Rational Action

It started with Florida.

I was looking closely at the county returns. Broward and Palm Beach weren’t in yet, so I checked out the more moderate and Republican areas. Then I compared the margins with the 2000 returns. Gore had done better in all of them in 2000 than Kerry was doing at the time. And I spoke up.

“Uh, guys, it looks like Kerry isn’t doing so well in Florida.”

Five minutes later CNN said the same thing. That Bush was doing better in most counties this time around. So I turned to Ohio, where Kerry had a slim lead.

Suddenly Bush was ahead. I looked at the counties, and Cuyahuga (Home of Cleveland) was barely reporting. At that point I began waiting for Cuyahuga’s returns to erase the Bush lead, which of course never happened.

Two thoughts:

1) We took Pennsylvania. We took Pennsylvania because I went there with Kate Hurwitz and campaigned in the rain.

2) My father voted for John Kerry. I cannot overstate the importance of this vote. A large part of me hopes that my arguing with him throughout the summer had something to do with it.

Okay, those were statements. So here’s a third thought:

3) The Democratic party is absolutely, absolutely fucked. This election is a complete disaster. Kerry is squeaking it out in states where he should have huge margins. The South is solid red, moreso than 2000. It looks like Daschle is toast. It’s time to rethink the party values, and rethink them fast. It’s also time to think about proportional representation.

This summer I fought in a vicious argument over who would win on November 2. The polls at the time were more or less tied. I predicted that Bush would build a lead over the coming months and ultimately win the election. I reasoned that anyone who bought into Kerry’s foreign policy charges or his cries of economic mismanagement was already voting Blue. With the so-called “transfer of sovereignty” finished, Iraq would fall off the front page of newspapers. Kerry would continue to criticize the administration’s handling of the war, but with public’s perceiving that Iraq was stabilizing, that critique would fall on deaf ears. Likewise, the “jobless recovery” finally seemed to have lost its derogatory adjective: there had been several months of robust payroll employment growth, and with Greenspan indicating he wanted to hike rates, even the experts were claiming that the trend would continue.

As the RNC came to a close, I saw my prediction slowly coming true. The Republicans were running away with the media coverage, making Iraq seem like a another successful Democratic experiment. Payroll employment was up 144,000 in August (from the report released September 3), not enough to increase participation rate, but a sizeable number nevertheless. Media coverage made it seem like a major accomplishment in the recovery.

Then a few unanticipated things happened.

First, Iraq never really faded from the headlines. It returned after the RNC, and the images conflicted with the Republicans’ rosy picture. The 1000th American soldier was killed on September 7, and criticism of the war from within the President’s own party indicated that the security situation was detiorating. It did not help that several major urban areas of Iraq weren’t even under coalition control, shattering the administration’s claims that order had been restored.

The economic news was of no help to Bush, either. When the Current Employment Survey results were released on October 3, payroll employment did not even climb by 100,000 — economists had been expecting gains of roughly 150,000. (For those who think 100,000 jobs is plenty to add in a month, remember that in order to keep (Employment)/(Labor Force) constant, the economy needs to add 150,000 jobs every month.) While this news wasn’t nearly as high-profile as the security situation in Iraq, it left the Bush team with no new information to cheer about, and it allowed Kerry to continue claming that the current administration was the first since Hoover to lose jobs.

These developments in current events occurred along with another factor that I had either not considered or completely discounted in my summer argument: the debates. If you had asked me in August, I probably would have predicted that Bush would blow Kerry out of the water in ability to convince swing voters. In fact, I felt that Bush thoroughly beat Kerry on style in at least the first two debates (I mainly listened to the final debate, and felt like Kerry sounded much better than Bush). However, polls from the first and third debate showed swing voters heavily favoring Kerry, and most polls even gave Kerry a slight lead in the second debate.

As it stands, the numbers have converged and the election is in a virtual tie. Most national polls have Bush up by only a few points, but they said the same thing in 2000, and Gore won the popular vote. The electoral college is a complete tossup. Kerry has hung in there, and time has proven my summer claims incorrect.

Is there a moral to the story?

I’m not sure. For one: please, please, don’t trust my predictions. The truth is that the ups and downs of this election have depended less on the candidates and more on the weather. While Kerry’s debate performance was admirable, he couldn’t have done it without the current events ammunition that was seemingly handed to him by God. Fate has given Kerry good hand after good hand, now let’s see if he can beat my prediction once and for all on November 2.

(P.S. About the current events ammunition: I still haven’t figured out where goose hunting comes into play here.)

Here is a list of my priorities for the next president.

• A foreign policy that promotes the United States as a positive world influence and as an ideal worthy of replication. That means a greater focus on our alliances with other democracies (A democracy should never be treated as an antagonist; see America vs. France, America vs. Germany). The message must be: all freely elected democracies are friends of the United States, so come join the community. We must make a massive commitment to “soft power” (The power of our ideas) instead of “hard power” (The power of our military).
• The continued lowering of barriers to trade. For the United States, that probably means putting agricultural subsidies on the table, and then subsequently pushing those subsidies off the table, into the trash. If American companies need government checks to produce food profitably, then they shouldn’t be producing food. Since outsourcing is a form of trade, lowered trade barriers would likely encourage it. That’s okay: we have lots to gain from outsourcing. Yes, there will be losers, but the government can help them by e.g. providing incentives to learn new skills and assistance during this retraining period. In this way, most Americans will get small gains from increased globalization, and although there will be losers, they will be able to change for the times and find new jobs.
• The balancing of the federal budget. It’s a pipe dream — both candidates only promise to halve the deficit by 2008 — but any current debt just gets tacked on to future budgets. Whenever we run a deficit now, we’re making it harder to run a surplus later. If we find ourselves in need of a large fiscal stimulus in the near future, large deficits could make that stimulus very difficult to deliver.
• A foreign policy that confronts the Middle East by acknowleding the complexity and interrelatedness of its actors. Iraq was the wrong place to start; our invasion has only made things worse, and the more-or-less true perception that the war was a unilateral act has damaged our credibility. Peace and democractization are heavily linked to the Israel-Palestine question. No more blank checks for Israel — demand an end to settlement creation, demand the beginning of settlement destruction (Gaza is a start). If the U.S. can give itself the appearance of being more even-handed on the conflict, it will have more diplomatic influence on other Middle Eastern nations. (This is probably too optimistic. It may be impossible for any Israeli PM to rein in the far right…)

Here are my secondary priorities:

• Some kind of health care reform that decreases the number of uninsured. That doesn’t necessarily mean any huge programs, but we do need to get these people on some kind of basic coverage.
• The lifting of NIH stem cell research restrictions. This is blindingly obvious.
• Support for pro-choice organizations. Allow government money to fund institutions that teach more than abstinence, especially those institutions based abroad. Stop trying to ban partial birth abortions, and stop trying to make a fetus and a baby legally equivalent.
• Civil unions for same sex couples. Don’t call it marriage, it angers too many people and makes any progress politically impossible.
• A renewed focus on civil liberties. Thankfully a lot of people have latched on to that.
• Decreased censorship of the media — filtering at the client level (e.g. you tell your TV to block shows with sexual content, instead of the government prohibiting sexual content from being broadcast). No mandates for libraries to filter content. No regulation of basic cable.
• Copyright reform. Protect fair use in digital content, allow for reverse engineering. It’s impossible, but I’ll say it: reduce the term of copyright protection, since it makes no economic sense for the term to last so long.
• Patent reform. Reevaluate our position on software patents, and hire more people at the US Patent and Trade Office so that fewer bad patents slip by.

Okay. Comments?

Let’s Get Sacarny continues with a new first verse, written by none other than Granola’s own Eric March:

I’m the King mack, call me the A-Sac
Five five and jacked you better watch yo back
My mission: efficiency. Let the pain begin
Honeys warm, Economics Keynesian

Experts buggin’, trade international
Supremely rational, what’chu got Krugman?
You ain’t nothin’ when me and MC K-Roll start
Bitch slap you with a tax cut, stuff yo’ ass with a payroll chart

Analysis, paralysis give it up try your next look
Up in here when I close you like an IR text book

Goodnight peepers.

As I was driving out of the office parking lot towards a client’s house, my boss drove up from the opposite direction, stopped, and rolled down his window.

“You know the house you’re going to? It’s the same plot of land where the Moxley murder happened. They finally tore down the house a few years ago, but it’s the same place. Anyway, have fun.”

Whoopedydoo. I drove to the house and there met an extremely nice lady with a broken computer. I helped fix it, then returned to the office. No big deal. Just a little murder two decades ago.

But the story doesn’t end there, though. I mean, come on. Would I really post something without mentioning economics or politics? Or, more specifically, just economics? I think the answer is rhetorical, but I’ll make it blindingly clear:

Boss just called me up to give me another interesting tidbit. A guy who used to live at this house was responsible for endangering the economy of many nations, including but not limited to that of the United States. The guy apparently runs (or ran) a hedge fund named Long Term Capital Management. What, you ask, is a hedge fund?

A private investment partnership, owned by wealthy individuals and institutions, which is allowed to use aggressive strategies that are unavailable to mutual funds, including short selling, leverage, program trading, swaps, arbitrage and derivatives. (definition here)

Because hedge funds get their money from the wealthy, the government does require their regulation. They tend to operate in secret, making high risk bets that net them hefty returns.

This fund in particular had made bets adding up to 1.25 trillion dollars. They started with 2.2 billion dollars in capital, using that to buy 125 billion dollars of government securities. With the government securities as backing, they then pulled in 1.25 trillion in — I can’t even figure out what the right term is — financial transactions, says one news article. (Yeah, I called them “bets” earlier in the paragraph. I’m not sure that’s even the proper wording.)

How on earth did they work their magic? A New York Time article (Now for $$$) reveals:

In essence, the fund placed bets that tiny deviations in the traditional relationships between the prices of various securities would eventually return to normal. For example, the interest rate on a medium-quality corporate bond is usually about one percentage point more than the rate on a 30-year Treasury bond, reflecting the greater risk of lending to a company than to the U.S. government. If the gap, called the spread, widened to more than one percentage point, the Meriwether team could bet with confidence that the relationship would ultimately revert to normal. Myron S. Scholes and Robert C. Merton, who shared a Nobel prize in economics, helped program powerful computers to recognize countless similar profit opportunities.

The stategy paid of initially, but then a series of the fund’s bets began to fail. On the verge of collapse, the fund attempted to secure more captial. The failure of the fund would have made major shocks throughout the world markets. When no one came forward with the dough, the U.S. Federal Reserve stepped in and negotiated a buyout. All was well, but the events still spooked analysts of the trading markets and called into question the practices of many hedge funds — and the Fed’s inability to regulate them. (source 1, source 2)

Anway. The woman at the house was very nice. I suppose this Meriweather fellow can no longer show his face in Greenwich, since he nearly fucked over pretty much everything. Which is why I fixed the computer of some nice lady, and not the computer of some rich gambler.

Ah. What a town.

I have spent a great deal of time (in combination with Ethan and the Granola team) working on the Granola website. Now we need to make it popular. Here is a link to the site:

Come see the Apple Rug Productions showing of Granola! The Musical!

The idea is to get the page listed on google by having lots of people link to it. So if you have any remote interest in Granola! please put the following text into your blog, livejournal, or webpage:

Come see the <a href="http://www.applerug.com">Apple Rug Productions showing of Granola! The Musical</a>!

Thanks for the help everyone! Please leave comments detailing any problems, funkiness, or dislikes with the site.

Yup. It’s back.

Are Columbia students pretentious?

Various sources tell me they are. I’m intrigued.

From 8pm last night to 5pm today I centered my life around writing a 7 page Lit Hum paper. Now, I’m not claiming I have more work than anyone reading this blog — I’m only claiming two things: 1) No matter how little work I have, I make it into a lot of work and 2) When I write essays, I constantly tell all my friends how many words I’ve written.

I realized that by going through my instant message logs, I could build a line graph of the progress of my essay. So here it is. Every dot represents a time I told someone my current word count over IM.

Note: Points three and four seem to connect on a nearly vertical line. That represents me at 100% efficiency. It’s cold hard proof that I am a lazy essaywriter.

So last week in Econ my professor (who surely is the most excellent professor in the world) ended the class in this manner:

It was the end of the 1970’s, an election year. With the problem of inflation and stagnation both at once, Professor Mendell approached then-candidate Reagan with a radically different plan for dealing with the economic crisis. Candidate Bush called it “Voodoo Economics”. So what exactly was this plan? We’ll talk about it next class.

At which point I was on the edge of my seat, although it seemed like everyone else wanted to run out. Yesterday he finally explained it to us, and now the whole world makes sense. I could never figure out if Bush was Keynesian or not. Now I know: he’s not. Not in a strict sense at least. Let me explain:

Keynesian economics deals with the demand side of the economy. It proposes that recessions are caused by inadequate consumer spending, and you can counteract that “gap” (It’s only a temporary thing) by:

1. Increasing government spending, so that the government purchases what the consumers don’t
2. Cutting taxes (Increasing disposable income for the consumer), thereby giving them incentive to purchase

So it’s all about increasing demand, whether it comes from the government or the consumer. Supply siders posit that there’s too much focus on demand, and they propose to stimulate the supply end of the system. To counteract a recession, supply siders propose:

1. Putting money into the hands of those who will invest it, since that will give businesses capital to expand
2. Decreasing business taxes on the margin — lowering taxes in order to give businesses the incentive to produce more

Those two reasons have pretty similar effects. Decreasing taxes on the margin means lowering taxes as the bracket gets higher. And the ones who invest are the ones in the higher brackets. (I haven’t been able to find any info online about the business taxes. I think that’s what prof said though…)

Supply side economics explain’s Bush’s tax cuts: cutting taxes on the rich and on capital gains allows for greater investment, which helps businesses, which stimulates the supply side. Tax nods to big business? Same deal.

If you’re interested, check out Supply Side Economics and Keynesian Economics on the Wikipedia.

As for classes: it turns out that next year’s sole Macroeconomics class comes at the same time as next year’s sole Data Structures and Algorithms class, which happens to need as a corequisite another Comp Sci class. Forced to choose between Comp Sci and Macro, I threw Macro out the window and picked the two CS classes and Microeconomics.

Lamenting the situation, my father woefully commented, “Micro sucks.”