Update on Divestment

An update to the controversy in the Presbyterian Church over divestment. You can say one thing for them: they don't act speedily--took one year to decide to "press". (They also added a bank that may have helped channel money to Palestinian terrorists. Presbyterians want to be right, they also want to be perceived to be fair.) They still get called anti-Semitic, though with an adjective.

Threat to Divest Is Church Tool in Israeli Fight - New York Times: "The Presbyterian Church U.S.A. announced Friday that it would press four American corporations to stop providing military equipment and technology to Israel for use in the occupation of the Palestinian territories, and that if the companies did not comply, the church would take a vote to divest its stock in them."

Intermittent Blogging

I'll be blogging less over the next few weeks. My older sister is going to have hip replacement surgery and I'll be traveling a couple times to help during this time.

Finland Bureaucracy Is Innovative?

Robert Kaiser has another interesting article on Finland in today's Post. (Caution: he makes 2 math errors in one paragraph; I've written the editor.) He claims the country is united in pushing innovation, trusting the government to guide R&D, and devotes more GDP to R&D than the US:

"'We are helping to plan R&D projects that we will then fund,' he said. About a third of the projects Tekes funds fail completely, Saarnivaara said. He would like that percentage to be higher -- in other words, he would like to take more risks."

I'm amazed by the statement--I can't imagine any US government agency boasting that 1/3 of its money is wasted (at least, that's how the politicians of the out party would phrase and the media would be hot on their tails). If I'm right that you almost never do things right the first time (witness Chertoff's reorg of Homeland Security), the ability to learn from your failures is critical. That assumes you're free to fail, which most US agencies aren't.

It's possible though that Kaiser and I are over-enthusiastic. Both DARPA and NSF probably have a bunch of failures that are mostly hidden. And the history of government steering development isn't always good. I remember in the early 90's Japan was pushing the "5th generation computers". A blind alley, I believe. But with all the cautions, I'm still envious of a society that seems to trust its government that much.

Homes As Hummers

Sometimes I agree with Robert Samuelson of the Wash Post; sometimes I don't. Today's column is one I agree with. Among the nuggets is a poll that showed 35 percent of Americans think a home theater (room) is highly desirable. (There was a bit in the Post over the weekend where builders said they weren't building libraries anymore.)

"Another cause of this relentless upsizing is that the government unwisely promotes it. In 2005, about 80 percent of the estimated $200 billion of federal housing subsidies consists of tax breaks (mainly deductions for mortgage interest payments and preferential treatment for profits on home sales), reports an Urban Institute study. These tax breaks go heavily to upscale Americans, who are thereby encouraged to buy bigger homes. Federal housing benefits average $8,268 for those with incomes between $200,000 and $500,000, estimates the study; by contrast, they're only $365 for those with incomes of $40,000 to $50,000. It's nutty for government to subsidize bigger homes for the well-to-do."

Why don't liberals make proposals here? (Samuelson just points with alarm but doesn't make suggestions like the following.) From H&RBlock:

If you take out a mortgage to buy a second home, the interest is deductible if the mortgage is secured by the home and you itemize deductions. Your deduction may be limited if the mortgage exceeds the fair market value of the home or if the mortgages on your main home and your second home exceed $1 million ($500,000 if you are married, filing a separate return).

Granted, these days $1 million doesn't buy as much of a home as it used to. But my great grandfather had a cabin that was about 600 square feet, with 7 people (mother-in-law, wife, four kids). I'd think 500 square feet per person is a very reasonable cap. Limit deductibility of interest to the lesser of $1million or interest on the average cost of a home in the ZIP code sized to the number of dependents reported x 500 square feet.

There's no way the taxpayers should subsidize beach houses, ski houses, etc. This issue appeals to the populist instincts we still have.

Creating Disability--History

Don't usually listen to NPR but tuned in briefly today to an Odyssey program, interviewing someone on "disability" and the place of the ADA. He attributed it to the Frederick Taylor efficiency expert mode circa 1900, which created the idea of "able-bodied" as the norm and therefore "disabled" as the inferior. (He used "valorized", a term I'm too old to touch.)

Meanwhile, yesterday got word that my 69 year old sister will need a hip replacement. Also, recently discussion about the ethics of infant euthanasia--doctor in Netherlands drew up guidelines for ending the life of children under certain instances (like lack of a functioning brain, a skin condition that leaves the infant in pain and the skin peeling off from any touch).

Strikes me that humans, and other animals, are innately competitive so we always have a pecking order. Taylor conceptualized and categorized it, but a good part of the rise of "disabled" must be from the growing wealth of society which permits us to express (occasionally) our better instincts. We want to preserve all life, but the reality is that the harder the life, the more likely the "weaker" will not survive. Think of extreme cases--the Donner Party the women survived, the weak and isolated did not. Before hip replacement surgery, my sister would have faced a painful, immobile, and probably short life. Now she can look forward to keeping her kid brother in his place for another 15 years or so. So while there may be a bit of truth in the guy's take, which seemed a slap at industrial capitalism, it also hides truth, the truth that we are making progress.

More on Bankruptcy Statistics

Posted earlier in the week on possible errors in bankruptcy statistics because of the way software was designed. I just stumbled on a reference in an economics book, "Does Atlas Shrug", a compilation of articles on the effects of taxing the rich, that may also be pertinent. In 1986 the Bill Bradley/Rostenkowski Tax Reform Act passed (with minor assistance from what's his face, the guy at 1600 PA). In the introduction to the book, the editor says there's research showing that entrepreneurs switched the form of their business as a result of the changes in tax treatment. Apparently the big switch was from corporation C (never heard of it, I assume it's just the straight corporation form) to corporation S (which I have heard, where the business is a corporation but for tax purposes all the income is attributed to the individual). Note that I don't know for sure that such changes might affect bankruptcy comparisons, but it seems possible and 1986 is the date mentioned in the previous article.

It raises a bigger subject--the idea that there's a discrepancy between what is presented by lawyers and accountants under the tax laws and what the economic reality is. That's a discrepancy my old agency had a lot of experience with--farmers would change their organizations so as to limit the impact of payment limitation laws and regulations, but the economic reality wouldn't change.

The bottom line is that statistics can be tricky things.

When Cabinet Secretaries Can't Count

Former Labor Secretary Robert Reich, on NPR as reported in TomPaine.com - What Africa Really Needs:

"Last year, the United States paid our cotton growers $3.2 billion in subsidies. That comes to about half a million dollars per farmer. These aren’t family farms, for the most part. They’re giant agribusinesses. These big businesses argue that without the subsidies the United States would lose its cotton industry and we shouldn’t rely on other nations for a vital material like cotton."

I don't want to get into the debate over what is a family farm, who is a farmer, or how badly subsidies to cotton farmers hurt the farmers in Africa. I do want to challenge Reich's figures:
Let's divide $3.2 billion by .5 million. That give 6,000 as the number of cotton farmers in the U.S. But even the toughest opponents of cotton subsidies acknowledge the U.S. has around 20,000 cotton farmers. I'd also note that the Environmental Working Group database for ag subsidies shows cotton at $2.7 billion for 2003 (although attacks on subsidies often include government benefits other than direct payments to farmers). Secretary Reich's calculation is off by an order of magnitude. I'd guess he got the half million figure from a separate source, perhaps representing subsidy payments over 10-20 years. Anyhow, IMHO carelessness with figures means one is more anxious to make a case, than to find the truth. Shame.

x

An End to the "War on Terror"?

I'm still getting used to John Tierney as the conservative columnist in the NY Times (registration required) but I did like today's column, in which he tied the London bombings to the fear he felt when the snipers were terrorizing the Washington, particularly Maryland, area. An excerpt:

"But I think that we'd be better off reconsidering our definition of victory in the war on terror. Calling it a war makes it sound like a national fight against a mighty enemy threatening our society.

But right now the terrorists look more like a small group of loosely organized killers who are less like an army than like lightning bolts - scary but rarely fatal. Except that the risk of being struck by lightning is much higher than the risk of being killed by a terrorist."

As he says, terrorists could easily imitate the snipers, and if they switched cars each time it would take luck to catch them.

Vulnerability to Terrorism

I was planning to blog on this a couple weeks ago when a study on the vulnerability of the milk supply to botulism was published. I think it was done by the National Academy of Sciences and caused discussion over the flow of information: is it better to publish so vulnerabilities can be fixed or watched or to keep the information unpublished so that terrorists aren't given a roadmap?

It's an old argument. I seem to remember back in the 70's the Progressive magazine published information on how to make a nuclear fission device, arousing much the same discussion. There was also a murder case in Maryland where the killer allegedly followed the instructions in a book on how to kill. The New York Review of Books, now rather staid and proper, in the late 60's printed an issue with a diagram of how to make a Molotov cocktail on the cover. (The cocktail, although out of fashion now, then represented the height of terror/people power. It was the sort of thing that the Hungarian uprising in the 1956 used against the Soviet tanks.)

I'm generally on the side of more information. In the case of milk, I rationalize my support this way: The job of the terrorist is to bring together different things: rage against "the West", either for its way of life, its adverse impact on Islam, or its support of Israel; knowledge of a destructive device; ability to gather the materials to build a destructive device (using "device" very generically); knowledge of and access to a vulnerable site. Note that "knowledge" and "access" are two different things--bin Laden might have a trained pilot or two left, but if he can't get into a locked cockpit, the knowledge is useless.

The way I look at it, terrorists are highly unlikely to have both knowledge and access to the milk supply. So far as I can remember, terrorists (Al Qaeda, IRA, the Basques, the Tamil tigers, etc.) have not attacked what I'd call "esoteric" vulnerabilities, like the milk supply, chemical plants or transport, nuclear facilities, etc. The problem for them might be that book learning isn't enough. You can read all you want about a subject, but try walking onto a farm or into a milk processing plant. Because they aren't public facilities, you'd stick out like a sore thumb. So a terrorist who might want to attack such targets would have to go under cover, taking a job in the industry to get the access. But there's a Catch-22--without access you can't really judge whether an attack can be successful, unless you are reasonably sure an attack could succeed you're unlikely to invest the time and effort required to gain access. All of this is not in isolation. There's the constant awareness that bombing nightclubs or buses, trains or ships, requires much less of an investment.

So, as economists might argue, the decision is rational, invest your anger and time in attacking the target requiring the least investment and providing the most immediate return (in terror).

From this perspective, the 9/11 attack pushed the boundaries of what terrorists could achieve. But flight schools for pilots were available as was access to airliners. There seems some conventional wisdom now that Al Qaeda is no longer a top-down organization. I'd leap to the conclusion that it's less likely now that regional terror groups could muster the delayed gratification necessary to plan and carry out an operation requiring years.

How about anthrax? It looks as if we'll never know the perpetrator of the anthrax attacks, but it seems clear it wasn't a terrorist connected to an international organization. If we ever have an attack on the milk supply, I'd suspect a domestic terrorist, a demented dairy farmer, before Al Qaeda. (Tim McVeigh did have the help of a farmer to get the nitrate needed for his bomb.)

Good IT Design and Bankruptcy

Interesting article in the NYTimes (registration required) today, discussing bankruptcy. The claim it reports is that the new bankruptcy law was based on an apparent decline in the number of business bankruptcies, from about 20 percent to about 2, with a corresponding increase in individual bankruptcies. This led to the conclusion that individuals were abusing their credit and the bankruptcy system, therefore the law was tightened.

Now a Harvard study claims to have traced the change in statistics back to a software error:

"The Kauffman study discovered why the government had undercounted entrepreneurs to such a large degree: a computing error. In the mid-1980's, the bankruptcy court system's records began to be computerized, and the most common software programs defaulted to individual settings. The error often went uncorrected.

'The model that Congress used for writing the bankruptcy law - a growing number of consumers and a rapidly shrinking number of entrepreneurs and small-business owners - was simply wrong,' said Professor Warren. 'It's bad policy on lots of levels.'"

A caution--someone on Volokh, I think Zyblocki, thinks professor Warren does bad studies, so this isn't gospel. But taking it as written, a couple comments:

1. I wouldn't consider this an error. Good user design will almost always default to the most common choice, in this case presumably "individual" instead of "sole proprietorship". Defaults save time and aggravation. (Of course, in 1986 the data entry was probably through a green screen terminal. If so, doing defaults may have been more difficult than it is now with graphical (Windows-like) screens.
   
2. The key issue here is whether the distinction is only for statistical purposes, or whether it is real--does the difference make a difference in how a bankruptcy is processed? If it doesn't, then the person doing the entry won't care and you'd have to use a drop down box with "pick one" showing. If it does make a difference, then ideally the software does something that depends on the right choice--prints out forms showing: "Bill Harshaw, Sole Proprietor of FacelessBureaucrat" rather than "Bill Harshaw, Individual".
   

This is a reminder that statistics can and do lie, particularly when they don't evolve out of the business process but are a separate operation. We should also remember that the bankruptcy statistics before the process was automated may have been defective. I'm also curious whether the bankruptcy process was automated once nationally, or district court by district court.