The Google Book Search settlement will be, if approved, the most significant book industry development in the modern era [emphasis added]. . . . The Authors Guild has about 8000 members. [...]]]> The Google Books litigation has inspired a lot of commentary on the web. As an early October fairness hearing approaches, a consensus appears to be building: the proposed settlement is too important and complex for a court to approve in its current form. Agent Lynn Chu has complained that “No one elected the[] ‘class representatives’ to represent America’s tens of thousands of authors and publishers to convey their digital rights to Google.” Pamela Samuelson, by all accounts one of the leading academics in American intellectual property law, has this to say:

The Google Book Search settlement will be, if approved, the most significant book industry development in the modern era [emphasis added]. . . . The Authors Guild has about 8000 members. OCLC has estimated that there are 22 million authors of books published in the U.S. since 1923 (the year before which books can be presumed to be in the public domain). Jan Constantine, a lawyer for the Authors Guild, is optimistic that authors and publishers of out-of-print books will sign up with the Registry, but there are many reasons to question this.

For one thing, the proposed settlement agreement implicitly estimates that only about 750,000 copyright owners will sign up with the Registry, at least in the near term. Second, many books are “orphans,” that is, books whose rights holders cannot be located by a reasonably diligent search. Third, many easily findable rights holders, particularly academic authors, would much rather make their works available on an open access basis than to sign up with the Registry. Fourth, signing up with the Registry will not be a simple matter, since the Registry won’t just take your word for it that you are the rights holder. You are going to have to prove your ownership claim.

The non-representativeness of the class is one ground on which it is possible to object to the proposed Book Search settlement. Other reasons to object or express concerns will be explored in subsequent articles. Objections must be filed with the court by September 4, 2009.

A suitable platform for hosting public discussions of the deal only launched a few weeks ago, thanks to the diligent efforts of James Grimmelmann (who is also organizing an academic conference on the issue in October). The proposed settlement raises a number of issues, which may only be addressed by extensive regulation of the project — or a public alternative dedicated to serving those marginalized by the current proposal.

The issues fall into at least four categories:

1) Antitrust: Randal Picker, Christopher Suarez, and James Grimmelmann have addressed the proposed settlement’s likely effects on competition in the field. On the surface, it appears that Google Books would be a good alternative to companies like Amazon and Elsevier, offering a new intermediary designed to drive down the cost of access to knowledge. However, academics have pointed out several specific terms of the proposed settlement that threaten to reduce competition in the field of digitized books in the long term.

2) Pricing: Here the basic worry is that Google Books could become like the big intermediaries criticized by the open access movement for excessive pricing of academic, scientific, and technical works. Universities have been burned in the past by nonchalantly accepting big publishers’ mergers and growing control over a corpus of academic journals. Though Google is supposed to bargain on behalf of book users to reduce prices charged by book owners, the record of private insurers in accomplishing the same “middleman” role is not heartening.

The proposed settlement envisions that Google will stand between consumers and producers of knowledge. It will play a role similar to that of private insurers in standing between providers and patients—determining what access people get, how much they have to pay, etc. The worrisome aspect of that arrangement is that providers and private insurers are both very concentrated in the US, and consumers (i.e., the businesses and individuals who buy insurance plans) are not. That’s a key reason why the US spends so much more on health care than other industrialized nations, without getting better results, access, or quality.

I’d expect to see the same dynamics play out in the context of books if this settlement goes through, because it promises to create parallel levels of concentration in the Registry (imagine all hospitals combined into one bargaining unit) and Google (similarly, imagine a merger of Cigna, United Health, and WellPoint). Bilateral monopolies aren’t pretty for those on the outside — think of ever-rising ticket prices for fans that result from the negotiations of the players’ union and baseball owners. That’s why I think a “public option” is as important in digitized books as it is in health care. And at the very least, ongoing antitrust supervision, like that provided for similar schemes in the past, should apply here.

3) Privacy: Here I can’t do better than EPIC, a leading group on these issues. Here are their concerns:

Civil liberties organizations are urging Internet users to tell Google to adopt privacy protections for the Google Book Search. A judge in New York will determine later this year whether to approve the proposed settlement that would establish the service and give Google access to detailed personal information without any privacy safeguards.

The chart at the bottom of that page shows how the settlement threatens the “right to read anonymously.”

4) Cultural Power: Authors are concerned about Google’s power over the distribution, visibility, and pricing of their work. The Registry’s proposed leadership is not sufficiently representative of the wide range of publishers and authors. Perhaps a) different types of books should be subject to different types of boards of leadership, and b) all decisions about distribution, visibility, and pricing be made in an open manner. As for 4a), I think academic author in particular should worry about their books being subject to the types of revenue strategies pursued by, say, romance novelists or self-help authors. We need a separate board to handle academic books, or at least university press books. As for 4b): Google will counter that it needs to be secretive here, as it is in so many other areas, because unsavory actors could game the system. But Google should at least concede that concerns about gaming are lower in the book space than in the search space, since search engine optimizers are unlikely to publish fake books to game the system. Also, there could be a relaxation of these terms of openness as long as there is some open alternative.

In conclusion: for me, the key problems law can address are

a) extraordinary pricing power by Google/Registry alliance,
b) lack of transparency about how terms will be set,
c) lack of a public alternative to serve the people that Google fails to serve, and
d) threats to privacy

How do we solve these problems? I would propose the following responses:

a) guarantee of some form of free or subsidized access for those making under 300% of federal poverty level wages,
b) either open all Registry proceedings or at least follow Danny Weitzner’s approach to “extreme factfinding” here,
c) condition the settlement on either i) Google’s giving a copy of the digitized corpus to the government in exchange for the cost of scanning and a reasonable rate of return and/or ii) the government requiring all works copyrighted after 2009 to be digitally deposited and part of a corpus that the government could operate and make available on its own terms, and
d) allow EPIC and others to negotiate with relevant FTC policymakers to build in privacy safeguards.

I know these terms are all likely to be controversial. A public option in particular should respect the autonomy and growth of private search in this field — the organization of knowledge is an exciting field for private sector innovation. But I hope one thing is clear: it would be unjust to allow the parties to settle the case without giving a wide range of stakeholders an opportunity to fully vent their concerns. And given the likely need to involve the FTC, DOJ, and Copyright Office in ongoing supervision of the settlement terms, it is time for some inter-branch cooperation and coordination on the issue.

Image Credit: *keng.

On April 16, 2009, the Thurston County Court ruled in favor of a Vietnamese man who sued for defamation. This case was the first of its kind in the state of Washington. . . . The court found the five defendants . . . guilty for wrongly accusing the plaintiff . . . of having communist sympathies.

[I]n this case, both the defendants and plaintiffs fought against communism during the Second Indochina War. All those interviewed invoked a word commonly used within the Vietnamese émigré community to describe the act of wrongly accusing someone of communist sympathies: chụp mũ. [...]]]> I was recently listening to a program on the rise of “red-baiting” in some Vietnamese-American communities. It’s apparently becoming a common rhetorical strategy:

On April 16, 2009, the Thurston County Court ruled in favor of a Vietnamese man who sued for defamation. This case was the first of its kind in the state of Washington. . . . The court found the five defendants . . . guilty for wrongly accusing the plaintiff . . . of having communist sympathies.

[I]n this case, both the defendants and plaintiffs fought against communism during the Second Indochina War. All those interviewed invoked a word commonly used within the Vietnamese émigré community to describe the act of wrongly accusing someone of communist sympathies: chụp mũ. As this trial brought to light, chụp mũ is a widespread practice among Vietnamese community leaders. However, it is very rare for a person who has been chụp mũ to sue his/her accusers.

This might be an interesting precedent for those accused by shock jocks of being socialist, Marxist, Bolshevik, or in favor of concentration camps.

It also brought to mind the vituperative attacks often directed at Gretchen Morgenson of the New York Times. As a recent profile noted, many are bizarrely dismissive of her pathbreaking work:

“The consensus view of her among actual business people I know is pure contempt,” says [a source who] has represented high-profile business-press targets. “Her work has a sort of drive-by, potshot quality to it that leads to habitual mistakes and ideological laziness. She is reflexively opposed to free markets and assumes bad faith in almost every subject or person she examines.”

[But] many will be surprised to learn she’s a moderate Republican. “I believe in capitalism,” she says. “To me it’s natural that I would go after the people who are wrecking it.”

What becomes apparent over several conversations is that Morgenson is a business reporter–no more, no less. She’s more likely to mention investors as her main concern than readers or “the public.” Her views are pragmatic, sometimes small-bore to the point that her detail-laden writing can turn off casual readers. Her fixes are meliorative and not particularly original–better regulation, more competition. Her radical idea is, basically, that regulators should regulate, rating agencies should rate according to the merits of the credit, corporate compensation committees should set executive pay at arm’s length, directors should look to the interests of shareholders first, large shareholders should act like the owners they are and mortgage lending should be something other than a game of three-card monte. That these views are seen as “antibusiness” in some circles tells us less about Morgenson than about the ethical breakdown among this generation’s corporate elites.

People like Morgenson realized that the abuse of the capitalist system could lead to its decline around the world. It’s sad to think that in today’s lapdog business press, shibboleths have often supplanted sober appreciation of the stellar work she’s done.

Take a typical trader at a bank, investment bank, hedge fund or whatever. . . .[W]hen they place financial bets [they face the following odds]: Heads, you become richer than Croesus; tails, you get no bonus, receive instead about four times the national average salary, and may (or may not) have to look for a new job. These bright young people are no dummies. Faced with such skewed incentives, they place lots of big bets. If tails come up, OPM [other people's money] will absorb almost all of the losses anyway.

[Now] let’s consider the incentives facing the CEO and other [...]]]> Former Fed Vice Chair Alan S. Blinder’s column “Crazy Compensation and the Crisis” offers a sensible perspective on some origins of the current economic crisis:

Take a typical trader at a bank, investment bank, hedge fund or whatever. . . .[W]hen they place financial bets [they face the following odds]: Heads, you become richer than Croesus; tails, you get no bonus, receive instead about four times the national average salary, and may (or may not) have to look for a new job. These bright young people are no dummies. Faced with such skewed incentives, they place lots of big bets. If tails come up, OPM [other people's money] will absorb almost all of the losses anyway.

[Now] let’s consider the incentives facing the CEO and other top executives of a large bank or investment bank (but, as I’ll explain, not a hedge fund). For them, it’s often: Heads, you become richer than Croesus ever imagined; tails, you receive a golden parachute that still leaves you richer than Croesus. So they want to flip those big coins, too.

After this flash of insight, Blinder retreats into quietism, counseling that “fixing compensation should be the responsibility of corporate boards of directors and, in particular, of their compensation committees.” I don’t know why he doesn’t consider the power of an income tax system that’s much more progressive at the very top income levels. As David Leonhardt observes,

Today . . . the very well off and the superwealthy are lumped together. The top bracket last year started at $357,700. Any income above that — whether it was the 400,000th dollar earned by a surgeon or the 40 millionth earned by a Wall Street titan — was taxed the same, at 35 percent. This change [from the past] is especially striking, because there is so much more income at the top of the distribution now than there was in the past.

Of course, we may need to be sensitive to the rising costs of living for the wealthy.

For example, consider the sad tale of relative deprivation in Franklin Lakes that was chronicled in “Real Housewives of New Jersey:”

“We’re definitely the poor people out here,” [one] said of her leafy Franklin Lakes neighborhood, an assertion that belied the message of her ornate gilded and faux-painted interiors. “We had no landscaping for seven years. The pool isn’t gunite. I’m not spending that kind of money. Is there a liner, can you swim? So who’s stupid, you or me? I don’t look to impress.” [Her husband] added, “People can take us or leave us.”

[After touring a few rooms, the] great room was next, yardage the family crosses to reach the television room or the kitchen, which lie on either side. Downstairs was the “man cave,” as the home improvement shows say, more acreage but this time accessorized with pinball machines, a Skee-Ball setup, an Atlantic City-style card table, a pool table, a black velvet bean bag the size of a Manhattan studio apartment, a suite of leather furniture in front of a giant flat screen TV, and a gym as big as the one on your corner.

Any plan to limit or tax compensation in the financial sector needs to take full cost of these necessities into account.

Social networking sites and blogs have increasingly become breeding grounds for anonymous online groups that attack women, people of color, and members of other traditionally disadvantaged groups. These destructive groups target individuals with defamation, threats of violence, and technology-based attacks that silence victims and concomitantly destroy their privacy. Victims go offline or assume pseudonyms to prevent future attacks, impoverishing online dialogue and depriving victims of the social and economic opportunities associated with a vibrant online presence. Attackers manipulate search engines to reproduce their lies and threats for employers and clients to see, creating [...]]]> From tomorrow through Thursday, Concurring Opinions will be hosting a number of scholars invited to discuss Danielle Citron’s work Cyber Civil Rights. Responding to controversies over online attacks, Citron argues the following:

Social networking sites and blogs have increasingly become breeding grounds for anonymous online groups that attack women, people of color, and members of other traditionally disadvantaged groups. These destructive groups target individuals with defamation, threats of violence, and technology-based attacks that silence victims and concomitantly destroy their privacy. Victims go offline or assume pseudonyms to prevent future attacks, impoverishing online dialogue and depriving victims of the social and economic opportunities associated with a vibrant online presence. Attackers manipulate search engines to reproduce their lies and threats for employers and clients to see, creating digital “scarlet letters” that ruin reputations. . . .

Web 2.0 technologies accelerate mob behavior. With little reason to expect self-correction of this intimidation of vulnerable individuals, the law must respond. General criminal statutes and tort law proscribe much of the mobs’ destructive behavior, but the harm they inflict also ought to be understood and addressed as civil rights violations. Civil rights suits reach the societal harm that would otherwise go unaddressed and would play a crucial expressive role. Acting against these attacks does not offend First Amendment principles when they consist of defamation, true threats, intentional infliction of emotional distress, technological sabotage, and bias-motivated abuse aimed to interfere with a victim’s employment opportunities. To the contrary, it helps preserve vibrant online dialogue and promote a culture of political, social, and economic equality.

As I’ve noted before, I think this piece breaks new ground in applying venerable laws to the online environment. In this cyber-symposium, we propose to discuss the following issues:

What can the law do to respond to these threats?

How we deter harassment while promoting legitimate speech?

How do we balance the privacy rights of speakers and those they speak about in the new communicative landscape created by sites like AutoAdmit, Juicy Campus, Facebook, and anonymous message boards?

A list of scholars invited to discuss these issues appears below:

Ann Bartow

David Fagundes

Michael Froomkin

Nathaniel Gleicher

James Grimmelmann

Orin Kerr

Nancy Kim

Susan Kuo

Daithí Mac Síthigh

Helen Norton

David Post

David Robinson

As co-organizers of the online symposium, Danielle, David Hoffman, Deven Desai and I welcome these guests and look forward to participating in the discussion. We have decided to default to “no comments” for this cyber-symposium. It was a tough decision, but ultimately we tended to feel that, for this topic in particular, the costs of editing and/or responding to abusive or off-topic comments would likely be higher than the benefits of our usual default to openness.

As recent controversies have shown, it’s easy for online mobs to inflict real injuries on their victims–and women bear a disproportionate share of the abuse. Citron argues that “acting against these attacks . . . helps preserve vibrant online dialogue and promote a culture of political, social, and economic equality.” We look forward to an animated and insightful discussion on how to balance liberty, equality, and privacy online.

[T}he failures are rooted in recurring themes: agency appointees selected primarily for ideology and loyalty, rather than competence; agency heads who overruled staff experts and suppressed reports that did not coincide with administration philosophy; agency-industry collusion; [...]]]> I have tried to keep track of executive failures over the past eight years in financial, health, and safety regulation. But I have been overwhelmed. As James Galbraith argues in The Predator State, the past administration appointed the most extreme anti-regulatory voices it could find, across the board. Now the Center for Public Integrity has released a report on the results: the “eight-year tenure of the Bush administration was marked by more than 125 systematic failures across the breadth of the federal government.” As they note,

[T}he failures are rooted in recurring themes: agency appointees selected primarily for ideology and loyalty, rather than competence; agency heads who overruled staff experts and suppressed reports that did not coincide with administration philosophy; agency-industry collusion; a bedrock belief in the wisdom of deregulation; extensive private outsourcing of public functions; a general failure to exercise government’s oversight responsibilities; and severely slashed budgets at understaffed agencies that often left them unable to execute basic administrative functions.

The question now is, what to do about it? Responding to the administration’s torture policies and other human rights violations, Jack Balkin and Bruce Ackerman have suggested two approaches. Both of them are worth looking into with respect to some Bush-era holdovers who will be on independent agency boards for years to come.

Ackerman argues that federal judge Jay Bybee should be impeached because of his role in the politicization of the OLC:

When he was promoted to head the Justice Department’s Office of Legal Counsel, he became the final judge of legal matters within the executive branch. Yet his opinion on torture was so poorly reasoned that it was repudiated by his very conservative successor, Jack Goldsmith.

Under the Constitution, impeachment requires a finding of “high crimes and misdemeanors.” This is a high standard. Although Bybee’s opinion fails minimum tests of legal competence, he may have acted in good faith. This should protect him from conviction. But his legal distortions might also be evidence of the abdication of his fundamental legal responsibilities. Instead of engaging in a good-faith interpretation of the War Crimes Act and the Geneva Conventions, he may have merely been responding to political pressures from the White House to liberate the CIA and the military from the rule of law.

The lines between strained interpretations, incompetence, and intentional wrongdoing can be fine. But anyone familiar with the Supreme Court’s discussion of the term “modify” in the ATT v. MCI decision can grasp the limits of agency authority. Agency leadership appointed by Bush (and especially those burrowed in) should be held accountable for crossing that line.

Unfortunately, given the downward spiral of the economy, impeachment proceedings for such players would likely just distract from pressing business at hand. That’s where Jack Balkin’s idea of “Truth and Repudiation” commissions may come in handy. We need to illuminate exactly how industry ties influenced critical decisions in the Bush administration–and how its administrative leaders and allies get rewarded for those decisions later on.

I believe that our economic recovery may well depend on the emergence of commissions like Pecora’s in response to an utterly corrupted financial order. Ordinary citizens increasingly feel that Wall Street is a shell game, and they are becoming reluctant to invest in anything. We need to fully understand and shame the players who racked up incredible wealth from schemes that skirted the very edge of fraudulence. When criticized, finance leaders now enjoying tens of millions of dollars in bonuses tend to plead, “Well, everything we did was legal.” Perhaps so, but if ordinary citizens believe it can happen again, all dreams of a democratized investor class are kaput.

PS: Charles Fried wins the “setting high standards for our leaders” award:

If you cannot see the difference between Hitler and Dick Cheney, between Stalin and Donald Rumsfeld, between Mao and Alberto Gonzales, there may be no point in our talking.

PPS: Hat tips to Brian Leiter and Frank Rich.

I’ll start with two pieces in the NY Times Sunday Magazine this week that raise interesting questions about individualization versus generalization and the struggle for equality for women and people with disabilities.

In Creature Comforts, Rebecca Skloot reports on the difficulty faced by people with disabilities seeking to use a variety of animals to assist them in day-to-day public life. In doing so, she identifies the inevitable tension between the individualized inquiry required by the ADA and the urge (and sometimes need) to generalize. The people maintaining public spaces, including those who use those spaces, want bright lines about which animals are permissible service animals, while the ADA requires [...]]]> Thanks to Dan for inviting me to blog this month. I’m looking forward to it.

I’ll start with two pieces in the NY Times Sunday Magazine this week that raise interesting questions about individualization versus generalization and the struggle for equality for women and people with disabilities.

In Creature Comforts, Rebecca Skloot reports on the difficulty faced by people with disabilities seeking to use a variety of animals to assist them in day-to-day public life. In doing so, she identifies the inevitable tension between the individualized inquiry required by the ADA and the urge (and sometimes need) to generalize. The people maintaining public spaces, including those who use those spaces, want bright lines about which animals are permissible service animals, while the ADA requires that they accommodate individuals with disabilities and their individualized needs.

Similarly, in The Senator Track, Lisa Belkin comments on the difficulty that women (including Caroline Kennedy) face when they seek jobs after taking what she calls a “mom sabbatical.” Belkin claims that we need to redefine “experience” so that “what you do, and think, and produce, and change all count—even if none of your activities take place in an office, where you enjoy a title and a salary.” This call for individualized inquiry, however, butts up against the simplicity and utility of generalization; in short, working in an office with a particular title serves as a general proxy for a group of skills that Belkin would have employers examining on an individual basis (e.g., ability to run meetings, to arrive on time, to manage accounts, etc.).

The fight for individualization over generalization is a worthy one. In setting up the equality struggle in this way, however, both pieces miss an important component of the battle: longstanding and entrenched biases. In the disability context, our perceptions and judgments about the suitability of certain animals for public accommodation are undoubtedly intertwined with our biases regarding difference (and our definitions of “normalcy”). It will be much easier, I expect, to get people to accept, for example, horses as service animals for the blind than it will be to get people to accept a parrot as a service animal for a man prone to psychotic episodes. Similarly, the difficulty faced by women who take time out of the traditional work force to provide care for family members is as much one of stereotypes as it is of a more neutral inclination to generalize. I’m reminded here of research by sociologist Shelley Correll and colleagues at Cornell on the motherhood penalty (for a recent review of the research the work in this area, see Stephen Benard et al., Cognitive Bias and the Motherhood Penalty, 59 Hastings Law Journal 1359 (2008)). This research suggests that a woman seeking to reenter the traditional work market will have to overcome stereotypes that her male counterpart will not. Imagine a mother and a father who each picks up a child from your neighborhood school, Monday through Friday at 1:30 pm. You bump into each one and engage in conversation; which one do you expect will have an easier time convincing you (through subtle signals or otherwise) that he/she is engaged in workforce-related activities between 9:00 and 1:00?

I have no sympathy for Madoff. But the fact is, his alleged Ponzi scheme was only slightly more outrageous than the “legal” scheme that Wall Street was running, fueled by cheap credit, low standards and high greed. What do you call giving a worker who makes only $14,000 a year a nothing-down and nothing-to-pay-for-two-years mortgage to buy a $750,000 home, and then bundling that mortgage with 100 others into bonds — which Moody’s or Standard & Poors rate AAA — and then selling them to banks and pension funds the world over? That is what our financial industry was doing. If that isn’t a pyramid scheme, [...]]]> Thomas Friedman delivers today with a column that makes me proud he’s a fellow Marshall Scholar. My favorite paragraphs:

I have no sympathy for Madoff. But the fact is, his alleged Ponzi scheme was only slightly more outrageous than the “legal” scheme that Wall Street was running, fueled by cheap credit, low standards and high greed. What do you call giving a worker who makes only $14,000 a year a nothing-down and nothing-to-pay-for-two-years mortgage to buy a $750,000 home, and then bundling that mortgage with 100 others into bonds — which Moody’s or Standard & Poors rate AAA — and then selling them to banks and pension funds the world over? That is what our financial industry was doing. If that isn’t a pyramid scheme, what is?

[T]his legal Ponzi scheme was built on the mortgage brokers, bond bundlers, rating agencies, bond sellers and homeowners all working on the I.B.G. principle: “I’ll be gone” when the payments come due or the mortgage has to be renegotiated. . . . The Madoff affair is the cherry on top of a national breakdown in financial propriety, regulations and common sense.

Thank you, Mr. Friedman. Finally, respectable opinion is coming around to a view that the “man on the street” has intuited for some time: the recklessness of contemporary finance capitalism is systemic, not merely the product of a few bad apples. A passion for deregulation and budget cuts left an administration unable to detect even the grossest frauds. In that culture, virtually anything went. And as the Bush years come to a close, I expect many inspector generals across the administrative state will be detecting ever more wrongdoing.

Friedman reported on Chinese dismay at the breakdown in the American system, and the growing international sense that US assets are being hollowed out by a craven superclass. James Fallows’s interview with Gao Xiqing, “the man who oversees $200 billion of China’s $2 trillion in dollar holdings,” gives another perspective on the Chinese view of America’s descent toward kleptocracy:

If you look at every one of these [derivative] products, they make sense. But in aggregate, they are bullshit. They are crap. They serve to cheat people. I was predicting this many years ago. In 1999 or 2000, I gave a talk to the State Council [China’s main ruling body], with Premier Zhu Rongji. They wanted me to explain about capital markets and how they worked. These were all ministers and mostly not from a financial background. So I wondered, How do I explain derivatives?, and I used the model of mirrors.

First of all, you have this book to sell. [He picks up a leather-bound book.] This is worth something, because of all the labor and so on you put in it. But then someone says, “I don’t have to sell the book itself! I have a mirror, and I can sell the mirror image of the book!” Okay. That’s a stock certificate. And then someone else says, “I have another mirror—I can sell a mirror image of that mirror.” Derivatives. That’s fine too, for a while. Then you have 10,000 mirrors, and the image is almost perfect. People start to believe that these mirrors are almost the real thing. But at some point, the image is interrupted. And all the rest will go.

When I told the State Council about the mirrors, they all started laughing. “How can you sell a mirror image! Won’t there be distortion?” But this is what happened with the American economy, and it will be a long and painful process to come down. I think we should do an overhaul and say, “Let’s get rid of 90 percent of the derivatives.”

Fans of Fischer Black-inspired financial wizardry may blanch. But we need a fundamental reconsideration of the modern “science” of finance, as this essay shows, systematically deconstructing the myths that got us where we are today:

Neoclassical economics . . . is based on the following assumptions:

i. Most of the time markets are in or close to stable equilibrium, ii. Participants in markets act rationally to maximize fixed and known preferences described by definite and time independent utility functions., iii. Participants in markets have perfect knowledge of the information driving the markets as well as all other participants., iv. Prices are set by a deterministic process of joint maximization of the preferences of all involved in a trade, v. Fluctuations in prices are small, random and uncorrelated, vi. There is perfect liquidity so all prices are well defined, and all markets clear, vii. There is no important difference between markets comprising a few individuals and those comprising millions, so simple models suffice to elucidate the principles that govern markets.

The neoclassical paradigm based on these ideas has had some undisputed successes. At the same time, it appears to have led to the adoption of practices and recommendations, which are at least partly at the root of the present crisis. These included the ideas that,

i. Regulation is limited or unnecessary because markets find and stay close to stable equilibrium where they operate most efficiently, leading to maximally stable economic growth, whereas regulation only leads to slower growth. But we face a potentially precipitous decline in economic growth and prosperity in the wake of some deregulation.

ii. Everything has a value or price, at all times, that can be uniquely determined by some definite objective process. This includes contracts that refer to prices of fluctuating variables at future times. There is experience with futures contracts, which have prices which are set daily by their being actively traded. But we are now seeing these values evaporate.

iii. This trading experience may be generalized to a claim that complex financial instruments which oblige actions to be taken at future times based on conditions not known till then, still have definite values and prices even if they are never or rarely traded. But part of the crisis is due to the fact that the balance sheets of banks and companies holding these contracts cannot be computed because they include instruments whose prices have been revealed as simply hypothetical and are now proving to be indeterminate .

iv. Stability can be increased by inventing and trading abstract complex financial instruments rather than principal contracts like stocks and mortgages. Examples are derivatives. . . . The theory behind the possibility of combining fluctuating variables into variables that fluctuate less is critically dependent on the above assumptions, especially that the fluctuations are small, random and uncorrelated. But these assumptions have been shown to be false.

v. It has been argued that these innovative instruments should not be regulated even as much as stock trading because they function as insurance to increase stability. This was based on another false assumption that any mathematical function of the values of stocks at different times has a fixed and determinate value at any time.

vi. Because price determination is a definite process of maximization of known preferences in an environment of perfect knowledge, and because all values are definite, it can be in some instances automated and carried out by computers programmed to trade under specified conditions. But some markets thus operated have failed to function or clear trades.

I think the Edgesters behind the essay correctly diagnose the problems here, but may be making the same old mistakes they criticize when they try to address the crisis by reifying the economy as a physical system. If this crisis teaches us anything, it is that distributional questions are fundamentally moral. Our system has failed to recognize the inevitably value-laden nature of economic policy. As Linda Bilmes and Joseph Stiglitz lament, recent American economic policy has utterly failed to take this moral dimension of economic life into account:

The worst legacy of the past eight years is that despite colossal government spending, most Americans are worse off than they were in 2001. This is because money was squandered in Iraq and given as a tax windfall to America’s richest individuals and corporations, rather than spent on such projects as education, infrastructure, and energy independence, which would have made all of us better off in the long term.

President Bush did manage, by way of deficit spending, to grow the economy by 20 percent during his tenure. But who benefited from that growth? Between 2002 and 2006, the wealthiest 10 percent of households

saw more than 95 percent of the gains in income. And even within those rarefied strata, the gains tended to

be concentrated at the very top. According to one study, the nation’s 15,000 richest families doubled their annual income, from $15 million to $30 million. . . . .

Even as the wealthiest families have increased their holdings, the families at the center of the income spectrum saw their incomes shrink by 1 percent. In 2000, the average weekly earnings of production and nonsupervisory workers (70 percent of the workforce) amounted to $527 (in current dollars). Six years later, their

wages had risen a mere $11, and those same workers have meanwhile seen their net worth (assets minus liabilities) wither as a result of falling home values, higher personal debt, and shrinking savings—factors now being exacerbated by the collapsing stock markets.

And let’s not forget skyrocketing health insurance premiums. With benefit of hindsight, these windfalls for the wealthiest appear more and more pointless. Friedman and Gao are helping us see exactly the kind of conduct that was “incentivized” by tax cuts for the ultra-rich: feverish shuffling of representations of assets that ultimately metastasized the risk it was putatively managing.

One of the weirdest, most perceptually jarring things about the economic crisis is that everything looks the same. We are told every day and in every news venue that we are in Great Depression II, that we are in a crisis, a cataclysm, a meltdown, the credit crunch from hell, that we will lose millions of jobs, and that the great abundance is over and may never return. . . . And yet when you free yourself from media and go outside for a walk, everything looks . . . the same. . . . [For example,] [e]veryone’s still overweight.

Charlie Gibson of [...]]]> Former Reagan speechwriter Peggy Noonan recently commented on a strange incongruity in the current economic downturn–everyone she sees seems to be doing all right:

One of the weirdest, most perceptually jarring things about the economic crisis is that everything looks the same. We are told every day and in every news venue that we are in Great Depression II, that we are in a crisis, a cataclysm, a meltdown, the credit crunch from hell, that we will lose millions of jobs, and that the great abundance is over and may never return. . . . And yet when you free yourself from media and go outside for a walk, everything looks . . . the same. . . . [For example,] [e]veryone’s still overweight.

Charlie Gibson of ABC may have the same problem. Perhaps we are just a “nation of whiners,” as Phil Gramm claimed. But Wonkette dissents:

See, Peggy, many average mortals realize that we’re in a bad economy when they “lose lots of money,” unlike you, who will only understand it when 1930s-era hobo anachronisms start showing up on the corner of Park & 79th. . . .[T]he Wal-Mart death stampede this morning is, for what it’s worth, a solid 2008 equivalent to the terrible 1930s stereotypes on which she bases economic well-being.

Peggy is right when she says “the mall is still there.” But people aren’t at the mall, you see! They’re at Wal-Mart, where people shop on “Black Friday” when they’re poor. And they’re all there, all trying to buy the same limited number of cheap goods. It becomes a race, and they’re willing kill people as collateral damage. And yes, “Everyone’s still overweight,” Peggy, because the unhealthiest foods — usually corn-derived and subsidized by the government — are the cheapest and most readily available in this country. . . .

But in defense of Noonan, it’s important to realize how hidden the suffering may be in this downturn. As Drake Bennett notes, the price of clothing and food has gone down relative to what it was in the 1930s:

Unlike the 1930s, when food and clothing were far more expensive, today we spend much of our money on healthcare, child care, and education, and we’d see uncomfortable changes in those parts of our lives. The lines wouldn’t be outside soup kitchens but at emergency rooms, and rather than itinerant farmers we could see waves of laid-off office workers leaving homes to foreclosure and heading for areas of the country where there’s more work – or just a relative with a free room over the garage. Already hollowed-out manufacturing cities could be all but deserted, and suburban neighborhoods left checkerboarded, with abandoned houses next to overcrowded ones.

And above all, a depression circa 2009 might be a less visible and more isolating experience. With the diminishing price of televisions and the proliferation of channels, it’s getting easier and easier to kill time alone, and free time is one thing a 21st-century depression would create in abundance.

Culture also plays a role in “closeting” those hit by hard times. Think about the tactics used to defeat SCHIP last year, when various forces opposed to subsidizing children’s health insurance blamed uninsured kids’ parents for their plight. As Ezra Klein noted, the message was clear: ask for help, and you get smeared. One of the most heartening things about the recent Studs Terkel tribute on “This American Life” was an interviewee’s anger at her son’s use of this type of rhetoric with respect to poor African-Americans out of work. “Your father was looking for a job during the Depression, and he couldn’t find one!” she declares, the searing experience of poverty giving her a lasting sympathy for those on the margins.

One of C. Wright Mills’s greatest insights concerned the threshold of politics–when personal pain becomes a matter of social justice. There will be many voices over the coming years telling those slipping out of the middle class to “tough it out,” to “get more education to become globally competitive,” to make do with less. While that’s all good advice, there are some other sources for the current crisis that need to be examined:

[From] 2002-2006 . . . [h]ousehold income increased a total of $863 billion over the period. $626 billion of the total gain went to the top 1 percent of households. The bottom 90 percent got only $41 billion, less than 5 percent of the total gain.

Resources didn’t just evaporate over the past year or so due to a natural disaster. Political decisions systematically reallocated them. And until the tens of millions of Americans with insecure health coverage, crumbling infrastructure, and housing insecurity “come out” to demand a better deal, we can only expect more of the same.

UPDATE: An explanation for Peggington’s perspective.

Payday lenders are spending millions of dollars to back ballot initiatives that challenge state restrictions on their cash-advance practices. . . . [In Arizona], Yes on 200 is financed by the local affiliate of the Community Financial Services Association, a national payday-lending group. . . . . [T]he wording of the ballot initiative suggests it would impose further regulation on payday lenders; in fact, it would roll back much tougher rules. Yes on 200 is promoting the initiative with a counterintuitive strategy: spending money on ads that depict payday lenders as unscrupulous. One ad says, “Arizonans [...]]]> Who’d guess that my worries about the political power of the financial sector and Jaya’s concerns about misleading ballot initiative wording would converge? Easha Anard reports on the trend:

Payday lenders are spending millions of dollars to back ballot initiatives that challenge state restrictions on their cash-advance practices. . . . [In Arizona], Yes on 200 is financed by the local affiliate of the Community Financial Services Association, a national payday-lending group. . . . . [T]he wording of the ballot initiative suggests it would impose further regulation on payday lenders; in fact, it would roll back much tougher rules. Yes on 200 is promoting the initiative with a counterintuitive strategy: spending money on ads that depict payday lenders as unscrupulous. One ad says, “Arizonans agree: Payday lenders who rip off hard-working Americans need to be stopped,” and asks voters to support the ballot initiative.

Now those are people you can trust! No regulation needed for them.

I wonder if Bryan Caplan would consider those who want to regulate payday lending financial illiterates–and approve this “noble lie” as a way of promoting better policy?

Woolley’s analysis animates the article and should wake up anyone still complacent about the validity of the “efficient markets hypothesis.” Ford points out a cozy revolving door relationship between academics, regulators, and tycoons in high finance. All were complicit in a parasitic reallocation of money from the real economy to speculative games designed to enhance cream-skimming at [...]]]> Accoring to an article by Jonathan Ford of Prospect, the finance sector gobbled up nearly 35% of total corporate profits in the US and Britain in 2005. As financier-turned-academic Paul Woolley observes in the piece, “There is no economic merit in a sector that makes exceptional profits and devours capital and labour, and then justifies it on the grounds that you can get some ‘cash back.’”

Woolley’s analysis animates the article and should wake up anyone still complacent about the validity of the “efficient markets hypothesis.” Ford points out a cozy revolving door relationship between academics, regulators, and tycoons in high finance. All were complicit in a parasitic reallocation of money from the real economy to speculative games designed to enhance cream-skimming at the top:

While the efficient market idea held sway, academics viewed the expansion of finance with equanimity. . . . Financial instruments always existed for a purpose—such as to pass on risk cheaply and efficiently to the investor best placed or most willing to bear it. If that were not the case these products simply would not exist. More trading was beneficial because it enhanced liquidity, and liquidity lowers costs and promotes efficient pricing.

But, according to Woolley, the scale of derivatives trading should be seen as symptomatic of distorted markets. . . . [M]omentum causes mispricing which in turn creates an insatiable demand for active management. This then spills into the derivatives markets in various ways. For instance, the investor responds to the volatility of the equity market by hedging his risk and buying a put option (giving the right to sell shares at a pre-determined price). The seller of the put protects his own exposure by selling equities. The investor has thus brought about, at a cost, the very event he was seeking to insure against.

Both Ford and Woolley still endorse “market solutions” to the crisis, such as “lengthening the period over which performance is assessed,” so that bonuses depend less on quarterly and annual results. Dilip Abreu has proposed similar realignment of incentives for ratings agencies. But I’d like to see more public involvement in investment decisions generally–a move featured in the stimulus plan Timothy Canova has suggested.

I have one quibble with what is an otherwise excellent article. Ford tries to draw a distinction between the productive and the nonproductive economy with an unfortunate example:

Whereas companies such as Microsoft and Google have risen by devising products that have added to the productive capacity of the economy, finance provides no such final good or product. It is a utilitarian mechanism for bringing together savers and borrowers, and this has not changed markedly since the 1960s. . . .

Let’s look at Google’s profit machine a little more closely. Aren’t they, like the finance companies, a middleman? As the Google/Yahoo antitrust hearings suggested, we have little sense of how much of Google’s pricing power for text ads in search is driven by innovation, and how much by the brute fact of its control over so much of the relevant audience. (It will have about 90% of the search advertising market in the US if the “joint venture” with Yahoo goes through.) Similarly, Microsoft’s fortune was largely built on positive legal decisions regarding the copyrightability of its code (and noncopyrightability of Apple’s graphical user interface, which many claim MS copied). It’s hard to clearly distinguish between profits driven by sheer innovation and those due to fortuitous network effects or clever lobbying and legal ploys.

This misconception drives Nicholas Thompson’s otherwise excellent essay on presidential tech policy as well. Thompson writes:

John McCain is an AT&T guy; Barack Obama is a Google guy. And that’s one of the most important policy differences between the two.

Think of the Internet as working at different layers. There are all the pipes that go into your home, and then there’s all the stuff on your screen—from e-mail to eMule. The telecom companies like AT&T control the pipes; the software companies, like Google, create the stuff. In an ideal world, both these layers would be sites of great innovation and creativity. But in the United States, that isn’t so. The software industry may seem like a team of Gandalfs, constantly producing magic. But the average telecom company resembles Jabba the Hut: it moves slowly and slobbers a lot.

I have no great sympathy for the telecoms. But anyone who cares deeply about net neutrality has to think about dominant carriers and search engines together, as I try to do in this article.

I concede that companies in the finance and internet intermediary sectors have done some great things. But I fear that we have little grasp of exactly what the value of their services is–as opposed to the power they’ve accumulated via favorable regulation and manipulation of the markets they manage. Even worse, trade secrecy in both sectors may keep us from ever truly getting at the answers to these questions.

Art Credit: El Greco, Christ Driving the Money Changers from the Temple.

While many find these particular modifications to bodily form grotesque, opposition to unfortunate [...]]]> Corpus 2.0, a recent design project on potential human bodily evolution, has been spreading around the web. One model with a shoulder bump finds it much easier to keep her handbag steady. Other forms of “progress” include a “ridge in the nose developed for wearing glasses, ears moulded to accommodate earphones, a thumb with an extra joint for sending SMS messages more efficiently and a foot adapted to create the same posture as wearing high heels.” This work struck me as a less critical version of the “future farms” and other body modifications both proposed and ridiculed at the “Design and the Elastic Mind” show at MOMA earlier this year.

While many find these particular modifications to bodily form grotesque, opposition to unfortunate evolutionary pressures on attitudes and mental habits strikes me as much less developed. That’s one reason I cautioned against runaway “cognitive enhancements” in an article last year. The founder of Better Living Through Chemistry predicts that we should be happy to choose “average hedonic set point[s] of our children. . . . [so that] allelic combinations . . . .that leave their bearers predisposed to unpleasant states of consciousness . . . will be weeded out of the gene pool. . . [leading to] some form of paradise-engineering.” Following Walker Percy, I think such people are actually quite useful to a world too prone to “irrational exuberance”–even if introversion is maladaptive for the introvert himself.

Shanghai Jiao Tong University’s “Academic Ranking of World Universities,” assigns scores to institutions on the basis of four factors: quality of education, quality of faculty, research output, and per capita performance. . . .Quality of faculty counts the number of staff members who have won . . . awards as well as the number of “highly cited researchers” in 21 fields. . . . The “Times Higher Education-Quacquarelli Symonds World University Rankings” is more heavily focused on reviews by academics, which account for 40 percent of an institution’s score. A survey of employers contributes 10 percent. The rankings also consider the faculty-student ratio, the [...]]]> This piece in the CHE covered the increasing importance of international rankings systems to universities around the world (including the US).

Shanghai Jiao Tong University’s “Academic Ranking of World Universities,” assigns scores to institutions on the basis of four factors: quality of education, quality of faculty, research output, and per capita performance. . . .Quality of faculty counts the number of staff members who have won . . . awards as well as the number of “highly cited researchers” in 21 fields. . . . The “Times Higher Education-Quacquarelli Symonds World University Rankings” is more heavily focused on reviews by academics, which account for 40 percent of an institution’s score. A survey of employers contributes 10 percent. The rankings also consider the faculty-student ratio, the proportion of international faculty members and international students, and the number of citations per faculty member.

Germany reached a recent decision on dividing nearly two billion euros among designated universities largely on the basis of how strong they were in research. In France, a central goal of a new law intended to shake up the higher-education system is increased collaboration among institutions involved in scientific research.

Meanwhile, rankings appear to be shaping secondary schools abroad as well; Neal Lawson reports that in Britain, “private companies will run ’sin bin’ schools for excluded pupils and . . . more parents are using lawyers to secure school places.” Lawson worries that rankings-mania will make education “a positional good – one that is valued only because it gives one child a better education than another.”

This quote doesn’t do Bartels’s book justice, but it discloses one foundation of [...]]]> Larry Bartels’s new book Unequal Democracy: The Political Economy of the New Gilded Age helps explode some persistent myths about income inequality. We are frequently told that inequality–even the extreme growth in inequality witnessed over the past 30 years–is an inevitable concomitant of globalization, or is necessary for economic growth, or can’t be remedied by politics. Bartels’s work complements the growing consensus–led by people like David Cay Johnston, Jacob Hacker, Stephen Gosselin, Barbara Ehrenreich, and Robert Frank, among many others–that all these complacent contentions are not merely unsupported, but actually reverse the true causes and effects at work. Political change has accelerated US inequality–and only political change can address it.

This quote doesn’t do Bartels’s book justice, but it discloses one foundation of his argument:

[T]he real incomes of middle-class families have grown twice as fast under Democrats as they have under Republicans, while the real incomes of working poor families have grown six times as fast under Democrats as they have under Republicans. These substantial partisan differences persist even after allowing for differences in economic circumstances and historical trends beyond the control of individual presidents. . . .

[E]scalating in equality is not simply an inevitable economic trend—. . .a great deal of economic in equality in the contemporary United States is specifically attributable to the policies and priorities of Republican presidents. . . . .Voters’ seemingly straightforward tendency to reward or punish the incumbent government at the polls for good or bad economic performance turns out to be warped in ways that are both fascinating and politically crucial.

Insights like this should not be news–one need only to look at how lopsidedly the tax cuts of 2001 and 2003 helped the very wealthy in order to see real partisan differences in attitudes about inequality. But it turns out that the same political ignorance that libertarians like Ilya Somin and Bryan Caplan have been complaining about turns out to be quite helpful to their fiscal strategy:

[P]ublic opinion regarding the Bush tax cuts was remarkably shallow and confused, considering the multitrillion- dollar stakes. More than three years after the 2001 tax cut took effect, 40% of the public said they had not thought about whether they favored or opposed it, and those who did take a position did so largely on the basis of how they felt about their own tax burden. Views about the tax burden of the rich had no apparent impact on public opinion, despite the fact that most of the benefits went to the top 5% of taxpayers; egalitarian values reduced support for the tax cut, but only among strong egalitarians who were also politically well informed.

A well-fed (and math-phobic) media elite doesn’t like elevating the raw numbers here into salience–as Bartels notes,

[A] social gulf has been exacerbated by the economic trends of the New Gilded Age. . . [It] constitutes a significant obstacle to political progress in responding to those trends. One can only wonder how many affluent readers [and owners of an ever-more concentrated media] will get around to pondering “The Inequality Conundrum” as soon as they return from the Cayman Islands.

There are also some choice refutations of bien-pensant complacency about inequality throughout Bartels’s first chapter:

Many ordinary Americans believe that “large differences in income are necessary for America’s prosperity,” as one standard survey question puts it. However, economists who have studied the relationship between in equality and economic growth have found little evidence that large disparities in income and wealth promote growth. There is not even much hard evidence in support of the commonsense notion that progressive tax rates retard growth by discouraging economic effort. Indeed, one liberal economist, Robert Frank, has written that “the lessons of experience are downright brutal” to the notion that higher taxes would stifle economic growth by causing wealthy people to work less or take fewer risks.

Much of the economic argument for in equality hinges on the assumption that large fortunes will be invested in productive economic activities. In fact, however, there is some reason to worry that the new hyper-rich are less likely to invest their wealth than to fritter it away on jewelry, yachts, and caviar. According to one press report, the after-tax savings rate of house holds in the top 5% of the income distribution fell by more than half from 1990 through 2006 (from 13.6% to 6.2%), while real sales growth in the luxury retail industry averaged more than 10% per year.

Well, the huge appetite of ultra-wealthy investors for subprime paper in the early 2000s did some good, right? Expanding opportunities for homeownership via option ARMs, “pick-a-pay,” and NINJA loans? Oh, wait. . . .

There’s only so much words can say. Bartels’s charts really paint the picture of inequality starkly. Here are trends in family incomes overall:

And here are how things look among that top 1% that was doing so well in the graph above:

In other words, we live in a world of fractal inequality, where chasms of income open up even within already elite circles. Bartels shows the mutually reinforcing relationship between a winner-take-all economy and a polity where “elected officials are utterly unresponsive to the policy preferences of millions of low-income citizens, leaving their political interests to be served or ignored as the ideological whims of incumbent elites may dictate.” His perceptive scholarship is a reality check for a media entranced by the petty personality disputes of the long campaign.

[Many contributors] seem particularly concerned to empirically demonstrate that social institutions, particularly global ones, have the effect of depriving the poor of the resources they need for a decent life. Pogge, for example, frequently compares current practices to the historical examples of Stalin’s disastrous economic plan of 1930–33 . . . But why is it not enough just to point out that the rich are interfering with the poor by keeping them from using the surplus resources [...]]]> That’s the subtitle of a new book edited by Thomas Pogge (on a theme that I tried to tackle a few years ago). Bookforum brought two good reviews to my attention. James Sterba of Notre Dame admires the book, but thinks the authors should be more radical:

[Many contributors] seem particularly concerned to empirically demonstrate that social institutions, particularly global ones, have the effect of depriving the poor of the resources they need for a decent life. Pogge, for example, frequently compares current practices to the historical examples of Stalin’s disastrous economic plan of 1930–33 . . . But why is it not enough just to point out that the rich are interfering with the poor by keeping them from using the surplus resources that the rich possess?

The poor clearly are coercively restricted from using the surplus of the rich to meet their own basic needs; and if the poor have no other way to meet those needs, why are these obvious social facts not enough to show that the rich are harming the poor by interfering with them? Suggesting that some complicated empirical argument is needed here, when in fact none is required, may weaken the strong case that exists for a right to freedom from poverty based on a negative right of noninterference. . . .

I would think that recognizing a right to freedom from poverty applicable both to existing and future people requires us to use up no more resources than are necessary for meeting our own basic needs here and now, securing for ourselves a decent life but no more. To use up more resources than this, it would seem, would be to deprive at least some future generations of the resources they would require to meet their own basic needs.

Here’s an excerpt from a review by Brian Harward:

Thomas Pogge and his colleagues at the UNESCO project on severe global poverty have provided a very readable, insightful, well-reasoned, timely, and exceedingly important collection of essays on the human right to be free from poverty. When more than one billion persons worldwide live below the $1 per day international poverty line, unable to access adequate food and other essential items, we are faced with a disastrous deprivation of basic human need and are forced to confront our own complicity in sustaining such an arrangement. . . .

[As] Pogge notes, “rules governing economic transactions are the most important casual determinant of the incidence and depth of poverty in the modern world” (p.26). As a consequence, an institutional arrangement that “foreseeably produces a reasonably avoidable excess of severe poverty . . . manifests a human rights violation on the part of those who participate in imposing the order” (p.30). The wealthy, then, have imposed an order that perpetuates and indeed may deepen world poverty. This constitutes a human rights violation insofar as the effects of the global order have been foreseeable. The wealthy then have the negative obligation to eliminate severe poverty.

***

In a particularly insightful essay, Marc Fleurbaey proposes that any inequality in wealth carries with it oppressive qualities. When the parties to trade include one who is severely poor, the effect is all the more pernicious. His thesis is that inequality (especially severe poverty) forces participants to accept options (work, for example) they would otherwise refuse. That is, “a society in which the poor are legally constrained to ‘accept’ degrading living and working conditions thus allows an oppression to be brought to bear on them which is close enough to physical violence for one to regard it as a violation of their personal integrity” (p.144). Such an analysis is interestingly connected to familiar objections to redistributive programs (e.g. Nozick 1974), as this perspective involves the consideration of the fairness in acquisition and transfer of holdings among unequal participants to trade.

Looks like some key features of Robert Hale’s thought are becoming respectable again.

Dutch

Much of life

is Dutch

one-digit

operations

in which

legions of

big robust

people crouch

behind

badly cracked

dike systems

attached

by the thumbs

***

while, back

in town, little

black-suspendered

tulip magnates

stride around.

In the first meeting of my first seminar of my first year, [real-estate developer Charles] Kushner’s son Jared entered my classroom and promptly took the seat across from mine, sharing the room, so to speak. I was drawing an annual salary of $15,500 and borrowing the remainder for survival in Cambridge, in order that he might be given the best possible education. [About 5 years later] Jared . . . purchased The New York Observer for $10 [...]]]> The Washington Times has accused Barbara Ehrenreich of being a Marxist for her work exposing the effects of inequality in the US. (Maybe they bought into that scurrilous Facebook app “What German Philosopher is She“?) I wonder if intellectuals’ attitudes toward inequality are rooted in encounters like these:

In the first meeting of my first seminar of my first year, [real-estate developer Charles] Kushner’s son Jared entered my classroom and promptly took the seat across from mine, sharing the room, so to speak. I was drawing an annual salary of $15,500 and borrowing the remainder for survival in Cambridge, in order that he might be given the best possible education. [About 5 years later] Jared . . . purchased The New York Observer for $10 million, part of which he made buying and selling real estate while also attending my seminar. As publisher, one of his first moves was to reduce pay for the Observer’s stable of book reviewers. I had been writing reviews for the Observer in an effort to pay my debts.

I guess somebody isn’t going to be supporting estate tax repeal.

[On May 12] [f]ederal immigration agents raided the Agriprocessors factory, arresting nearly 400 workers, most of them men, for being in the United States illegally. Within minutes of the raid, with surveillance helicopters buzzing above the leafy streets, the wives and children of Mexican and Guatemalan families began trickling into St. Bridget’s Church, the safest place they knew. . . .

Father Ouderkirk [of St. Bridget's] said in an interview . . . . “This has happened after 10 years of stable living. These people were in school. They were achieving. It has ripped the heart out of the community and out of the parish. Probably every child I baptized has [...]]]> States are passing more immigration laws, and the federal government has done some extraordinary raids recently:

[On May 12] [f]ederal immigration agents raided the Agriprocessors factory, arresting nearly 400 workers, most of them men, for being in the United States illegally. Within minutes of the raid, with surveillance helicopters buzzing above the leafy streets, the wives and children of Mexican and Guatemalan families began trickling into St. Bridget’s Church, the safest place they knew. . . .

Father Ouderkirk [of St. Bridget's] said in an interview . . . . “This has happened after 10 years of stable living. These people were in school. They were achieving. It has ripped the heart out of the community and out of the parish. Probably every child I baptized has been affected. To see them stunned is beyond belief.”

I have no idea what our general policy on immigration should be–suffice it to say that the Wall Street Journal editorial page’s emphatic support for nearly open borders leaves me leery of that kind of extremism. But I also agree with Father Ouderkirk that sudden interventions like the Iowa raid are in no one’s best interests. The dream of providing a better life for one’s family by working hard is the most genuine and pervasive form of heroism available today, as artist Dulce Pinzon writes:

The Mexican immigrant worker in New York is a perfect example of the hero who has gone unnoticed. It is common for a Mexican worker in New York to work extraordinary hours in extreme conditions for very low wages which are saved at great cost and sacrifice and sent to families and communities in Mexico who rely on them to survive.

The Mexican economy has quietly become dependent on the money sent from workers in the US. Conversely, the US economy has quietly become dependent on the labor of Mexican immigrants. Along with the depth of their sacrifice, it is the quietness of this dependence which makes Mexican immigrant workers a subject of interest.

The randomness of raids like that on Agriprocessors seems to make them less about realizing the rule of law than about striking fear into those at the bottom of America’s economic pyramid.

Photo Credit: Dulce Pinzon, Image of Bernabe Mendez, who “works as a professional window cleaner in New York [and] sends 500 dollars a month” in remittances back to Mexico. As her website explains, “Her latest project “The Real Story of the superheroes” . . . reintroduce[s] the Mexican immigrant in New York in a satirical documentary style featuring ordinary men and women in their work environment donning superhero garb, thus raising questions of both our definition of heroism and our ignorance of and indifference to the workforce that fuels our ever-consuming economy.”

Hat Tip: weather pattern.

“People who try to claim their employer-sponsored benefits are worse off than they were two or three decades ago,” said Judge William Acker Jr., who was appointed by President Reagan to the U.S. District Court for the Northern District of Alabama in Birmingham and who has written extensively about ERISA. “The law that was supposed to protect them has been turned on its head.” . . .

[O]ver the last two decades — with relatively little notice and almost no awareness on the part of the buying public — the insurance industry has [...]]]> Mentioned in these pages in May and fresh off a positive NYT review today, Peter Gosselin has a good editorial in the L.A. Times explaining how law can intensify market-based trends toward inequality:

“People who try to claim their employer-sponsored benefits are worse off than they were two or three decades ago,” said Judge William Acker Jr., who was appointed by President Reagan to the U.S. District Court for the Northern District of Alabama in Birmingham and who has written extensively about ERISA. “The law that was supposed to protect them has been turned on its head.” . . .

[O]ver the last two decades — with relatively little notice and almost no awareness on the part of the buying public — the insurance industry has changed the nature of its policies in ways that leave homeowners on the hook for vastly more than they used to be on the hook for. . . Similar changes — with similar shifts of economic risk from business and government to families — have occurred in retirement, where the switch from traditional pensions to 401(k)s has left individuals largely on their own to provide for old age.

The current recession is less a discontinuity than an intensification of trends that have left more and more Americans feeling financially vulnerable.