I mentioned The Economist’s praise for the US system of Chapter 11 bankruptcy a few posts ago. This close-up look from the NYT doesn’t go so far as to deny the superiority of the US approach, but it is certainly a more jaundiced view.

The NYT also mentions an auction-based proposal by well-known economists Hart and Moore. Auctions are where the action is in economics nowadays, and I am edging into the field myself.

I’ve mentioned before that Ozplogistan is more politically balanced than it was in ancient times (that is, June 2002). Two additions to the blogroll maintain the balance. Stewart Kelly is generally left of centre, while the self-explanatory Wog Blog is generally right of centre.

On the US scene, I’ve already linked to Patrick & Teresa Nielsen Hayden’s excellent Electrolite, and now I’m adding them to the blogroll.

And I should mention that David Morgan is back, after a prolonged absence due to new fatherhood. He’s had some excellent posts on the Windschuttle-Reynolds row recently.

The Lovely Bones by Alice Sebold. Weird, but moving, it’s narrated from heaven by a 13-year old murder victim.

Also England Under the Tudors by GR Elton, reprinted in the Folio History of England series. Some striking numbers are that the population of England at the time was around 3 million and that the King’s annual revenue was less than 100 000 pounds. Here are some thoughts on this.

(a) Given that 80 or 90 per cent of the population were peasants who had no real chance of an education, the pool from which English governments drew their talent was smaller than that available to a lot of city councils in Australia. Did this make a difference?

(b) Estimating Mr Darcy’s income, Brad DeLong says, with suspicious precision, “In 1810 the pound had a present-day value of £27.28”. As I recall there was a fourfold inflation following the discovery of the New World goldmines, so lets say that the price level has risen 100-fold since Tudor times. This gives a government budget of around 10 million pounds per year or $30 million Australian dollars, which is less than it costs to run a medium-sized university.

On a related theme, Brad riffs off Virginia Postrel’s observation that

CHEAP STAPLES: I bought a five pound bag of Gold Medal flour yesterday for 69 cents. I find that amazing.

to estimate a 400-fold improvement in standards of living since the 16th century.

Over 500 years, this would imply a doubling time of around 60 years or, using the rule of 70, an annual growth rate in income per capita of about 1.2 per cent . I think this overstates things a bit because the relative price of food has been declining at least for the past century, suggesting more rapid productivity growth in agriculture than in the economy as a whole. However, some of the price decline is due a lower income elasticity of demand reflecting the finite capacity of the human stomach – the treatment of this is complicated.

In the comments thread to my post on the Lott fiasco, Jason Soon raised an interesting issue (I think I saw a similar point in another blog somewhere, but omitted to link it. )

Does Strom Thurmond himself think America would be a better place if he had won in 1948? It would certainly raise my opinion of him if he came out and said without equivocation that he deserved to lose.

This report in the NYT is notable, not for its content but for the fact that it’s the first time I’ve seen the Times use the term “current account deficit” without some explanatory gloss such as “the broadest measure of the trade deficit”. The NYT is not alone on this – the only other paper I’ve seen even report CAD statistics is the WSJ and it usually has a gloss.

For Australian readers of a certain age, the rise to prominence of the CAD will be all too familiar. The high interest rates of the late 1980s and the ensuing recession were largely motivated by concern about the CAD, though every historical point is bitterly disputed. Even today, no Australian tabloid would have any qualms in reporting the CAD and assuming its readers had a general idea what it was.

As this report from the Bureau of Economic Analysis shows, the CAD is now at 5 per cent of US GDP and shows no sign of declining, despite the recent deprecation of the dollar. Although economists are more relaxed about deficits than they were a decade ago, this is still dangerous territory.

One reason US commentators have ignored the CAD is the fact that, although the US is a net debtor, the deficit on income payments is still quite small – only $3 billion in the last quarter. So the CAD is not much different from the balance on goods and services. But with deficits at 5 per cent of GDP, the magic of compound interest will start to work before long. Expect to see this statistic make the move from the business pages to the front pages in the near future.

Jason Soon has an interesting link to an interview with Arthur Jensen, a leading hereditarian and advocate of the idea that intelligence is dominated by a single ‘g’ factor. It struck me that, although Steven Pinker gives generally favorable references to Jensen, this is the exact opposite to the Cosmides-Tooby idea of intelligence as a ‘modular’ bag of tricks which Pinker strongly supports.

This lead to me to another thought – an egalitarian implication of evolutionary psychology that I don’t think has been noticed before. Hereditarians like Jensen, Herrnstein & Murray etc argue that some people have ‘better genes’ than others – superior intelligence, greater physical strength etc. and that these advantages seem to be positively correlated.

But strong versions of Darwinism imply (roughly speaking) that evolution proceeds so rapidly that, most of the time, animals are optimally adapted to their environments. This involves trade-offs, and when the environment changes,so do the optimal trade-offs. In humans, intelligence is clearly the biggest single concern, and if you buy the Cosmides-Tooby story, you’d expect to see some environments favoring more allocation of resources to the spatial module, others to the interpersonal module and so on. (A nice feature of this argument is that it doesn’t rely on any particular hypothesis about the environments in which humans evolved, only that they varied and the variations made different demands on intelligence.)

This leads to the conclusion that insofar as ability is determined by genetic endowments, ability in one area should be negatively correlated with ability in others. This is a standard feature of popular ‘folk’ psychology, which assumes, for example, negative correlations between math ability and interpersonal skills. In my case, it’s pretty clear that whatever environment shaped my genes, it didn’t place a lot of weight on fine motor skills.

Glenn Reynolds and other warbloggers are desperately unwilling to give up the phrase ‘objectively pro-Saddam’ to describe their opponents even after it’s been pointed out to them that George Orwell, from whom they took it, later repudiated it as dishonest.

In a series of thoughtful posts, Sasha Volokh and Josh Chafetz attempt to find an alternative formulation that doesn’t carry the dishonest imputation that opponents of a war with Iraq actually support Saddam, but end up reaching the conclusion that there isn’t one. Along the way, they try out ‘plays into the hands of”, another locution that Orwell exposed as a pretext for dishonesty, and then ‘pro-Saddam in effect, if not in intent’.

Volokh settles on:

How about just “anti-war protesters help Saddam”? “Pro-X,” no matter how you qualify it, still connotes that you agree with X’s agenda.

I think this is fair enough, but once we have reached this point, the obvious question is “So What?”. Harming (or not helping) Saddam might be a good thing, but as a ground for war it’s pretty thin. In any case, it has been specifically rejected by the Administration, which has not only repudiated the International Criminal Court, but intimated that it would not look too hard for Saddam if he left office of his own volition. We should be assessing policies on the basis of whether they are good or bad for us and the world, not whether they are good or bad for Saddam.

The basic point of most opponents of war with Iraq is that the costs are likely to outweigh the benefits. Reynolds and most other warbloggers hold exactly this opinion in relation to North Korea, yet refuse to accept the parallel even when it’s pointed out to them. In fact, Reynolds and others have been at pains to play up the dangers of an attack on North Korea so as to rebut claims of inconsistency in the Administration’s policy. Their arguments that North Korea is too tough a nut to crack are obviously helpful to Kim Jong-Il in exactly the way as warnings about body bags and the possibility of chaos in the Middle East are helpful to Saddam.

Coming back to Orwell, it’s reasonable to ask why this kind of phrase is being used now. I suggest it’s because it is becoming increasingly necessary to ignore inconvenient facts in order to maintain an unequivocally pro-war position. The dossiers of satellite photos that were being displayed a few months ago gave a pretty clear impression that the US government knew that Saddam was building weapons of mass destruction and where he was building them. Moreover, the information coming out of the Administration strongly implied that Saddam was well on the way to getting nuclear weapons.

It now seems pretty clear that this was a misleading picture. Saddam may well have some stocks of botulin toxin and nerve gas stashed away, and perhaps even a carefully hidden lab or two, but it’s becoming evident that there is no nuclear weapons program currently in operation and probably no large-scale chemical or biological program. The sites that were displayed in the satellite photos have already been inspected and have turned up nothing. Some mustard gas shells have been found and more may show up, but if we knew six months ago what we know now, it’s doubtful that weapons of mass destruction would have formed the basis of a plausible casus belli.

In these circumstances, phrases like ‘objectively pro-Saddam’ are being used pre-emptively in exactly the way described by Orwell, to silence those who might question the truthfulness of the core elements of the case for war.

The Economist argues in favor of the US rule of Chapter 11 bankruptcy under which firms in financial difficulties are encouraged to trade out of them. The argument seems plausible, but it doesn’t address the question of moral hazard. Firms will be more willing to take on excessive debt if there’s a possibility of repudiating it and surviving.

Another point of interest is that survival rates for Chapter 11 seem to vary widely. Airlines seem to do OK, but very few of the tech and telecom companies that have entered Chapter 11 have ever emerged. With dotcoms, the problem was often one of finding enough assets to pay a liquidator. I have the impression that, overall, the survival rate of firms going into Chapter 11 is falling, but that’s only an impression.

Unqualified Offerings from Jim Henley. Thoughtful commentary on US politics from a left-liberal perspective. I’ve also added Manas whom I mentioned a few days ago.

Update Jim Henley writes in the comments thread to inform me that he is a libertarian and not a ‘left-liberal’. Sorry about that !

It just goes to show I shouldn’t try to infer a complete political position from arguments on a few key issues. Still even on the basis of the little I’ve read of Jim’s blog I can say that I wish there were more libertarians like him.

Confusion regarding Iraq and the Middle East is everywhere. Scuds from North Korea hidden under a load of cement are apparently a legitimate cargo. The WashPost runs a story quoting Administration officials saying Saddam has given VX gas to Al-Qaeda and it’s already on its way to the West. If correct, this would certainly justify war, but would also give it a ‘shutting the stable door’ quality. The next day, the report seems to be little more than a rumor.

Meanwhile the Iraqi declaration and the US response are puzzling in the extreme. In the standard warblogger scenario, the declaration was the trigger. Once it came out, the US would produce the evidence to show Iraq was lying and the war would be under way. The peaceful resolution scenario was that Iraq would ‘fess up and destroy its weapons. Instead, Iraq is denying everything but the US is in no hurry to prove that Saddam is lying.

Today’s NYT quotes US officials as saying that the report fails to account for stocks of WMDs that were already located by the last round of inspections. If this claim stands up, it would make a pretty strong case for declaring Iraq in material breach. But, as the NYT says, it’s hard to prove a negative. What I find really bizarre is this:

The second [option] is to continue with the inspections, and to aid inspectors with intelligence that would guide them to suspect locations. But Mr. Fleischer said earlier this week that the inspectors would receive no information that revealed the sources and methods used to collect them.

How serious a threat can Saddam be if it’s more important to protect any and all intelligence sources than to produce the evidence that would justify his overthrow. You can imagine cases where the US would put sources first – for example a highly-placed mole in Saddam’s entourage. But the kind of evidence that’s been hinted at so far is nothing like this – it’s routine surveillance using satellites, phone intercepts etc. Kennedy compromised sources far more sensitive when he produced the photos proving the Russians were building missiles on Cuba.

The only interpretation that makes sense is that, despite all the dossiers that were waved about a few months ago – including satellite images of ‘suspect’ sites – the Administration doesn’t really have anything beyond some suspicious purchases.

Blix will apparently give his assessment of the Iraqi document next Thursday, My guess is that he won’t give much support to a ‘material breach’ finding and will instead call for more inspections. That puts any real action off until the first inspection report, due on January 26 as I recall.

There’s still a significant chance that Saddam will be nailed on a clear falsehood in the declaration or that inspectors will turn up something damning. And there’s an outside possibility that the alleged links to Al-Qaeda will pan out. But it’s becoming more and more likely that neither terrorist links nor WMDs will be solid enough evidence to justify an invasion.

What’s left of the case for war is the obvious fact that Saddam is an evil dictator and a menace to peace in the Middle East. The problem is that a war based on this argument must be conducted very differently from one based on evidence that Saddam is aiding terrorists or hoarding WMDs. Overthrowing one oppressive dictator in a region full of them is not a sustainable policy. Unfortunately many of the dictators are US allies, just as Saddam was 20 years ago. And the oppressive Middle Eastern regime that arouses the most resentment is that operated in Palestine by America’s closest ally. The fact that the same ally operates the only real domestic democracy in the region makes things even trickier.

Quite frankly, I don’t believe the US Administration is capable of managing a war for democracy in the Middle East. But if they show that they can, for example by demanding an immediate start to the dismantling of Israeli settlements in Palestine, and dumping their friendly dictators, I’ll be the first to cheer them on.