NB: wrote most of this about a month ago, but nothing much has changed since then.
Well, we have the stress tests now, and I think the whole situation is marginally less bad than I thought when they came up with the idea. Naturally, I don't for a second believe that the stress tests reflect the reality of the losses that will be taken. The "most adverse scenario" is in line with any thinking person's (and in particular several thinking persons at the IMF) baseline case at this point. I'd say there a 50% chance that the losses themselves could be worse. And then you have the question of how much earnings will cover over those losses. Right now, banks are back to making money hand over fist. They turned a tidy profit trading in Q1 and the government has lowered their funding costs substantially. The stress tests essentially had this trend continuing, which I think is dubious. Finally, the whole operation is based around bringing the banks to a 4% equity ratio after losses and earnings -- ie. 25-1 leverage. If this is what banking will continue to look like after the fall, we should all be scared. Banks need to go back to being boring. Those that aren't boring must be permitted to fail. With 25 to 1 leverage, there's never a dull moment, unless you are referring to that twilight calm that overtakes a driver on the highway just as he is falling asleep. In sum, I suspect these banks will be back at some later date. The actual math of the stress test was the farce it was expected to be.
Why, then, have I learned to stop worrying and love the bomb?
Basically, because the charade was at least a plausible farce. A lot of things in economics have to do with confidence, and banking is the clearest example. So even making the banks appear solvent can prevent a further run on them. It turns out that this required a lot more than keeping a bazooka in your pocket, as Hank Paulson put it, but in the end, a new president, a gigantic expansion of the Fed's balance sheet, and some jawboning about public private partnerships and stress tests seems to have done it. If the government wants to prop up the banking system, it can always do this; modern banks are only really insolvent when the ATM stops working, and given that the government prints up the greenbacks that they spit out and only accept these as satisfying your tax, the worst that can happen is hyperinflation and social and political breakdown -- but at least no banking system insolvency.
Naturally, this brings me to the key observation. You can always bail out the banking system. But do you want to? Basically, Obama has gambled that it was both politically necessary and economically viable to preserve more or less the same banking system he inherited. I won't comment on the political necessity of this decision. The guy is obviously a genius politician, I broadly agree with the direction he appears to want to take us in, and I don't see any reason to second guess his best judgement regarding how to get there.
I am worried, however, that he underestimates the ability of the financial system to lobby to resist change, and in this underestimation, he has made a pact with the devil. The pact may have been necessary to go anywhere at all -- again, I would have preferred a much more radical tack, but this is probably also why I'll never be a politician -- but that is no guarantee that it will work. If he does not take the opportunity to really reform finance and reign in this giant parasite, then his new deal will leave him perpetually hostage to a group that now knows better than ever that they can bring the train to a screeching halt again anytime. So propping up the banking system may have been a good step 1, but he better have a hell of a step 2 if he doesn't want to end up back at step 1 again in 4 years.
For the moment, I'm willing to go along with the 12 dimensional chess analogy., and reason that certain key people and groups need to receive concessions in anticipation of their future support. But I think we should keep in mind that the other team(s) are playing 12 dimensional chess as well, and they are not powerless or stupid. The society of owners may have stumbled, but the are staggering quickly to their feet and if you don't knock them out soon, we will be back to the same old cycle where money-makes-influence-makes-money.
Friday, May 29, 2009
Mechanism Design
Not to beat the same dead horse as always, but ... giddy-up! In my defense, Alan Blinder repeats himself as well, and his WSJ op-ed is identical to the comments he made a month ago at that Minsky conference.
Nothing has changed about the structure of financial industry incentives. Literally nothing. If anything, the bailouts have reinforced the idea that losing other people's money is just fine, and you will never be forced to suffer and serious personal consequences, either financially, or even in terms of reputation. Conventional bankers ruined conventionally can get a new lease on life by profiting from each other's ruined-ness.
Of course, the reason I repeat myself is because I consider this idea of mechanism-not-morals so important. You can find perverse incentive structures all over the place if you look around. Politicians want to get re-elected, and so have every incentive to write laws that better enable them to raise the funds to do just that. Companies want to find some competitive advantage, and so have every incentive to get ahead of the competition by capturing the political process. The military industrial complex wants to keep being the military industrial complex so they have every reason to want the country involved in a paranoid war against an unbeatable imaginary foe.
All the conspiracy theories you've heard are true; you simply have to replace the nefarious central intelligence agency they implicate with a evolved mechanism for self-perpetuation. Feedback loops don't stop on their own. They feed back to the hand that bites us.
The source of the problem is really quite simple: Give smart people go-for-broke incentives and they will go for broke. Duh.
Nothing has changed about the structure of financial industry incentives. Literally nothing. If anything, the bailouts have reinforced the idea that losing other people's money is just fine, and you will never be forced to suffer and serious personal consequences, either financially, or even in terms of reputation. Conventional bankers ruined conventionally can get a new lease on life by profiting from each other's ruined-ness.
Of course, the reason I repeat myself is because I consider this idea of mechanism-not-morals so important. You can find perverse incentive structures all over the place if you look around. Politicians want to get re-elected, and so have every incentive to write laws that better enable them to raise the funds to do just that. Companies want to find some competitive advantage, and so have every incentive to get ahead of the competition by capturing the political process. The military industrial complex wants to keep being the military industrial complex so they have every reason to want the country involved in a paranoid war against an unbeatable imaginary foe.
All the conspiracy theories you've heard are true; you simply have to replace the nefarious central intelligence agency they implicate with a evolved mechanism for self-perpetuation. Feedback loops don't stop on their own. They feed back to the hand that bites us.
Wednesday, May 27, 2009
The Poverty of Economics
A paper over at VoxEU has some interesting data about the boom and bust in railroad stocks in England during the 1840's. The question is whether you could have identified the bubble in shares and done something about it in order to mitigate the effects that the bust had. The author's argument is that shares of railroad companies were priced at a premium to the rest of the market, but that their dividends were also growing more rapidly, so there was no way to see that a bubble was inflating. Here's the money quote:
Only an academic could imagine that the short term spike in dividend growth rates contained all the information available to the market, and so could rationally justify the prices, because only an academic could manage to so thoroughly ignore the fact that common sense and simple logic are also source of information. I am reminded of certain scenes in the original Star Trek series in which Kirk reasons the superior intellect of an alien computer into a flashing, smoking, that-does-not-compute heap.
At any rate, the paper leaves out the only relevant number in the whole damn calculation, which is just how long the high dividend growth would have to continue to justify the premium to the market. This was the same logic that escaped folks in the tech bubble, where at one point, Cisco was priced at such a premium valuation that it's extraordinary growth would have had to continue unabated for 20 years to produce the same return as a treasury bond, at which point the company would have encompassed something like 99% of all US economic activity. Oh ... but the shares were not obviously mispriced because the company was growing faster than average.
God help us if these are the people we have in charge of controlling monetary policy.
As an investor, I find this logic absolutely comic; only an economist could be so narrow-minded as to believe that the high growth of the railroad dividends would go on forever. You don't need to predict the Potato Famine or the Commercial Crisis or anything else to know that trees don't grow to the moon. Eventually, the growth rate of every industry reverts back to the growth rate of the whole economy, if only, at the extreme, because an industry that grows fast forever eventually IS the economy. The only relevant question is how long this process takes.These results suggest that dividends had a highly influential role in determining share prices during the Railway Mania, with there being evidence of a relationship between share prices and both current dividends and short-term dividend growth. However, investors seem to have been unable to forecast the longer-term dividend changes, and this is why prices rose and fell in the way that they did.
Investors initially embraced railway shares as dividends rose following a period of sustained economic growth and widespread fare reductions which had led to a doubling of passenger numbers. These investors seem to have been initially unable to predict the Irish Famine, or the Commercial Crisis of 1847, both of which would eventually reduce incomes and trade. They also failed to forecast the extent and unproductiveness of new railway construction, which occurred as a result of the Mania and reduced the overall profitability of the railway industry. When these threats to dividends eventually became clear, the prices of railway shares began to fall. However, during the boom in prices it would have required considerable foresight for anyone to have successfully predicted the extent of these threats, and railway shares were not obviously mispriced.
Only an academic could imagine that the short term spike in dividend growth rates contained all the information available to the market, and so could rationally justify the prices, because only an academic could manage to so thoroughly ignore the fact that common sense and simple logic are also source of information. I am reminded of certain scenes in the original Star Trek series in which Kirk reasons the superior intellect of an alien computer into a flashing, smoking, that-does-not-compute heap.
At any rate, the paper leaves out the only relevant number in the whole damn calculation, which is just how long the high dividend growth would have to continue to justify the premium to the market. This was the same logic that escaped folks in the tech bubble, where at one point, Cisco was priced at such a premium valuation that it's extraordinary growth would have had to continue unabated for 20 years to produce the same return as a treasury bond, at which point the company would have encompassed something like 99% of all US economic activity. Oh ... but the shares were not obviously mispriced because the company was growing faster than average.
God help us if these are the people we have in charge of controlling monetary policy.
Monday, May 25, 2009
Deleuze, Bacon, and Macroeconomics
Yesterday I went to the Met's new exhibit to hear some dopey Englishman who pretends to be an art critic fuck Bacon's dead corpse like it were Kyle Minogue on a reality show. I violently dislike people who try to drag art through the muck and turn it into a sordid little secret puzzle about who traumatized who. If biographical detail about the artist actually helps us get into the art and experience it more fully, great, if not, then I don't care how many pairs of women's panties the guy owned. The worst is that this longtime 'friend' of Bacon's started of by saying how Bacon was very careful to manage what he said in public regarding his life because he felt that the surest way to ruin the experience of a painting was to try to reduce every one of them to a family portrait. So the artist explicitly warned about reading narrative into his works, explicitly sought to avoid it on the canvas and in the art tabloids, and yet he's not dead 20 years and we've got this celebrity vulture of haut-couture betraying the man. Revolting.
But the exhibit is worth seeing. And the roof garden afterwards was fun and vastly more rewarding than the lecture ...
I got interested in Bacon because I knew he was Deleuze's favorite painter. His paintings hold a central place in the classes he gave about painting, and in fact, the way Bacon paints really stands in for the art of painting in general in those lectures. The key concept that Deleuze developed there was something he called the diagram. The idea was that a canvas is not about the visible forms that you see once it is finished, but about the process by which those forms came into being. He meant this in the double sense of the actual process of laying paint on the canvas (and he goes into some detail about the history of the way canvases (or stone) were prepared since the time of the Egyptians) and of the way that the image of what you are trying to paint develops as you go on painting it and gradually revealing it to yourself. Basically, Bacon started by painting some image from a photo and then gradually transforming it as he worked. The distorted and overlapping forms you encounter at the end of this process are in some sense arbitrary, as the point of the painting is to somehow capture the themselves invisible forces that were working to transform the form he started with.
We can debate whether this is a good description of painting in general (really just a question of whether it makes painting enter our lives a little more fully) but I find that it definitely helps when looking at Bacon. He was really drawing diagrams and almost making very abstract charts and graphs, which also helps to account for the strange geometric framework that appears in every single painting. Some of the later stuff even includes small arrows that point to ... well .. they don't really point to anything at all, and the idea would be that they point to hidden singularities that define the forces that will shape the forms in just the way that a gene might shape the outcome of a developmental process. Pointing at a particular key gene in an embryo would look just as weird.
The whole idea is classic Deleuze, and if you wanted to sum up his philosophy in a soundbite you would look in this direction -- there is no such thing as a thing; all things are semi-stable forms that are the outcome of dynamic processes; the important thing to do is to follow the logic of these processes, to discover how they combine, and try to understand how very different looking forms might actually be just two stages of the same process, or examples of the same set of forces working themselves out under different conditions. Every-thing is a process, so there is no-thing; only everything is. Good formula ¿no?
Obviously, this applies very well to macroeconomics. In pretending to be a science, macroeconomics patterned itself on physics and got very obsessed with some simple forms -- their atom, the perfectly rational homo economicus, and their picture of a utopian market, magically sitting at perfect equilibrium. Somewhere along the way it forgot that both these forms have to be produced somehow. The purportedly rational humans through and evolutionary and social process, and the market through an institutional, technological and political process. They took their forms too seriously and forget to understand that those forms were just one possible semi-stable resolution of the forces that animate an economy. Economics forgot about history.
A better version of macroeconomics would look more like Bacon's paintings. It would stop worrying about predicting what will happen next quarter (which is never managed to do very well anyway) and start trying to illuminate what forces are pushing on the system at any given point. It would help us draw a diagram.
Take our current situation with those camel-fuckers in Shenzen. We have a clear problem set out in terms of forces -- they are saving and producing and we are spending to consume it. The resulting trade and payments imbalance has to work itself out somehow, and what macroeconomics might help us to do is to see what different forms of economic organization these forces might produce. The forces define the problem and you have to somehow figure out what forms will be compatible solutions, which different forms can coexist as solutions, and which cannot occupy the same world at the same time, even though they would also be valid solutions in other circumstances.
I would defend macroeconomic thinking from this perspective, even though I realize that to turn it into a science, you would have to attach some numbers to those diagrams.
But the exhibit is worth seeing. And the roof garden afterwards was fun and vastly more rewarding than the lecture ...
I got interested in Bacon because I knew he was Deleuze's favorite painter. His paintings hold a central place in the classes he gave about painting, and in fact, the way Bacon paints really stands in for the art of painting in general in those lectures. The key concept that Deleuze developed there was something he called the diagram. The idea was that a canvas is not about the visible forms that you see once it is finished, but about the process by which those forms came into being. He meant this in the double sense of the actual process of laying paint on the canvas (and he goes into some detail about the history of the way canvases (or stone) were prepared since the time of the Egyptians) and of the way that the image of what you are trying to paint develops as you go on painting it and gradually revealing it to yourself. Basically, Bacon started by painting some image from a photo and then gradually transforming it as he worked. The distorted and overlapping forms you encounter at the end of this process are in some sense arbitrary, as the point of the painting is to somehow capture the themselves invisible forces that were working to transform the form he started with.
We can debate whether this is a good description of painting in general (really just a question of whether it makes painting enter our lives a little more fully) but I find that it definitely helps when looking at Bacon. He was really drawing diagrams and almost making very abstract charts and graphs, which also helps to account for the strange geometric framework that appears in every single painting. Some of the later stuff even includes small arrows that point to ... well .. they don't really point to anything at all, and the idea would be that they point to hidden singularities that define the forces that will shape the forms in just the way that a gene might shape the outcome of a developmental process. Pointing at a particular key gene in an embryo would look just as weird.
The whole idea is classic Deleuze, and if you wanted to sum up his philosophy in a soundbite you would look in this direction -- there is no such thing as a thing; all things are semi-stable forms that are the outcome of dynamic processes; the important thing to do is to follow the logic of these processes, to discover how they combine, and try to understand how very different looking forms might actually be just two stages of the same process, or examples of the same set of forces working themselves out under different conditions. Every-thing is a process, so there is no-thing; only everything is. Good formula ¿no?
Obviously, this applies very well to macroeconomics. In pretending to be a science, macroeconomics patterned itself on physics and got very obsessed with some simple forms -- their atom, the perfectly rational homo economicus, and their picture of a utopian market, magically sitting at perfect equilibrium. Somewhere along the way it forgot that both these forms have to be produced somehow. The purportedly rational humans through and evolutionary and social process, and the market through an institutional, technological and political process. They took their forms too seriously and forget to understand that those forms were just one possible semi-stable resolution of the forces that animate an economy. Economics forgot about history.
A better version of macroeconomics would look more like Bacon's paintings. It would stop worrying about predicting what will happen next quarter (which is never managed to do very well anyway) and start trying to illuminate what forces are pushing on the system at any given point. It would help us draw a diagram.
Take our current situation with those camel-fuckers in Shenzen. We have a clear problem set out in terms of forces -- they are saving and producing and we are spending to consume it. The resulting trade and payments imbalance has to work itself out somehow, and what macroeconomics might help us to do is to see what different forms of economic organization these forces might produce. The forces define the problem and you have to somehow figure out what forms will be compatible solutions, which different forms can coexist as solutions, and which cannot occupy the same world at the same time, even though they would also be valid solutions in other circumstances.
I would defend macroeconomic thinking from this perspective, even though I realize that to turn it into a science, you would have to attach some numbers to those diagrams.
Democracy is the worst form of government except for all the rest ...
... which makes clear that the best form of government is none.
Without following through to the inevitable conclusion that states too big to govern are too big to exist, Paul Krugman hammers the nail directly on the head once again.
The problem with the US isn't really the (lack of) financial regulation or out of control healthcare spending, or anything that seems to be so pressing in a real economic sense. All those problems are soluble so long as you have a functioning political system, which we don't. So when are we going to admit that democracy was a noble experiment that failed to scale? Or, perhaps equivalently, when do we put Google's warehouse-scale-computer architecture in charge of the whole works?
Maybe that's the fundamental insight of evolution. Statistically speaking, any given space-time sample of the history of the universe will be populated by things that scale well in one way or another.
Without following through to the inevitable conclusion that states too big to govern are too big to exist, Paul Krugman hammers the nail directly on the head once again.
Last week Bill Gross of Pimco, the giant bond fund, warned that the U.S. government may lose its AAA debt rating in a few years, thanks to the trillions it's spending to rescue the economy and the banks. Is that a real possibility?Well, in a rational world Mr. Gross's warning would make no sense. America's projected deficits may sound large, yet it would take only a modest tax increase to cover the expected rise in interest payments — and right now American taxes are well below those in most other wealthy countries. The fiscal consequences of the current crisis, in other words, should be manageable.
But that presumes that we'll be able, as a political matter, to act responsibly. The example of California shows that this is by no means guaranteed. And the political problems that have plagued California for years are now increasingly apparent at a national level.
The problem with the US isn't really the (lack of) financial regulation or out of control healthcare spending, or anything that seems to be so pressing in a real economic sense. All those problems are soluble so long as you have a functioning political system, which we don't. So when are we going to admit that democracy was a noble experiment that failed to scale? Or, perhaps equivalently, when do we put Google's warehouse-scale-computer architecture in charge of the whole works?
Maybe that's the fundamental insight of evolution. Statistically speaking, any given space-time sample of the history of the universe will be populated by things that scale well in one way or another.
Saturday, May 23, 2009
The War on Debt
America, fuck yeah! Though seriously, today's missive regards the analogous campaign in the UK. Martin Wolf is always worth a read, and his column about how the UK should get tougher on its banking sector (or die trying) is no exception. But I've been over this argument that finance as an industry needs to shrink so many zillion times now that I'm starting to get bored with it. What really caught my eye in the column was this phrase:
One of the interesting things about this crisis is the way it echoes some of the things that happened the last time we had a big financial crisis, ie. the Great Depression. Proceeding strictly by analogy, you would expect that the bursting of a massive credit bubble would result in debt-deflation, failed financial institutions and a massive contraction in the economy. Back then, the solution lay partly in the New Deal, but mostly in WWII, the greatest public works program of all time. Does this mean that we're in for an inevitable world war?
My arch rhetorical question makes it obvious that I expect history to rhyme rather than repeat itself, as the saying goes. We're not going to have another world war, I propose, because we already had one. Isn't that what Wolf's offhand remark suggests? We already had the war in the sense that we already paid for it, which, from an economic perspective, is the only thing that counts.
Bear with me here and we'll see if this makes sense.
Normally people only dedicate a lot of time to working and making stuff because they anticipate that in the not too distant future they will get something they want in return. This is great as long as everybody else keeps working so that your incremental output kind find a buyer. If your customer decides he can simply make do with less, then when you go to exchange your own output with him, you are bound to get less in return. This reduces your incentive to work, which then reduces his incentive to work, and ... it's the paradox of thrift all over again.
One good way to cure this is debt. In a closed system with inviolable contracts, debt is really just a promise to keep working. I can give you what I made today in exchange for just the promise that tomorrow you'll make some stuff for me. As long as we both keep our word and things stay more or less equal (I made promises to you and you made as many to me) this is a great way to overcome all kinds of timing issues like who has what and when -- we'll all just keep making stuff and it will come out in the wash at the end.
Unfortunately, debt has a tendency to get unbalanced. Let's imagine I'm doing all the lending because I'm making a lot more stuff than you are (relative to the amount I'm consuming myself). After a while it's going to seem like I'm doing all the work and you're doing all the promising, and we both start to get worried. I'm worried that you're not really going to keep working, and you're worried that you're just going to be working forever like a sharecropper, while I kick back and live off your foolish promises. So we both, quite rationally, stop working, and rideshare the same handbasket to hell (or at least reduced production). I guess this could happen with debt at any point, as any promise can be broken if trust collapses, but it seems to me that it's especially exacerbated in periods of income inequality, where one segment of the population is a net debtor and one a net creditor. When a system of mutual promises like this unwinds it runs the logic of economic cooperation in reverse, and we get a great depression.
I promise I'm heading somewhere with all that. It seems that the process of debt accumulation, if it gets unbalanced, came come to a sudden halt and then run in reverse. So the boom in credit, the bust, and the ensuing need to pick up the pieces are all linked.
Since the Great Depression of course, we have relied on the government to actively step in and pick up the pieces, rather than let the cycle of debt-deflation run its course. To stop it, you have to somehow get everybody to trust that they will be rewarded if they go back to work. Back in the day this was easier. The pharaohs were the only real consumers and were net debtors in a real sense (the slaves worked while they genetically engineered their cats) but they also controlled the apparatus of credit and technology. Instead of paying the slaves in food, you paid them in religion. A more modern society, even a fairly religious one like the USA, is more steely-eyed and cynical than this ... except when it comes to WAR.
War is really just a good excuse to keep everybody working and making stuff. Better yet, the stuff you make for war doesn't allow you to be any more productive -- it just explodes in the air or even reduces the total productive capacity by destroying your neighbors factory. It's the little piece of religion that an out of balance capitalist system needs in order not to collapse. War is a means of enforcing frivolous consumption that also allows the system to consolidate distributed debt (you owe me and I owe you) into one giant federal debt. If you make your definition of war more abstract, or just focus on its economic consequences, you can see how we've already been involved in one.
That's my story, which sets up my punch line, namely that debt is already a form of fascism. At first, it manifests the good side of fascism, the fact that we're all cooperating and working a lot now without worrying how we will be compensated in the future. But then it tips over into the totalitarian side of the phenomena -- you can't stop working, you need to keep marching alongside everyone else and produce more than you consume so that it can be symbolically wasted, or the whole system will fall apart. This time we're just wasting it on bankers instead of bombs.
The fiscal costs of this crisis will be comparable to those of a big war.
One of the interesting things about this crisis is the way it echoes some of the things that happened the last time we had a big financial crisis, ie. the Great Depression. Proceeding strictly by analogy, you would expect that the bursting of a massive credit bubble would result in debt-deflation, failed financial institutions and a massive contraction in the economy. Back then, the solution lay partly in the New Deal, but mostly in WWII, the greatest public works program of all time. Does this mean that we're in for an inevitable world war?
My arch rhetorical question makes it obvious that I expect history to rhyme rather than repeat itself, as the saying goes. We're not going to have another world war, I propose, because we already had one. Isn't that what Wolf's offhand remark suggests? We already had the war in the sense that we already paid for it, which, from an economic perspective, is the only thing that counts.
Bear with me here and we'll see if this makes sense.
Normally people only dedicate a lot of time to working and making stuff because they anticipate that in the not too distant future they will get something they want in return. This is great as long as everybody else keeps working so that your incremental output kind find a buyer. If your customer decides he can simply make do with less, then when you go to exchange your own output with him, you are bound to get less in return. This reduces your incentive to work, which then reduces his incentive to work, and ... it's the paradox of thrift all over again.
One good way to cure this is debt. In a closed system with inviolable contracts, debt is really just a promise to keep working. I can give you what I made today in exchange for just the promise that tomorrow you'll make some stuff for me. As long as we both keep our word and things stay more or less equal (I made promises to you and you made as many to me) this is a great way to overcome all kinds of timing issues like who has what and when -- we'll all just keep making stuff and it will come out in the wash at the end.
Unfortunately, debt has a tendency to get unbalanced. Let's imagine I'm doing all the lending because I'm making a lot more stuff than you are (relative to the amount I'm consuming myself). After a while it's going to seem like I'm doing all the work and you're doing all the promising, and we both start to get worried. I'm worried that you're not really going to keep working, and you're worried that you're just going to be working forever like a sharecropper, while I kick back and live off your foolish promises. So we both, quite rationally, stop working, and rideshare the same handbasket to hell (or at least reduced production). I guess this could happen with debt at any point, as any promise can be broken if trust collapses, but it seems to me that it's especially exacerbated in periods of income inequality, where one segment of the population is a net debtor and one a net creditor. When a system of mutual promises like this unwinds it runs the logic of economic cooperation in reverse, and we get a great depression.
I promise I'm heading somewhere with all that. It seems that the process of debt accumulation, if it gets unbalanced, came come to a sudden halt and then run in reverse. So the boom in credit, the bust, and the ensuing need to pick up the pieces are all linked.
Since the Great Depression of course, we have relied on the government to actively step in and pick up the pieces, rather than let the cycle of debt-deflation run its course. To stop it, you have to somehow get everybody to trust that they will be rewarded if they go back to work. Back in the day this was easier. The pharaohs were the only real consumers and were net debtors in a real sense (the slaves worked while they genetically engineered their cats) but they also controlled the apparatus of credit and technology. Instead of paying the slaves in food, you paid them in religion. A more modern society, even a fairly religious one like the USA, is more steely-eyed and cynical than this ... except when it comes to WAR.
War is really just a good excuse to keep everybody working and making stuff. Better yet, the stuff you make for war doesn't allow you to be any more productive -- it just explodes in the air or even reduces the total productive capacity by destroying your neighbors factory. It's the little piece of religion that an out of balance capitalist system needs in order not to collapse. War is a means of enforcing frivolous consumption that also allows the system to consolidate distributed debt (you owe me and I owe you) into one giant federal debt. If you make your definition of war more abstract, or just focus on its economic consequences, you can see how we've already been involved in one.
That's my story, which sets up my punch line, namely that debt is already a form of fascism. At first, it manifests the good side of fascism, the fact that we're all cooperating and working a lot now without worrying how we will be compensated in the future. But then it tips over into the totalitarian side of the phenomena -- you can't stop working, you need to keep marching alongside everyone else and produce more than you consume so that it can be symbolically wasted, or the whole system will fall apart. This time we're just wasting it on bankers instead of bombs.
Thursday, May 21, 2009
Mistakes were made
The guys at the Economist sometimes have these weird blind spots:
How would you define 'unethical' in that case? Is it just relative -- 'more unethical than your neighbor'? Trying to weasel your way out of the meaning of ethical (and of course he means moral, not ethical, strictly speaking) here is akin to the Nazi's trying to say that they were just following orders, or to the American populace trying to get off the hook for the Iraq war by claiming that they were 'misled'. Yeah, mistakes were made, everybody was doing it, and few people had a full understanding of how the whole system worked ... but that doesn't make it less unethical, to use the triumphant triple negative.
In the end of course, this debate is kinda stupid. Let's quit worrying about whether it was moral or not and figure out what mechanism was behind it.
Borrowers, mortgage brokers, bankers, CEOs and policymakers all had incentives to engage in behaviour that brought the global economy to its knees. Bad and reckless decisions were made; I am not sure they were unethical.
How would you define 'unethical' in that case? Is it just relative -- 'more unethical than your neighbor'? Trying to weasel your way out of the meaning of ethical (and of course he means moral, not ethical, strictly speaking) here is akin to the Nazi's trying to say that they were just following orders, or to the American populace trying to get off the hook for the Iraq war by claiming that they were 'misled'. Yeah, mistakes were made, everybody was doing it, and few people had a full understanding of how the whole system worked ... but that doesn't make it less unethical, to use the triumphant triple negative.
In the end of course, this debate is kinda stupid. Let's quit worrying about whether it was moral or not and figure out what mechanism was behind it.
Tuesday, May 19, 2009
Rogoff Runoff
I completely agree with Kenneth Rogoff's little piece about the "new normal" for economic growth post apocalypse. The US consumer is up to his eyeballs in debt and China can't turn into a Gucci society overnight. But the guy is still captive to the idea that the fancy financial system of the last several years was a good thing for growth.
I have trouble seeing how the US and China, the main engines of global growth for two decades, can avoid settling on a notably lower average growth rate than they enjoyed before the crisis.
Let's start with the US, the epicenter of the financial crisis, and still the most important economy in the world. In the best of worlds, the US financial sector will emerge from the crisis smaller and more heavily regulated. Not to worry, some economists, say. The US grew rapidly in the 1950's and 1960's with a relatively heavily regulated banking system. Why not again?
Sure, but the early post-war financial sector wasn't called upon in those days to support nearly as diverse and sophisticated an economy as it is today. If authorities set the clock back several decades on banking regulation, can we be so sure they will not also set the clock back on income?
This remains the party line. God knows we wouldn't want to threaten "financial innovation". Woe is us if you can't buy credit default swaps on a company that trades Zimbabwean bean futures leveraged 80 to 1. That would restrict growth.
The truth is that the drivers of real economic growth have not changed at all since the 50's and 60's, and the monster parasite of a financial system that we have now is no more necessary for our current growth than it was in the past. From the man in the black pajamas:
Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.
Sure, you could add a few more things about technology and education and the invention of social technologies like the joint-stock corporation, but these are indeed the natural course of things. Adam Smith doesn't mention FDIC insurance, Fed liquidity facilities, or the inalienable right to credit that these backstop. These alleged 'innovations' are of dubious value, and if the word 'natural' is going to have any falsifiable meaning at all, we will have to make it stand for things that arise from the bottom-up, in a decentralized fashion, rather than for things invented by the big bang of highly centralized government regulation of credit and money.
In fact, the dirty secret of capitalism, and what distinguishes it from a market economy, is that the government has always controlled the capital stock -- whether this was early bronze age know-how, arable land and seed stocks, naval ships for risky but profitable long distance trade, or, in the modern incarnation, fiat money and credit. So there is nothing natural or market based about the recent spate of financial innovation. Our current banking industry is just government by other means. It is another piece in a long history of the centralization and abuse of power, and a perfect example of what classic liberals like Smith railed against as an impediment to (long term) growth. Setting the clock back on banking regulation (like back to 1776) would be a grand idea, and it won't do a damn thing to harm our 'diverse and sophisticated' incomes.
A Knew Kind of Science
Recently I've watched a few videos from the Perimeter Institute for Theoretical Physics recent conference on The Economic Crisis and its Implications for The Science of Economics. Some of the stuff is super complicated, as you might expect from a bunch of theoretical physicists. So complicated that even their fucking website is too complicated to use unless you have a PhD, so I'll just mention the link to the various presentations that they have at the Edge. So far I have only taken a look at those from Taleb, Leigh Tesfatsion and Eric Weinstein. Taleb says the same thing he always says, though in a slightly more rigorous fashion -- we don't know shit about shit. While certainly true, and bizarrely contrary to what most folks in economics think, I fail to see how this is especially enlightening. Still, the presentations is fun and data rich and worth on hour if listening to the guy repeat himself doesn't already make you nauseous.
Leigh Tesfatsion made some interesting remarks about how to start using agent based models in economics. Some of this stuff definitely makes you say "duh" if you have not had your brain poisoned by modern economics, but the idea of simulating how an agent based system can reach equilibrium, rather than simply assuming that it does, turns out to be pretty revolutionary thinking for the discipline. The best part of her presentation was the abstract way she was using the concept of agent. She wasn't simply trying to perturb the classical image of homo economicus with a little bit of irrationality, a little imperfect information, and then see what the simulation produced. She wanted to be able to have higher level agents, agents composed of agents (by the way, why isn't this idea in the matrix?), that wold represent things like corporations, governments, unions, etc ... This came out naturally in her presentation because she simply thinks of all agents as just objects in her programming.
Weinstein's skit was more intriguing to me. I don't know how useful gauge theory is going to be in economics anytime soon (hell, there are people who wonder if these equations are worthwhile even in current physics), but I don't think that your opinion one way or the other is crucial to appreciating the talk. The gist is that markets are an animal behavior pattern that you can study with very precise numbers. This makes economics a sort of marriage of biology and physics, one dealing with adaptation and selection and the other with how systems with interacting particles tend towards (or away from) meta-stable equilibrium. The guy is clearly very clever, and their are a lot of great quotes are packed in there -- "humans should be subclassed from primates in economic models", "there is only one truly free market" (followed by a picture of the sibicidal behavior of the masked booby), and my favorite, "economics is too sentimental" because it assumes that the self-interest of humans has an almost Victorian invisible fence that somehow magically prevents it from spilling over into grisly violence. Instead it assumes some sort of benevolent invisible hand that forces it to settle down into some self-correcting equilibrium, coincidentally, one that fits with our current moral values. WWII was a great program for full employment from an economic perspective.
Real food for thought, even if computational economics is going to be pretty tough to get off the ground.
UPDATE: I have hacked the overwrought organizational underpinnings of the Perimeter Institute website, and all the videos can also be found here. No word yet regarding my honorary PhD for this feat.
Leigh Tesfatsion made some interesting remarks about how to start using agent based models in economics. Some of this stuff definitely makes you say "duh" if you have not had your brain poisoned by modern economics, but the idea of simulating how an agent based system can reach equilibrium, rather than simply assuming that it does, turns out to be pretty revolutionary thinking for the discipline. The best part of her presentation was the abstract way she was using the concept of agent. She wasn't simply trying to perturb the classical image of homo economicus with a little bit of irrationality, a little imperfect information, and then see what the simulation produced. She wanted to be able to have higher level agents, agents composed of agents (by the way, why isn't this idea in the matrix?), that wold represent things like corporations, governments, unions, etc ... This came out naturally in her presentation because she simply thinks of all agents as just objects in her programming.
Weinstein's skit was more intriguing to me. I don't know how useful gauge theory is going to be in economics anytime soon (hell, there are people who wonder if these equations are worthwhile even in current physics), but I don't think that your opinion one way or the other is crucial to appreciating the talk. The gist is that markets are an animal behavior pattern that you can study with very precise numbers. This makes economics a sort of marriage of biology and physics, one dealing with adaptation and selection and the other with how systems with interacting particles tend towards (or away from) meta-stable equilibrium. The guy is clearly very clever, and their are a lot of great quotes are packed in there -- "humans should be subclassed from primates in economic models", "there is only one truly free market" (followed by a picture of the sibicidal behavior of the masked booby), and my favorite, "economics is too sentimental" because it assumes that the self-interest of humans has an almost Victorian invisible fence that somehow magically prevents it from spilling over into grisly violence. Instead it assumes some sort of benevolent invisible hand that forces it to settle down into some self-correcting equilibrium, coincidentally, one that fits with our current moral values. WWII was a great program for full employment from an economic perspective.
Real food for thought, even if computational economics is going to be pretty tough to get off the ground.
UPDATE: I have hacked the overwrought organizational underpinnings of the Perimeter Institute website, and all the videos can also be found here. No word yet regarding my honorary PhD for this feat.
Saturday, May 16, 2009
Shackled to the future
All hail the wisdom of open source software.
If you can't reprogram a device, you're really just renting it. And you don't even have a contract for how long you get to have it, or under what circumstances. Johnathan Zittrain expressed this extremely clearly in The Future of the Internet and How To Stop It. The growth of tethered devices is yet another example of the increasing concentration of economic, and hence social and political, power. Big oil, big pharma, big finance, and big government means little people.
Update, 13 May: Beginning yesterday, Random House Publishers began to disable text-to-speech remotely. The TTS function has apparently been remotely disabled in over 40 works so far. Affected titles include works by Toni Morrison, Stephen King, and others. Other notable titles include Andrew Meachem's American Lion, and five of the top ten Random House best-sellers in the Kindle store.
If you can't reprogram a device, you're really just renting it. And you don't even have a contract for how long you get to have it, or under what circumstances. Johnathan Zittrain expressed this extremely clearly in The Future of the Internet and How To Stop It. The growth of tethered devices is yet another example of the increasing concentration of economic, and hence social and political, power. Big oil, big pharma, big finance, and big government means little people.
TSA Terrorism
The authorities at the Newark airport have installed a fancy new device called the "Ionscan". The machine is a sort of cross between a phone booth and a jacuzzi; you step into a chamber, stand shoeless on the painted outline of the last unfortunate pair of socks, and get sprayed head to toe by a series of jets of air. Afterwards, in a voice only marginally more robotic than any of the nine uniformed TSA chimps slouching around this supposed oracle, you are ordered to shuffle towards the hypersensitive metal detector which is destined to touch off a panic over your pocket change. To date, no brain wave detectors (link) have been installed, nor do the jets (yet) contain gas aimed a providing a quick, efficient, and eminently individualized final solution to all your terrorism prevention needs.
The process of going through airport security is clearly a terrorist act that we perpetrate against ourselves. This is hardly a new technique -- a reign of terror is the oldest and perhaps most stable form of political control. After all, we don't really imagine that the pharaohs simply asked nicely when they wanted the slaves to drag all that stone out onto the Nile floodplain. Terror and politics are inseparable; it has always been easiest to control people through fear. You disconnect them from one another, set them at odds and make them suspicious, and assure that the only way they can reconnect is through the third party of a centralized state. You make sure they feel like small humiliated particles floating helplessly in a giant incomprehensible system. With the fluid mercury of this now atomized material you proceed to build a new society of aryans or soviets or owners or whatever.
What's interesting to me is how this phenomena self-organizes. Because when I say "you" in the last paragraph, I obviously don't mean you -- I'm not Machiavelli writing to the prince here -- I mean us. We control ourselves through terror, through constant fear and paranoia. You can see it in some many aspects of our lives, from our rudely clamoring cities to our panicky financial markets to standing in line holding your shoes at the airport, silently absorbing another dose of hysteria. What is interesting to me is the mechanisms by which we dehumanize ourselves, by which we build a world we no longer fit into as individuals.
UPDATE: Apparently arya has a sanskrit origin that Nietzsche claims (seemingly with some basis in fact, even if it scares the folks at wikipedia) originally meant "possessor". So maybe we should already have heard dark resonances when Bush started talking about the 'ownership society'.
The process of going through airport security is clearly a terrorist act that we perpetrate against ourselves. This is hardly a new technique -- a reign of terror is the oldest and perhaps most stable form of political control. After all, we don't really imagine that the pharaohs simply asked nicely when they wanted the slaves to drag all that stone out onto the Nile floodplain. Terror and politics are inseparable; it has always been easiest to control people through fear. You disconnect them from one another, set them at odds and make them suspicious, and assure that the only way they can reconnect is through the third party of a centralized state. You make sure they feel like small humiliated particles floating helplessly in a giant incomprehensible system. With the fluid mercury of this now atomized material you proceed to build a new society of aryans or soviets or owners or whatever.
What's interesting to me is how this phenomena self-organizes. Because when I say "you" in the last paragraph, I obviously don't mean you -- I'm not Machiavelli writing to the prince here -- I mean us. We control ourselves through terror, through constant fear and paranoia. You can see it in some many aspects of our lives, from our rudely clamoring cities to our panicky financial markets to standing in line holding your shoes at the airport, silently absorbing another dose of hysteria. What is interesting to me is the mechanisms by which we dehumanize ourselves, by which we build a world we no longer fit into as individuals.
UPDATE: Apparently arya has a sanskrit origin that Nietzsche claims (seemingly with some basis in fact, even if it scares the folks at wikipedia) originally meant "possessor". So maybe we should already have heard dark resonances when Bush started talking about the 'ownership society'.
Friday, May 15, 2009
¡Waterboard Cheney Now!
No punches pulled.
We should waterboard Cheney to get the truth about what happened regarding the interrogations. He says it's not torture, there's no lasting damage, and it works, so what are we waiting for? I want the ad revenue from the live broadcast.
Tuesday, May 12, 2009
Neoclassical Economics
A physicist, a chemist and an economist are shipwrecked on a desert isle, along with a container full of cans of baked beans.
The chemist says that if they can start a fire, he can calculate the temperature at which a can will explode.
The physicist says that she can work out the trajectory of the baked beans after the explosion, so that they can gather the baked beans and eat them.
The economist looks at them in disdain, and finally says "Guys, you're going about it the hard way. Let's assume we have a can opener".
Saturday, May 9, 2009
Honestly
I just don't even no where to begin with this one.
Visiting a mosque on the second day of his closely watched first visit to the Holy Land, Pope Benedict XVI on Saturday denounced the “ideological manipulation of religion”I'm really starting to like this pope. At least he has a sense of humor and what's more, he's photogenic.
Wednesday, May 6, 2009
The Second New Deal?
From an interesting old article:
I always joke that I feel about free private enterprise the way Gandhi felt when asked about western civilization -- "it sounds like a good idea".
The Second New Deal After 1935 Roosevelt embarked on a new tack: leftward in rhetoric, rightward in policy. Instead of seeking business partnership in the reorganization of economic institutions, the Second New Deal embraced the theory of a competitive economy and strove for recovery through a three-pronged reform campaign.
One prong, which naturally outraged those businessmen who endorsed competition in principle but hated it in practice, was a campaign against the ''economic royalists'' and the concentration of private economic power. The thesis, Roosevelt said in 1938, ''is not that the system of free private enterprise for profit has failed in this generation, but that it has not yet been tried.''
I always joke that I feel about free private enterprise the way Gandhi felt when asked about western civilization -- "it sounds like a good idea".
Monday, May 4, 2009
Einverständnis
Okay, sorry about that last post. The title stands corrected. Alex Ross was just talking about this in The Rest is Noise. Apparently that word is translated as acquiescence or consent, but literally means "thinking as one". You'll have to follow the link to read the page as cutting and pasting for quotes remains mired in the dark ages despite Google's best efforts.
At any rate, the reference is to The Baden-Baden Lesson on Einverständnis a bit of musical theater composed by Brecht and Hindemith in 1929. Ross contends that pieces of this era set the stage for nazism in evidencing a German desperation for conformity and community in between the wars. Sometimes I wonder how much use there is in seeing the most recent period of American history as our own special version of fascism. It's easy to argue that there has been an extraordinary rise of the corporate-state, and a sort of resonance of these two forms of power. Call it corruption or the predator state or whatever you want. Call it the mechanism of fascism. Consumer fascism. I think of the core of this mechanism as being the spontaneous centralization of power -- everyone's incentives line up and we march off to our mutual destruction selling each other houses and SUVs. Strange how the atomization of society and the total breakdown of trust can go hand in hand with this sort of mass movement.
At any rate, the reference is to The Baden-Baden Lesson on Einverständnis a bit of musical theater composed by Brecht and Hindemith in 1929. Ross contends that pieces of this era set the stage for nazism in evidencing a German desperation for conformity and community in between the wars. Sometimes I wonder how much use there is in seeing the most recent period of American history as our own special version of fascism. It's easy to argue that there has been an extraordinary rise of the corporate-state, and a sort of resonance of these two forms of power. Call it corruption or the predator state or whatever you want. Call it the mechanism of fascism. Consumer fascism. I think of the core of this mechanism as being the spontaneous centralization of power -- everyone's incentives line up and we march off to our mutual destruction selling each other houses and SUVs. Strange how the atomization of society and the total breakdown of trust can go hand in hand with this sort of mass movement.
Einwilligen
James Kwak has hit the nail on the head. Banking as such offers very little in terms of economies of scale. You need more branches, more loan officers, more risk officers, and just about more everything to make more loans. On top of that, being bigger doesn't even allow you to charge higher rates or control pricing, because at bottom you are still just one supplier of the ultimate commodity.
Bank lobbying, however, is both imminently scalable and provides a durable competitive advantage to the first movers, given the complexity of the rules and the centralization of the relevant decisions makers. The capture of the regulatory apparatus is the natural outgrowth of capitalism, and the exact opposite of a market economy.
Bank lobbying, however, is both imminently scalable and provides a durable competitive advantage to the first movers, given the complexity of the rules and the centralization of the relevant decisions makers. The capture of the regulatory apparatus is the natural outgrowth of capitalism, and the exact opposite of a market economy.
The great corporations which we have grown to speak of rather loosely as trusts are the creatures of the State, and the State not only has the right to control them, but it is duty bound to control them wherever the need of such control is shown.
Theodore Roosevelt, "Address at Providence," 1902 (emphasis added)
By "creatures of the State," Roosevelt meant not that corporations were created by the state, but that their existence and power existed because of and in concert with the state. A few years ago, someone reading this quotation would have probably thought first of Halliburton; today, it evokes the large banks that are too big to fail.
That quotation was pointed out to us by Zephyr Teachout, a law professor at Duke, who has been proposing new antitrust laws aimed at reducing the political power of large firms.
Teachout's response is clear: write new laws. In particular, she argues, existing antitrust law does not address the problem of political influence.
There are many reasons a "too big to exist" conception of antitrust law makes good sense for a democracy. Perhaps most importantly, large companies have proven to have disproportionate power over the political process. Concentrated financial power often leads to concentrated political power; if you have a lot of cash, one of the most efficient uses of it to maximize profits is to petition the government to change the rules in your favor. Economies of scale might work all too well when it comes to influencing government.
Sunday, May 3, 2009
Deleuze's Classes
I'm aware that most folks would question my sanity for (among other things) my continuing obsession with Gilles Deleuze.
Deleuze gets a bad rap. His books are really hard to understand. He was (accidentally, I maintain) one of the founding fathers of a certain degenerate trend in French intellectual life -- the rock-star philosopher. A number of other figures from that era (Derrida, Foucault, etc ..) went on to be big celebrities in the US and while they had some interesting ideas early on, I suspect the fame and followers finally went to their head. Deleuze gets tarred with the same brush, and superficially it is easy to see why. His most famous books are written in a convoluted and hyper-inter-textual style that borrows from other disciplines as he sees fit, the combination which makes people suspect he doesn't know what he's talking about. Did I mention that he's French? Anyhow, outside of the success he and other "post-modernists" have had in transforming academic life in American literature and cultural theory departments (nobody in the Anglo philosophy world can refrain from looking at their belly-button long enough to read him) I think most people who have heard of him think he's a wanker. This is likely what these same folks think of the aforementioned literature and cultural theory departments, a view I mostly agree with. In fact, the term postmodernism makes me grind my teeth at this point, and every time I hear the latest rock-star philosopher like Zizek give a lecture, I feel nauseous.
But I am here to tell you that Deleuze is the real deal. Not only was he a great philosopher -- as great as Heidegger or Hegel or Kant -- but he was a mensch as well. He came from that always tenuous line of philosophers like Spinoza and Bergson and Nietzsche who all believed that philosophy should have something to do with life. They all believed that what was at stake was more than intellectual popularity or a game of concepts or even some sort of quasi-scientific investigation of the foundations of Being. For all of them, philosophy was fundamentally about living the good life. Philosophy as a form of therapy. So I want to assure you that even if he may be difficult to read and you may legitimately question how effective this form of therapy would be for most people, he is not pulling your leg or talking in circles or simply mimicking the bullshit of an empty intellectualism. Deleuze does have a sense of humor, but it is not at all at our expense.
This is all apropos of reading transcriptions of his classes about Spinoza. The classes really shine because you can see immediately what I'm talking about. They are very clear. Actually they're almost slow. He's not trying to dazzle or impress students, he's actually trying to teach. I've read the ones about Anti-Oedipus and A Thousand Plateaus, and some about painting that don't seem to be translated to English yet. The classes about Spinoza are especially good though, because he was Deleuze's philosophical hero.
After you read a few of these you instantly know that this guy was dead serious (not that I really required convincing of course). You can see as well how all those wide-ranging connections have an immense erudition behind them. Cryptic short passages in his books get several minutes of discussion, and suddenly make perfect sense. Discussions of mathematics or biology that left you scratching your head turn out to be quite sensible and beautiful analogies. And just in general, if you compare this to any lecture by Derrida or the execrable Zizek, you can see that the label "postmodernist" has nothing to do with Deleuze.
I'm sure this leaves everyone desperate for updates, and I will let you know when I finish the course about Leibniz.
Deleuze gets a bad rap. His books are really hard to understand. He was (accidentally, I maintain) one of the founding fathers of a certain degenerate trend in French intellectual life -- the rock-star philosopher. A number of other figures from that era (Derrida, Foucault, etc ..) went on to be big celebrities in the US and while they had some interesting ideas early on, I suspect the fame and followers finally went to their head. Deleuze gets tarred with the same brush, and superficially it is easy to see why. His most famous books are written in a convoluted and hyper-inter-textual style that borrows from other disciplines as he sees fit, the combination which makes people suspect he doesn't know what he's talking about. Did I mention that he's French? Anyhow, outside of the success he and other "post-modernists" have had in transforming academic life in American literature and cultural theory departments (nobody in the Anglo philosophy world can refrain from looking at their belly-button long enough to read him) I think most people who have heard of him think he's a wanker. This is likely what these same folks think of the aforementioned literature and cultural theory departments, a view I mostly agree with. In fact, the term postmodernism makes me grind my teeth at this point, and every time I hear the latest rock-star philosopher like Zizek give a lecture, I feel nauseous.
But I am here to tell you that Deleuze is the real deal. Not only was he a great philosopher -- as great as Heidegger or Hegel or Kant -- but he was a mensch as well. He came from that always tenuous line of philosophers like Spinoza and Bergson and Nietzsche who all believed that philosophy should have something to do with life. They all believed that what was at stake was more than intellectual popularity or a game of concepts or even some sort of quasi-scientific investigation of the foundations of Being. For all of them, philosophy was fundamentally about living the good life. Philosophy as a form of therapy. So I want to assure you that even if he may be difficult to read and you may legitimately question how effective this form of therapy would be for most people, he is not pulling your leg or talking in circles or simply mimicking the bullshit of an empty intellectualism. Deleuze does have a sense of humor, but it is not at all at our expense.
This is all apropos of reading transcriptions of his classes about Spinoza. The classes really shine because you can see immediately what I'm talking about. They are very clear. Actually they're almost slow. He's not trying to dazzle or impress students, he's actually trying to teach. I've read the ones about Anti-Oedipus and A Thousand Plateaus, and some about painting that don't seem to be translated to English yet. The classes about Spinoza are especially good though, because he was Deleuze's philosophical hero.
After you read a few of these you instantly know that this guy was dead serious (not that I really required convincing of course). You can see as well how all those wide-ranging connections have an immense erudition behind them. Cryptic short passages in his books get several minutes of discussion, and suddenly make perfect sense. Discussions of mathematics or biology that left you scratching your head turn out to be quite sensible and beautiful analogies. And just in general, if you compare this to any lecture by Derrida or the execrable Zizek, you can see that the label "postmodernist" has nothing to do with Deleuze.
I'm sure this leaves everyone desperate for updates, and I will let you know when I finish the course about Leibniz.
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