Al Dente

Steve: Still don't trust me?
Stella Bridger: I trust everyone. It's the devil inside them I don't trust.
--The Italian Job

Italy continues to look like the next EU hotspot. Italian sovereign debt is marking new lows this am. Chatter is getting louder that the Italian prime minister Berlusconi and his administration are on the way out.

Contacts from my network that know the situation suggest that income administrations are likely to make Berlusconi look like the austerity king...

Democracy, Inconsistency, and Conscience

I see the problem start
I watch the tension grow
I see you keeping it to yourself
And then instead of reaching conclusions
I see you reaching for something else
--Saga

Nice essay on the immorality of democratic voting.

One must conclude that those who advocate 'majority rule' voting must not believe in the property rights and the rights of the individual. Iinstead, they must believe that property is the domain of the collective to be forcefully redistributed at the whim of majority interest.

It is difficult to understand how the consciences of these people are not constantly haunting them. They must struggle with questions such as:

How can I justify forcing a minority, even a single dissenter, to give up their property to me and my cohort? How is this not outright theft--like highwaymen accosting the lone traveler?

If I do not respect an individual's right to property, then how can I honestly claim other personal rights, such as speech, religion, etc? What is the source of the personal rights that I do claim?

The inner conflict must be severe.

Judge's Orders

How can we find out more
Who owns the keyless door
Where does the circle end
Who are the unwatched men
--Zebra

The judge continues to operate in the zone, this time w/ a letter to the OWS crowd. He suggests three demands that the OWS people should focus on if they want the federal govt to stop killing people and to cease picking winners and losers:

1) End the Fed
2) End the wars
3) End the income tax

Doing that essentially starves the beast.

The judge explains that the current 99/1 propoganda is a class warfare ruse to distract the OWS from the real issue: the complicity between strong interest groups and the federal govt. He says,

"You are not poor because ten percent are rich. You are poor because the federal government has taken up all the oxygen of success in the room. You are poor because of decades of federal mismanagement that has laid ruin to our economic system. Capitalism did not make you poor. The lack of capitalism did. Your inability to pursue your entrepreneurial dreams unmolested by the government is the crime the government has committed against you."

The judge remains one of the very few in mainstream media who exhibit mastery of the priniciples upon which this country was founded.

Moral Irony

"Must men go to jail because they find themselves at odds with a self-appointed prophet?"
--Henry Drummond (Inherit the Wind)

The hypocrisy on display daily by the Left and the Right is sometimes jaw dropping. Take, for example, each side's views on 'morality.'

The Right often seeks to employ government as an agent for imposing a moral code of conduct grounded in organized religion. The Left often seeks to employ government as an agent for imposing a moral code grounded in a secular morality. Each side constantly warns the other: "Don't try to impose your morals on me!"

Yet that is precisely what both sides attempt to do.

Most ironic of all, both sides seek to use government, the world's strongest arm, to coerce the other side into normative submission.

The use of force to impose a moral code may be the most immoral act of all.

Political Quotient (PQ)

Kay Chandler: You're not a Democrat, are you?
Dutch Van Den Broeck: What if I am?
Kay Chandler: We talk. I give you books to read
--Random Hearts

Central to the method for measuring media bias in Groseclose (2011) is the political quotient (PQ). The PQ is a number, generally between 0 and 100, that reflects how liberal an individual is. The higher the number, the more liberal.

The PQ estimates the extent to which an individual agrees with endorsed positions of Americans for Democratic Action (ADA), a liberal interest group. Thus, to determine liberal media bias, the PQ employs criteria selected by liberals.

This is an attractive approach, because it reduces the contestability of what constitutes the liberalism construct. Liberals are defining it themselves. Stated differently, the PQ metric garners considerable validity because it is difficult to contest that the ADA issues are not a legitimate representation of the liberal political agenda.

The PQ of members of Congress can be estimated in a straightforward manner. Whenever an issue supported by the ADA (here is a current list of ADA issues) comes up for vote in the House or Senate, then a Congressperson's liberal bias is expressed by whether his/her roll call vote sides with the ADA's endorsed position.

The PQ is basically the number of times that an individual's roll call vote sides with the ADA position, divided by the total number of ADA-related issues put to a vote. In his method, Groseclose normalizes the scores so that a 50 represents the score of the average member of Congress (here is a list of some well-known politicians and their PQs).

Thus a PQ greater than 50 implies greater agreement with the liberal political agenda than average, or someone who is 'more liberal.'

People who don't happen to be members of Congress can estimate their PQs by assessing how they would have voted on the same issues. Here is a quiz that employs roll call votes taken in the House and Senate in 2009 on ADA-centric issues. Assume some margin for error here, as more accurately pinning down your 'real' PQ may require a larger sample size of roll call issues.

One concern that I have with this approach is that it assumes a unidimensional scale for measuring political bias. Of course, this is a common assumption that facilitates positioning political bias as being on either one side (Left) or the other (Right).

As we've noted on these pages, it is more likely that political beliefs are more appropriately captured on multidimensional rather than on unidimensional scales--which means that the oft referred to 'political spectrum' is more accurately thought of as a 'political landscape.'

Consequently, the PQ scale may commingle groups that have importantly heterogenous beliefs. For example, a libertarian might vote in favor of ADA agenda items related to particular social and foreign policy issues, while voting against ADA agenda items related to economic and fiscal policy issues. On the PQ scale, then, libertarians might appear as moderately liberal.

Groseclose, for example, estimates libertarian Ron Paul's PQ as about 31. However, it is difficult to view Paul's position on the PQ as completely consistent with the well-known politicians bracketing him on Groseclose's example list.

That said, Groseclose's PQ scale offers a worthy building block for estimating media bias. We'll discuss how in future posts.

Executive Order

"They want what every first-term administration wants--a second term."
--Robert Ritter (Clear and Present Danger)

American presidents have been issuing executive orders ever since the ink was drying on the Constitution. Early executive orders were informal and undocumented. It was not until 1907 that executive orders were formally numbered and archived (at that time, orders back to the Lincoln administration were retroactively captured as well).

There is no Constitutional provision that explicitly permits executive orders. When challenged, presidents claim that they are merely acting in accordance with the 'executive power' clause (Article 2, Section 1). This is a problem because the framers clearly intended for the legislative branch of the federal government, Congress, to be in charge of lawmaking. Because there is a gray area between making law and executing it, any president seeking to 'take the law into his own hands' possesses a potential vehicle for doing so in the executive order.

A straightforward conclusion of anyone who has studied this country's founding is that the founders did not intend for the executive branch of the federal government to possess as much power as it does today. And it is easy to posit that the executive order has been a primary mechanism for presidents to assimilate power.

Which president holds the record for most executive orders? I was fairly certain of the answer before looking it up. FDR issued an astonishing 3,466 executive orders during his tenure. His successor, Truman, was the second most active with 893. The 4000+ orders issued by these two administrations are more than all executive orders issued by subsequent administrations combined.

The backdrop of the FDR and Truman administrations was the Great Depression and WWII. It is during such times--times perceived as crises--that people are more willing to cede power to a central authority (Staw, Sandelands, & Dutton, 1981). It follows that rulers hungry for power will exploit those times. The executive order can help a president circumvent the Constitution and consolidate power.

This leads to the following proposition: The more difficult the times, the more likely that presidents will employ executive orders.

In the past few weeks, it seems increasingly clear that the Obama administration wants to use executive orders to implement its agenda. The president has been stating that he 'does not want to wait for Congress,' and argues that the tough times that we live in demand that he take action.

Of course, he also has an election coming...

Hard not to sense an FDResque deja vu moment. And if our proposition holds, we're likely to witness a tidal wave of executive orders from a president who, as famously stated by his former chief of staff, will not want to let a crisis go to waste.

References

Staw, B.M., Sandelands, L.E., & Dutton, J.E. 1981. Threat-rigidity effects in organizational behavior: A multi-level analysis. Administrative Science Quarterly, 26: 501-524.

End Zone

"You have no idea what men of power can do."
--Scott Pritchard (No Way Out)

Wondering about the plan hatched last wk in the euro zone? This explains it pretty well.

Another 'debt w/ more debt' proposal...

Left Turn

I break tradition
Sometimes my tries are outside the lines
We've been conditioned to not make mistakes
But I can't live that way
--Natasha Bedingfield

I recently completed Tim Groseclose's Left Turn, a book on liberal bias in the media. Groseclose is a rare bird. He's thrived in the big league academic world, a world dominated by liberals, despite being a vocal conservative. He is a full professor at UCLA, and holds joint appointments in the school's political science and economics depts. Previous appointments include CalTech, Stanford, Ohio State, and Carnegie Mellon.

He has been interested in media bias for some time, but it was his 2005 paper coauthored with Jeff Milyo (Univ of Missouri) that elevated his work to elite levels. The paper, "A Measure of Media Bias," was published in the Quarterly Journal of Economics. Currently in its 126th volume, QJE is a mecca for academics who aspire to place economic-oriented research in top tier journals.

In the paper, Groseclose and Milyo present their approach for measuring media bias. That approach in large part forms the basis for Left Turn.

What makes the original paper's publication in QJE even more interesting is that the journal is controlled by editors at Harvard, a bastion for liberal bias in the arts and sciences. What this implies is that Groseclose and Milyo's work was rock solid in its approach, lest it would have been unable to navigate the editorial gauntlet that surely was looking to riddle holes in the paper (those who have been thru the process understand what this means).

Stated differently, as much as Groseclose and Milyo's (2005) work likely ran counter to the beliefs of QJE editors and reviewers, the editorial staff could not find a legitimate reason to reject the paper--unless the staff was to turn intellectually dishonest.

Interestingly, it was after the publication of this paper in QJE that prestigious institutions around the country began offering Groseclose endowed chairs. Groseclose chose to remain at UCLA, where he is currently the Marvin Hoffenberg Chair of American Politics.

Not surprisingly, the media has failed to widely embrace the findings of the original paper or the subsequent book. But Groseclose's (2011) Left Turn is a compelling and interesting read. In posts to come I plan to record some of my key takeways so that I can hopefully retain them more effectively.

References

Groseclose, T. 2011. Left turn: How liberal media bias distorts the American mind. New York: St Martin's Press.

Groseclose, T. & Milyo, J. 2005. A measure of media bias. Quarterly Journal of Economics, 120(4): 1191-1237.

Democratic Despotism

So glad we almost made it
So sad they had to fade it
Everybody wants to rule the world
--Tears for Fears

Many people believe that the framers designed a democratic form of government for the United States. These people are mistaken. Democracy is a form of governmennt where government acts based on the will of the majority.

The framers were deeply aware of political history, and they knew that governments grounded in majority rule were destined to self-destruct. One reason is that, like any individual, people who comprise majorities seek to satisfy their interests using the least amount of effort possible. And, if given the opportunity to grow wealthier by political means rather than through productive effort, majorities will vote themselves more weath thru use of government force. Special interest groups perpetually wrestle to gain majority control of government's wealth redistribution mechanism.

That wealth comes out of the hides of the minority vote, who are forced to comply at the point of a gun.

When push comes to shove, therefore, majorities trample the rights of minorities in democracies.

The framers knew that the only form of government where people could be treated equally under the law and maintain freedom was a constitutional republic. Citizens elect from among themselves those people judge as most apt to represent their interests. But because the constitution is written in manner that places strict limitations on what central government can do, majorities or even supermajorities cannot employ government as an instrument to better their condition on the backs of minorities.

Majorities could not rule minorities if the supreme law of the land, the Constitution, was respected.

The framers assumed, of course, that the Constitution would be respected. This has proven to be a bad assumption.

Absent respect for the Constitution, government has become a wealth redistribution agent for any group that can marshal political favor from Washington. Those who ride that special interest wave are, of course, vocal proponents about the virtues of democracy.

However, democracy's primary feature, despotic dominance of the many over the few, can hardly be considered a virtue.

Greek Surprise

"I'll give you ten thousand dollars for driving me to Paris."
--Jason Bourne (The Bourne Identity)

In a move said to have 'blindsided' many, the Greek government has called for a referendum (a.k.a. a vote of confidence) on the bailout plan recently hatched by EU officials.

The word is that the 'voluntary' 50% writedowns on Greek debt may have been palatable to many external holders of Greek debt, but those inside Greece holding their own country's bonds, including Greek banks, don't want to take the haircut. For one, it would render some Greek banks insolvent.

The theme from Wall Street types in my personal circle is that, while they were largely skeptical that the plan put together last week would hold up, they are surprised by how fast it is unraveling.

That surprise is being reflected in markets worldwide. Sovereign debt of many Euro countries like Greece and Italy is getting crushed today. Stock markets are listening to chin music as well. The SPX is down about 2.5% in early trading.

Seems to me that domestic stock markets are in a precarious situation currently. Shorts have been squeezed out, hedgies have been buyin' 'em after feeling 'underinvested, and there has been a general movement toward more 'risk on' out of euphoria that the EU didn't collapse in early Oct.

Perhaps the collapse was merely postponed by a month or so.

From where I sit, if the SPX can't hold 1220 support, then it looks pretty vulnerable for a downside whoosh.

position in SPX