Tag: James Pilant

Structuralist Economics

On By southwerkIn Economic measurement, Teaching

I found a pdf file of an interview with Lance Taylor. Structural economics is a form of macroeconomics that challenges the current orthodoxy. An orthodoxy, I might add, that has failed to explain or predict the current economic crisis.

Here is a quote where Taylor explains the reversion to classical economics after the second world war:

“It went through several stages, but in effect, what happened is
that by, say, the 1970s and certainly the 1980s, mainstream macroeconomics
had reverted to nineteenth-century economics. The major
figure in late-nineteenth–early-twentieth-century economics was Knut
Wicksell from Sweden, and basically what has come out in recent
decades is a less interesting version of his work.”

This is fascinating work. I recommend it.

James Pilant

This is a Lance Taylor lecture. He is quite good at making economics straightforward and understandable. (It makes me wish I was a student again!)

Here’s another:

“Ace” Greenberg – Not My Fault

On By southwerkIn business ethics, Government Failure1 Comment

Alan “Ace” Greenberg, a few days ago, gave an interview to Newsweek’s Nancy Cook. The former head of Bear-Stearns, took time from his busy schedule in order to enlighten and engage with us. It was everything that poor unlettered blogger like myself could have hoped for. The pearls of wisdom fell on me like a warm, summer rain.

When asked if he had any regrets about his time at Bear-Stearns, he had none. (During his tenure, the price of Bear Stearns stock went from a 52 week high of 133.20 to the ten dollars a share it finally sold for, although strangely enough, not as low as the two dollars that Bear Stearns originally agreed to.)

When asked if he had learned anything from the financial collapse, he said, “Nothing that I didn’t know before.” (Could the concept that maybe your company shouldn’t acquire notional contract amounts of approximately $13.40 trillion in derivative financial instruments, of which $1.85 trillion were listed futures and option contracts, be something new to you?)

When asked about a remark in his new book that the presidents of companies never really know what’s going on, he said, “I don’t care how much you watch things or how acutely involved you are, there are probably bad things that happen.” (Is this the same thing as saying that the president of a company is never really at fault?)

The interview continued in this manner. Let me sum up for Mr. Greenberg. “I did nothing wrong. I did not exercise poor judgment. Banking institutions are already regulated enough. No new regulations are needed. Derivatives are good. Derivatives make money; how then can they be bad? People don’t understand derivatives. Bad loans made to people who couldn’t pay for the homes they bought are responsible for the crisis. Bear Stearns was in no way whatsoever at fault.”

It is interesting to contrast the interview with reports of what happened at Bear Stearns. They seem to be two different versions of reality. I remember reading in philosophy that attitude is a key element in happiness. Mr. Greenberg has an excellent attitude in regard to his personal happiness.

Unfortunately, reality is not easily mocked.

Karl Jaspers wrote in his book, General Psychopathology that a delusion has three central characteristics. The first is certainty. The belief is held with absolute conviction. The second is incorrigibility. That is, the belief is not subject to change by argument or facts. The third is the impossibility of the content. Bizarre, implausible or patently untrue.

Let’s go through the elements. Let’s begin with certainty. Was there any self doubt or questioning at any point in the interview? Let me quote Greenberg from the article: “Certainly at Bear Stearns, I think that I didn’t make many mistakes. But, you know, you have to keep in mind that the only people who don’t make mistakes are the ones who don’t do anything.” That’s as close as we’re going to get to self doubt in the interview.

The second element is that the belief is not subject to change by counter argument or facts. In the excerpt from the full interview, we don’t see Nancy Cook press very hard. However, I would point out that Greenberg says clearly that he learned nothing from what happened” Let’s look at the exchange –

(Nancy Cook) Do you feel like you, as a businessman, learned anything following the financial collapse?

(Alan “Ace” Greenberg) Nothing that I didn’t know before.

His belief system did not change under enormous pressure from contrary events. This is a good argument for incorrigiblity but not conclusive argument, I would like to see him challenged with facts in a tough interview. That may very well happen in the larger Newsweek article.

The third element is impossibility or falsity of content. Well, the idea that Bear Stearn’s only error was too much trust in other banks is a difficult concept considering the massive evidence of poor judgment, poor management and poor leadership.

Greenberg lives in a world where he is faultless, the economic system works fine and whether or not you make money is the only measure of human accomplishment. I tend to believe that a great many of those leading both the government of the United States and, more in particular, the “titans” of industry, believe these things. There is a problem with hubris here.

Once again quoting from wiki: Hubris often indicates being out of touch with reality and overestimating one’s own competence or capabilities, especially for people in positions of power.

Believing in your own infallibility has only limited potential for damage in isolated settlements, in a giant metropolis or a great nation, the possibilities of overreach and massive damage are far more likely. The worst and deadliest of the characteristics we see here is that even after financial catastrophe unrivaled since the Great Depression, there is no feeling of guilt or mistake. If you don’t acknowledge a mistake, you cannot change your behavior.

What will the next acts of these individuals be and where will they take us?

James Pilant

Arizona restaurant blasted for lion burgers

On By southwerkIn ethics

This blog is about business ethics and business crime. But sometimes something happens that catches your attention. This is it.

I laughed when I first heard this. Why the fuss, I thought, calling a fancy burger, a lion burger is hardly crime. Then I read the article. The burgers are 80% lion meat. I didn’t know you could get it. I can’t figure out why you would want to get it.

So, my second thought was, well maybe, a lion killed his sister and this is revenge. Not a good reason to eat lion, but better than nothing. Nope, no family losses to lions. What does that leave? Is he allergic to cats?

This is just a bad idea. Get a regular burger, call it a lion kill burger, a lion victory over some beefy animal. We have lots of beefy animals and very few lions.

James Pilant

What’s The Verdict – Financial Reform?

On By southwerkIn business ethics, Government Failure

Loren Steffy of the Houston Chronicle writes, “Most of the provisions that would have forced Wall Street to change its ways were compromised out of this law weeks ago.”

John Talton of the Seattle Times chooses this title: Financial ‘reform’: Big bankers cry all the way to the…

David Moon writing from the Knoxville Biz entitled his blog entry – Financial reform is a political charade. The rest of the article is even tougher.

I was looking at this newspaper’s web site and discovered they had no new column on the financial reform disaster but they did make an excellent prediction and for that I must honor them. Read below.

In its June 23rd editorial, the St. Petersburg Times said, “Congressional negotiators have a choice as they hammer out the final details on much-needed financial reform. They can stand for financial reform with real teeth and stand up to the pressure of the banking lobbyists. Or they can bow to those deep-pocket financial interests that have sponsored more than 800 fundraisers over the past year for members of the congressional banking committees. A weak reform bill that offers too little oversight and too many loopholes would not be in the nation’s best interest.”

I will follow up with more newspaper comments. I have looked at a dozen newspaper business pages after checking the ones above. It appears that the editorial pages have not caught up with the news. So, I will return to the subject probably on Monday.

James Pilant

Financial Reform Watered Down?

On By southwerkIn business ethics, Government Failure

Wall Street’s Incredible Victory

On By southwerkIn business ethics, Economic measurement, Government Failure

The LegislationIt’s difficult to conceive that a nation driven to the brink of financial collapse by an irresponsible, greedy, incompetent industry that runs an operation more comparable to Monte Carlo gambling casino than banking could escape meaningful regulation and yet, they did. It is a catastrophic failure on the part of the Presidency and Congress to protect the American people from rapacious financial predators.

I exaggerate you say? From wikipedia –

In a dramatic meeting on September 18, 2008, Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke met with key legislators to propose a $700 billion emergency bailout. Bernanke reportedly told them: “If we don’t do this, we may not have an economy on Monday.”

That sounds serious. A disinterested observer might conclude that an unregulated financial industry could be a problem. But remember we all know that the financial industry is self regulating. It’s watched over by a horde of business publications and reporters who would detect any problem long before it could happen. What’s more, the people, these amazing highly talented aces of industry who clearly merited the enormous sums they commanded were of such high intellectual capabilities and monumental experience that their unmatched stewardship would without any doubt guide their businesses and as a pleasant but wonderful and inevitable side effect, the United States of America to well deserved financial success.

Forgive me. I don’t want to spread the idea that the Chicago School of Economics might not understand economics.

The disaster that occurred in the financial industry in 2007 and 2008 and cost this nation more than ten million jobs should have been made impossible under a new set of rules. But the game is the same. The incentives are the same. The players are the same. The legislation changes none of that. An economic disaster resulting in millions of unemployed Americans is now avoidable through luck. Don’t you feel good?

There are plenty out there who say take what you get. We got more than could have been expected. No. Again no. This isn’t a matter where you can compromise. The survival of the United States as an economic power is an issue here. There are some who proclaim this an incredible victory over immense odds. You’d think they’d just blown up the Death Star, when they compromised with it and decided they could forgive that little Alderran incident as looking backward not forward.

There are some who say the banking industry got creamed. There is one guy who thinks this is a major success for Congress.

What does the banking industry think? Do they feel that it was a compromise in which they got some stuff and lost some stuff, a gain of one thing and the loss of another? No, that’s not how they feel about it. Let’s read the AP headline – Bank stocks soar on financial regulation agreement.

So, what do we do now? Nothing. The Congress and the President are not interested. They have created a piece of legislation with the correct sounding name. This will convince many that something has been done. But it’s just another joker, another game, another day in Washington where symbolism trumps reality.

I have read commentary that says that the government of the United States has been unable to deal with any major legislative crisis over the last thirty years, that the government is simply paralyzed only able to eek out temporary compromises, small bandages for large problems.

This is America. We can accomplish amazing things. We do not have to suffer the foolish and the greedy. We can do better than this.

(What do you think? If you disagree, don’t let me wonder about it. Tell me. I won’t learn if you don’t let me know. If you agree, I can be more confident that I speak for others as well as myself. Don’t be silent.)

James Pilant

Law schools and the legal job market (via Minding the Workplace)

On By southwerkIn business ethics, ethics, Teaching2 Comments

In difficult economic times, the market for lawyers tends to crashed. Well, it has crashed and it’s crashed for the four or five years at minimum. Are law schools adjusting to the changing demand by raising entrance requirements, cutting class sizes, and lowering tuition?

What do you think? Of course not. The law school business is immensely profitable. After all, they sell dreams of monetary success for the avaricious, justice for the inspired and job security for the frightened.

When times are good, law school graduates, tend to get some of those things. But times are not good and many of those dreams are going to be nothing more than a lifetime of debt and second rate jobs.

It is ethical for law schools, especially second tier, to keep on doing what they have been doing without the slightest deviation?
No.

Are they going to change?
No.

But this is a good discussion of the situation and I recommend you read it. I’m very impressed with the web site. The guy is honest to God idealist. Treasure him, there are not a lot left.

James Pilant

Law professor Brian Tamanaha (recently of St. John's University in New York; now at Washington University in St. Louis) challenged law professors at non-elite law schools in a blog post to consider the ethical implications of attracting thousands of students to pursue an expensive legal education at a time when the job market cannot provide them with meaningful employment.  Citing to angry, despairing posts on blogs by law students and recently g … Read More

via Minding the Workplace

The McChrystal Apology?

On By southwerkIn ethics

Lauren Bloom writing on her blog, discusses whether or not McChystal’s apology to the President should have been or could have been effective. She believes that the obvious contempt of his staff toward the President made the situation impossible for the general.

I quote: “For an apology to be effective, it has to be sincere. It’s hard to imagine how the general could made a sincerely humble apology after flaunting such arrogance in front of a reporter.”

World Cup Ethics And Flexible Ethics In The Wake Of The BP Disaster

On By southwerkIn business ethics, ethics

Two extremes, right? The title represents Chris MacDonald’s last two blog entries. His June 15th entry discusses worker productivity and the World Cup. Here MacDonald asks the question, “How should an important-but-time-consuming cultural event like the World Cup be integrated into the workplace?” You should give it a read.

His other entry is for June 14th. Here he discusses whether or not ethical obligations appear differently under conditions of stress, in this case, in the aftermath of BP’s contribution to the environmental movement. He makes comparison between the Katrina aftermath and the current gulf situation. He concludes with a pretty paragraph. Let me quote it in full.

Now there are of course differences in the two cases. In the Katrina and Haiti cases, people were literally fighting for survival — it was literally life-or-death. Presumably no one in the Gulf Coast tourism industry is literally going to starve to death. But still, the general question remains interesting: to what extent can ethical rules legitimately be bent, when someone’s interests are seriously threatened?

Not a Churchillian statement by any measure but a good summing up.

You could probably avoid a number of my posts by simply putting MacDonald in your favorites and checking him every couple of days.

James Pilant

The Supreme Court Is Right.

On By southwerkIn business ethics, ethics, Government Failure

I despise the Roberts court. After the Citizen’s United case in which the court addressed an issue that wasn’t even brought up in the case to give corporations the same rights as human beings meaning that they could spend unlimited amounts for advocacy. It seemed to me then and now that a paper entity and a citizen of the United States have striking differences.

Many, many people including me get upset when the obviously guilty walk free. I remember when Imelda Marcos evaded conviction with some anger and I could name some more. One of the most loathsome characters in the history of the United States and Canada is Lord Black also known as Conrad Black. This odious figure used a non-compete clause to enrich himself by many millions of dollars. Jeff Skilling, one of the architects of the Enron debacle, is also likely to walk free. It is difficult to contemplate any number of common criminal thefts and robberies that can close to Skillings incredible career of monetary destruction. Yet, it seems today that their convictions will be thrown out because of a Supreme Court decision.

Conrad Black should be in prison. He is a criminal.

Jeff Skilling is a criminal. He should be in prison.

But the Supreme court is right. The issue at question is the “honest services” law. Under the law if you fail to offer honest services you have committed a crime. The problem here is obvious – what are honest services? If you are late to work, are you late, stealing from your employer and thus liable under the law? The law gave enormous discretion to prosecutors, actually the word incredible come to mind. It was more a license to convict than a law. Alabama Gov. Don Siegelman was convicted under the law. His crime was to appoint a contributor to a position in exchange for his financial support for a campaign for a statewide lottery. It was a non-paying position that he had been appointed to several times under previous governors. That’s grounds for a federal prosecution?

What is worse about this whole stinking prosecutorial mess is that I believe that under the law, there were legitimate statutes under which to try most of these men, particularly simple fraud. The time is up for new criminal filings. Because the prosecutors opted for the easiest possible legal theory, there will be no convictions at all.

James Pilant