Saturday, April 29, 2017

The Oil Kings by Andrew Scott Cooper (Book Review #11 of 2017)

The Oil Kings: How the U.S., Iran, and Saudi Arabia Changed the Balance of Power in the Middle East

If you've ever read one of Henry Kissinger's books and thinks he's a genius, then this book will be a real eye-opener. The author has painstakingly gone through recently declassified or released material, as well as the memoirs of several players, to piece together the deceit and failures of Kissinger and the Nixon Administration that led to the collapse of the Shah of Iran and the "special relationship" the US maintains with Saudi Arabia today. Cooper shows conclusively that an overconfident and economically incompetent Kissinger made promises to and deals with the Shah during the Nixon Administration, then tried to keep both the promises and the consequences secret from Gerald Ford when he was kept on as Secretary of State and National Security Advisor, then destroys the evidence when Carter comes to power, setting the next President up for the next crisis. Cooper also shows what details Kissinger omits from his memoirs, or identifies the odd, out-of-the way efforts Kissinger defends decisions or outcomes in the anticipation that one day these details would be public.

You can sum up the broad plot line like this:
The dilemma for the US-Iran relationship was basic economics: The Shah needed higher oil prices to fund his government programs, primarily his vast military. The military equipment and infrastructure projects required US equipment and expertise, so everything from fighter jets to engineers were contracted to Iran. The Nixon administration was constantly promising more-- Nixon promised "everything but the (nuclear) bomb."
The Nixon Administration could go along with the higher prices in exchange for these large deals for the Defense sector and an anti-Soviet and pro-Israeli ally in a Middle East where Egypt, Syria, and Iraq got Soviet arms and expertise against Israel. Iran also was able to funnel money to Nixon's secret campaign bank account in Mexico, aiding Nixon directly. But higher oil prices led to stagflation in the West, and political pressure for Western politicians to be hard on Iran. Iran, meanwhile, suffered from "Dutch disease" as an oil producer. The increase in government spending and influx of foreign investment led largely to spiraling inflation and social unrest. When Ford took the helm, Kissinger worked hard behind-the-scenes to keep the promise to the Shah, while never fully disclosing them to Ford.  When Ford's team finally began to purge and reorganize in view of the coming election, they pivoted toward friendship with Saudi Arabia, which by this time was a much larger-volume producer and was proving itself to be a more publically stable ally. Breaking OPEC and inflation to preserve Western democracy, particular in places like Europe which were seeing Communist-leaning parties gaining votes during high unemployment, was more important. The pivot was fatal to Iran. All of Nixon and Kissinger's secret deals, misguided economic understanding, and political tightrope during the Ford administration went whitewashed from their personal histories.

I picked up this book expecting something similar to Daniel Yergin's The Quest, on the development of the global oil trade, or Stephen Kinzer's The Brothers, which focuses on White House and CIA-led efforts in the 1950s and 1960s to secure the Middle East as a source of oil and a bulwark against the USSR. Instead, I was pleasantly suprised by an almost day-by-day account of the period from 1967-1977 where foreign policy was directed mainly by Kissinger and Nixon where promises were made and then covered up. Whether it's uncovering that U.S. officials offered to sell nuclear power and fuel to the Shah, or made a deal where the Shah would transfer money to Nixon's secret and illegal campaign bank account in Mexico, this book is a sobering reminder that the Nixon administration was criminal in many ways. The implication of the book, of course, is that the genesis of the special relationship with Saudi Arabia led to the indirect funding of Saudi projects like madrasas in Pakistan that train the Taliban to Bin Laden's mission to attack America for supporting the Saudi regime and the endless war we have on terrorism today.

Cooper, now a news correspondent in Tehran, became motivated to write this book during the late aughts (2000's) when Saudi Arabia was intentionally overproducing oil to maintain a low price. Much was written in the US about the effect on the coal and natural gas markets, the Saudis seemed bent on putting fracking out of business. Less, however, was written about how this was an intentional economic attack on Iran by Saudi Arabia. A lower price of oil hurt the government's ability to provide services as well as stem the tide of dollars to terrorist groups like Hezbollah. It also helped further the post-election unrest under Ahmadinejad.

Cooper began studying history and found a similar US-encouraged Saudi action in 1977, which crippled the Iranian economy and eventually contributed to the shah's ouster and the establishment of the Ayatollahs' Islamic Kingdom we know today. But this seemed an oddity-- the Shah was a very publicly-supported US ally and his government's weakening had obvious downsides for the US. The 1977 Saudi-US relationship was actually about breaking the OPEC cartel, but instead broke the Shah and led indirectly to the US hostage crisis, the "seige of Mecca" in 1979 (see Trofimov's excellent book), the spread of Wahabbism, and the Saudi-Iranian proxy war in Yemen we see the US participating in daily (daily bombing campaigns) under the Trump Administration. What was odd, however, was that the American players involved seem to go out of their way to mention what led to these decisions or any reflection on their consequences when they wrote their memoirs. Cooper sets out to solve the mystery.

The problem started in roughly 1966 when Richard Nixon was pondering a run for President and laid out his foreign policy doctrine. The Shah's brother-in-law, foreign minister, future Ambassador to the US, Ardeshir Zahedi began to get closer to Nixon when he realizes he is running for President. Nixon visited Tehran in 1967. Nixon recognized that US-style democracy was not for everybody, and expressed his open admiration for Shah Pahlavi.  The Shah, meanwhile, wanted to be a revived King Cyrus, ruling over an influential Persian Empire. Cooper chronicles that his dreams of grandeur seem to get worse as he aged and became more delusional.

Other prominent characters in the book include US Ambassador to Iran Douglas MacArthur II, defense contractor and likely CIA operative David Rockefeller, CIA Director and Iranian Ambassador Richard Helms, and Treasury Secretary Bill Simon. MacArthur was the Ambassador in Tehran from 1969-1972 and filed either false or naive reports about the Shah's situation at home. This was over a decade in which the US largely looked the other way as the unrest grew and attacks on Americans and American interests became more coordinated and frequent. Rockefeller worked defense deals with Iran for equipment and manpower that helped break Iran's budget and put the Administration on the line to deliver.

The State Department's own official account of the 1969-1972 period can be found here.
Nixon and Kissinger negotiated heavily with Iran, culminating with a visit by Nixon to Iran that was staged heavily by the Shah. Nixon's group narrowly missed disaster during a coordinated bombing campaign and protests during their visit, something that was chalked up to student dissidents or foreign elements--a theme that would keep running until the Ayatollah Khomeini would return and seize power. The dealings with Iran get ever-complicated in the midst of the volatile oil market, the Vietnam War, Middle East conflict, and unfolding Watergate scandal. Basically, Nixon arranged to sell massive amounts of F-14s and other equipment to Iran, along with US military and defense contractors to maintain them, in exchange for oil. The Shah donated to Nixon's re-election campaign via a bank in Mexico City, which the CIA was fully aware of. Kissinger negotiated complicated finance arrangements including Iran's sending part of its aircraft purchases to Vietnam, Iranian tankers docking in Guantanomo Bay, and more. Nixon also pledges to arm the Shah's ally of the Iraqi Kurds as a further bulwark against the  Sunni-Baathist Iraqi threat against Iran. Now-released transcripts reveal some of Kissinger's dealings and the quotes aren't flattering. The Joint Chiefs of Staff actually spied on Kissinger, raiding his filing cabinets and such, to see what deals he was making that would commit US armed forces without their knowledge. True to persona, Nixon was privately supportive of Iranian oil price hikes while publicly critical.

Nixon had a tense relationship with Helms and the CIA, and often threatened to gut the agency because he knew it had dirt on him. These were the days just prior to the 1975 Church Committee hearings on CIA activities that revealed the "family jewels" of various assassination plots, and domestic spying by the CIA and the US Army. Nixon lost his nerve in 1972 to gut the agency, but would roughly appease and get rid of Helms by making him Ambassador to Iran. (Helms would later be indicted for perjury for his 1973 confirmation hearings testimony regarding clandestine activities, pleading guilty to a lesser charge.)

One weakness of the book is that the author ignores other international economic pressures that came into play. The Bretton Woods system of coordinated exchange rates ultimately tied to gold limited the ability of countries to deficit-spend. When the US began to run deficits under Johnson to pay for Vietnam and the War on Poverty, programs continued by Nixon, the system was put under a basic pressure that the Nixon finally "closed the gold window" and unilaterally ended the post-war era that resulted in floating exchange rates and market turmoil. (I recommend Yergin and Stanislaus' Commanding Heights alongside Yergin's other books on energy markets.) He also doesn't really look much at Nixon's controversial domestic economic policies during the gas price crisis of 1972-1973, namely wage and price controls. Economic advisor George Schultz was dismissed as a naive fool for advocating against Nixon policies, but the author doesn't exactly spell out the debate. He also doesn't explain well how the high oil prices were to the USSR, helping prop up an internally-crumbling Soviet economy for another decade. All that played a role in Soviet support for various Middle Eastern regimes.

Instead, the author focuses on the import of oil and the effect of prices on domestic production. High oil prices were crippling to American businesses and products (like plastics) which are made from petroleum. But they are also a boon to domestic production and exploration. In order to support high prices for the Shah, Kissinger preferred arguments about the benefit of high prices to encourage domestic production and keep out foreign oil. Cooper notes that Kissinger neglected to ask for any study about what amount of reserves the US government had available to tap to relieve the problem and what the effect on price would be, much less any long-term consequences. Kissinger consistently ignores contingencies and unintended consequences. But stagflation in Europe led to negotiations involving European countries, oil companies, and OPEC countries. There was a fear that the economic malaise was increasingly tilting politics toward Communist parties and nationalism. There was fear, specifically, about losing Italy to the Communists. European countries were suddenly at risk of defaulting on their bonds, unable to make the interest payments. (This brings to mind the EU sovereign debt crisis during and after the 2008-2009 recession.) If the debt crisis had worsened, the contagion would have had consequences for the US as well.

Meanwhile, domestic pressure within Iran began to mount. The Iranian public always resented the US-led coup by Kermit Roosevelt that installed the Shahs and kept Iran in Western orbit. The Shah's infidelity was public, the press was under his thumb, and his security forces sometimes wantonly killed people for minor offenses, much less jailing and torturing many. The Shah's decision to exile Ayotollah Ruhollah Khomeini, thinking that would be better than executing him, of course ended up having consequences as a committed opposition could be formed outside of Iran as well as inside. Iran was eager for US defense contract deals because the more Americans working in Iran, the more likely the US would have to defend Iran from any attack by Iraq or others; the Shah's paranoia about invasion drove his ridiculously large military purchases. Iran saw Saddam Hussein as a threat, and at one point wanted to invade Kuwait pre-preemptively fearing Hussein would take it (1990, anyone?). Meanwhile, King Faisal was guiding the Saudis as a rival power in the region and vying for attention. Qaddafi took power in Libya and nationalized the oil production, putting more power in OPEC's hands.

In 1973, the US and Israel ignored both the Shah and King Faisal's warnings that an Egyptian-led war with Israel was coming. The US found itself suddenly in a weak position to help its ally Israel in the middle of the Watergate crisis. The oil embargo was crippling the US and leading to anti-Arab, anti-Iranian sentiment. Iran and the Nixon Administration considered various military responses to the embargo, and how to get oil to the US. The Shah had placed his vast order of military equipment before 1973, and now that US pledge was in jeopardy.

The scariest episode, worth pondering in light of fears during Trump's first 100 days (as I write this), is probably when a distraught-over-Watergate Nixon got drunk and passed out as the Soviets began to mobilize their military. Kissinger and Alexander Haig pondered whether the USSR would invade the Middle East while the US was obviously distracted. There is a scene where Haig shuttles to the West Wing and the residence, pretending he is getting instructions from Nixon. I grew up in the 1980s and 1990s, so the information we have on the incompetent and clearly corrupt Nixon Administration that was unavailable while he was alive is quite sobering-- this book makes me realize America has been in decline for a while and the 1970s were much worse than 2017 (for now, at least).

The US had already entered into some defense contracts with Saudi Arabia, troops and contractors were helping build defenses there when the Saudis suddenly grew concerned that the US might actually invade their land. Scoop Jackson and the original Neocons were printing serious proposals in conservative magazines by 1975 calling for outright seizure of Middle Eastern oil fields. (How many Americans remembered this history in 1991 or 2003?) The US had already reached arms agreements with the Saudis, and US troops and contractors were helping to build defenses when Saudi Arabia got concerned they might face imminent invasion. Ultimately, this at least made them scared enough to finally bend to US demands for greater oil supply.

The embargo led to some decision-making and frustration with the Shah. New Treasury Secretary Simon was initially made fun of by Nixon and Kissinger, but grew into his role and tended to disagree with Kissinger on various issues and was no fan of the Shah. While the Shah paraded himself as an educator of women, a proponent of Western values, and others he was truly an autocrat who increasingly ruled by the sword as opposition within his country was growing. As Nixon resigned and Ford took the helm, he was left out of the complete loop of what Kissinger and Nixon had had pledged to the Shah-- not just defenses but nuclear energy technology. Kissinger had "learned economics from the Shah," according to Cooper, seeing the world of oil markets his way. Worse, Kissinger would "disparage" Ford as incompetent in private meetings with the Shah, undermining any trust. The Shah began to publicly criticize the US government and public opinion was not favorable of the Shah.

After the Ford Administration got settled, its top advisors, including Donald Rumsfeld, began to clean house. Cooper writes that Rumsfeld "stalked" Kissinger, being rightfully distrustful. This was the time of the "Halloween Massacre," when Kissinger was removed from his post as National Security Advisor in favor of Brent Scowcroft. Rumsfeld replaced Schlesinger as SecDef; Cooper writes of the rampant corruption in defense deals involving actual uniformed officers in Iran (Kermit Roosevelt was also implicated in corruption). William Colby was fired from the CIA. Some of these moves were likely to help Ford beat Ronald Reagan's challenge for the GOP nomination, something Ford was was quite bitter about, personally.

At the height of the 70's relationship, 40,000 Americans were living in the country. Iran was important to the CIA, which was running a program called Ibex that collected signals intelligence and Soviet radar/intercept defense capabilities from bases in Iran. American expats, which the Shah had worked so hard to intentionally attract via contracts, were living privileged lives with classic "Ugly American" stories. In a conservative country, Westerners were showing up with halter tops and shorts to visit mosques as tourists. As expats flowed in, the cost of housing rose to meet demand, infrastructure had to be expanded, and inflation ran rampant. The world had a petrodollar recycling problem.

Kissinger, now of diminished political influence, had secret meetings and cryptic messages with one of the Shah's top advisors. Meanwhile, the Shah's top advisors are keeping knowledge of the Shah's medical condition--cancer-- a secret from the Shah himself. It's unthinkable for the Shah of Iran to have a terminal illness. Iran's condition worsened; it now needed a bailout, a better economic deal to supply oil to the US than what it had. Rumsfeld and others move to nix it while Gerald Ford pivots toward Saudi Arabia. While Iran needed higher prices to prop up the Shah's government, the Saudis were eager to undercut.

Ford had inherited a stagflation mess, and in the run-up to the election, the American economy began to stall again. Alan Greenspan was Ford's CEA Chair, and the author basically blames him for having rose-colored glasses when bad economic data came in. The author writes that in 1975, Congress had passed and Ford approved over $15 billion in tax cuts and stimulus spending. While this was contrary to Ford's ideology of smaller government, it was seen as a goo idea at the time. Cooper writes that much of the stimulus went unspent, blamed on the economic bent of Ford's team (Greenspan, Simon, etc.) which was more free-market and small-government oriented. Apparently Arthur Burns is also to blame in regards to interest rate policy. But while Arthur Burns did lead the FOMC to raise interest rates in April and May of 1976, he followed by lowering rates from July to November. So, I am skeptical of the 1976 economic history as Cooper tells it. There are other versions.
Like the collapse of Bretton Woods during this period, monetary policy generally is beyond the scope of this book (and the authors' expertise) but important to the economy and the politics.

When Carter wins the election, Kissinger states that he will not be turning over certain documents related to Iran to the new administration. Cooper asks what Kissinger is trying to cover up. Some documents are given to the Library of Congress or other sources to be relased later, others apparently are locked away somewhere or have disappeared. Kissinger now denies what we know from clear documentation about Nixon's promises to the Shah about providing defenses. Ambassador Helms returns to the US for Iran to plead guilty to a lesser charge than perjury and face prison time. He would later claim that he "never took the Shah seriously." Carter naively inherited the mess with an expectant Shah of Iran, who was increasingly ill. The disconnect between the CIA and the State Department in regards to the uprising about to happen in Iran has been documented. When the Shah visited Washington in 1977, pro-Shah supporters were attacked by anti-Shah protestors, injuring dozens. When the Shah returned in 1978, he was met with even larger demonstrations and rioting. See this Washington Post story for another forgotten bit of history.
"In Iran, a general strike by opponents of the shah was called to coincide with demonstrations here and succeeded in shutting down parts of Tehran, the capital, and three other cities. No violence was reported by wire services, although demonstration leaders here told protesters that Iranian police had reportedly killed 20 persons and arrested at least 2,000."

When the Shah was granted asylum in the US for cancer treatment, the final match on the gasoline of US-Iranian relations was lit. This book tells the essential bit of history from 1966-1978 that put all the gasoline that has been burning ever since.

I give this book 4 stars out of 5. Some better international economic understanding, particularly on monetary policy, would help the author. But his investigative skills are great, and this book is essential reading for anyone interested in American foreign policy.

Wednesday, April 26, 2017

Why Science Does Not Disprove God by Amir Aczel (Book Review #10 of 2017)

Why Science Does Not Disprove God by Amir Aczel

This book is basically about the unacknowledged cognitive biases of various "New Atheists," and what basic physical processes are unknown to science or perhaps cannot be known. My review can't really do the book justice, so I recommend reading it yourself.

Commenting on a book like this tends to draw a lot of troll comments, so let me start with other books I've reviewed that were either cited by the author or helpful in understanding this book:
Black Holes and Baby Universes (Stephen Hawking)
The Universe in a Nutshell (Hawking)
The Grand Design (Hawking)
The Hidden Reality (Brian Greene)
The Fabric of the Cosmos (Greene)
The Elegant Universe (Greene)
The God Delusion (Richard Dawkins)
Letter to a Christian Nation (Sam Harris)
Arrival (Andreas Wagner)
The Misbehavior of Markets (Benoit Mandelbrot, polymath and apparently friends with Aczel. Chaos theory.)

Not cited but helpful:
The Trouble with Physics (Lee Smolin, arguments against the cult of string theory from a quantum loop gravity physicist.)
The Accidental Universe (Alan Lightman, physicist armchair philosopher who is critical of Hawkins but has his own logical fallacies.)
Randomness in Evolution (John Tyler Bonner, slime mold biologist who argues natural selection is far less important than randomness.)
First Life (David Deamer, mix of astrophysics and biology)
Can a Darwinian be a Christian? (Michael Ruse, philosopher asking questions of consciousness and such.)
I Don't Believe in Atheists (Chris Hedges, also debated Hitchens and Harris; familiar with Aczel's arguments.)
The Quest for Meaning (Great Courses lectures by Dr. Robert H. Kane based on his book The Significance of Free Will. A history of philosophy that also asks what "values" are and has a response to postmodernists who argue nothing has objective value.)
The Reason for God (Tim Keller)
Reasonable Faith (William Lane Craig)

Aczel has a Masters in Mathematics with a PhD in Statistics and an interest in physics, having written books on the discovery of the Higgs Boson among other things. He can explain every issue below much more lucidly than I can, but the book is addressed to the same lay audience that the New Atheists write to. Aczel debated Dawkins and found his misuse of mathematics and lack of training in logic disturbing. He's also dialogued with Andreas Wagner and engaged in a TV interview review of one of Brian Greene's books, which went sour when Greene got evasive with his answers on string theory and a multiverse or would not concede Aczel's point. Aczel has similar problems with Harris' and Lawrence Krauss' books, finding outright errors. Krauss boasts that quantum mechanics gives the reason for the universe's existence but Aczel shows that quantum mechanics "says no such thing." He notes Richard Feynman never claimed such a thing (and claimed those who claim to understand quantum mechanics do not understand quantum mechanics).

On the origins of the universe and string theory, Greene, Hawking, and others fall back on "well, the math says so, so I trust the math." (Aczel's work was written before Greene's later work, The Hidden Reality, positing that we are probably just zeros and ones living in a video game like The Sims, or maybe a video game inside another video game, infinite regression.)  These cosmologists put a lot of faith in ideas that are impossible to test and therefore, by definition, not actually science. (Hawking, for example, in The Universe in a Nutshell admits it would take a Hadron collider larger than the entire universe to test aspects of string theory.)

What bothers Aczel is that Krauss and Dawkins can believe we are all just randomly assembled molecules yet make claims about truth and morality. If we are just randomly assembled particles that will again be scattered, how can a Dawkins or Krauss say it's wrong if I scattered his molecules before the synapses in his brain might personally desire them to be scattered. Philosophy matters (see Dr. Kane's lecture series above).

The author, born in Israel, pivots to specific issues dealing with religious artifacts, giving a brief history of religion. He seems to be of no particular religious bent himself, but rather argues that religion has been a central part of man's history and a motivating factor for examining and explaining surroundings. He takes issue with Hitchens' claim that there is "no proof" that any of the stories of the Bible happened, walking through a list of plenty of archaeological finds from Old and New Testaments ranging from Jericho to Pontius Pilate, showing that these historical places and people were discovered by archaeologists after after skeptics had long claimed they were fiction.

Aczel gives examples of how Krauss and Dawkins quote scientists like Gould and Einstein's thoughts about the possibility of a God out of context in an attempt to reinterpret them as more militantly atheist than the context could possibly allow. They apparently feel some obligation to be apologists for previous scientists who were not militant atheists. He gives little time to the idea of a multiverse, noting that physics who do real science believe in a Big Bang, a beginning. The multiverse cannot be tested and by the definition of science Krauss and Dawkins state their belief in must be relegated to the metaphysical. He is on good grounds with other physicists in this regard.

The author also makes important points about uncertainty, which Dawkins seems to believe can't exist. Science is a constant process of hypothesizing and testing. There are a lot of facts taught about the universe in the 1950s that are no longer believed true today, and some of what we "know" will also be proven. Hence, we all need to be epistemologically humble.

Aczel is also friends with Benoit Mandelbrot, the father of fractal geometry, and discusses chaos theory; small changes can have very far-reaching consequences that are difficult to predict. To quote Sardar and Abrams, chaos is: "the occurence of aperiodic, apparently random events in a deterministic system. In chaos there is order and in order there lies chaos. The two are more interconnected than we ever thought before." Chaos entails uncertainty. A process like evolution or the expansion of the universe might appear deterministic, but it involves events that cannot be predicted and feed back on the deterministic process.

Further, Aczel goes into the anthropic principal-- the universe exists the way it does because we are here and able to observe it. He looks at the various cosmological constants for our universe for which no one can explain why they are fine-tuned as they are. The multiverse believer will simply say this universe is one of an infinite number and we just happen to exist such as in order to see it. But, again, the multiverse is of the realm of metaphysics and not actual science. One ignores the fine-tuning argument with some difficulty.

As a mathematician, the author is disturbed by the flippant use of infinity by various parties arguing against God. Once you inject infinity into an equation, you can prove whatever you want. Similarly, non-mathematicians like Dawkins use the word "nothing," as in "the universe came from nothing" in a way that deceivingly does not mean the null set-- the state of absolute nothingness. Rather, they mean a state where a certain level of radiation exists or some other conditions. This is also problematic, it allows them to dodge the question of how something could possibly come from nothing-- they don't mean the same "nothing" that a philosopher would. Anselm solved the problem for the theist-- God is the ultimate necessary being. Aczel also critiques Dawkins use of stats, giving concrete examples from Dawkins books in which he makes elementary errors.

Aczel turns to Darwin, the theory of natural selection, and the Darwinism purported by many New Atheists. Evolution can explain processes that we see but, unlike theories in physics, can make no predictions and thus is an incomplete theory. Scientists still lack a mechanism to explain why and how evolution occurs. For example, how and when did cells realize that light and sound waves contained valuable information, such that they developed mechanisms to receive and process that information? (If Darwinist John Tyler Bonner is correct and it has much more to do with randomness than most Darwinists give it credit for, then imagine the odds that you can see, hear, and taste today.) I read an article last week that scientists have discovered plants-- non-sentient beings-- are able to sense vibrations of water and this is why they grow their roots to and through pipes.

How did those cells get lucky enough to sense this, store that trait in their DNA and pass it to ancestors? Aczel is no believer in the young earth of Ken Ham, but seems to argue that these lucky processes evolved us to today in a much shorter time than would seem possible. (Remember, the metaphysical idea that we're in just one of an infinite multiverses has no proof and no ability to be tested. Besides, it leads back to the problem of the New Atheists defining morality.)

One of the final problems Aczel examines is the idea of consciousness. What is it, where does it come from? What are the implications for artificial intelligence? I read an article last month about how leading scientists still don't understand consciousness and how the brain is still able to do some processes better than the most advanced AI. A computer program consists of algorithms and choices based on probability. Consciousness, however, involves senses, emotions, chemical reactions, etc. Every book I've seen on the human mind has an author marveling at how much scientists still don't know. Aczel basically adds reasons people should be skeptical of the promise of artificial intelligence.

A good scientist recognizes that "some truths are unattainable." Aczel's book makes foolish all those who preach that they alone are not fools.

The book is better than my review. 4 stars.
Note, in reviewing this book I discovered the NY Times obituary for Aczel from 2015.

Sunday, April 23, 2017

That time I chatted with Greg Mankiw...

On Saturday, I attended the annual Economics Teaching Workshop hosted by the University of Kentucky Gatton College of Business (alum, '02). The keynote was N. Gregory Mankiw. If you make a Venn diagram with a circle of of all economists and a circle of all people who have influenced me then Mankiw is at the intersection. Mankiw's Principles textbook (particularly Principles of Macroeconomics), his blog, and monthly column in the NY Times does a lot to explain economics to a lay audience, something sorely missing since good communicators like Milton Friedman have passed. Mankiw was one of the pioneer economics bloggers, and i'm not sure I'd still have this blog if he didn't still have his.

Mankiw was taller than I'd imagined.
I got to tell Dr. Mankiw one of my favorite teaching stories: I first adopted his Macro textbook while a Grad Assistant (2006-2007) and irked the ire of my colleagues who told me Mankiw was "too conservative" and would be dangerous for young minds. Fast forward to 2009, I again adopted the text at another university where I was teaching full-time and was warned Mankiw was "too liberal" and would be dangerous for young minds. This symmetry is my idea of perfection. (His book came with the highest-quality powerpoints, Aplia, and test banks which was actually more important to me than ideology.) So, it was truly an honor to thank his hand and say "Thank you." I also got to ask him about my favorite topic, nominal GDP level targeting (see below).

Mankiw's keynote address was titled Today's Economy and its Discontents, which was generally exploring the idea of "secular stagnation" without using that term. Graphs he presented came from usual sources you've seen over the years if you have followed this issue. I have typed my notes from his talk below:

-Piketty and Saez note income gains in the US are increasingly going to the top one percent.
-In the US, there is slower growth of per-capita income relative to the early 1970s (as measured in 15-year averages), the decline has been steady but more markedly slower since the 2008 recession.
- However, this data is distorted by US tax-code changes over the years. As the tax code changes, people report income differently (ex: pass-through entities) and the tax code was never meant to be a way to measure economic data.

But supposing the data on income growth generally is correct, what explains the slower growth?
- Labor-force participation has declined, a demographic problem.
- Mankiw highly recommends Robert Gordon's book on why productivity growth has slowed. (Gordon summarizes some of his research in this paper  )
- One paper finds we have many more researchers than ever but flat total-factor productivity growth.
- Without mentioning Tyler Cowen, he makes similar arguments as Cowen's book.
- The boost from women entering the workforce has now been fully experienced.
- The latest inventions do not bring about the gains to productivity that ones 50 years ago did. (My example: We have fancier toilets today, but indoor plumbing was the real revolution.)
- What about the spread of markets worldwide and rapid growth in developed countries like India and China?
- Stagnation in productivity is seen in most-developed countries but less so in developing ones.
- This is little comfort to the American or European voter.
On inequality of growth in income:
- Mankiw also recommends Goldin and Katz's book the Race Between Education and Technology, calling it "The best explanation of inequality."
- Technology is replacing low-skilled workers. (His example: the ATM. Driverless trucks can't be far from now.)
- Education is a force to make people more equal. But increasingly, gains in earnings are only to Masters degrees and above.
- Educational advance has slowed in recent years, fewer people in US are pursuing the most-advanced degrees.
What about trade?
- Surveys show economists unanimously believe America gains from allowing China to produce goods in which it can do so relatively more cheaply than the US while the US does likewise.
- But economists also overwhelmingly agree that workers in these industries are hurt. So, economists agree with both of these and the need is to do a better job of explaining gains from trade to the general public.
- Gains are increasingly to "Superstars." The #1 draft pick earns multiples of what the #10 draft pick earns, for example.
- The women's movement and assortive mating also play a role.
- High-educated/high-income singles marry eachother, concentrating the wealth divide.
- In the 1960s there was a negative correlation between husband/wife earnings-- if the husband got a raise, the wife could work less.
- Now, husband and wife income are positively correlated.
How do we address the root causes of slower growth and widening inequality?
- Prescriptions are difficult and filled with caveats.
1. Education, with patience for results.
- Knows one researcher who is convinced that early preschool really helps. Implementing the perfect preschool law, however, would take another 20 years to have an impact when the first beneficiaries enter the labor force.
2. Open the door to skilled immigrants. "We ought to be handing out green cards with diplomas." (This struck me as not a good idea for the less-developed countries these students came from, however.)

What about the tax code?
His graph illustrated that changes in tax rates among quintiles from 1980 to today is quite modest relative to the change in income distribution growth over these decades-- Obama's rates were not that different from Reagans and the tax code doesn't appear to matter much.

Business taxation (See Mankiw's article in Friday's NY Times, he summed up his points in this lecture.): 
- The rate (not very interesting), worldwide vs. territorial, income vs. consumption, origin vs. destination-based.
- It's easier to tax at destination rather than at origin (how do you define where the multinational iPhone or pencil is made?)

Is there hope?
- Again, global extreme poverty and disease are in decline.
- US citizens at the federal poverty level are poorer than 85% of other US citizens, but richer than 85% of the world.
Rather than "Make America Great Again," Mankiw would like to "Make America Grateful Again," because we truly live in a wonderful age of prosperity.

Questions from the audience:
- I asked Dr. Mankiw whether he thought a NGDP level target would help. He admitted he had completely avoided monetary policy (because "that would require its own lecture") he voiced tacit support that it might be useful. But he felt like it's less useful when the instruments available (the interest rate, expectations channel, etc.) may not be as powerful as NGDP level target proponents hope, particularly when the interest rate is at the "zero lower bound."  

- One person voiced a hypothesis that we have too many researchers researching things not really useful to productivity growth. (Ex: Trying to find whether there was ever water on Mars instead of finding water for starving people in Africa.)

- What about household formation, as outlined in Charles Murray's book Coming Apart?
- Mankiw really likes the Murray book, household formation and stability might matter.

- What about a carbon tax, any hope of that?
- Mankiw revealed he and another economist had met with Donald Cohn at the White House to speak specifically about a carbon tax, and now he was hearing news reports that there was a "debate" inside the White House. He was not optimistic given Trump's favoritism of coal on the campaign trail, but is optimistic that there are several "debates" about issues like trade more favorable to mainstream economics.
- On trade, he felt that Kevin Hassett was probably in agreement that trade deficit doesn't matter and that the Administration would be better off working on other policies.
- A student speculated that the rising cost of college tuition relative to return on investment might explain the graph of slowing educational attainment. Mankiw noted that education economics, education as a signalling device, etc. is its own problem.

Issues I felt he did not address:
- Tyler Cowen's hypothesis that since leisure time and activities have never been cheaper (think YouTube and Twitter), along with basic necessities, people need to earn less to have the basic standard of living they wanted, hence have traded more work for leisure.
- Similarly, Cowen's "complacent class" thesis.
- The role of consolidation of major firms (banks, Time Warner-AT&T, etc.) and market power pushing out competitive forces and massive economies of scale discouraging start-ups.

In all, it was a good time. Mankiw is taller than I expected for some reason.

Sunday, April 16, 2017

The World of Jesus by Dr. William H. Marty (Book Review #9 of 2017)

The World of Jesus: Making Sense of the People and Places of Jesus' Day

This book is a good overview of the history of Israel from the Old Testament to the time of the first century AD told in very layman's terms, focusing on the "intertestamental period" and Jewish politics in the time of Jesus. I'm a Sunday school teacher who needed a better grasp of the context of the first century AD. I once heard John MacArthur, a hyper proponent of sola scriptura, say in a sermon "You can't understand the scene between Jesus, Herod, and Pilate without understanding first century Jewish-Roman politics." So, this is a good book to start learning.  Marty teaches undergraduates and this is at that level, highly readable, I recommend it to Bible study leaders. I highlighted a whole lot in my Kindle app and then was able to put those highlights onto Evernote where I can keep them as a reference forever.

I bought this Kindle book when it was a 99 cent deal. I would not, however, pay $8.99 for it. The information comes almost entirely from the Bible, Book of Maccabees, and the works of Josephus. It's mainly for Protestants who suspect it's sinful to even pick up the Book of Maccabees, much less apply it to their knowledge about the times of Jesus. (You should at least read 1 Maccabees before this book.) Dr. Marty does not point out any potential shortcomings of those sources; his goal is a simple narrative. There are dozens of names, multiple family trees, and various figures in Roman politics to keep track of, so Kindle x-ray is essential. Disappointingly, the author provides no timelines, charts, or other helps; I recommending finding a good study Bible that has these things for reference (NIV Study Bible edited by DA Carson has some helpful supplements and Rose eCharts has several charts and such available as well).  He also begins each chapter with a few paragraphs of ficticious dramatization of an event that he will later explain; these seem a bit out of place. He jumps forward and back chronologically at times to deal with issues like the temple, starting from what we know from the Bible and going back and explaining the context-- Jesus spoke about the temple, so who built the temple in Jesus' day, why did it take so long, why was it built, etc? It could have contained more information about the Decapolis, the area around Nazareth, various cites around Galilee, and more.

Each chapter has discussion questions, which are helpful both to quiz yourself on the material covered as well as think more deeply about it. Some are sure to evoke discussion. (I like this trend among Christian books today that include discussion questions, assuming either group reading or maybe just the need to retain the knowledge.) I give it 3 stars out of 5. It's short, and it will give any student or teacher a decent overview and whet your appetite to read more in-depth research into the history. I would also recommend reading Josephus' works as well as Paul Johnson's History of the Jews, various books on the Maccabean revolt, and Greek and Roman history such as Freeman's Egypt, Greece, and Rome.

Saturday, April 15, 2017

Boomerang by Michael Lewis (Book Review #8 of 2017)

Boomerang: Travels in the New Third World by Michael Lewis

I finished Liars Poker (1989) and Boomerang (2011) consecutively; I'd read some of Lewis' other works years ago (The Big Short, Moneyball, The Blind Side) and some of his Vanity Fair articles that contributed to this book. It is interesting to observe Lewis' progression as a commentator on Wall Street and the financial system over the years. Liars Poker has a rather humorous feel written from a more innocent time, but by Boomerang the choices of Wall Street traders were no longer funny as they contributed to a massive economic crisis and backlash against government institutions and the Western capitalist-democratic system itself. If Lewis is forgiving in Liars Poker, he is quite caustic and ominous in Boomerang.

Much of this book is made up of long-form articles Lewis wrote as he traveled Europe. Lewis' Vanity Fair article on Greece ("Beware Greeks Bearing Bonds") is a must-read on how the Eurozone is doomed. The government itself cooked the books and lied to the EU, World Bank, the EU, and everyone else about its budgets. What's to keep other countries from doing similarly? Lewis' stories on Greek priests owning assets is humorous, but avoiding and evading taxes is a national sport.
It may have been able to kick the can for a decade now, but the next economic slowdown or financial crisis will doom it.

Lewis starts in Iceland, whose debt crisis attracted far more attention than a country of 300,000 deserves. But the small population and limited economic potential makes the capital inflow and lending boom even more difficult to understand. Lewis was already a celebrity writer and his visit attracted attention. He was invited to speak to the Prime Minister, but everyone can see the PM there whenever he wants. As the bubble inflated, people moved from fishing to banking-- as though Iceland's banks had discovered a magic elixir that made everyone rich. Economists who had visited and given some warning of bubble bursting were roundly ignored. By the time Lewis gets there in the midst of the meltdown, he is awakened by the noise of people blowing up their Range Rovers because they can no longer make the loan payments and instead rip off their insurance company. Debts are nationalized, people are outraged, but change or prevention of the next crisis did not appear forthcoming. One cultural insight is sexism-- the ruling political party is made up entirely of men.

I suppose this book was controversial because of Lewis' commentary on cultural traits. The European crisis is the result of not only violating the Mundell-Fleming criteria for optimal currency areas but also an attempt to join diverse cultures in harmony. Greek is pretty much a developing country, one need only look back to its independence and rebuilding in the mid-1800s (after war with the Ottomans) to see institutions haven't been modern there for a while; and the monks that Lewis highlights are steepend in a culture that is ancient.

From Greece, Lewis goes to Ireland, where the problem was purely a real estate boom and bust that everyone wanted to ignore. A whopping 25% of Ireland's GDP was in the housing sector as people bought and sold houses that there were not enough to live in. Unlike the US, the big shots and CEOs went down with the banks and were bankrupt. In Ireland, people declaring bankruptcy are publicly shamed and face restrictions on activities like traveling abroad. However, Ireland nationalizes the losses of the banks themselves and justifies this in various ways. Lewis points out that Irish politicians cited law that didn't say explicitly that bondholders and creditors needed to be made whole-- they made up reasons for the bailout that just weren't factual.

Lewis then travels to the mainland, Germany. He begins citing from obscure sources about a weird German fascination with... feces. This fascination is evident in German vernacular, there are many words, idioms, and rumored sexual practices that Lewis armchair psychoanalyzes. He then relates this to how Germans got involved in the financial crisis and are currently dealing with filthy countries like Greece, that need German consent to bailouts. In The Big Short, it's the Germans who were still buying subprime mortgage-backed securities after the rest of the market was finally getting the whiff that they might be...well, feces. German bank runs also led to German bank bailouts. It is powerhouse Germany that basically sets monetary policy for the rest of the Eurozone, which is unfortunate. Greece and Ireland would benefit from higher inflation than would be tolerable to Germany, and the ECB maintained a less-expansionary policy than the US or UK central banks.
In Germany, patriotism is "taboo," contra Ireland, where Lewis writes many people are patriotic even though few Irish patriots actually live in Ireland. Lewis explains the insanity of the German-driven Greece debt restructuring, how increased austerity guaranteed that Greece would not be able to hit its next payoff target leading to the Germans to call for even more austerity, and the vicious cycle continues. Greece is the feces that Germans are fascinated with but don't want to own themselves.

Lest the American reader think the financial crisis is behind him, Lewis travels back to the US to look at the looming unfunded pension crisis that was exacerbated by the recession. From New Jersey to California, there are an estimated $3.5 trillion in unfunded state and local pension liabilities. (I live in Kentucky which, not mentioned by Lewis, is among the worst-funded state pensions in the nation, roughly 11% by some estimates.) This is on top of another estimated $3.5 trillion unfunded for federal pensions. Federal funding is one thing, Lewis focuses on California, whose budget crises seem intractable. He begins by bike riding with Arnold Schwarzenegger (there's an amusing anecdote of him hearing a woman on her cellphone mistake Arnold for Bill Clinton, "another guy with a sex scandal," the ex-Governor quips). Lewis recounts Schwarzenegger's political rise and his battle with Republicans and impossibility of balancing the budget in the face of the housing price crash. Lewis pays attention to the city of Vallejo's unfulfilled promises to police and fire fighters and the angst in the community as the bankrupt city had to cut its public protection and find revenue. There were angry meetings where the police and fire fighters held out against making concessions in their benefits while the citizens got angry-- threatening the very fabric of civic culture. This disaster faces Detroit, New Jersey, Kentucky, Illinois, and a host of others -- not to mention Puerto Rico. These unkeepable promises of politicians that drive Lewis to real moralizing, for which he draws on various other writers.

Lewis makes the point that a culture of instant gratification is killing society. We want our cake now, not when we're 67. As Raguram Rajan pointed out in his book on the financial crisis, housing was one vehicle for people to get rich quick. Politicians loved Fannie and Freddie and low-interest loans for low-income people because housing creates jobs for low-skilled, middle-class people, helps people feel wealthy and spend more, raises tax revenue for localities as houses increase in value, and happier communities vote for the incumbent. Americans have a time-consistency problem-- we know for our long-term health we should eat right and exercise, but today it feels so good not to do those things. Same thing with credit, we know we'll have to pay it in the future but we want it now; and then when our interest rates reset we cry "foul." Lewis fears that society, as a whole, has lost its ability to self-regulate. As developing countries embrace Western lifestyles and marketing, they too want to "super-size" their fast food and drive up credit card debt (I would personally point to Turkey, currently, as an example). Like all the other financial crises before it, the problem is so obvious that no one wants to see it. Lewis finds this maddening. He's been writing about this behavior since Liar's Poker, and Boomerang makes it sound like he's finally pulling his hair out, saying "Stop the madness!"

I give this book 4 stars out of 5.

Thursday, April 13, 2017

Liar's Poker by Michael Lewis (Book Review #7 of 2017)

Liar's Poker: Rising Through the Wreckage on Wall Street

I finished Liar's Poker (1989) and Boomerang (2011) consecutively; I'd read some of Lewis' other works years ago (The Big Short, Moneyball, The Blind Side) and several of his articles. It is interesting to observe Lewis' progression as a commentator on Wall Street and the financial system over the years. Liar's Poker has a rather humorous feel written from a more innocent time, but by Boomerang the choices of Wall Street traders were no longer funny as they contributed to a massive economic crisis and backlash against government institutions and the Western capitalist-democratic system itself. If Lewis is forgiving in Liar's Poker, he is quite caustic and ominous in Boomerang.

Lewis lucked into a job at Salomon Brothers by striking up conversation with the CEO's wife at a posh dinner party in England. Lewis had earned an economics degree from the London School of Economics, and apparently in the early 80's everyone did that to become a trader. Lewis describes the job interview and the long orientation process. Supposed geniuses from Princeton and Harvard didn't seem to know much about finance but they wanted to be part of the culture that was Salomon Brothers. It had less to do about what you knew and more about who you knew and the attitude with which you carried yourself.

The reader is introduced to people like the "Human Pirahna," and the inner workings of a rather dysfunctional management style where roles are driven more by personalities than skills. Salesman have to sell, while traders do the math or know score. Everyone plays off of one another's ignorance in order to sell their junk. Lewis is played as a fool in one of his first deals, being praised by the company bosses for "jamming" (offloading) junk at the expense of a poor sap client. Lewis relies heavily on another man for info while selling and trying to build business for Salomon, something Lewis was apparently skilled at. Everyone is faking it until they make it, maybe never understanding the global financial market and how it affects bond prices, and skill is obviously an illusion.

The 1980s was the real estate boom and bust era and the invention of the junk bond. Lewis describes well the frathouse culture of Salomon, where most women didn't have a chance and the greatest compliment for traders and salesmen was to be a "big swinging dick." There is a bizarreness to the culture, Lewis describes "freeding fenzies" where traders would order and consume massive amounts of food-- an image of Wall Street excess where there was no such thing as "too much." Liar's Poker is the name of a game the big-shots play that is about being willing to raise the stakes, bluff heavily, and hope you're lucky.

Salomon pioneered trading in the mortgage-backed security and the implications of securitizing American home loans, even if they were made up of bad loans, seemed apparent to Lewis in 1989. This experience certainly helped him write The Big Short decades later. The 1980s featured leveraged buyouts and Salomon wasn't immune to rumors of corporate raiding. The author chronicles the downfall of Michael Milken, the junk bond market, and the 1987 crash leading to layoffs at the firm. Warren Buffet was called on to bail out the firm at one point. Lewis writes of the betrayal many felt in the company as management battled on what businesses Salomon should pursue or shut down. Lewis apparently kept his job but left voluntarily in 1988.

I listened to Lewis interviewed recently on a podcast and he briefly summed his time at Salomon and the disconnect he saw between prices--the earnings of traders and their firm-- and the actual value added to the economy. He was from New Orleans and had been taught values from working people-- he knew who was earning his money and who was a fraud. It's clear the financial largess and prowess bestowed upon Wall Street chafed at Lewis, and following this book up with Boomerang really gives one an impression on how much more chafed Lewis has become as the world refuses to learn from crises and just repeats them.

In all, I give this book four stars out of five. I assigned The Big Short as required reading in a Money and Banking course I taught in 2011; I wanted to inoculate students from any rosy visions they had of Wall Street corporate culture or anyone who claimed to be a financial expert. This book serves just as well in that capacity, maybe better since it's of the perspective of someone who was just out of school at the time. 4 stars out of 5.

Saturday, April 08, 2017

Made to Stick by Chip and Dan Heath (Book Review #6 of 2017)

Made to Stick: Why Some Ideas Survive and Others Die

This book is one of the most-recommended business books and was a disappointment. It's three stars. They have sequels, I might get to them, but it's not high-priority. The book is basically a continuation of the research highlighted in Malcolm Gladwell's Tipping Point. If you're familiar with heuristics and cognitive biases (Kahneman and Tversky) then you may not glean much from this book. Maybe, as the authors remind me, I just suffer from the curse of knowledge-- where I know something and forget what it is like not to know it. The tips of the book are useful to anyone who needs to create a message, from a team manager trying to instill a direction or process, to a pastor who wants to make his sermon or church's mission statement memorable.

I finished this in early 2017 and applied this book to explaining why Trump won the election:
Trump's campaign had a "sticky" slogan that everyone can repeat-- Make America Great Again (MAGA). (The authors give the example of the successful Texas anti-litter campaign "Don't Mess with Texas," very similar.) This hearkened back to the Presidential campaigns of the 1800s where candidates had theme songs played at beer halls and train stops along the way (Thanks to the Washington Post's Presidential podcast for the knowledge there). Whoever had the best song won. (Turkey and other countries today have catchy songs in their political commercials today.) MAGA fits the Heaths' six principles for making an idea "sticky," their acronym SUCCES:
Simple - "Find the core of your idea" - MAGA is an idea summed in four words.

Unexpected - Generate curiousity about your idea. If it's counterintuitive, they will think about it more and thus be more interested.
This is the "again" part of MAGA. To me, that's counterintuitive because we're already great.

Concrete- Make sure an idea is memorable. Use concrete images and proverbs. It helps if you narrow the scope. The authors point out that if you ask people to name white objects in a kitchen, they will struggle to point out many compared to when you ask them to "name white objects in a refrigerator." You narrow the scope and it's easier, even though all items in the refrigerator are also found in a kitchen.
This is the "America" part of MAGA-- it's not about broad concepts like the "future," or       "freedom," the entire world, or human rights. America is narrow enough.

Credible- It can't just be a compact phrase or a "sticky, untrue statement." It must be true and convey an idea. Be "compact and core."
MAGA is compact and core but you can argue it isn't credible. If America is already great (what I argued made the statement counterintuitive) then the statement isn't true. I think we've seen enough lies repeated as truths through 2016-2017 (I know I go to Snopes to debunk fake news stories now more than years ago) that this idea doesn't hold. Every person clings to ideas you think are true but are actually not. It CAN be a sticky, untrue statement in 2017; people will repeat the lie until it is true (Goebbels). In fact, the authors examine various urban legends and myths that were "sticky" even though they were false.

Emotional- The idea must create empathy and appeal to identity. MAGA appeals to patriotism (and also nationalism). The emotional response helps make it sticky, which is also why I would say it can also be untrue in this day and age. It doesn't matter that vitamin C drops don't appear to do anything for anyone, the idea that it does makes people think it does-- placebo effect.
"America great again" makes one think back to childhood or an earlier period when he/she was happy to be an American. Probably a 4th of July picnic before you had to pay taxes or worry about childcare. That's the emotion the slogan appeals to, subconciously.

Stories- People remember stories even if they don't remember the content. People like a good comeback story, rag-to-riches, etc. If you can make that part of your message, it sticks.

Trump's campaign garnered so much attention because it was initially seen as a circus sideshow joke with little chance of winning. Everyone seemed eager to watch him lose at every stage. We all know how that turned out. But Trump also told stories about violence, jobs being shipped to China, Mexican druglords, etc. Those were largely verifiably false but people believed the stories. (Can you remember any stories Hillary told?)

Other details in the book:
Everyone is overconfident in his knowledge and thus many a high-paid marketer has gotten fired for creating a sure-fired campaign that wasn't sticky. But that also relates to the Counterintuitive essential of the sticky idea--your message must show the person's "knowledge gap." "Did you know...?" Knowledge gaps are painful and people naturally want to close them. If you can hook them with something they think is counterintuitive, then they hear the entire message and it will likely stay with them (and maybe they Google more about it later).

Limit the paramaters of your message (see above refrigerator example). If using statistics, or diagrams, you'll want to use the proper scale.
Beware of availability bias and other cognitive biases.

One note on psychology to keep in mind-- people tend to ask "What's in it for my group?" and not just "what's in it for me?" This tribalism is important. People subconciously ask themselves "How are poeple like me expected to think or behave?" In the "Don't Mess with Texas" campaign the appeal was Texans and gave an ideal standard of a "real Texan." This created an identity decision "If I'm a real Texan, I mustn't litter." Images of litter evoked empathy and the slogan appealed to identity-- what does my tribe take pride in?

Your message should also choose a "plot" to go along with the story. Person X did Y and the result is Z. It could be an underdog story or something else. The epitomy of SUCCES, according to the authors, is the Subway Jared Fogle commercials. "Eat subs, lose weight." It was counterintuitive-- it violated the schema we think of when we think "fast food." It was the story of a normal guy who accomplished something big. It was counterintuitive-- anyone can do this! It appealed to emotions--Americans struggle with weight and shame. The story was true and verifiable.

The authors spent time researching where various urban myths and beliefs like "nice guys finish last" came from. It's nice to hear the roots of these stories to help ward against our cognitive blinders.

In all, I give this book 3 stars out of 5. Like most best-selling business books, you're better off reading a review or a summary than the actual book. But you likely forfeit the stories in the book that make it "stick," (but hopefully my review has given you a couple stories to help you remember).

Friday, April 07, 2017

The Affordable Care Act: Examining the Facts by Purva Rawal (Book Review #5 of 2017)

The Affordable Care Act: Examining the Facts (Contemporary Debates)

So, given I work for a Medicaid managed care company (the best one, by the way), was really close to Medicaid budget and policy in an Expansion state under both a Democratic and Republican administration, and spend much of my free time reading KFF, Health Affairs, etc. it only made sense that I read the definitive book on the Affordable Care Act. Because a part of me thinks it's still useful to have well-informed policy debates even in 2017 when facts don't seem to matter.

This book is a great compilation of every policy argument, budget analysis, and the history of the years-long negotiations and political wrangling of passing the Affordable Care Act. At the time I read it, there was not a single review on Amazon under five stars. The author is partial to the ACA, having worked as an analyst in its passage. This causes her to leave out tidbits like the "Cornhusker kickback," but to attack various Republican myths and scaremongering related to the ACA. Previous to this, I'd read Steven Brill's America's Bitter Pill on the history and passage of the ACA (with focus on Kentucky's exchange rollout), Jonathan Alter's The Center Holds along with Axelrod's memoir that recounts a lot of the politics (Mitch McConnell's memoir as well, though briefly). I've also read books on Medicaid by both Brookings Institute and Avik Roy. This book recounts all of the negotiations with multiple parties and the budget math behind the ACA and answers every claim about the ACA in a chapter-by-chapter Q & A format.

I made a lot of highlights in this book (61 pages of Google Doc highlights), it's a bible of ACA information and stats. Here are just a few points:
People forget the context under which the ACA was passed, the wake of the Great Recession. Health care reform was a centerpiece of the 2008 election, both sides were going to do something radical-- even John McCain's plan would apparently be anathema in 2017's political world after the rise of the Tea Party.

"A record nearly 50 million individuals were uninsured in the wake of the Great Recession, and health care costs accounted for nearly 17 percent of Gross Domestic Product" (p. 16). In 2008, the debate was about healthcare inflation including rising premiums, people--including children-- being denied coverage for reasons that came down to prexisting conditions, and hospitals and other providers complaining about complaining about indigent care because not enough had insurance. Republicans, in particular, were concerned about the national debt driven largely by projected increases in Medicare. How do you get insurance companies to cover more people and conditions, get more people to pay for coverage, and get the least-likely to sign up into coverage, all the while not increasing the long-term debt situation? Well, in a rational world you gather proposals from health care economists, negotiate with managed care entities and insurers, and wrangle with the various budget committees in Congress to find a way to get it to pass. The work began in bipartisan fashion.

"Chairman Baucus and Ranking Member Grassley (R-IA) plotted out a bipartisan process to craft a health reform bill. The pair held three roundtables on the main pillars of the legislation—coverage expansion, payment and delivery reforms, and financing options. Following each roundtable, the committee publicly released reform options...In addition to informal involvement, the President held numerous meetings with members of both sides of the aisle" (p. 29, 31).

As the details took shape, so did much of the buy-in from the healthcare industry.
"The pharmaceutical and hospital industries publicly announced agreements with the Senate Finance Committee and the Administration in the summer of 2009" (p. 34). The author details what each industry got and offered. "The device tax is still the most contested of the industry fees or payment cuts as the sector continues to push for repeal of the tax" (p. 38). Grassley pushed for and got Medicare payment and service delivery reform, meaning the ACA would be able to reduce Medicare spending. Although Republicans had wanted to reform Medicaid for years, they blamed Obama for "cutting Medicare to seniors" when this goal was achieved via the ACA.

No piece of legislation is perfect, and anything large takes grease to get through. The more grease, the worse it gets. You bring big pharma along by requiring all insurance to provide prescription drug coverage. You bring hospital associations along by promising more people will show up at the ERs with insurance. You promise Senators something for their home town, etc.

There were flaws in the final version of the bill, in part because of all the concessions made to get it passed. Premium subsidies likely needed to be larger and more available to those over 400% of FPL. There needed to not be such a cliff of premiums and deductibles for a family going from 138% of FPL to 139%. There also needed to be a mandate with consequences to ensure the young & healthy jumping into the pool. Exchanges only worked because risk corridors worked like reinsurance. When Marco Rubio and Republicans kicked those out from under the exchanges, of course they collapsed.

"To protect against the uncertainty in the risk in the health insurance exchange markets, the ACA included three mechanisms—risk corridors, reinsurance, and risk adjustment—collectively known as the 3Rs. The first two are in effect from 2014 through 2016, and risk adjustment continues in perpetuity"  (p. 236). This idea was nothing new, and similar method was used to stabilize the market in the Republican-passed Medicare Part D a decade prior. But it's now clear that these risk corridors were required to keep insurers in the exchanges. The more uncertainty Congress has now created about what 2018 will be like, the worse it gets.

The author notes that the $15 billion public health fund that partly went to fund the Navigators was a controversial use of the funding, and Republicans quickly made it a priority to stop that, calling it a "slush fund" and working in states like Kentucky to end funding for any marketing efforts for Medicaid or the exchanges. Likewise, even though Congress worked hard to keep abortion out of the bill, Republicans alleged the ACA made abortion funding more prevalent.
"To try to avoid an abortion-related debate during health reform, lawmakers applied the long-standing Hyde Amendment, which prohibits the use of federal funds for abortion unless the pregnancy is a result of rape or incest, or the woman’s life is in danger. In addition, the ACA does not preempt state abortion laws, such as waiting periods or parental consent or notification (Salganicoff, Beamesderfer, and Kurani, 2014). However, the claims that the ACA would fund abortions—and increase funding to abortion providers—have continued" (p. 274).

Rawal's greatest criticism of President Obama is his promise that "If you like your plan, you can keep it," which would always be impossible given that the ACA adds the ten Essential Health Benefits to every plan. I personally found the politics behind delaying the mandate a year and allowing people to keep plans as grandfathered problematic-- it created more uncertainty in the insurance markets. But much of the criticism belongs to Republicans, particularly long-serving ones who flipped their positions on certain aspects of reform:

"Senators Orrin Hatch (R-UT) and Charles Grassley (R-IA). In 2009–2010 both of these men were still in the Senate, and they both sat on that body’s powerful finance committee. But their opposition to the ACA led them to denounce the very individual mandate that they had once praised. In 2009, days before the ACA passed the Senate, Sen. Orrin Hatch (R-UT) voiced his opposition to the individual mandate, 'Congress has never crossed the line between regulating what people choose to do and ordering them to do it. The difference between regulating and requiring it is liberty' (Hatch, 2009)" (p.305).

Given the hyper-partisan Congress in 2017 and the failure we have seen in recent weeks of Republicans to reach an agreement on what should be done about Obamacare after 7 years of vowing to repeal it, I'm largely convinced that the Affordable Care Act will be the last bill ever to pass Congress with this level of complexity. This book deftly explains the complexity, economics, and politics that went into this legislation.

Five stars. A must-own if you want to have all the information through 2015 about the ACA at your fingertips.