Casablanca quotes in the style of The Wire

I have a good idea. Let's divide up Casablanca into sections, and then select a quote from each section that would be the quote shown in the beginning of an episode if Casablanca was made in episodes like The Wire. Got that? Let's go:

• Introduction
  "We hear very little, and we understand even less." - an Englishman
• The arrival of Major Strasser
  "Everybody comes to Rick's." - Captain Renault
• The letters of transit
  "I found myself much more reasonable." - Ugarte
• A 10,000 Franc wager
  "Yvonne, I love you, but he pays me." - Sacha
• The arrest of Ugarte
  "Are my eyes really brown?" - Rick Blaine
• The arrival of Victor Laszlo and Ilsa
  "Play it, Sam." - Ilsa Lund
• Rick gets drunk
  "...if it's December 1941 in Casablanca, what time is it in New York?" - Rick Blaine
• Flashback to Paris
  "We said 'no questions.'" - Ilsa Lund
• Laszlo comes in for questioning
  "Even Nazis can't kill that fast." - Victor Laszlo
• The black market
  "...the Germans have outlawed miracles." - Ferrari
• Rick does a beautiful thing
  "Oh, he's just like any other man, only more so." - Rick Blaine
• The Marseillaise
  "Your winnings, sir." - the croupier
• Ilsa plies Rick for the letters of transit
  "...a story without an ending." - Rick Blaine
• Rick and Laszlo have a chat
  "Since no one is to blame, I demand no explanation." - Victor Laszlo
• Rick sets up to leave Casablanca
  "I shall remember to pay it...to myself." - Ferrari
• Rick turns on Capt. Renault
  "I suppose you know what you're doing, but I wonder if you realize what this means?" - Captain Renault
• Rick reveals his intentions
  "...soon, and for the rest of your life." - Rick Blaine
• Conclusion
  "Round up the usual suspects." - Captain Renault
  
  

Where is all the money going?

Here's a chart showing that America spends way more per capita on health insurance than any other country:



What I don't understand is: where is all this extra money going? Who is profiting from this? Big insurance companies or something? Then wouldn't these companies have gigantic revenues, like ExxonMobile or WalMart or something? I don't understand it very well.

Three detainees at Guantanamo were clearly tortured to death

The amount of circumstantial evidence for this is almost comical.

You need 51 votes to pass a law in the Senate, not 60

But you wouldn't know it from the way this NYT article is presented:

Obama’s Jobs Bill Fails in Senate in First Legislative Test

By ROBERT PEAR

The vote of 50 to 49 to open debate on the measure was shy of the 60 needed to overcome procedural objections, forcing the White House to consider breaking up the package.

When is the Washington establishment going to realize that you can't govern with supermajority requirements in the legislature, and that this way of doing business in the Senate is a radical departure from the past?

The Senate needs to abolish the filibuster, or neither party will be able to make headway with the gigantic structural problems the country faces.

Economics follows the logic of self-fulfilling prophecy, not morality

It is common for humans to understand things in moral terms when confronted with a phenomenon they don't understand. For example, faced with the inscrutable vagaries of weather, ancient peoples would interpret poor weather as some sort of recrimination from the gods, and favorable weather as a divine blessing. It is in some ways a very narcissistic view of the world, because it posits human goings on as the ultimate cause of the phenomena.

However, once humans achieve an empirical understanding of the phenomenon, the old moral framework is abandoned in favor of a scientific one. Suddenly the drought is no longer seen as divine vengeance for our moral transgressions. Instead, it's seen as an indifferent naturalistic occurrence that can be predicted and maybe even stopped with the aid of tools, technology, and a coordinated plan of action.

I've noticed that with economics--and particularly the current recession--many people are reverting to a morals-based view of the economy because they lack a proper understanding of it. Hence, the recession and unemployment must be due to some moral failing of the American people: we lack a good work ethic, or we're being one-upped by the Chinese, or we're not educated enough, or we're not thrifty enough, etc. The general idea is that we are being punished for one moral failing or another, or a deficiency in our character, or for the sins of our ideology or way of life. Bad things are happening and it's not clear why; surely we must have angered the gods!

The problem with this way of thinking is that, not only is it not helpful, it is actually actively harmful, making the situation worse. For when we view economics in a moral framework, the remedy that presents itself is the one that makes us feel the cleansing, righteous pain of punishment. And so we undertake "austerity measures"--we begin to spend less, buy fewer things. But ironically when everyone does this in unison--as well as convince politicians that the government should be spending less money, as well--it makes the recession worse and everyone more poor than if they had never changed their spending behavior at all. But this in turn only causes people to become even more austere. It is a vicious cycle; a self-fulfilling prophecy.

Once this understanding of the economic situation is reached--once it is realized that there is a mechanism of self-fulfilling prophecy, a feedback loop, that is the driver of mass unemployment--a very different remedy than austerity presents itself. Indeed, we see that what is needed is a way to break the vicious circle by introducing a giant amount of demand (spending) into the economy. The only player big enough to inject this much demand is the government: it can encourage people to spend by targeting tax breaks to people who will spend the money (e.g., the unemployed), lowering real interest rates so more people will take out loans and/or repay their debts faster, and increasing government spending on infrastructure and state aid (money given to the states will be used to sustain government employee payrolls). What is causing the recession is the downward spiraling of demand; what is needed to end it is a giant, forced injection of demand into the economy.

Pivoting back to the moral understanding of the economy, this advice--to spend spend spend--seems bonkers. That we are experiencing tough times morally implies that we must have done something irresponsible to bring it upon ourselves; surely the irresponsible behavior must have been reckless spending; so how can the remedy to our troubles be even more reckless spending, to double-down on the unvirtuous behavior that got us here? The answer, of course, is that it is simply not the case that immoral behavior on our part has caused the recession, any more than immoral behavior on our part can cause a drought.

To be sure, there are some people who actually really are responsible for what is happening--specific people who did specific things, not all Americans in general. After all, the recession was caused by the financial crisis in 2008, and certainly there were people to blame for this: the investment elites who recklessly leveraged their positions, positions that ultimately rested on the false belief that housing prices would never fall, and complex financial instruments called CDOs were risk-free, AAA assets. And after the recession hit, it was Republicans and gun-shy Democrats who prevented the government from injecting enough stimulus into the economy (Obama's stimulus needed to be somewhere between $1.5 to $2 trillion; it ended up being a paltry $800 million); and even now, it is the Federal Reserve who pursues the lender-friendly (i.e., bank friendly) policy of keeping real interest rates high, which sustains the recession and high unemployment. So there ARE people to blame, but it is specific people for specific, technical things that they are or are not doing; the blame does NOT lie with the American people in general or society in general, and it doesn't have anything to do with moral character or anything like that.

And indeed, when you think about it for a moment, it becomes clear that the moral understanding of the recession doesn't really make any sense. In the 1990s things were going wonderfully; then there was the dot-com bust, and then in the Bush years things were growing again. Then in 2008 the financial crisis struck, and we've been in recession ever since. So in a 20 year period we went up, down, up, and back down again. Are we to believe that we, as a people, were driving this movement in economic fortunes with our personal moral behavior? Were we especially frugal and responsible in the 90s and then suddenly became lazy and incompetent at the end of the decade? Were we hard-working Protestants in the 00's and then suddenly decided we would slack off and charge too much on our credit cards in 2008? The answer is, of course, no. We have been the same people, with the same financial moral fiber, through all these ups and downs.

So this is something to consider as the Occupy Wall Street movement consolidates into whatever it is it's going to consolidate into, and as voters continue to pressure the government into austerity mode, and as the Federal Reserve continues to keep inflation low and (therefore) real interest rates--and unemployment--high. What is needed right now is demand, even though that requires further deficit spending. This isn't sinful behavior; in macroeconomics, there is no such thing.

The Super Mario Bros. 3 interpretation of continents

This video about the arbitrary way we divide the globe into continents has been making the rounds. While I don't think there's anything very interesting about this--just an issue of semantics, really--I do think that insofar as cultural considerations enter into it, one thing people of a younger generation have in mind is the video schema of different "worlds", where each one has some recognizably different aesthetic or gimmick. For example, there's always an ice world, a fire/volcano world, maybe a cloud world, etc. And there's usually around 7-10 different worlds.

The upshot of all this is that you HAVE to count Antarctica because that's DEFINITELY the ice world.

Off I go

I'll be back in SF after Labor Day Weekend.

This earthquake taunting doesn't make any sense!

Californians, taunting the east coast for overreacting to a 5.8 earthquake does not make sense, because, unlike here, nothing on the east coast is built to withstand an earthquake. So a 5.8 earthquake over there ought to be regarded as a big deal.

It's like when SF people complain about 90 degree weather. At first it sounds like ridiculous whining until you realize that the city isn't built to withstand heat--e.g., no one has air conditioning here.

That is all.

Informative post on California high-speed rail

This is a must-read post to get oriented the facts for CA high speed rail. Cost estimates have been drastically revised upwards recently, but some of that has to do with accounting changes and some of it is legitimate.

Bottom line, though, per-mile costs are about lining up with the international average. Moreover, it's important to remember that the state's population will be increasing over the next few decades and so infrastructure will have to be built, whether that's a high-speed rail system, more airports, or more highways. No it's not a question of rail or no rail, but rather, rail or some other transit option.

If you're poor, you spend a lot of your income on food

To me, one of the best measures of wealth is the percentage of one's income that is spent on food. If you check out this map, you'll see that the wealthy spend down around 10% of their income on food, whereas those in poverty spend up to 50%.

This is also a good way to intuitively grasp the dramatic increase in total worldwide wealth since the industrial revolution. I tried finding looking for some historical data for this but my Google-fu wasn't strong enough. If I find something though I'll post it.

Greek yogurt sales soar

An odd factoid:

Indeed, the Greek yogurt market in the U.S. has undergone a growth spurt that a recent Wall Street Journal article called “nothing short of astronomical.” While sales five years ago amounted to a mere $60 million annually, today they represent nearly a quarter of the $6.8 billion spent on yogurt in the U.S. every year.

The theory is that Americans associate Greek cuisine with healthy, simpler, natural foods.

Is a perfect investor possible?

The previous post made me think of an idea I've had for a while that isn't really fully formed, which is: is it possible for there to be a "perfect" investor, or is there some formal/logical reason why such perfection would be self-defeating?

On the face of it, it would seem that the presence of a perfect investor would break the market. For normally when we make an investment, it's based on some empirical fact about what we're investing in--that the company is profitable, or that the currency will be devalued, or a trade agreement will be signed, whatever. But suppose God were an investor, and invested in X. In this case, I would also invest in X, not because of anything having to do with X, but simply because God invested in it and I know that God can do no wrong in the market. What's more, all other investors would think the same way, and also make the same investment. At this point, market behavior would become detached from empirical reality, and a prolonged (infinite?) period of irrational exuberance for X would follow.

Of course, one way out would be to simply point out that a truly perfect investor would strive to keep the fact of his perfection a secret by deliberately losing money on investments from time to time. Specifically, the investor could only continue to win so long as his success itself did not become the basis for other players' decision making. In such a scenario, whatever empirical data being collected by the perfect investment algorithm would cease to be relevant, because a new theory--that generates some other set of empirical data--would now be regulating investor decisions. (In this case, the "new empirical data" would be what investment choices the perfect investor is making. The new theory would be, "whatever the perfect investor invests in is a good investment". In the short term, switching to this new theory would not hurt the perfect investor--everyone would continue to invest in X. But eventually the pattern would have to collapse, for the same reason that pyramid schemes always collapse: at some point, you run out of new investors in X--and besides, there would undoubtedly be bizarre and disastrous global effects of so much wealth accumulating to one arbitrary investment.)

How humans use cognitive salience to guide mutually recursive decision making

Try the following experiment:

In a classroom, give every student a slip of paper. The challenge is that they must devise a way to all meet each other at some location in France at some time during some arbitrary day in the future, say October 14 2012--only they are not allowed to communicate with each other. Each student must write down what is essentially a guess on the slip of paper, completely incommunicado.

As you can probably guess, the students are for the most part successful: most will write down "Eiffel Tower, noon" on their slip of paper.

What happens, of course, is that each student goes through a process of mutually recursive decision making: the student must guess what the others will guess, knowing that those students' guesses are dependent on his own, and so on ad infinitum. Realizing that the guess will be hopelessly arbitrary, the student supposes that, all things being equal, he would meet the others at the most canonical place and the most canonical time of day. But, knowing that the others will also gravitate to this same canonical time and place, the student can now know with some certainty that they will choose the same time and location. And so it is the very rational arbitrariness of the decision that reveals the particular salience of one time and place (in this case, Eiffel Tower at noon). This salience is then used as an empirical datapoint to rationally arrive at a now-suddenly-non-arbitrary choice, "Eiffel tower at noon".

My thinking is that this process is precisely the same one that governs markets. Stock price, for example, though naively a reflection of the "value of a company", is strictly speaking a reflection of other investors' demand for the stock. But since all investors are using the same decision function, and the function takes as its inputs the decisions of all other investors, rational decision making stalls on an infinite regress, rendering the decision arbitrary. But the arbitrariness of the decision, now placing all choices on an equal footing, reveals that some choices are more salient than others--in particular, the ones that correspond to the "naive" understanding of stock price as a reflection of the "value of a company". Because if all theories are equally arbitrary, what other theory would everyone pick? Surely, they will pick the naive theory, since that is the most salient one--because canonically, one buys the stock of a company that is doing well.

However, if there is no most-salient theory to fall back on when the initial mutually recursive decision process fails in infinite regress, then chaotic instability ensues, and bubbles and sell-offs will non-linearly continue until a sufficiently salient theory once again takes hold, and investors bind their decisions once again to independent empirical data. (Note that it is entirely possible that the chaotic movements of the stock will themselves form the basis of a new theory about the company--for example, if the stock chaotically plummets in a sell-off, this will be interpreted as an "adjustment" in response to "new information" that reveals that the company was "overvalued". But if the stock had chaotically risen in a bubble, the community might just as easily have interpreted this as "renewed investor confidence" and selected some good news about the company to use as cognitively plausible "evidence" for the company's good prospects.)

Given all this, you have to wonder how it is that computers can model the movements in financial markets. Unless your algorithm somehow is able to take into account the salience of various explanatory theories, you cannot make headway into the problem, unless you already assume some empirical theory, and use the empirical data from the theory as inputs for the computer program. But even with this, it would be the human's task to monitor the investor zeitgeist to determine when it shifts to a different most-salient theory, or when there is a theory vacuum and the market goes into chaotic instability.

This whole post was instigated, by the way, by a blog post by Zachary Karabell, where he concludes:

That is where trust becomes even more essential: we have to know that executives are behaving responsibly, in their own self-interest, and that regulators are ensuring that leverage isn’t excessive and capital is. We have to believe that ratings agencies are diligent in affirming strength, especially if we then give them credence when they announce weakness à la downgrading the United States. And we have to imagine that the media report things that have a tangible relationship to something called the truth. But we do not live in that world, and that is a headwind pushing against currents of balance, growth, and repair.

Here, I take him to be saying, in so many words, that the most-salient theories need to be reinforced credibly by institutions if we are to avoid the dreaded state of theory-less chaotic instability in the markets. However, I wonder if what he advises next makes sense:

In that world of trust deficit, we’d do well to repeat the following mantra: just because it happened last time doesn’t mean it is happening again. Being skeptical is healthy; being cynical, not so much. And the only way to judge the present is on the present, not on false application of the lessons of the past, and not on irrational fears of what the future might hold.

My problem with what he says here is that he seems to be placing the blame--or at least, expecting the fix to come entirely from--the investors who have lost "trust" in the prevailing salient theories, rather than the institutions that are charged with instilling and maintaining trust in the theories. It's hardly "irrational" of investors to withdraw from the market when suddenly there's a chance the US Government will stop paying its bills and the German government is mulling over whether it should just let Greece, Ireland, and Spain default on huge amounts of government debt--these remarkable and historical economic events threaten to bring into being a "new normal" that wipes away the old, long-agreed upon most-salient theories
that kept the markets from spiraling off into non-linear chaos.

In light of this, I would think the right "call to action" is to get Wall Street and the rest of the financial world to put extreme political pressure on the US and German governments to guarantee government debt and double-down on the prevailing global financial world order.

The high cost of dysfunctional government

As Yglesias points out, 5 year, 7 year, and 10 year US Treasuries have such low rates that their real interest rates (that is, the interest rate after inflation is taken into account) is negative.* Which means that the US government is in a better position than someone who can borrow money for free; investors are actually paying the US government to borrow their money.

This means that, at a minimum, the US can borrow a bunch of money and just let it sit there, and that would be better than not borrowing any money. But more reasonably, it means that for any expenditure that we know must take place within the next 10 years, it makes sense to pay for it now rather than later (if possible).

The most obvious category of spending that presents itself is infrastructure. Over the next decade, we know we're going to have to build new schools and hospitals and upgrade old ones; expand airport capacity and update our air traffic control systems; repave roads and replace old pipe and sewer systems; build new highways and bridges; dig new tunnels; retrofit a lot of old buildings; expand existing rail and other mass transit; improve energy efficiency to eliminate dead-weight loss, for example by painting roofs of buildings white; etc. So there's a lot of work to be done. But there are three reasons why infrastructure spending now is a particularly good idea:

• We know with certainty that the work must be done over the next decade anyway
  
• Much of the work is done by state and city governments, and so federal dollars would be providing a timely boost to ailing state and city budgets
• These projects will efficiently stimulate overall demand because they will mobilize the huge amount of idle labor in the construction sector, which was hit hardest by the bursting of the real estate bubble; so there is no danger of inefficient "crowding out"**
  

The idea of spending infrastructure dollars now rather than later is agnostic to what ideology you subscribe to or what specific policies you prefer--it's just the common sense avoiding of dead-weight loss, like our implicit daily decision to NOT just burn a bunch of $100 bills for no reason. And yet, because Congress--specifically, House Republicans--have made obstruction their number one priority, we are forced to go right on ahead and set fire to large piles of money.

* Say I borrow money from you at 5%. I repay you in a year--but money by then has become 5% less valuable, due to inflation. So in real (as opposed to nominal) terms, I paid 0% interest. So inflation works as a discount on borrowing money.

** In a recession, by definition, there are a bunch of idle resources in the country--perfectly good employees and machines, but no demand that puts them to work. So the way to end a recession is to increase demand so that idle resources are mobilized into productive action. One way to do that is to encourage the private sector (companies and consumers) to spend money, for example by making it cheaper to borrow money (lowering interest rates), increasing the money supply (increasing inflation, which as discussed in * has the effect of lowering real interest rates), or just giving people extra cash and hoping they spend it (tax breaks). But if that doesn't work, the federal government can just employ the idle resources directly by spending a bunch of money, say on new bridges or F-18 jets or something (stimulus). However, what happens when the government spends a bunch of money in non-recessionary times, when there are not a bunch of idle resources? Well, in the case of construction say, the government would be bidding with private entities (companies and consumers) for the scarce supply of construction labor. The government would end up bidding up the price, thus pricing out of the market a bunch of private companies and consumers--in other words, "crowding them out". Crowding out might be bad if you think the government doesn't do things as efficiently as private entities do; but this concern is moot if no crowding out is happening, which is precisely the case when the government hires labor that would have been idle anyway.

Screed against Cambridge Journals Online

It's a well known fact that the business of academic journals is a racket, pure and simple. So when I found out I couldn't read an esoteric Philosophy article without paying thirty goddamn dollars, I wrote them this very satisfying missive:

Subject: you people are the scum of the earth

Hello,

I just wanted you to know that, in my opinion, you people are a bunch of rent-seeking societal leeches who contribute nothing to society. Here I am, just an ordinary non-academic person who has taken an interest in David Hume, and who wants to better my understanding of his argument about induction by taking a look at Alan Schwerin's article Hume On Our Notion of Causality. Imagine my disgust when I see that I can have access to this completely obscure academic article for the outrageous sum of $30! Congratulations, you have effectively walled off higher education from the common man and made academic knowledge completely unavailable to a wide audience in a time, ironically, when it costs virtually nothing to disseminate information.

Just what is it that justifies this price for the privilege of downloading an electronic copy of the article, which costs you almost $0.00 to send to me? What value are you adding to the product? What on earth are you doing with the money you receive? Surely, it is not as if you yourselves peer-review all the content of your publication with your own stable of well-paid professional philosophers. And yet that is the only value added from "prestigious" journals such as yourself.

If you're reading this and nodding along and thinking, "I agree buddy, but I'm just a low-level lackey earning my paycheck in a bad economy, like everyone else", then that's fine--we all have to pay the bills. But if you get any satisfaction--or think there's anything noble at all--about the industry you work for, please understand that you are badly undermining the ability of people to pursue knowledge, and what's worse, doing so in pursuit of your own grotesque and stupid greed.

If there's any justice in the universe, your dismal company will soon be replaced by an institution that does everything you do, but for free or at an extremely low cost.

Burn in hell,
David

PS: I see in your "About Us" section your ostensible "commitment...to advance learning, knowledge and research worldwide". More like a commitment to line your own underserving, rent-seeking, stupid pockets with the hard-earned cash of people who want to learn, advance knowledge, and do research. Assholes.

PPS: I mean really.