Saturday, December 29, 2007

Setting a horrible example

It's astonishing how low some people will stoop.

The following heart-tugging essay won a six-year-old girl from Texas four tickets to a Hannah Montana concert along with airfare and a makeover.

My daddy died this year in Iraq. I am going to give mommy the Angel pendant that daddy put on mommy when she was having me. I had it in my jewelry box since that day. I love my mommy.

The only problem with the essay was that it was a fabrication. As the girl's mother helpfully explained,"We did the essay and that's what we did to win...We did whatever we could do to win."

Every element of this story is disgusting, beginning with the mother entering a six-year-old into a contest to receive a makeover, moving on to the falsified essay, and then lying about the child's father being killed in Iraq. You have to feel most sorry for the little girl who was led into this fraud and who is still living with a parent with such a skewed moral compass.

The contest sponsors have withdrawn the prize. However, that does not even begin to address the harm that this fraud has caused. Fitting compensation would be to require the mother to hand-write apologies to the families of each of the nearly 4,000 service people who have perished in Iraq and whose cherished memories she has traded on.

Friday, December 21, 2007

President Bush gets two presents, our kids get the bill

This week Congress wrapped up the year by passing several major budget bills. One bill gave the President an additional $70 billion to continue trying to unbungle the Iraq war over the next six months. Another bill temporarily adjusted the Alternative Minimum Tax (AMT) so that it won't reach so far down into the upper middle-class. Two disparate pieces of legislation, but at President Bush's and the Republicans' insistence they had one important thing in common--neither was accompanied by any offsetting revenue adjustments.

As mentioned, the war spending bill (calling it a war funding bill would be something of a misnomer) will add $70 billion to the national debt between now and next May. The one-year AMT patch will add a further $50 billion to the debt. With two strokes of the pen, the debt--which was already projected to grow this year--will balloon by $120 billion.

The national debt currently stands at about $9 trillion. If we divide that equally across the population of the U.S., the share owed by a household of four comes to $120,000 (or if you would like, $60,000 for mom and dad and $60,000 for the kids). As a result of the new legislation, the household's bill just went up by another $1,200.

When the holidays are done and the kids are writing their thank you notes, make sure they save one for the President.

Thursday, December 20, 2007

Observations from Seoul

I just got back from a "short" trip to attend an economics confernce in Seoul. As the flights to and from Seoul took nearly the same amount of time as the stay, it probably wasn't the most rational itinerary in the world, but it was a good conference and a nice, albeit brief, visit.

One of the striking things about Seoul and its environs is the tremendous amount of transportation infrastructure--a huge international airport, a vast port system, numerous bridges and causeways, and an extensive public transportation network. The infrastructure is all the more amazing when you consider that a half century ago South Korea was a poor, undeveloped country just emerging from a devastating war. While the country has developed rapidly since then, its per capita GDP is still only five-ninths that of the U.S.

Some of the investment in infrastructure is a simple matter of need. The Republic of Korea has a population of just under 50 million and roughly half of that population is concentrated in and around Seoul. Even with the infrastructure, traffic grinds to a standstill in many parts of the city during the rush hours.

A considerable amount of investment was also spurred by the 1988 Summer Olympics, which were held in Seoul. While we usually think of the Olympics as prompting investments in sporting venues, they also lead to transportation improvements (and in the case of South Korea, the games also contributed to the transition to democracy).

Whatever the reason, Seoul's example shows that these types of investments owe at least as much to societal will and character as they do to simple cost-benefit calculations. When societies set goals and pull together, they can accomplish great things.

Sunday, December 9, 2007

Rationality in marriage

In his new book, The Bridge of Sighs, Richard Russo has a terrific passage that skewers two assumptions at the core of the rational model of marriage, namely, that people can identify the actual costs and benefits and that their preferences remain stable over time.
Matrimony, she explained, was based on two fallacies, both real doozies. The first was the ridiculous notion that people knew what they wanted. There was no evidence in support of this contention and never had been, but they seemed to enjoy believing it anyway, blinded as they were by love and lust and hope, only the last of which sprang eternal. The second fallacy, built on the shifting sands of the first, was equally seductive and even more idiotic--that what people thought they wanted today was what they'd want tomorrow. Sarah's mother filed this under the general heading of "Failures of Imagination," which was probably the biggest category in the entire history of categories, its origin almost certainly divine... Divorce, she maintained, made a better sacrament than marriage, if you had to have one. It signaled that at least one person and probably two had come to his or her senses and taken a long hard look at not only their spouse but the institution that had encouraged such irrational behavior.

Compared to Russo's character, family economists almost seem to be quaint romantics.

Thursday, December 6, 2007

Rationality in Iran

One of the most widely recognized tools of rational analysis is the cost-benefit comparison in which a decision-maker balances the advantages and disadvantages of alternative choices before pursuing a course of action. Rationality implies that decision-makers make choices that they believe are in their net best interest. A corollary of this is that decision-makers respond in relatively predictable ways to incentives and penalties.

Earlier this week, the National Intelligence Council released a National Intelligence Estimate (NIE) on Iran's nuclear intentions and programs. NIEs are reports that summarize the judgements of the nation's different intelligence agencies. The most recent NIE made headlines because it reversed a previous intelligence conclusion that Iran was actively pursuing a nuclear weapons program--the new NIE concludes that the country halted that effort in 2003 (key differences in the earlier and most recent NIEs are summarized on the last page of the report).

What's the connection to rationality, you ask. Well, tucked away inside the report is a reassessment of Iran's decision-making process. Specifically, the report states
Our assessment that Iran halted the program in 2003 primarily in response to international pressure indicates Tehran’s decisions are guided by a cost-benefit approach rather than a rush to a weapon irrespective of the political, economic, and military costs.

The report indicates that Iran's decisions going forward might be influenced by appropriate carrots and sticks, though it cautions that the precise inducements are hard to determine.

As the NIE points out, a problem for U.S. and international policymakers is that Iran's decision to halt its pursuit of nuclear weapons "is inherently reversible." So the country's future behavior is critical. Oddly, though, the NIE applies rationality only to the country's past behavior. In describing Iran's future actions, the report states that
convincing the Iranian leadership to forgo the eventual development of nuclear weapons will be difficult given the linkage many within the leadership probably see between nuclear weapons development and Iran’s key national security and foreign policy objectives, and given Iran’s considerable effort from at least the late 1980s to 2003 to develop such weapons.

In essence, the government responded to international pressure before but likely won't again. Moreover, the report justifies its assessment in terms of Iran's past behavior--behavior that the NIE also concluded supported rational decision-making.

There are few issues that are more serious than the spread of nuclear weapons, especially among countries like Iran with clear links to terrorism. While the NIE is loaded with caveats and is contradictory in its assessment of Iran's past versus future motivations, the report nevertheless suggests an additional set of instruments that could help rein in Iran's behavior. So far, there is no indication that the Bush administration's policy has budged one inch in response to the new analysis. A rational response would be to consider these additional tools.

Tuesday, December 4, 2007

Hit and run

Some acts defy rationality. Tonight a young life in nearby High Point hangs in the balance because a driver didn't stop for a school bus. The driver didn't stop afterword either.

Maybe it was one of those days--too many things to get done, too little time. All you want to do is get to the extra stop that was added to tonight's packed schedule. But the drive home is just as bad as the day was. Cars are dawdling through the short-timed traffic lights. Every driver is an idiot, and their collective inattention accretes into a slow rolling road block. Finally, you whip around the moron who's stopped at the head of the pack. You glare back over your shoulder as you accelerate...

Maybe you and your teen buddies are rushing home from school. Everybody is pumped and trying to get into the conversation. Nobody can believe what Ted did in Chemistry class. "I know, did you see how he..." "No, and then Mr. Morris was right behind him." "And Ted was reaching for Alyson like this." "Like what?" "Like this"...

Maybe the cell phone started to ring. It always goes off while it's in your pants pocket. On the second ring, you're still fighting to get past the seat belt. On the third ring, you reach it, but it's stuck. By the fourth ring, it's out. As you flip it open, the caller hangs up. You look down to check the "missed caller" number...

Maybe the baby in the back seat is making THAT sound. You turn your head back and see her looking surprised and wearing her lunch...

Maybe it was just too hard to stay out of the bar today. You didn't feel right stumbling out, and you recognize your mistake as you're heading down the road. But if you can just keep it together for another two miles...

Maybe you saw the bus's flashing lights and stop sign but thought that there was still time to get by...

It's easy to comprehend how a tragedy unfolds when our lives and everything that happens in them is so important.