Quotulatiousness

March 21, 2013

The choices for Cyprus don’t seem to include saving the banks

Filed under: Economics, Europe — Tags: , , , , — Nicholas @ 11:04

In Forbes, Tim Worstall sums up the real problem facing Cypriots:

There’s a very large portion of the European political elite who believe, take on faith (for there’s certainly no convincing real world evidence about it) that the creation of the euro is part of the inevitable creation of the European State. And as such it is entirely irreversible. It’s not just that people once in the euro shouldn’t leave it: it’s that it is simply inconceivable that anyone ever would leave it. Either wish to leave it or be allowed to leave it.

Wherein lies the danger to said European dreams and it’s tiny Cyprus that poses said danger.

As both Krugman and Yglesias point out, the Cypriot banking system is bust, gone. Even if it needn’t have happened this way having the system closed for at least a week is going to lead to bank runs when they finally reopen. The economy is most certainly going to stutter if not be deeply depressed as a result of that banking system going. Given that a substantial part of the economy is about offshore finance, and that that’s not going to survive the banking system crash, there will also, whatever else happens, be substantial declines in GDP.

It’s most certainly true that leaving the euro will cause all of those things to happen. But if they’re going to happen anyway then why not leave the euro? Why not bring back the Cyprus Pound? That is, do an Iceland?

[. . .]

But here’s the thing: there’s still that religious insistence among the federasts that the euro is irreversible, a part of the future of the politics and economy of the continent. And if Cyprus does leave and does recover without too much paid then what reason for Greece, or Spain, Portugal, to stay in? If going bust and going back to one’s own currency is, as Iceland showed (although they kept, rather than went back to), less painful that the austerity required to stay in the euro then, well, why stay in the euro?

“Henrich had thought he would be adding a small branch to an established tree of knowledge. It turned out he was sawing at the very trunk.”

Filed under: Americas, Economics, Science — Tags: , , , , — Nicholas @ 10:02

By way of Five Feet of Fury, an interesting story about challenging some very basic assumptions about psychology:

While the setting was fairly typical for an anthropologist, Henrich’s research was not. Rather than practice traditional ethnography, he decided to run a behavioral experiment that had been developed by economists. Henrich used a “game” — along the lines of the famous prisoner’s dilemma — to see whether isolated cultures shared with the West the same basic instinct for fairness. In doing so, Henrich expected to confirm one of the foundational assumptions underlying such experiments, and indeed underpinning the entire fields of economics and psychology: that humans all share the same cognitive machinery — the same evolved rational and psychological hardwiring.

[. . .]

When he began to run the game it became immediately clear that Machiguengan behavior was dramatically different from that of the average North American. To begin with, the offers from the first player were much lower. In addition, when on the receiving end of the game, the Machiguenga rarely refused even the lowest possible amount. “It just seemed ridiculous to the Machiguenga that you would reject an offer of free money,” says Henrich. “They just didn’t understand why anyone would sacrifice money to punish someone who had the good luck of getting to play the other role in the game.”

The potential implications of the unexpected results were quickly apparent to Henrich. He knew that a vast amount of scholarly literature in the social sciences — particularly in economics and psychology — relied on the ultimatum game and similar experiments. At the heart of most of that research was the implicit assumption that the results revealed evolved psychological traits common to all humans, never mind that the test subjects were nearly always from the industrialized West. Henrich realized that if the Machiguenga results stood up, and if similar differences could be measured across other populations, this assumption of universality would have to be challenged.

Henrich had thought he would be adding a small branch to an established tree of knowledge. It turned out he was sawing at the very trunk. He began to wonder: What other certainties about “human nature” in social science research would need to be reconsidered when tested across diverse populations?

A notion that’s popped up several times in the last couple of months is that the easy access to willing test subjects (university students) introduces a strong bias to a lot of the tests, yet until recently the majority of studies disregarded the possibility that their test results were unrepresentative of the general population.

The technological imbalance between security and threats

Filed under: Government, Liberty, Technology — Tags: , , , — Nicholas @ 09:17

Bruce Schneier on the power of technology in a security context:

A core, not side, effect of technology is its ability to magnify power and multiply force — for both attackers and defenders. One side creates ceramic handguns, laser-guided missiles, and new-identity theft techniques, while the other side creates anti-missile defense systems, fingerprint databases, and automatic facial recognition systems.

The problem is that it’s not balanced: Attackers generally benefit from new security technologies before defenders do. They have a first-mover advantage. They’re more nimble and adaptable than defensive institutions like police forces. They’re not limited by bureaucracy, laws, or ethics. They can evolve faster. And entropy is on their side — it’s easier to destroy something than it is to prevent, defend against, or recover from that destruction.

For the most part, though, society still wins. The bad guys simply can’t do enough damage to destroy the underlying social system. The question for us is: can society still maintain security as technology becomes more advanced?

I don’t think it can.

How Russians view American foreign policy moves

Filed under: Government, Middle East, Politics, Russia, USA — Tags: , , , , — Nicholas @ 00:01

In short, they don’t believe it’s mere ham-handedness, arrogance, and incompetence — they think it’s only supposed to look that way:

It’s instructive to view ourselves through a Russian mirror. The term “paranoid Russian” is a pleonasm. “The fact is that all Russian politicians are clever. The stupid ones are all dead. By contrast, America in its complacency promotes dullards. A deadly miscommunication arises from this asymmetry. The Russians cannot believe that the Americans are as stupid as they look, and conclude that Washington wants to destroy them,” I wrote in 2008 under the title “Americans play monopoly, Russians chess.” Russians have dominated chess most of the past century, for good reason: it is the ultimate exercise in paranoia. All the pieces on the board are guided by a single combative mind, and every move is significant. In the real world, human beings flail and blunder. For Russian officials who climbed the greasy pole in the intelligence services, mistakes are unthinkable, for those who made mistakes are long since buried.

From a paranoid perspective, it certainly might look as if Washington planned to unleash chaos. The wave of instability spreading through the Middle East from Syria is the direct result of American actions. [. . .]

If the Russians sound mad, consider this: there is another substantial body of opinion that sees an evil conspiracy behind American blundering in the Middle East, and it votes for Ron Paul and Rand Paul. I am not suggesting that Sen. Rand Paul is a paranoid, I hasten to clarify: I have never met the man and don’t presume to judge his state of mind. But his popularity stems in no small measure from conspiracy theorists who think that the U.S. government really is planning to criss-cross the continental United States with killer drones and pick off American citizens on their home soil. A lot of the same people think that America invaded Iraq on behalf of the oil companies (who would make a lot more money if Iraq were zapped by space aliens) or by the Israelis (who never liked the project from the outset). A fair sampling of such paranoia gets posted on the comments section of this site.

Thus we have the strangest pair of bedfellows in modern politics, the Russians and the rubes. Try to explain to them that George W. Bush was a decent and well-intentioned man without a clue as to the consequences of his actions, and they will dismiss it as disinformatsiya. Tell them that the New York Times and the Weekly Standard both believed in the Arab Spring as the herald of a new era of Islamic democracy, and they will see it as proof of a conspiracy embracing both the Democratic and Republican establishments. How, the paranoids ask, could two administrations in succession make so many blunders in succession? It stretches credibility. I wish it were a conspiracy. The truth is that we really are that dumb.

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