During the second half of the 19th century... To prevent the breakdown of industrial and commercial progress, hundreds of creative reformers concluded that the world needed a shared set of facts. Knowledge had to be gathered, organized, standardized, recorded, continually updated, and easily accessible...BONUS
The result was the invention of the first massive "public memory systems" to record and classify—in rule-bound, certified, and publicly accessible registries, titles, balance sheets, and statements of account—all the relevant knowledge available... for investors to infer value, take risks, and track results... Over the past 20 years, Americans and Europeans have quietly gone about destroying these facts. The results are hardly surprising. In the U.S., trust has broken down...
The financial crisis was a major event which was caused by Wall Street's shortsighted greed — a greed which is epitomized in the way that the copula function became ubiquitous even though risk managers and even Li himself knew full well that it was extremely limited in how it should be used. If we want to 'be vigilant and not forget' the destructive potential of Wall Street, then the Gaussian copula function is actually a really good thing to get as a tattoo. There's an irony here too. Elms got this tattoo, in part, because of its very incomprehensibility — the way it epitomizes the way that Wall Street is 'predicated in obfuscation'. But Wall Street embraced Li's formula for the opposite reason — that it was very tractable and easy to understand, at least if you were a quant with a degree in finance. Elms's tattoo is the version of the formula which I used in the Wired article — but it's not, actually, the version of the formula which was used day-to-day on Wall Street... Most representations of the copula look nothing like that, and are much harder to understand. All of which shows that Elms is absolutely right, at heart, about the copula function and what it represents. To Wall Street, it's simple and easy — disastrously so. To the rest of us, however, it makes a Semiotext(e) book look like a Sesame Street lyric. And that, I think, is why Levin and Elms are going to be disappointed, and Blankfein is going to remain out of jail. Back in 1933, when Ferdinand Pecora uncovered huge scandals on Wall Street, they were easy for all Americans to understand, and easy to protect against. This time around, Wall Street's activities are incomprehensible not only to the lay person but even to senior bankers: a big part of the reason why the crisis was so big and so bad is precisely that people like Stan O'Neal and Bob Rubin failed at their job of understanding the risks their banks were taking. They were knavishly foolish, but still more fools than knaves — which means that it's extremely hard to make a strong case in front of a jury that what they did was criminal.
While the traditional view of financial innovation emphasizes the risk sharing role of new financial assets, belief disagreements about these assets naturally lead to speculation... Financial innovation always decreases the uninsurable variance because new assets increase the possibilities for risk sharing. My main result shows that financial innovation also always increases the speculative variance. This is true even if traders completely agree about the payoffs of new assets. The intuition behind this result is the hedge-more/bet-more effect: Traders use new assets to hedge their bets on existing assets, which in turn enables them to place larger bets and take on greater risks. This effect suggests that financial innovation is more likely to be destabilizing in more complete financial markets and when it concerns derivative assets... A question emerges as to how new assets should be introduced to minimize their short run impact on the speculative variance. I show that staggering (or delaying) the introduction of new assets is not effective because it reduces traders learning simultaneously with their speculation. A viable alternative is to set temporary position limits (or taxes) on new assets.
Private prisons don't save money, but they create an obvious and counterproductive profit motive that leads to policies that increase the prison population. Private prisons need more prisoners. While the most effective way to reduce prison costs is to "reduce the headcount," that is, the number of incarcerated. Private prison companies have a financial interest in doing the opposite. So whatever cost-saving private prisons might offer in the short run is swamped by their interest in making sure America imprisons more people, because otherwise they'd go out of business...
I'd be much more sanguine about the prospects for an agency in either the prison or welfare system that got paid only if their "clients" stayed employed, out of jail, and drug free for a year after leaving the system. But I doubt you could find many companies willing to take on such a contract, because who wants to bet on your ability to change the behavior of legal adults who have, as a group, a higher-than-normal propensity to be out of work and take drugs? ...
The genius of the real private economy is that firms that are really poorly run go out of business. It's not that some magic private sector fairy dust makes the firms all be runs soundly. Lots of bad businesses are out there. But they tend to lose money and close. Meanwhile, well-run firms tend to earn profits and expand. The public sector doesn’t have this feature. Just because a public agency is inept is no guarantee that it will go out of business. Resources are allocating according to political clout rather than any criteria of merit. It's a problem. But it's not a problem that "privatizing" public services actually solves. There's no magic private sector fairy dust.
Five of eight private prisons serving Arizona did not accept inmates with “limited physical capacity and stamina” or severe physical illness or chronic conditions, according to the state’s analysis, issued last month. None took inmates with “high need” mental health conditions. Some inmates who became sick were “returned to state prisons due to an increase of their medical scores that exceeds contractual exclusions.”posted by hippybear at 8:59 PM on May 23, 2011
“Unlike the private contractors,” the analysis said, the state “is required to provide medical and mental health services to inmates regardless of the severity of their condition.” Medical costs averaged up to $2.44 a day more for state inmates, a third higher than private prisons.
That gap can be wider. In Florida, officials found that two private prisons spent only about half as much on health care per inmate as comparable state prisons, a difference of $9 million over two years. Florida officials say that the new plan will better balance costs, and that private prisons comply with a 7-percent-savings law. But skeptics like State Senator Mike Fasano, a Republican, fear cherry-picking may be the only way they can do that.*
Now, our information society has made admirable progress learning to appreciate the behaviors and pathologies of the New Global Elite over the last few years (and adjust our expectations accordingly). We have given up our naive belief that laws will be used to prosecute “fraud” and made our peace with their brazen tax avoidance schemes, and we have, for the most part, come to recognize that whatever “rage against the machine” we harbor is best targeted at unionized sanitation workers, public school teachers and the like. What we have not fully come to terms with is how the unstoppable rise of the New Global Elite has ravaged gender relations...[random 'impressionistic' links thrown in to provide 'context' ;]
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posted by GuyZero at 2:35 PM on May 23, 2011