Banking as Conceptual Art

From the life-imitating-art department

The BBC is currently running a dramatization of Little Dorrit, which contains perhaps the most vile portrayal in literature of a corrupt and corrupting banker: Mr Merdle. News arrives from America of an outrageous fraud by a modern Mr Merdle: one Bernard Madoff who (as it now turns out) had been running his hedge fund as some kind of Ponzi scheme [BBC News, 16 December 2008].

Emperor's new clothes

Born into a wealthy Japanese banking family, Yoko Ono moved to New York to become a conceptual artist, with the help of LeMonte Young and John Cage. In one of her best-known early performances, she sat on a stage while members of the audience cut away pieces of her clothing until she was naked. This can be seen as a prophetic metaphor for the current banking crisis.

Use your illusions

In an article for the London Review of Books (November 2008), Slavoj Žižek compares the perceived urgency of the banking crisis with the talk-and-no-trousers of our dear leaders in the face of other crises (saving endangered species, saving the planet from global warming, finding a cure for Aids, saving the starving children, . . .)

"The sublimely enormous sum of money was spent not for some clear ‘real’ task, but in order to ‘restore confidence’ in the markets – i.e. for reasons of belief. Do we need any more proof that Capital is the Real of our lives, the Real whose demands are more absolute than even the most pressing demands of our social and natural reality?"

When Žižek talks about the Real, he presumably uses this term in the Lacanian sense. [See Slavoj Žižek Key Ideas. For further comment see Jodi Dean. and Long Sunday.]


Spending all that money as a symbolic act, in order to prop up some non-existent wealth? I am sure Lacan says something somewhere about the ritual destruction of assets. Is that what they call a potlatch?

Talking ourselves into a crisis?

Glenn Stevens (Governor, Reserve Bank of Australia): "The biggest mistake we could make would be to talk ourselves into unnecessary economic weakness" (Australian Business, 19 November 2008)

Ken Henry (Australian Treasury Secretary) : "We can talk ourselves into worse outcomes, course we can, people do. It wouldn't be the first time, but we don't have to." (ABC Radio, 12 November 2008. Via Kevin Rennie, who calls it "white-anting", an Australian term for internal erosion.)

(I've never been to Australia, but my mental image of "white-anting" is of a structure that suddenly collapses without warning, because of an accumulation of invisible damage. I think that metaphor perfectly describes the collapse of several large financial institutions because of an accumulation of unwise decisions by their traders and executives. But I think public nay-saying by opposition politicians is quite different from this, and I put a comment on Kevin's blog to this effect.) 

Jon Atkins (Business psychologist): "Are we driven to recession or do we talk ourselves into one? (EZine, 23 October 2008)

Don't Waste A Crisis

... says Rahm Emanuel, just appointed chief-of-staff by President-elect Barack Obama.

"You don't ever want a crisis to go to waste; it's an opportunity to do important things that you would otherwise avoid. In 1974 and 1978 we never dealt with it, and our dependence on foreign oil never changed."

[BBC News, 7 November 2008]

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A crisis is a terrible thing to waste

According to Thomas Friedman, this phrase was coined by economist Paul Romer. It echoes the slogan of the United Negro College Fund: A mind is a terrible thing to waste. There have been lots of people using this phrase in the last few weeks, plus some earlier uses. Here is a small selection.

• Thomas Friedman (New York Times, 18 April 2004)
• Eliot Spitzer (January 2005)
• Arthur Affleck (February 2006)
• Geoff Davis (April 2007)
• John Lee (July 2008)
• Hazel Henderson (September 2008 - good article this one)
• TwinCities (October 2008, article deleted but the comments still there)
• Tim Dollmeyer (October 2008)
• Richard Heinberg (October 2008) via Matt Holbert
• Max McKeown (October 2008)

Finally, Avrim Lazar attributes a version of the phrase Canadian economist Don Roberts

"A crisis is too precious an event to waste."

[Daily Gleaner, 5 November 2008]

A cliché is a terrible thing to waste.

 

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Related posts: Don't waste a miracle (October 2010), The Value of Chaos (December 2021)

Worshipping the Golden Calf

An American preacher called Cindy Jacobs organized a strange ritual in Wall Street yesterday. This apparently involved offering prayers at a statue of a bull, presumably in the hope that the current bear market will be terminated and the bull will rise again. [700 Club via Train Wreck Politics] 

It is difficult to see how this ritual fails to offend against the Ten Commandments. See also Exodus 32. I had never heard of Mrs Jacobs, but a quick internet search revealed her to be a controversial figure. I found a couple of websites accusing her of being a false prophet (Obadiah1317 and Philip Powell). An article on her was deleted from Wikipedia in December 2006. 

According to Mrs Jacobs, the current economic crisis is God's punishment not only for our stance towards Israel, but our blatant sin against Him in passing laws such as the one allowing homosexual marriages. 

Our? As far as I can make out, the current economic crisis is affecting Israel's friends and foes alike, as well as Israel itself. Surely if God wanted to send that kind of message, He would make Himself a bit clearer. But according to the Bible, His anger was particularly targeted at those who worshipped golden calves. Perhaps Mrs Jacobs needs to be a bit more circumspect.

 

See also Vain Repetition (November 2020)

Female Politicians and Electoral Crisis 2

It's not apparently just men who have an irrational reaction to Governor Palin. Women are also strongly polarized, between those who love her to bits and regard all attacks on her as sexism and/or elitism (for example, the editor of the PalinSexismWatch blog) and those who regard her as a sorry representative of their sex.

Clearly some of the items found by the PalinSexismWatch blog includes some pretty stupid and abusive stuff - childish rubbish and worse. But it also includes some serious questions posed by Palin's critics: to put serious political comment into the same category as childish rubbish is either naive or devious.

It is hard to guess the motives behind the childish rubbish. Some people may think that it is terribly amusing to be abusive about Governor Palin. But the effect of this is to create noise that gets in the way of serious debate. So who benefits from this? The people who want Palin to fail, or the people who want Palin's critics to fail?

Pam Atherton asks Why Some Smart Women Think Palin is a Good Choice, and suggests that it is hard for partisans to change their mind when there are so many narratives that help to explain away inconvenient observations. This explanation works both ways of course: there may be as many Democrats who are not prepared to give her a fair hearing as there are Republicans who are not prepared to give her critics a fair hearing.

Female Politicians and Electoral Crisis

In my previous post Playboy Models and Economic Crisis, I criticized research that purported to show men preferring taller, older women during an economic downturn, studies which were based on the rather unconvincing evidence of a few Playboy centrefolds. 

In Something about Sarah, Kathleen Parker accuses Senator McCain of having allowed sexual attraction to influence his selection of running mate. Parker cites a Canadian study published in 2003, which indicated that men made hasty decisions for short-term reward when confronted with attractive women.

Obviously McCain's selection of Governor Palin is based on extremely short-term thinking - she is chosen to help him win the election and certainly not to be an effective Vice-President (let alone, God forbid, President). And according to Robert Draper in The Making and Remaking of McCain, McCain struts like a younger man when he has Palin at his side. So it apparently benefits his campaign for him to appear more vigorous and virile, despite what I said in my post on Political Double Acts. 

The key question is whether McCain was himself befuddled by Palin's womanly charms, or whether he was calculating on this effect befuddling the American voter. There is also a question whether this befuddling effect is amplified by the current economic crisis, which evidently causes great anxiety for the American electorate (and therefore for McCain himself), thus providing a further reason for discounting the future. Parker ends her piece thus:

"If McCain, rightful heir to the presidency, loses to Obama, history undoubtedly will note that he was defeated at least in part by his own besotted impulse to discount the future. If he wins, he must be credited with having correctly calculated nature's power to befuddle."

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Margo Wilson and Martin Daly, Do pretty women inspire men to discount the future? Proc. R. Soc. Lond. B (Suppl.) 271, S177–S179 (2004)

Playboy models and economic crisis

Is there no depth to which once-respectable newspapers will delve to find titillating stories to entertain their readers? Daniel Finkelstein of The Times reports an alleged correlation between economic prosperity and soft porn - What the economic crisis will do to Playboy models (October 17th 2008). Apparently men prefer taller women during an economic downturn. See also Marginal Revolution. For a contrary view, see Indexed. 

Apart from the fact that the correlation is based on such a small sample that its statistical validity is very weak, the analysis assumes that any correlation can be explained in terms of male preferences for different kinds of women. This preference is then explained in terms of evolutionary biology - the so-called Environmental Security Hypothesis. Ha! 

Evolutionary biology provides a catch-all kind of explanation for all sorts of nonsense, including sexist nonsense. I'm not saying that all evolutionary biology is suspect, but much of what reaches the lay reader seems to be based on very poor science. 

The reason this is a bad explanation for this particular phenomenon is that it is looking at the wrong system. There is a simple economic system based on women taking their clothes off for magazines, and this system is controlled by editors, photographers, models and their agents. The models are not selected by the readers, but by professionals who think they know what the readers want. The selection is primarily driven by economic forces of supply and demand, and there are fairly obvious ways in which the economic environment might affect these forces - for example women who are capable of getting good jobs in good economic conditions may be forced to find less dignified work when times get harder. The idea that the selection of models is based on evolutionary biology seems pretty far-fetched, because there is no obvious mechanism connecting cause and effect. 

Now that nicely spoken boys from good schools can't get jobs in the City, some of them may become footballers instead. Some women (and gay men) might find some of these footballers more fanciable, because they know a bit of Ovid as well as the offside rule. No doubt the evolutionary biologists would try to explain this in terms of the Environmental Security Hypothesis as well. Ha! 

 

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Daniel Finkelstein, What the economic crisis will do to Playboy models (17 October 2008) 

Jessica Hagy, Unattainable is always sexy (Indexed, 22 October 2008)

Terry F. Pettijohn, II and Brian J. Jungeberg, Playboy Playmate Curves: Changes in Facial and Body Feature Preferences Across Social and Economic Conditions  (Personality and Social Psychology Bulletin, September 2004)

Alex Tabarrok, The Playmate Indicator (Marginal Revolution, 16 October 2008)

Gregory D Webster, Playboy Playmates, The Dow Jones, Consumer Sentiment, 9/11 and the Doomsday Clock: A Critical Examination of the Environmental Security Hypothesis (Journal of Social, Evolutionary, and Cultural Psychology 2008, 2 (2): 23-41)

See also Female Politicians and Electoral Crisis

Steering into the Skid

Contrasting (and presumably uncoordinated) approaches to the global economic situation.

• "The Bank of England has cut UK interest rates to 5.5% from 5.75% amid signs that the economy is slowing." [BBC News, December 6th 2007]

• "President George W Bush has outlined plans to freeze rates on sub-prime mortgages for five years to help people hit by the US housing market crisis." [BBC News, December 6th 2007]

One of the presenting problems has been a credit crunch. But how is a cut or freeze in interest rates supposed to deal with a perceived shortage of credit? Doesn't that just make things worse? After all, according to the simple economics of supply and demand, the normal response to a shortage of something is to put the price up, not reduce it. Or is this one of those paradoxical interventions, where you do the exact opposite of the common-sense action, like steering into a skid.

The difficulty with economic management, of course, is that there are many conflicting purposes and outcomes (inflation, growth, employment, trade, stability), and many conflicting views on how these can best be achieved. Those responsible for managing the economy have to understand the dynamics and governance of complex systems, from which they produce a single headline number - the new interest rate - which is chosen to produce some outcome or balanced compromise between multiple outcomes. Driving the economy around a slippery track, steering into the skid.