To predict politics by Game Theory

Political scientist  Bruce Bueno de Mesquitas game theory models can with a 90 % accuracy predict complex business and political scenarios. He presents his technique and at TED.

Thanks to

Has the Rule of Law been abandoned in the US?

I have always admired the US Constitution in general but most of all the strict adherence to the principle of Rule Of Law. This principle now seems fast to be eroding. During George W Bush the Rule of Law as regards to individual privacy all but disappeared  and now the Obama administrations behavior in the Chrysler bankruptcy has made it go away in business life as well.

Todd Zwycki writes in today Wall Street Journal and it makes me aghast, totally horrified.

Chrysler and the Rule of Law-The Founders put the contracts clause in the Constitution for a reason.

The rule of law, not of men — an ideal tracing back to the ancient Greeks and well-known to our Founding Fathers — is the animating principle of the American experiment. While the rest of the world in 1787 was governed by the whims of kings and dukes, the U.S. Constitution was established to circumscribe arbitrary government power. It would do so by establishing clear rules, equally applied to the powerful and the weak.

Fleecing lenders to pay off politically powerful interests, or governmental threats to reputation and business from a failure to toe a political line? We might expect this behavior from a Hugo Chávez. But it would never happen here, right?

Until Chrysler.

The value of the rule of law is not merely a matter of economic efficiency. It also provides a bulwark against arbitrary governmental action taken at the behest of politically influential interests at the expense of the politically unpopular. The government’s threats and bare-knuckle tactics set an ominous precedent for the treatment of those considered insufficiently responsive to its desires. Certainly, holdout Chrysler creditors report that they felt little confidence that the White House would stop at informal strong-arming.

And what if the next time it is a politically unpopular business — such as a pharmaceutical company — that’s on the brink? Might the government force it to surrender a patent to get the White House’s agreement to get financing for the bankruptcy plan?

Renewing classical liberalism? Part 1. The libertarian Democrat Manifesto

Terry Michaels on what he thinks liberalism ought to be if you are a Democrat.

He writes:

What’s the story behind today’s Democrat brand? I continue to be a partisan Democrat, but I’m not sure. I believe it’s something like: “Government isn’t all that bad; look at Social Security and Head Start. America isn’t always that good; we try to impose our will on a multi-cultural world. The marketplace is full of bad guys who need to be restrained, including their greed-driven political speech. Hey, we’re religious, too. And, not just equal opportunity for all, but re-distributive social justice entitlements for special “minority” victims, because, except for me and my friends, racism endures.”

Terry Michaels asks about a renewal of the Democrat party.

1. Centrist

2. Old time religion , offered by the economic policy reactionaries overly represented in the party’s congressional wing, preaches a return to an “old-time religion,” “complete-the-New-Deal” ideology.

That Fifties and Sixties battle cry might have made sense once. But it is mis-matched for today’s smarter voters, who want to make decisions from their homes, or at least their states.

Social welfare left-liberals often peddle a kind of middle-class neo-populism, a William Jennings Bryan appeal to folks with SUVs and satellite TV, with selective-memory imagery of the good life of the 1950s (again, see Bob Samuelson’s book.)

Sometimes they push class warfare, a version of which the ultra-ambitious John Edwards now seems to be selling as the self-appointed trial lawyer for the underclass.

Old-time religion seems to move (or at least receive lip service from) the Dupont Circle, K Street and AFL-CIO Washington-based wings of the base, but usually leaves the hinterland center cold. And the Beltway-based lefties have lost their nerve on non-interventionist foreign policy, so afraid of that “soft-on-defense” Cold War scarecrow the DLC neo-cons have been peddling for two decades that they allowed Bush’s elective war to commence without engaging any real debate.

So what is Terry Micheals suggestion. Become Jeffersionain liberals or as he in his libertarian Democrat Manifesto says;

We need a new story. Here’s a rough cut, a little more than can fit on a bumper sticker, assembled around the three fundamental issue frames of politics – economic, social, and foreign policy:

“Government: assure liberty by staying as far away as possible from our bank accounts, our bedrooms, and our bodies. Spread pluralistic democracy and free markets by example, understanding that neither can be planted by force on political real estate lacking indigenous cultivators for their growth. Restore the moral authority of mid-20th century “civil rights,” fashioning public policy around individuals, not tribal identity groups.”

The Blind fighting the Blind – Obama Keynesians vs Bush Keynesians

The nearly unimaginable problem we find us in now was caused by Keynesian and Neoclassic macroeconomic theories. The belief that by adjusting levers and micro tinker the economy you can smooth the economy i.e. cooling a overheating economy and heating up a recession. Both Neoclassic and Keynesian economics theory uses as its base the rational individual. The Neoclassic believe in Homo Economicus on an individual level and the Keynesian, nowadays also Behavior Economic theory, believe in the rational politician, bureaucrat, the illusion I call Homo Illuminatus.

In fact we are all individuals and we all behave, and if an individual is not behaving rationally how can an individual that is a politician, bureaucrat be assumed to behave more rationally? This is the fallacy of the Neoclassic theory that individuals always behave rationally but an even greater fallacy is the assumption that individuals always behave irrationally. Individuals in fact behave rationally most of the time, irrational behavior is rare but it exists and causes problems.

We have seen time after time since WWII that the effects of trying to manipulate, adjust the economy has led to the opposite of the intended effect. Overheating an already hot economy and supercooling an already cold economy. In fact in the US since Bill Clinton have had two types of Keynesian, conservative and liberal. The Conservative Keynesians has cut taxes to stimulate the economy but has not cut spending, George W. Bush Liberal Keynesians, as we have now, focus on public spending and has no focus on cutting future deficits.

We are now witnessing the Obama NeoKeynesian and Behavior Economic theorists talking down Neoclassical theories. They perceive that Neoclassic theory has brought us her and refuse to see that Keynesian ideology is equally or perhaps even more at fault. Instead of a moratorium on tinkering, manipulating they once more is intending to to impose the Enlightened planner, the Homo Illuminatus. Hayek has already explained that there can be no individual nor politician, bureaucrats that can no all preferences over time for all individuals.

The Use of Knowledge in Society
F.A. Hayek AER, 1945


What is the problem we wish to solve when we try to construct a rational economic order? On certain familiar assumptions the answer is simple enough. If we possess all the relevant information, if we can start out from a given system of preferences, and if we command complete knowledge of available means, the problem which remains is purely one of logic. That is, the answer to the question of what is the best use of the available means is implicit in our assumptions. The conditions which the solution of this optimum problem must satisfy have been fully worked out and can be stated best in mathematical form: put at their briefest, they are that the marginal rates of substitution between any two commodities or factors must be the same in all their different uses.

This, however, is emphatically not the economic problem which society faces. And the economic calculus which we have developed to solve this logical problem, though an important step toward the solution of the economic problem of society, does not yet provide an answer to it. The reason for this is that the “data” from which the economic calculus starts are never for the whole society “given” to a single mind which could work out the implications and can never be so given.

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The strange research of John Bates Clarck medal winner Emmanuel Saez

The case for higher taxes is based on the (false) assumption that the top tax payers in the US have more than doubled their share of income since 1980. The statistics is from the research of John Bates Clarck medal winner Emmanuel Saez with Thomas Piketty.

He has made has made his research available to the general public in his article Striking it Richer:The Evolution of Top Incomes in the United States. He claims that the top tax payers income has gone up dramatically, doubled. However if you scrutinize his research as Alan Reynolds has in WSJ article The Top 1%…of What? You find that the effect is imaginary, only an effect of changes in tax law, the actual underlying income is the same since 1980. Instead of having corporate income business owners changed the status of the corporations from C-corp to S-corp status. income reported as corporate income no was reported as individual income, however the total sum of income is the same. See Piketty/Saez rebuttal, extremely weak in my opinion.

To try to legitimize income redistribution with research is  in my opinion necessary but to try to do it with misleading research is dishonest, it is much more fair to use pure ideological arguments of class warfare. But unfortunately the American people does not support income redistribution unless you can substantiate it.

If Saez won the John Bates Clarck medal for this, his research one must wonder what the prize committee was thinking? Political maybe or just populist as was the Nobel Committees selection of Paul Krugman, a brilliant economist but a populist and biased partisan propagandist.

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Responsible Liberalism?

I moved to the US from Sweden. I became interested in what US liberalism stood for. As soon as I understood I shook my head in disbelief. In my opinion they had totally lost their way. They talked and acted like old school Big Government statists at best and socialists at worst. US Libertarians with a capitol L was not even close to classic liberals, the likes of Adam Smith and John Stuart Mill.

Then I found the Responsible Liberalism of former California Governor Pat Brown. In his inaugural speech presented January 5, 1959 he put into words exactly how I felt what a progressive classic liberalism was about. It was not class, racial or gender divisive politics of the poststructuralist left but pragmatism and realism, politics of vision and hope:

The essence of liberalism is a genuine concern and deep respect for all the people. Not monuments or institutions or associations, but people. Not one race, or one creed, or one nationality, but all the people. When people come first and special privilege is scorned, government is truly liberal.

In a liberal atmosphere, the individual stands secure against invasion of his dignity or intrusion on his conscience. He has the right to require justice and fair play, the right to demand protection from economic abuse and selfish threats to his security. At the same time, government must not, in naïve good intention, stifle his initiative or smother his growth. Men must indeed have freedom to breathe the air of self-respect.

A liberal program must also be a responsible program, a reasonable, rational, realistic program. We must know how much it will cost and where the money is coming from. Benefits must be measured against burdens. A program which pampers the people or threatens our solvency is as irresponsible as the one which ignores a vital need. But we will always remember that there is a difference between responsibility and timidity, and we are resolved to be governed more by our hopes than by our fears.

The Swedish Psyche, the extreme rationalist. A Viking tradition.

Be cautious. It’s a national trait explored on the first page of Modern-Day Vikings (2001). Labelled as “a practical guide to interacting with the Swedes” the opening lines quote the Hávamál, verses of Old Norse poetry dating back 1,000 years.

“Praise not day until evening, no wife until buried, no sword until tested, no maid until bedded, no ice until crossed, no ale until drunk.”