Headline Whose First Six Words I Misunderstood

From The NewYork Times:

Doctor Who Helped Find Bin Laden 

Given Jail Term, Official Says

Wouldn't it be great, though?

Greek Power (Not a Post About Fraternities)

I don't know much about international macroeconomics, to put it mildly, but I know a little about game theory. So I've been puzzled by the way the Greek government just let the Germans roll over them in the euro crisis. Not exactly Spartan, except in the life they were signing up for.

The story in brief: Greece, having run up big budget deficits and lied about it, needs to get money from the rest of Europe (which basically means Germany) to avoid defaulting on its debt.  Germany has said OK, on the condition that that Greece make savage budget cuts, which have tipped Greece into a real live depression. The questions are (1) how much to ease up on Spartan austerity, and (2) whether Germany should be asked to do anything  that might ameliorate the situation (such as following a more expansionary fiscal policy itself, or even allowing a little more inflation in Europe). Germany's answers appear to be (1) not at all, and (2) no.

The conventional interpretation is that it's a simple application of the cynic's golden rule: he who has the gold makes the  rules. Germany has the money, Greece needs the money, end of story.

But does Germany really have all the power here? One way to evaluate the balance of power is to look at how well Greece does with and without Germany's cooperation, and compare that to how well Germany does with and without Greece's cooperation.

Skipping over details, here's the choice. Alternative A: Germany bails out Greece, in return for savage austerity (think Great Depression). Alternative B: Greece defaults and, presumably leaves the euro. Greece then has a very hard time borrowing money to pay its bills, and Greeks are furious when they see that their savings are worth a lot less in drachmas than in euros. Let's assume that Alternative B is perceived  by the Greeks as somewhat worse than Alternative A.

But consider how it looks from Germany's perspective. Alternative A: Germany goes on pouring (some) money down a (small) rathole. Alternative B: German banks take a (smallish) hit on loans to Greece. Greece leaves the euro. Speculation, in both senses, arises over whether Spain and Italy will be next. Since those two countries together are bigger than Germany, and more than ten times as big as Greece, bailing them out starts to look problematic. There's a good chance of panic about lending to countries on the European "periphery," which leads to those countries' having to pay much higher interest rates, which increases budget deficits, leading to more defaults, which end up breaking up the euro altogether, with unknown consequences for the whole idea of European unity.

Looked at this way, it seems clear that Alternative B is a lot worse for Germany than Alternative A. This means that Greece has some bargaining power if it threatens to default. Default would be bad for Greece (let's assume), but also bad for Germany. There's a strong resemblance to a game of Chicken, with each side trying to bluff the other: Greece trying to convince everyone that default is an option, Germany trying to convince everyone that it's not.

Recent elections in Greece, where the two main parties were thrashed, of course strengthen Greece's bargaining power. As in any game of Chicken, it is helpful, though risky, to be able to tie one's own hands. If you're driving toward a head-on collision with some who has disconnected his steering, you will (probably) swerve before you crash. In this case Greece's negotiators get more leverage from being able to say, "I see your point of view, but my people will never go for that."

A few final words about Germany's tendency to moralize about how Greece screwed up and should pay the price. After World War One, the Allies imposed harsh reparations on Germany in the Treaty of Versailles. These are generally considered to have led to economic depression in Germany and thence to the rise of Hitler. So at the end of World War Two, the Allies decided not to repeat their mistake, and the U.S. established the Marshall Plan instead, even though Germany's responsibility for the devastation of Europe was if anything greater than in the previous war. It's ironic that it is Germany that seems most willing to engage in finger-pointing, and least willing to learn the lessons of Versailles.

We Are Everywhere

The New York Times ran a story Friday about crony capitalism in China, in which family members of high-ranking Party officials get involved in big investments by foreign companies. Obviously these family members are trying to make their foreign partners comfortable: the son of a former prime minister, now CEO of one of China's largest investment banks, calls himself Levin Zhu. Will his grandson be named Hymie? Stay tuned.

Tragically Unhip

If I just heard Andrea Mitchell correctly on MSNBC:

British Prime Minister David Cameron sent a message of condolences to his friend Rebekah Brooks when she had to resign as editor of the News of the World over the phone-hacking scandal. Oddly, he signed the message "LOL." LOL? That seems a cruel thing to say in a message of condolences. It seems he thought that meant "lots of love." LOL.

People, Not Places

Back around 1990, there was much talk among political commentators about the Republican "electoral lock" on the White House. The idea was that Republicans had won the last three elections relying on a solid bloc of votes in the Sunbelt. Many of these states had gone Republican all of the last five elections. Moreover, their electoral significance would continue to rise, as they were growing rapidly in population while Democratic strongholds were shrinking. So the situation would only get worse.

To anyone who bothered to think about it, it was obvious that this was nonsense. Places don't vote, people do. If a lot of people are moving from Democratic strongholds to the Sunbelt, the normal assumption would be that the Sunbelt is becoming more Democratic. People don't check their politics at the door when they move, or get a new party registration when they close on a house.

And so it turned out. When Clinton ran in 1992, the Republican electoral lock was nowhere to be found. Clinton won both the popular vote (a plurality) and the electoral vote.

Now this thinking seems to be making a comeback. In a column in Tuesday's New York Times, Timothy Egan talks about how Karl Rove's strategy for a "durable Republican majority" is being undone by demographics. Rove's plan included a focus on the "exurbs," fast-growing areas located far from city cores. But now central cities are growing faster than exurbs, and, since central cities are Democratic territory, this is bad news for Republicans. See the fallacy?

There are, of course, some legitimate reasons why city residents might vote differently just by virtue of being  city residents. They're likely to be less concerned about gas prices, for instance, and more concerned about support for public transportation. But that's a long way from changing one's party affiliation.

There are also real demographic trends that are worrisome for Republicans. They do badly among young voters; since people tend to stick to the way they voted in their first few elections, this is a long-term problem. They also are unpopular among non-Cuban Hispanics, and there's no obvious reason why new voters in this fast-growing group would like them better than old voters. But these are people trends, not place trends.

It may be true, as Egan seems to believe, that "demography is destiny." But geography is not demography.

Defending Marriage?

One thing that's odd about the anti-gay-marriage discourse is that it's so often phrased as a "defense of marriage," as in the Defense of Marriage Act, which bans any Federal government recognition of same-sex marriage. Why "defense of marriage"?

Granted, a title like the Guys Kissing Is Gross Act would lack a certain gravitas. But are people really lying awake at worrying about the state of marriage? I decided to look into what effect gay marriage was having on divorce rates.

Unfortunately, the Census Bureau's 2012 Statistical Abstract only has data up to 2009, and at the beginning of 2009 only Massachusetts and Connecticut had same-sex marriage. But it's still interesting to look at the pattern that emerges. States that currently have same-sex marriage are shown below in italics.

Divorces per 1000 people, 2009
Nevada    
6.7
Arkansas       
5.7
West Virginia  
5.2
Wyoming        
5.2
Idaho              
5.0
Oklahoma      
4.9
...........
New Hampshire 
3.7
............
Vermont          
3.5
United States
3.4
............
Connecticut        
3.1
District of Columbia
2.6
New York
2.6
Illinois
2.5
Iowa
2.4
Massachusetts
2.2

Of the six states that had the lowest divorce rates in 2009, five now have gay marriage. Of the six states with the highest divorce rates, four now have constitutional prohibitions of gay marriage (West Virginia and Wyoming have statutory prohibitions).

What are we to make of this? Beats me, but maybe people in states where marriage is weakest are most concerned about defending it. If so, I doubt they're following an effective strategy.

L'Esprit d'Escalier, Supreme Court Edition

It's French for "staircase wit," meaning all the clever remarks that occur to you immediately after you leave the party. Not being notably quick verbally, I can sympathize with Solicitor General Verrilli for sometimes having trouble, at the Supreme Court's recent health-care jamboree, fielding questions from out of right field. Herewith, some wittier answers.

JUSTICE SCALIA: Could you define the market -- everybody has to buy food sooner or later, so you define the market as food, therefore, everybody is in the market; therefore, you can make people buy broccoli.

CLARITAS: [All the law students listening to the audio have a drink at the first mention of broccoli. Some of them will end up under the table; the index to the transcripts lists eight occurrences of the word.] No, Justice Scalia, that would be a good analogy if the health care law said that people had to have heart transplants, but it doesn't.
.................................

JUSTICE SCALIA: Mr. Verrilli, you could say that about buying a car. If people don't buy cars, the price that those who do buy cars pay will have to be higher. So, you could say in order to bring the price down, you're hurting these other people by not buying a car.

CLARITAS: No, we're saying that by not buying insurance, they're shifting costs onto other people, just like when a car doesn't have pollution control equipment. There's been an extraordinary amount of energy devoted to the claim that this law is completely unprecedented, that it's making people buy a product, that it's regulating "inactivity." Actually, it's no different from when the government makes drivers buy catalytic converters, which is clearly Constitutional. The only difference is that people can, in theory, choose not to drive, but everyone uses health care. 

It's also true that the problem is worsened by not allowing insurance companies to exclude people for preexisting conditions, which leads to higher prices, but it's hard to think of a car analogy there.
...................................

GENERAL VERRILLI: No. It's because you're going -- in the health care market, you're going into the market without the ability to pay for what you get, getting the health care service anyway as a result of the social norms that allow -- that -- to which we've obligated ourselves so that people get health care.

JUSTICE SCALIA: Well, don't obligate yourself to that. Why -- you know?

CLARITAS: Justice Scalia, since you've said you'll resign if there's ever any conflict between your duties as a justice and your Catholic faith, I hope it's not true that your best solution to this Constitutional question is, "Let 'em die!"
....................................

JUSTICE SCALIA: An equally evident constitutional principle is the principle that the Federal Government is a government of enumerated powers and that the vast majority of powers remain in the States and do not belong to the Federal Government. Do you acknowledge that that's a principle?

CLARITAS: So what you're saying is that the Constitution reserves to the states the power to make people buy broccoli?

More Republican Contempt for Women

From The New York Times:

"This year, Mr. Adelson gave $10 million, along with his wife, to support Newt Gingrich’s presidential campaign."

Thinking About Oil Prices

I talk often on this blog about how political debate would be much improved if people were acquainted with a few simple facts. But the discussion of oil prices requires even less: just the application of some thought.

1. Premise: Oil is sold in a free market. Therefore,

2. It will be sold wherever in the world the price (net of transportation) is the highest. Therefore,

3. Big disparities in price around the world cannot exist for long. Therefore,

4. There will be a single world price for oil. The price for Americans will be the same as the price for everyone else. Therefore,

5. Increased production and reduced consumption in the U.S. affect the price to Americans only to the extent that they affect the world price.

As logical as this is once you think about it, it's hard to give up the view that it's our oil, so if we pump more of it, we'll have more, and won't have to worry about what foreigners are doing. Alas, not true. Oil we pump becomes part of the world market, financially if not physically. That is, the oil will stay here only if prices here are as high (net of transportation) as prices elsewhere.  When world oil prices rise, prices here must rise as well. Therefore,

6. "Energy independence" is a myth. Even if the U.S. had no net imports, an increase in world oil prices would raise the price to Americans, hurting consumers and helping producers. Conversely, new production in Libya or the South China Sea has approximately the same effect on the U.S. price as new production in  the Gulf of Mexico.

So why all the brouhaha about increasing production in the Gulf of Mexico? Making production easier in the Gulf of Mexico certainly helps Americans. But it's a big help to the Americans involved in oil production, and hardly any help to those filling up at the pump.

Who Owns Our Debt?

I am constantly surprised by how much of the political discussion in this country is based on beliefs that are simply and demonstrably factually wrong. As a social scientist, I find it inexplicable that no one makes much effort to fix this, not even politicians (I'm looking at you, Mr. President) whose political interests would be served by people knowing the facts.

Take America's national debt, for example. We've heard a lot about how it's all borrowed from China, and how at any time they could decide to stop lending us money and then where would we be?

So how much of our national debt would you guess that China owns? Thirty percent? Fifty? Seventy?

Here are some figures (Table OFS-2):

Total debt, June 2011, in billions:
      14,343
  Owned by US govt.(incl. Fed. Reserve, Soc. Sec. Trust Fund)
       6,220     43.4%
  Privately held                                                                            
       8,123       56.6%
                  Foreign                                                                             
                       4,501      31.4%
                                  China                                                                           
                                     1,166        8.1 %


That's right, China owns 8 percent of our debt. Foreigners in total own just over thirty percent. And the U.S. government owns more than 40 percent.