Involuntary risk
Morality in a recessionary world
It used to be that the American retirement system relied on a so-called three-legged stool of assets: Social Security, a pension, and private savings. Changes in our economy over the last 50 or so years have cut away at two of the legs.
Our personal savings rate dropped to the low single digits for much of the 00s and most Americans don’t have access to a good pension (much less a career-track job). That’s why so many of those forty and older are suddenly scared to death about their retirement. With the precipitous decline in markets, few have truly adequate savings to bridge the gap between their 401k (if they have one) and Social Security.
Corporations have struggled, too. Those that invested their pension funds bullishly now have billions in liabilities they can hardly afford to cover. That’s why so many are reinvesting more conservatively. State and local governments, however, are doing just the opposite:
But states and other bodies of government are seeking higher returns for their pension funds, to make up for ground lost in the last couple of years and to pay all the benefits promised to present and future retirees. Higher returns come with more risk.
“In effect, they’re going to Las Vegas,” said Frederick E. Rowe, a Dallas investor and the former chairman of the Texas Pension Review Board, which oversees public plans in that state. “Double up to catch up.”
State and local governments employ about 14.8 million people. These employees tend to belong to strong unions that often negotiate for health and retirement benefits comparatively better to those found in the private sector (when they are offered at all).
But a good pension contribution plan isn’t much help when the bottom falls out. Because employees can’t control the investment portfolio, state and local workers are forced to take on an inordinate amount of risk–one that we now recognize can be crippling.
What’s the solution? Giving employees some measure of control over the pension mix seems like a coordination disaster, and there is no guarantee that a majority vote would prevail in favor of a more conservative mix.
That said, giving workers a choice about what risks they incur lessens the apparent moral harm when stock market swoons wipe them out. But many have argued that the current recession shows exactly why we need to give individuals less, not more, choice over how they save for retirement. It’s too easy to underestimate far-off risks, even when so much is at stake.
A more sensible approach would be to enact more stringent regulations about retirement investment–both for public and private funds.
It seems like we’re relearning the lessons that led to the creation of Social Security during the New Deal. It’s not good to be poor when you’re old, and it’s worth forcing people to insulate themselves from that risk. Liberty reaches its its limits when the capacity for informed choice is similarly limited.
-Sam
Should luge be cancelled?
Accounting for risk in sports.
The tragic death of young Georgian luger Nodar Kumaritashvili during a practice on the eve of the 2010 Olympics has not only cast a dark pall over this year’s Winter Olympiad, it has also raised questions about a notoriously dangerous sport. While debates will rage on over whether host-nation Canada afforded foreign lugers ample practice time, or whether exposed steel beams ought to have been covered, the deeper question is how and to what extent we allow athletes to risk their bodies.
Everybody knows somebody . . .
. . . who crashed a Toyota.
Toyota has recalled 9 million cars worldwide due to a faulty breaks, bad accelerator pedals, and defective floormats (yes, floormats). The move has come as a shock to many observers, both due to its scope and because Toyota has set the paradigm for high-quality production. Businesses around the world look to Toyota’s unique production philosophy, which emphasizes continuous improvement (kaizen) and features the andon cord–a mechanism which allows any factory floor worker to stop the production line of he or she detects a problem.
Now it appears that Toyota’s entire organization has ignored this philosophy. The automaker was slow to take decisive action, even as reported problems with numerous Toyota models were mounting.
Today, the company’s President apologized in stark terms: “I deeply regret that I caused concern among so many people . . . I believe what is happening now is a very big problem. We are in a crisis.”
From a PR perspective, this is probably too little, too late. But who does bear responsibility when something goes horribly wrong in a large corporation? Read more
Brooks vs. Taibbi on Haiti
The interwebs have been buzzing about David Brooks’s recent column on Haiti and Matt Taibbi’s acerbic response.
Brooks says the following:
Haiti, like most of the world’s poorest nations, suffers from a complex web of progress-resistant cultural influences. There is the influence of the voodoo religion, which spreads the message that life is capricious and planning futile. There are high levels of social mistrust. Responsibility is often not internalized. Child-rearing practices often involve neglect in the early years and harsh retribution when kids hit 9 or 10 … We’re all supposed to politely respect each other’s cultures. But some cultures are more progress-resistant than others, and a horrible tragedy was just exacerbated by one of them … It’s time to find self-confident local leaders who will create No Excuses countercultures in places like Haiti, surrounding people — maybe just in a neighborhood or a school — with middle-class assumptions, an achievement ethos and tough, measurable demands.
Taibbi responds with a lot of language I won’t reprint here, but suffice it to say he thinks Brooks is making a racist, ignorant, arrogant, and cold-hearted argument.
An earthquake is nobody’s fault. There’s nothing to do after a deadly earthquake but express remorse and feel sorry. It’s certainly not the time to scoff at all the victim country’s bastard children and put it out there on the Times editorial page that if these goddamned peasants don’t get their act together after a disaster this big, it might just be necessary to start swinging the big stick of Paternalism at them.
Even setting aside the issue of sensitivity, this is an interesting and vitally important debate - Brooks (and others) argue that well-intentioned aid from wealthy nations is largely useless and that many underperforming cultures - like spoiled, recalcitrant children - just need a dose of tough love. Taibbi thinks this view is born of profound ignorance and that Brooks et al overstate the extent to personal or cultural “initiative” is really the problem.
So we arrive back to our familiar, central dilemma. How do external circumstance and personal will collectively create our outcomes? The balance between the two is at the nexus not only of the development debate, but of most liberal - conservative debates as well.
-Colin
How must we help Haiti?
It is heart-wrenching watching scenes of destruction and devastation in Haiti. Most people will believe that the international community has some degree of responsibility to help in the response and recovery effort. We have written many times about the demands of justice and the relevance of borders to these demands. In describing a Peter Singer argument, Jake wrote that “distance doesn’t matter morally” for “it makes no moral difference whether the person I can help is a neighbor’s child ten yards from me or a Bengali whose name I shall never know, ten thousand miles away.”
But in some circumstances, particularly when time is of the essence, might distance matter? In the case of Haiti, there is a certain time threshold after which the likelihood of finding survivors in the wreckage and the likelihood of survival for the critically injured significantly decreases. Similarly, food and clean water are urgent necessities for those that have survived. Thus, it is vital for the international community to immediately contribute medical support, search and rescue capabilities and food and water. Given the proximity of the United States and the global delivery capabilities of our government and non-governmental organizations, is there a greater moral demand on us to contribute than other countries?
-Marc
Bloggingheads
If you haven’t heard of Bloggingheads.tv, you should check it out. It’s basically a huge archive of videos in which two “experts,” sometimes famous, sometimes not, discuss important political topics. There are some great ones between Robert Wright and Christopher Hitchens, Anne-Marie Slaughter and Steven Walt, and so on. Here’s a snippet of a conversation between law prof Eric Posner and Heather Hurlburt of the National Security Network on moral arguments surrounding climate change policy.
-Colin
Max Weber and realism
We’ve been talking a lot about the idealism vs. realism debate here at TPP - Is compromise necessary, and how much of it is admissible? How much should our political values be restrained by immediate possibilities?
Matt Yglesias takes this on here, citing Weber’s Politics as a Vocation to suggest a distinction between an ethic of of “ultimate ends” and an ethic of “responsibility.” Yglesias says that in our world, responsibility must be the guiding principle:
…a lot of what goes wrong in American foreign policy commentary, I came to see, was a refusal to adopt the ethic of responsibility. Instead, people would want to orient themselves in a way that expresses a sense of moralized outrage.
To be sure,
“Realism” pursued on behalf of purely selfish goals is immoral, but the pursuit of laudable goals in an unrealistic and destructive manner doesn’t help anyone.
And on applying “responsibility” to climate change:
The sensible goal, however, is to avert the collapse. To do the best we can today, and the best we can tomorrow and the best we can the day after that. And next week? To do the best we can. And again next month and next year and next decade.
-Colin
Free market journalism
Do we need a “public option”?
Much has been made lately about the media’s incessant coverage of relatively unimportant matters (”Balloon Boy,” Sarah Palin’s new book, Tiger Woods’s affairs, Michael Jackson’s death) as compared to pressing policy debates (Afghanistan, global warming, health care reform, unemployment).
This phenomenon isn’t exactly new. The zealousness of the mainstream media for hype, controversy, and celebrity has been a well-worn punching bag for people like Jon Stewart for years. And from a broader vantage point, ridicule for the “mass diversions,” whether they consist in sports, gossip magazines, or low-brow comedy, is probably a cultural mainstay.
But some say that we are facing a crisis in journalism. Well, that’s what I say anyway. As large media companies and papers such as the New York Times and Washington Post fire thousands of employees, close bureaus, and migrate to the internet, it is becoming harder and harder to do the job. Meanwhile, the relative success of Fox News, which regularly outperforms almost all other cable news networks combined, is driving its competitors to emulate the Fox model - hot blondes, flashy headlines, and an emphasis on controversy over depth or accuracy.
This might all be traced back to basic market forces. Detailed, responsible journalism just doesn’t sell as well as polarized, simplistic coverage. Sure, the New York Times might do better work than The Drudge Report (I should hope so), but people want Drudge. Hemingway might be better reading than Danielle Steele, too, but I haven’t seen anyone carrying The Old Man and the Sea on the subway.
The law and the death penalty
The New York Times has an interesting discussion on the criminal sentencing of juveniles and the mentally handicapped, a topic we’ve discussed extensively here. The article explores the difference between rules and standards in sentencing. For example, “if you commit murder even hours before your 18th birthday, you cannot be put to death for your crime. The same killing a few hours later may be a capital offense.” That is a clear rule about when to use the death penalty. A similar Supreme Court ruling bars the execution of the mentally disabled. According to the article, while this sounds like a rule, it is actually a standard, because determining mental handicap is somewhat subjective, as compared with proving age. In the end, all of these debates link back to responsibility – at what age and level of mental capacity can we call people responsible for the crimes they commit?
-Marc
Subsidizing spiritual healing
Non faith-based reply to Marc
Marc argues that a strong moral argument exists to require insurance companies to cover spiritual healing. He writes that, “When risk is involved, the bearer of the risk should ultimately make the decision.” Since patients in need of care bear the risk of the success or failure of the procedure, if they desire a spiritual healing, insurance companies ought to cover the cost, Marc argues. This argument fails because the insurance companies—and all the fellow members of the insurance plan—are the people covering the cost and bearing the risk.
The purpose of insurance, Marc writes, “is to prevent bad luck from having a negative impact on our life circumstances.” The way it does that is by spreading the costs of bad luck and accidents. The individual who selects a faith healing procedure does not bear the risk alone; everyone shares the risk, at least financially. Assuming that those individuals who select faith healing procedures would have the opportunity to select science-based procedures should the former fail, the end result would be higher premiums for everyone. Why should others have to subsidize other people’s religious beliefs via a science-based insurance company? If the faith healing procedures were the same price or cheaper than the science-based procedures—and people who selected them couldn’t then see a medical doctor as well—it would be a different story. But even were that the case, I don’t see why such an option should be mandated by the government.
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