Octavo Dia

Friday, January 30, 2009

Book Review: Forgotten Continent

Reid, Michael. Forgotten Continent: the Battle for Latin America's Soul. New Haven, CT; Yale University Press, 2007.

This book was much more a history than a theoretical work. I don't have much of a background in Latin American history, so it's worthwhile in that regard anyway.

The theory, such as it is, is that history has a sacred place in Latin America--everything is interpreted in light of the recent or not-so-recent past. The interpretation of history is the source of political power--if a policy can be linked to a historical high period it is accepted, and vise versa (which goes a long ways towards explaining Chavez' ceaseless references to Bolivar).

The battle for Latin America's soul, therefore, is the dispute over the legacy of Latin America's founders. Does it belong to the populists or the democrats? Whose interpretation will be accepted?


Monday, January 19, 2009

Book Review: Exit, Voice, and Loyalty

Hirschman, Albert O. Exit, Voice, and Loyalty: Responses to Declines in Firms, Organizations, and States. Cambridge, MA; Harvard University Press, 1970.

This was a good book. It was filled with counter-intuitive conclusions, such as a monopoly is more secure when it has minor competitors than when it is pure. Here are some of the concepts that struck me as I was reading:

1. Those with the least price sensitivity will be the first to switch to a competitor. They derive a high, marginal utility surplus, and so are able to bear the costs of switching much more easily.

2. An industry with a combination of public and private options can very often be worse than a pure state of either. In a solely public environment, those who are unhappy with the situation have to remain in it, and will therefore actively seek to change it (the voice). In a solely private situation, leaving a failing enterprise for a substitute in itself shift demand from lesser to greater. In a mixed environment, however, those who are unhappy with the public situation will shift to the private, and their influence will be lost on the public institution.

3. Hirschman explains why two party systems still have ideological divides. Those who are powerless to exit (because the other party is "worse" than the one to which he subscribes), have the strongest incentive to keep the party in line. Thus the extreme of the party creates internal propaganda (and even external) to keep the party from shifting too far towards the center. (See RINOs.)

4. Loyalty is the final concept in this book, and it is one which does not fit the homo economicus model. Theoretically, when quality drops and there is a better value alternative, the exit should be en masse. That, however, would destroy any organization that slipped at all. Loyalty is, therefore, the sacrifice of short term good for long term good. A loyal customer purchases an overpriced or substandard product, so as to purchase that product again when it has reverted to its normal price and quality.


Saturday, January 17, 2009

Book Review: Angels and Demons

Schuetze, John D. Angels and Demons: Have Wings--Will Travel. Milwaukee, WI; Northwestern Publishing House, 1998.

This book was really short and really light reading: I read it in a single commute. As for the content, the shortness and lightness meant that it really didn't go into any sort of detail. I didn't learn anything I didn't already know from this text.

Stylistically, the "Old West" metaphor he used in the book broke down towards the end, as was kind of forced all along.


Friday, January 16, 2009

How to recapitalize a bank

So here's my own personal plan to recapitalize banks. $700 billion divided by 138 million American taxpayers is $5702 each. So you send that amount of money to every taxpayer, with the condition that if there are any debts outstanding, it must be applied to that debt, with the highest interest debt paid first.

Indirectly, then, this form of rebate would recapitalize the banks. They'd get the money second hand anyway through debt payment, but this proposal has several other benefits:

(a) by reducing or eliminating debt payments, you'd free up income for additional consumption, which would have an immediate benefit to the economy.
(b) by reducing or eliminating other debt payments, remaining current on mortgages would be much more manageable--thereby reducing the foreclosure rate.
(c) by paying the highest interest rate first, you'd be removing the riskiest assets from bank balance sheets, thereby improving the soundness of the bank's investments.
(d) it would contribute to the economy-wide deleveraging which would otherwise take a much longer time.

The only real downside I see is that whoever implemented this would be a populist god.

Real Whistleblower protection

In Great Britain, the cabinet is derived from the House of Commons. Every member of the Cabinet has his own seat in the House. This automatically guarantees that if a minister resigns in protest, he has a back bench position to fall back on. Not so for the American cabinet members. If you disagree with the administrations position, you resign AND you're unemployed.

I think we should have a golden parachute for Cabinet members. Guarantee them that when they're approved by the Senate, they will receive their paychecks until the end of the term. Thus financial considerations would not enter into the decision to take protest to the next level.

Sunday, January 11, 2009

Book Review: Nickel and Dimed

This book has been on my reading list for years. I was still in college when I added it, so it's been at least six.

My main problem with her approach is theoretical. She set herself up for failure. Poverty is not a solo affair. She plunged herself into a variety of settings with no family, no friends, no, for example, uncle who could give her a ride to work when her car broke down or cousin who she could live with while she found a place to stay. Even illegal immigrants tend to go to places were other illegals have established themselves. The trailblazers are a unique subset of the lower class.

One of the more interesting things, to me, was the impact that men have on the lower class lifestyle. A husband or boyfriend, among the women she met, was very often all the difference in the world. And not only from a solely economic perspective, as she discovered while living on a ground floor roach motel. Physical security was often just as much a part of womens' well being as the economic security men offered.

And just on a stylistic note, even though I knew this was a polemical piece, her populist, Marxist leanings are a bit forced, as well as rather condescending, but the false consciousness thesis has always appeared condescending to me.

Saturday, January 10, 2009

How to organize a labor union.

I believe labor unions have the right idea, but the wrong approach. Instead of a legal approach, they need a business approach. If you think about it, labor is purchased from millions of tiny entrepreneurs each of whom are running their own, tiny, human capital firm. Looking at it this way, worldwide, WalMart contracts with 2.1 million tiny firms--average annual revenue of each <$20,000. That's no way to run a business; there are no economies of scale.

On the other side, all of the companies are forced, for that reason, to have a sideline business devoted entirely to contract writing with all these tiny firms. Human resources, or how to do business on a microlevel. Even businesses that use temp agencies still have to have their HR department.

What they need is a business that focuses solely on the development and sale of human capital (a human capital firm, HCF for short). This organization would vet employees, provide training as needed, and cover all of the human resources problems. Rather than working for the company in question, you'd be working under contract for the HCF. Your benefits wouldn't depend on where, business wise, you worked, because that would be covered by the HCF. If one company laid you off, you'd just be back on the HCF roster of available workers. They'd retrain you and deliver you to their next client.

On the business side, you'd have only one organization to deal with. You wouldn't have to worry about benefits packages, training, or anything like that, and you'd have your employees pre-screened. On the personal side, there would be no job lock from benefits, losing a job would not be as traumatic, allowing much more labor mobility. Plus, with a HCF able to negotiate, you would have the same bargaining power as a union, but without the harmful effects on the business in question.

Monday, January 05, 2009

I aim to please

I currently live among a teeming multitude of city folk. In my day to day interactions with them, I have surmised that city people do not know how to enjoy themselves. A city person "enjoys" being distracted. Whatever they find pleasurable, it must be distracting. A constant flit of activity. There is no pleasure for them in concentration, in focus. Thus when they travel to a less distracting berg, it is promptly pronounced "boring" with the attendant declaration that "there's nothing to do." Nothing to distract them, that is. And without achieving the pinnacle of distraction, they cannot enjoy themselves.

Why Chicks dig Vampires

I have a theory as to why vampires are so frequently cast in romantic roles. Women figure that, if a guy is 200 years old, he just might have grown up.