Friday, February 04, 2005

So, Hernando de Soto has noticed that impoverished people have no economic power. It's a real problem.

And he has a solution: give them property rights, and let the magic of the market sort it out. Unfortunately, it's not a real solution. It's been tried, and it doesn't work.

In slightly more detail: de Soto's idea is that if you give peasants and slum dwellers title to their fields and shacks, they'll then be able to borrow on credit, and participate in their economies. And he's well-connected and persuasive enough to have gotten governments to try it. With the result that the teeming masses almost immediately give up their property rights, selling out to the local rich for a fraction of what they are actually worth.

Has de Soto missed something? I think so, and it's worth remarking because so many other economists miss it as well. He's missed human nature.

The people in economic models aren't quite Homo Sapiens. They're Homo Economicus -- a subspecies with some unusual properties. First off, they not only know their own utility function -- that is, they know exactly how much they'll like a given state of affairs, in quantitative terms. Second, they are also very good at calculating how their choices will affect it. Smart economists know this is bogus, and some recent Nobel Prizes have been awarded for more realistic behavior models. But de Soto seems to be making the assumption hard and raw. In several ways.

First off, the plan is that once you give illiterate slum dwellers property rights, they'll immediately go out and mortgage their property to finance improvements on their handcarts, or whatever they use to make a living. There are two key assumptions here: first, that they know what a mortgage is, and second, that they can find someone to provide one. Neither turns out to be true.

What does turn out to happen is that where the shacks and fields have any real value at all (and they often don't), the peasants almost immediately wind up selling out at pennies on the dollar to local speculators with the financial savvy to know what to do with an asset -- and the money to hire muscle to use against poor folks with other ideas.

John Gravois actually managed to confront de Soto with this, and here was his reply:

He told me wealthy land-grabbers should know that it's in their best interests to have the productive power of the poor brought into the economy. When I replied that those elites don't seem to be aware of that, de Soto simply offered: "I can make them aware."

And then they'll do the right thing, because they are Homo Economicus -- far-seeing maximizers of a numeric utility function which is almost directly equivalent to the balance in their bank accounts. Except that they're not. And not just because they don't see far enough.

Expropriating the poor is an old, old pattern in human societies. Including ours. Alexander Hamilton's buddies screwed thousands of Revolutionary War vets out of their back pay by buying up their scrip on the cheap, and then arranged with Hamilton to get the scrip redeemed to them at full face value. Before that, there's the English enclosure movement. Before that, there's, well... most of ancient history.

Some of that may have been that the elites involved lacked the wisdom that might be imparted to them by de Soto. But there's something else going on here. There's a type that you see throughout history that really doesn't care how good or bad their standard of living is in absolute terms, so long as it's dramatically better than what people around them have. They don't want cash, they want domination. And that leads to behavior which will frustrate any economic modeler, because Homo Economicus has no will to power.

via Matthew Yglesias.

Wednesday, February 02, 2005

New England is once again neck-deep in Superbowl hype.

I remember the first time the Patriots went to the Superbowl. Their opponents were the Chicago Bears, under Ditka, who of course destroyed them. There was hype then, too, on a national level -- for the Bears. This was the era of the Saturday Night Live "Chicago Superfans" skit, in which loyal Bears fans tried to convince each other that Ditka could field a Pop Warner team against NFL opposition, and win. Students of Ditka's subsequent career will know it's not like that. Whatever happens on the field, the players also have something to do with it.

And yet in Boston we're seeing exactly that kind of hype about Pats coach Bill Belichick. To give you some idea how bad it is, here's the sort of thing I'm used to hearing around here. Suppose both of the starting cornerbacks on the Pats' defense had season-ending injuries. People are saying -- not as a joke, but in all seriousness -- that Belichick could put together a secondary whose featured players are an undrafted free agent, a five-time castoff, and a converted wideout, put this group on the field against the most prolific passing offense in the history of professional football, and have them allow just three points. Not for a quarter, but for an entire game. It's completely ridiculous.

Tuesday, February 01, 2005

Whenever I hear good news from Iraq, I wait for a day or two to see how things settle out. So it was with the good news from the elections, where reports from Iraqi bloggers on the ground are that turnout figures were inflated both by generous guesstimation on the part of the officials, and more seriously, by the widespread perception that people who didn't go through the motions of voting would get their food rations cut. Which certainly makes me see those photos of Iraqis with indelibly inked "I voted" fingers in a somewhat different light.

Now, some of these folks may have an undisclosed partisan axe to grind. And even with the best will in the world, they can only report what they see, which is a fraction of the whole picture. Still and all, they generally have a better record than, say, the New York Times's Judith Miller. (Who, by the by, reports that her old buddy Ahmed Chalabi is negotiating for a role in the new, wholly independent, freely elected Iraqi government -- negotiating, that is, with the Americans. But can you believe it?)

But, if you want reports from more, well, established news sources: Reports are now that turnout in Sunni areas, where the insurgents have most power, was apparently very low, and at least one major Sunni group has already denounced the election as illegitimate, even before the results are announced. Even some relatively secure areas didn't even receive ballot boxes.

If the government that results from this manages to convince all Iraqis -- including the ones that didn't or couldn't vote -- of its legitimacy, the election still could turn out to have been a positive step. But from all this, it seems that will be a hard sell. Which is not what you'd necessarily have concluded from the happy headlines in yesterday's newspapers.

Yesterday evening, on the Harvard Square Red Line platform, there was a musician playing Andean instruments -- Spanish guitar and pan pipes. But something about the tune he was singing in Spanish, in a Latin style, didn't sound quite Latin. It sounded like an American tune, put through some serious changes -- but as long as he was singing, I couldn't figure out what. It took an instrumental break on the pipes, without the distraction of the Spanish lyrics, before I recognized the tune he was playing in an unaccustomed style: "I Did It My Way."

Monday, January 31, 2005

On SUVs, two links:

First, satire: the Kenworth Dominator.

Second, satire becoming obsolete: the International CXT.

It's a recreational pickup truck built on a cement-mixer chassis, with a massive diesel engine and a really plush cab. And two truly priceless touches on the brochure. There's the footnote on the claim that "you don't need a commercial driver's license to drive it": "State restrictions may apply. Talk to your local motor vehicle department." Then there's the slogan: "The Brilliance of Common Sense". Nick Lachey owns one. What says "brilliance of common sense" more than that?

If you want to believe the worst about the current occupant of the White House, TBR news will tell you what you want to hear. It has regular notes from someone they call "The Voice of the White House", full of stuff like this:

Bush, who has insulated himself from the public with high walls and iron discipline and listens only to sycophants and toadies, honestly believes that he has a mandate -- not from the American people which he does not, but from Almighty God himself! I have actually heard him say this and in my professional opinion, he is becoming very, very dangerous. Bush believes that whatever he does, he does in the name of and with the permission of God and that to question, thwart or criticize him is blasphemy. I realize this sounds like some kind of a rant but if you worked here on a daily basis and saw for yourself the sorry state that American leadership has fallen into, you would feel like outraged rants as well.

But how can you know it's genuine, particularly since the story about who this guy supposedly is has changed over time? (He claimed to be a reporter at first, but then he started talking about stuff to which no reporter would plausibly have access). Well, he makes testable predictions for the future:

Bush wants to invade Iran and Syria. Bush wants to have the Iraqi elections over on Sunday and has ordered that whatever the sorry and predictable outcome there, it be declared a "great victory for American-style liberty." ... Once he personally declares victory, which is coming, then the troops are to be pulled out in spite of strong warnings from senior military officers in the field that utter and bloody chaos will reign. These troops will be "refreshed" and prepared for future wars.

But to readers of "The Voice of the White House", this is old news. He, she, or it was predicting that Israeli planes would be flying off American aircraft carriers to hit targets in Iran last October.

Why involve the Israelis? "Because of the political ramifications". As if directly involving Israel would somehow make the attack less provocative to Arabs and the larger Muslim world. (And ironically, the more you believe the rumors I've seen on more credible sites of sub rosa ties between Feith & co. in the Pentagon and the Likud Party in Israel, the less credible this line gets. The line I've seen is that Sharon did what he could to push the U.S. to war in Iraq, through his policy proxies in the Pentagon, because he didn't want to get involved in a hot war himself).

Now, it's not inconceivable that an outright conspiracy rag could pick up echoes of something genuine. Reliable journalists like Seymour Hersh are talking about, at least, covert stuff in Iran that may be ongoing. And I'm honestly not sure that an Israeli attack on Iran would be the dumbest plan yet to come out of Dubya's White House. But if you want to believe, please reflect that TBR news has also carried a report (on a different byline) that the Asian tsunami was somehow orchestrated by the "Zionist Cabal" in "New York" as a sacrifice of "goyim" for some obscure propaganda move...