Finance

Comment Of The Day: “Comment Of The Day: ‘Sunday Ethics Warm-Up, 1/12/2020′” (Economic Data Thread)

/ Jack Marshall / 12 Comments

This Comment Of The Day covers a wealth of ethics issues, including the ancient ethics debates over what is a fair share on societal wealth and who decides when someone has “enough” wealth. It also is an Ethics Alarms first: Chris Marschner’s Comment of the Day is on his own Comment of the Day!

And here it is, his Comment of the Day on his previous Comment of the Day on the post, “Sunday Ethics Warm-Up, 1/12/2020: Broken Ethics Alarms, An Ethics Conflict, And “Who Are You Going To Believe, Me Or Your Own Eyes?”

The point I was making was that people use economic data to illustrate all kinds of things. Typically they use charts and graphs to illustrate a point THEY want to make. The values within those charts and graphs need full examination before drawing a conclusion. For example, Reagan dropped the unemployment rate overnight by including the military in the labor force. In that case the number employed went up and the labor force went up as well. Given that the unemployment rate is the number unemployed/labor force if the denominator rises the UE rate falls.

Conversely, between 2008 and 2012 the unemployment rate showed a downward trend because the Labor force participation rate (LFPR) shrank and not because more people got jobs. People gave up looking for work so they were no longer treated as unemployed and the number of people working grew relative to the LFPR. Since 2016 the LFPR has been growing and the UE rate is dropping. That means that there are more people are working. That is a good thing because it puts upward pressure on wages.

For some, higher wages have overtaken what is known as an individual’s reservation wage. The reservation wage is the minimum amount needed to get a person to accept the offered job. Unfortunately, we have a great number of people whose true reservation wage has been distorted in both psychological and real terms. Reservation wages have been growing because of the growth in governmental income maintenance programs. Imagine how many will decide to live only on Yang’s guaranteed $12K a year. Couple that $1000 a month with housing assistance, food stamps, childcare, Medicare, and WIC you can live quite well on the dole. Oh I know, Yang says he would replace all those other programs to fund his guaranteed minimum income. Name a program that ever went away. We just layer one atop another.

These are not my opinions but well established facts and fundamental economic theory that is taught in first year Econ classes. I know because I taught those courses for 20 years. Continue reading →

Comment Of The Day: “Sunday Ethics Warm-Up, 1/12/2020: Broken Ethics Alarms, An Ethics Conflict, And ‘Who Are You Going To Believe, Me Or Your Own Eyes?”’

/ Jack Marshall / 21 Comments

For today’s “Economics for Dummies” lecture, and we can only hope those in thrall to the “income inequality” hucksters running for President will somehow hear it, we have Chris Marschner. What inspired his discourse was this chart,

from #3 in the 1/12 Warm-Up, regarding Michael Bloomberg’s deliberately dishonest statement, “The U.S. economy is working just fine for people like me. But it is badly broken for the vast majority of Americans.”

Here is Chris Marschner’s Comment of the Day on the post, “Sunday Ethics Warm-Up, 1/12/2020: Broken Ethics Alarms, An Ethics Conflict, And “Who Are You Going To Believe, Me Or Your Own Eyes?”

One of the great fictions of economics lies in how data is portrayed. Growth rates are one of my favorite methods of telling lies. The wage growth rate above requires a bit of basic math and economics understanding to fully capture its relevance.

The lowest quartile or quintile will have substantially higher rates of growth even if all incomes rise at exactly the same amount. For example if someone making the highest limit of the lowest quartile (say $25,000) gets a $5000 raise that earners wage growth is 20%. As we move up the line, if the highest limit of the second quartile is $50,000 and a  $5,000 raise, that rate of increase is a mere 10%. As we move up the ladder the basis or denominator gets progressively larger and if the numerator – the raise – remains constant, the rate of growth falls. Most people know this or should know this. Continue reading →

Netflix’s “The Laundromat” And Money Laundering Ethics

/ Jack Marshall / 2 Comments

Now streaming on Netflix, “The Laundromat” is an entertaining and flamboyant  examination of the phenomenon and roots of international money laundering, brought to us by director Steven Soderbergh (“Erin Brockovich,” “Traffic”) using a screenplay by Scott Z. Burns. The often tongue in cheek film is narrated by actors Gary Oldman and Antonio Bandaras playing lawyers Jürgen Mossack and Ramón Fonseca , whose now defunct firm set up tax shelters and shell corporations for the rich, corrupt and criminal  all over the world. Their empire was shattered by the Panama Papers data dump in 2016.

The film’s tone veers from smug to blunt as it focuses on three adaptations of true stories involving  Mossack Fonseca clients, all narrated by the excuse- and rationalization-spouting lawyers, the real life versions of which tried to sue to halt the production.

“The Panama Papers” as they are now called consisted of 11.5 million leaked documents that detailed financial and attorney–client information for more than 214,488 offshore entities, many of which were legal, but that supported fraudulent schemes and other crimes.  The documents were the property of  Mossack Fonseca. Even now, the fall-out from the release of the documents is unclear, in large part because so many of them involve attorney-client privilege, and the rules and laws governing their legal handling are spread over many nations, laws and ethics rules. The leak itself was a crime, and the hacker responsible, who goes by the name of “John Doe,” has never been identified.

This is an international ethics train wreck, and one that is so complicated that I didn’t cover it in 2016. That was ethics commentary malpractice on my part, I think. It was the biggest ethics story of the year, even if it is still largely unresolved.

Whether the law firm itself broke any laws is still a matter of debate. As Oldman and Bandaras constantly remind us, Mossack Fonseca set up arguably legal structures, and, they claim, didn’t know or care how they would be used. This is still a gray area of legal ethics in the U.S., one that was highlighted when “60 Minutes” broadcast its Global Witness episode in 2016 . Partners in eleven large Manhattan  law firms were caught on hidden cameras  exploring possible ways to represent an individual posing as the agent of an “African despot” seeking ways to launder millions of dollars. The ethics rules say that a lawyer may not knowingly assist a client in a crime or fraud, but contrived ignorance can be an effective, if unethical, device for lawyers to avoid  accountability when representing  unsavory (but profitable) clients.  Remember, Enron’s law firm avoided any sanctions, while the company’s accounting firm, Arthur Anderson, was prosecuted and destroyed.

No, Ethics Alarms didn’t cover the Global Witness scandal either, though I have talked about it in legal ethics seminars ever since. Clearly, money laundering has not had proper priority here. Again, my fault. I’ll do better. Continue reading →

Cancellation Culture Gone Nuts: The Kenneth Fisher Saga

/ Jack Marshall / 20 Comments

“Be afraid…be very afraid.”—Geena Davis in “The Fly”

Kenneth Fisher, the acclaimed billionaire money manager whose investment firm manages more than $112 billion of investors’ money,  spoke at an October 8 conference.  In his remarks, he said getting new clients was akin to “trying to get into a girl’s pants.” The analogy between marketing and seduction is old, common, and not without validity. It can (and should) be expressed in less vulgar ways, to be sure, but no one in the audience could have mistaken Fisher’s meaning.

Yet the New York Times described the remark as a “lewd and sexist joke”—Lewd? Joke?—and like-minded cancellation culture posse members set out to destroy Fisher and his business in retribution for using an analogy of dubious taste. [ I should note that some attendees at the conference–including some who are Fisher’s competitors—reported that there were other “off-color” comments that could not be confirmed by the Times.]

Thanks to a news and social media campaign since he made that “joke,” the past two weeks have seen public pensions and institutional investors pull nearly $2 billion from Fisher Investments, which has 3,500 employees.  They also deserve to lose their jobs, presumably, because their boss is insufficiently sensitive in a #MeToo world. Other public pensions have placed  Fisher’s firm on a watch list for potential action.

Oh, Great. ANOTHER Fake Stat That Everyone Will Cite As True For A Decade Or More: The $400 Emergency Expense Lie

/ Jack Marshall / 27 Comments

“Good news, Fake Campus Sexual Assault stats, Fake Gender Pay Gap stats, Fake Gun Violence stats, and the rest of the club! You have anew member!

Senator Kamala Harris cited the stat in April, and if someone doesn’t stop her, it will become part of the pro-socialism “narrative” during the 2020 election campaign.  “In America right now today,” she said, “almost half of Americans are a $400 unexpected expense away from complete upheaval.”  Naturally the statistic appealed to Top Demagogue Senator Elizabeth Warren, who echoed Harris last month: “The gap between incomes and costs is so gaping that 40% of Americans can’t come up with $400 in an emergency.” Then there is  Bernie, or course,  who says: “Four in 10 [Americans are] unable to afford a $400 emergency expense.”

I’m sure the rest of the field will come around to using the stat too; dishonesty loves company, especially when the idea is to frighten the members of public who trust what politicians say. And why shouldn’t they? Warren was a Harvard professor—she must know what she’s talking about! She wouldn’t use a statistic like that without checking it, would she? Nah! Warren and Harris are both lawyers too, and lawyers have enforced ethics rules that say they must not lie. All three—Warren, Harris and Sanders—are U.S. Senators. Surely three distinguished Senators wouldn’t all use a false statistic to deceive us! Would they? Continue reading →

Sunday Ethics Warm-Up, 5/19/2019: Conflicts, Hypocrisy, Censorship, And Creeping Totalitarianism…Praise The Lord.

/ Jack Marshall / 7 Comments

1. I love headlines like this. The Times tells us (in its print edition) , “Party Hosted By Drug Company Raises Thorny Issues.” Really? A group of top cosmetic surgeons had all their expenses paid to attend a promotional event in Cancun for a new competing drug for Botox. The doctors were fed, feted, invited to parties and given gifts, then they went on social media and gushed about the product. The “thorny issue”: Should they have informed their followers that they had just received all sorts of benefits and goodies from the drug manufacturer to encourage their good will? (Because none of them did mention this little detail.)

Wow! What a thorny issue! I’m stumped!

Of COURSE it was unethical not to point out that their sudden enthusiasm for the product had been bought and paid for. This is the epitome of the appearance of impropriety, and an obvious conflict of interest. The Times article chronicles the doctors’ facile, self-serving and disingenuous arguments that they didn’t have such an ethical obligation, but the fact that these are unethical professionals in thrall to an infamously unethical industry doesn’t make the ethics issue “thorny.”

2. The Assholes of Taylor University. Vice-President Mike Pence was the commencement speaker at Taylor University, and when he moved  to the podium, thirty or so students rose and walked out on him, in a smug and indefensible demonstration of assholery. The University should withhold the diplomas of every single one of these arrogant slobs until they each author a sincere letter of apology to the Vice-President, who was the school’s invited guest. Continue reading →

Sunday Ethics Warm-Up, 5/12/2019: The Tricky Edition

/ Jack Marshall / 5 Comments

Well, the news from Harvard has me half-headed and depressed, so I think I need to hear Winston Churchill’s favorite hymn…and my Dad’s, too.

1. I think this is known as “a drop in the bucket.”James Bennet, the editorial page editor of The New York Times, announced that he would recuse himself from any involvement in opinion coverage of the 2020 presidential election, after his brother, Senator Michael Bennet of Colorado, announced his candidacy for the Democratic nomination. I suppose this is admirable, as it is a standard conflicts of interest move, but I’m sorely tempted to call it grandstanding, and maybe even a diversion. Bennet’s brother candidacy is hardly the only blatant conflict of interest on the times staff that makes its news coverage and punditry suspect. Virtually all of them are Democrats, for example, and progressives. What’s so special about an editor’s brother making a completely futile run for the Presidency? (Quick: if you’re not in Colorado, can you picture his face? Name anything he has accomplished?)

This note from 2017 (in RealClearPolitics) puts the Times editor’s decision in proper perspective:

There is a pretty substantial symbiotic relationship between the political left in Washington and the media. While a few people went from the media to the Bush Administration, it was never like it was with Obama.

Jay Carney went from Time to the White House press secretary’s office. Shailagh Murray went from the Washington Post to the Veep’s office while married to Neil King at the Wall Street Journal. Neil King has left the Wall Street Journal to work for Fusion GPS. Linda Douglass went from ABC News to the White House and then the Atlantic. Jill Zuckman went from the Chicago Tribune to the Obama Administration’s Transportation Department. Douglas Frantz went from the Washington Post to the State Department and Stephen Barr went from the Post to the Labor Department.

Ruth Marcus, who heads the Washington Post Editorial Board, is married to the Obama Administration’s former Federal Trade Commission Chairman. Jonathan Allen had been at the Politico before going to work for Debbie Wasserman Schultz, then back to Politico before going to the left leaning Vox. Now he is at NBC News. Andy Barr worked for the Politico before leaving for Democrat politics. Michael Scherer was at both Salon and Mother Jones before going to Time. Laura Rozen was at Mother Jones and the American Prospect before Foreign Policy magazine. Even Nate Silver had started out at Daily Kos. Then, of course, there is Matthew Dowd, who worked for scores of Democrats before working for George Bush. That, though he later washed his hands of Bush, bought him street credibility with ABC News to become its senior politically analyst alongside George Stephanopoulos, formerly of the Clinton Administration.

It goes on and on in a feedback loop of incestuous politics and worldview shaping. In the Obama Era, it was all about protecting their precious. Now it is about undermining the President.

2.  Puerto Rico Ethics. OK, explain to me, if you can,  why this isn’t incredibly unethical:

From the Times:

The government oversight board leading Puerto Rico through its $123 billion debt crisis sued dozens of banks and financial firms on Thursday, saying that they had helped the island issue $9 billion of debt illegally, and that the people of Puerto Rico should not have to repay it.

The board said the debt should be voided because it exceeded the territory’s constitutional debt limit, and it added that Puerto Rico would try to recover hundreds of millions of dollars in interest and principal payments that it has already made.

The board was joined in the litigation by the official committee representing Puerto Rico’s unsecured creditors in the territory’s bankruptcy-like legal proceedings. Both plaintiffs said they understood they were making an unusual request, but asserted that no other approach would be legal or fair.

“The laws of Puerto Rico limit government borrowing authority for a reason: to prevent the government and its financiers from hitching the Commonwealth and its instrumentalities, as well as taxpayers and legitimate creditors, to a level of debt that cannot be repaid without sacrificing services necessary to maintain the health, safety and welfare of Puerto Rico and its people,” the plaintiffs said in one of several complaints…

What a great theory! The government of Puerto Rico has managed its finances irresponsibly and needs more money. “Hey!” says a brilliant staffer. “There’s a law that limits how much debt we can run up. Let’s borrow billions from banks illegally, then later sue them saying that the debt is invalid because they abetted our illegal act!”

3.  Candidate for the Rationalization #22 Hall of Fame. Rationalization #22 is one of the most cited entries on the Rationalization List, and in my opinion, the worst of them all:

22. The Comparative Virtue Excuse: “There are worse things.”

If “Everybody does it” is the Golden Rationalization, this is the bottom of the barrel. Yet amazingly, this excuse is popular in high places: witness the “Abu Ghraib was bad, but our soldiers would never cut off Nick Berg’s head” argument that was common during the height of the Iraq prisoner abuse scandal. It is true that for most ethical misconduct, there are indeed “worse things.” Lying to your boss in order to goof off at the golf course isn’t as bad as stealing a ham, and stealing a ham is nothing compared selling military secrets to North Korea. So what? We judge human conduct against ideals of good behavior that we aspire to, not by the bad behavior of others. One’s objective is to be the best human being that we can be, not to just avoid being the worst rotter anyone has ever met.

Behavior has to be assessed on its own terms, not according to some imaginary comparative scale. The fact that someone’s act is more or less ethical than yours has no effect on the ethical nature of your conduct. “There are worse things” is not an argument; it’s the desperate cry of someone who has run out of rationalizations.

Now outgoing Mayor of Chicago Rahm Emanuel has boasted in the  New York Times about his success at  introducing  police reform and reducing crime.Emanuel  makes his case in part by comparing Chicago’s crime numbers over the last two years with those of  Baltimore, one of America’s most dangerous, murder-prone, mismanaged cities. He omitted mentioning New York orLos Angeles, perhaps because his city had more murders in 2018 than New York and L.A. combined, though Chicago is smaller then either.

I wonder if the Chamber of Commerce is considering “Less dangerous than Baltimore!” as a promotional slogan. [Pointer: City-journal]