Risk Management

I'm taking Internal Auditing this summer, and a large part of that is evaluating your company's risk management. We get all sorts of fancy graphics, jargon, and acronyms about how to define both the problems and the solutions. (The COSO Cube counts as all three.) It's enough to keep an army of consultants employed for decades, and I'm sure you can put together a knockout Powerpoint presentation with it.

I had the same reaction to this that I have to the Business Ethics class that the MBA students have: it's pointless. None of this crap is either necessary nor sufficient for a company to manage its risk properly. Six Sigma, or Total Quality Management, or whatever is on the bestseller list right now, might help out on the margins, but it won't do the job by itself.

There's really only one thing necessary for a business to be ethical, or to manage risk, and, if the company has it, everything else will follow. The people who run the company have to believe in ethics or risk management, and they have to demand it of their employees. That's it. It's very simple, and depressingly rare.

If the people in charge of an organization really take something seriously, that something will happen. They will figure out what system will make it work. It might not be best practices, but it will be enough, assuming they have time to weed out the employees who don't get it. I don't often say this, but in this instance, it's true: what's important here is the will to do it. Whether the boss in innovative or not, it will happen.

If the people in charge don't really believe in it, or won't enforce it, then no set of processes will really do the job, no matter how clever they sound. They can say all the right things. They can put a whizbang system into place. They can fool the auditors, but risk management and ethics are the kind of things that are good to have in general, but really matter at the extremes.

Practicing good risk management in normal times isn't that hard. It requires thought, and effort, and there is always the temptation to let it slide, but most intelligent people can do it. It's when there's a gigantic housing bubble, and clods everywhere are making a fortune doing stupid things that it gets tested. You have to have someone in charge who can say no to everyone who is clamoring that you MUST get on this gravy train, or the world's going to end, or the analysts will downgrade you, or something.

It's not a test of brains. It's a test of character. As much as a lot of self-aggrandizing fools want you to believe otherwise, those aren't the same things. In fact, there's just about zero correlation between good character and high intelligence. Eddie is as dim as they come, but it's hard to be a better person. Six Sigma doesn't build moral courage; it just produces large bills from Accenture.

If anything, the people who make it to the top of large corporations are selected for *not* having this virtue. (I think that they are also less likely to be particularly ethical, but that's another rant.) Even if they have an inclination that way, the incentives facing them tend to discourage it. All of the biases are towards excessive risk taking. The behavior that produced the financial meltdown isn't acute; it's systemic.

Look at the career path you have to follow to become a Fortune 500 CEO. You have to work very hard, and I'll accept, for argument's sake if nothing else, that you have to be very smart. You have to be extremely successful at everything you do along the way. You are way out on the right tail of good results. That means that you were someone who took large risks along the way, and that they almost all worked out. Someone who doesn't take big risks can't be a complete failure, but they can't be the big winner, either.

Of course, they never think of themselves being lucky, though they are. In most cases, it's easy to attribute all of the positive outcomes to skill, rather than luck. It probably did take skill, but fortune also smiled on the successful. Unless you believe that some people actually are inherently lucky, though, there's no reason to think that the people who have gotten away with big risks in the past are any more likely to get away with them in the future than the rest of us.

This can be extremely difficult to see from the inside. One way to demonstrate it is with a scam that the guys you see in infomercials hawking their sports betting, or stock picking, system, except that it works through mailings. What you do is send, say, 128 people a free newsletter telling them to put their money on Team A; send a different 128 people a free newsletter telling them to bet on Team A's opponent. (The illustration works best with a power of 2, but it isn't necessary.) Guess what? You're guaranteed to have successfully predicted the winner for 128 people. Ditch the losers. Break the winners up into two groups of 64. Do the same thing again, with two groups of 32. Keep whittling it down until you have four people left for whom you have SUCCESSFULLY PICKED SIX CONSECUTIVE WINNERS! (That part has to be said in All Caps.) Those are your marks. You demonstrated your prognosticating powers for them, for no money, just to demonstrate your ability. Now hit them up for money. It's best to ask for a lot up front, because you're 50% likely to get every game you pick going forward wrong, and they probably won't pay you too many more times.

From the outside, it's easy to see what is happening. It's a mathematical certainty that someone in your initial pool is going to be really lucky. There's just no way to know in advance who it's going to be. If you're the person receiving the newsletter, though, it looks entirely different. All you see is that this genius is right every single time. Obviously, success on the way up the corporate ladder doesn't have the mathematical precision or certainty that the scam does, but there are so many ambitious risk takers who start out corporate careers that it's inevitable that some of them are going to take 8-10 big risks along the way, and get good results on all of them. Some of it is skill, but there's plenty of luck, too.

Those are the people who become CEOs. They are conditioned to think that taking risks is always a good thing, at least when they do it. It can work sub-consciously, even if they know better. Some of them are just colossal egos, though, who will flat out tell you that. Modesty is not a good way to get the key to the executive bathroom. Natural selection weeds out the character trait necessary to take risk management seriously.

Then there are the incentives. For all the talk about how we are going to change things around, so that executives get rewarded for something other than short term profits, I don't believe that it's really possible. We could make a lot of improvements on executive compensation, but the fundamental fact of the matter is that making profits are the goal, and human beings have a very strong tendency to think that small samples of results have big meaning for overall trends. Ask your friend whether or not the manager should pinch hit with the guy who is 8 for his last 12, because he's the hot hand, despite being a career .230 hitter with no power.

I should note that I'm not even talking about cooking the books, or doing anything notably unethical to pump up the stated profits. Executives aren't really long the stock price the company they work for. They're long the volatility of the stock price of the company they are working for. For them, the rewards of big time success are greater than the costs of big time failure. Stock option compensation plans and large severance bonuses make this worse. They're going to go all in, because a lot of the money they are playing with belongs to the house.

With very rare exceptions, you aren't going to be able to teach a CEO to really care about your fancy methods of making sure that no one takes risks that are too large. They may say they do, and they may even think that they do, but most of them don't. It's not nefarious on their part, really; they can't help it. This is not to say that I don't think a bunch of them are sociopaths, because I think exactly that; it's just hard, in the big picture, to blame the sociopath for ending up that way. They're kind of like rabid dogs. In the end, they don't really care about it, and they'll find ways to circumvent it right when they need most to avoid it.

Really, it has to be a societal change. Over the last thirty years, the United States has taken to worshiping the innovator. The entrepreneur. The risk taker. The guy who drops out of college and starts a computer company in his garage. The guy who takes over a moribund company, and turns it into the year's biggest success story.

Very clearly, this has produced a lot of good. The kinds of technological innovation we've seen wouldn't have happened without it. We are, in a number of ways, better off for shedding the risk averse mindset of the 50s and 60s.

But it certainly hasn't been an unalloyed good thing. I'm not convinced that it has, on the whole, been a positive. Like a lot of things, I think the benefits of this change were apparent long before the pitfalls. We're now seeing the ladder. One of them is that we have institutionalized to big an appetite for risk. It's a cycle we continually tread, and it may be that we just have to live with it. I'm just afraid that the costs of the risky parts of the cycle are getting larger, and that we may do ourselves permanent harm one of these times.

To close, if you've been following this blog long enough to remember my lengthy post on William Slim, and think that there's a connection between my thinking about him and the first half of this post, you're right.

Iran Thoughts

This post is not original to here. It was a comment I posted on Balloon Juice, in a thread on the Iranian protests. Its genesis is that I've been getting very annoyed with people who insist: 1) that there is no difference between the candidates, and 2) that we should shut up because we shouldn't encourage the Iranian people to get massacred. I've left it as I posted it, so it will seem a bit odd without its antecedents.

Dude, they’re contesting a practically meaningless election. When it’s all over they’ll still be an oppresive Islamic regime.

That’s what this was eight days ago. Not now. You can’t get those kinds of demonstrations, of that size and intensity, over a meaningless election. If that’s what it was before, the demonstrations themselves make it more than that.

As I’ve said before, even if all that were to happen is to install Moussavi as president and someone else as Supreme Leader (there’s zero possibility of Khamenei surviving this if the demonstrators win), this changes Iran in fundamental ways. Moussavi’s power base has changed. It’s no longer a clique of the mullahs; it’s now the people he can bring out to the streets. He’s had to promise them too much to be able to go back now, unless he’s prepared to call out the tanks to crush them. He’s Gorbachev: a man who wanted only to change the system a bit from within, but who let loose far more than he intended, and wasn’t willing to shoot the people down to stop what was happening.

But I’ll go even farther. Even if all that were implemented were what Moussavi promised on the campaign trail, Iran would be changed in positive ways. It would be much more open, to freedom of expression, to women, and to ethnic minorities. It wouldn’t be insane on foreign policy. All of these things alone are positive. It may not mean much to Americans, or the US government, but it means a hell of a lot to Iranians.

There’s a bigger picture involved, too. Frankly, I think we’d all be better off if the change does happen within the system of the Islamic Republic. First, I don’t think that there’s anything particularly wrong with that structure, given the other alternatives in the region. Sure, I’d never want it here, but public opinion is in a different place in the Middle East. If that’s what happens, we have an officially Islamist state operating based upon popular sovereignty, offering freedom of expression, and other liberties. That would send shockwaves through the region. Not the sort that Bush produced in Iraq, but a real development.

As for all of the moaning about encouraging the Iranians to go to their slaughter, give it up. They aren’t being pushed by us. Believe it or not, they are full-fledged moral actors of their own, and are capable of making the decision to risk their lives themselves. If there is a massacre, it isn’t the responsibility of anyone over here, no matter what they’ve posted. The blame goes to the people that conduct the massacre, and the decision to put themselves in a position to be massacred belongs to the people who do that.

I plan to do what I can to show my support for that decision in every way that I can. As I’ve said before, I would never, ever urge someone to put themselves in that position (save for the unlikely scenario where I ever am in a position to take the risk myself). It’s their risk, not mine, and so it would be wrong for me to push them into it. However, if they are brave enough to do so, then I believe that that is the right decision. Systems of oppression will never be overthrown without people who are willing to make that choice. Lots of them. The chances to mobilize enough of them don’t come along very often, so I would like to see the people seize it.

No decision of this sort is ever wasted. If nothing else, courage and decency on the individual level are laudable in and of themselves. Beyond that, they can’t help but have a positive effect on the world. The Prague Spring was crushed brutally, but it left a memory that inspired later. I still think a better example is Poland in 1980, because crushing the Czechoslovaks was done by an outside country. Here, as in Warsaw, it will have to be the their own countryman that commence the slaughter. I don’t believe the rumors of Lebanese being imported; if they had been, there would be evidence from Lebanon, and not just tweets from Tehran. Even if they are there, the orders would still have come from Iran’s own leadership, and that will wipe away their legitimacy no matter who does the killing.

No government survives in the long run if they are forced into the level of internal repression that this would take. The protests in Burma last year, or Tiananmen Square, didn’t involve anything like the proportion of the population that has been marching in Tehran, and there was no evidence that unrest ever spread to the outlying regions, as it so clearly has to Tabriz, Isfahan, and Shiraz. The only way the current incarnation of the Islamic Republic survives the next decade is if Moussavi, and the protesters back down.

If that’s the decision they make, there will be no criticism from me. I have no idea if I could make the choice to stand in front of the Basij without flinching, and there would be nothing shameful if I couldn’t. Getting beaten to death is a price no one should ever be forced to pay. I hope they don’t, though. I hope that they have the courage that I might not have. The only way to beat Khamenei is to take him on.

Sorry for disappearing for so long. I can only muster the energy to pursue a couple of lines of effort at a time, and blogging lost out over the last month. I've taken three of the CPA exams, and passed one; I'm still waiting for my scores on the other two. I've been admitted to the Masters of Accountancy program at the University of Minnesota's Carlson School of Management. I'm volunteering two hours a week tutoring math to students at the International Institute of Minnesota. And, I'm taking a class in internal auditing.

I'm going to try to be better, though. I finally broke down and installed the air conditioner. It's been 85 and humid here lately, so I know what it must have felt like working on the bridge over the River Kwai.

Movie Trailer Mashups

Thanks to Balloon Juice, I discovered a new art form today: the remixed movie trailer. Here are some I particularly like:

Taxi Driver as a romantic comedy:



Office Space as a psycho killer flick:



Dirty Dancing as directed by David Lynch:



Ferris Bueller's Day Off as serious drama:



Sleepless in Seattle as Fatal Attraction:



The Shining as lighthearted family comedy:

Alone

I am not in touch with anyone I went to high school with. I'm not in touch with anyone I went to college with. With minimal exceptions, I'm not in touch with anyone I've ever worked a job with.

I probably haven't tried as hard to stay in contact with people as others do, but it isn't that I've put no effort into it. On several occasions, I've tracked down the e-mail or phone number of someone from my past, and said hello. When I ran into people from college at a Gopher football game a few years ago, I gave them my phone number. I just never hear back from them.

Of the people from work, Dave lives downstairs, and I go to lunch with him once a week and see him on plenty of other occasions. There are two people from Citigroup that I still exchange messages with, but one of them is phenomenally busy with law school and a toddler. The other agrees we should go out sometime, but never gets pinned down on a time.

I have a few other friends, but really only three people that I could call up and say, "Let's do something," with any confidence that it will actually happen. Dave lives downstairs, and, in one of life's strange coincidences, a couple that I knew growing up in Ann Arbor happen to live five houses down the street. Beyond that, nothing, really.

It's not that I think that no one likes me. I'm pretty sure that there are all sorts of people in my past that did, and probably still do. It's just that it seems that I'm not important enough to any of them to remember. It's sort of reverse paranoia: I'm dead certain that no one is out to get me, for good or for ill. In gaming terms, I feel like an NPC in my own life.

Like a lot of things, I'm sure I exaggerate this in my own mind. I probably haven't tried as hard to stay in touch with people as it feels like I have. Even at that, I know that I haven't gone too far out of my way. Still, it's one of those things where the reality isn't as important as my perceptions of that reality, and those perceptions leave me feeling very lonely.

This is all magnified at the moment. A couple of weeks ago, I had a date. This wouldn't be monumental news for most people, but it is for me. Previous to this, I've only dated three women in my life, and that's probably stretching it in one case. (I'm sure you won't ever see this, but sorry, Weatherley. I was a bit of a cad.) It went really well. I had a good time. She said she had a good time. We agreed to do it again. Then . . . nothing. She hasn't returned any of my messages. At this point, twelve days after the last communication, I have to assume that it's dead.

That feels like the same story as always, written in small print. I'm just feeling very tired.

The Myth of German Military Superiority: Combat Troops

Back to the subject. Along with the officer corps, the Germans are also usually credited with having the best soldiers, man for man, in the world throughout the World Wars. I think that this is probably true, but by a much narrower margin than most people appreciate.

One element is that, just as with the officers, people making this claim are usually defining "soldier" very narrowly. They mean combat infantrymen and tank crewmen, and sometimes combat pilots, though other countries produced plenty of these that were at least as good as the Germans. On this definition, they were the best soldiers in the wars. They were very tough, very disciplined, and very skilled.

However, there's more to soldiering than just infantry and tanks. Here again, the Germans channeled all of their best troops into one area. It sounds like a good idea to make sure that the actual combat personnel are the very best men that you can produce. They are, after all, the ones doing the fighting. In practice, it doesn't work out that way. Even right at the front, German artillery was frequently less effective than their enemies'.

Here is where I'm going to bring in the comparison with the US Army. During World War II, it was often the case that, if they could pull any strings, soldiers tried to get out of front line duty. This meant that you had highly qualified men working in supply, and maintenance, and other support roles. This means the job got done better.

On top of this, Americans were simply better mechanics than the Germans were. The size of the US market allowed for mass manufacturing that the Germans couldn't match. By the outbreak of the war, there were close to 30 million automobiles in America, something the Germans couldn't hope to match. (The vaunted Volkswagen program was, in fact, a complete flop.) This meant that there were millions of GIs with experience tinkering with their cars. This training came in handy in the effort to keep tanks, halftracks, trucks, planes, and ships operational.

There's another problem with putting all of your best men on the firing line. Casualties among combat infantrymen and tankers are frighteningly high. Even if you give them an edge by only using the highest quality troops, they are going to die in large numbers. If an army's best men suffer casualties at a disproportionately high rate, the quality of that army is going to decline.

You can see this effect during the later stages of World War One. As someone mentioned in one of my posts on the Western Front, the Germans adopted the tactics of Stosstruppen, or Stormtroopers. They identified their best infantrymen, and moved them to elite units. These troops were trained in infiltration tactics, and used at the leading edge of offensives, often without much artillery preparation in order to maintain surprise. These tactics were initially used against the Russians, and perfected. Then, the Germans launched their first major offensive in the West in two years in the spring of 1918.

A major reason why the Kaiser's Offensive was such a success was that, here, the British really were inept. Since Verdun had been entirely fought by the French, the British hadn't been subjected to any significant attacks since Ypres in 1915, which was before they had a mass army. They had perfected the art of attacking a trench system under cover of artillery. They had no idea how to defend anything.

Attacking these unprepared lines, the Stosstruppen were hugely successful. At first. The casualties among the Stosstruppen were astronomical, much higher than was typical among British assault troops. Overall, German casualties weren't particularly heavy by the standards of the Western Front, but the attrition ate away at the Reichswehr's operational effectiveness since it was concentrated among key personnel. The offensive eventually ran out of steam, and the Germans had nothing left. All of their best troops were gone.

Something similar happened in World War Two. Perhaps the most effective small units in the war were the German Pionieren, a group of elite assault engineers. They were a bit different than US combat engineers, because they weren't trained in bridge building, or the other construction skills these American troops, or even regular German combat engineers had. They were skilled in demolitions, flamethrowers, and blowing things up in close quarters. Huge numbers of them died in Stalingrad, trying to root the Red Army out of the rubble and cellars. Again, the German approach to solving a problem was specialized infantry, and, again, they ran out of men before they ran out of jobs for them.

All this said, even the gap between German and American combat troops wasn't as great as usually thought. Like the Wehrmacht, the US military had a force made up of all volunteers, put through initial training that went beyond brutal into the realm of sadism. Like their German counterparts, these Americans emerged from that training an elite, tough, and skilled, and were used at critical points when no one else would do. The difference is how these troops were equipped and used. The Waffen SS was made into heavy armor, and fought toe to toe with equally heavily armed Russians, British and Americans wherever German lines were most threatened. The US Marine Corps became light infantry, and stormed beaches in the Pacific. They never fought the Germans at all, so it isn't quite fair to compare the Wehrmacht, including the best units they had, with American forces whose best units were literally on the other side of the world.

For all of the talk of German tactical skill, the Marine Corps solved a tactical problem far more difficult than anything the Wehrmacht ever looked at. The Germans barely figured out how to get on boats, let alone back off of them under fire. They were defeated by the English Channel.

I just got done reading Utmost Savagery: The Three Days of Tarawa. It's a recent analysis of that battle, using sources, particularly Japanese, not available when the standard histories were written shortly after the war. It's well written, and manages not only to explain the tactical problem, but also convey some of the horror involved.

Ignore all of the problems that are unique to the logistics and planning of amphibious assaults, and you're still left with a nightmare. Somehow, you have to get off the boats and onto land, while the enemy is shooting at you. The coral atolls of the South Pacific presented an additional obstacle not present at Normandy: the reef. At Tarawa, this reef varies from 500 to 800 yards away from the actual beach. The tide was too shallow to allow landing boats to cross it.

The innovation the 2nd Marine Division came up with, entirely on its own and against the resistance of pretty much everyone else involved, was to use amphibious tractors designed for carrying cargo to bridge that gap from boat to beach. The gamble was a success, and incorporated into general doctrine, but at a very high price. The combination of an ineffective preliminary naval bombardment with the basic unsuitability of the vehicles, slow and thin skinned, for combat operations meant that accurate Japanese fire destroyed them in huge numbers. The intention was for the LVTs to make repeated runs from the reef to the beach, but this didn't happen. By the morning of the second day, fewer than ten of the original 83 tractors were still in service.

This produced a problem for the first wave, and a related problem for the rest of them. Another of the things that makes opposed landings so difficult is the complete chaos the descends on the attackers instantly upon the start. LVTs tried to dodge fire, so many of them hit the beach somewhere other than where they were supposed to. Between those shot down getting to the beach, and the extreme vulnerability of troops as they got out of the tractors, the initial assault companies suffered casualties far over 50% within the first minutes of the battle. The survivors were shocked and demoralized, and unit cohesion was shattered by the casualties and the intermingling of different units in the confusion. Most of the officers were dead. An offensive is just like the balls you study in physics class. An attack in motion tends to remain in motion; an attack at rest tends to never get back underway. The Marines hit the seawall, and stopped dead.

The attempt to restart the momentum had a difficulty beyond the disintegration of the chain of command and the shock. A crucial part of military campaigns is operational depth. Having space to the rear allows the opportunity to regroup, and to move around to find a weak spot in the enemy front. In normal offensives, the area utilized is miles deep. At Tarawa, it was measured in feet. Any regrouping would need to be done under fire, and the only maneuver room was salt water.

For the successive waves of Marines, with the losses among the LVTs, the only way to get to the beach was to walk. They had to move the 500-800 yards beyond the reef on foot, under fire, rifles held over their heads to keep them sort of dry. It was like attacking on July 1, 1916, except through four feet of water.

This was the problem the Marines faced. Through sheer determination, they got off the beach and destroyed the Japanese. Ten weeks later, they demonstrated that they had learned the lessons needed to keep casualties down when they invaded Kwajalein.

Update

I haven't had the motivation to write lately. Studying for the CPA exams has been taking up most of the energy I can generate. They are going well. I took both FAR and AUD, and I'm pretty sure I passed both of them. BEC is on the 27th, but I could pass it if I had to take it tomorrow.

I did get out and go to a class on salsa dancing last night. An online friend suggested that that was a good way to meet people. It seems like it'll work out.

I should also have a couple of posts up in the next couple of days.

Cathy

Cathy, if you're reading the blog, please check your e-mail.

Greed and Morality

In our capitalist society, we recognize that greed is an inherent part of human nature, and try to provide incentives to channel it in socially productive ways. This has led to a sensibility that greed is not simply inherent, but actually moral. The crudest form of this sensibility, which you heard a lot in the 1980s, but less so now, is, "Greed is good." I've actually had people tell me that this was Adam Smith's position, which indicates that the speaker has never read The Theory of Moral Sentiments.

What has become, if anything, more common is a subtle conflation of what is legal with what is moral. Matt Yglesias has a post today, not his first on the subject, making the argument that people enforcing contracts in a way that maximizes their profit is not necessarily moral behavior. In fact, such greed can be extremely immoral, even though we allow it.

Roughly speaking, I agree with Yglesias. I think that there is another element to it, which hearkens back to my point in the Arlen Specter post that moral imperatives are not the same for all actors, or even for the same actor in different roles that they play. I think that a case can be made that, for a publicly held corporation, the moral imperative is to maximize profit regardless of other consequences. Of course, corporations aren't people, except in the most narrow legal sense, and so they can't have moral imperatives. They devolve to the corporate officers, such as the CEO and the board of directors. For these officers, there is an ethical requirement to be greedy. This extends beyond just publicly held corporations. The hedge funds Yglesias discusses have the same issue, because their reason for existence is to maximize returns for their investors.

Just as with the politician in my last example, though, these officers are also individual human beings. As such, they are also subject to the same moral imperatives that the rest of us are, in which greed is not a virtue, but rather a flaw that we tolerate. What has happened is that this second set of moral imperatives have been lost in the fog of the first. We have built an ethos in which we pretend that a CEO, or the manager of a hedge fund, should behave under a system of ethics that sees that role as the only role that the human being in question plays.

This is destructive. Balancing different sets of imperatives is complicated, hard, and extremely difficult to evaluate. Tough. It needs to be done. We can't have powerful individuals operating as if the morality of individuals does not apply to them. Life is full of balances and trade offs that must be made. This is one of them.

Of course, this also touches on a complaint I made here a while back that Greed, or Avarice, if you prefer, is the only one of the deadly sins that free market absolutists want to take into account in their system. They sometimes make room for Wrath, but that's not enough. This is warped, and produces a society that is inherently unstable. (It's also an example of how my posts can ramble and escape the original subject matter, but let that pass.)

Sloth needs to be accounted for. This is, in the small world way that posts unintentionally relate back to each other, a part of that whole hatred of Europe that the right wing has. By building a system around greed, we have exalted GDP growth above all other measures by which we measure societal success. Europe, on the other hand, has made a fairly conscious decision to exchange some potential economic growth for things like longer vacations and shorter work weeks. Some of the wealth they have accumulated is additional leisure time, and, make no mistake, this is a form of wealth, even though it doesn't get measured as a positive in typical economic statistics.

I won't really get into Lust, because its opponents generally don't argue against it on economic grounds. I don't want to stray too far from my original purpose.

The most important of the sins, in an economic sense, that needs to be accommodated is Envy. Like it or not, Envy is a very real part of human nature. I can put together some practical reasons why excessive disparity in wealth and income is a bad thing. Beyond those, though, is that Envy must be accounted for. The have-nots are going to envy the haves. If you let this build up enough, it can and will tear society apart. Even if it doesn't lead to violent revolution, it can produce some extreme economic inefficiencies as the haves spend a lot of money, not on anything productive, but simply protecting what they have from those that don't have it.

Leftist governmental impulses are the most obvious way to take Envy into consideration. Envy is best dealt with in the political sphere. Anyone who believes in the free market because it turns a vice into something that benefits society really should, if they are intellectually honest, recognize that they have to make other concessions to human nature. An awful lot of them don't, though, and consider any such concession as tolerance of evil. One might think that they have a Greed inspired motive for thinking that only their own sin should get a pass.

For my own part, I try to be flexible on everyone else's sins in the hopes that they will reciprocate on my big one, which is neither Greed nor Envy.

Constitutional Monarchy

I stopped by the local game store to buy a couple of miniatures today, and overheard a couple of people discussing a number of subjects. Keep in mind that game stores are inhabited by cranks, who tend to lean glibertarian. They mangled several subjects, but one that got them very exercised was the fact that George Washington turned down an opportunity to be king when the United States was being formed. They declared that we were very, very fortunate that he turned it down.

Now, I'm a pretty big fan of the American political system (though I could do with a Senate that was somewhat more equally proportioned). Let's be serious for a moment, though. It's not like anyone was considering giving King George the First the powers of Louis XIV or anything. The alternative to our purely representative democracy was along the lines of Great Britain. Even 220 years ago, they had a system that we would pretty much recognize as a functioning parliamentary system. At the time, the king retained a large share of the foreign policy portfolio, splitting executive duties with the Prime Minister. However, the Patriots considered making Washington a non-hereditary king. In a lot of ways, it would have been very similar to the current office of President, except with a very long term. I think we're better off the way we ended up, but don't go overboard exaggerating the alternatives.

This is related to something that really annoys me about the current Republican party, though it's way down the list of their problems. If you listen to them, when they declare that Barack Obama is a socialist, they inevitably say that he wants to make the US just like Europe. This is said in tones indicating that this would mean turning our fair country into a living hell. Visions of tyranny and poverty abound.

I've been to Europe several times. The places I've stayed have uniformly been pretty nice. I've even noticed that the natives usually seem happy. I've only run into the secret police on one occasion. The stores were well stocked, public transportation works, and people have fairly nice living accommodations. I could even, god forbid, imagine myself living there, so long as I can bring my cats with me.

There are really only two exceptions to my general good feelings about the continent, though I've never been to the center of evil, France:

1) The Dutch carbonate their iced tea. This means that they don't qualify as civilized. However, for being out in the barbarian wilds, it wasn't too bad.

2) The one time I ran into the secret police was in an honest to god socialist hell hole. I spent two days in East Berlin back when there was such a place. I can compare the Republicans' rhetoric to the real thing, and officially come to the conclusion that they have no idea what they are talking about.

Good News for McCain

Arlen Specter becomes a Democrat. I'm really pleased about this. Don't get me wrong; I don't have any more respect for Arlen Specter the human being today than I did yesterday. He's still spineless, weaselly, and motivated entirely by self interest. The only reason he switched parties is because a poll came out last week that showed him 21 points behind his Republican primary challenger. The chances of him winning were slim, and only became possible by doing things that would have ensured losing the general election. Arlen wants to remain a Senator, and this was his only shot.

So what? Look, the entire point of representative democracy is that politicians should respond to the incentive of getting re-elected. It's a perfect example of Machiavellian ethics, which I'm actually a believer in. (I think that Machiavelli gets an unfair rap by popular understanding.) Machiavelli was talking about the state, but the same thing holds here. Individuals operate under different moral imperatives than politicians do. A certain amount of craven self interest is moral behavior for a US Senator*, because we want them to represent their constituents. In Specter's case, it's pretty clear that his constituents don't really want a Republican representing them. My biggest problem with regards to the Senate is that I have little to no respect for the voters of Maine, who are unwilling to put the fear of losing an election into their two Senators, and so Snowe and Collins get away with pretending that they are moderates when they consistently vote otherwise.

Perhaps the best part of this is that it is clear that the GOP hierarchy had absolutely no clue that this was coming. How's that party purity coming along, Senator McConnell?

*Of course, Arlen Specter is both an individual human being and a US Senator. This means that he operates under different, and sometimes contradictory, moral imperatives. It's tough to sort out, and it is why there is also value in sometimes sticking to your beliefs even if they are unpopular with your constituents.