Relevant and even prescient commentary on news, politics and the economy.

Substantively misleading reporting on winners in oil manipulations

Yves Smith writes to blast more ‘reporting’. I also follow Angry Bear Robert’s Stochastic Thoughts whom Mark Thoma has recently been linking, who has a unique style for his thoughts, on ‘ballance’ in reporting.

It isn’t until paragraph 14, when cursory readers have already checked out, that we get a mention of who really wins from the continued lack of transparency:

In an initial report in March, the organization said it was concerned prices could be manipulated if traders submit false prices or volumes. Among a list of proposals, the organization said it was considering establishing an industry regulator as well as requiring mandatory reporting of trades…. 

Some traders have been accused in the past of abusing the pricing system, but the number of cases has dropped significantly in recent years. In 2000, U.S. refiner Tosco Corp. sued Arcadia Petroleum, a London-based oil-trading firm, accusing it of manipulating oil prices. Arcadia later settled the suit for an undisclosed sum. 

In 2007, Marathon Oil Corp. agreed to pay $1 million to settle oil-manipulation charges by the Commodity Futures Trading Commission. 

Arcadia and Marathon neither admitted nor denied wrongdoing. 

Now these four paragraphs are the sum total of the mentions of possible and actual abuses by traders. By contrast, the information vendors are the focus of a full eleven paragraphs of the article. The mention of fewer cases of pricing abuses being filed might be taken to mean there is less bad behavior, when it might also be a function of weaker oversight. 

Readers might think I am making overmuch of this story, but it is precisely this sort of objective-sounding but substantively misleading reporting that lulls the public to sleep on important issues. A more vigilant public is less likely to be conned.

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More on Michigan Voting

The U.S. Election Atlas shows the Michigan county by county results for the general election in 2008.  Note that they have inexplicably reversed the normal Red-Blue color coding.   Contrast those results with the 2012 Republican primary results.

In the Lower Peninsula, the counties that went for Romney in a big way generally went for Obama in a big way in 2008.  Wealthy, densely populated Oakland county went for Obama by 56% to 42% (660,000 total votes.)  Romney crushed Santorum there by 50% to 29%. (116,000 total votes.) Romney tended to win the counties that were close between Obama and McCain four years ago.   Along the west coast, though, many counties that were solidly in Obama’s camp in 2008 went overwhelmingly for Santorum in the Republican primary.  But these counties had big margins on Tuesday with small turnouts.

Commenter CSH at Johnathon Bernstein’s blog remarked, “I can’t recall seeing the rich-poor, East-West gap in that state as strongly represented as last night.”  CSH also pointed out that Romney won the State by 32,000 votes.  Coincidentally, he won Oakland County by 32,000 votes.  The rest of the State was a wash.

The Upper Peninsula as always, has its own different story.  Santorum carried all but two counties, and generally by large margins, while the the ’08 vote was split among counties between Obama and McCain.  The primary was closest in the eastern section of the U.P., which McCain carried in ’08.  But vote counts in the U.P. on Tuesday were very sparse – in the range of a few hundred to about 3,000 total, per county. 

It’s far from one-to-one, but Romney’s results vs Santorum more or less parallel Obama’s results vs. McCain four years ago.  Romney’s best showings were in places where he has virtually no chance in the general election.  Santorum’s best showings were in less populated areas that are likely to vote Republican, regardless.

The other significant factor is voter turnout.  Romney and Santorum together collected 787,420 votes, Statewide.  In 2008, McCain got over 20 2 million votes in Michigan, and lost the State by 16%.

Despite the hype, the stark differences between the two front runners, and Romney’s alleged home field advantage, the total turnout was less than half of McCain’s votes in ’08 this looks like a lot of less Republican apathy than I first thought, but still a significant lack of interest.  Can that bode well for their prospects in November?  (Corrections made in last 2 paragraphs.)

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Michigan Primary Results

Mitt Romney won the Michigan Republican primary yesterday by a margin of 41.1% to 37.9%, the remainder going to the rest of the overpopulated field – Herman Cain, Jon Huntsman and others were on the ballot. Romney and Santorum each gained 11 delegates.

This Huffpo article has an interactive map showing results by county.

The spread in the results is interesting. Along the west coast of the Lower Peninsula is Michigan’s bible belt. Santorum carried most of those counties by Margins of 10 to 20%. Kent county, which contains the city of Grand Rapids, it the exception. Santorum won that county by only 42.4% to 40.3%. This illustrates the other part of the Michigan dynamic. Romney did better in urban areas, while Santorum did better in places where cows or deer outnumber the people. Santorum won many more counties, but lost the total vote count.

This population effect shows up in the victory margins of the counties that Romney won. In the 5 by 2 band of counties that Romney won in the southern part of the state, Romney’s take generally decreases while Santorum’s generally increases as you move west. Then, when you reach the bible belt, it flips to Santorum. Along the Ohio border is a band of sparsely populated counties that Santorum swept. Monroe, Lenawee and Branch counties have towns of significant size in them, and in those counties Romney did better by a couple of percentage points.

Ron Paul got between 10 and 12% of the vote almost everywhere. This illustrates something about the modern Republican party. It is an unholy alliance of far-right Christian fundamentalists, pro-business (pseudo-fiscal) conservatives and libertarians – and the cracks are starting to show. If nothing else, the endless campaign of Republican debates has cast these differences into bold relief.

Logically, the fundamentalists and libertarians should hold each other in contempt. The libertarians and the pro-business faction can agree on many things, but not isolationism and the gold standard. To the business crowd, the fundamentalists are prey.

For decades, the Republicans have drawn the religious right into their fold with emotional hot button issues that have very little actual relevance, like abortion and gay marriage. The recent campaign against birth control has been an over-reach that is finally causing a back-lash.

 In my dreams, the Republican party tears itself apart, and becomes a marginalized political minority. The Michigan results give me hope that this dream might become reality.

H/T to my lovely wife.

Cross posted at Retirement Blues.

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What is meritocracy?

Andrew Gelman points to our confusions regarding merit in our social perceptions of winners and losers. I might make a list of naughty and nice sayings for another post.

Tyler Cowen pointed to an article by business-school professor Luigi Zingales about meritocracy. I’d expect a b-school prof to support the idea of meritocracy, and Zingales does not disappoint.

But he says a bunch of other things that to me represent a confused conflation of ideas. Here’s Zingales:

America became known as a land of opportunity—a place whose capitalist system benefited the hardworking and the virtuous [emphasis added]. In a word, it was a meritocracy.

That’s interesting—and revealing. Here’s what I get when I look up “meritocracy” in the dictionary:

1 : a system in which the talented are chosen and moved ahead on the basis of their achievement
2 : leadership selected on the basis of intellectual criteria

Nothing here about “hardworking” or “virtuous.” In a meritocracy, you can be as hardworking as John Kruk or as virtuous as Kobe Bryant and you’ll still get ahead—if you have the talent and achievement. Throwing in “hardworking” and “virtuous” seems to me to an attempt (unconscious, I expect) to retroactively assign moral standing to the winners in an economic race.
Later, Zingales writes:

The fundamental role of an economic system, even an extremely primitive one, is to assign responsibility and reward.

Huh? Again he seems to be conflating economics with morality, in a similar way as when economists Mankiw and Weinzierl implied that the state only has a right to tax things that are “unjustly wrestled from someone else.” Zingales in the above quote is taking the economic functions of prices, wages, supply, and demand and transmuting them into to the morally-loaded terms “responsibility” and “reward.”

Finally, in his praise of meritocracy, Zingales doesn’t seem to be aware of the concept’s self-contradicting nature. As James “Effect” Flynn has pointed out,

The case against meritocracy can be put psychologically: (a) The abolition of materialist-elitist values is a prerequisite for the abolition of inequality and privilege; (b) the persistence of materialist-elitist values is a prerequisite for class stratification based on wealth and status; (c) therefore, a class-stratified meritocracy is impossible.

To put it another way, Zingales talks a lot about the threat to meritocracy from business capturing government regulation or from pitchfork-wielding hordes raising the marginal tax rate, but he doesn’t consider some much more direct effects of meritocracy such as this.

More can be read at Andrew’s place. (link is at beginning)

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