Streetwise Professor

February 25, 2017

Should Social Media Be Regulated as Common Carriers?

Filed under: Economics,Politics,Regulation — The Professor @ 6:43 pm

Major social media, notably Twitter and Facebook, are gradually moving to censor what is communicated on them. In Twitter’s case, the primary stated rationale is to “protect its users from abuse and harassment.” It has also taken upon itself to  “[identify] and [collapse] potentially abusive and low-quality replies so the most relevant conversations are brought forward.” There are widespread reports that Twitter engages in “shadowbanning”, i.e., hiding the Tweets of those users it identifies as objectionable, and making these Tweets inaccessible in searches.

Further, there are suspicions that there is a political and ideological component to the filters that Twitter applies, with conservative (and especially alt-right) content and users being more likely to fall afoul of these restrictions: the relentlessly leftist tilt of CEO Jack Dorsey (and most of its employees) gives considerable credence to these suspicions.

For its part, Facebook is pursuing ways to constrain users from posting what it deems as “misinformation” (aka “fake news”). This includes various measures such as cooperating with “third party fact-checking organizations“. Given the clear leftist tilt of Mark Zuckerberg and Facebook’s workforce, and the almost laughably leftist slant of the “fact-checkers”, there is also considerable reason for concern that the restrictions will not be imposed in a politically neutral way.

The off-the-top classical liberal/libertarian response to this is likely to be “well, this is unfortunate, but these are private corporations, and they can do what they want with their property.” But however superficially plausible this position appears to be, in fact there is a principled classical liberal/libertarian response that arrives at a very different conclusion. In particular, as arch-libertarian Richard Epstein (who styles himself as The Libertarian in his Hoover Institute podcast) has consistently pointed out, even during the heyday of small government, classical liberal government and law, the common law recognized that restrictions on the autonomy of certain entities was not only justifiable, but desirable. In particular, natural monopolies and near-monopolies were deemed to be “common carriers” upon whom the law imposed a duty of providing access on a non-discriminatory basis. The (classically liberal) common law of that era recognized that such entities could exercise market power, or engage in discriminatory conduct without fear of competitive check. Thus, the obligation to serve all on a non-discriminatory basis in order to constrain the exercise of market power, or invidious discrimination based on the preferences of the owner of the common carrier.

Major social media (and Google as well–perhaps most of all) clearly have market power, and the ability to discriminate without fear of losing business to competitors. The network nature of social media (and search engines) leads to the dominance of a small number of platforms, or even one platform. Yes, there are competitors to Facebook, Twitter, and Google, but these companies are clearly dominant in their spaces, and network effects make them largely immune to competitive entry. Imposition of a common carrier-inspired obligation to provide non-discriminatory access is therefore quite reasonable, and has a substantial economic and legal foundation. Thus, libertarians and classical liberals and conservatives and even fringe voices should not resign themselves to being second or third class citizens on social media, merely because these are private entities, rather than government ones. (Indeed, the analogy should go the other direction. A major reason for limiting the ability of the government to control speech is because of its monopoly of legal violence. It is monopoly power, regardless of whether in a market or political setting, that needs to be constrained through things like rights to free speech, or non-discriminatory access to common carriers.)

Further, insofar as leftists (including the managements of the major social media companies) are concerned, it is utterly incoherent for them to assert that as private entities they are perfectly free to restrict access according to their whims, given that leftists also adamantly (indeed, obnoxiously) insist that anti-discrimination laws should be imposed on small entities operating in highly competitive environments. Specifically, leftists believe that bakers or caterers or pizzarias with zero market power should be required to serve all, even if they have religious (or other) objections to doing so. But a baker refusing to sell a wedding cake to a gay couple does not meaningfully deprive said couple of the opportunity to get a cake: there are many other bakeries, and given the trivial costs of entry even if most incumbent bakers don’t want to serve gays, this only provides a commercial opportunity for entrant bakers to cater to the excluded clientele. Thus, discrimination by Baker A does not impose large costs on those s/he would prefer not to serve (even though forcing A to serve them might impose high costs on A, due to his/her sincere religious beliefs).

The same cannot be said of Twitter or Facebook. Given the nature of networks, social and otherwise, entrants or existing competitors are very poor substitutes for the dominant firms, which gives them the power to exclude, and which makes their exercise of this power extremely costly to the excluded.  In other words, if one believes that firms in highly competitive markets should be obligated to provide service/access to all on a non-discriminatory basis, one must concede that the Twitters, Facebooks, and Googles of the world should be similarly obligated, and that given their market power their conduct should be subject to a substantially higher degree of scrutiny than a small firm in a competitive market.

Of course, it is one thing to impose de jure an obligation on Twitter et al to provide equal access and equal treatment to all, regardless of political beliefs, and quite another to enforce it de facto. Of course Jack and Mark or Sergey don’t say “we discriminate against those holding contrary political opinions.” No, they couch their actions in terms of “protecting against abusive behavior and hate speech” or “stamping out disinformation.” But they retain the discretion to interpret what is abusive, hateful, and false–and it is clear that they consider much mainstream non-leftist belief as beyond the pale. Hence, enforcement of an open non-discriminatory access obligation would be difficult, and would inevitably involve estimation of discriminatory outcomes using statistical measures, a fraught exercise (as employment discrimination law demonstrates). Given the very deep pockets that these firms have, moreover, prevailing in a legal battle would be very difficult.

But this is a practical obstacle to treating social media like common carriers with a duty to provide non-discriminatory access. It is not a reason for classical liberals and libertarians to concede to dominant social network operators that they have an unrestricted right to restrict access as a matter of principle. In fact, the classical liberal/libertarian principle cuts quite the other way. And at the very least, imposing a common carrier-like obligation would substantially raise the cost that social network operators would pay to indulge in discrimination based on politics, beliefs, or ideology, and this could go a long way to make these places safe for the expression of political opinions that drive Jack, Mark, et al, nuts.

 

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February 19, 2017

More Contradictions and Confusions

Filed under: History,Politics — The Professor @ 2:12 pm

One could really make a parlor game out of identifying all of the contradictions and confusions in the “thinking” of the identity progressive left.

Further yesterday’s point, how can they possibly win (in the US, anyways)? On their terms, winning would mean the subjugation of the victimizers (e.g., the alleged white patriarchy, including all of those white privileged denizens of Appalachia). How is this to occur? Since those to be subjugated are unlikely to voluntarily agree to become Morlocks, they must be subdued by force or the ballot box. The current correlation of forces, however, is strongly on the side of the alleged oppressors. Re-education camps to get their minds right would also be required, but “elite” liberal arts colleges (the closest thing to such camps currently in operation n the US) have already made plain their unwillingness to admit such people, and coercion would be required to force them into something that Pol Pot could love. And given that those to be coerced have the guns (a fact the left never ceases to bewail), how could that possibly work?

And is victory even possible? The leftist version of identity politics is predicated on the conflict between the oppressed and the oppressors. What happens if the oppressed defeat the oppressors? How could they function if a vital piece of their worldview disappears? When your life is structured around fighting The Man, what do you do when The Man loses/dies/disappears? My guess is that there would be a period of internecine struggle to identify who assumes the role of oppressor, and who gets the prized role of being the oppressed.

This brings to mind the Taoist critique of other (not exclusively, but mainly) western religions and philosophies which posit wars between light and darkness, goodness and evil, and so on, which can be summarized as: “um, what happens when light/good win?” Similar critiques have been applied to progressive thought (cf. Alan Watts): how is progress possible in a world of polarity? This problem is particularly acute for identity leftists, because polarity (oppressed/oppressors) is at the core of their mental model.

Traditional Marxists faced a similar dilemma. Marx was quite detailed in describing the class struggle and its ultimate outcome of a dictatorship of the proletariat, but he was quite hazy at describing just what that dictatorship would look like, and how it would be free of conflict (in the presence of any specialization at all).  I would guess that in the unlikely event of victory that the intramural contests on the left would put the intra-party conflicts among the Bolsheviks post-1917 to shame. (And remember what ended the latter conflict: Stalin killing everybody who disagreed with him.)

One last thing. the focus on identity has led to a category error in interpreting US politics, Trump’s rhetoric, and the appeal of that rhetoric to his supporters. In the identity left’s worldview, nationalism is inherently based in national, racial, and ethnic supremacism (and gender and sexual orientation and on and on). Hence, when Trump or a Trump supporter celebrates or asserts American nationalism, the Pavlovian response on the left is to think of European nationalism of the blood and soil variety. No! American nationalism has always been different, and to equate Trump with a Le Pen or an Orban–or a Putin!–on this issue is fundamentally wrong.

On this eve of Presidents’ Day, a review of Lincoln’s formulation of American nationalism, and his distinction between American and European varieties is quite useful. Sadly, all too many people have forgotten this fundamental distinction, including Republican Senators, notably John McCain, who committed this very category error a few days ago. In a statement aimed clearly at Trump, as well as continental nationalist leaders, he said:  “[The founders of the Munich conference] would be alarmed by an increasing turn away from universal values and toward old ties of blood and race and sectarianism.”

Maybe that’s true in some countries, but it is not what is going on in the United States. Indeed, it is a disgusting insult of tens of millions of Americans to insinuate that it is. McCain’s combination of senility and narcissism is becoming too much to bear, but this remark (and other things he said in Munich) demonstrate how deeply the identity left/progressive rot has penetrated establishment opinion in the US.

 

 

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February 18, 2017

Putin Is So Smart That He Outsmarted Himself–You Should Have Listened to Me, Vlad

Filed under: History,Military,Politics,Russia — The Professor @ 2:29 pm

Apparently there is buyer’s remorse in Moscow, as Putin and his coterie are disappointed at Trump’s failure to change dramatically the relationship between the US and Russia. Don’t believe me? The WaPoo and the FT say so.

This is no surprise to me at all. Indeed, from the time that the hysteria over alleged Russian manipulation of the US election broke out, I said Putin should be careful what he asks for, because it was be unlikely that Trump would behave as expected–and hoped, in Moscow, apparently. There are several reasons for this, some of which I pointed out at the time.

The first is Trump’s mercurial nature. Counting on what he says at time t to be reliable information for forecasting his behavior at T>t is a mugs’ game, because much of what he says is for tactical value and to influence negotiations, and because he changes his mind a lot, in part because he does not have strong ideological convictions.

I think Trump’s stand on Nato–an issue of particular importance to Putin–is a classic example. There is good sense at the core of Trump’s position: European Nato states have been free riding for years. He wants to get them to stump up more money. What better way than to threaten to ditch Nato? He has quite clearly put the fear into them. Then he dispatches his reasonable emissaries–Mattis and Tillerson–to lay out the framework of a modus vivendi.

The second is that Trump’s assertion of an independent United States with attenuated ties to traditional multilateral organizations is hardly helpful to Putin. This is especially true because part of Trump’s program along these lines is to revitalize the US military. Russia has strained mightily to overcome the decrepitude of its 1990s military, and has managed to recapitalize it sufficiently to make it a credible force. Even after these efforts, however, it can only dimly see the tail of the American military in the distance. If Trump goes into super-cruise mode, Russia’s expenditures will have largely been for nought. Closing the military gap required the US not to compete. Trump made it clear he would compete. How could Putin have desired that?

Nato was already the US military plus a few European military baubles hung on for decoration. A stronger US military makes Nato stronger, regardless of what the Europeans do. If the Europeans kick it up a bit too, well that all really sucks for Vlad.

The third is something that has only become manifest in the past months. Namely, the Democratic loss left them desperate to find a scapegoat. Russia has become that scapegoat, and anything said that is remotely positive about Russia unleashes paroxysms of fury–not just from Democrats, but from many Republicans as well. Any positive move that Trump would take towards Russia would be seized upon as evidence of a dark bargain with the Kremlin. So (as he acknowledged in his press conference) he has no political room to deal with Russia. Indeed, if anything he might be forced to being more Russophobic Than Thou in order to put this issue to rest.

That is, the dynamic created by his intervention has completely undermined Putin’s purpose. A self-inflicted wound.

There is yet more irony in this development. Along with their spawn, 1980s peaceniks who shrieked that Reagan’s robust stance with the Soviet Union threatened the earth with nuclear annihilation now sound like those in the hard right in the ’80s who thought Reagan was a wimp, and a traitor for talking with Gorbachev. Trump, of all people, is the one lamenting that defusing conflict and talking with the Russians would reduce the risk of nuclear holocaust.

All this calls into considerable doubt Putin’s vaunted tactical and strategic acumen. If indeed Russia intervened heavy-handedly in the US election, it is not turning out well for Putin. And evidently he recognizes this, and is sharply reducing his ambitions. Maybe, pace Stalin, we’ll see him write an article where he claims Russia is dizzy with success, and needs a respite to consolidate its gains.

Truth be told, I do not think that Putin thought that his machinations (whatever they were–and I am skeptical about some of the more lurid claims) would result in Trump’s election. I surmise that his objective was to damage Hillary, in the full expectation that she would win and it would be advantageous to deal with a weakened president. But, he was too clever by half, outsmarted himself, and now has to deal with an unpredictable dervish capable of turning any which way.

Viewed in this light, Putin is less Sorcerer, than Sorcerer’s Apprentice, who cast a spell he could not control: authoritarians who have been in control too long have a tendency to do that, because they are convinced of their own greatness. Whatever his intent, the unintended consequences of his actions have arguably left him worse of than if he had left well enough alone. I do not believe that it was his intent to elect Trump. When Trump was elected, he let his mind run wild with the possibilities, but he has now come crashing to earth.

Wiley Coyote comes to mind. That Acme Election Kit (or would it be the Acmeski Election Kit) hasn’t worked quite as planned, has it Vlad?

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The Identity Left Needs to Heed the Lesson of Major Patrick Ferguson & King’s Mountain

Filed under: History,Politics — The Professor @ 12:56 pm

At his Thursday press conference Trump unleashed a frontal attack on the press, and appealed directly to the American people: he said, in not so many words, that he would not accept the press as an intermediary standing between him and the electorate  because it is not an honest broker, but is instead  tendentiously partisan, and fundamentally dishonest in its partisanship. Trump followed this fusillade with a Tweet labeling an alphabet soup of media organizations “enemies of the people.”

The media reacted predictably, and indeed as Trump predicted during his press conference. And you know what: He doesn’t care! Indeed, he relishes it, precisely because he knows that the people to whom he is appealing detest the media. And the primary reason that they detest the media is that they know the media detests them, and indeed, largely considers them beneath contempt.

Which brings me to my main subject, which is the left’s doubling down on identity politics post-election. This is the subject of an excellent essay in the Claremont Review of Books by William Voegeli (unfortunately behind a paywall).

Voegeli brings out a couple of very important points. One is the relentless, and indeed militant, subjectivity of identity politics. (This is something I’ve remarked upon going back at least 25 years.) The premise is that there are no universals, but that everyone’s beliefs,  mind, and behavior are determined by their identity, which is the function of a nexus of primarily race and gender (with the latter definitely NOT being binary) and sexual orientation (and crucially, only to a very minor degree class/economic status–more on this in a bit).

This leads to an intense tribalism.*  This tribalism inherently creates conflict and makes dialogue impossible. This is greatly exacerbated by the leftist belief that language itself is highly subjective and the product of power relationships. When the possibility of a common meaning of language is denied, conversion by persuasion and the demonstration of error through argument become impossible. The left thinks the Tower of Babel is, if not a good thing, an inevitable thing. In such a world, dispute can be settled only by conflict and the assertion of power. In this situation, language serves the purpose almost exclusively of signaling one’s identity tribe, and to one’s identity tribe, rather than to engage in civil discourse with those outside it.

Moreover, the most crucial part of these identities is victimization. Which requires a victimizer. The left of course has that all figured out, and of course it is identifiable by race, gender, orientation etc.: the victimizers are white, primarily male, heterosexual, and middle class. Often rural or exurban, living in the Heart of Darkness that stretches from the Hudson to the San Andreas fault (with a few small islands inhabited by good tribes, namely college towns, scattered there).

And as Voegeli notes, this creates a tremendous problem for the left. They were convinced that demography, combined with raising the identity consciousness of the victimized categories, would result in an electoral majority that would sweep them into power. Once in power, they could take their revenge on the benighted–and Voegeli points out that many (e.g., Harvard’s–go figure!–Mark Tushnet) were quite explicit in their desire to exterminate the American kulaks as a class.

But the demographic revolution has not proceeded as quickly as the left had anticipated, and they launched their revolution too quickly, while the hated kulaks were still in a majority (and in particular, in an Electoral College majority–pesky Constitution!). They also misjudged their enemy. (And I am not being hyperbolic here–they definitely view whites in flyover country as the enemy.)

They should have read Walter Russell Mead’s description of the Jacksonian American. It is usually politically detached and rather passive. But when it perceives it is threatened, it reacts with a rather frightening intensity, latent with the threat of violence.

A historical example illustrates this. During the American Revolution, the “Overmountain Men” of Tennessee, the proto-Jacksonians, largely remained aloof from the conflict. They wanted to be left alone. But neutrality did not satisfy the British crown. The British demanded subservience and support. British commander Patrick Ferguson made blood curdling threats to attack Over the Mountain unless subservience was forthcoming, post haste.

These threats pushed the Overmountain Men into outright defiance. Believing their liberty to be at risk, and not willing to bend to any man (which is why they were living in the wilderness in the first place), they flooded out of their mountain fastness and gathered near King’s Mountain, North Carolina, where they met Ferguson and his Redcoats. And proceeded to shoot them to pieces, killing Ferguson in the process, in one of the most decisive and one-sided battles of the war.

The Trump election bears some similarity to this. The left’s identity politics requires that their enemies either deny their own identity and submit, or commit suicide (which, in fact, some on the left have helpfully suggested). Yes, this may work with pussified white males at Oberlin (obedient products of the feminized primary and secondary education systems in the US), but it doesn’t work with high school graduates in Gunland. As the left found out to its horror and shock on November 8, 2016.

The old Marxist left always went on and on about how the internal contradictions in capitalism would cause its collapse. The new cultural left is blind to the internal contradictions of identity politics. One cannot reasonably expect that the Evil Identity–which the Good Identities constantly call out by name–will not itself consolidate on identity lines and fight back, but that is exactly what the left’s strategy requires. A strategy based on one’s enemy’s self-abnegation can hardly be calculated to succeed, especially if that enemy is Jacksonian America, which (a) already has a well-formed identity, and (b) has a nasty habit of fighting war to the knife when threatened.

Indeed, the irony here is almost too much. The gravamen of the left’s criticism of the white middle class focuses on the very characteristics (which Obama conveniently summarized as clinging to guns and religion) that make it dangerous when threatened. So it’s not like this should have been a surprise.

One last thing about economic status and class that is worth mentioning. Although Trump’s message does appeal mainly to the white middle and working class, the fact that it is primarily economic (jobs! factories! Make America Great Again!) its appeal is not limited to whites. Indeed, it has the potential to appeal to blacks and Hispanics who are in similar economic circumstances to the whites who put Trump in the White House, especially in places like Wisconsin, Michigan, and Pennsylvania.

This is a mortal threat to the left, because the supposed demographic inflection point has not arrived, meaning that the left needs every black and Hispanic vote, and it needs these groups to turn out in number. Indeed, by pushing away many whites who have in the past voted Democratic, the left needs these minority voters all the more. Therefore, Trump’s attempts to appeal to these voters, and the inherent appeal of his program to those in the 30th-50th income percentiles, and those without advanced degrees, regardless of ethnicity, is potentially disastrous for the left. This is why Trump has to be portrayed as a racist indistinguishable from Bull Conner.

The left has responded to the Trump defeat not by questioning the wisdom of its identity-based strategy, but by doubling down on it. Those who question–such as Columbia Historian Mark Lilla–are subjected to a torrent of abuse not much different from that directed at Trump. If you want to see the doubling down, look at the contest for DNC chair, which is all about identity politics. The most flagrant example of this being the statement of one candidate to the effect that she (a white woman) believes that her “job is to shut other white people down when they want to interrupt.” Yeah. That will work really swell with Jacksonian America. You go, girl!

Thinking about these things, and reading things like Voegeli’s essay, leaves me very dispirited. The entire premise of the left is that there is no common ground among Americans. We are a collection of tribes defined by racial, ethnic, gender, and sexual orientation categories. Language is a reflection of oppressive power relationships, and is not to be trusted. If this is what one believes, then persuasion and debate and appeal to sweet reason are futile. It all comes down to a fight.

And the left’s big mistake is not recognizing that they have picked a fight with people who outnumber them, are quite disposed to fight back, and who now have as president someone who is quite willing to bring it on, and won’t back down.

I say this not because it is something I want. It is a diagnosis of what I believe the situation to be, independent of my desires. What I desire is that Americans accept a common civic creed applicable to all, and where diversity is respected by letting heterogeneous people pursue happiness according to their own lights, and where the role of the state is largely limited to protecting individuals from force and fraud attempted by foreign nations and fellow citizens.

But that is not what the left desires. It demands obedience to its (self-contradictory) creed of no common creed, and is willing to crush those that do not submit. It is acting like a modern-day Patrick Ferguson, and has stirred the descendants (some literally, most figuratively) of the Overmountain Men to take up their arms and fight. That did not work out well for Major Ferguson, and is unlikely to work out well for the left. Not that such an outcome would disappoint me. What is disappointing is that they have brought on this battle. Whoever wins, America would have been much better off had it not been fought at all.

*Reading Voegeli’s essay I was reminded of something else that I read recently, namely that most Native American tribe names were not given by the tribes themselves: most tribes referred to themselves by a word meaning “the people.” Instead, tribes were named by their enemies, and the name was usually something meaning enemy, or some negative characteristic.

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February 14, 2017

A Refreshingly Un-Straussian–and Evil–Statement from a Diehard Neocon

Filed under: History,Military,Politics — The Professor @ 4:33 pm

Many neoconservatives are devotees of Leo Strauss. Among the hallmarks of Straussian thought and rhetoric are indirection and concealment. The Straussian neocon does not make statements and arguments that are transparent to, understandable to, and have common meaning for, all. Instead he writes or speaks in a language that conveys very different meanings to the initiated, and to mere hoi polloi who are duped into supporting things from which they would recoil from in horror if they actually understood what is going on.

Thus, Bill Kristol is to be congratulated for being transparently evil, rather than deviously so as a Straussian would be. This afternoon he tweeted:

Obviously strongly prefer normal democratic and constitutional politics. But if it comes to it, prefer the deep state to the Trump state.

The phrase “deep state” has its origins in Turkey, and means that a nation’s true rulers are the security and intelligence apparatus working behind the scenes, rather than the duly constituted civil authorities to whom the said apparatus is formally subordinate. In the deep state, the de facto rulers are quite different from the de jure government: a very Straussian arrangement, come to think of it, because the surface appearance is completely at odds with the reality.

In addition to Turkey, Egypt is considered to be another exemplar of the Deep State phenomenon. And viewed objectively, a siloviki-dominated Russia is another exemplar. The Duma plays for show: the siloviki play for dough.

So it is ironic that someone who has excoriated Trump for his alleged affinity to Russia is an avowed supporter of bringing Russian (and Egyptian and Turkish) deep state methods to the United States. All because he doesn’t like the current occupant of the White House.

I called Kristol’s statement evil, and I mean that. It is evil unadulterated. The gravest threat to individual liberty and safety is an unaccountable state. The entire American Constitutional system of checks and balances is predicated on the bedrock principle that every person in every branch of government is accountable and subject to checks and balances that constrains him (or her) from wielding power not authorized under law and the Constitution.

Lincoln called this system “the last, best hope of earth.” And Bill Kristol is willing to sacrifice this last, best hope because he doesn’t like Donald Trump.

The Sorcerer’s Apprentice comes to mind here. Kristol blithely summons forces that he cannot control–and that no one can control. Once these powers are invoked, they will do as they will, not as Bill Kristol and all the others who are totally OK with an intelligence agency coup would like. Once the Deep State is empowered, it will not go away. It will be emboldened to enhance that power. Again, the siloviki model shows that clearly.

And there are so many historical examples that demonstrate how these bargains almost always go wrong. Consider the Roman rulers who invited barbarians to intervene on their side in internecine conflicts. . . . and then couldn’t get rid of the barbarians when “victory” had been achieved.

The Founders were deeply suspicious of a standing army because of the threat it posed to liberty and republican government. The United States has proved remarkably successful at constraining the uniformed military. But the intelligence establishment presents a threat far, far more dangerous than anything that the Founders could have possibly imagined, and a far greater threat than the uniformed military, precisely because it operates in the shadows and because it controls information–and information is power. It also controls misinformation and disinformation, and those are powerful too.

The right and proper way to deal with Donald Trump–or any president, for that matter–is to ensure that the existing system of checks and balances works, rather than undermine it in a way that will result in its destruction. We have already seen this in action. The Ninth Circuit–wrongly in my view, but that is not the point–has already stopped one administration initiative. The likelihood that Trump will get most of his legislative agenda through is extremely low. His executive orders have been more symbolic that substantive, precisely because the power of the presidency does have limits. For all his bluster, there are many ropes that keep Trump tied up like Gulliver.

It is beyond disgusting to see people like Kristol pay lip service to “normal democratic and constitutional politics,” and then cheer the subversion of those norms. Disgusting, but useful. At least those who actually do believe in democratic and constitutional politics know who they are fighting, and what those they are fighting stand for.

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February 13, 2017

The Intelligence Community Coup Continues

Filed under: History,Military,Politics,Russia — The Professor @ 8:27 pm

Update (2239 CST, 2/13/17). The pack has caught its quarry: Flynn has resigned. The taste of blood will just excite their appetite for more. Further, this will show that leaking works. Unless this is rooted out ruthlessly, this administration will die the death of 1000 leaks. Regardless of what you think of Trump, the ramifications of this are disturbing indeed.

The hounds are baying at the heels of National Security Advisor Michael Flynn. Flynn’s sin was to discuss sanctions with the Russian ambassador Sergey Kislyak before inauguration. Flynn denied this when the issue was allegedly raised.

Flynn’s denial has been challenged by the Washington Post, which relied on descriptions of intercepts of Flynn’s communications with the Russian ambassador. Flynn’s alleged dishonesty has allegedly led Trump to “evaluate” his status.

The substance of Flynn’s conversation with the Russian ambassador was benign. The WaPoo reports it thus:

Two of those officials went further, saying that Flynn urged Russia not to overreact to the penalties being imposed by President Barack Obama, making clear that the two sides would be in position to review the matter after Trump was sworn in as president.

“Kislyak was left with the impression that the sanctions would be revisited at a later time,” said a former official.

“Cool your jets.” Wow. How incendiary. Even if the interpretation placed on Flynn’s alleged words is correct, he did nothing more to say that sanctions would be part of broader discussions with Russia. This is a surprise why, exactly?

I further note that the WaPoo is basically serving as a ventriloquist’s dummy, dutifully mouthing “a former official’s” interpretation. (My nominee for the “former official”: Ex-CIA director and all around slug John Brennan.) Everything about “making clear” and “left with the impression” is the “former official’s” interpretation. Does he read minds? Kislyak’s in particular?

If Flynn is to be axed because he dissembled, every figure from every past administration should be sanctioned in some way. It’s almost amusing how the WaPoo is SHOCKED! SHOCKED! at the thought. FFS. Ben Rhodes comes out and says that the Obama administration lied to the media and the public as a matter of policy, and the WaPoo shrugged its shoulders so hard it took months of chiropractic treatment to straighten out.

And none of this is the real story. The real story is that this is just another act in the intelligence community’s attempted coup of the duly elected president of the United States. Consider the facts here. First, the intelligence community was surveilling Flynn’s communications. Second, it leaked those communications in order damage him and the president of the United States over a matter of policy disagreement.

The chin pullers seriously intone that Flynn may have violated the Logan Act, i.e., that he was conducting diplomacy as a private citizen. But if he was a private it was unlawful to surveil him without a warrant, or if his communications were intercepted while communicating with a legitimate target of surveillance, his communications had to be discarded/minimized, and certainly NOT leaked. (Exceptions include those communicating with Al Qaeda and other terrorist organizations. Russian ambassadors don’t count.)

If he was not a private citizen, the Logan Act allegation is bullshit. In that case, Flynn had some official status, and his communications were almost certainly classified, which would make leaking them a crime.

So whatever way you cut this, someone in the intelligence community has committed a crime, or multiple crimes.

This episode also gives the lie to the IC’s justification for not providing anything more than a Wikipedia entry to document alleged Russian hacking of the election. Recall that the IC claimed that releasing specific communications was impossible, because it would compromise sources and methods.

Um, this leak about Flynn doesn’t?

Evidently–and not surprisingly–the IC’s concerns about “sources and methods” are oh-so-situational, aren’t they?

This is all beyond the pale. Yet anti-Trump, pro-IC fanboyz (e.g., the execrable John Schindler) think it’s just great! Trump is the security risk, so everything’s fair! The ends justify the means!

Um, no. If these IC people have a basis to believe that they should resign publicly. They are not judge and jury. To arrogate those roles is a violation of the constitutional order, and they should be terminated forthwith, and prosecuted if they are revealing classified information. (Funny how Schindler was all for hanging Hillary from the highest tree for jeopardizing classified information on her server, but he’s all in with these leaks.)  Those who are currently outside government should be prosecuted as well.

The irony meter has exploded from being overloaded, but I will mention another irony: Schindler, Brennan, and other critics of Snowden constantly said that he should have taken his concerns through channels, rather than leaking classified material based on his own political views. More situational “ethics”: apparently this “go through channels” dictum is not operative when Trump or Flynn are involved.

Yet another irony: those baying the loudest here also constantly intone ominously about the threat that Putin and the siloviki pose. But what is the siloviki (one component of it anyways) but senior intelligence personnel acting outside the law in order to exercise power and decapitate political enemies and rivals? So those who warn of the danger of the Russian siloviki grab their pom-poms and lead the cheers for American siloviki.

Why is this happening? I think the problem is overdetermined, but there are a couple of primary drivers.

First, there is intense bad blood between Flynn and the CIA. This apparently goes back to Flynn’s opposition to the CIA’s glorious endeavors in Syria, most notably his incredibly prescient prediction of the rise of ISIS, and his insinuation that this would be the direct result of US policy (acting largely at behest of the oil ticks in the Gulf), either intentionally or unintentionally. This is payback, and also an attempt by the CIA in particular to defend its prerogatives against someone who is deeply skeptical of its (disastrous) machinations.

Second, it is a well known strategy of those who want to attack the king to strike at his trusted retainers first. This isolates the king; makes him reluctant to rely on others (because in so doing he makes them targets too); and sends message to those who dare to support the king.

It is for this reason that I believe that Trump will not throw Flynn to the hounds, at least not now when the baying and panting is at its most intense. He knows that it would just encourage his enemies to select a new fox once they tear this one to pieces. And he also knows that eventually they will be emboldened to go after him directly.

Regardless, this is an extremely dangerous turn of events. The intelligence community (which has a litany of failures to its “credit”) cannot be allowed to use leaks and surveillance to undermine the legal order, either because of a policy disagreement, a dislike of the man elected president, or to protect its institutional interests (including protecting it from being held accountable for past failures). Once upon a time the left–the Washington Post prominent among them–told us the same. But that was then, and this is now.

PS. I suggest you also read Spengler’s take on this, which is similar to mine.

 

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February 12, 2017

The Yemen Raid: Inherent Risk, Not Failure.

Filed under: History,Military,Politics — The Professor @ 1:43 pm

There has been a lot of controversy about the first (that we know of) major special operations raid carried out post-inauguration. The raid–in Yemen–did not go according to plan. A member of Seal Team 6 was killed. Two other Americans were seriously injured. A V-22 Osprey was damaged in a hard landing and had to be destroyed. Civilians were killed, including (allegedly) the 8 year old daughter of Anwar al-Awlaki, and several other women (who may, or may not, have been firing weapons).*

Immediately the raid was politicized. An ex-Obama administration official, one Colin Kahl, immediately took to Twitter to claim that, contrary to Trump administration statements, the raid had not been considered or planned under the Obama administration. Instead, Kahl claims, only a “broad package” of operations was discussed prior to the departure of the Obama administration, and this “information was shared” with the incoming administration.

I call bullshit. This kind of operation requires detailed planning and extensive intelligence collection, both of which take time. It takes more time for this to work its way up through the chain of command, including I might add a review by the lawyers to evaluate the risk of civilian casualties. There is no bleeping way in hell this went from a “broad package” to lead flying in a week. It would have been reasonable for the lame ducks to leave the decision to the new team, but it is risible to claim that this was an impromptu rush job undertaken by a rash Trump administration. (For one thing, there is no way Mattis would have signed off on any such thing.)

So what went wrong? Murphys Law. Shit happens. That is the nature of special operations raids. They are inherently risky, tightly coupled operations where pretty much everything has to go right in precise sequence. When they go wrong they tend to go horribly wrong, because they involve small elements who are usually outgunned, relatively immobile, and isolated if they lose the element of surprise or run into an obstacle that delays their quick ingress or egress.

These operations rely on surprise, speed, and sometimes brutal shock action.  All the planning and training and experience in the world cannot guarantee these things will work. The “for the want of a nail” phenomenon is baked into special operations.

Apparently the SEALs operating in Yemen in late-January lost the element of surprise, and rather than abort they relied on aggression to attempt to complete the mission. In so doing, they suffered casualties and inflicted a lot of them, including some on civilians.

This is nothing new. Almost exactly two years earlier, a raid to rescue western hostages in Yemen was compromised by a barking dog. A week before the election, a Special Forces team was shot up in Afghanistan because it ran into an unexpected gate: two very experienced SF men were killed and several others were wounded.

The Obama administration obviously owns that last one, and arguably is was more of a clusterfuck than what happened in Yemen last month. But you haven’t heard much about it, have you? Go figure.

As for the Osprey, they are prone to “brownouts” (i.e., the pilot losing his bearings when the huge rotors blow up a cloud of dust while landing), as occurred in Hawaii in 2015. They can also lose lift because they enter a vortex ring state. (This is the leading theory of the crash of the stealth helo during the bin Laden raid.) Again, this is another roll of the dice with this kind of operation with this kind of aircraft.

I could go on and on. The success rate of US (and also UK and Australian) special operators is amazing, but periodic disasters are part of the package.

As for the civilian casualties, that to is inherent in the nature of these operations, and the enemy against whom they are directed. These terrorists, be they in Afghanistan or Yemen or wherever, are typically embedded in the civilian population. In Afghanistan in particular, they are just part of the ordinary menfolk. Such is guerrilla warfare. Even if civilians are not targeted, they will be killed.

What happened in Yemen a couple of weeks back is not extraordinary, given the nature of the operation, and most importantly, the extent and intensity of these kinds of operations that the US is conducting in Southwest Asia, Africa, and the Middle East. Indeed, it is a testament to the skill of US special operators that these things don’t happen more often.

It is therefore incredibly disgusting to see this politicized. Yes, ex-Obama admin people and their water carriers in the media are primarily culpable in this incident, but they have help, notably from John McCain who really needs to STFU: his hatred of Trump leads him to make opportunistic statements (e.g., calling this mission a failure) that convey a very misleading picture of realities. This politicization does not help the US military, or enhance the effectiveness of its operations. Most of the politicized criticisms also tend to be blissfully ignorant of military realities.  There is a justification for having a debate about whether the current anti-terror strategy that relies heavily on high tempo special operations is worth the risk. But that discussion has to be predicated on the understanding that things like those that transpired in Yemen in January (and in December, 2014) are inherent to that strategy, and do not necessarily imply failure or incompetence.

*The only basis for the claim that Awlaki’s daughter was killed is a statement by her grandfather.

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February 11, 2017

Risk Gosplan Works Its Magic in Swaps Clearing

Filed under: Clearing,Commodities,Derivatives,Economics,Politics,Regulation — The Professor @ 4:18 pm

Deutsche Bank quite considerately provided a real time example of an unintended consequence of Frankendodd, specifically, capital requirements causing firms to exit from clearing. The bank announced it is continuing to provide futures clearing, but is exiting US swaps clearing, due to capital cost concerns.

Deutsch was not specific in citing the treatment of margins under the leverage ratio as the reason for its exit, this is the most likely culprit. Recall that even segregated margins (which a bank has no access to) are treated as bank assets under the leverage rule, so a swaps clearer must hold capital against assets over which it has no control (because all swap margins are segregated), cannot utilize to fund its own activities, and which are not funded by a liability issued by the clearer.

It’s perverse, and is emblematic of the mixed signals in Frankendodd: CLEAR SWAPS! CLEARING SWAPS  IS EXTREMELY CAPITAL INTENSIVE SO YOU WON’T MAKE ANY MONEY DOING IT! Yeah. That will work out swell.

Of course Deutsch Bank has its own issues, and because of those issues it faces more acute capital concerns than other institutions (especially American ones). But here is a case where the capital cost does not at all match up with risk (and remember that capital is intended to be a risk absorber). So looking for ways to economize on capital, Deutsch exited a business where the capital charge did not generate any commensurate return, and furthermore was unrelated to the actual risk of the business. If the pricing of risk had been more sensible, Deutsch might have scaled back other businesses where capital charges reflected risk more accurately. Here, the effect of the leverage ratio is all pain, no gain.

When interviewed by Risk Magazine about the Fundamental Review of the Trading Book, I said: “The FRTB’s standardised approach is basically central planning of risk pricing, and it will produce Gosplan-like results.” The leverage ratio, especially as applied to swaps margins, is another example of central planning of risk pricing, and here indeed it has produced Gosplan-like results.

And in the case of clearing, these results are exactly contrary to a crucial ostensible purpose of DFA: reducing size and concentration in banking generally, and in derivatives markets in particular. For as the FT notes:

The bank’s exit will reignite concerns that the swaps clearing business is too concentrated among a handful of large players. The top three swaps clearers account for more than half the market by client collateral required, while the top five account for over 75 per cent.

So swaps clearing is now hyper-concentrated, and dominated by a handful of systemically important banks (e.g., Citi, Goldman). It is more concentrated that the bilateral swaps dealer market was. Trouble at one of these dominant swaps clearers would create serious risks for CCPs that they clear for (which, by the way, are all interconnected because the same clearing members dominate all the major CCPs). Moreover, concentration dramatically reduces the benefits of mutualizing risk: because of the small number of clearers, the risk of a big CM failure will be borne by a small number of firms. This isn’t insurance in any meaningful way, and does not achieve the benefits of risk pooling even if only in the first instance only a single big clearing member runs into trouble due to a shock idiosyncratic to it.

At present, there is much gnashing of teeth and rending of garments at the prospect of even tweaks in Dodd-Frank. Evidently, the clearing mandate is not even on the table. But this one vignette demonstrates that Frankendodd and banking regulation generally is shot through with provisions intended to reduce systemic risk which do not have that effect, and indeed, likely have the perverse effect of creating some systemic risks. Viewing Dodd-Frank as a sacred cow and any proposed change to it as a threat to the financial system is utterly wrongheaded, and will lead to bad outcomes.

Barney and Chris did not come down Mount Sinai with tablets containing commandments written by the finger of God. They sat on Capitol Hill and churned out hundreds of pages of laws based on a cartoonish understanding of the financial system, information provided by highly interested parties, and a frequently false narrative of the financial crisis. These laws, in turn, have spawned thousands of pages of regulation, good, bad, and very ugly. What is happening in swaps clearing is very ugly indeed, and provides a great example of how major portions of Dodd-Frank and the regulations emanating from it need a thorough review and in some cases a major overhaul.

And if Elizabeth Warren loses her water over this: (a) so what else is new? and (b) good! Her Manichean view of financial regulation is a major impediment to getting the regulation right. What is happening in swaps clearing is a perfect illustration of why a major midcourse correction in the trajectory of financial regulation is imperative.

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February 5, 2017

Those Who Control the Past Control the Future, Climate Data Edition

Filed under: Climate Change,Politics — The Professor @ 10:33 pm

Advocates of the anthropogenic climate change hypothesis excoriate anyone who expresses skepticism as being anti-science. One of the hallmarks of true science is uncompromising commitment to the integrity of data. Ironically, this is a norm that warmists repeatedly transgress.

Case in point: the influential paper by Thomas Karl and coauthors which purports to show that the 15+ year pause in warming was chimerical. But a former NOAA scientist who was the primary steward for temperature data, and the designer of climate data protocols, has blown the whistle on this article. Dr. John Bates asserts that the data was fundamentally flawed, that the basic protocols were not followed, that Karl et al repeatedly made choices that biased their results in favor of finding warming, and that they failed to submit the data for review. To give just one example of their dubious choices, these “scientists” forced the more reliable buoy sea surface temperature data to conform with less reliable data collected the old fashioned way by ships.

But it gets better. And by better, I mean worse: “the computer used to process the software had suffered a complete failure,”  which means the study cannot be replicated. (What?!? No backup?!? How is that possible?)

Replication is another bedrock principle of science. Since Karl et al cannot be replicated, for all intents and purposes the article does not exist. The journal that published it–Science–should withdraw the paper, especially since Karl et al violated the journal’s policies involving data archiving and documentation. Indeed, Science should repudiate it. It should be removed from all citation indices, and any journal that published a paper that cites it should carry an errata listing all of these articles. Further, the conduct of the researchers should be evaluated in order to determine whether any federal funding supporting the research should be returned.

Would that this were a one-off. Alas, basic temperature data has been manipulated in a perfect illustration of Orwell’s dictum: “He who controls the past controls the future. He who controls the present controls the past.”  Those who control the data in the present have “adjusted” historical temperature records repeatedly, and almost uniformly in a way that shows more rapid warming. This has involved, for instance, reducing recorded temperatures from decades ago–most notably from the 1930s, which was a very warm period in the original, unadjusted data. By making the past cooler, these manipulations have increased the estimated rate of temperature increase, thereby advancing the warming narrative, and exerting control over current and future policy. The adjustments have not been done transparently, and they cannot be reviewed or replicated. God only knows if the original data has been retained with its integrity intact.

But even that Orwellian fiddling with the past was not enough to eliminate all anomalous evidence: the pause was flatly inconsistent with the predictions of the climate models, and in an effort redolent of “hiding the decline” of Climategate infamy, Bates makes a compelling argument that Karl tortured the data in order to “bust” the pause. And before anyone could check, checking became impossible.

It is not too much of an exaggeration to say that the data have been raped, by Karl in the present instance, and by many others who are actually allegedly the stewards of the basic records. This is profoundly unscientific, which makes the arrogant posturing of individuals like Karl, who presume to judge those who disagree with them as being anti-science, all the more insufferable. It also makes one wonder what they are afraid of, if the evidence regarding warming is so overwhelming and incontrovertible.

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February 4, 2017

The Regulatory Road to Hell

One of the most encouraging aspects of the new administration is its apparent commitment to rollback a good deal of regulation. Pretty much the entire gamut of regulation is under examination, and even Trump’s nominee for the Supreme Court, Neil Gorsuch, represents a threat to the administrative state due to his criticism of Chevron Deference (under which federal courts are loath to question the substance of regulations issued by US agencies).

The coverage of the impending regulatory rollback is less that informative, however. Virtually every story about a regulation under threat frames the issue around the regulation’s intent. The Fiduciary Rule “requires financial advisers to act in the best interests of their clients.” The Stream Protection Rule prevents companies from “dumping mining waste into streams and waterways.” The SEC rule on reporting of payments to foreign governments by energy and minerals firms “aim[s] to address the ‘resource curse,’ in which oil and mineral wealth in resource-rich countries flows to government officials and the upper classes, rather than to low-income people.” Dodd-Frank is intended prevent another financial crisis. And on and on.

Who could be against any of these things, right? This sort of framing therefore makes those questioning the regulations out to be ogres, or worse, favoring financial skullduggery, rampant pollution, bribery and corruption, and reckless behavior that threatens the entire economy.

But as the old saying goes, the road to hell is paved with good intentions, and that is definitely true of regulation. Regulations often have unintended consequences–many of which are directly contrary to the stated intent. Furthermore, regulations entail costs as well as benefits, and just focusing on the benefits gives a completely warped understanding of the desirability of a regulation.

Take Frankendodd. It is bursting with unintended consequences. Most notably, quite predictably (and predicted here, early and often) the huge increase in regulatory overhead actually favors consolidation in the financial sector, and reinforces the TBTF problem. It also has been devastating to smaller community banks.

DFA also works at cross purposes. Consider the interaction between the leverage ratio, which is intended to insure that banks are sufficiently capitalized, and the clearing mandate, which is intended to reduce systemic risk arising from the derivatives markets. The interpretation of the leverage ratio (notably, treating customer margins held by FCMs as an FCM asset which increases the amount of capital it must hold due to the leverage ratio) makes offering clearing services more expensive. This is exacerbating the marked consolidation among FCMs, which is contrary to the stated purpose of Dodd-Frank. Moreover, it means that some customers will not be able to find clearing firms, or will find using derivatives to manage risk prohibitively expensive. This undermines the ability of the derivatives markets to allocate risk efficiently.

Therefore, to describe regulations by their intentions, rather than their effects, is highly misleading. Many of the effects are unintended, and directly contrary to the explicit intent.

One of the effects of regulation is that they impose costs, both direct and indirect.  A realistic appraisal of regulation requires a thorough evaluation of both benefits and costs. Such evaluations are almost completely lacking in the media coverage, except to cite some industry source complaining about the cost burden. But in the context of most articles, this comes off as special pleading, and therefore suspect.

Unfortunately, much cost benefit analysis–especially that carried out by the regulatory agencies themselves–is a bad joke. Indeed, since the agencies in question often have an institutional or ideological interest in their regulations, their “analyses” should be treated as a form of special pleading of little more reliability than the complaints of the regulated. The proposed position limits regulation provides one good example of this. Costs are defined extremely narrowly, benefits very broadly. Indirect impacts are almost completely ignored.

As another example, Tyler Cowen takes a look into the risible cost benefit analysis behind the Stream Protection Rule, and finds it seriously wanting. Even though he is sympathetic to the goals of the regulation, and even to the largely tacit but very real meta-intent (reducing the use of coal in order to advance  the climate change agenda), he is repelled by the shoddiness of the analysis.

Most agency cost benefit analysis is analogous to asking pupils to grade their own work, and gosh darn it, wouldn’t you know, everybody’s an A student!

This is particularly problematic under Chevron Deference, because courts seldom evaluate the substance of the regulations or the regulators’ analyses. There is no real judicial check and balance on regulators.

The metastasizing regulatory and administrative state is a very real threat to economic prosperity and growth, and to individual freedom. The lazy habit of describing regulations and regulators by their intent, rather than their effects, shields them from the skeptical scrutiny that they deserve, and facilitates this dangerous growth. If the Trump administration and Congress proceed with their stated plans to pare back the Obama administration’s myriad and massive regulatory expansion, this intent-focused coverage will be one of the biggest obstacles that they will face.  The media is the regulators’ most reliable paving contractor  for the highway to hell.

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