Howard S. Katz has an excellent blog this week at http://thegoldbugnet.blogspot.com. Katz argues that the banks' plan to bail out the sub-prime lenders, M-LEC, is merely a pretext for inflation by the Federal Reserve Bank. Katz argues that the only possible reason for M-LEC is to facilitate inflationary policy by the Federal Reserve Bank, and that the history of inflation is the history of economic decline.
The problem facing America today is inflation or depreciation of the dollar, but more fundamentally, the mentality that you can get something for nothing. Jim Cramer and many on Wall Street argue for low interest rates, i.e., currency depreciation, in order to stabilize the markets. But such terminology is just pretext for "subsidizing my stock portfolio". Where do the subsidies come from? They come from consumers who pay higher prices at the supermarket checkout because of the inflation that lower interest rates create.
Thus, we have a ninety year old policy of the average American's subsidizing wealthy investors through low interest rates and inflation. We also have a ninety-year history of opportunistic academics' providing bogus justifications for low interest rates, such as "full employment", even as Fed policies have stimulated robust stock markets that encourage top managers to think in terms of moving plants overseas to maximize their executive stock option holdings.
Katz is right that monetary depreciation causes misallocation of resources and economic decline. Why has it proceeded for so long? The answer is self-indulgence on the part of America's wealthy, a self-indulgence that parallels welfare in prior decades and the something-for-nothing mentality characteristic of liberalism.
Monday, October 22, 2007
Moses Maimonides, Profit Maximization and the Case of a Disabled Actor
I recently posed the following discussion question to students in my web-based human resource management course:
>"Your name is Daryl F. Zanuck, co-founder of Twentieth Century Fox. It is the early 1950s. A talented actor, recently graduated from Yale Drama School, asks to meet with you. He says that he wants to be a leading man for Fox. The problem is that the actor is missing an eye. He had lost an eye in a childhood illness. You tell him that although he has acting ability, it is not realistic for someone missing an eye to be a leading man. Appearance is an essential job requirement, a job related requirement or a business necessity, and you cannot consider him for such a role. Only one in a million people gets to be a movie star. Someone missing an eye has to be ruled out. The answer was "no".
(1) Did Zanuck make the right decision?
(2) What are the two or three chief ways to validate staffing decisions and employment tests?
(3) Did Zanuck apply a potentially validated selection criterion?
(4) Does your answer to (3) matter to your answer to (1)?
All students must participate. Do not wait until the last minute as failed postings will not get credit."
Of the twenty-odd responses, only two or three said that it might be possible that the actor should be hired. Most said that he should not. Several students contrasted profit-maximization (not hiring) with altruism (hiring). None suggested that the profit maximizing decision would be to hire the actor if he were competent.
The following response was typical:
>"Depending on how you look at it the decision that was made could have been right or wrong. The two ways of looking at it is the legal way or your own selfish way. Legally the decision Zanuck made (may be) against the law, since it's discrimination to reject some one due to a defect or appearance (if they're the best qualified and reasonable accommodation can be made). But on the other hand if I was looking from my own selfish point of view I made the right decision because the job does require appearance and for this job he was not the right candidate even though he might have been an outstanding actor but sex sells."
(Technically, the above answer is incorrect because if appearance is an essential job requirement, as it is with actors, then the Americans with Disabilities Act does not mandate hiring.)
The question is a trick one, because it is based on the A&E biography account of Peter Falk.
Wikipedia's entry on Peter Falk states:
"Falk's unusual gaze is due to a glass eye that he has had for most of his life. His right eye was surgically removed at the age of three because of a malignant tumor."
According to the Peter Falk official site, Falk has appeared in 38 films, to includ "Murder, Inc.", "It's a Mad, Mad, Mad, Mad World", "A Woman under the Influence", the (1979) original "In Laws" in which he co-starred with Alan Arkin, "Wings of Desire" and "The Sunshine Boys". He has been nominated for two Academy Awards. Imdb.com indicates that he has appeared in 130 television shows.
Falk is best remembered for his starring role as Detective or Lieutenant Columbo, one of the best known and most memorable roles in television history.
According to Falk's A&E Biography, Daryl F. Zanuck told him that he could not be a star because of his eye.
In Economics of Discrimination Gary Becker showed that not discriminating, basing hiring decisions on pure performance criteria, is profit maximizing. Thus, economic justice and the maximization of profit coincide. The individual who best fits the job ought to be hired regardless of race, creed or disability.
The idea that a disabled actor might be best qualified is not intuitively obvious. Human resource management ought to serve the end of rationalization; HR ought to overcome psychological and social biases and develop employment methods that are profit maximizing. This is an ethical quest. However, the rationalism of good human resource management is seldom appreciated because it does not acknowledge the egos of senior managers, who may flatter themselves into believing that their judgment is more reliable than methods that are statistically validated over long periods of time. One example might be not doing something stupid like hiring an actor with a glass eye.
In fact, few American firms utilize human resource management policies that could improve financial performance to the extent that they might. One example is in hiring boards of directors. I have not heard of firms using statistically validated selection methods in hiring boards. The idea is almost never suggested. Yet, current governance problems could be swept away if the current "I shoot pool with a guy so let's put him on the board" approach to corporate governance is replaced by identification of the skills needed; development of ability, knowledge or assessment center tests; and application of those tests to the rational selection of corporate boards.
The equation of justice and ethics has Aristotelian roots and has many links to the Judeo-Christian tradition. In an article in Online Athens Ronald Gerson discusses the ideas of Moses Maimonides, the famous Aristotelian Jewish philosopher, about the rungs of charity:
>"While he emphasizes anonymity in the higher rungs, when he reaches the eighth and highest level, this is what he says: 'The highest form of charity is to strengthen the hand of the poor by giving him a loan, or joining him in partnership, or training him out of his poverty, to help him establish himself.'"
That is, the best form of charity is to enable people to help themselves. This is done by empowering them with competence and the ability to succeed on their own. Good human resource management involves uncovering the competencies that can best support firms' performance; finding most competent employees; and finding ways to enable the most competent employees to flourish.
Friday, October 19, 2007
Town of Olive Luminaries, William T. Golden; Al Higgly; Bruce Ratner; Mary Margaret McBride
Al Higgly, a Shandaken fruit stand operator, restaurateur and real estate investor, mentioned to me that his "birthday buddy" William T. Golden had died on October 9, 2007, just a few weeks before his 98th birthday. Higgly and Golden were both born in the last week of October. Mr. Golden owned more than 10,000 acres in Olivebridge, not far from my West Shokan home.
According to the New York Times Mr. Golden was an investment banker who, after retirement, was on the boards of nearly 100 organizations, including the American Association for the Advancement of Science and the Carnegie Commission on Science, Technology and Government (as its chairman). Mr. Golden was an advocate for science policy and helped create the National Science Foundation. He worked on the Atomic Energy Commission at the time of its founding in the late 1940s. His neighbor in Olivebridge was his former boss, Harold Lindner, former president of the Export-Import Bank and ambassador to Canada. William T. Golden, RIP.
Another famous New York business figure recently moved into the Town of Olive. Bruce Ratner has purchased an estate also not too far from West Shokan. The Town of Olive has always welcomed many interesting people. Jimi Hendrix lived on Traver Hollow Road, about three miles from where my cabin is now located, in 1969, the year of the Woodstock concert and also a year before Hendrix's death.
Al Higgly once told me that when he was a youngster in the 1940s he used to say "hey" to Eleanor Roosevelt, who was a weekly visitor to the home of Mary Margaret McBride in West Shokan. According to Wikipedia McBride, originally from Missouri, was a radio personality from 1934 to 1940 on WOR in New York City. Also, she appeared on NBC and ABC radio until 1960. According to Wikipedia, "during World War II, she began 'breaking the color line', mixing in African American guests." Ms. McBride died in West Shokan in 1976.
The West Shokan curmudgeon blogs that there are differences between the nearby Village and Town of Woodstock versus West Shokan, in the town of Olive:
>"Culture
Woodstock: hippy
West Shokan: hippless
>"Shopping
Woodstock: tie-dye ear-muffs
West Shokan: coffee (coming soon)"
Actually, the coffe is going soon as I have heard a rumor that the only store in town, the American General Store is closing on December 1. Alas, West Shokan is a small town, but there are those who love it. The curmudgeon doth protest too much, methinks. The Town of Olive has a population of 4,579 and West Shokan has 760 or so. It is a privilege to live in a special place.
According to the New York Times Mr. Golden was an investment banker who, after retirement, was on the boards of nearly 100 organizations, including the American Association for the Advancement of Science and the Carnegie Commission on Science, Technology and Government (as its chairman). Mr. Golden was an advocate for science policy and helped create the National Science Foundation. He worked on the Atomic Energy Commission at the time of its founding in the late 1940s. His neighbor in Olivebridge was his former boss, Harold Lindner, former president of the Export-Import Bank and ambassador to Canada. William T. Golden, RIP.
Another famous New York business figure recently moved into the Town of Olive. Bruce Ratner has purchased an estate also not too far from West Shokan. The Town of Olive has always welcomed many interesting people. Jimi Hendrix lived on Traver Hollow Road, about three miles from where my cabin is now located, in 1969, the year of the Woodstock concert and also a year before Hendrix's death.
Al Higgly once told me that when he was a youngster in the 1940s he used to say "hey" to Eleanor Roosevelt, who was a weekly visitor to the home of Mary Margaret McBride in West Shokan. According to Wikipedia McBride, originally from Missouri, was a radio personality from 1934 to 1940 on WOR in New York City. Also, she appeared on NBC and ABC radio until 1960. According to Wikipedia, "during World War II, she began 'breaking the color line', mixing in African American guests." Ms. McBride died in West Shokan in 1976.
The West Shokan curmudgeon blogs that there are differences between the nearby Village and Town of Woodstock versus West Shokan, in the town of Olive:
>"Culture
Woodstock: hippy
West Shokan: hippless
>"Shopping
Woodstock: tie-dye ear-muffs
West Shokan: coffee (coming soon)"
Actually, the coffe is going soon as I have heard a rumor that the only store in town, the American General Store is closing on December 1. Alas, West Shokan is a small town, but there are those who love it. The curmudgeon doth protest too much, methinks. The Town of Olive has a population of 4,579 and West Shokan has 760 or so. It is a privilege to live in a special place.
Monday, October 15, 2007
Madmen, Hillary and the Wizard of Oz
American Movie Classics'(AMC's) Madmen is great television. Madmen's quality equals HBO's and Showtime's, which puts it a cut above today's Hollywood movies.
Madmen stars Jon Hamm as Don Draper. It is about an advertising agency in the golden age of television, the late 1950s and early 1960s. The name "Draper" alludes to draping or deceiving, and we are reminded of the Wizard in the Wizard of Oz, whom Dorothy exposes behind the drapes of the control room. Like the Wizard, Draper's job is to create illusion. One of the story lines is that Draper's firm represents the Nixon campaign pro bono in the 1960 election, the first that television influenced.
Before watching Madmen it would be useful to read a history of consumerism. One is William Leach'sLand of Desire: Merchants, Power and the Rise of a New American Culture and another is Gary Cross's All Consuming Century. Both books provide rich perspective on the dynamic of consumerism and its implications for culture. Leach goes into an extended analysis of the Wizard of Oz.
Following amusement parks, Wannamaker's department store decorations, the Macy's Thanksgiving Day Parade and L. Frank Baum's ideas (Baum, besides being an author, was an early expert about window displays), advertising has been the basis of consumerism. That is, one of the characteristics of consumerism is the creation of imaginative imagery about consumption. Thus, New York and several other large cities became the centers not only of art, culture, theater and television, but more importantly of imagery about consumption that created today's global culture. Such imagery would be unnecessary or unimportant were it truthful. The association of consumerism and advertising suggests that deception is at consumerism's root.
There is an inherent conflict. To be possible, consumerism requires advances in technology. In turn, technology depends on uncovering of the truth, discovery of fundamental principles and a relentless willingness to let old modes, business methods and social constructs die. Schumpeter called this creative destruction. But stimulation of consumption relies on creating an image, one that is often false, romantic or misleading.
At the same time the left is a romantic movement that itself is a reflection of consumer society and advertising. The left manufactures political ideas that are romantic but have as little truth or reality as the mountain stream in a Newport cigarettes ad. The left claims to oppose the deception inherent in commercialization, but does so through "draping" and deception that parallel commercialization. To the left, ideology plays the role that advertising plays to consumerism. The left substitutes lies about a romanticized past and a fictional claim to ethical belief. It deceptively claims that the past is the future.
Thus, the left claims that centralized economic planning (monarchy) is economically superior to markets, a lie. The left claims that government power and regulation, much like the power of kings, is more humane than limited government and private enterprise, which is a lie. The left claims that monetary expansion, which favors the wealthy over the poor, is necessary to help the poor, which is also a lie.
Hence, the dialogue of twentieth century America* was largely between a conservative, market-based view which depends on the truth and technology for its foundations, but furthers its ends through lies and mass media; and a left-wing view whose ideology is itself a lie. Both modern conservatism and left/liberal ideology depend on groupthink. Both rely on the mass media. Both focus on the trivial. Both advocate policies whose effects are the reverse of what they claim. It may be said that in the twentieth century the Sophists triumphed and that the Sophists now dominate our most retrograde institutions, such as universities.
The Republicans claim to be for less government, then when elected expand government. The Democrats claim to be for the poor, but create massive inner city slums, urban ghettos that isolate racial minorities and the poor. As well, the Democrats' educational policies, via left-wing institutions like NCATE, cripple the poor by enfeebling them educationally; and they and the left attack private institutions such as Wal-Mart that benefit the poor economically.
Were it not for the left, the role of intellectual would in part be the one that L. Frank Baum assigned to Dorothy: lifting the drapes from the Wizard's control room, and exposing him for the fraud that he is. That is the tradition of Thorstein Veblen as well as the Austrian economists. But the academy fell prey to ideology, and has adopted rigid, ideological deception, commitment to elitism and attacks on the poor, for instance, through attacking Wal-Mart and through favoring the Federal Reserve Bank, low interest rates and inflation. Universties themselves are a state supported system that encourages class stratification, alienation of the average person and economic isolation of the talented poor. Universities are institutions who demonize the average person, humanity, in the name of an inept elite that produces nothing and whose main purpose is to institutionalize itself.
Doug Ross @ Journal lists "Hillary's Top Ten Fabrications". These include her claim that she was named after Sir Edmund Hillary although she was born five years before he climbed Mt. Everest; her failure to disclose profits from Whitewater; and her description of abortion as a "tragic choice".**
It is not surprising that Hillary is a liar. Nor would it be surprising that the Republicans are equally liars. The groupthink; lack of vision; fixation on trivia; emotional outrage about superficial issues and ignoring the fundamental issues such as special interest group influence; corruption of the democratic process through gerrymandering and related processes; misleading disclosure in areas like government operations and inflation; monetary expansion and the corruption of the dollar; claiming to be for less government when you are for more government (such is the history of Rudy Giuliani) all suggest that Republicans and Democrats have similar stakes in equivalent forms of corruption. Both are parties of liars.
It is increasingly important that competition be introduced into the political system. "Voters for None of the Above" offers a mainstream alternative. I discuss NOTA here.
*In Europe, with the exception of Britain, the chief ideologies of the twentieth century were mainly variants of the left, to include fascism, Nazism, communism and today's dirigisme.
**Concerning the abortion issue, William Saletan of Slate writes:
"...against the ugliness of state control, she wants to raise the banner of morality as well as freedom...'There is no reason why government cannot do more to educate and inform and provide assistance so that the choice guaranteed under our constitution either does not ever have to be exercised or only in very rare circumstances.'...Once you embrace that truth—that the ideal number of abortions is zero—voters open their ears...Admit the goal is zero, and people will rethink birth control. 'Seven percent of American women who do not use contraception account for 53 percent of all unintended pregnancies'..."
But Clinton's argument, which transfers the moral concern about abortion into a discussion of abortion as a quality process, a quality target that needs to be minimized, is itself a form of draping.
Madmen stars Jon Hamm as Don Draper. It is about an advertising agency in the golden age of television, the late 1950s and early 1960s. The name "Draper" alludes to draping or deceiving, and we are reminded of the Wizard in the Wizard of Oz, whom Dorothy exposes behind the drapes of the control room. Like the Wizard, Draper's job is to create illusion. One of the story lines is that Draper's firm represents the Nixon campaign pro bono in the 1960 election, the first that television influenced.
Before watching Madmen it would be useful to read a history of consumerism. One is William Leach'sLand of Desire: Merchants, Power and the Rise of a New American Culture and another is Gary Cross's All Consuming Century. Both books provide rich perspective on the dynamic of consumerism and its implications for culture. Leach goes into an extended analysis of the Wizard of Oz.
Following amusement parks, Wannamaker's department store decorations, the Macy's Thanksgiving Day Parade and L. Frank Baum's ideas (Baum, besides being an author, was an early expert about window displays), advertising has been the basis of consumerism. That is, one of the characteristics of consumerism is the creation of imaginative imagery about consumption. Thus, New York and several other large cities became the centers not only of art, culture, theater and television, but more importantly of imagery about consumption that created today's global culture. Such imagery would be unnecessary or unimportant were it truthful. The association of consumerism and advertising suggests that deception is at consumerism's root.
There is an inherent conflict. To be possible, consumerism requires advances in technology. In turn, technology depends on uncovering of the truth, discovery of fundamental principles and a relentless willingness to let old modes, business methods and social constructs die. Schumpeter called this creative destruction. But stimulation of consumption relies on creating an image, one that is often false, romantic or misleading.
At the same time the left is a romantic movement that itself is a reflection of consumer society and advertising. The left manufactures political ideas that are romantic but have as little truth or reality as the mountain stream in a Newport cigarettes ad. The left claims to oppose the deception inherent in commercialization, but does so through "draping" and deception that parallel commercialization. To the left, ideology plays the role that advertising plays to consumerism. The left substitutes lies about a romanticized past and a fictional claim to ethical belief. It deceptively claims that the past is the future.
Thus, the left claims that centralized economic planning (monarchy) is economically superior to markets, a lie. The left claims that government power and regulation, much like the power of kings, is more humane than limited government and private enterprise, which is a lie. The left claims that monetary expansion, which favors the wealthy over the poor, is necessary to help the poor, which is also a lie.
Hence, the dialogue of twentieth century America* was largely between a conservative, market-based view which depends on the truth and technology for its foundations, but furthers its ends through lies and mass media; and a left-wing view whose ideology is itself a lie. Both modern conservatism and left/liberal ideology depend on groupthink. Both rely on the mass media. Both focus on the trivial. Both advocate policies whose effects are the reverse of what they claim. It may be said that in the twentieth century the Sophists triumphed and that the Sophists now dominate our most retrograde institutions, such as universities.
The Republicans claim to be for less government, then when elected expand government. The Democrats claim to be for the poor, but create massive inner city slums, urban ghettos that isolate racial minorities and the poor. As well, the Democrats' educational policies, via left-wing institutions like NCATE, cripple the poor by enfeebling them educationally; and they and the left attack private institutions such as Wal-Mart that benefit the poor economically.
Were it not for the left, the role of intellectual would in part be the one that L. Frank Baum assigned to Dorothy: lifting the drapes from the Wizard's control room, and exposing him for the fraud that he is. That is the tradition of Thorstein Veblen as well as the Austrian economists. But the academy fell prey to ideology, and has adopted rigid, ideological deception, commitment to elitism and attacks on the poor, for instance, through attacking Wal-Mart and through favoring the Federal Reserve Bank, low interest rates and inflation. Universties themselves are a state supported system that encourages class stratification, alienation of the average person and economic isolation of the talented poor. Universities are institutions who demonize the average person, humanity, in the name of an inept elite that produces nothing and whose main purpose is to institutionalize itself.
Doug Ross @ Journal lists "Hillary's Top Ten Fabrications". These include her claim that she was named after Sir Edmund Hillary although she was born five years before he climbed Mt. Everest; her failure to disclose profits from Whitewater; and her description of abortion as a "tragic choice".**
It is not surprising that Hillary is a liar. Nor would it be surprising that the Republicans are equally liars. The groupthink; lack of vision; fixation on trivia; emotional outrage about superficial issues and ignoring the fundamental issues such as special interest group influence; corruption of the democratic process through gerrymandering and related processes; misleading disclosure in areas like government operations and inflation; monetary expansion and the corruption of the dollar; claiming to be for less government when you are for more government (such is the history of Rudy Giuliani) all suggest that Republicans and Democrats have similar stakes in equivalent forms of corruption. Both are parties of liars.
It is increasingly important that competition be introduced into the political system. "Voters for None of the Above" offers a mainstream alternative. I discuss NOTA here.
*In Europe, with the exception of Britain, the chief ideologies of the twentieth century were mainly variants of the left, to include fascism, Nazism, communism and today's dirigisme.
**Concerning the abortion issue, William Saletan of Slate writes:
"...against the ugliness of state control, she wants to raise the banner of morality as well as freedom...'There is no reason why government cannot do more to educate and inform and provide assistance so that the choice guaranteed under our constitution either does not ever have to be exercised or only in very rare circumstances.'...Once you embrace that truth—that the ideal number of abortions is zero—voters open their ears...Admit the goal is zero, and people will rethink birth control. 'Seven percent of American women who do not use contraception account for 53 percent of all unintended pregnancies'..."
But Clinton's argument, which transfers the moral concern about abortion into a discussion of abortion as a quality process, a quality target that needs to be minimized, is itself a form of draping.
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