Duck Dynasty Thoughts

Robert H

Neither his nephew, grand nephews, nor Launchpad are getting the kind of education they will need when they inherit Scrooge McDuck's magnificent fortune. I get wanting to force work ethic into the next generation but sailors (?), pilots, and boy adventurers do not make good material for the future richest duck men in the duck world.  These duck people need to be developing their financial literacy and learning about how to help the duck poor, not serving as Scrooge's flunkies and gadflies.

Even more horrifying, in past comics scrooge has indicated that his heirs might receive not just most of his wealth but also take over his business.  And Donald, his closest relative, is a leading candidate as heir!  Again, this is an aging, out-of-work sailor who has spent the last few decades taking odd jobs and fantasizing about being a nazi.  Other than his heroic service as a commando in WWII, when he was dropped solo behind enemy lines and destroyed a Japanese air base housing the imperial army's supply of racist caricatures, very little about his life qualifies him to become one of the most powerful beings in Duckburg, much less the world.

Plus, what the hell is Scrooge doing exposing children to race cars, lasers, and aeroplanes?  Six year olds should not live their lives in a duck blur.  I get that Scrooge made his fortune adventuring, but there are only so many giant gold nuggets in the world, and Scrooge really needs to consider pushing his grand nephews in a different direction.  Even if he doesn't, let's wait until they are a little older before we start putting them in life threatening situations, k?

If the Mcduck and Duck families want to become the Duck dynasty, they need to start planning for the future.

Writing Tips from Winston Churchill

by Charlie Clarke

Riffing on the writing advice you learned in elementary school, Deidre McCloskey offers this anecdote:

Miss Jones filled us with guilt about using a preposition to end a sentence with.  Winston Churchill, a politician of note who wrote English well, knew how to handle her and the editor who meddled with his preposition-ended sentence.  He wrote in the margin of his manuscript corrected by a student of Miss Jones, "This is the sort of impertinence up with which I will not put."

Found in Economical Writing.

 

If Only There Was Some Place To Hedge Exchange Rate Risk

John Quiggin argues in Jacobin that Wall Street needs to shrink.  I think there are many persuasive arguments that the financial sector is too large, but I didn't think Quiggin made a very compelling case.  Particularly, this passage stood out quite a bit.

Since differences in inflation rates have generally been small, and changes in patterns of comparative advantage are usually gradual, it was expected that market-determined exchange rates would be relatively stable, contrasting with the sharp devaluations (of as much as 20 or 25 percent) occasionally forced on governments during the Bretton Woods era. This stability would, in turn, help to stabilize national economies. 

In fact, the reverse has been the case. Exchange rates have gyrated wildly even in the absence of significant changes in fundamentals. For example, the Australian dollar traded at $US1.10 when it was first floated in 1983, before falling below 50 cents and then rebounding all the way back to $1.10. The current rate is around $US 0.90. These fluctuations have had catastrophic effects on trade-exposed sectors like manufacturing.

The central bank of a country can only target one thing.  If the central bank decides to print money and buy foreign exchange in such a way to keep its foreign exchange rate with some other currency constant, it cannot conduct counter-cyclical monetary policy.  It cannot let the currency fall during recession to stimulate exports and help the faltering economy recover.  After the fall of Bretton Woods, many countries decided that stabilizing their currency was not the appropriate goal, and they'd be better off conducting counter-cyclical monetary policy to help prevent recessions.  Thus, it's very strange to point to the instability of exchange rates, when countries obviously knew they were trading the stability of their exchange rates for more control of the stability of their economies.

He goes on to point out that the gyrations in the exchange rate were devastating to manufacturing.  What a strange point to make in a piece about the excess of the financial sector!  One of the benefits of a highly developed financial sector is that manufacturing firms can hedge their exposure to foreign exchange risk.  By trading sometimes complex derivatives, firms can lock in the price at which they export by offsetting any changes in the exchange rate with derivatives contracts.  Their counter-parties may in part be import firms looking to lock in the price of their imports.  And if the relative prices are off, speculators or just "insurance sellers" will step in and absorb the foreign exchange risk in exchange for a risk adjusted return.

There is considerable risk in the world and one thing a well-developed financial market can do is carve up that risk, so that a company or person can only hold the right kind of risk.  McDonald's is willing to hold the risk that their burgers don't sell abroad, that's a risk they understand and is central to their business, but they may not want to hold the risk that the profits they make abroad are worth considerably less in US dollars due to exchange rates they have little to do with.  If there are considerable risks of this type, a well developed financial sector can carve them up and sell them off to individuals more able and willing to bear them.  Ironically, the way they'd do this is with complex financial derivatives.

Explaining Jokes to Bob Murphy

by Charlie Clarke

Bob Murphy finds Krugman saying something monstrous:

 We won’t be able to pay for the kind of government the society will want without some increase in taxes…on the middle class, maybe a value added tax….And we’re also going to have to make decisions about health care, doc pay for health care that has no demonstrated medical benefits. So the snarky version…which I shouldn’t even say because it will get me in trouble, is death panels and sales taxes is how we do this.

Murphy's reaction is, "Ha ha ha, the government deciding who lives and dies because it’s taken over health care, and right-wingers are routinely mocked for making the exact same claim. How droll."

Of course, Murphy completely misses the joke.  Paul Krugman is equating not covering health care that has no demonstrated benefits to a "death panel."  That's a ridiculous thing to do.  It is funny and snarky, because Republicans actually do this!  Even though every insurance company ever, private or public, has to decide what procedures to cover, it is somehow a monstrous death panel when the government does it.  Granted, it's easy to see how people like Bob Murphy who think it's perfectly acceptable to equate taxation and theft can miss the irony.

The deeper irony is that the well-informed academic critique of health care on the right argues that this is actually the main problem with health care in this country.  Due to government subsidies, people buy too much health insurance, perform too many high cost, low benefit procedures and drive up the costs of health care.  They would argue that the primary cost benefit of national single payer systems is rationing health care and not improving efficiency.  I think the point has merit, but apparently Republicans don't.  Ironically, I was first convinced this argument had merit by Paul Krugman's Age of Diminished Expectations as an undergraduate.

New Finance Research Shows Finance Researchers Are Awesome

The paper shows that PhDs in Finance and Economics manage money better than non-PhDs.

"Several hundred individuals who hold a Ph.D. in economics, finance, or others fields work for institutional money management companies. The gross performance of domestic equity investment products managed by individuals with a Ph.D. (Ph.D. products) is superior to the performance of non-Ph.D. products matched by objective, size, and past performance for one-year returns, Sharpe Ratios, alphas, information ratios, and the manipulation-proof measure MPPM. Fees for Ph.D. products are lower than those for non-Ph.D. products. Investment flows to Ph.D. products substantially exceed the flows to the matched non-Ph.D. products. Ph.D.s’ publications in leading economics and finance journals further enhance the performance gap."

Hat tip: Marginal Revolution

This Post is Secretly About Diction

By Robert H.

Leo Strauss argued that truly ground breaking thinkers have had to disguise their work ever since Socrates got hemlocked by the idiot masses.  Just so, Strauss thought many important texts were written on two levels: 1. with an exoteric meaning, a straightforward reading acceptable to prevailing sentiment, and 2. With an esoteric meaning, a covert reading that advances arguments too troubling or unacceptable to be openly shared with mainstream audiences and local elites.  The esoteric meaning is revealed through the author sprinkling in symbols, deliberate contradictions that weaken his straightforward argument, etc.

I bring it up because, in a Straussian critique of Straussian scholarship, Tyler Cowen has been writing tongue-in-cheek Straussian reviews of popular films.

I bring that up because the AV club just published the first straight-faced Straussian review of a movie I've ever seen in the mainstream press.  Apparently Ender's Game, a pulpy science fiction movie about space Harry Potter also being Space Horatio Hornblower (sorry, Honor), is a bad movie because it is actually a subtle attempt to advance intentionalist ethics, the very thing Charlie and I have been arguing about in a sports context.  The review is really an epic exercise in writing horses---; I highly recommend it.

Protip: The esoteric meaning of this post is that I like saying the word "Straussian."

Put him in a body bag!

By Robert H.

Charlie points out that I didn't address reputational issues in my last post.  It was a big oversight, so I'll do that here:

First, it is clearly true that violating norms in sports can be unethical.  If there is a norm rather than a rule against punching, you still shouldn't punch.  But that doesn't actually tell us anything about whether intentionally injuring a player is unethical -- the punch is unethical regardless of your intent.  We are in the same place as my last post, only now I am saying "it's ethical to try to injure other players within the rules *and norms*."

So, Imagine a league has a norm against trying to injure other players with legal hits.  Point one: this is a bad norm!   Sports aren't a court room with a lot of time to dig into motives, they're fast affairs full of thousands of decisions and actions.  Norms should stick to policing obvious actions.  Stuff like "don't hit a boxer who wants to touch gloves at the start of a fight."  To the extent intent is looked at, it should be intent clearly discernible from the action.   An intentional late hit looks different from a guy who simply can't avoid the runner after the whistle is blown.  But when you go beyond "was that action intentional" and get to "what was the intent of that action," that is some hazy stuff.  Did Roy Williams horse collar that guy because it is an effective tackle and he wanted to take him down?  Or because it is a dangerous tackle  and he wanted to hurt him?  Maybe courtrooms could get to the bottom of that, but I'm not sure refs, players, and spectators can.  Again, better to police people intentionally going for the knees to injure players with a rule (or norm) against intentionally going for the knees than a rule (or norm) against intentionally injuring players.  It's just too hard to discern motive.

That said, a way out is to use reputation.  Maybe over the course of his career someone who tries to injure other players will injure more guys, people will notice, he will get a bad reputation and other players will retaliate.  My thoughts about this:

1. This rarely happens.  When I think of players with bad reputations it's normally because they routinely engaged in acts that clearly violated the rules and norms -- they cheat.  If a guy twists ankles in the pile a lot the ref may not notice, but the players do.

It's more rare for a guy to get a reputation simply because bad things seem to happen around him more than usual (ie, he has injured more people over his career).  The only thing I can think of is pitchers: if you "accidentally" beam a lot if batters, pretty soon people will decide it isn't an accident.

2. The norm is clearly a good *strategic* reason not to try to injure.   That said

3.  When the norm is enforced with cheating, it's clearly not ethically binding.  "Don't try to hurt other players because if you do people will cheat against you in retaliation"?  That's a ridiculous norm and using the threat of cheating to constrain your opponents play is as bad as cheating itself.  At best, cheating can be a strategic decision -- we will give up the penalty yardage and cheat in order to get the outcome we want.  But while it might be good strategy, I have trouble seeing it as an ethically binding norm on the other guys.  "If we try to eat up the clock they will foul us, so we have an ethical norm to not eat up the clock" is crazy thinking.

4. At last the hardest question, what to say when the norm is enforced with threats of licit retaliation.  Imagine the norm is enforced with a sort of mutually assured destruction: if you try to legally injure players people will notice the greater number of injuries and try to injure you right back.  Has that created an ethically binding norm?  This puts tension on some of my claims (it seems more workable than other options, it removes any "I have to do it because I don't want the other guy to get an advantage" rational, and it multiplies the harm of intentionally injuring, since it will push the whole sport in a more violent direction).  I am going to tentatively say that I don't think so.  Remember point two of my last post: the outcome of blowing up the norm is that it will lead to injuries society neither abhors nor thinks people should not be able to consent to.  This isn't really mutually assured destruction, where breaking the norm means nuclear annihilation.  It's a sport, and breaking the agreement means some marginally greater number of injuries everyone has already consented to risk.  They knew these types of injuries happen and they knew a breakdown in this unofficial norm could happen when they took the field, marginally increasing the incidence of this type of injury.

To me, the consent issue clinches it.  It could be strategically very dumb to start legally injuring a greater number of players than usual, but I don't think it is unethical.  If it's within the rules, if everyone has consented to that possibility, then whether to do it or not is as much a strategic question as whether to tackle high or low.

And again, in practiced I think this norm enforced this way  is rare.  People don't dislike Meriweather because he has violated a norm against intentionally injuring people, they dislike him because he repeatedly employs dangerous, illegal hits.  Bad reputations are normally about repeated cheating, not dark motives revealed by statistically aberrant outcomes over years of play.

Well that was rambley.