Ontario's Surprisingly Intelligent Budget

Crisis seems to concentrate minds. The normally-feckless McGuinty government has sensibly used the fiscal crisis to cut corporate taxes and harmonize provinical sales tax with the GST. Hopefully, the rest of the country will follow suit and we will have a more economically-efficient tax system.

DOJ to Link Manager's Pay to Producing More "Racialized" Lawyers

The Lawyer's Weekly (story is not online) reports that the Federal Department of Justice will link manager's pay to the number of lawyers they get from visible minorities and "other designated groups", although the ADM in charge, Donna Miller, admits that there is no actual lack of population representativeness in the DOJ. This would never happen if Stephen Harper were Prime Minister.

The problem is that these lawyers lack an adequate sense of grievance. As Ms. Miller puts it:

Miller said DOJ is actively working to promote racialized lawyers.

The article helpfully notes that the contracts for diversity training will be quite lucrative. Any Pith & Substance readers with the appropriate credentials are advised to take advantage of this great opportunity.

The Conservative Dilemma: Charles Murray's Two Conceptions of Human Nature

I want to talk about Stephen Harper's venture into the "Whither Conservatism?" sub-genre. But first I want to talk about Charles Murray's excellent contribution earlier this month.

It's hardly an original thought, but much of the American right in the age of Obama resembles the liberal-left in the era of Reagan. Back in those days, the conservative intellectual elite understood leftist arguments, while the left basically just assumed that conservatives must be stupid and evil. They could not really comprehend that their might be an argument on the other side, or that it could be adopted by someone who understood their own perspective and was not wholly malevolent. Right-wing intellectuals like Milton Friedman were the ones who were trying to shake their opponents into seeing things differently. They knew they'd win the argument if they could get a hearing. But even when they took power, they still couldn't be taken seriously. The Reagan/Thatcher revolution must just be a terrible burst of atavistic primitivism, rather than a rival set of ideas.

Obviously, there are still people like that on the left today, and there were unthinking partisans on the right back in 1980. But my sense is that today it is the right that talks to itself, and is blinded by its own certainty that it is always right. There are exceptions, but they tend to be moderates -- the kind who are easily praised by the New York Times.

Murray, as co-author of The Bell Curve and a bona fide movement neoconservative/libertarian, can hardly be accused of the same. In his March speech, he gave an uncompromising defence of fusionism and left no doubt that he expects advances in genetics to falsify left-wing assumptions about human equality. But he did so while making serious arguments and without pretending that mild social democracy and Stalinism are exactly the same. He does not pretend that Obama is Mugabe, but makes a fairly appealing argument against what Obama wants to do.

Murray's speech has two parts, and the division between them is, as Ross Douthat has noted, rather stark.

*In the first part, Murray makes a deep argument against European/Canadian-style social democracy and in favour of the Red State American model. Murray adopts Aristotle's idea that happiness (the good life) consists not in pleasure and the avoidance of pain, but in a life of "deep satisfactions" -- hard but important things:

I'm talking about the kinds of things that we look back upon when we reach old age and let us decide that we can be proud of who we have been and what we have done. Or not.

To become a source of deep satisfaction, a human activity has to meet some stringent requirements. It has to have been important (we don't get deep satisfaction from trivial things). You have to have put a lot of effort into it (hence the cliché "nothing worth having comes easily"). And you have to have been responsible for the consequences.

There aren't many activities in life that can satisfy those three requirements. Having been a good parent. That qualifies. A good marriage. That qualifies. Having been a good neighbor and good friend to those whose lives intersected with yours. That qualifies. And having been really good at something--good at something that drew the most from your abilities. That qualifies. Let me put it formally: If we ask what are the institutions through which human beings achieve deep satisfactions in life, the answer is that there are just four: family, community, vocation, and faith.

The most important objection to the European social democratic model is that it denies these four to huge swathes of people. The model citizen of Canada or the EU cohabits, but does not marry, and does not have children. S/he avoids atavistic attachments to tribal identity. S/he is probably a spiritual seeker or at least believes in UFOs and ghosts, but does not belong to a church. And if s/he does not have the skills to be a knowledge worker, s/he doesn't work at all.

Murray does not seem optimistic that the hard things will survive if there are easy ways to avoid them.

Last April I had occasion to speak in Zurich, where I made some of these same points. After the speech, a few of the twenty-something members of the audience approached and said plainly that the phrase "a life well-lived" did not have meaning for them. They were having a great time with their current sex partner and new BMW and the vacation home in Majorca, and saw no voids in their lives that needed filling.

In this part of the speech, "human nature" has a teleological meaning. It consists in proper ends for a human life, ends that can be lost sight of by whole cultures.

But in the next part of the speech, "human nature" gets a scientific, measurable, even positivistic meaning. He expects (undoubtedly correctly) major advances in the biological understanding of human psychology, and he expects it to refute core social-democratic premises. Women and men think differently about sex and babies. Intelligence and personality are largely determined by genes, and those genes are differently distributed in different partially reproductively-isolated human populations. Etc.

The difficulty is bringing these two conceptions of human nature into one frame. If the deep satisfactions are triggered by our biology as given through eons of natural selection, then it is hard to see how Barack Obama can seriously threaten them. On the other hand, it may be that wealthy twenty-somethings caring more for fast cars and loose sex partners than for the virtues is also coded in the genes, and was as familiar to Aristotle and Plato as it is to visiting professors in Zurich. To the extent social change is making this attitude more common, it is just the spread of wealth and education. Wealth makes it easier to avoid hard satisfactions, and the educated sensibility cannot just return to the naive faith without becoming an angry fundamentalism. In other words, if anything is at fault, it is capitalism (for generating the wealth) and the Enlightenment. In other words, it is a product of the same forces that will drive those advances in genetic science.

Why are the Bond Rating Agencies Still in Business?

If there are clearly identifiable villians in the sub-prime mortgage fiasco, it is the bond rating agencies. The idea of securitization is that the market can price and bear certain kinds of risk better than institutions. The Pithlord continues to believe that this is so, and therefore that securitization will rise again.

But the Pithlord's faith depends on honest intermediaries giving the straight goods about what the risks are. Moody's and Standard & Poor notoriously failed to do so. They didn't distinguish between diversifiable risk and non-diversifiable risk, and therefore gave collections of crappy mortgages much higher ratings than they deserved. And they were in a conflict-of-interest, since their revenues depended on sales. At the height of the bubble, the market was happy to be suckered.

So why, asks Matthew Yglesias, are these same agencies still around:

One of the bolder libertarian contentions out there is that the world could do without the function that’s performed by the Consumer Products Safety Commission. After all, the logic goes, consumers want to buy safe goods. This means that producers want to be able to credibly signal the safety of their goods. That means that there ought to be, in a CPSC-free world, a market opportunity for a firms that rate the safety of consumer products. Toaster makers would hire toaster-inspectors, and ask them to give the toasters a clean bill of health. “That’s crazy,” you might say, “who would trust a toaster-rater who was getting paid by the toaster-makers?” But the answer is clear. A toaster-rating agency needs to have a strong, credible brand to be valuable to toaster-makers. Getting a seal of approval from a toaster-rating agency that’s known to cook the books in exchange for business would be worthless. So toaster-raters should stay honest, and those who aren’t honest should find themselves out of business.

Now as it happens, we don’t handle consumer product safety like that. But we do handle bond rating that way. But there are only three ratings agencies. And as it happens, during the late boom years all three acted corruptly. So instead of losing credibility and going out of business, all three are still in business. And when you think about it, something similar happened with the big accounting firms during the Enron bust.

Yglesias' account of the Enron scandal is a bit misguided - after all, Andersen did go broke as a direct result. This was pretty rough justice, since the Big Five were probably equally guilty, but it did have an effect on the other four. They leavened their 1990s-style "innovation" with a bit more risk aversion - at least for a few years.

So why was there nothing like the bankruptcy of Andersen as a result of the CDO debacle? Doesn't this genuinely create a problem for those of us who think markets usually work better than regulators?