HoltesThoughts: Process Improvement

Showing posts with label Process Improvement. Show all posts

Monday, April 21, 2014

Undue influence and Dependency Corruption or why the Supreme Court Decision was so corrupt

In my last few posts I quoted from Justice Roberts Majority decision in the McCutcheon Case [http://www.supremecourt.gov/opinions/13pdf/12-536_e1pf.pdf] to illustrate why the decision was not only wrong headed but corrupt. Essentially the problem is that they redefined half of what is obvious corruption as "embody[ing] a central feature of democracy—that constituents support candidates who share their beliefs and interests, and candidates who are elected can be expected to be responsive to those concerns." And they went on to say that "Any regulation must instead target what we have called “quid pro quo” corruption or its appearance." I've already talked about how that is a corrupt decision as most corruption reflects inequality and a balance of power that is in favor of those who have excess power and wealth and who use that power and wealth to protect that power and wealth.

Defining the only kind of permissible corruption that the government can go after is "Quid Pro Quo" is deliberately making it impossible to go after 90% of corruption, including all but the most obvious quid pro quo corruption. The Supreme court in one swoop of deeper and deeper intentional process corruption after another has eviscerated 500 years of lessons on what corruption is and how to fight it, including the forms of corruption that the Founding fathers criticized. What Lessig calls "dependency corruption." A friend at the "Robin Hood Tax Site" rips into this with this graphic from an article at "Talking Points Memo":

Src: https://pbs.twimg.com/media/BlxEXjKCQAACh3I.png

I already talked some about "undue influence" but the author Lawrence Lessig explains that what we are talking about is further defined as "dependence corruption" which he explains in this article in Harvard Review [http://harvardmagazine.com/2012/07/a-radical-fix-for-the-republic] as a kind of systematic corruption where representatives lose the independence necessary to perform their function of representing and serving the people and become dependent on some outside force.

“the Framers wanted to avoid…Parliament’s loss of independence from the Crown” resulting from royal gifts of “offices and perks” that pulled members “away from the view of the people they were intended to represent.” The Founders were aware of the fragility of the system they had fledged: when Franklin walked from Independence Hall as the Constitutional Convention ended, Lessig writes, a woman asked what he had wrought. “A republic, madam,” he replied, “if you can keep it.”

Fighting dependency corruption was the reason for separation of powers.

Founders were fighting Systematic Corruption

Lessig, writing for the Daily Beast wrote [http://www.thedailybeast.com/articles/2014/04/02/originalists-making-it-up-again-mccutcheon-and-corruption.html]:

"The roots of that argument were handed to the government from an unlikely source: the Framers of our Constitution. Building upon the work of Zephyr Teachout, two researchers and I scoured every document that we could from the framing of our constitution to try to map how the Framers used the word “corruption.” What was absolutely clear from that research was that by “corruption,” the Framers certainly did not mean quid pro quo corruption alone. That exclusive usage is completely modern. And while there were cases where by “corruption” the Framers plainly meant quid pro quo corruption, these cases were the exception. The much more common usage was “corruption” as in improper dependence. Parliament, for example, was “corrupt,” according to the Framers, because it had developed an improper dependence on the King. That impropriety had nothing to do with any quid pro quo. It had everything to do with the wrong incentives being allowed into the system because of that improper dependence."

The right of course, loves "dependency corruption" because it reflects their efforts to create a new "dependency" aristocracy in which their shills would be the new "middle class" and pretty much everyone else can kiss their wealth and influence good bye. This article Seth Barrett Tillman can be found all over the internet, probably well advertized: http://news.yahoo.com/why-professor-lessig-dependence-corruption-not-founding-era-100206490--politics.html So naturally he claims that:

"No such unified concept existed in 1787-1788" as "a stable, unified meaning as to how the Framers (and the public during the Framers’ era) understood corruption in relation to the Constitution of 1787-1788: the Constitution of the Framers and Ratifiers."

Tillman is (of course) parsing. The Founders didn't use the words "improper dependence" alone but also talked about the "undue influence" of the Crown. Undue influence exists because it creates a dependence on the corruptor on the part of the corrupted, or simply involves raw power. So when the founders used the term "undue influence" or "improper dependence" they were using terms that are referring to a balanced system where money, influence and power are balanced. The line between "undue", "improper" dependence and independence are often political, arbitrary and shifting. Corruption is not just about law-breaking, but also about whether a system is functional for all it's stakeholders, optimized for the few, or completely FUBAR for the majority. So yes Mr. Tillman is right in that the founders didn't have an objective, by the numbers, standard by which to judge undue influence or dependency, but that is a straw argument. They had a definition of corruption that the entire constitution sought to remedy. And it was an imperfect remedy by imperfect (and thus corruptible) people, so the result was an imperfect document. Indeed you see just this sort of corruption referenced in the Anti-Federalist warnings about ratifying the constitution, one "Republicus":

(referring to President's powers).... "is it not probable, at least possible, that the president who is to be vested with all this demiomnipotence - who is not chosen by the community; and who consequently, as to them, is irresponsible and independent-that he, I say, by a few artful and dependent emissaries in Congress, may not only perpetuate his own personal administration, but also make it hereditary?"

For both Federalist and Anti-Federalist (who wrote this, corruption and tyranny are tied. Almost all of whom were influenced by John Locke, and when they talked about corruption they were more likely to be referring to the tyranny of monied classes and aristocrats than to someone putting a bag of coins on a desk. The subversion of dependency is process corruption that ultimately results in concentration of power and aristocracy:

By the same means, he may render his suspensive power over the laws as operative and permanent as that of G. the 3d over the acts of the British parliament; and under the modest title of president, may exercise the combined authority of legislation and execution, in a latitude yet unthought of. Upon his being invested with those powers a second or third time, he may acquire such enormous influence-as, added to his uncontrollable power over the army, navy, and militia; together with his private interest in the officers of all these different departments, who are all to be appointed by himself, and so his creatures, in the true political sense of the word; and more especially when added to all this, he has the power of forming treaties and alliances, and calling them to his assistance-that he may, I say, under all these advantages and almost irresistible temptations, on some pretended pique, haughtily and contemptuously, turn our poor lower house (the only shadow of liberty we shall have left) out of doors, and give us law at the bayonet's point.

The anti-Federalists rightly feared the corruptive influence of concentrated power.

Or, may not the senate, who are nearly in the same situation, with respect to the people, from similar motives and by similar means, erect themselves easily into an oligarchy, towards which they have already attempted so large a stride? To one of which channels, or rather to a confluence of both, we seem to be fast gliding away; and the moment we arrive at it-farewell liberty". . . .

So for the founders the fear was the creation of an oligarchy or monarchy where the people would be dispossessed and oppressed.

"To conclude, I can think of but one source of right to government, or any branch of it-and that is THE PEOPLE. They, and only they, have a right to determine whether they will make laws, or execute them, or do both in a collective body, or by a delegated authority. Delegation is a positive actual investiture"....

http://www.thisnation.com/library/antifederalist/72.html

The fact is that when Lessig did a search on terms in the founders writings before he wrote about this he notes:

"The results were striking. A significant majority of the times the Framers use the term “corruption,” corruption is predicated of an entity, not an individual (57%). Every instance of “quid pro quo” corruption is describing individual corruption, not entity corruption. And for the significant number of cases in which the Framers are discussing “improper dependence” as a kind of corruption, they are describing entity corruption (67%) not individual corruption (33%)."

And he concludes:

These numbers make it hard to believe that the Framers of our Constitution would have used the term “corruption” to refer to “quid pro quo” corruption alone. Or put more sharply, these number suggest that only a non-originalist could support the idea that “corruption” refers to “quid pro quo” corruption alone." Src: [http://www.lessig.org/2013/07/the-original-meaning-of-corruption]

Thus indeed the main reason for separation of powers, for the first 10 Amendments, and for institutions like trial by jury was to resist "undue influence" and corrupt dependency. The remedy for undue influence being representation. The remedy for corrupt dependency being independent branches, defined powers and rule of law. And the remedy for corruption being good and functional government. "A well regulated" government is one where corruption is so minimized it's not an issue. So all his examples don't prove Lessing wrong. If they took the word "corruption" out of the impeachment clause it's because it is entirely possible for the corrupt to engage in impeachment by projection of their own designs and motives. As we saw when the Republicans impeached Bill Clinton for having sex with a page and lying about it, when later it turned out the principles making the charges were guilty of the same crime. Corruption is often a subjective thing. But it's a "I see it when I see it, and I can smell it when it's present" thing too. An objective standard for "dependency corruption" is as fraught with peril as any other remedy. But certainly there are limits to what we should let our oligarchs get away with -- and we'd be a lot better off without them. Lessig is write and this author is blowing smoke.

I wrote about this somewhat in my blog on the subject. http://holtesthoughts.blogspot.com/2014/03/corrupt-court-and-undue-influence-and.html but quoting from the same source I find this argument for Jury trials:

"The excellence of the trial by jury in civil cases appears to depend on circumstances foreign to the preservation of liberty The strongest argument in its favor is that it is a security against corruption As there is always more time and better opportunity to tamper with a standing body of magistrates than with a jury summoned for the occasion there is room to suppose that a corrupt influence would more easily find its way to the former than to the latter."[The Federalist and Other Constitutional Papers by Hamilton, Jay ..., Volume 1 edited by Erastus Howard Scott

Hamilton in this excerpt pretty much assumes that there would be attempts to corrupt Juries too, but that the combination of Judge and Jury and other process guards can "provide a check on corruption".."decreasing it's obstacles to success" and reducing the prospect of Judicial "prostitution" which judges would otherwise be tempted to engage in. Sounds like Hamilton was warning of the Roberts Court. Too bad he doesn't have to convince a Jury of his rulings. They sound like Judicial prostitution to me.

Tuesday, April 15, 2014

Mt. Pelarin and Milton Friedman -- fighting to make the world safe for Oligarchy since the 1940's

Introduction

I've been interested in Milton Friedman since his ideas started competing with the "Austrian School" folks as the alternative to Keynesian inspired economic concepts. His critique of Keynesian economics was blown up by his fanatic disciples into a complete "refutation" of what was status quo economics between the 1940's and the 1970's in favor of free markets, laissez faire, and a narrative that reversed the observations about the depression of those who lived it and blamed "government" for the cause of the Great Depression.

This was the 70's when I was exposed to them for the first time. Headlines talked about how false "Keynesian economics" had been. I didn't see it. I never could accept those arguments on their face, but my way is to give ideas the benefit of the doubt and I believe that whenever confronted with new ideas one has to study them critically and not reject them outright. So I was somewhat swayed by them anyway. I studied them and saw no superior arguments. For that reason I couldn't stomach them enough to embrace them. And since no money was going to come from critiques of them. I realized I wasn't going to be able to afford an advanced economic degree challenging them as all the money was going to those who either genuinely believed those ideas or could pretend to. I changed my major to the more "practical" Business Administration. I still regret that decision.

Naturally in Business School they were even more popular than in the Econ department. They were very convenient to business folks because they validated their freebooting natural beliefs. Business folks love the idea is that you can only go wrong if government tries to intervene in the economic system. The business folks I knew gravitated to Libertarianism as ideology and Republicanism as a means to get access to contracts, contacts and pots of money. Compared to the Austrians Friedman made sense. Friedman's math even mapped to Keynesian math. He later acknowledged that.

Mt. Pelarin Society

It turns out that while they argued interminably, Friedman was basically in the same orbit as other Austrians and was a founding member of the Mt. Pelarin Society. It's "about page states" (Taken 4/15/2014)

"After World War II, in 1947, when many of the values of Western civilization were imperiled, 36 scholars, mostly economists, with some historians and philosophers, were invited by Professor Friedrich von Hayek to meet at Mont Pelerin, near Montreux, Switzerland, to discuss the state and the possible fate of liberalism (in its classical sense) in thinking and practice."

Now the major powers had just defeated the Nazis. Capitalism had survived an onslaught of Fascism and while there was an assault going on from the Bolshevik countries (China and Russia) this statement has to be deconstructed. Bolshevism, it turns out was the straw enemy, but they were as much against "social democracy" as they were Bolshevism. And the Mt. Pelarin society seems have been aimed at coming up with an ideology to fight both. Their real target was the New Deal.

"The group described itself as the Mont Pelerin Society, after the place of the first meeting. It emphasised that it did not intend to create an orthodoxy, to form or align itself with any political party or parties, or to conduct propaganda. Its sole objective was to facilitate an exchange of ideas between like-minded scholars in the hope of strengthening the principles and practice of a free society and to study the workings, virtues, and defects of market-oriented economic systems."

So the Mt. Pelarin society was founded as an agency of the Anti-Communist movement. They've been quite open about it in the past. But they've also been an enemy of Republics having too many democratic attributes and it has the stamp of it's founder (Hayek).

"Members who include high government officials, Nobel prize recipients, journalists, economic and financial experts, and legal scholars from all over the world, come regularly together to present the most current analysis of ideas, trends and events."

And Milton Friedman was a founding member

Source:https://www.montpelerin.org/montpelerin/images/photos/miltonFriedman.jpg"
Milton Friedman (in light coat and with hat, in the centre) with friends in an excursion at the first meeting of the Mont Pelerin Society in 1947.
[src: https://www.montpelerin.org/montpelerin/mpsAbout.html]

Friedman, Mt. Pelarin and the Austrians

Now you wouldn't think of Milton Friedman as important in 1947. And the Austrians, almost all of them, hated some of his ideas, especially the notion that government can have any role in controlling economics other than staying out of the way of the Free Market or, sometimes, ending the Reserve Banking system. But Friedman gives his credit to the Mt. Pelarin Society in this 1995 interview:

What really got me started in policy and what led to Capitalism and Freedom was, in an indirect way, the Mont Pelerin Society. The first Mont Pelerin Society meeting was in 1947 in Switzerland. Hayek arranged it. It was his idea.

So he gives credit to Hayek, Mont Pelarin and the people he met there.

"Mont Pelerin was the first time that I came into contact with people like Hayek, Lionel Robbins, and the European contingent of that time. That widened my perspective about issues and policy."

He says:

"The Mont Pelerin Society was people who were deeply concerned about issues. It was people with whom you shared a basic common belief, who at home were isolated. Its great contribution was that it provided a week when people like that could get together and open their hearts and minds and not have to worry about whether somebody was going to stick a knife in their back--especially for people in countries where they were isolated." Src: Reason Magazine: http://reason.com/archives/1995/06/01/best-of-both-worlds/2

So regardless of how much Austrians, Friedmanista Monetarists, and others fight, they all share a common core belief.

But what is that belief?

Friedman and the Austrians

Friedman wasn't an Austrian Fanatic. He believed that if the government simply controlled the money supply so that enough money, and no more, was available to business and banks everything else would go well. He really believed in Laissez Faire. In that belief he overlapped the Austrians. Both believed that business people would never do crazy things, speculate, or recklessly gamble and so so the only role of Government was to keep the Government out of business. Friedman's monetary ideas received criticism from Austrians because Austrians preferred "hard money" and didn't trust them, but otherwise he and they overlapped a lot.

And Friedman credits the Mt. Pelarin society and the Volker foundation that funded them for his writings:

"The reason the Society ever happened was that Hayek had written The Road to Serfdom, which attracted the attention [of Harold Luhnow who had control of] the Volker Foundation, and it was the Volker Foundation that financed the American participation in the Mont Pelerin Society. A Swiss group financed the Swiss and European participation." ([] added for clarification)

The Volker Foundation may have been founded by William Volker, but it was used after his death by it's trustee Harold Luhnow to fund Right Wing and anti-Communist efforts to provide an alternative to the socialist influenced economics of the Keynesian school and people like John Kenneth Galbraith who were seen as too "socialist". Ostensibly the enemy was communism, but the RW then as now preferred to see anyone championing ordinary citizens or labor as "communists". At the time most academics still remembered the Great Depression and were rightfully skeptical about pure capitalism or laissez Faire. The task of Luhnow was to find and cultivate people like Hayek and Friedman as alternatives to "leftists" and funded them to combat liberalism as it had evolved in the 30's and 40's. Friedman writes:

In the middle '50s, the Volker Foundation undertook a program of summer institutes for junior academics who were favorably inclined toward a free-market point of view or were interested in such issues. Capitalism and Freedom was based on a series of lectures that I gave at one of those seminars.

Friedman also writes:

"Those seminars forced me to systematize my thoughts and present them in a coherent way. And they also provided a very good audience because the people who were there were lively, outspoken, didn't hesitate to criticize. It was a very good audience. There was a lot of free time as well for discussions outside of the formal seminar. And I learned a great deal, not only from the students who were there, but also the fellow lecturers."

Murray Rothbard acknowledges that he was recruited and paid by the Volker Foundation at the beginning of his career. Friedman and Hayek were also recruited by Luhnow. He was playing a long game. The goal was to recruit students and future professors to the libertarian and RW cause.

Milton Friedman and the IRS

The Republicans would love to get rid of the IRS, but they wrote it's codes and created it. And Milton Friedman takes credit for creating it when he was an employee of the Democrats he had a lifelong hatred of. An online journal [The Economic Policy Journal] gives him credit for creating the Income tax we live under:

"I was an employee at the Treasury Department. We were in a wartime situation. How do you raise the enormous amount of taxes you need for wartime? We were all in favor of cutting inflation. I wasn't as sophisticated about how to do it then as I would be now, but there's no doubt that one of the ways to avoid inflation was to finance as large a fraction of current spending with tax money as possible."

Apparently Friedman, with like minded colleagues deserves credit for moderating the inflation of World War II by using the Income Tax, not only to finance it, but to ensure that the financing of the war limited the impact on the financier class. He continued during the interview:

"In World War I, a very small fraction of the total war expenditure was financed by taxes, so we had a doubling of prices during the war and after the war. At the outbreak of World War II, the Treasury was determined not to make the same mistake again."

But the problem was that if they increased taxes many people would be unable to pay them "post hoc." So Friedman came up with the brilliant idea that it would be smarter to make the employer withhold those taxes.

"You could not do that during wartime or peacetime without withholding. And so people at the Treasury tax research department, where I was working, investigated various methods of withholding. I was one of the small technical group that worked on developing it."

Essentially the income tax went from being a tax figured up on surplus at the end of the year, to being a rent charged on labor by government and with-held by employers. This became the model for all sorts of taxes, and also for employers making employees pay for employee benefits out of their pay. Friedman stated at the time:

"One of the major opponents of the idea was the IRS. Because every organization knows that the only way you can do anything is the way they've always been doing it. This was something new, and they kept telling us how impossible it was. It was a very interesting and very challenging intellectual task. I played a significant role, no question about it, in introducing withholding. I think it's a great mistake for peacetime, but in 1941-43, all of us were concentrating on the war. I have no apologies for it, but I really wish we hadn't found it necessary and I wish there were some way of abolishing withholding now."

http://www.economicpolicyjournal.com/2014/04/how-milton-friedman-helped-invent.html

If one thinks of wages as something that ought to be a laborer's personal property and of it as improper to pay labor less than their labor is worth, then this method of raising money to fight a war might seem improper. Further if one thinks that government shouldn't be getting in the way between the master and his absolute right to pay or not pay his slaves (labor) based on their signature with blood on a contract, then income taxes seem an infringement on that absolute property and contractual right as well.

Jonah Goldberg (who is right here for the wrong reasons) notes:

"Withholding numbs workers to the pain of their taxes. As the Treasury Department Web site explained as recently as 2009: Tax withholding “greatly eased the collection of the tax for both the taxpayer and the Bureau of Internal Revenue. However, it also greatly reduced the taxpayer’s awareness of the amount of tax being collected, i.e. it reduced the transparency of the tax, which made it easier to raise taxes in the future.” (Oddly, that fact sheet no longer appears on Treasury’s Web site)."[Src: http://www.aei.org/article/economics/fiscal-policy/taxes/automatic-tax-withholding/]

A friend shared a story that Friedman boasted that this made the IRS less progressive and boasted about saving business from high taxes by instituting it. I can't find the quote, but by inventing with-holding he did make it easier for the income tax to go from being a purely progressive instrument under the tutelage of Henry C. Simons, to a tool of regressive taxation starting during World War II, and becoming more and more obvious each year. Goldberg and Rothbard have other complaints: http://archive.lewrockwell.com/rothbard/rothbard43.html

But of course Rothbard and his bunch saw the problem differently from me. To me the problem is too much power for business oligarchs. To Rothbard the problem was too much government power to limit business oligarchs.

Saturday, November 30, 2013

Commissions - Institutionalized Democratic participation versus Robin Hood

We've developed a cludgy legal system, where lawyers and judges have been trying for years to "control juries". This pits them at odds with the concept of an empowered, informed jury. The justification for every increasing jury control is that "wild juries" have been known to free locals, over-ride the legislature, and "nullify" decisions -- when given half a chance. This works to protect "Robin Hood" type high status criminals in a neighborhood against frustrated prosecutors and Sheriffs, but it also, traditionally has been a protection for ordinary citizens against corrupt prosecutors and police who treat their neighborhoods as occupied territory to loot and steal from with impunity. In my review of Racketeering, Influence and Corrupt Organizations (RICO) and their history, one thing that popped out at me was that legal concepts such as "Racketeering" shift in meaning in US Legal politics. Racketeering law (and it's predecessors) was initially applied selectively; aggressively against Unions and tradesmen, and not at all among higher status business felons (Lawyers, Wall Street, Big Business). As a result, mostly minority communities such as those where Italians, Irish or Jews lived, often resisted these laws. From the point of view of reformers and elites these people were all racketeers; tradesmen, union organizers, union members. From the point of view of folks trying to survive in cities and rural areas, these people were often heroes. From the point of view of folks living in cities and rural areas, the officials going after them were corrupt oppressors. This is where you get Robin Hood style legends applied to local real gangsters:

Classic Robin Hood stories

I've heard the same Robin Hood story told about Jessie James, and Al Capone (Heard story, no evidence). Al Capone is credited with starting a soup kitchen. The point is that when the government is corrupt and people are excluded from participating in their government; two things happen. One is that the people form their own informal governments, including elevating gangs to power (Robin Hood effect). And the other is that when the authorities have no social pressures to limit their looting and corruption and become oppressors some of the criminals become heroes. Example Story:

"A Missouri widow claimed that Jesse James and his gang boarded with her one evening. While she served them dinner, not knowing who he and his gang were, she lamented the fact that the government was going to foreclose on her house, due to unpaid taxes. James generously gave her the money she needed to pay her taxes. What a kindly soul he was."

"However, legend goes on to say that James and his gang waited for the tax collector to leave the woman’s house and then, robbed him- thereby obtaining their money again!"[From Brighthubeducation.com]

Similar Stories are found all over the world where government is often corrupt and mistreats people.

Policing the Police: Citizen Commissions

The principle here is that no one person should ever be prosecutor, judge, jury and executioner, in the same person and we need to change the manifold locations where we have that currently.

The issue is that the people either participate in government or government acts like a looting army. Juries were created to put a check on corrupt judges. "Commissions" have a more problematical history due to their tradition of being agents of established authority.

Rather than join with the outlaws activists have found that participating in government works better than forming "Robin Hood Bands" or trying to outwit corrupt taxmen and other executives. Commissions traditionally are created with high status lawyers forming their members, and the only way the government seems to think it can establish balance is to appoint partisans from both dominant party and it's nearest competitor. This often leaves out reformers, citizens, labor, etc.... A commission is often formed of "experts" who never-the-less deliver less than expert results. Commissions often are accused of (and many guilty of) being official white-wash on institutional malfeasance, and the old boy network created by appointing insiders, relatives and country club members from the same club as the prosecutors, judges and executives belong to, is so obvious that people often lose their trust in their legitimacy. They simply don't do their jobs a good portion of the job, or when they do, they do it for the "wrong" stakeholders.

The way to reform this is through citizens commissions drafted by lot from among the jury pool, and staffed with the folks who usually run commissions plus people hired by the commissioners themselves. The commission chair can be a judge or expert, but the commissioners should explicitly have explicit power within the scope of their commission. And when their commission expires a new one will be convened. This certainly would work better than the current arrangement.

Citizen commissions are vital for policing any institution where "old boy" habits develop; police, fire, legal professionals, judges, executive agencies. And they can have the further benefit of serving as juries when there are disputes within executive organizations that otherwise would be handled by the hierarchy. To get at genuine justice, the "judge" and Jury must both be impartial. And to get at that doesn't mean that people can't know the subject, they simply can't have a vested interest in the outcome one way or another or corrupt associations.

We need to empower juries not control them. A jury trial or any other commissioned citizen exercise should be a discovery walk through a body of knowledge where the Jurors play the "ingenue" and can look at issues freshly to render a verdict. We need citizen commissions to balance the institutional prejudices and vested interests inherent in appointed or elected judges and other executives. We also need to clearly separate the judging role from the executive role for all decision making except the highest level of abstraction. This is a matter of good process, good government, and executing integral principles to establish or restore, and enforce integrity.

Sunday, October 27, 2013

Faulty Assumptions and Verification

Paul krugman today writes in his article "Macrofoundations (Wonkish)"

"John Quiggin has a fun post debunking the notion, all too common among economists, that macroeconomics — the study of inflation, depressions, and all that — is somehow flaky and unworthy of the field’s grandeur, that only microeconomics, derived rigorously from rational behavior, is real science. Keynesian macro, in particular, is often regarded with intense distaste, and a lot of economists would like to ban it from the field."

Some Economists have come to that conclusion because of dogmas that haven't worked and their unwillingness to deviate from faulty assumptions, which are microeconomic assumptions:

"Quiggin points out, rightly, that almost all microeconomics depends crucially on the assumption that the economy is at full employment; this assumption is false, but what makes it not too false in normal times is the existence of stabilization policies, monetary and fiscal, that usually produce fairly quick recoveries from slumps. Macro is what makes micro work, to the extent that it does."

Every rational endeavor depends on observation, assumptions and verification. When assumptions are faulty, the results will be faulty. That is why we verify, debate, argue and sometimes have to change our minds. Krugman continues:

"I would add that macro is the only reason anyone listens to all those microeconomists who think they’re being rigorous. To see why, we need to think about the history of thought."

Because of the unwillingness to challenge authority, or even verify authority, science and scientists keep getting stuck. The unwillingness to verify has allowed dogma and faulty faith to substitute for reason, due to reasonable seeming theories turning out to be faulty:

"If you go back to the state of American economics in the 1930s and even into the 1940s, it was not at all the model-oriented, mathematical field it later became. Institutional economics was still a powerful force, and many senior economists disliked mathematical modeling. When Paul Samuelson published Foundations of Economic Analysis in 1947, the chairman of Harvard’s economics department tried to limit the print run to 500, grudgingly accepted a run of 750, and ordered the mathematical type broken up immediately."

And he continues:

"So why did model-oriented, math-heavy economics triumph? It wasn’t because general-equilibrium models of perfect competition had overwhelming empirical success. What happened, I’d argue, was Keynesian macroeconomics."

The thirties were a catastrophe not only for the nation but for mainstream economists like Von Mises, Hayek, and their classical counterparts all over the world. Their response to failure was to double down on their theories, but others challenged those theories by trying to examine assumptions and model out cause and effect.

"Think about it: In the 1930s you had a catastrophe, and if you were a public official or even just a layman looking for guidance and understanding, what did you get from institutionalists? Caricaturing, but only slightly, you got long, elliptical explanations that it all had deep historical roots and clearly there was no quick fix. Meanwhile, along came the Keynesians, who were model-oriented, and who basically said “Push this button”– increase G, and all will be well. And the experience of the wartime boom seemed to demonstrate that demand-side expansion did indeed work the way the Keynesians said it did."

Of course the reality of the models is that they too are based on assumptions, and the underlying assumptions are either things that can be held fixed, or they tend to blow up the models. Sometimes we can hold a variable fixed for calculation purposes, but we always have to be aware of the assumption and treat it as a modeling risk. Still, Keynesian concepts worked within the realm of those assumptions. Krugman continues:

"It’s not an accident that Samuelson, even as he was raising the math level of microeconomics, was a key figure in the triumph of Keynesian economics. Nor was it at all an accident that his intro textbook, in its 1948 edition and for a long time thereafter, started with macro, and only got to micro later. The perceived success of macroeconomics did double duty, establishing the bona fides of a model-oriented approach and also suggesting that full employment was not too bad an assumption — given the right monetary and fiscal policies."

Given the right monetary AND fiscal policies. Without responsible officials, again, the assumptions blow up. Krugman continutes:

"Oh, and economists who are upset that the public seems to judge the profession by its success at macro diagnosis and prediction are missing the point: it has always been thus, and purists who disdain macro are making mock of the only reason anyone takes them at all seriously."

So much for "praxeology." He continues:

"The academic enterprise of economics as we know it, in other words, rests on a macro foundation, and in fact a Keynesian foundation — and economists who denounce all of that as witchcraft are busily sawing off the branch they’re sitting on."

Of course the other reason the micro-economists folks don't like admitting they depend on macroeconomics is that most of them are conservatives who feel "in their bones" that the old classical assumptions always hold. That is why they jumped all over Friedman's ideas and monetarism. It was classical economics with a monetary stick they could wave like a magic wand.

http://krugman.blogs.nytimes.com/2013/10/26/macrofoundations-wonkish/?_r=0

Thursday, October 24, 2013

Corrupt judges on the Supreme Court

When Sandra Day O'Conner retired CNN came out with an article talking about the relatively low salaries of Supreme Court Justices. http://money.cnn.com/2005/07/01/news/newsmakers/salary/ and they claimed:

"But one thing they won't get a chance to do is make a boatload of money in the process."

If only.

It is true that they should make a really good salary, and they do, but do we really want their salary to be competitive with corporate Americans. The article continues:

"Whoever replaces O'Connor will undoubtedly have one of the finest legal minds in the country. He or she will also have a paycheck of less than $200,000 a year, compared with an average of over $5 million for corporate executives.

You can look up their salary, it's up to 223,000$ now and the articles will still tell you it is fixed, not that much, etc.... But that turns out to not be true. It might have been true for relatively honest people like Sandra Day O'Conner, but it is not necessarily even true about them. So we get the advertizing about our saintly judges (from same article):

'There is a motivational force that is not money," said Paul Hodgson, a compensation specialist at the Portland, Maine based research group the Corporate Library, in explaining why people become civil servants. "If you're a lawyer and you're not motivated by money, that would probably seem like the most important job there is."'

Sure, we are supposed to play the violin for them.

"Hodgson said the compensation discrepancy is especially acute for Supreme Court justices because, unlike many other high-level public employees, their lifetime appointment means they will most likely not return to the lucrative private sector."

But this becomes meaningless if they are able to break judicial ethics rules and receive outside compensation From the Private sector as these rule changes made possible. Paying officials too much makes them vulnerable to ego inflation, but paying them too little or giving them license to make unlimited outside income makes them susceptable to bribery!

Actually the compensation discrepancy is an issue because every time the government fails to pay officers the officers make up any discrepancy (real or perceived) with corruption. No wonder Kennedy ruled in a case that applied to lower courts that:

"That speakers may have influence over or access to elected officials does not mean that those officials are corrupt. And the appearance of influence or access will not cause the electorate to lose faith in this democracy"."

But Kennedy and the other Judges exempt themselves from those rules!

Bribery is defined! under title 18 as:

" directly or indirectly, corruptly gives, offers or promises anything of value to any public official...or ...give anything of value to any other person or entity, with intent— "

And all this to:

"(A) to influence any official act..."

Bribery isn't just piling a heap on goods on a desk. It also takes more subtle forms such as making deals while playing golf. Or simply attending the same functions and paying ones wife! Are we to believe that the Supreme Court can exempt itself from the appearance of corruption?

So the Heritage foundation doesn't employ Clarence Thomas' wife in order to influence Clarence Thomas? When the Supreme Court made it's Massey ruling, which it cited in it's corrupt Citizens United decision, the mere appearance of possible corruption, and not even a smoking gun of evidence of such influence was enough for them to rule that the Judge should have recused itself. So how do we excuse Clarence Thomas? We shouldn't. Open Secrets notes:

"U.S. Supreme Court Justice Clarence Thomas, for instance, made headlines last month for failing to disclose years' worth of income his wife had earned -- including more than $686,500 between 2003 and 2007 from the Heritage Foundation."

Heritage Foundation campaigned for Thomas to get on the Supreme Court, and now they reward him, directly, by employing his wife. This isn't just the appearance of corruption. According to Title 18 a case can be made this is the reality. Pay in such a case can be presumed to be indirect gift for the sake of influencing his decision making. Of course with our Supreme Court Justices they were selected, groomed, and rewarded on the basis of such influence over a long period of time. One can say that these corrupt organizations pretty much created them in the first place. So it's no wonder the Supreme Court pretends that just because there is obvious influence and association between organizations like Heritage foundation and the Judges and politicians they create and maintain, and the wealthy individuals who pay Heritage Foundation to promote their personal seditious and corrupt purposes -- that just because there is the appearance of corruption (which is what they were saying in the Citizens United Case) doesn't mean there is the reality. Oh, no Thomas' hiding his wife's income was just an accounting error!

But of course though one can look up the disclosure statements of Supreme Court Justices, one can't know whether they are corrupt or not unless they disclose their income.

Open Secrets reports a relatively modest list of "outside incomes" for the Justices for instance:

Rank Name Grand Total Member Total Spouse Total Dependent Total

1 Stephen G. Breyer $46,812 $46,812 $0 $0

2 Antonin Scalia $45,655 $45,655 $0 $0

3 Clarence Thomas $26,955 $26,955 $0 $0

3 Samuel A. Alito $26,955 $26,955 $0 $0

5 Anthony M. Kennedy $26,500 $26,500 $0 $0

6 Ruth Bader Ginsburg $23,000 $23,000 $0 $0

7 Elena Kagan $15,000 $15,000 $0 $0

7 John G. Roberts $15,000 $15,000 $0 $0

Rank	Name	Grand Total	Member Total	Spouse Total	Dependent Total
1	Stephen G. Breyer	$46,812	$46,812	$0	$0
2	Antonin Scalia	$45,655	$45,655	$0	$0
3	Clarence Thomas	$26,955	$26,955	$0	$0
3	Samuel A. Alito	$26,955	$26,955	$0	$0
5	Anthony M. Kennedy	$26,500	$26,500	$0	$0
6	Ruth Bader Ginsburg	$23,000	$23,000	$0	$0
7	Elena Kagan	$15,000	$15,000	$0	$0
7	John G. Roberts	$15,000	$15,000	$0	$0

But do you see Clarence Thomas' spouse reported, no? All of them have net worth in the millions.

Rank Name Minimum Net Worth Average Maximum Net Worth

1 Ruth Bader Ginsburg $5,415,015 $14,265,007 $23,115,000

2 Stephen G. Breyer $4,760,058 $10,647,529 $16,535,000

3 John G. Roberts $2,680,039 $4,542,519 $6,405,000

4 Sonia Sotomayor $1,225,010 $3,477,505 $5,730,000

5 Antonin Scalia $1,885,023 $3,142,511 $4,400,000

6 Clarence Thomas $715,014 $1,317,507 $1,920,000

7 Elena Kagan $600,017 $1,080,008 $1,560,000

8 Samuel A. Alito $380,006 $740,003 $1,100,000

9 Anthony M. Kennedy $330,004 $515,002 $700,000

Rank	Name	Minimum Net Worth	Average	Maximum Net Worth
1	Ruth Bader Ginsburg	$5,415,015	$14,265,007	$23,115,000
2	Stephen G. Breyer	$4,760,058	$10,647,529	$16,535,000
3	John G. Roberts	$2,680,039	$4,542,519	$6,405,000
4	Sonia Sotomayor	$1,225,010	$3,477,505	$5,730,000
5	Antonin Scalia	$1,885,023	$3,142,511	$4,400,000
6	Clarence Thomas	$715,014	$1,317,507	$1,920,000
7	Elena Kagan	$600,017	$1,080,008	$1,560,000
8	Samuel A. Alito	$380,006	$740,003	$1,100,000
9	Anthony M. Kennedy	$330,004	$515,002	$700,000

Oh well. So we aren't talking "quid pro quo" corruption are we. We are talking influence cultivated over a period of years; such as Kagan's involvement with Goldman Sachs, or the Gang of Five and the Federalist Society. Maybe some of the influences are benign. Kennedy gives speeches for the Annenberg and Colonial Williamsburg foundation. But Thomas' relationship to the Heritage foundation is a scandal, and he doesn't ever recuse himself from decisions where his opinions just happen to match theirs. So the point? Separate and privileged access are the heart of corruption, and denying that is itself corrupt. There are two kinds of corruption, one is legal corruption, and the other is when a process is degraded. In the second sense, the mere appearance of corruption is itself corrupt.

This article is a follow on to an earlier post on "Corruption, Racketeering and the Supreme Court: http://holtesthoughts.blogspot.com/2013/10/corruption-racketeering-and-supreme.html

Related Posts:: A Corrupt Court, Tuesday, June 26, 2012: http://holtesthoughts.blogspot.com/2012/06/corrupt-court.html; A corrupt decision blind to corrupt access and influence October 8, 2013: http://holtesthoughts.blogspot.com/2013/10/a-corrupt-decision-blind-to-corrupt.html; Corruption, Racketeering and the Supreme Court, Wednesday, October 16, 2013: http://holtesthoughts.blogspot.com/2013/10/corruption-racketeering-and-supreme.html; Corrupt judges on the Supreme Court. October 23, 2013: http://holtesthoughts.blogspot.com/2013/10/corruption-judges-on-supreme-court.html; Corrupt Court and Undue Influence and access according to Founders, Thursday, March 27, 2014: http://holtesthoughts.blogspot.com/2014/03/corrupt-court-and-undue-influence-and.html; The Expected Corrupt Decision by a corrupt court, Saturday, April 5, 2014: http://holtesthoughts.blogspot.com/2014/04/the-expected-corrupt-decision-by.html; Is Quid Pro Quo the only kind of corruption that Government can regulate. April 5, 2014: http://holtesthoughts.blogspot.com/2014/04/is-quid-pro-quo-only-kind-of-corruption.html; Undue influence and Dependency Corruption or why the Supreme Court Decision was so corrupt, April 21st, 2014: http://holtesthoughts.blogspot.com/2014/04/undue-influence-and-dependency.html

Thursday, October 17, 2013

Managing energy on spying

To: <aclu@aclu-md.org >;
Dear Susan Goering

I've been researching the regime setup for internal spying and have found that the culprit is as much local as national. I'm glad to see the national organization noticed this: https://www.aclu.org/spy-files/more-about-fusion-centers

The relationship between NSA/FBI, Private organizations, and the Fusion Centers that Homeland Security let each Governor setup to pass on the tools that formerly had been exclusively with NSA to FBI, State and local police and private companies sabotages the value of protesting NSA. Stopping NSA from spying on us won't stop the spying unless we reform the secret organizations that have been spun off including The Domestic Security Alliance Council (DSAC) which is coordinating spying from the FBI.

Unless we understand how spying has metastasized, reigning in NSA, will just shift the center of domestic spying to the FBI, and worse, or even shift it to private actors including the DSAC and it's Networked members, including Maryland's MCAC.

These organizations include (Related to Maryland):
http://www.gohs.maryland.gov/ii_sharing_accomplishments.html
http://www.mcac.maryland.gov/
National participation from MCAC:
http://www.nfcausa.org/default.aspx/MenuItemID/117/MenuGroup/Home+New.htm
Further reading:http://www.zcommunications.org/fusion-centers-and-the-maryland-spying-scandal-by-anthony-newkirk.html

http://www.dsac.gov/Pages/index.aspx
http://www.ise.gov/annual-report/section1.html#section-5

I'd like to participate in protests against NSA but I think it confuses the issue as NSA is the least guilty organization. Moreover, there are legitimate security concerns and so I'm not even sure that prohibition is either possible nor wise. We certainly need changes to how we manage tele-comm information and a lot less use of secrecy laws to prevent whistleblowing and enable misuse of that information.

Christopher H. Holte

Wednesday, October 16, 2013

Corruption, Racketeering and the Supreme Court

Racketeer Influenced and Corrupt Organizations And the Supreme Court

Anyone who has studied corruption and racketeering in America will certainly find the reasoning in the Citizens United Case specious at best, and astoundingly corrupt at worst, not for the corporate personhood provisions, but for the corrupt deliberate obtuseness of Justice Kennedies opinion that;

“That speakers may have influence over or access to elected officials does not mean that those officials are corrupt. And the appearance of influence or access will not cause the electorate to lose faith in this democracy.”

HoltesThoughts