. the Board of Directors) flexibility in crafting executive compensation.

Management should eat its own home cooking? What management eats if they're not properly incentivized and watched is the shareholders' winter provisions and seed corn.

If the Senator's proposal would increase shareholder value, why do we not have a chorus of institutional investors and academic theorists calling for amendments in corporate charters to effect this change regardless of whether the Senator’s proposal is enacted into law? But that chorus is silent.

Which brings up another odd statement of the Senator's aide, that "the senator consulted a number of people, (retired and currently serving CEOs) as he prepared the suggested reforms," a procedure which might charitably be compared with consulting with a number of foxes as one prepares to reconstruct the chicken coop, at least if it is not done with the careful understanding that executives don't really care whether shareholders prosper if the executives are well paid. That is the exact problem options are suppose to address.

The possible methods of compensating for the Senator’s proposal mentioned by his aide are revealing:

“For example, restriction periods on new grants could be extended to strengthen the retention element, and the mix of cash, stock and options awards could be adjusted…”

Yes, all of these things would “strengthen the retention element” – in each case at the cost of retaining an executive with a severely reduced interest in increasing the company’s share price. But an increase in share price is the only way shareholders are rewarded. The correct question is NOT whether there are ways to “strengthen the retention element.” Simply agreeing to turn the company over to management lock, stock and barrel could do THAT. The correct question is whether there are ways to “strengthen the retention element” on terms that cause the interests of the shareholders and management to be aligned, and which increase the chance that share value will rise without cooking the books.

And how about the priceless assertion that "even if executives would like to leave their company in order to sell their stock, there aren't many other companies to which most top managers can go and have similar responsibilities." Perhaps the Senator and his aide have spent too much time in Washington, where it is true that a Senator looking for other employment finds no other Federal Senate in which to seek a seat. But in the business world executives who succeed in raising shareholder value generally do not want for other shareholders whose representatives would be more than pleased to take such an undercomensated executive off the hands of his or her current employer. Or perhaps Messrs.Salter and McCain are under the impression that, say, Jack Welch simply had no place else to go while General Electric's stock was soaring on his watch? Might I suggest to Messrs.Salter and McCain that it is executives who do not make their shareholders money that have fewer alternative places of employment - but why Messrs.Salter and McCain care a fig about assuring companies that they will not be in danger of losing such executives if the Senator's plan goes through is a mystery to the Man Without Qualities.

One of the few things worse for the shareholders than a legal structure that creates an incentive for executives to leave prematurely would be a legal structure that creates an incentive for executives who don't care about shareholder value to stay on in office, fully compensated and comfortable.

Senator McClain’s proposal doesn’t even come close to reaching the correct goal. That’s not surprising, since there are no affirmative indications that he or his aide is even aware of the correct question. Indeed, from what has appeared in the media, the Senator appears too interested in purity to get his hands dirty rooting around for something as prosaic as the correct question to ask.


UPDATE: Virginia Postrel also provides insight on Senator McCain's proposal.

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Thursday, July 18, 2002

Saint Paul and the Founders

The following is what Donald Lutz of the University of Houston writes in The Origins of American Constitutionalism (Baton Rouge, Louisiana: Louisiana State University Press, 1988) about Christianity's influence during America's founding era (1760-1805):

If we ask which book was most frequently cited in that literature [of the founding era], the answer is, the Bible. ...[T]he biblical tradition accounted for roughly one-third of the citations in the sample. However, the sample includes about one-third of all significant secular publications, but only about one-tenth of the reprinted sermons. Even with this undercount, Saint Paul is cited about as frequently as Montesquieu and Blackstone, the two most-cited secular authors, and Deuteronomy is cited almost twice as often as all of Locke's writings put together. A strictly proportional sample with respect to secular and religious sources would have resulted in an abundance of religious references....

Approximately 80 percent of the political pamphlets published during the 1770s were reprinted sermons. When reading comprehensively in the political literature of the war years, one cannot but be struck by the extent to which biblical sources used by ministers and traditional Whigs undergirded the justification for the break with Britain, the rationale for continuing the war, and the basic principles of Americans' writing their own constitutions.

So Justice Scalia seems to be in tune with the Founders. And it would appear that those who wish to construe the writings of Saint Paul as perceived by the Founders as inconsistent with the principles of American democracy are likely importing more of their own opinions than historical fact into the analysis.

Thomas Jefferson was not a fan of Saint Paul, who Jefferson considered to have distorted Jesus' more sublime teachings. (Jefferson wrote: "Of this band of dupes and impostors, Paul was the great Coryphaeus, and the first corrupter of the doctrines of Jesus.") But Thomas Jefferson was not the only founder. And Jefferson seems to have disapproved of Saint Paul as a religious and moral teacher, and not to have argued that Saint Paul's writings were inconsistent with Jefferson's own political principles, or at least the Man Without Qualities has not discovered any such Jeffersonian writings mentioning Paul in that way. Jefferson did delete Paul's writings from the Jefferson Bible.

There was certainly no universal agreement among enlightened people at the time that Saint Paul was a benefit to mankind. Lord Bolingbroke, an 18th century English philosopher who was definitely NOT a Founder (but Thomas Jefferson held him in high regard), for example, wrote:

It is time to speak of the articles of faith commonly claimed by Christianity. It is this issue that has furnished all matter of strife, contention, and uncharitableness, from the apostolic age to this very day. It is this that has added another motive, and one that is stronger than any other, to animosity and hatred, to wars and massacres, and to that cruel principle which was never known until Christians introduced it into the world. That being the persecution for opinions, for opinions often of the most abstract speculation, and of the least importance to civil or religious interests. It is this, in short, whose effects have been so fatal to the peace and happiness of mankind, that nothing which the enemies of religion can say on the subject will be exaggerated beyond the truth. But still the charge they bring will be unjustly brought. These effects have not been caused by the gospel, but by the system raised upon it. Not by the revelations of God, but by the inventions of men. The gospel of Christ is one thing, the gospel of St. Paul, and of all those who have grafted after him on the same stock, is another.

The Works of Lord Bolingbroke, Vol. III, pp. 417-418, Frank Cass & co., London, 1967

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Surely You Jest!

During the last Presidential campaign, George Bush said that his favorite philosopher was Jesus!

Wasn’t that a silly thing to say?

Perhaps it was. Some liberal commentators certainly said as much.

But, if it was a silly thing to say and think, George Bush is now at least the second person to occupy the White House who said and thought just that.

The first such person appears to have been Thomas Jefferson, who was not a Christian and did not believe Jesus was God. Just his favorite philosopher.

Specifically, Jefferson wrote that in the teachings of Jesus “a system of morals is presented to us which, if filled up in the style and spirit of the rich fragments he left us, would be the most perfect and sublime that has ever been taught by man.

Jefferson also wrote:

“[My views of] the Christian religion ... are the result of a life of inquiry and reflection, and very different from that anti-Christian system imputed to me by those who know nothing of my opinions. To the corruptions of Christianity I am indeed opposed, but not to the genuine precepts of Jesus himself. I am a Christian, in the only sense in which he wished anyone to be: sincerely attached to his doctrines in preference to all others, ascribing to himself every human excellence, and believing he never claimed any other.”

And he wrote that Jesus' "moral doctrines, relating to kindred and friends were more pure and perfect than those of the most correct of the philosophers.

In fact, Jefferson was so impressed with Jesus as a philosopher, that Jefferson created his own version of the Bible (the “Jefferson Bible”).

And in the course of all this, Jefferson also took time to specifically compare Jesus in writing with other philosophers (Greek, etc.), and tried to show that Jesus was the best of the bunch.

Weren’t those silly things that Thomas Jefferson said? Favorite philosopher! Mr. Jefferson, surely you jest!

And what about that John Kennedy, who famously said, during a dinner for Nobel laureates, that the White House hadn't seen such a gathering of great minds since Thomas Jefferson dined alone!

UPDATE: Technically, Mr. Bush stated that Jesus was his "favorite political philosopher." Few people - and few of Mr. Bush's critics - have focused on the "political" qualifier, and commenters on his response often (perhaps usually) acknowledge that Jesus' moral teachings have generally been construed as having consequences affecting political and most if not all other relationships among people and peoples. Few people seem to have construed the use of the word "political" in the question as limited to that word's narrow meaning, which refers to government. Common use of the word "political" now goes way beyond that narrow meaning. "Sexual politics," "gender politics," "racial politics," and many (if not all) other categories of human interactions which at one time might have been more readily seen as posing "moral" questions are now routinely discussed as political. Indeed, the so-called critical legal studies movement considers virtually all social decisions political ones. Mr. Bush was surely not adopting the argot of that movement, but the fact that the movement chooses the vocabulary it uses (especially its use of "political") indicates how broad the meaning of this word has become as a matter of current popular and educated use. Mr. Bush was correct to treat the word the way he did. And Mr. Bush's friends and foes alike are correct to construe his response as indicating that he was referring to Jesus as his favorite philosopher of human relations. Jefferson also appears to have admired Jesus in this capacity.

It's also worth noting that John McCain answered that his favorite political philosopher was Teddy Roosevelt. Teddy Roosevelt was many things, and he even engaged in some political philosophy. But is it correct to describe Roosevelt as a philosopher? In the narrow meaning of this term, Roosevelt was not a philosopher; that just wasn't his focus. But in the context of this question, which seems to have been phrased to allow the Iowa debate participants a great deal of latitude to interpret the language, I think the answer is a clear "yes." Roosevelt at least arguably had a political philosophy and Mr. McCain was saying that Roosevelt's philosophy had deeply affected Mr. McCain in a manner he highly valued.

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Wednesday, July 17, 2002

Size Does Matter.

Rand Simberg points out that Godzilla would burn up because it would be just too darn big to release all the heat generated by its metabolism.

In an era in which popular thinking more and more presumes that one thing or another traditionally given weight just doesn't matter, it is important to have such a jarring reminder dropped on us of what should be the obvious fact that SIZE DOES MATTER. Put another way: No, you can't just scale everything up. It doesn't work with pastry recipes, and it doesn't work with warm-blooded animals.

Here's another reminder: You can't kill a mouse by dropping it out of an airplane.

As an animal gets smaller, the ratio of its the two-dimensional cross-section shrinks with the square of its height, but its volume and weight shrink with the cube of its height. You can't kill a mouse by dropping it because a mouse is so small it has becomes its own parachute. It's terminal velocity is less than the velocity that would kill it.

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Harken Up The Wrong Tree

FURTHER UPDATE: It looks like Senator Tom Daschle at least is getting a wiff of the option-free, business-free-future for the Democrats he is helping to create, and he doesn't seem to like what he sniffs in the air.

But House Minority Leader Gephardt sees a brave new world coming for him!


UPDATE: Max Power writes to emphasize out that Bush need not have disclosed all information about the stock he sold to his buyer, only all material non-public information. Max is correct, and the phrasing below is over simplified in that respect, thereby suggesting Bush is more exposed than he really is.

Max also points out correctly that if Bush accepted any pay off, that would be alarming. I agree. It was also alarming that Hillary Clinton accepted the notorious and still unexplained $100,000 - and these matters are very comparable, as Max points out.

But unless some actual evidence of a payoff is adduced, nothing disturbing has been revealed in Bush's case so far. Bush sold his stock two months before Harken posted an unusually large quarterly loss. It is the constant frustration of equities fund managers and analysts everywhere that there are few executives of public companies who can reliably predict their quarterly results that far in advance - and the spot memos on recent corporate performance Bush is said to have received as a director contained nowhere near the information needed to predict quarterly results. In fact, much of the current uproar in accounting practices is the product of executives trying to "deliver quarters" to Wall Street when that just can't be done - hence the temptation to "warehouse" losses or "manage" the earnings of the company. What we do know is that the stock price went up strongly in the intermediate period after the initial negative market reaction to the quarterly loss, which suggests that buyer and seller were acting fairly normally. It is also strange that the loudest hue and cry in this matter is coming from the "Bush is a Dumb Businessman" crowd, who in this case seem to want to cast him as a predictive financial wiz.

It is useful to compare this situation with Hillary's. She claimed to have made her winning commodities trades herself on the basis of what she read in the Wall Street Journal, where that paper subsequently ran an article pointing out that it had published almost no relevant information on that topic during the relevant period. To my knowledge, no serious commodities expert has come up with a reasonable explanation for her winnings (other than a commodities "straddle", a possibility which was subsequently discounted).

The media see fit to re-examine Mr. Bush's old trades in the light of the current markets uproar. That's not wrong and not very surprising.

Hillary's trades are also old news that should be revisited by the media especially because they are bugging Bush, but that is not happening. That is wrong and not very surprising.

And, by the way, if you're not reading Max regularly, I believe you should be.


Even some good liberal commentators like Matt Miller continue to seek El Dorado in the identity of "the unnamed 'institutional investor' who came out of nowhere, unbidden, to buy Bush's shares of Harken Energy in 1990." There has been much more or less unfounded speculation that the buyer was a member of the Bass family, or maybe Richard Rainwater associates.

But, as Mickey Kaus beats me to pointing out (darn him!): "Isn't it also true that if Bush was relieved of his Harken stock, before it temporarily tanked, by a friendly benefactor (as has been suggested) then Bush is almost certainly not guilty of using his inside-information to foist the stock off on some innocent third-party buyer."

Contrary to what the media keep saying, selling stock on the basis of "inside information" is not morally wrong or criminally or civilly actionable.

What is improper is for a seller to sell stock and not tell the buyer everything the seller knows. If Bush had any relationship with the buyer, then he is almost certainly not running afoul of insider-trading laws. Further, the right of redress lies with the buyer, and is the buyer's to waive. This buyer seems to have waived if there was any problem, since the buyer is not only not suing Bush but is not even revealing the buyer's name.

So why are the Democrats pursuing this chimera?

There seems to be some very silly speculation that if the buyer was a Bush friend who paid full price, then it may have been some kind of "pay off."

But the same could be said of any transaction. For example, Bush's sale of a house. This approach just confesses that the insider-trading angle goes nowhere. And all the inconsistent, unsupported Democrat speculation just increases the public impression they are acting from silly partisan motives.

Given the President's continuing approval rating of about 65%-70% despite the Democrat and media pressure on this topic (some polling data indicates the public is more skeptical about members of the Administration other than the President, but nobody in the Administration is running for office for more than two years, unlike members of Congress), maybe the Democrats will want to revert to the "what did the President know and when did he know it" hooch they were peddling a few weeks ago.

The Democrats might also want to keep track of how all their naked and increasingly general anti-business warfare is going to play with the business supporters the Clinton-Gore administration was able to round up. Will people such as Silicon Valley entrepreneurs be happy when they try to access capital markets rendered inert by Democrat scaremongering and their class warfare rallies? And didn't all those Democrat-leaning software executives get rich - and hope to get rich - on the very options now demonized by the Democrats? Time will tell. True, the Democrats have everyone on the run in public now, at least in the sense that Republicans will not resist even the most inane "reform" measures.

But I very much doubt that either Wall Street or Main Street businessmen are feeling very friendly towards Democrats right now. I’ll bet they are mad as can be, but have to shut up and bide their time. And their love will not increase as all that restrictive, Democrat-originated legislation kicks in, and the public at large forgets all this fuss as the public at large is want to forget the fuss-of-the-day. Indeed, just to pluck but one example, one wonders how the big media mavens at, say, liberal AOL-Time Warner feel about the Democrat push against business right now. In the present climate stoked by Democrat-fostered hysteria, there may just have to be a big SEC investigation, maybe a Justice Depatment investigation. One wonders how Mr. Parsons and other AOL-TW executives feel about all that.

How much of a future is there for a modern American political party that wants proudly to be known as the "Party Against Business." The Democrats are letting Messrs. Daschle, Gephardt and company teach them by example. Do they plan to do fund raising under their own names in the future?

And one wonders if the Democrats know the meaning of “Pyrrhic Victory.”
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More Dangerous Nonsense

Brian O'Connell has some interesting things to say about international law and democracy, here and here relating to my earlier interchange with Demosthenes about some Dangerous Nonsense.
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Starting Points and Premature Dead Ends

Preliminary plans are out for use of the World Trade Center site ("Ground Zero"). The chairman of the Lower Manhattan Development Corporation, John C. Whitehead, said the six designs are simply a starting point, a means for Americans to demonstrate their resilience and determination after the terrorist attacks of Sept. 11. He also suggested a seventh possible design, without some of the requirements for office and retail space imposed on the original six.

But if the plans are "simply a starting point, a means for Americans to demonstrate their resilience and determination," and a seventh proposal that would almost completely ignore the economics of the site is also to be considered, why is there no plan to build something really comparable to the destroyed World Trade Center presented.

Former Mayor Koch, for example, suggested rebuilding the exact same buildings from the exact same plans.

One might also consider building at least one 125-story building on the site in addition to whatever else goes up (if anything).

I'm not advocating really big buildings at this point. But since we're in the "concept' stage - why has that rather obvious "means for Americans to demonstrate their resilience and determination" been already eliminated from the concepts without any public debate.

It can't be the admittedly dubious economics of very big buildings that ended their consideration at this point, since the seventh proposal is suppose to throw economics largely to the wind.

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Tuesday, July 16, 2002

DeLong Descent

UPDATE: The Minute Man has more history.

As does Off-Wing.


Bradford DeLong, a Berkeley professor of economics and former Clinton administration appointee, writes seriously that he believes Justice Antonin Scalia supports those who collaborated with Hitler ("Charles de Gaulle for his rebellion against the collaborationist French government of Philippe Petain and Pierre Laval stands, in Scalia's eyes, condemned as an enemy of God.")

And that is Professor DeLong's right.

Professor DeLong writes also that he is "instituting a policy" under which he deletes all of my comments because one of them included: "And I love the witty "Capiche?" at the end, Brad. You sound just like Mussolini when you say that while you pull the plug on nearby dissent, you old cutie. I’ll bet the girls love it, too!" This he says is because (in his words) "Commenters who compare others (or me) to Stalin, Pol Pot, Hitler, or Mussolini should not expect their comments to remain in the database."

And that is Professor DeLong's right.

Most American I think would say that someone who refers to actions of ministers of a given faith as "craven bootlicking" is a simple, despicable religious bigot, and many a blogger would remove such a religiously bigoted post. Most Americans would also probably agree that a comment that ascribed such a religious bigotry to Thomas Jefferson, perhaps the greatest advocate of religious toleration this country has seen, was both radically inconsistent with Jefferson's beliefs and offensive to basic American ideals. Professor DeLong maintains just such a comment in his comment box. Indeed, it appears that professor DeLong may actually be the author of the comment, but he certainly believes it reflects Jefferson's beliefs (He writes: "Posting under the name of historical figure is fine, but the position adopted in the post must be that of the historical figure in question for... aesthetic reasons. ... In whose judgment? Mine, of course.)

And that is Professor DeLong's right.

It is also the right of those who read Professor DeLong's blog to judge these matters for themselves, and to come to such conclusions concerning the moral and ethical content and character of Professor DeLong as they so deem fit in their sole and complete discretion.

And every knowledgeable, sane person in this country knows for a fact that Justice Antonin Scalia would pledge his life, fortune and sacred honor to preserve all of those rights, even those of Professor DeLong, as the law of this land.

Even if Professor DeLong is everything he appears to be.
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DeLong and DeShort of It


I placed this post as a comment on Professor DeLong's site, too. And, wouldn't you know it, he deleted this one, too. There's a surprise.

Now he suggests that the deletion has something to do with this Basic Blogger site not having a "Comment" section. But he could link to this site with a response. And haven't I shown by posting his e-mail that I'm willing to post anything he writes to me on this blog? Well, if that's not already clear, I will say so now!

Of course, the Man Without Qualities is not "polite" by Professor DeLong's standards. Here, we just don't know when the finer rules of etiquette require one to call a United States Supreme Court Justice one of the "theocratic intellectual zombies, strange creatures from the ranks of the undead, creatures etc...."

We just weren't brought up right like Professor DeLong, to whom these things are second nature.


The post appearing immediately below is a comment on Professor DeLong's post that, among other things, asserts that Justice Scalia is "a theocratic intellectual zombie, a strange creature from the ranks of the undead, a creature that belongs at the benighted court of the medieval imperial Pope."

I placed the post below as a "Comment" to Professor DeLong's. But he has deleted it and sent me the following e-mail of explantion:

"The DeLong hatchet job is worth reading as evidence of the ongoing academic degradation and dishonesty in American universities...

"You will be polite in my space, or you will not play in it. Capiche?

Brad DeLong"

I'm so sorry, Professor DeLong.

Perhaps I should have written:

"The DeLong piece is worth reading as evidence that American universities are peopled with theocratic intellectual zombies, strange creatures from the ranks of the undead, creatures that belong at the benighted court of the medieval imperial Pope.

That would have up to your standards of politeness.

And I love the witty "Capiche?" at the end, Brad. You sound just like Mussolinni when you say that while you pull the plug on nearby dissent, you old cutie. I’ll bet the girls love it, too!
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It's A Doosey

For a spectacular and apparently willful misinterpretation of panel discussion remarks by Antonin Scalia, it's hard to beat this doosey by Brad DeLong and the equally distorted New York Times article from which it is cribbed. The Times piece is the work of Sean Wilentz, who directs the American studies program at Princeton

Scalia is, of course, well known as a passionate advocate of democratic principles, consistently applied - especially the First Amendment and federalist structure. His speech is nothing but a reminder that the better interpretation of American "fundamental rights" is largely that of the Founders, especially Jefferson and Madison - as rights required for consistency with the Divine plan of government. As the Pledge of Allegiance later averred to this: "One nation, under God." As Jefferson and Madison pointed out, elections and elected representatives can violate fundamental rights and the Divine Plan as much as the ukase of any king. In Scalia's view, and those of Jefferson and Madison, a democratic decision to commit genocide, for example, is a violation of fundamental rights notwithstanding any amendment to the relevant constitution allowing such a thing. Nor do legislative and electoral decisions fail to involve religious considerations, in the Scalia or the Founders' distinct views.

But to Professor DeLong, Scalia is being "unAmerican." DeLong dares to use that word. The most seriously confused objective apologists for tyranny will no doubt concur with him and Wilentz.

Professor DeLong fails to note that Justice Scalia's comments were offered as part of a panel discussion whose transcript has been posted on the web, but to which Professor DeLong chooses not to link and which he and Professor Wilentz fail to even mention. Curiously, although the panel discussion featured several highly sophisticated liberals (E.J. Dionne, Jr., former Senator Paul Simon and Beth Wilkinson) and occurred before a University of Chicago audience which was invited to participate and did, not one person on the panel or in the audience is recorded to have construed Justice Scalia's remarks in a way even remotely approaching Professor DeLong's bizarre take (which is that of the New York Times article he appropriates with disclosure). But then, E.J. Dionne, Jr. is a major presence at the Washington Post.

The role of religious considerations and political question was addressed in the following Q-&-A session interchange, which doesn't seem to reflect the kind of specious considerations hatched by Professors DeLong and Wilentz:

QUESTION: Hi, this question is for Justice Scalia. In the previous session, Professor Garnett discussed a reshaping of the capital punishment debate. Do you believe the argument could, or should, be reshaped to include directly religious viewpoints? If so, how would you propose this accommodationist solution, which affects not only the death penalty, but the whole of the First Amendment interpretation by the Supreme Court?

MR. DIONNE: Professor Garnett gave a talk earlier in which he discussed the importance of allowing the – and correct me if I’m wrong – the importance of including religious arguments among the arguments brought to courts and into the public square as part of the argument against the death penalty. He was suggesting that you could only get a full understanding of the issues at stake if you included a religious sense in this sense of moral anthropology.

Justice Scalia?

JUSTICE SCALIA: You’re talking about whether the religious viewpoint should have a role in the legislative and political process. Of course it should. It always has in this country. I mean, you know, coming back to slavery, my goodness, the anti-slavery movement was led and sustained by clergymen -- all except Catholic clergymen, by the way, who simply ignored all the edicts from Rome, in case you ever think the American Catholic church is always right.

(Laughter.) No, I think we would, as a nation, have a very different history if we excised from our political debate those views that were distinctively religious views. On the most important issues facing our country they have always been heard and expressed.

The DeLong hatchet job is worth reading as evidence of the ongoing academic degradation and dishonesty in American universities, a deterioration vastly more extensive than anything known to have occurred to date in American corporate ethics.

It is fascinating that Professors DeLong and Wilentz write this kind of thing in the apparent expectation of continuing to have an academic reputation afterwards - and, chillingly, they are probably correct. In some respects their confidence in the ambient intellectual corruption in which they work suggests that of Michael A. Bellesiles, whose arrogant certainty that these same colleagues would continue to give his increasingly flagrant dishonesties a "pass" came crashing down on him and his fraudulent Second Amendment confections. Indeed, as an aside, what role has American studies program at Princeton played in rooting out the Bellesiles fraud. The Man Without Qualities cannot recall the name of that program in various articles on the topic, although the program's title suggests its bailiwick includes that fraud. Perhaps I missed it.

But, then again, other people have also noted that when it comes to topics that suit his political fancy (such as Bellesiles' delusions) Professor Wilentz is notably more forgiving that he has been with Justice Scalia. As Glenn Reynolds noted: Just look at how clueless Princeton historian Sean Wilentz is about statistics -- and about his own cluelessness.

This NOT because some fellow academic determined that enough was enough. No. It took a newspaper to expose Professor Bellesiles and make it stick - only later did the academic population (it is surely not a community) chime in. Some academics are STILL defending him.

But here that Wilentz New York Times article is part of the problem. As noted, he makes no mention at all of the panel discussion, and willfully conflates Justice Scalia's remarks with a Court dissent - in the face of Justice Scalia's repeated disclaimer that his personal and religious views are not "supplemented" by his judicial writings. Undeterred, Professor Wilentz dismisses what he terms Justice Scalia's "ritual disclaimer" and willfully misrepresents:

Justice Scalia spoke on these matters at the University of Chicago Divinity School in January, beginning with the ritual disclaimer that "my views on the subject have nothing to do with how I vote in capital cases"; his remarks appeared in the May issue of First Things: The Journal of Religion and Public Life. They are supplemented by his dissent to the court's decision on June 20 that mentally retarded people should not be executed. Justice Scalia's remarks show bitterness against democracy, strong dislike for the Constitution's approach to religion and eager advocacy for the submission of the individual to the state. It is a chilling mixture for an American.

This level of omission of material fact should be enough to send a corporate executive to jail. Professor DeLong's appropriation of the Wilentz article is all the more bizarre since there are easily available sources that already point out many of its howlers: here, here, here, and here. Ramesh Ponnuru also points out that Wilentz has some big issues in the area of misrepresentations of the Founders' intent, which a serious academic would have taken as a warning before appropriating his writing.

Professor DeLong may want to confer with some of his lesser students as to what sources make the most reliable cheat sheets if he's determined to continue to join them on his present path.

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Monday, July 15, 2002

Possibly the Headline Indicating Least Understanding of International Finance This Year

New York Times headline:

"Euro Edges Past the Dollar in Victory for Europeans"

Now the reader may be foregiven for remembering that countries seem to spend a lot of time trying to "beggar their neighbor" by devaluing the currency.

But not to worry, the Times also reports that:

Some analysts said that Americans may now begin to take the euro seriously as a symbol of how far Europe's efforts at integration have come. "This is not the worst thing for the trans-Atlantic relationship," a senior German diplomat said.

So it appears that the New York Times financial reporters think that a "senior German diplomat" and an "analyst" are pretty much the same thing. Does that make readers have more confidence in the Times financial reporting?

If one is ever interested in how currencies are moving against one another, or whether to buy a German stock, one should certainly keep in mind that the Times would apparently call up a "senior German diplomat" for guidance. So presumably on this side of the Atlantic, the Times always remembers to consult with the State Department for financial and currency expertise.

And, gee, since they're writing about "victories," why didn't the Times ask a senior German military officer?

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ALL Sides?

The Associated Press says:

The events of Sept. 11 have found their way into Bruce Springsteen's latest album. The CD, ``The Rising,'' features 15 songs that are influenced by the terror attacks, offering individual stories from all sides. It is Springsteen's first studio recording with the E Street Band in 15 years.

"Offering individual stories from all sides?"


I haven't heard the album, yet. But if it lives up to this news story, it could be strange. Very, very strange.

Let's hope it was the AP - and not Springsteen - who got it wrong.

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Britain Doesn't Deserve This

According to the generally rather far-left London newspaper, the Independent:

England and Wales now top the Western world's crime league, according to United Nations research. The UN Interregional Crime and Justice Research Institute reveals that people in England and Wales experience more crime per head than people in the 17 other developed countries analysed in the survey... including the US, Japan, France and Spain.England and Wales also have the worst record for "very serious" offences, recording 18 such crimes for every 100 inhabitants, followed by Australia with 16. And "contact crime", defined as robbery, sexual assault and assault with force, was second highest in England and Wales – 3.6 per cent of those surveyed. This compares with 1.9 per cent in the US.

Link from Best of the Web

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Sunday, July 14, 2002

Some Blogger Tricks That have Worked for Me

Like many Blogger bloggers, the Man Without Qualities has had some recent frustrations with the Blogger.

Here are some tricks that have often worked for me, which I offer without warranty but in the hope they might help someone else, too;

Problem: Get message: "unable to load template file."

Often-times fix: Click on "Template." Make no changes in template. Then click on "Save changes."
Click on "Posts" (should return screen to horizontally spit form with orange "Publish" button on the right in the middle
Click on "Publish" button.
Click on "Edit" at bottom of post (to bring post back into upper half of screen, as if you were going to edit it). Do not edit.
Click on "Post & Publish"

Problem: Can't get deep (internal) link to work (especially for a new post).

Often-times fix: Click on "Archive"
Click on "Republish All" (wait for a minute for pages to generate)

Problem: When publishiing a new post, get "Transfer successful" message, but no post appears on blog.

Often-times fix: Click on "Edit" at bottom of post (to bring post back into upper half of screen, as if you were going to edit it). Do not edit.
Click on "Post & Publish" Wait for about one minute
Again click on "Edit" at bottom of post (to bring post back into upper half of screen, as if you were going to edit it). Do not edit.
Post should appear on blog.

Good luck.
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The "Blame Game"

Brendan Nyhan makes some good points on the limitations of arguments that a Republican "climate" or Democratic "tone" caused the current spate of corporate malfeasance.

Mr. Nyhan cites to Rush Limbaugh, Howard Kurtz and Joshua Micah Marshall as having noted that Bill Clinton, while president, may have created a "tone" of dishonesty that somehow led to fraudulent accounting. However, the point was made by the Man Without Qualities, in response to a contrary (and even earlier) article by Matt Miller, a week before any of those sources chimed in. Mr. Nyhan's cites to Kate O'Beirne, Steve Forbes and Republican strategist Rogers are even tardier.

As noted here previously, the most likely exemplar effects of Bill Clinton's general dishonesty were probably inflicted on ordinary people - such as the book-writing Enron juror who attracts Matt Miller's umbrage. But eight years of Presidential demonstrations of the effectiveness of "stonewalling" and perpetual evasiveness may well have had a serious effect on the thinking some executives. Nevertheless, Mr. Nyhan is correct to point out that such effects are very difficult to measure and attribute.

Mr. Nyhan also correctly notes:

Aren't changes in specific incentives -- such as threats of prosecution, pressures to increase profits, and opportunities for personal gain from stock options -- obviously more relevant than a "climate," an "atmosphere," or the alleged example of Bush? If Bush largely carried over the same policies that were in place under Clinton, how did this "climate" suddenly arise?

And at this point, the symmetry between the Republican and Democratic positions ends, because there is a specific federal agency charged with monitoring and regulating exactly those things Mr. Nyhan mentions: the Securities and Exchange Commission. That agency appears to have been seriously undermanaged during the Clinton-Gore Administrations by Arthur Levitt. In fact, as noted in another prior post:

Under the management of Harvey Pitt, its current chief, the Securities and Exchange Commission has uncovered quite a few very large irregularities originating in the Levitt years. Mr. Pitt has not required whatever enhanced legislation or regulation or accounting rules or practices Mr. Levitt said he needed to do the job.

Nor do most of the alleged or apparent irregularities have much to do with any of the supposed "reforms" Mr. Levitt hides behind. No one is saying that WorldCom or Xerox or Global Crossing or whatever company hits the screen tomorrow were themselves led astray by consultants, nor is anyone seriously suggesting that the auditors for any of these companies were compromised by imprecations from their consultant partners in need of business (Mr. Levitt's big hobgoblin), nor are we hearing that fancy off-balance-sheet "structured finance' transactions (or the accounting therefor) were the problem. No.

The most serious alleged problem is the old fashioned problem: deliberate fraud and simple lies. ...

While the financial world has known for a while that some new forms of businesses (such as trading in electricity or rentals of telephone wires or broadband sales) have created opaqueness, gaps, quality-of-earnings issues and opportunities for abuse in the financial reporting of companies involved in such businesses. ...

The SEC had a clear awareness that such problems, and opportunities for problems, had developed in areas of the economy serviced by established companies. Indeed, much of the FASB rules reform in this area was prompted by SEC action. But the SEC's investigatory and enforcement actions did not follow suit. There is no indication that Mr. Levitt directed the attention of his enforcers and investigators towards such companies. It is hard to imagine a more misguided application of agency resources - and Mr. Levitt is responsible for that misapplication. Paying increased attention to such businesses might have made a real difference in some of these cases, unlike Mr. Levitt's mostly irrelevant "reforms." Enron's collapse prompted much of the Levitt spin regarding his defeated "reforms," but notably lacking from the evidence adduced at the recent Andersen trial was any indication that the consulting/audit threat that Mr. Levitt's "reforms" purported to address played any role in the Enron/Andersen disaster. Nor has that dichotomy surfaced as a contributing cause in any of the other recent scandals.

The fact is that the current spate of corporate abuses originated under Mr. Levitt, were not addressed by his supposed 'reforms" and have been uncovered by Mr. Pitt without additional resources. Pretending that there is a naive symmetry between these two men creates a false impression of the problem.
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Jiminy Cricket: Tasty, Nourishing Snack

When life serves you lemons, make lemonade. And when the winds send locust swarms ...
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Why WorldCom?

The New York Times reports that a group of 25 banks that the Times says includes Citigroup (Citigroup, a bank holding company, is not a bank, but this is New York Times financial coverage, so allowances must be made) charged in a lawsuit filed Friday that WorldCom Inc. defrauded them out of nearly $2.5 billion six weeks before publicly disclosing a $4 billion accounting coverup.

Curiously, although Citigroup has never confessed to being aware of the various shenanigans that occurred and are alleged to have occurred (some with Citibank help) at Enron, Citigroup is not reported to have filed a comparable fraud suit against that company.

Why has Citigroup sued WorldCom for fraud but not reportedly sued Enron for fraud? Citigroup is certinly claiming it has substantial losses attributable to the Enron matter. Doesn't Citigroup want to recoup those? [Perhaps Citigroup has sued Enron for fraud, but the Man Without Qualities hasn't seen the press release. In that case, I would appreciate any reader sending me the relevant information.]

That Enron is functioning under Chapter 11 protection is, of course, no answer. While the popular media often suggests that lawsuits cannot be brought against such companies because of the so-called "automatic stay" activated by a Chapter 11 filing, that is an incorrect understanding of federal bankruptcy law. What Chapter 11 does require is that all lawsuits against a bankrupt company be brought only in the bankruptcy court. Further, Citigroup could sue the reportedly ultra-liquid ex-officers of Enron if they perpetrated the fraud. After all, as a corproation, Enron could not have defrauded Citigroup without some human doing the dirty work. Where is Citigroup's fraud suit against Mr. Lay and company, as rich individuals. [Perhaps those suits have been quietly filed, too without knowledge of the Man Without Qualities. In which case, I make the same request as above.]

There is more than one possible reason why Citigroup might not sue Enron and its officers and directors for fraud - and not all of those reasons are insidious. But one very good reason for not suing for fraud is that one was not in fact defrauded because one knew just what was happening all along.

Another possible reason for not bringing the suit is that in order to show Enron committed fraud, Citigroup would have to show that the very "structured finance" gimmicks Citigroup helped to create and market were fraudulent.

Did Citigroup and, in particular, Robert Rubin, know all about Enron's alleged misuse of all those "structured finance" gimmicks that Citigroup invented at the time of Mr. Rubin's notorious call to his former underling at the Treasury Department reportedly urging that the Department put the squeeze on the Enron credit rating agencies to forestall a downgrading of Enron debt? There's more and more evidence suggesting that to be the case. But somehow the well-connected Mr. Rubin is not being hounded quite the way one might imagine would be the case, especially given all the scrutiny and hostility now being directed at fast-talking upper corporate management.

The Times, which has been running many savage articles attacking upper corporate management, has maintained a curious detachment from Mr. Rubin's antics. Citigroup is one of the Times biggest advertisers and Mr. Rubin is reported to have rather friendly, personal relationships with the higher-ups at the paper. That's not proof that the Times is acting badly, of course.

But here's a suggestion for the members of all those Congressional committees obsessed with Martha Stewart. Put all the Stewart toys away, send some subpoenas to Mr. Rubin and various other Citigroup officers to appear before your committee, put them all under oath and ask them why Citigroup is not suing Enron or any of its rich officers for fraud but has elected to sue WorldCom.

The current suit against WorldCom and the somewhat peculiar nature of the WorldCom credit agreement on which this suit is based will be the topic of a future update.

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