Noam Chomsky: the purpose of education
My favourite wise old bird. Lovely moment late in the interview where he tells a story about a famous MIT physicist being asked by a Freshman “what are we going to cover this semester?”
“It doesn’t matter what we cover”, replies the academic. “What matters is what you discover.”
Broadband in Ruritania — and elsewhere
This morning’s Observer column.
A document has come into my possession. It appears to emanate from the government of Ruritania or some other insignificant country. The cover is illustrated by a low-resolution smartphone photograph of an out-of-focus bedspread, but this homely imagery is offset by the brave rhetoric inside.
“We should have the best superfast broadband network in Europe by 2015,” it declares. “That’s a challenging goal but it’s one that we can and must achieve. It’s vital for the growth of the economy – especially to small businesses that are so often the engines of innovation.”
Quite so. The government of Ruritania is “committed to ensuring the rapid rollout of superfast broadband across the country. Rural and remote areas of the country should benefit from this infrastructure upgrade at the same time as more populated areas, ensuring that an acceptable level of broadband is delivered to those parts of the country that are currently excluded.” It is also believed something called “two-way video conferencing” may encourage Ruritarians to work from home.
There is much more in this vein, together with talk of “a world-class communications network” that will help the economy grow.
Betting our futures on the beauty contest
James Carville, Bill Clinton’s masterful campaigning guru, once said this:
“I used to think if there was reincarnation, I wanted to come back as the president or the pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everybody.”
He said that in 1993 and, to be honest, I didn’t really know what he meant at the time. Now we all understand it, as we watch our (European) governments cringe in terror as they endlessly speculate how to tailor economic policy to appease the bond market. The fact that this is daft should have been well known ever since Keynes’s General Theory, which appeared in 1936, but it seems to have escaped our leaders.
Discussing the behaviour of rational agents in a market, Keynes used the analogy of a newspaper beauty contest in which readers are shown photographs of women and asked to choose a set of the six “most beautiful”. Readers who pick the most popular face are eligible for a prize.
The naive strategy is simply to choose the pictures one finds most beautiful. A more sophisticated strategy is to increase one’s chances by picking the women whose images conform to conventional or popular theories of attractiveness. An even more sophisticated strategy is to choose the women that one thinks the other competitors will regard as the most attractive. And so on, in every-ascending levels of abstraction.
So, Keynes writes,
“It is not a case of choosing those that, to the best of one’s judgment, are really the prettiest, nor even those that average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practice the fourth, fifth and higher degrees.”
Our governments appear to view the bond market as if it were a Golem — “an animated anthropomorphic being, created entirely from inanimate matter” (Wikipedia) — whereas in fact it’s much closer to Keynes’s beauty contest. Which means that trying to placate the Golem is a fatuous, nay witless, enterprise, for the simple reason that the bond market isn’t a Golem. It’s something quite, quite different — and much more complex.
Interestingly, journalism has been remarkably uncritical of governments’ hallucinations about the Golem. It’s not clear why this has been so. Maybe it’s perhaps most hacks have no idea of how the bond market works. (Our media showed the same fatal lack of curiosity about the ratings agencies in the run-up to the banking crash, btw.) Or perhaps it’s because editors think that readers and audiences aren’t interested in such arcane stuff.
Whatever the explanation, the New York Times broke some welcome new ground today with a fine piece by Katrin Bennhold in which she tried to explain what actually goes on in the bond market and how its traders view the world.
The bond market has emerged as a mighty protagonist in Europe’s economic crisis, representing a seminal shift in power from politicians to investors and a relatively obscure cohort of bankers. Their collective day-to-day judgment can now topple governments and hold the key to the survival of the euro.
If that market seems an unfathomable Goliath to outsiders, in interviews bond traders themselves confessed to being fearful and confused.
Some of the traders to whom Ms Benhold spoke said that they worry that too many of their colleagues lack the skills to decipher conflicting signals from Europe’s leaders in an industry ever more dependent on perception and political guesswork. The short-term fluctuations of bond rates, they concede, are not always an accurate reflection of value and risk. Yet traders are being taken as the last word by politicians on any range of government policies — and are often misinterpreted, they said.
“We used to be able to measure everything to the nth degree,” said Tim Skeet, managing director of fixed income at the Royal Bank of Scotland. “These days, nothing is measurable. This has become less about number-crunching and more about the oracle of Delphi.”
Economists tend to treat the bond market as a rational player imposing budget discipline on politicians. Politicians portray it as having the conscience of a mob, accusing “bond vigilantes” of undermining Europe’s recovery and its cherished welfare state. The reality is more nuanced.
That sounds right to me.
And then there’s the pernicious positive feedback loops built into the situation.
With so much leverage at its disposal, the bond market’s judgments can have the power of prophecy — that is, they can be self-fulfilling, influencing events even as traders assess them from the trading floor.
If investors and traders judge Spanish bonds to be risky because Spain’s government may default, they help make it more likely that Spain will indeed default, by raising its borrowing costs.
“Whatever the Spanish government does — and it has done a lot — it doesn’t actually help much, because the market is pretty much convinced a full-fledged bailout is required,” said Nicholas Spiro, managing director of Spiro Sovereign Strategy, a consulting firm in London that specializes in sovereign credit risk.
Great piece, worth reading in full.
Footnote: Carville is a great source of pithy quotes. For example:
“Republicans want smaller government for the same reason crooks want fewer cops: it’s easier to get away with murder.”
Who will choose the next US President?
Answer: a very small number of American citizens, most of whom are uninterested in politics. Startling New Yorker piece by Elizabeth Kolbert.
According to a recent Washington Post/ABC News poll, just six per cent of Americans—or less than one-sixteenth of the electorate—think there’s a good chance that they will change their minds about the Presidential race before November. Only nineteen per cent of those polled said there was any chance they’d change their minds. For comparison’s sake, at a similar point in the 2008 election cycle, ten per cent of Americans said they were undecided, and twenty-five per cent said there was a chance they’d switch their choice. Former Clinton adviser Paul Begala recently noted in Newsweek that when you factor out the undecideds in securely red or blue states (since their votes won’t change the Electoral College results), the election comes down to “around 4 percent of the voters in six states.”
“I did the math so you won’t have to,” Begala continued. “Four percent of the presidential vote in Virginia, Florida, Ohio, Iowa, New Mexico, and Colorado is 916,643 people. That’s it. The American president will be selected by fewer than half the number of people who paid to get into a Houston Astros home game last year.”
Mutt Romney
The crassness of Mitt Romney continues to amaze Europeans. (It also amazes some Americans, but a surprising proportion of their electorate seems to think that he might be a serious contender for President.) Before his European and Middle East trip the idea that he might win in November was scary enough. Now, it looks like a nightmare or — as Maureen Dowd said in the NYT, “more like Munch’s ‘The Scream'”.
The strangest thing of all about Romney is that, as the saying goes, “there’s no there there”.
There’s a political joke doing the rounds in the US.
A liberal, a conservative and a Tea Party fanatic come into a bar.
Q: What does the barman say?
A: “Hi Mitt!”
Or, as Dowd puts it,
Wherever he went, whatever situation he was in, he remained frozen in himself. It was reminiscent of the stinging review of an Oscar Wilde lecture by Ambrose Bierce, who wrote that Wilde was a “gawky gowk” who “wanders about posing as a statue of himself.”
Dowd quotes a remark by Stuart Stevens [Romney’s Press spokesman] observation that “it’s easy to imagine Romney in the White House”. “I can visualize him right now”, says Dowd, “lapidary and frozen, in the Rose Garden. A statue of himself”.
Romney was annoying and gaffe-prone in London, but that was small beer compared to his irresponsibility in Israel where he effectively egged on the Israelis to launch an attack on Iran and made some unbelievably stupid comparisons between the innovativeness of Israeli high-tech industry and the alleged backwardness of the Palestinians. “As you come here”, he said at a $25,000-a-head fundraising dinner in Jerusalem,
and you see the GDP per capita for instance in Israel which is about $21,000 and you compare that with the GDP per capita just across the areas managed by the Palestinian Authority which is more like $10,000 per capita, you notice a dramatic, stark difference in economic vitality.
He then went on to cite what he sees as the unique factor in this contrast. ”Culture makes all the difference” he said, a phrase that was immediately — and understandably — interpreted as racist, and not just by Palestinians.
As usual, Romney got his facts wrong. According to the World Bank, Israel’s per-capita GDP was about $31,000 in 2011, while the West Bank and Gaza’s was just over $1,500. And he conveniently ignored the fact that the West Bank and Gaza are territories which are effectively being throttled by Israel.
Romney’s observations about the differences between Israeli and Palestinian economic success emanate from a crass (mis)reading of Jared Diamond’s Guns, Germs and Steel: A short history of everybody for the last 13,000 years
It is not true that my book ‘Guns, Germs and Steel’, as Mr Romney described it in a speech in Jerusalem, “basically says the physical characteristics of the land account for the difference in the success of the people that live there. There is iron ore on the land and so forth”. That is so different from what my book actually says that I have to doubt whether Mr Romney read it.
But, says Diamond, “that’s not the worst part”.
Even scholars who emphasize social rather than geographic explanations — like the Harvard economist David S. Landes, whose book Wealth And Poverty Of Nations
was mentioned favorably by Mr Romney — would find Mr Romney’s statement that “culture makes all the difference” dangerously out of date.
Ouch!
Gore Vidal
Gore Vidal is dead at 86. Lots of obituaries online (see Arts & Letters Daily for a characteristically thorough round-up). I particularly liked Andrew Sullivan’s reflections. Sullivan disliked many aspects of Gore, especially his contempt for the gay movement. But…
I must say that his extreme hostility to the American Empire – sustained relentlessly through the decades – looks much less repellent to me than it did before Bush-Cheney. He ruined his case by exaggeration, and absurd moral equivalence. But he was surely onto something from the perspective of the 21st Century. And his willingness to court public outrage and disdain in defense of his ideas is a model for a public intellectual, it seems to me. As a historical novelist of the Roman past, he was superb – even peerless. No one can or would dispute his profound erudition. And his astonishing memoir, Palimpsest, is better than any writer has any business aiming for.
But he also, it seems to me, let his passions outweigh his reason more than a thinker as gifted as he was should. This emotionally turbulent quality seemed to me to be related to his woundedness as a brilliant scion forced by his homosexuality into a marginalization he learned to adorn with enormous style. He never, perhaps understandably, learned to let go of resentment. But this very rebelliousness was, in some ways, the flipside of a deep and romantic patriotism. You can never be that angry if you have never been that naive.
I agree about Palimpsest
One thing that the NYT Obit got right about Vidal is that success never mellowed him. He was a cantankerous old bugger right to the end.
Quote of the day
“Computing has changed from being something you go to a computer to do to something that the computer comes with you to do. It’s a subtle change, but world-altering for PC makers.”
Astute observation by Charles Arthur in today’s Observer.
