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The US political system serves special interests and the rich

A paper written by Martin Gilens and Benjamin Page and entitled Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens has been recently released and reported on (h/t Michael Crimmins) that studies who has influence on policy in the United States.

Here’s an excerpt from the abstract of the paper:

Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence.

A word about “little or no independent influence”: the above should be interpreted to mean that average citizens and mass-based groups only win when their interests align with economic elites, which happens sometimes, or business interests, which rarely happens. It doesn’t mean that average citizens and mass-based interest groups never ever get what they want.

There’s actually a lot more to the abstract, about abstract concepts of political influence, but I’m ignoring that to get to the data and the model.

The data

The found lots of polls on specific issues that were yes/no and included information about income to determine what poor people (10th percentile) thought about a specific issue, what an average (median income) person thought, and what a wealthy (90th percentile) person thought. They independently corroborated that their definition of wealthy was highly correlated, in terms of opinion, to other stronger (98th percentile) definitions. In fact they make the case that using 90th percentile instead of 98th actually underestimates the influence of wealthy people.

For the sake of interest groups and their opinions on public policy, they had a list of 43 interest groups (consisting of 29 business groups, 11 mass-based groups, and 3 others) that they considered “powerful” and they used domain expertise to estimate how many would oppose or be in favor of a given issue, and more or less took the difference, although they actually did something a bit fancier to reduce the influence of outliers:

Net Interest Group Alignment = ln(# Strongly Favor + [0.5 * # Somewhat Favor] + 1) – ln(#
Strongly Oppose + [0.5 * # Somewhat Oppose] + 1).

Finally, they pored over records to see what policy changes were actually made in the 4 year period after the polls.

Statistics

The different groups had opinions that were sometimes highly correlated:

Screen Shot 2014-04-17 at 6.40.59 AM

Note the low correlation between mass public interest groups (like unions, pro-life, NRA, etc) and average citizens’ preferences and the negative correlation between business interests and elites’ preferences.

Next they did three bivariate regressions, measuring the influence of each of the groups separately, as well as one including all three, and got the following:

Screen Shot 2014-04-17 at 6.46.55 AM

This is where we get our conclusion that average citizens don’t have independent influence, because of this near-zero coefficient in Model 4. But note that if we ignore elites and interest groups, we do have 0.64 in Model 1, which indicates that preferences of the average citizens are correlated with outcomes.

The overall conclusion is that policy changes are determined by the elites and the interest groups.

We can divide the interest groups into business versus mass-based and check out how the influence is divided between the four defined groups:

Screen Shot 2014-04-17 at 6.52.19 AM

Caveats

This stuff might depend a lot on various choices the modelers made as well as their proxies. It doesn’t pick up on smaller special interest groups. It doesn’t account for all possible sources of influence and so on. I’d love to see it redone with other choices. But I’m impressed anyway with all the work they put into this.

I’ll let the authors have the last word:

What do our findings say about democracy in America? They certainly constitute troubling news for advocates of “populistic” democracy, who want governments to respond primarily or exclusively to the policy preferences of their citizens. In the United States, our findings indicate, the majority does not rule — at least not in the causal sense of actually determining policy outcomes. When a majority of citizens disagrees with economic elites and/or with organized interests, they generally lose. Moreover, because of the strong status quo bias built into the U.S. political system, even when fairly large majorities of Americans favor policy change, they generally do not get it.

Categories: #OWS, modeling

How recently have you experienced democracy? #OWS

A few weeks ago Omar Freilla came to talk to my Occupy group. Omar is a founder of the Green Worker Cooperatives and shared his experience as an organizer.

He is a well-spoken guy and talked passionately about forming community cooperatives, where workers “have a direct role in decision-making and a share of all profits, build community wealth and help make a democratic economy real.”

At one point in his presentation, Omar asked us was how recently we’d “experienced democracy.”

On the face of it I didn’t think it was a fair question, especially when he compared it to experiencing anger or happiness. After all, democracy isn’t an emotion and I can’t experience democracy, say, by myself in a room, but of course I can conjure up emotions by myself in a room, especially if I have a laptop, wifi, and Netflix to help me.

But since his visit, I have to admit I have dwelled on that question and it’s become more and more reasonable in my mind, although I made two decisions on how to interpret it.

First of all, I chose to interpret it not as a formal gesture of democracy, like asking how recently have you voted in a formal election. Instead, it’s a local decision-making process question: how recently has your vote mattered in a local decision that affects a group?

Second, it’s not really about me. It’s about looking around and deciding who around me gets to participate in democratic decisions and who doesn’t.

For example, it might be at work. Although I personally get to make a lot of decisions at work, that fact clearly separates me from tons of people who simply get told what to do by some kind of authority. And there is an important distinction between people who have a manager but get to make decisions internal to their projects and people who have every decision laid out for them.

And that latter workplace anti-democratic situation is, I imagine, maximally soul-crushing, and is the audience that Omar is worried about and is reaching out to. And that’s why his question turns out to be a really good question after all.

I also consider democracy inside my own family. Since I’m the mom of the family, I tend to make more decisions that affect my little group than other people, but now I’m more sensitive to sharing that power there when I can. Turns out my kids love making decisions, it makes them gleeful in fact, even if it’s just what to eat for dinner. And they make good decisions too, which I’m consistently proud of.

My final example is Occupy, which is by construction a direct democracy, and I know how good participating and experiencing democracy actually feels there, and it’s a big part of why it works.

What about you? How recently have you experienced democracy?

Categories: #OWS

Envy, greed, and the American Dream #OWS

I was sent this Falkenblog post entitled Why Envy Dominates Greed a while back (hat tip David Murrell). The post suggests an interesting thought experiment which I’d like to discuss this morning.

Namely, it asks us to examine the extent to which our economic assumption that “everyone is working in their own self-interest” can be replaced by the assumption that “everyone is working to improve their relative ranking” and whether you’d get more clarity from economics that way.

I’ve done myself the favor of ignoring everything author Eric Falkenstein actually says about the economic theory, because he’s focusing on investing in the stock market, which honestly only a minority of people ever do even once. Even so I’d like to consider this idea of envy versus greed and try to make sense of it.

First of all, I do think that a certain kind of relativity combined with proximity is deeply important to humans. When members of my Occupy group talk about living on $2 a day while sleeping at homeless shelters in New York City, surrounded by men in suits with chauffeurs, it is very relevant that the privations described are combined with with a deep sense of humiliation of their understanding of their relative position. These are highly intelligent people who know how things look and they feel it keenly.

Similarly, when I think about poor people in other countries, it’s a different level of destitution than we see here, and yet it doesn’t make me want to drop everything and work in India. There’s something about proximity that we all respond to, and which has been well examined by social scientists.

Going back to my New York friend: is that envy being displayed, exactly? I don’t think so. I think it’s something more like dispossession and despair. And it’s honestly something I believe our natures would rather avoid, but sometimes just slaps us in our face, especially in places like New York City.

I’m not throwing envy out altogether. In fact, I do think envy is strongly at work, but only at a local level. I am working at Columbia now, so it’s natural and proper that I am envious of my colleague’s slightly-larger office. I ignore the stuff I don’t see like how the trustees are chosen and treated. A person in a given town is envious of their neighbor’s house or car or job or wife, but they don’t think about what’s happening in a different neighborhood. In fact they might obsess over such things. It happens. But again, it’s local.

Evidence that people only think very locally about wealth and inequality is everywhere; so when people are polled and asked to describe income or wealth inequality, they always think it’s much less skewed than it is. Why? I’ll guess. It’s because they extrapolate from their very local experience, where there the outliers are not so very outlying at all. It’s a safe kind of assumption that doesn’t boil the blood.

So envy is there, it’s powerful, but it biases us enormously. If anything, I’m starting to think envy is something to distract us from something more dangerous, which is that sense of privation and dispossession, which runs deeper and is more anarchic. By contrast, envy seems like a myopic feeling that keeps us acting safely inside the system, where if we follow the rules but we’re a little bit better at them, we will get that bigger office or bigger car.

In the end, I reject envy as a unifying glue that describes our world, at least in times of severe inequality like now. It just doesn’t address the growing hostility that I’m sensing, which is that second kind of feeling, which exists beyond envy.

Moreover, I think the assumption that everyone is feeling something as small as envy, or rather the projection of envy onto the entire population, is damaging.

So, for example, there was an New York Times Op-Ed recently entitled Capitalize Workers! that suggested we get more people involved for saving for their retirement by investing in the stock market with “minimum pensions”.

I think the idea here is that everyone wants a piece of that amazing stock market return. But if you think about where people actually are financially, it’s such a weirdly out-of-touch plan, the idea that everyone is a Wall Street trader or wants to be.

For most people I meet and talk to, at this point retirement is not at all about the thrill of risk-taking, but rather the avoidance of risk altogether. If you asked those people, they’d rather just have their Social Security benefits doubled. They are not trying to take their chances to double their money, but rather trying to eke out a retirement without severe pain.

Why is this happening? Why are the authors of this piece, who both work at the think tank Third Way,  making such bizarre assumptions about how poor people want to retire? My first guess was that they are just working with the funds on Wall Street who would reap (even more) profits if more people invested.

But another less suspicious possibility is given by my above observation. Namely, they are projecting their myopic envy, that makes sense in their world, onto the poor and middle class worrying about retirement.

In their neighborhood, the way envy works is about trading and making big gains with extra money, but of course to do that you have to have extra money to start out with. In other words, the distance between the authors and the people they claim to be trying to help is too large for their system of envy to translate meaningfully.

 

Categories: #OWS, musing

Defining poverty #OWS

I am always amazed by my Occupy group, and yesterday’s meeting was no exception. We decided to look into redefining the poverty line, and although the conversation took a moving and deeply philosophical turn, I’ll probably only have time to talk about the nuts and bolts of formulas this morning.

The poverty line, or technically speaking the “poverty threshold,” is the same as it was in 1964 when it was invented except for being adjusted for inflation via the CPI.

In the early 1960’s, it was noted that poor families spent about a third of their money on food. To build an “objective” measure of poverty, then, they decided to measure the cost of an “economic food budget” for a family of that size and then multiply that cost by 3.

Does that make sense anymore?

Well, no. Food has gotten a lot cheaper since 1964, and other stuff hasn’t. According to the following chart, which I got from The Atlantic, poor families now spend about one sixth of their money on food:

Rich people spend even less on food.

Rich people spend even less on food.

Now if you think about it, the formula should be more like “economic food budget” * 6, which would effectively double all the numbers.

Does this matter? Well, yes. Various programs like Medicare and Medicaid determine eligibility based on poverty. Also, the U.S. census measures poverty in our country using this yardstick. If we double those numbers we will be seeing a huge surge in the official numbers.

Not that we’d be capturing everyone even then. The truth is, in some locations, like New York, rent is so high that the formula would likely be needing even more adjustment. Although food is expensive too, so maybe the base “economic food budget” would simply need adjusting.

As usual the key questions are, what are we accomplishing with such a formula, and who is “we”?

Categories: #OWS, modeling, statistics

Lobbyists have another reason to dominate public commenting #OWS

Before I begin this morning’s rant, I need to mention that, as I’ve taken on a new job recently and I’m still trying to write a book, I’m expecting to not be able to blog as regularly as I have been. It pains me to say it but my posts will become more intermittent until this book is finished. I’ll miss you more than you’ll miss me!

On to today’s bullshit modeling idea, which was sent to me by both Linda Brown and Michael Crimmins. It’s a new model built in part by the former chief economist for the Commodity Futures Trading Commission (CFTC) Andrei Kirilenko, who is now a finance professor at Sloan. In case you don’t know, the CFTC is the regulator in charge of futures and swaps.

I’ll excerpt this New York Times article which describes the model:

The algorithm, he says, uncovers key word clusters to measure “regulatory sentiment” as pro-regulation, anti-regulation or neutral, on a scale from -1 to +1, with zero being neutral.

If the number assigned to a final rule is different from the proposed one and closer to the number assigned to all the public comments, then it can be inferred that the agency has taken the public’s views into account, he says.

Some comments:

  1. I know really smart people that use similar sentiment algorithms on word clusters. I have no beef with the underlying NLP algorithm.
  2. What I do have a problem with is the apparent assumption that the “the number assigned to all the public comments” makes any sense, and in particular whether it takes into account “the public’s view”.
  3. It sounds like the algorithm dumps all the public comment letters into a pot and mixes it together to get an overall score. The problem with this is that the industry insiders and their lobbyists overwhelm public commenting systems.
  4. For example, go take a look at the list of public letters for the Volcker Rule. It’s not unlike this graphic on the meetings of the regulators on the Volcker Rule:reg_volcker
  5. Besides dominating the sheer number of letters, I’ll bet the length of each letter is also much longer on average for such parties with very fancy lawyers.
  6. Now think about how the NLP algorithm will deal with this in a big pot: it will be dominated by the language of the pro-industry insiders.
  7. Moreover, if such a model were to be directly used, say to check that public commenting letters were written in a given case, lobbyists would have even more reason to overwhelm public commenting systems.

The take-away is that this is an amazing example of a so-called objective mathematical model set up to legitimize the watering down of financial regulation by lobbyists.

 

Update: I’m willing to admit I might have spoken too soon. I look forward to reading the paper on this algorithm and taking a deeper look instead of relying on a newspaper.

Categories: #OWS, finance, modeling, rant

Could we use eminent domain to help suffering homeowners? (#OWS)

Here are two things you might have some trouble believing if you read the papers regularly and find yourself convinced we are in a housing recovery. First, there are still huge numbers of homeowners on the brink of, or just starting to enter, foreclosure. Second, many of the banks foreclosing on those properties do not have clear legal ownership over the mortgages in question.

Obama should have addressed the first problem through TARP way back in 2008. In fact mortgage modification was an intention of TARP that was promised Congress when it passed the second half of the money but it never happened. Instead Obama came up with the garbage called HAMP, which has been dreadfully implemented and possibly a net harmful program.

Even without Obama, we should have seen a willingness to renegotiate debt. After all, we can negotiate credit card debt, and businesses routinely renegotiate their mortgages. Why are private home mortgages kept airtight? I guess the banks see it as in their interest not to allow negotiations, and whatever the banks want, the banks seem to get.

The second problem, which is essentially one of botched paperwork (explained here), is probably technically the job of some regulator to deal with, but nobody wants to “blow up the system” so nobody is dealing with it. This is especially ironic considering how often we hear about the so-called sanctity of the contract.

The result of these huge looming problems is that banks got bailed out and the system never got cleared of its actual debt and paperwork problems,.

Enter the concept of using eminent domain to force these two issues. Strike Debt, an offshoot of Occupy Wall Street, is pushing this in a few nationwide court cases, for example in Richmond, California.

More recently, and what inspired this post this morning, is a plan cooked up by Strike Debt using eminent domain to force courts to clear up broken chains of title, written by Hannah Appel and JP Massar.

This idea is on its face unappealing, given the history of that crude tool eminent domain. Everyone I meet has their own stories, but start here for a short list of eminent domain abuses.

And it might not work, either. A district judge might not want to deal with the complexity of the issue and might just let the bad paperwork through.

For that matter, many concerns have been voiced about the practicality of this approach, and one that deeply resonates with me is the idea of using it against current mortgages – i.e. mortgages where the homeowner is up-to-date with payment. Using eminent domain in such a case could set a precedent whereby, even though someone has been taking care of their property, the city uses eminent domain to condemn it based on historical data which implies the owner is likely to neglect their property. That would not be good enough. As far as I know the current plan only uses mortgages where there have been missed payments, though.

The bottomline is this: we’re in a situation where all these homeowners are being crushed with unreasonable monthly payments, and hugely inflated principals, where the legal ownership of the mortgage itself is under question, and nobody seems to want to do squat about it. Maybe it’s time a crude tool is used against a cruel enemy.

Categories: #OWS, finance, musing

Crashing a Wall Street party

I’m just recovering from a killer flu that had me wheezing and miserable for 5 days. I have a whole backlog of rants and vents but no time this morning to even start, so instead let me suggest you read this article (hat tip Chris Wiggins) about a New York Times reporter who crashed the yearly party of Kappa Beta Phi, a Wall Street secret society. Pretty amazing, if true.

Categories: #OWS, finance
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