The Dumbest Post I've Ever Read from Andrew Sullivan

I've read him for years. I don't agree with him on much, but he's intermittently interesting, and it's good to get a variety of ideological perspectives.

But then I come across this post today. He writes:

Every time the government protects someone or some company from the consequences of their own economic profligacy, the chances of future profligacy increase. It's vital that the government let the Big Three automakers go down, and vital that only minimal help be given for those so greedy or so stupid that they took on loans they had no way to pay off.

We're in the middle of the greatest economic downturn in 75 years and Sullivan's version of keeping his eye on the ball is to point out a moral hazard? This is dogmatic allegiance to principle at its most reckless and stupid. It's hard to even know where to start.

The first sentence is nonsense. You could use this rationale to attack the merits of TANF funds, unemployment, or bankruptcy for that matter. Why not bring back debtors prison? That'll teach those damned bankrupt individuals and companies "the consequences of their own economic profligacy".

Secondly, it's "vital" that we let the Big Three fail? Why? Presumably (and we must presume because Sullivan provides zero rationale or analysis) so that we can teach companies what happens when they're run poorly. A fine lesson in the abstract to be sure. But this is no abstract situation. There are millions of jobs at stake. Millions of families and foreclosed homes.

His argument boils down to this: We need to increase unemployment and foreclosure rates by 50%, further depress housing prices, and drastically decrease domestic spending (we'll ignore the increased crime and host of other peripheral externalities) so that future companies and individuals can learn from all this misery and be less inclined to do it in the future. What noble adherence to principle.

Every time new medical advances are made to treat STI's (such as anti-retrovirals or HPV vaccine) I hear religious fundamentalists make a similar argument. If we treat the consequences of risky sex, oh how shall I put it....the chances of future profligacy increase. High risk sex is something to be discouraged right (just like risky borrowing)? So, if no effective treatments for HIV exist then people will be less likely to engage in behavior that makes contracting it possible. So, why doesn't Sullivan's argument hold here? Cause it's all about principle, right?.

Well, no actually. That would be silly, shortsighted, and cruel. If Sullivan wants to object to the auto-bailout, by all means make a case. Hell, I'm not totally sure I'm sold on the idea. But don't offer up some bullshit quote from an Economics 101 textbook and make it a substitute for an educated opinion, particularly when it concerns a complex issue that viscerally effects tens of millions of people.

PW's Pirate Redux

Well, if we’re going to seriously engage in this pirate business, then 1) I have some thoughts, and 2) it’s time to administer a good old-fashioned TPBP smackdown to PW, who while possessing a generally superior intellect, is off the mark on this one.

He starts out on the right track by attempting to point out the economic contexts of the situation. I remember reading recently (I can’t find the source, so take it with the requisite grain of salt) that piracy generated Somalia’s largest influx of hard currency, ringing in at over $100 million in the last year (a shockingly small amount for the largest sector of a 7 million person economy).

But then we get to this:

Certainly, there is something to the observation that much of Africa should be better integrated into the global economy on terms that actually generate wealth for more people who live there. But that doesn't really fly in Somalia.

I think that it would fly. It would take a large investment, but not impossibly large. Move in 10K troops for peacekeeping purposes, and dump $1 billion a month for infrastructure spending. I should point out that I have no idea what I’m talking about in terms of aid expenditure, distribution, etc. -- which is an admittedly poor start, but I have a hard time believing that some small fraction of our Iraqi expenditure, used even semi-productively, wouldn't make a real difference in economic terms.

Minus some kind of real government/economic security improvement you can count on these attacks continuing, if not escalating. But, when PW posits --

What kind of weapon systems could you fit to a tanker for half the cost of the 20mil USD you'd have to pay for a ransom?

--he's sidestepping a problem of scale.

Arming any one ship would be quite expensive, arming an entire fleet even more so, and arming all cumulative fleets that travel in Somali territorial waters would be impossibly expensive. There’s a reason this option hasn’t really been discussed, and all of these companies are instead clamoring for government military escorts. It’s deceptively intuitive to see a scenario that morphs into an acquadic version of the last half hour of Fast and the Furious (a la truckers with shotguns), but it’s not going to happen. PW is making an economic argument: raise the cost of piracy to the point that the pirates will no longer wish to engage in it. Though it’s not inconceivable that the costs of piracy become high enough to prevent it, that evolution is somewhat at odds with Somalia’s overall economic and political reality.

I’m not advocating the following tactic so much as opening the floor for discussion, but perhaps these pirate groups (or at least the most powerful among them) should be engaged in negotiations to open Somalia’s costal shipping lanes. This would neutralize the threat, prevent PW’s (ultimately inefficient and expensive) armed conflict and allow us to open up lines of communication with a group (the pirates) with whom we probably have more in common than the Islamic Courts Union folks that are ostensibly in charge of the country.

This piracy business is a pain in everyone’s ass, but more importantly it’s an increasingly costly pain in everyone’s ass. The only way PW’s solution works for any meaningful length of time is the permanent and significant arming of all commercial shipping operations (lest they get lax and the piracy resumes). If you could just pay the pirates some percentage less than the total cost of said arming (hopefully a tiny fraction of the total cost) everyone would be better off. It’s probably not the solution, but worth thinking about at any rate.