Politicians vs. Information

Martin Devon comments thoughtfully about an innovative approach to evaluating geopolitical risk. He also quotes a couple of idiot pols who are agin’ it.

If you can create a real-money market in risk evaluation, it’s usually a good idea to do so, if only for price-discovery (in this case, risk discovery) purposes. People in the aggregate, voting with their own money, generally make better bets than do individuals who are merely writing position papers. And creating a market in risk assessment facilitates the pooling and hedging of risk. Of course these are the same principles that underlie insurance markets, which may be why some pols don’t like them. Imagine: individuals and businesses dealing with risk on their own, without needing politicians to “help” them. Too bad there’s no organized market for hedging away Congressional risk.

UPDATE: From Instapundit’s post on this topic and the comments here, there seem to be several objections to this idea. I paraphrase some objections (italics), below, and then respond. (Feel free to leave additional comments if I left anything out.)

Moral hazard: terrorists or other bad guys might cash in by betting in advance of their own terror attacks, or by committing terror attacks solely to make money. There is also incentive for govt officials, journalists, et al to manipulate the market by hyping nonexistent risk and then taking the other side of trades made by people who are betting on an attack.

There may be reason for concern, but it’s already possible to bet on terrorism: all you have to do is buy a large quantity of stock-index puts. And trades of this type, especially in a market dedicated to terrorism risk, would serve a valuable function by telling the world that something was up (in much the same way as an out-of-nowhere jump in the price of a stock may suggest that a takeover bid is imminent). The more narrowly tailored the market was — e.g., an assassination market for a particular leader — the more useful the information so transmitted would be. I think the benefit would probably outweigh the moral hazard, though I may be wrong.

With respect to people falsely hyping nonexistent terror attacks, markets are effective at discriminating this kind of false alarm. The first time it happened the market would probably move significantly, but after one episode of crying wolf the same tactic might not work again. It might also be possible to create legal penalties for false alarms. Such penalties wouldn’t deter everyone, but would at least impose a high expected cost on anyone who had something to lose, e.g., government officials and journalists, who are also the kinds of people most likely to be able to move the market by hyping terrorism concerns.

Innocent people might avoid participating in the market because there is a hypothetical risk that they would be arrested for knowing too much if they profited from terrorism predictions.

I don’t know. Whether this is an issue probably depends on how many people use this market and how much sense the government has. And it’s only a problem if they arrest innocent people. If they arrest guilty people it’s a benefit.

Information about pending terrorism is by nature private, and therefore public markets such as the envisioned terrorism-futures market would not be useful to predict attacks. As Glenn Reynolds put it:

An InstaPundit reader who is too smart to be in Congress emails with a more meaningful criticism: the futures market won’t identify “unknown unknowns,” since the betting — as with ordinary futures markets — must take place within the context of standard “products.”

It’s true that a public market would not discount private information, a.k.a. “unknown unknowns.” That’s generally true of markets. However, markets have a good record of making predictions based on publicly available information. The mistake is to compare a futures market to a crystal ball. The real comparison should be between the futures market and “expert” analysts who have no accountability for their biases. Markets look good by this standard, and the government could still do its own private research, much as financial firms do proprietary research in stock and futures markets, to supplement what it learned from public terrorism-risk markets.

Also, private information may become public if there’s money to be made. That’s a big advantage of markets in this case, as publicizing incipient terror attacks brings better countermeasures or the possibility that the terrorists will call off their attack.

It’s wrong to bet on misfortune and people’s deaths.

If this assertion is true, insurance is immoral, as are futures markets in agricultural commodities (betting on crop failures!) and stock indices (betting on, um, misfortune and people’s deaths). These markets are insurance by another name and are just as useful.

The reinsurance industry already does what terrorism futures are supposed to do.

This is partly true, though the reinsurance market operates largely out of the public eye and therefore may not transmit information as well as a futures market would. But if it’s really true that a futures market is unnecessary, then a futures market won’t succeed. It’s impossible to know for sure without trying.

If we’re lucky, someone overseas, like Tradesports, will start offering systematic opportunities to bet on terror-attack odds. Unfortunately, DARPA’s idea has unleashed so much demagoguery by American pols that it may be some time before anyone will be willing to set up such a futures market, even outside of the U.S. Pity.

Virginia Postrel has additional relevant links here.

Sullivan Weighs in Against Coulter

Andrew Sullivan weighed in against Ann Coulter today. How cute: “CoulterKampf”. By using a German sounding word, Sullivan gets to call Ann Coulter a Nazi, without actually saying it. He gets to throw a sucker punch at a woman while maintaining deniability. Maybe he’s afraid she’ll take off one of her stilleto heels and slap him around with it. And this is just the insinuating and underhanded start to a piece where Sullivan tries hard to suck up to the kind of people who routinely call anyone who disagrees with them a Nazi. (The fact that Ann Coulter is not a fan of Sullivan’s pet causes like “gay marriage” may have something to do with it, too.)

Sullivan’s great fear seems to be the taunting of liberals: “…when liberals taunt conservatives with being McCarthyites, conservatives now have to concede that some of their allies, namely Coulter, obviously are McCarthyites – and proud of it.” Trust me, liberals don’t care if they are taunted by Conservatives. They expect nothing less from fascists. That outrage is feigned. It is a tactic. And they counter-attack. Sullivan takes Coulter to task for “making huge and sweeping generalizations about all liberals.” Liberals do this all the time. Conservative? You’re a racist, a fascist, you want women to be barred from the workplace, to be illiterate, you want to poison the Earth. Please. This crap is so common it is taken for granted. It is the air we breathe. It is taken for normal. It’s like the Matrix, an all-pervasive cocoon of lies. If you are in favor of abortion, for example, you are a moderate, but if you are opposed you are a right-wing religious extremist. Coulter’s return fire leaves everyone appalled. But not me. I find it very refreshing to have at least one conservative who slaps them around in the fashion they so casually dish out. Turnabout is fair play.

And I am happy to join Coulter as being, at minimum, an anti-anti-McCarthyite.

I suppose I should say just whom I refer to when I use “liberals” as a noun in the foregoing since I am being so mean to them. Do I refer to my neighbors in the socialist village of Oak Park? No. My colleagues who are Democrats? No, not really. People who work in the real world, especially in commercial businesses with customers and clients are exposed to too much ordinary human variety every day to become prisoners of a truth-defying ideology. What I mean by “liberals” in this context is people who have a professional and public stake in liberal and leftist causes, the types of people who are drawn to that type of work, and the type of mindset that flourishes in that milieu. Specifically, people who work at think tanks and public interest groups, at activist liberal law firms, university departments especially in the humanities and social sciences, people who work in the senior ranks of government bureaucracies, most Democratic politicians and their professional staffs and consultants who work for them, people who work in entertainment media and publishing, and most especially at the major media operations like television and newspapers. People in these settings rarely meet anyone who serioiusly disagrees with them. They are free to demonize an imaginary “other”. They think Archie Bunker is social realism. They think George Bush is an idiot. They think people who go to church are pathetic, deluded simpletons. They think there is such a thing as “the global justice movement “. And such people have an enormous amount of control over what is and is not discussed or taken seriously since they hold the “commanding heights” of the media, the academy and the entertainment industry. This loose commuity is more or less whom Coulter is referring to, too, when she says “liberal”. Sullivan works in this world, and he has to maintain some liberal street cred as a matter of professional prudence. Attacking the religious right no doubt makes him some useful friends, as does being forthrightly gay, probably. Attacking Ann Coulter will also help him professionally. One does what one must, doesn’t one? If this seems too tough on Sullivan, note that his piece presumes that Coulter is motivated by money. A base charge indeed.

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Rabinowitz, Have you no shame?

Dorothy Rabinowitz was responsible for a dishonest and misleading attack on Ann Coulter’s book “Treason”, which appeared in today’s Wall St. Journal. I just finished reading the Coulter book the other day. Ann is pretty busy throwing punches in that book. She is really mean to a lot of people. But so what? She is mean to the people who need being mean to. The main thing here is that Rabinowitz fails entirely to respond to the core of Coulter’s book, which can be summed up in one sentence: The decrypted Venona messages prove that there were hundreds of Soviet agents in the United States government, that McCarthy was absolutely right to demand that they be exposed and investigated, and that liberals opposed him not because they were innocent, but because they were complicit, and guilty, so they “fought like animals.”

Rabinowitz talks about peoples lives being ruined. OK. What about Soviet spies working in the U. S. Government? There were plenty of them. More than most people ever were willing to admit. They were helping Stalin. Stalin destroyed a lot more lives than McCarthy. And no lives would have been destroyed if the commie bastards had confessed what they knew. No, they fought like animals, and maybe some people got hurt who probably shouldn’t have. Well, purging Soviet spies from the U.S. Government was necessary at the height of the Cold War, and collateral damage is how the cookie crumbles. Anyway, Rabinowitz talks only in vague generalities about people who suffered these supposedly horrible atrocities due to McCarthy. Why no names, why no pathos-filled details of innocent victims? Because there aren’t any.

Daniel Patrick Moynihan discussed this in his book Secrecy, which Coulter refers to. Moynihan says, yeah, there were a Hell of a lot of Soviet spies, making essentially the same case as Coulter. Coulter however, puts two and two together — these people were spies for Stalin’s Russia, the worst tyranny ever (top 3, anyway), their liberal friends knew it, and lied for them and protected them. Not treason? OK, what then?

Rabinowitz refers to the Annie Lee Moss episode, in which a purportedly poor and ignorant woman claimed to be mystified at the suggestion that she was a Soviet agent. This vaudeville act appealed to liberals who think that black people are wise and good, yet somehow also stupid and needing their help. My mother saw that hearing and thought Moss was lying. Coulter’s discussion of the matter is much stronger than the dishonest version Rabinowitz presents, and much more convincing.

Rabinowitz fails completely to come to grips with Coulter’s case, for reasons which make no sense to me. Maybe she is put off by the sheer bloody-minded hatred which exudes from every page, the gobs of spit and flailing fists. Why? People who betrayed their country to Stalin, or who lied to protect spies for Stalin, and continued to lie about it for decades, and who have now been smoked out and continue to lie, don’t merit hatred? Why? If not, who does?

Rabinowitz’s title is also wrong. Coulter is not the Maureen Dowd of the Conservatives. She is our Johnny Rotten. She doesn’t care what anybody thinks is appropriate behavior, or which topics are just not talked about, or about the liberal pieties, she snarls right back. And if she is over the top, she is at worst doing what one of her villains Dean Acheson admitted to be doing — speaking more plainly than the truth in order that the truth will be heard. And evil should be called evil, in season and out of season.

I was not an Ann Coulter fan until I read this book. Now I am. I hadn’t paid much attention to Rabinowitz until today. I now know she is dishonest and can’t be trusted. I’ll never read another word she writes after this.

(I await with very great eagerness the forthcoming book Ann Coulter mentions by M. Stanton Evans about McCarthy. That will be a scholarly tome which will help to set the record straight on these major events.)

Not So Bright, Not So Liberal II: The Attack of the Atheists

One of our valued readers left, in part, the following as a comment to Jonathan’s earlier post:

Wouldn’t atheists find the assertion from religious people that they are plugged into some cosmic truth through their faith to be smug, arrogant and insulting? But I suppose it’s only a sin if the other side does it. If you do it it’s just asserting the obvious.

I started typing a comment in reply, which had a hostile tone. I deleted it. Then I decided to just leave it there, move on. Then on third thought I decided I would respond. But that comment got out of hand. I then had a fourth thought, the old saying about never arguing with the guy who buys ink by the barrel — “hey, this is my blog, I’ll just put MY response out in the open”. So here it is:

The tone, sir, the tone. The gratuitously insulting tone. We must work on that. Civility is a virtue which we all should have. It is the mortar holding together our pluralistic society. It is the foundation of our priceless civil peace, which is the envy and wonder of the world. So, starting out assuming that someone who disagrees with you has various moral failings is bad form socially and bad citizenship, as well as being intellectually unsound.

I will tell you that the Roman Catholic religion is true. I assert that. I assume the burdens of that assertion. I try to live up to the standards imposed on me by that assertion. This necessarily means that I also assert that contradictory statements are not true. (Incidentally, I certainly don’t think this is an “obvious” truth, so you are wrong about that. It takes some prayer, reflection, experience and study to get there. I’ll also assert that it is worth the effort.)

OK, I did it. I have made a “truth” statement. Pause. Look around. The sky has fallen on neither of us. Nor does that mean I cannot remain friends with people who do not make this assertion, or who aren’t sure, or who don’t want to think about it. There is no inconsistency between my assertion of the truth of Roman Catholicism and my genuine friendship with and respect and affection for those who do not do so. You have a poor, and false, idea of Roman Catholicism if you think otherwise.

We all live, function, act and think based on what we believe to be true. All human conduct is necessarily rooted in some set of premises about what is true. These premises may be well thought out, not thought out, or incoherent, but these premises are there. So, making an assertion that something is true does not present any problem in itself. We all do that all day long, in deed if not in word.

Now, some people may say, “if you cannot show me empirically or by means of scientific, quantifiable measurements, that your religious belief is true, then you may not speak about it.” I reject this. I reject the proposition that someone may engage me on a life or death matter, in fact a life-after-death matter, and say that I must accept that person’s truncated and false view of the world and of humanity and of what constitutes relevant evidence, all as some kind of ground rule for having a conversation. That strikes me as smug and arrogant, to use your adjectives. Someone initiates a conversation with me and insists that certain relevant matter is off limits, ab initio? Sorry, dude, Lex don’t play that.

Now, if the tone of religious believers whom you have met has been “smug, arrogant and insulting” that is a bad thing. That is not how it is supposed to be done. Christianity is supposed to be about love, charity, patience, understanding, service, humility, etc. It’s in the New Testament in a bunch of places. You can look it up. Also, many people down the centuries have actually approached this ideal, some of whom we know as saints, most of whom are known only to God. I have found that this approach is far more common among sincere believers, even among those Christians who think my Catholicism will damn me to Hell, than anything like what you describe. But, hey, you had some bad experiences. Sorry about that. But I repudiate your judgement of me based on your experience with some unknown third parties. I refuse to be included in whatever group of people you had a bad experience with. And I reject your categorical lumping of religious believers into some pejorative category. And I am mystified that you think anyone with any self-respect would just knuckle under to such overbroad and, frankly, bigoted statements.

Anyway, we believe in open and even hard-hitting free speech on this blog. But let’s treat each other with respect. Our model should be the old Victorians like Lord Acton, Cardinal Newman, Mill, James Fitzjames Stephen, Gladstone, all of whom were engaged from time to time in debates pertaining to religion in one way or another, and all of whom fought hard for their causes, all of whom threw hard oratorical punches, but who did not sink to personal rancor or insult the intentions of their opponents — whom they assumed to be serious men seriously engaged with serious matters, at least as an initial presumption.

In closing, I will say that the truth or falsity of Catholicism or Christianity or Islam or religion generally is NOT what I particularly want to discuss in this forum — though I have decided and I daresay well-founded views on these questions. My fellow ChicagoBoyz have their own divergent opinions and I don’t want to use this blog as a soapbox for my views on these issues, which are very serious ones, where their views may differ to a major degree. We have enough to talk about on this blog where we either agree, or might have a shared interest, or where we will have grounds for constructive disagreement. But if someone insults me or my religion, I may choose to respond, depending on what I deem appropriate under the specific circumstances.

Democrats Missing the Point

Just saw Terry McAuliffe on CNBC. He was carping about Bush, saying we should wait for evidence, not go it alone against Iraq (unless we have no choice — nice out), but that we should do something about North Korea which already does have nuclear weapons.

All I could think was: You jerk. You’re out of your depth and talking nonsense. You and the rest of the Democratic leadership might do better politically to be more cooperative with the Administration on national security. Sure, you’ll be playing second fiddle, but so what? It’s the right thing to do, and there are plenty of domestic issues where you could legitimately advance your own and the national interest by opposing Bush. As it is, the public distrusts the Democrats on foreign policy because it perceives correctly that they aren’t serious about it and are mainly motivated by domestic political considerations.

This isn’t a game, and leadership requires making important distinctions and difficult choices. That’s what Bush is doing, for example, in recognizing that Iraq requires quick action so that it doesn’t become nuclear-armed like North Korea. Meanwhile, we have to handle North Korea with great finesse, in part because Democrats were in charge, and did nothing, when North Korea was at the pre-nuclear stage that Iraq is at now.