There is a certain nagging annoyance that one gets when they see something in print that they know is just wrong, and write a response to it, with documentation, in order to correct it.
And then for whatever cause including fat-fingered error, the comment is moderated into oblivion. If it was an opinion piece then fine. Opinions are not worth all that much. But if it is a straight up factual correction, that is a bit annoying when the original in the media was designated to reinforce some point that one feels is a bit unjust.
So here are two recent example of things that were just wrong that appeared without correction in the mainstream media.
From Jeri-Lynn Scofield over at Naked Capitalism who picked up this piece in the NY post:
Snooki inspires legislation to limit state university speaker fees NY Post. Moi: Speaking as a born and bred Jersey girl, I applaud the state legislature’s action. Nice to see the state of my birth lead the way in something other than corruption or toxic waste. And about time– $32K to hear Snooki speak at the Rutgers commencement? Are the administrators nuts? And the proposed $10k cap is too high. Why should any speaker receive more than expenses and a modest honorarium, e.g., $1K– which incidentally, anyone with any class would immediately donate back to the university.I don't normally read the Post, except perhaps for financial pieces by John Crudele, so I was glad to see this at a site where I do read on occasion.
This is no knock on Jeri=Lynn whose major point remains intact, that commencement fees may be far too generous.
And as an old fogey, it seems to me to be a correct sentiment about paying far too much money and attention to these reality tv stars, our current President notwithstanding.
Except that this even with Snooki never happened, at least not in the way that the NY Post and the state legislator Republican Assemblyman John DiMaio portray.
And I suspect strongly that they carelessly framed the story the way in which they did, because the Post and the legislator have certain attitudes, ideological biases if you will, towards public universities in general, and college students and the terms of their crushing college debt.
Miss Nicole Snooki Polizzi, of Jersey Shore fame, never spoke at the Rutgers commencement, or any commencement that I could find. And she was not paid any money by the University administration for anything. Period.
She was paid $32,000 for two evening's 'performances' of a reality show nature for student audiences by the student run entertainment committee, which is an autonomous organization controlled by students. They book over 140 events per year. While the University does collect the money which in this case amounted to roughly 90 cents per student from a pool of general fees at the very large New Brunswick campus.
In other words, Snooki, who back in 2011 apparently had a following amongst the younger set, was a hired entertainer engaged by the students themselves without active involvement of University officials. And unless we wish to try and legislate the entertainment which college students may employ with their own money, and not allow it to be an issue for student government, I don't think that the esteemed GOP legislator's and the Post's points apply.
Here is a contemperaneous article, in which the University set the record straight.
Rutgers University officials made no apologies today for Snooki’s $32,000 appearance at a pair of student-run events on the Piscataway campus.I remembered this incident quite well, because my number one son was a student there at the time, and I kidded him about it. He pretty much shrugged it off to the liberal arts and music school crowd over the other side of the river, himself being ensconced at the Livingston and Bush campuses for engineering, business and medical/pharmaceutical students.
The "Jersey Shore" reality TV star was invited and paid by students, who are allowed to select their own entertainment, a campus spokesman said.
"The students use funds designated for student programming. The university does not censor the speakers students choose to invite to campus," said E.J. Miranda, a Rutgers spokesman.
And there was some thought that some elements in the legislature were perturbed that Rutgers did invite author Toni Morrison to speak at commencement, and did pay her $30,000 for it. And God knows what they payed Mr. Obama.
But it seemed snarky to attack that indirectly by throwing Snooki in, albeit falsely, thinking it played better with those who think that all public projects are foolish wastes of money, and students deserved all the bad fortune they may incur.
Thank God they did not invite Hillary. Those sort of stratospheric speaking fees are the domain of private enterprise, like the boys on Wall Street, who exercise their private judgement more precisely to get the most for their hard earned dollars. And as I recall they are also paid by the for-profit private education institutions, which have been generous with fees and sinecures for certain politicians, for example.
Let's face it. A certain amount of foolishness is a part and parcel of the coming of age rite that is a college education, or the period between high school and family life, for most participants Sowing a few wild oat when one is young is hardly an alien concept.
As I recall, I spent a huge sum on foolishness in my college career. I was a commuting student who worked as an auto mechanic three or four days a week throughout. But I hate to see what my total beer tab amounted to during that four year period.
I seem to recall consuming rather heroic volumes of beer at the school student 'mixers, and local college beer dives, with quaint names like The Downunder, Agora, and Rathskeller while in pursuit of good times and companionship of the female persuasion.
For my son's Rutgers graduating class of 2014, the University had engaged Miss Condoleezza Rice, of Bush Administration State Department fame, to speak at that their commencement. For a $35,000 by the way.
But I was grateful to be spared sitting through that on a hot day because of widespread objections to her honorarium from the University community, both faculty and students. And the faculty involvement in this was notable. And it angered our NJ Republican politicians, very much.
It also disappointed Barack Obama, by the way, who in his own subsequent commencement address to take the students to task at a later commencement address but that is another story. The professional class tends to defend the prerogatives of their own, sticking to their 'no consequences' principle for themselves and the acts of their peers, including the financiers.
And granting our betters public venues where the common people are forced to listen, but not allowed to answer back, is hardly an open sharing of ideas. I think the political parities had a close and personal organizational experience that in the recent elections.
A one-way commencement address is one thing, a debate with various viewpoints is quite another. And so the University community did what people in a weaker position always tend to do when confronted with the unspeakable— they protested against it. And far too often, protests against what the public views as outrages are crushed. That is what happened to Occupy Wall Street.
And now the out of power liberal establishment asks, why are so few protesting? Duh.
In the case of Secretary Rice, the students and faculty thought that it was hypocrisy to award an honorary law degree to someone who had consciously worked to circumvent the law, encouraged an aggressive war on contrived evidence, and helped permit the use of torture in violation of our nation's long standing principles. Condoleezza Rice Declines to Speak at Rutgers after Student Protests.
"Rice signed off to give the CIA authority to conduct their torture tactics for gathering information from detainees as well. These are clearly human rights issues. By inviting her to speak and awarding her an honorary degree, we are encouraging and perpetuating a world that justifies torture and debases humanity."I found it highly hypocritical of the Republican legislator and the arch-conservative Post to phrase their own stand against high commencement fees in such an incorrect manner, and dare I say false news. The Post and the politician knew better. They just did not give a damn in making their point.
And it also fits their own political bias against public works, like Universities, and any thought of relief for students who are being crushed by debt at rates significantly higher than their parents just provided to Wall Street to bail those contemptible jokers out.
Moving along, 'liberal' economist Brad DeLong of the University of California at Berkeley history of economics penned a recent column cited over at the excellent Economist's View run by Mark Thoma. The title of Brad's column is The Need for a Reformation of Authority and Hierarchy Among Economists in the Public Sphere.
Ok I have to admit that the title alone got me into a cranky mood. Lately certain unrepentant members of that disgraced profession, some of whom claim to be the consciences of the liberal establishment, have been expressing concern about the disrepute of the 'experts' and the need to allow the technocrats to take control of policy and the economy.
Granted, they may look like the lesser of two evils in some cases, as in the current nascent administration, and in their own minds. But their policy consensus and economic recommendations of the past thirty years or so, starting with the Fed chairmanship of Alan Greenspan at least, only look good in their own selective memories. Brad DeLong, by the way, banned me from his site comments noting, 'Alan Greenspan never made a decision with which I disagreed.' Since then even Alan Greenspan has admitted he does not agree with some of his decisions, in a sniveling and sneaky kind of a non-apologetic way.
For everyone else this cycle of growing inequality, policy skews to the wealthy few, and asset bubbles and bust that serve as wealth transfer mechanisms has been particularly trying.
But the specific factual point from Brad's piece that got me going was this:
"Merton and Scholes's financial math was correct, and the crash of their hedge fund did not require any public-money bailout"Yeah, right. Let's put aside the nicety of a Fed brokered bailout of LTCM by Wall Street money as technically not requiring public bailout money, in order to save the financial system from an epic overleveraged mispricing of risk based on that correct math.
I think it is less than trivial to know where and how the B-S risk model fails as math, as illustrated so well by Benoit Mandelbrot in his book The Misbehaviour of Markets. The math fails in its selection choice of variables and assumptions. Naseem Taleb has made a cottage industry and a personal fortune understanding this error.
And what makes it most egregious is that the error hs been known among those with mathematical minds for some time. I myself read Mandelbrot's book in 2001 and said, 'holy shit.'
Let's be clear. This was not some dumb error on the part of these fellows, or some sneaky trick. They could not resolve their math without making a certain assumption, and they did it openly and consciously. And as the write of the essay below notes, there has not been anything better produced yet to his knowledge.
It is not the theory itself that is 'bad.' It is the use and misuse to which it is put by opportunists and financial predators in misrepresenting it.
But the people who use the assumptions on risk contained in the model don't care. Like the efficient market hypothesis, it is an intellectual fig leaf that covers an epic era of looting and plundering bases on what is essentially a con game. If you assume that risk is a rare event, you can persuade the regulators and the very important people to let you run on leverage at extreme levels, especially if you can use other people's money.
Like some of the other accepted truths from the turn of the century greed is good crowd, it is a meme with which to silence the protests and permit the widespread mispricing of risk in order to reap enormous short term profits for a very few wealthy insiders. This had been going on for so long that it is almost accepted as a normal way of doing business.
Here is what an essay in Criticality had to say about the Merton-Scholes math. I suppose that the sophist would say that the math was indeed right. It was just the assumptions they used to construct the model was wrong. So 3+5 does equal 8. Its just that in the real world case there were three more factors that were tossed aside and ignored because they messed up the path to the more easily determined and reassuring result.
"This implies that rather than extreme market moves being so unlikely that they make little contribution to the overall evolution, they instead come to have a very significant contribution. In a normally distributed market, crashes and booms are vanishingly rare, in a pareto-levy one crashes occur and are a significant component of the final outcome.It is like allowing tobacco companies to widely distribute their products while a bevy of hired gun experts and media pundits and PR organizations promote the theory that tobacco is not a highly addictive substance that causes a wide range of debilitating diseases, including cancer. They know damn well that it is and it does, but they do not give a damn as long as the money is rolling in. And pity the fool who tries to stand up and tell the truth.
It has taken years for this to be taken seriously, and in the mean time financial theory has gone on using the assumption of normally distributed returns to derive such results as the Black-Scholes option pricing equation, ultimately winning an Nobel Prize in Economics for the discoverers Scholes and Merton (Black having already died), not to mention Modern Portfolio theory (also winning Nobels). That modern finance ignored Mandelbrot’s discovery and went onto honor those working under assumptions shown to be false has clearly annoyed Mandelbrot immensely and as mentioned previously he spends much of the book telling us of his prior discoveries and how he was ignored.
And so to has it been with the Banks. Indeed, the PR campaign and political donations they handled through their intermediaries during the 1990s to deregulate and overturn Glass-Steagal has to be one of the great propaganda accomplishments of the twentieth century. And the follow on campaign for the US to invade Iraq in retribution for 9/11 is not far behind it for the twenty first.
The greater point is not that the B-S model is based on faulty assumptions that greatly diminish the potential risks. Rather it is how such 'laws' of economics are so often of a dodgy, optionated and theoretical nature such that taking them as a given in forming public policy is a huge mistake in judgement.
Why? Because they may embody assumptions about what is true, and what is a priority, and what our principles and objectives may be, and propagate those assumptions (biases) into a general policy of our society that ends up causing great harm to many innocent participants. Indeed, as Obama said, there is a great need to discussion and understanding. It is just that it cannot be monopolized by a particular group of insiders who adhere to certain assumptions and professional courtesies of their own, dare I say it, class.
So there are my two corrections to the mainstream media and their writing of the public record— to suit themselves and their wealthy patrons. It seems like modern America spends an enormous amount of its intellectual capital and time on finding ways to scam the public. If we could somehow reorder the paybacks on financial corruption to even a third of what it is today we could probably cure cancer in five years or less. That is what it would take to 'make America great again,' for real and not just in the funny papers.
I would like to again stress that I am not finding fault with either of the two bloggers involved, both of whom I enjoy and admire for what they do. Mark Thoma is a class act, and even when he disagrees is very fair and open minded about it. And he keeps this site in his blogroll despite some special interests who have argued for its removal. That is more than I can say for some others.
Rather, I am trying to correct a couple of things from the broader media that seem to be factually wrong, purposely, and further, to help caution the reader that things that appear in the mainstream media written by bona fide members of the certified and qualified professional establishment cannot always be taken at face value.
The deterioration of the quality of the news is startling. I think it has a lot to do with the takeover of the media by a relatively few number of large corporations (thank you Slick Willy) Yeah, there is a lot of nutty stuff on the internet and in blogs. I spend a lot of time assessing it and avoiding it where I can. But to say that the mainstream is somehow authoritative, objective and pure is self-serving baloney at best, and a thin veneer for official propaganda when it serves the purpose at worst.