Sunday, May 29, 2011

Cosmology matters (or why Jews make the stupidest queer-haters)

Economist Deepak Lal usefully divides cultures—interwoven ways of doing things passed across generations by learning—into their material and cosmological aspects. In his words (pdf):
The former relate to ways of making a living and concerns beliefs about the material world, in particular about the economy. The latter are related to understanding the world around us and mankind’s place in it which determine how people view their lives—its purpose, meaning and relationship to others
Material beliefs are more amenable to changing circumstances, cosmological beliefs are more persistent. As Lal continues:
There is considerable cross-cultural evidence that material beliefs are more malleable than cosmological ones. Material beliefs alter rapidly with changes in the material environment. There is greater hysteresis in cosmological beliefs on how, in Plato’s words, “one should live”. Moreover, the cross-cultural evidence shows that rather than the environment it is the language-group which influences these world-views.
Since language provide cognitive maps, it is not surprising that language group might matter. (So Islam’s insistence on Arabic as its sacred language probably aids its consistency, its recurring patterns.)

Sex and gender – how sex is to be conceived, what genders there are, how are they to be conceived – are classic concerns of cosmological aspects of culture, since they are so important to being human and human purposes. The most important single reason why conservative Christian perspectives have been losing grand moral arguments within Western civilisation has been the improvement in the status of women. Giving women control over their own fertility, the right to exit marriage and full economic and property rights has involved basic shifts in some fundamental presumptions.

These changes are intimately connected with expanding knowledge and growing technology that has not only downgraded any premium on upper body strength (an area of male advantage), it has also made mental abilities more salient (men have no advantage over women in average intelligence) while making pregnancy much safer (so reduced greatly the risk that investment in educating women will be lost in early death) and child-raising more readily compatible with higher income work: both factors being strengthened by greatly increased average life spans. Capitalism promotes the spread of technology by encouraging use of its benefits, including in its hiring patterns. As women have become more competitive, they have been hired more. As they have become more broadly economically useful, so legal restriction have been removed, each process helping the other along.

Longer life spans and fertility-control technology encourage separation of sex from reproduction, weakening the ability to define sex in terms of reproduction: the fundamental sex-and-gender premise of monotheism since, in monotheism, sex separates us from the divine apart from procreation. (Clearer in Judaism and Christianity than in Islam, since in Islam the principle of status is so much stronger and more pervasive.)

Changing conceptions of gender, sex (and sexual possibilities) have knock-on effects. It is a nice historical resonance that John Stuart Mill and Harriet Taylor’s The Subjection of Women was published in the same year the term ‘homosexual’ was coined. The more equal in status men and women are, the less one man providing another with sexual pleasure involves “betrayal” of male status.

Sex and gender also involve intense, roiling emotions. Which makes it ripe for exploitation in all sorts of ways.

Religion-as-excluding
An important role of religion is to give you people to despise, to separate the righteous from the unrighteous. A sense of one’s own virtue (or possible virtue) is so much easier if combined with a sense of other people’s viciousness.

Monotheism, with its conception of a single, authoritative, definitive view of truth, and reviling of false gods and their worship, generally finds it easy to generate people to despise. Combine this status claim (believers as profoundly morally superior to unbelievers) with sex as only being validated by its procreative role, and you have a rich field of intense emotion to exploit. (It also counts for monotheism’s fun allergy, since almost any form of worldly enjoyment can be characterised as separating or diverting us from the divine.)

Controlling women
If sex is only validated by procreation, obviously queers (anyone who does not fit in the binary male/female sex-for-procreation framing) are anathema. But it also makes it much easier to insist on the motherhood-box as normative for women – a religiously-sanctified sex-and-gender role only permitted to be exited for religious reasons. Any attempt to escape the motherhood-box easily becomes an immoral transgression involving a profound loss of status.

[Read the rest at Critical Thinking Applied.]

Tuesday, May 24, 2011

Great Crises of Capitalism (3)

This concludes my review of P. D. Jonson's (aka Henry Thornton) Great Crises of Capitalism. The first part is here, the second part is in my previous post.


Money offers
Jonson quotes the famous line of inflation as “too much money chasing too few goods” (p.203). I prefer to talk in terms of money offers (Py or M/k), since money that is not spent has no inflationary effect. Base money aggregates can surge in either deflationary or inflationary situations. In the former, it represents money being hoarded (a rise in k). In the latter, it is part of a much wider monetary expansion (and can even represent a fall in k). Money aggregates can be as misleading an indication of monetary conditions as interest rates. (Jonson notes problems with interest rates as indicators [p.244].)

It is nonsense, for example, to suggest that low interest rates are a sign of “loose money”: if interest rates are zero, then that often implies negative money risk – that is, people are expecting the value of money to rise: this is not a sign of loose money. Just to confuse matters, it can also mean, if conditions are sufficiently peculiar, that there are inflationary expectations, these are just being overwhelmed by negative opportunity costs for capital: such a flood of capital in excess of demand that people are willing to pay to put it somewhere. (This is the situation Japan has found itself in.) The nonsense slogan that interest rates are “the price of money” leads to misreading of interest rates. What you can buy with money (goods, services, assets) is its (barter) price, its nominal price is 1. Interest rates include an element for expected changes in the price of money (money risk), so clearly are not the price of money. Interest rates are, at best, the price of capital (not the same thing as money, since capital has an across-time element to it).

All of which is to say I am a Sumnerian (or “quasi-monetarist”): I believe the crucial thing is Py (or nominal GDP). Consider this chart of change in nominal GDP with change in employment. Do you think that they might be connected? More precisely, the key thing is expectations about Py (what people expect about the overall level of economic activity in nominal terms) since they will drive their money holding (k) and their transacting. (Such as, for example, what wages will be agreed in contracts: so an unexpected deflation, or even disinflation, will lead nominal wages to "overshoot", discouraging employment.)

That monetarism needed to include the notion of ‘variable lags’ due to the disconnect between changes in monetary aggregates and price-level changes is an indicator of basic problems with the theory: use of such a “fudge factor” takes the power out of the theory – hence the rise of ‘quasi-monetarism’, focussing on expectations and nominal transactions.

Dot coms and Asian busts
Jonson moves on to a quick history of Japan from Commodore Perry onwards, recommending Ruth Benedict’s excellent Chrysanthemum and Sword, and noting some of the similarities in Japan’s postwar “miracle economy” with China’s recent economic rise. This culminated in Japan’s 1980s “bubble economy” and a spectacular 1991 bust from which Japan has still not fully recovered. The Bank of Japan “pricked” the bubble by raising interest rates but the failure to deal seriously with insolvent banks meant problems lingered: indeed, some of the more bizarre lending practices continued. Jonson holds that Richard Koo’s concept of a ‘balance sheet recession’ should be taken seriously (Pp209ff).

Many economists are puzzled by Japan’s fiscal policy of massive deficit spending – to the extent that it now has the world’s highest public debt to GDP ratio – coupled with the Bank of Japan’s policy of monetary restriction, thereby nullifying whatever stimulatory effect there might be from fiscal policy. (On of the basic policy principles is that ‘the monetary authorities move last’: i.e. they can respond much more quickly than fiscal policy.) The combination of fiscal stimulus and monetary restriction results in a flat economy and a mountain of public debt. (That Japan’s politicians have been coping with the new experience of competitive Party politics may be a factor in the mix.) Koo’s theory, an updated version of Irving Fisher’s debt-deflation analysis, at least explains the fiscal policy.

Jonson then discusses the 1997 Asian crisis, then the ups and downs of post-Soviet Russia, whose gyrations brought down the (spectacularly erroneously named) Long Term Capital Management. Then it is on to the Shanghai Stock Exchange bubble (the Cultural Revolution is a long way away now: modern China is far closer to Chiang Kai-shek’s vision than Mao’s) followed by an extended consideration of the dot.com booms and busts (Pp209ff).

Considering capitalism
Having started with three general chapters framing the issue, Jonson concludes with three chapters considering the history of boom and bust covered in the middle seven chapters. The first of the final three chapters examines how capitalism works, its strengths and weaknesses.

This is a matter of “myriad of transactions” with the great divide in macroeconomics being those who hold that all markets (eventually) clear (i.e. those who rely on equilibrium analysis) and:
a school of economics – based on simple facts – that asserts that economies develop irrational financial instability, with runaway asset and credit inflation followed by a reaction that leaves many resources unemployed or underemployed (p.230).
Jonson has considerable respect for Keynes, who grappled with these large questions and whose efforts “have not yet been bettered” (p.230).

While the facts of asset booms and busts, so engagingly covered by the author, are clear, I am less inclined to throw around terms like ‘irrational’, ‘mania’ and ‘animal spirits’. It seems to me one is dealing with patterns of reinforcing expectations in a situation where all we can have about the future are expectations (admittedly, based on available information including past experience), not direct information.

But any price one can sell at is economic reality, and so therefore are any expectations of capital gain they are based on: reality until, that is, they are not. Expectations are driven by information and experience but also frame how information (or its lack) is treated. Where there is a general expectation of rising prices, for example, lack of information is treated very differently than when expectations of falling prices have set in.

Still, one takes his point about dealing in reality. One just needs to expand rationality analysis to take account of the limits of time and information – including for cognition itself.

Jonson discusses the work of Keynes, Friedman and Minsky in the course of making some general policy recommendations, including “leaning into” asset booms (Pp229ff). His discussion of the continuing relevance of Hume’s analysis of monetary economics (Pp233-4) is reminiscent of Friedman’s comment that in the last two centuries monetary economics has only managed to go one derivative beyond Hume. Part of the problem is adding in a non-monetary asset to simple basic models of open economies quickly lead to very complicated mathematics (p.235). (See my previous point about limited information.)

Jonson then gets to the heart of his macroeconomic analysis, discussing what happens when one adds in a non-monetary asset to economic models in a world where China is massively expanding its production of goods and services – money expansion will be reflected in rises in prices of non-traded good and services and assets, with the (eventual) impact on traded goods and services potentially taking decades (Pp233ff).

The implication of this is that:
When analysts write of ‘global imbalances’ they are usually writing about an incomplete adjustment in which one country or group of countries have an external deficit (or a falling exchange rate), and another country has an external surplus (or a rising exchange rate) with incomplete price adjustment. The great modern example as the USA and other developed countries in deficit and China and similar nations in surplus (p.236).
As well,
goods inflation is slow to adjust to monetary contraction, the same approach predicts asset deflation (p.236).
Jonson cites then Chancellor of the Exchequer Churchill’s 1925 setting the gold value of sterling too high as a classic example.

Monetary economist Scott Sumner clearly takes the Fed’s recent disinflation as a similar example. When critiquing the inflationary habits of the Fed, it is well to remember it did its greatest damage by monetary contractions and managed to do so both on (1929-33, 1937-8) and off (2007-8) the gold standard.

Jonson discusses the main competing explanations of stagflation, the range of monetary regimes across history and the virtues of the gold standard and the problems and opportunities of booms and busts for asset management, citing some seminal texts on the way through. He is particularly exercised by the debt and inflation problems that emerge after banking crises and busts and is informative on the pervasive problems of lack of predictability of events (Pp229ff).

Lessons of up and downs
Then it is on to the lessons of booms and bust. Jonson regards attempting to stop booms and busts happening as likely impossible to begin with and having high costs – vitiating the achievements of booms and the punishing of poor or misguided behaviour of busts. He then proceeds to tease out lessons for governments, central banks and investors, with a helpful one-page summary at the end of the chapter (Pp247ff).

Jonson is not a fan of Greenspan or his successor Ben Bernanke and fears that the recent “quantitative easing” will release high inflation down the track. He is particularly concerned with the mounting levels of public and private debt, pointing out that large government debt leads to default, inflation or a squeeze on services (p.249). While very keen on policing of fraudulent behaviour and separation of investment banking from commercial or deposit banking, and use of anti-monopoly laws to stop any institution being “too big to fail”, he also suggests it is desirable if the broader citizenry was educated in basic principles of finance to try and reduce the level of public credulity (Pp250-1). Jonson also feels that some version of Keynes’ Bancor proposal is likely superior to Taylor rule targeting (Pp257ff).

Scott Sumner is eloquent on the pitfalls of a gold standard. The implication is that a monetary system that had the discipline to run a gold standard would also have the discipline to run a fiat money system, unless there is some very strong threshold effect in entering into the gold standard. Some version of Keynes’ Bancor might, through the international commitment involved, have such a threshold effect. One of the benefits of such agreements is, after all, providing an excuse to stand up to domestic interests – thus the structure and processes of the GATT-cum-WTO does not make much sense in terms of economic theory, but a great deal of sense as an international forum to deal with domestic political pressures.

Future shocks
In the final chapter, Jonson attempts to look forward, based on the principle that:
In the absence of some great catastrophe, the future will be like the past, only more so (p.263).
A survey of trends and possibilities is followed by a critique of the ‘two-speed’ Australian economy with rising interest rates and $A undermining small businesses, particularly small exporters: he judges that a classic “bust” is the likely outcome (Pp272-3). Brief considerations of issues of the economically disadvantaged and corporate power is followed by the suggestion of a continuing “regulatory pendulum” which Jonson judges as likely to swing towards more regulation (Pp276-7).

In contrasting the US policy of using “every form of stimulus known to man” with the British strategy of austerity, Jonson is inclined to think the latter will work better, as it forces focus on basics such as “thrift, hard work and smart ways to do things” (p.277). Jonson then makes various “modest suggestions” for reforming capitalism and reiterates his fear of financial instability spiralling out of control due to misguided attempts to stop the process of boom and bust (Pp278ff). He concludes, however, with a basic optimism about the possibilities before us.

Considerations
I enjoyed Great Crises of Capitalism a great deal. Jonson has an engaging writing style and a refreshing confidence that the facts matter. While taking his points about public debt, “too big to fail”, inevitability of booms and busts, the problems of ignoring asset inflation, I am less convinced by some of his assertions about monetary policy. As this post eloquently puts the case (with revealing graphs), disinflation by inflation hawks have (and continue to do) great damage.

If central bankers have a persistent tendency to be too sanguine about inflation much of the time, but disastrously over-concerned with it on some searing occasions, this surely raises the issue of the value of central banking in the first place. “But they just have the wrong theory” is always a suspect move in trying to explain away problems of central control. The pattern looks more like the perennial problems for central control of dubious incentives and information limitations.

But this is not a book for the ideologically pure and is mostly the better for it. Though a framework can be so open-minded that it lacks the constraints required for intellectual rigour. The diffidence of the author does leave a feeling that the heart of things has not quite been captured.

Talking of the failure of Long Term Capital Management (rarely has a major financial institution been more incorrectly named), Jonson writes:
these bright but naïve men used a short run of history in developing their models, the sort of silly mistake this book is dedicated to discouraging (p.242).
However one might quibble about this assertion or that implication, Great Crises of Capitalism succeeds very well at putting boom and bust into a deeply sensible perspective. It is not a book of answers so much as warnings, questions and examples: but that too serves. Far better than do the spruikers of the latest unending boom, who are not possessors of some new truth but mere purveyors of recurring delusions.

Monday, May 23, 2011

Great Crises of Capitalism (2)

This continues my review of P. D. Jonson (aka Henry Thornton) has written Great Crises of Capitalism. The first part is in my previous post.


History matters
After the first three chapters (on the GFC, role of crises in capitalism, plus war, peace and capitalism) set the stage, the fourth chapter is engagingly, and provocatively, titled The Dutch Tulip Boom of 1636; with Brief Comments on the Modern Market for Art. Taking us through the Dutch Republic’s success, particularly its role in financial innovation, Jonson summarises the Tulipmania as described in Charles McKay’s cultural classic Memoirs of Extraordinary Popular Delusions and the Madness of Crowds and then a more recent examination of the episode by Peter Garber, examining the difficulty of defining a ‘bubble’ in a way that is genuinely informative at the time, rather than only in retrospect (Pp79ff).

This is a genuine difficulty, since the point of asset price bubbles is that their turning points are not systematically predictable: if they were no one would get caught in them. It is the lack of predictability which makes bubbles possible in the first place.

Jonson makes the point that the prices of assets of different classes tend to rise and fall together, particularly in general crashes (p.94). The more fundamental lesson this suggests is to limit one’s debt exposure. Jonson’s point that likely the worst effect of Tulipmania was its undermining of ‘trust and honour’ is surely a powerful one.

His discussion of the booms in art prices associated with wider booms is rather whimsical in tone. As an activity of the extraordinarily rich, he does not think it a public policy problem – particularly as the pieces often end up on public display in museums (Pp91ff).

Then it is on to the South Sea and Mississippi bubbles of the early C18th. This is an amazing pair of stories. In both England and France the state was burdened with massive public debts it could barely manage to service. An able economist, gambler and scallywag, John Law, proposed to the French Regent a system of note issue to improve liquidity and thus economic activity: in effect, creating a central bank. This worked so well that the Regent decided more was clearly better. One thing led to another, and there was an enormous bubble followed by a dramatic crash.

England already had a central bank, the Bank of England: indeed, the original central bank. That the English central bank, far from being a participant in the English bubble, was engaged in a struggle against those at the centre of the South Sea bubble, limited the damage; though there was great rage against those felt to be culpable when the bubble burst.

In England, there was to be improved management of a consolidated national debt that was to permit the United Kingdom to fight major wars, successful (War of the Austrian Succession, Seven Years War), unsuccessful (War of American Independence) and long and eventually successful (French Revolutionary and Napoleonic Wars) while maintaining sound finances. Improvement in public finances in France from John Law’s innovations was temporary, and accompanied by much economic and social damage. As Jonson observes:
a leading edge in innovation can so easily become a bleeding edge (p.81).
The failure to deal with the underlying fiscal problems was to result in the Bourbon monarchy eventually being effectively bankrupted by a successful war (War of American Independence) and collapsing in revolution (Pp97ff).

A pop culture aside: Terry Pratchett’s Making Money is a splendid fictional take on some of these issues, with protagonist Moist von Lipwig likely being partly based on John Law, but one working for a competent autocrat, not a silly and greedy one.

The grand century
We then move onto the nineteenth century, concentrating on the UK and the US and a potted history of economic cycles in the US and UK, with supporting graphs and table focusing on the interaction between the gold standard, credit and railway speculation in particular. There seems to be a quasi-Austrian malinvestment theory behind Jonson’s analysis, except he points out that the railway investments turned out to be economic boons. I find the Austrian concept of malinvestment unpersuasive. There does not seem to be any useful general concept of ‘malinvestment’ that is independent of the level of economic activity. Sure, businesses fail but they do so all the time, even in the height of booms, and this discovery process is surely much more about exploring boundaries of what is or is not profitable (boundaries which shift as the level of economic activity shifts) than displaying some inherent characteristic. Yes, one can get inappropriate construction (e.g. empty housing estates in post-bust Ireland or various US cities) but they were the result of very specific forms of perverse incentives, not indicative of some general phenomenon, even in housing construction (even if you add in various complications).

Our author does fall into a common flaw of works of economic history, in failing to explain important features to readers. Specifically, a paragraph, or even a sentence or two, explaining why the Bank of England raised the Bank Rate (merely defined in the text as ‘a key contributor to economic stability under the gold standard’ [p.123]) in crises would have been very useful. There is a useful glossary of terms, which tells us what the bank rate is, but does not explain this crucial dynamic (Pp121ff).

Jonson has a nice eye for a good quote:
’A currency system which in difficult times,’ says Clapham, ‘depends on the chance occurrence of nuggets in gulches and gold dust in river sands lack stability (p.134)’.
Gold standard enthusiasts point to the stability of (goods and services) prices under the gold standard, but it is a stability which can lead to considerable instability in employment and economic activity, a factor that gains increased force given there is reason to believe that the degree of “stickiness” in prices and (particularly) wages has increased over time. The gold standard has also been compatible with wild swings in asset prices.

Leaving the nineteenth century in US and UK with praise of innovation and the warning that:
Prosperity often leads to over-exuberance and is often accompanied by fraud and incompetence, which helps to explain why prosperity often turns out to recession or depression (p.142).
Jonson moves on the “Marvellous Melbourne” and the extraordinary story of the Victorian land boom.

Antipodean occurrences
We start with a refreshingly (generally) positive portrayal of the energy, innovation and progress of the period, including Australia’s role as a pioneer of representative democracy, interspersed with references to Jonson family history (Pp143ff). In the midst of this (mostly) positive economic history, there was a land boom-and-bust in the late 1830s and early 1840s as wool prices surged then collapsed.

What Jonson labels – with an explicit invocation of recent American experience – as the ‘sub-prime land boom of the 1880s’ was built on two pillars: a plethora of building societies and a belief that it was impossible to lose money by investing in land. (This should sound very familiar.) What made things worse was that Victorian building societies were permitted to invest in real estate themselves. Prices surged: land prices in the CBD could double in price in a matter of months. When the boom busted, the crash was spectacular. Suburbs were built that remained untenanted for years; 20 major financial institutions closed, 120 public companies failed, high levels of fraudulent behaviour were revealed, there was massive unemployment accompanied by deprivation, misery and death (Pp151ff). It is hardly surprising that Melbourne became a bastion of labour and protectionist politics.

This is followed by a short economic history of Australia, where the period from 1900 to 1972 is covered rather more briefly than the period from the Whitlam Government on, interspersed with references to the author’s family and personal history. But the public policy history from 1972 onwards is very usefully covered, by someone who was a senior ‘econocrat’ for much of that time, concluding with a survey of current issues. That housing seems both clearly overvalued but has potential for future housing shortages just reminds us of the unknowability of the future (Pp161ff).

Income and expectation
My take on that is that rental prices tell the supply-and-demand story and value above a reasonable capitalisation of current rental (i.e. income) value tells the “bubble” story. (If a good return on an asset is 6%, take the annual rental value, divided by 6, multiply by a 100: that is the reasonable capitalisation of current rental value.) Except, of course, some of the excess price over said capitalisation may be (reasonable) expectation of future rental rises: that little difficulty of the unknowability of the future again. Still, one can do the check in reverse: take the current price, divide by 100, multiply by 6 – is that a reasonable expectation of future rents? If not, then there is in the price of the asset an expectation of capital gain beyond reasonable expectations of its future income value and we are in bubble territory.

That part of the price which is based on expectations of pure capital gain beyond income value can vanish astonishingly quickly if those expectations go away: which they do as soon as prices start falling sufficiently. Hence the sudden asset price “busts”. Which is unfortunate: it only becomes a disaster if it was the basis for debts, for one is then left with the debt without the asset value that was backing it. It becomes a catastrophe if lots of folk are in that position and suddenly financial institutions have a massive surge in “bad debts” – loans people cannot pay back and which are not covered by realisable assets. The loss of income and assets can destroy financial institutions and devastate capital markets leading to a dramatic drop in economic activity as people lack the funds to engage in transactions, or take their money out of the financial system, or simply stop transacting for prudential or anticipated rising-value-of-money reasons (since money in circulation is becoming more scarce).

A proposal
So, the truly risky form of debt is debt beyond the income value of an asset. Hence my suggestion that people simply be banned from borrowing against an asset beyond its capitalised income value. If people want to bet on capital gains beyond that, fine: but they can do it (only) with their own money, not on credit.

This is not some puritanical dislike of “speculation”, just a prudential concern to minimise systemic risk in the financial system. It would also take a lot of the “heat” out of asset price booms, as it would effectively eliminate the use of credit to generate expectations of capital gain beyond income value. It is not a proposal for perfection, merely of prudence. There would be some cost at the margin (that problem of reasonable expectations of future income gain) but the benefits would surely greatly outweigh that: the most one can hope for in any regulation. Moreover, it would actually increase information in the market, by forcing attention to how much of a price is current income value and how much expectations of capital gain (the problem with much regulation is that it either destroys or distorts information).

Roaring boom, savage bust
Jonson then moves back to wider economic history with his next chapter The Roaring Twenties and the Great Depression. The chapter has many quotes from Galbraith’s (highly quotable) The Great Crash, an account Jonson labels “sardonic and authoritative”, while Milton Friedman and Anna Schwartz’s magisterial A Monetary History of the United States only gets a role in the commentary towards the end.

The public policy question Jonson concentrates on is the proper role of a central bank in the face of a boom in asset prices. One of the major speculators, Charles E. Mitchell, became a director of the New York Reserve of New York, a blatant conflict of interest (p.172). Raising the rediscount rate was proposed to cool speculation (since it would have reduced the profit on broker’s loans) while controlling margins (what proportion of cash had to be put up to buy stocks) could also be used to discourage speculative borrowing. The Reserve merely issuing a statement in February 1929 caused the share market to drop and then stall, particularly as the attitude of the new President (Hoover) was unclear.

Then Mitchell stepped in and made it clear his bank would support what the Reserve had warned against. The market rallied, the Reserve was silent: as Galbraith wrote, it had decided not to be responsible for a market crash and the share price boom restarted (Pp173-5). This is a basic problem: what central bankers wish to be responsible for a crash? The post-Depression joke – the role of a central banker is to take the punch away just as the party is getting started – is not a counsel of popularity. And the further away the memory of the last big boom-and-bust is, the less credence there is likely to be that the alternative is worse. Particularly as technological and financial innovation can so easily feed the delusion that “this time is different”.

The market surged on the belief that there was a “shortage of securities”, which much human ingenuity went into addressing, the use of credit to buy stocks surged (such loans being safe – as long as the market continued to rise) and various commentators supported the siren song “this time is different”. Prof. Irving Fisher, who Milton Friedman regarded as the US’s greatest economist, made his infamous statement that ‘stock prices have reached what seems like a permanently high plateau’, while doomsayers were sharply criticised (Pp176ff). The discrediting of free commerce advocates by their spruiking of the boom and the severity of the subsequent bust was to have major political, public policy and intellectual consequences.

Fisher himself was to develop his debt-deflation analysis (pdf) of the subsequent Depression, which was largely ignored at the time but, decades later, was to become more influential.

Then the stock market crashed, with expectations of gain being replaced by fears of loss and lack of information (such as the ticker falling behind, or Sunday market closure) becoming an increaser of fear:
After the Great Crash came the Great Depression which lasted, with varying severity, for ten years. In 1933, America’s Gross National Product was nearly a third less than in 1929. Not until 1937 did the physical volume of production recover to the levels of 1929, and then promptly slipped back again. In 1933, nearly thirteen millions were out of work, or about one in four of the labour force. In 1938 one person in five was still out of work (Pp180-1).
In Australia, whose governments had run up massive public debts, the surge in unemployment was likely even worse than in the US and the struggle to service the debt as incomes crashed dominated politics (Pp178ff).

Jonson wrestles with the question of what caused the Great Depression without coming up with a clear answer: as there is no scholarly consensus on this subject, this hardly surprising. He notes that Friedman and Schwartz’s analysis of severe contraction in money supply is the generally accepted explanation for the severity of the Depression. Ben Bernanke, the current Chair of the Fed, provided evidence for a severe contraction in credit whose effect was even greater than the money supply contraction. The Smoot-Hawley tariff increases and increases in taxes did not help (Pp182ff). As well:
There was an irrational fear of inflation while the country was experiencing the most violent deflation in the nation’s history (p.186).
A pattern we have seen replicated in recent times.

Meanwhile, in Australia, tariffs were raised, quotas and foreign exchange restrictions were imposed, limiting trade. But there was also a massive currency depreciation and a 10% nominal wage cut while the options of default, deficit spending or balancing the budget dominated politics. Jonson feels it is likely that the currency depreciation and wage cut, plus business unhappiness with FDR’s Administration, were the prime reasons why Australia recovered from the Depression quicker than the US (Pp186ff). As for lessons learnt since, the Greenspan view that it is not the job of central bankers to act against asset bubbles (as distinct from cleaning up afterwards) became widely accepted. When the GFC and Great Recession crisis hit, the response – cutting interest rates, swapping private assets for cash (‘quantitative easing’), bailouts and fiscal stimulus – were all adopted “with almost religious fervour”, a dramatic contrast to the policies of the early 1930s (Pp188-9).

Stagflation
Then we are on to “the Age of Aquarius” and the rise of stagflation – inflation with unemployment – and a period where the author can rely more on personal experience. Inflation is denounced:
Misery is inevitable in any economy as inflation erodes the value of people’s investments, raises their cost of living and makes contracts difficult to adjust and in some cases impossible to enforce (p.191).
Made worse if people also lose their jobs and others fear doing so. Since this was the time when the Phillips Curve had appeared to provide a clear trade-off between (goods and services) inflation and unemployment, the conjunction of inflation with unemployment – which reigning theory said was impossible – caused confusion and conflict in policy circles (Pp191-3).

The analytical breakthrough was to add expectations about inflation into the analysis. As inflation rose without effective counter action, so did inflationary expectations:
both rose largely independent of the state of the economy as measured by unemployment (p.194).
The link between unemployment and inflation was broken, with rising costs of inflation driving up unemployment. (More precisely, the ‘equilibrium point’ of unemployment.) There was an extra complication:
It is a basic theorem of economics that small open economies with a fixed exchange rate will import the global rate of inflation (Pp195-5).
The last effectively meant the US rate of inflation. On August 15, 1971 President Nixon broke the last link between gold and the US dollar, so there was no ‘anchor’ for inflationary expectations beyond people’s expectations about the actions of the US Federal Reserve (and their effects).

This point was not as widely understood at the time as it might have been. The battle between “cost push” and monetary explanations was fought out, being (mostly) won by the monetarists. The new Chair of the Fed, Paul Volcker, changed the Fed’s operating procedures. This led to the Federal Funds rate rising to 20% in June 1981: unemployment surged, but the recession was short and (goods and services) inflation collapsed to 3% p.a. Appointed by President Carter, re-appointed by Reagan, Jonson labels Volcker:
history’s greatest central banker, its most effective inflation fighter (p.197).
It took other countries rather longer to catch up, requiring as it did flexible exchange rates and abandonment of the hope of painless solutions. Jonson covers the arguments over floating the Australian dollar, which the author supported against the objections of then Treasury Secretary John Stone, who was opposed on the grounds that loss of financial reserves was a stronger constraint on fleckless government (Pp197-8).

The rest of the chapter is devoted to a lengthy discussion of the costs of inflation, the costs of stopping inflation and judging the balance thereof. Jonson is firmly of the inflation-as-scourge view, which policy needs to be constantly alert against: one of the costs of persistent inflation being the drop in household saving (Pp198ff). Expectations of capital gain in house prices become an alternative “saving” strategy: one using credit and dependant on what goes up not coming down.

[This review will be concluded in my next post.]

Friday, May 20, 2011

Great Crises of Capitalism (1)

P. D. Jonson (aka Henry Thornton) has written Great Crises of Capitalism, a history of economic crises in capitalism since the C17th and a jeremiad against inflation. It is clearly provoked by the Global Financial Crisis (GFC) of 2007-08, which the book begins with a survey of, and the subsequent Great Recession whose consequences Australia largely avoided but the US and other major Western economies are still suffering the effects of.

Jonson notes that financial booms and busts have recently been getting generally greater in amplitude (as measured by change in asset prices from height of boom to depth of bust). He also argues that, with the rising economic significance of China and India, goods and services inflation has been restrained, so easy money has spilled over into asset booms. (That is, global supply has continually responded to increases in money offers so as to keep inflation low: the weakness in this argument is many goods and services are not globally traded, though the range of these is diminishing – and non-traded goods and services are considered later [Pp235ff].) Jonson faults Alan Greenspan in particular for encouraging the notion that Central Banks should ignore asset price booms (p.18).

Follow the money
Another way of looking at this is that Jonson is, in effect, taking the classic Fisher equation of MV = PT (money x velocity [average number of transactions money goes through in a given time period] = price x transactions [in that time period]) and saying the restriction of T to current transactions (thereby leaving out asset transactions), so using CPI or some derivative thereof as the measure of P, and thereby ignoring asset prices, is a fundamental error. (Jonson points out that Milton Friedman’s model implicitly assumed a single good and a single asset, money, leading to inflation being defined in terms of goods and services [Pp17-8].)

A recent review of Earl J. Hamilton’s classic American Treasure and the Price Revolution in Spain, 1501-1650 nicely sets out the basic economics of the Fisher equation:
Most economics students are familiar with Fisher's Equation of Exchange, to explain the Quantity Theory of Money in a much better fashion than nineteenth-century Classical Economists had done: namely, MV = PT. If many continue to debate the definition of M, as high-powered money, and of P — i.e., on how to construct a valid weighted CPI — the most troublesome aspect is the completely amorphous and unmeasurable "T" — as the aggregate volume of total transactions in the economy in a given year. Many have replaced T with Q: the total volume of goods and services produced each year. But the best substitute for T is "y" (lower case Y: a version attributed to Milton Friedman) — i.e., a deflated measure of Keynesian Y, as the Net National Product = Net National Income (by definition).[note 55: For various reasons, too complex to discuss here, I prefer to use the Gross National Product - as many economic historians, in fact do, in the absence of reliable figures for Net National Product.]

The variable "V" thus becomes the income velocity of money (rather than Fisher's Transactions Velocity) — of the unit of money in the creation of the net national income in the course of a year. It is obviously derived mathematically by this equation: V = Py/M (and Py of course equals the current nominal value of NNI). Almost entirely eschewed by students (my students, at least), but much preferred by most economists, is the Cambridge Cash Balances equation: whose modernized form would similarly be M = kPy, in which Cambridge "k" represents that share of the value of Net National Income that the public chooses to hold in real cash balances, i.e., in high-powered money (a straight tautology, as is the Fisher Equation). We should be reminded that both V and k are mathematically linked reciprocals in that: V = 1/k and thus k = 1/V
Thus kPy equals the demand for money and changes in k for a given level of M will lead to changes in Py. So, for example, if people expect deflation (and so wish to delay purchases and increase their k since they expect money to increase in value) then the withdrawal of money means either prices must fall or national product must fall, or both (with the balance depending on how downwardly responsive prices are). Conversely, if people expect inflation (and so wish to bring forward their purchases, and decrease their k, since they expect money to decrease in value) then either prices must rise or national product must rise, or both (with the balance depending on how upwardly responsive supply is – hence Jonson’s point about rising Indian and Chinese production reducing global inflationary pressures).

Clearly, expectations matter: for example, the belief that one has to get into the housing market as soon as you can because prices will keep rising faster than income is classic inflation-expectations behaviour.

As an historical aside, one can see how the flow of silver from the Americas in the C16th and C17th would have had price effects on its own, since the silver did not appear everywhere instantaneously, but passed through a series of hands; so there would be a lag in k responses, leading to an increase in P given that the silver kept flowing in and did so in patent excess of the ability of supply (y) to respond to the increased money offers (M/k=Py) within the European economy. Conversely, since only about a third of the silver went to purchase goods and services from the (much larger) Asian economy, and transport costs and official monopolies blocked convergence in prices (pdf), any price effect in Asia would have been much smaller, leading to European goods being priced out of Asian markets (except where they had no competitors) and Asian goods being priced into European markets.

About assets
Even in the explanation quoted above, we can see that there has been a move from considering all transactions and all prices to considering consumer prices only (and thus ignoring asset prices: even that part of National Product spent as investment). But money can be used to purchase consumer goods or assets. So our author has a plausible point.

Not that these macro considerations means that the characteristics of different specific markets do not matter. On the contrary, they matter a great deal. For example, money will clearly be attracted to assets where people have high expectation of income or capital gains (that is, downside risks are discounted). Such as housing markets with constricted supply; financial instruments where there has not (yet) been experience of problems or weaknesses or financial markets where explicit or implicit government guarantees have undermined prudence. The US brought all these things together in a “perfect storm” of (land) supply-restricted housing bubbles, sub-prime mortgages and Fannie Mae and Freddie Mac (as usefully discussed in this review of and also this review of a recent book on the matter).

Jonson notes that, in Australia:
By March 2007, compared to June 1986, consumer prices had slightly more than doubled, implying annual goods and services inflation of 3.8%. Over the same 21 years, average house prices had risen by 450%, the share price index had risen by a similar 480% while shares in BHP Billiton haqd soared by a massive 1150%. While the out-performance of BHP Billiton shares were in part, perhaps in large part, due to the ‘China boom’, other asset prices had risen by an order of magnitude faster than prices of goods and services (p.17).
Jonson’s argument about asset prices does point to a lacunae in mainstream economic thinking. But I disagree with some of his economic history, particularly his dismissal of the medieval economy. Jonson writes:
The strong inflows of Spanish gold and silver gave a pronounced stimulus to economies that had stagnated for centuries (p.40).
First, the dramatic increase in silver production from central Europe (based on technological advances) began well before the arrival of Spanish and Portugese gold and silver. Second, the medieval economy was far from stagnant: on the contrary, it was a highly adaptive economic system which created the first mass machine economy. The cathedrals were not signs of a stagnant economy. The Serene Republic of Venice in 1330 had more sophisticated capital markets than Qing China in 1830 (bonds were invented by the Serene Republic in 1171): indeed, financial innovation was likely at least as important in explaining the Great Inflation of the C16th and C17th as Central European and American silver.

Historical infelicities
There are also some simple historical errors in the book, such as that East Germany was not the People’s Republic of Germany (p.47), it was the German Democratic Republic. The Spanish influenza killed about the same number as killed in the fighting in the First World War, not half (p.48). I think one can reasonably claim that Japan joined the modern world before the A-bombing of Nagasaki and Hiroshima (p.209). There is also the odd failure of editing, such as:
When President Nixon devalued the US dollar against gold in 1971, the Japanese yen was set at ¥308 per $1, which compares to around 50 cents per US dollar at the start of the twentieth century (p.211).
This makes no sense, presumably ‘cents’ should have been ‘yen’. While in a sense the US won the Cold War due to much greater wealth than its Soviet rival (p.61), that was a result of a superior economic system, not some freestanding fact.

Jonson’s story about Sir Francis Drake’s looted Spanish treasure setting off a series of investments culminating in the East India Company being the source of England’s foreign investment (p.58) is a “lucky happenstance” analysis that is a completely inadequate explanation of why England (and the Dutch Republic) proved so much more successful than Spain and Portugal at taking long term advantage of the commercial opportunities of the European global commercial expansion. Massive flows of silver were not an asset, they were a long-term disaster. But if you have a dismissive attitude to medieval Europe, such a “they were lucky” analysis gains spurious plausibility. Jonson also keeps referring to Spanish gold (e.g. ‘vast gold fleets’, p.62) when silver was much more important.

Jonson is not adverse to some rather un-pc observations – such as ethnic Chinese integrate into democratic capitalist countries rather better than Muslims typically do (p.61): one of those embarrassing truths folk are not supposed to mention.

Jonson provides a brief potted history of great power struggles from the C16th to C20th, relying on Kennedy’s Rise and Decline of Great Powers (a study which sadly concluded by claiming that late 1980s America was suffering worse “imperial overstretch” than the Soviet Union) and Blainey’s The Causes of War (a much better book which Jonson relies rather more on) (Pp60ff).

Sometimes, one could wish for more economic history. Jonson’s:
There is clearly something deep in human character that is driven towards expansionism (p.68)
is not a helpful analysis. That people like wealth and rulers-cum-states like revenues are pretty straightforward reasons for both the expansion of farming (which has been going on for 10,000 years, since farming first began) and for imperialism (which has been going on since rulership first established itself, so at least 5,500 years).

Jonson raises the hardy perennial of how much ideological conflicts reflect underlying economic interests or tensions (Pp71ff). His suggestion that the American South could have won independence in the American Civil War by using insurgency tactics (p.74) seems to be based on the common Vietnam War-era misconception that insurgencies are naturally successful (most insurgencies fail) and is deeply implausible given an occupying North would have had the black population in support. But Jonson’s wider discussion of the connection between war and economies is nicely nuanced and thought-provoking (Pp74ff).

[This review continues in my next post.]

Wednesday, May 18, 2011

Narcissism: ego defence as self-delusion

A friend who practises Chinese medicine put me on to this Webinar by Lonny Jarrett, a Chinese medicine practitioner who runs the Nourishing Destiny website. In it Jarrett differentiates between the authentic self − which he identifies with the life force, the urge to create what was not there before − and the ego, which insists on separation and control. He explicitly evokes Taoist and Buddhist notions in this.

Jarrett argues that the ego is a great barrier to healing because it blocks seeing what is (a point that applies to both patient and practitioner) and, in particular, wants healing without taking responsibility for change, wants to delay doing what is required until it “feels like it”. The ego demands attention to its hurts, traumas and concerns in a way that can block actually fixing the problems.

That is surely true. Jarrett is arguing that the ego is where family and social conditioning resides (or, at least, operates through) and the authentic self is what one can use to break through that conditioning. Which is hard: particularly if one has been, in effect, conditioned to feel bound by one’s conditioning. To not believe that there is something that you have access to by your actions or thoughts which can be relied upon.

If one looks at the ego as insisting on separation and control then narcissism becomes – in its pure form – the complete insistence on separation and control. Including the insistence that reality serve that separation and control or, at least, that how reality is construed does so. The ego reaches out and blocks one’s apprehension of reality from contradicting the needs of the ego. In other words, the narcissist’s convenience becomes their reality principle, the determiner of how they see reality.

Which makes narcissism very hard to heal, since apprehension of reality is, in effect, policed before it can provide a contradicting perspective. There is neither the motive to change (since the harm is generally inflicted on others) nor an avenue for seriously assessing one’s own perspectives. No wonder counselling and psychotherapy can often make narcissists worse. The last thing they need is their emotions validated and it would take a very alert therapist to begin to pick holes in presentation of events that they have no independent verification of. Even if they do so, the narcissist is likely to conveniently reconstrue, or otherwise block, any responses by the therapist that contradict the convenience of the ego.

It can also make dealing with a narcissist profoundly disorienting, since the meaning of all their actions is subordinated to their ego needs. So there is no independent meaning, or even factual basis, to rely on: no consistency beyond their needs and conveniences (which can, of course, change – even from moment to moment). Words and actions do not have the meaning that would be commonly ascribed to them.

Once, however, you work out what is going on, then things suddenly make much more sense. (Though a sense which can be infuriating, in a different way.) One lives in a world where they feel free to contradict themselves and events whenever convenient. As Joanna Ashmum says in her very useful discussion of narcissistic traits:
The most telling thing that narcissists do is contradict themselves. They will do this virtually in the same sentence, without even stopping to take a breath. It can be trivial (e.g., about what they want for lunch) or it can be serious (e.g., about whether or not they love you). When you ask them which one they mean, they'll deny ever saying the first one, though it may literally have been only seconds since they said it – really, how could you think they'd ever have said that? You need to have your head examined! They will contradict FACTS. They will lie to you about things that you did together. They will misquote you to yourself. If you disagree with them, they'll say you're lying, making stuff up, or are crazy.
They are the classic emotional vampires who cannot see themselves in the mirror while being profoundly disorienting, or infuriating, or both to deal with.

Their deepest problem is fear: narcissists are profoundly fearful people. They are so terrified of having to bear responsibility for their actions that reflect badly on themselves that they make their (defensive ego) convenience their reality principle. Their psyche is profoundly out of balance: to be cured of their personality disorder, they need to be punctured from their protective ego-inflation and yet be led to the inner confidence to deal with their own bad behaviour. (Which, of course, mounts over time: so becoming ever more frightening.) This is a difficult double act to say the least: particularly given how thoroughly their sense of reality is policed.

The extent of the self-delusion involved can be staggering. (Do they really think that you do not remember what happened? Apparently not.) But that is the point, really. First there is no you-as-actual-person in all this, there is merely whatever picture of you is convenient for the narcissist at any given moment.

Second, there is no what-actually-happened either, there is merely what it is convenient for the narcissist to “remember” as having happened. Which means there is no conversation to be had, no meaningful interaction. There is nothing beyond the narcissist’s convenience that can be appealed to, that sets some common standard, or even common reality. The narcissist’s armour of self-delusion means that nothing will get through, not in the ordinary course of events. So nothing useful will come out, either.

Which makes interacting with a narcissist more like an unfortunate happening, a sort of personal natural disaster, than a personal interaction in any meaningful sense.

But, of course, they are a person: they speak, they act. It is very disorienting, to have to treat what they say and do as not having the ordinary meanings and consequences. This is why an acquaintance was so right to call narcissists “serial killers of the soul”, since such can so profoundly undermine one’s trust in others and, even worse, oneself.

It is very hard not, at some level, to accept their framing as mattering. They are a person, after all – particularly if they were a person who was emotionally important to you.

But they are not really a personality in quite the way other folk are. That is the first, last and hardest lesson of dealing with people personality disorders – they really do not think as you do.

It is, sadly, a lesson one often has to keep re-learning.

Sunday, May 15, 2011

Why is the Middle East so rife with conspiracy theories?

This dispatch provides examples of what observer after observer remarks about the Middle East: it is rife with conspiracy theories. Conspiracy theories seem to pervade people's cognitive maps to an extent which is truly astonishing.

Two fairly obvious features of Middle Eastern societies are highly controlled media and domination by authoritarian regimes, many of which came to power via conspiracies. If one has no trust in public media, and constant experience of deliberate control of the same, then conspiracy theories obviously have an appeal greater than they otherwise might, particularly due to the lack of respected public fora for their debunking. That various regimes came to power through conspiracies just reinforces the notion of hidden, or not so hidden, controllers behind the scenes.

Of course, the far more open societies of the West are not exactly immune to conspiracy theories either. The extreme right and the not-so-extreme left are both rather prone to conspiracy-mongering. 9/11 "truthers" are just propounding the latest in a long line of conspiracy theories. Both groups experience significant levels of alienation from their surrounding society and operate through activist networks. Conspiracy theories provide an "explanation" for why things do not happen as they want/expect as well as reflecting aspects of their own political existence.

While the far more open Western societies also provide plenty of avenues to debunk such conspiracy-mongering, conspiracy mongering still appeals to the cognitive bias to (over) ascribe intention to actions and particularly consequences. Still, the level of conspiracy-mongering in the West is clearly much lower than it is in the Middle East.

Nor does the greater level of alienation by ordinary folk from their public institutions, and the lack of respected public fora to debunk conspiracy theories, seem to be quite enough to explain the extent of the conspiracy-mongering in the Middle East.

The alternative to conspiracy mongering is greater confidence in more impersonal processes of causality. The epitome of which is science. It is another feature of the Middle East (and the Muslim world in general), that the level of scientific activity and understanding is much lower than in the West. Muslim scientists, or scientists with a Middle Eastern background, write long, thoughtful essays about, or otherwise discuss, the problems of science in the Middle East and the Islamic world. So, the lack of confidence in, or awareness of, other, far more impersonal, causal explanations may also be part of the problem.

It is, after all, notable that the extreme right in the West tends to put much emphasis on the heroic will -- which encourages conspiracy mongering -- while much leftwing thought in the West is still beholden in one form or the other to Marxism which -- with its notions of hidden forces, differential consciousness and individuals as manifestations of classes -- also encourages a personalised conception of causality that leads easily to conspiracy mongering.

The cognitive map which most pervades the Middle East, and the Islamic world in general, is, of course, a religious one. Moreover, a religious one which, since al-Ghazali, has emphasized a conception of causality as just the manifestation of God's will with no inherent ordering beyond that which God happens to follow. All of Creation is taken to be a manifestation of the intentional will of God in a specific, day-to-day, every-moment sense. Such a profoundly personalised conception of all of causality undermines more impersonal notions of causality and so encourages other personalised conceptions of causality -- such as conspiracy theories. Hence, a whole series of factors encourages conspiracy theories, leading to the intense level of conspiracy-mongering that is such a feature of the Middle East.

Which is not a good thing for the prospects of more formal systems of social action, such as the rule of law and democracy. The penchant for conspiracy mongering is not only a penchant for illusion and delusion, it is also a barrier to other ways of thinking about, and so acting in, the world.

[Cross-posted at Critical Thinking Applied]

Monday, May 9, 2011

Islam's recurring patterns

Like many people, I have been doing a lot of reading on Islam and Islamic history since September 11 2001. But my interests in history – particularly military and medieval history – meant I have been building on previous knowledge. Indeed, in the early 1990s, I gave a paper to a private discussion group when, in the course of the discussion, I was asked where the next challenge to the West would come from, I said ‘Islam’ simply on the basis that it is the other universalist civilisation.

In the end, what most strikes me is how much Islamic history seems to be stuck in recurring patterns. Islam comes basically in four varieties – modernising, reformist, traditional and splinter. The modernisers wish to open Islam up to achievements in other civilisations, particularly science and critical reason. The reformers wish to return to the purity of original Islam – that is, they hold C7th Arabia as the pinnacle of human social order. The traditionalists are based on lineages of teaching, notably via Sufi orders, which often incorporate local traditions on the way. The splinter groups are small, permanent minorities who may not be accepted as Muslim by many mainstream Muslims: classic splinter groups are the Alawi, the Ismailis and Ahmadis. Some splinter groups, notably the Druze, have left Islam.

Generally speaking, the splinter groups are the easiest for non-Muslims to deal with. As permanent minorities, they eschew the idea that their religious rules are to be imposed on others, turning religious law into community law following a path originally pioneered by rabbinical Judaism. Even the ruling Alawite regime in Syria, no matter how vile it is, parades its ‘secular’ nature in ruling over a Sunni majority.

Traditional Islam often incorporates various techniques to soften aspects of Shar’ia, something also pioneered by rabbinical Judaism in dealing with the homicidal severity of Torah rules. Since, however, traditional Islam retained full judicial power, the softening never went as far as with the rabbis.

While there has been some tendency for Westerners, particularly in the Anglosphere, to romanticise the Sufis – there have been strains of Sufism which were enthusiastically jihadist – nevertheless, due to its mysticism, Sufism has also included rather more humanitarian strains of Islam, open to non-Muslim influences. The notion of a direct connection to the divine provides grounds on which to restrain or reinterpret some of the harsher elements of the teachings of the Prophet.

Non-Muslims have often managed to reach accommodations with traditional Islam. A revealing study of anti-Americanism in the Islamic world (pdf) points out that one of the most overtly pious of Muslim countries (Senegal) is also the one of the most pro-American. There, religion is controlled by various Sufi orders who have reached a working accommodation with the secular political elite. Senegal (and Muslim West Africa generally), Javanese Islam, Bangladesh, Morocco are examples of such “accommodationist’’ or “traditionalist” Islam being dominant.

Islam has also had various modernising movements, at least as far back as the Mu’tazilites of the C8th to C10th. Kossovo, Bosnia, Tunisia and Azerbaijan are examples of countries where modernising Islam is currently dominant. (Though post-revolutionary Tunis is showing some tensions over that.)

[Read the rest at Critical Thinking Applied.]

Thursday, May 5, 2011

Theology in speculative fiction

[An earlier version of the discussion of Carey and Chan as examples of Taoism in SF was previously posted elsewhere.]

I once asked a friendly wizard to summarise the difference between Buddhism and Taoism. He responded with this story:
The Tale of the Three Vinegar Tasters
Three sages (a Confucian, a Buddhist and a Daoist) walk into a bar. There in the middle of the floor is a big cauldron. Sage 1 steps forward, says I'll handle this and takes a sip. "Ewww! It's sour!" quoth he and recoils from it.

Sage No.2 steps forward, has a taste and says yes. "It's bitter. But then, life itself is bitter, so it all fits really."

Sage No.3 has a taste and says "Hmmmmm. Probably REALLY good with fish and chips."
Which made me laugh, but is also very Taoist, for it gave one much to ponder on very succinctly.

Taoism turns up in various speculative fictions: notably Barry Hughart’s delightful novels of Master Li (who has a slight flaw in his character) and Number Ten Ox. Two speculative fiction authors who incorporate Taoism in their stories in a rather more positive form than does Hughart (who presents the Buddhist-originated Taoist-as-self-seeking-alchemists view) are the urban fantasies of Kylie Chan and Naamah's Kiss by Jacqueline Carey.

Descendants of Angels
Jacqueline Carey is much the better, and more profound, writer. I know that some of my friends who tried the first book in her D'Angeline stories, Kushiel's Dart, were put off by the heroine of the first trilogy, Phedre's, concern for her own beauty and the dark eroticism but, if that does not bother you (or you can get past it), you are taken along in grand stories full of striking characters and a vividly imagined world.

One of the things that most struck me about Carey's D'Angeline stories was her theological insight: her ability to get into how different theological premises lead to very different consequences, including social consequences. The D'Angelines—descended from angels who came to Earth out of love of Elua, the earth-born child of the blood of the crucified Yeshua ben Yosef—are all about beauty and eroticism. To them, rape is heresy but willing eroticism is to be celebrated. They are polytheists for whom sex and gender are part of the divine: not monotheists for whom sex and gender are inherently deeply problematic because sex is not part of the divine and gender is tied up in the absolutely trumping authority of a God conceived as masculine (which thereby associates masculinity with authority and femininity with the lack of it).

Carey is true to her stories. So the heroine of the first trilogy, Phedre, is a courtesan (hence her attractiveness matters deeply to how she makes a living) and an anguissette, someone who can take pleasure from pain. In a sense, she is formed to be a courtesan, and of a very specific sort. Phedre is as she is, in a very particular culture. Just as the hero of the second trilogy, her adopted son of royal and traitorous blood, Imriel, starts off as whiny adolescent because that is what he is, where he is coming from. But he ends up somewhere well beyond that. (And, to be fair, he had some fairly horrible boyhood experiences.)

Phedre’s trilogy does not only explore the implications for human actions of our cosmological assumptions, to use the language Deepak Lal invokes to analyse culture, but also a world where theology really is history, really is grappling with part of how things are. In the last book of Phedre’s trilogy, Kushiel’s Avatar, what had seemed an interesting backdrop for the stories becomes a fundamental driver of the narrative as the aspirations of even the most cunning mortal characters become the flotsam of the plans of gods. Carey explores what serving a divinity that genuinely hungered for destruction would be like. Yet, even here, Carey gift for making even her villains understandable – which makes them all the more memorable and effective as characters – can make a monster a person yet still be a monster: they are made comprehensible, they are not thereby justified or vindicated.

Showing that the theological insight about monotheism and polytheism is not a one-off, Carey explains the difference between Taoism and Buddhism rather well in Naamah's Kiss, the first book of her third D’Angline trilogy. Our heroine, Moirin—part D'Angeline, part Old Folk of Alba (Britain)—becomes the student of Master Lo Feng, a Daoist sage from far Ch'in. In the course of their travels, the men of the party she is in, including Master Lo Feng, disguise themselves as Buddhist monks. So he introduces them to the teachings of the Enlightened One. There and elsewhere in the story, Carey shows she gets the difference rather well.

[Read the rest at Skepticlawyer.]

Monday, May 2, 2011

Nobel Peace Prize winner announces that mass murderer has been assassinated

Here.

Two of everything?

This is based on a comment I made here.


A recent piece suggests choice of topic or issue is a major mechanism of media bias. A classic example is how homelessness was a major media topic in the Reagan-Bush years, and then dropped out of the mainstream media when Clinton became President. If one judged by media coverage, all one had to do to “deal with” homelessness was elect a Democratic President! There is a reason FoxNews has found such a (large) niche.

There seems to be a principle that any organisation in the policy/advocacy/education etc realm not of the right gets taken over by the left, as the left simply cannot be trusted to share. (Since dissent is evil, don’t you know?) The constant attack on the moral character, intelligence and motives of dissenters from Club Virtue’s orthodoxies -- such as Club Virtue’s habit of labeling anyone who disagrees with them on indigenous or migration policy as ‘racist’ -- and the tendency to recruit in their own image and likeness has a tendency to discourage, or even drive out, dissent. Social psychologist Jonathan Haidt raising of the issue of political outlook imbalance within academic social psychology is just an example of a wider pattern. (It is also amusing to see people who would take evidence of a lack of women, non-whites, etc in other fields as evidence of bias trotting out the old-faithful 'lack of people of sufficient talent' justificatory responses.)

One solution to this problem of imbalance is simply to set up two of everything. (Though that leads to the obvious issue about the ‘none of the aboves’.) Still, to take a specific example, given the fairly dreadful state academic Oz history has fallen into, setting up ‘Centres of Archival Research’ to reconnect history to actual evidence and away from the Manning Clark ‘myths that make me feel superior’ approach probably is a good idea.