[Plura-list] Whales decry the casino economy; Qualia

Cory Doctorow doctorow at craphound.com
Tue May 4 16:20:30 EDT 2021


This coming Friday (May 7), the Gaithersburg Book Festival is featuring
me in an interview conducted by John Scalzi; we pre-recorded the event
but I'll be in the live chat for the premiere.



Today's links

* Whales decry the casino economy: It's the high rollers you gotta watch
out for.

* Qualia: How Law & Econ pulled a qualitative bait-and-switch.

* This day in history: 2001, 2006, 2011, 2016, 2020

* Colophon: Recent publications, upcoming/recent appearances, current
writing projects, current reading


🧊 Whales decry the casino economy

Remember Hometown Deli? It's the squat cinderblock New Jersey sandwich
shop that is publicly traded and raised $2.5m on a $100m valuation,
based on $35k in annual revenue. It was the source of much puzzlement
and mirth last month.


Since then, there's been a lot of financial sleuthing to figure out what
this "company" is - the smart money is that it's a prepackaged financial
vehicle to allow an otherwise unmarketable offshore company to go
public, by doing a reverse-acquisition.


A reason for all this attention is that Hometown is a perfect emblem of
the casino economy, in which the financial sector makes vast fortunes
without producing anything of value, simply by making bets, including
bets on other bets (which are sometimes also bets on bets).

The stories about the casino are often about the way that unwise retail
investors are wasting their "stimmies" by being the sucker at the
poker-table, getting fleeced by the sharp operators who know how the
game is really played.

That's how things played out at the Berkshire Hathaway annual meeting,
where Warren Buffett and Charlie Munger (the only billionaire
power-couple that *isn't* getting a divorce) scolded the
Wallstreetbets/Gamestop speculators and their abettors:


But as David Dayen points out, the action from retail investors is just
a side-show. Take SPACs - a form of corporation-launder that allows
companies with unsound financial to go public without normal scrutiny.


The majority of SPACs did not originate through celebrity endorsers -
they were high-flying finance vehicles created by major investment banks
and funds.


Even the Gamestop bull run - this year's poster child for retail
investors moving markets - was mostly a wargame waged by titanic funds,
with retail investors providing protective coloration.


The Trump stimulus included a promise government to buy up as many
junk-bonds as the corporate sector could issue, pumping trillions into
the casino economy (cities and states, meanwhile, were hung out to dry,
left to fire teachers and firefighters):


All of that money has gone to socially destructive activity, including
the bull run on single-family dwellings, which Wall St is trying to
corner the market on so that everyone will pay rent to a finance
slumlord so their shelter can securitized into bonds.

Much of the money has been poured into anticompetitive mergers, as
companies seek to own their own markets (horizontal mergers) and their
supply chains (vertical mergers), and so far, the Biden admin has given
them all a pass:


Thanks to the fed's "we'll buy your junk bond" policy, these mergers are
largely debt-financed, leaving once-healthy businesses saddled with vast
amounts of debt that put their employees, customers and suppliers at
risk of collapse.

That's the *real* story behind the failed EU football "Superleague," in
which a dozen teams proposed to take over all of EU football so that
their debt-saddled owners could continue to make the interest payments
on the fortunes they extracted from them.

Football fans know this, of course. That's why #ManU fans stormed the
pitch and set off smoke-bombs to protest the team's debt-based takeover
by the US billionaire/speculator Glazer family.


(Incidentally, the best commentary on Superleague has come from Musa
Okwonga, whose Trashfuture episode on the teams' dodgy, ruinious
finances is an absolute must-listen)


Despite Buffett's finger-wagging, the casino economy is being run by
whales, not minnows. Even Hometown Deli, which looks more like a mob
money-laundry than a high-finance gambit, was built on the fortunes of
sophisticated, blue-chip investors.

Out of the $2.5m that Hometown Deli raked in from "investment" last
year, $2m came from Duke University and Vanderbilt University, who
invested through their multibillion-dollar endowments.


The fact that America's elite universities are now just "hedge funds
with educational arms" is a leading indicator of the financial rot's
spread through the system.


The same economists who brief against the elements of the Biden stimulus
that will create structural changes in jobs, climate resilience, energy
independence and food stability have no problem with this casino economy.


The only part they decry is the spectacle of the suckers at the table,
because whether they're getting fleeced or collecting a rare jackpot,
they bring the whole enterprise into disrepute.


🧊 Qualia

My latest Locus Magazine column is "Qualia," and it argues that every
attempt to make an empirical, quantitative cost-benefit analysis
involves making subjective qualitative judgments about what to do with
all the nonquantifiable elements of the problem.


Think of contact tracing. When an epidemiologist does contact tracing,
they establish personal trust with infected people and use that
relationship to unpick the web of social and microbial ties that bind
them to their community.

But we don't know how to automate that person-to-person process, so we
do what quants have done since time immemorial: we decide that the
qualitative elements of the exercise can be safely incinerated, so we
can do math on the quantitative residue that's left behind.

We can automate measurements of signal strength and contact duration. We
can do math on those measurements.

What we *can't* do is tell whether you had "contact" with someone in the
next sealed automobile in slow traffic - or whether you were breathing
into each others' faces.

The decision to discard the subjective *is* subjective.

When the University of Illinois hired physicists to design its
re-opening model, they promised no more than 100 cases in the semester
and made unkind remarks about how easy epidemiology was compared to physics.

Within weeks, the campus shut down amid a 780-person outbreak. The
physicists' subjective judgment that their model didn't need to factor
in student eyeball-licking parties meant that the model could not
predict the reality.

The problems in quants' claims of empiricism aren't just that they get
it wrong - it's that they get it wrong, and then claim that it's
impossible for anyone to do better.

This is - in Patrick Ball's term - "empirical facewash." Predictive
policing apps don't predict where crime will be, but they DO predict
where police will look for criminals.

Subjectively discarding the distinction between "arrests" and "crime"
makes bias seem objective.

40 years ago, the University of Chicago's Economics Department incubated
a radical experiment in false empiricism: the "Law and Economics"
movement, which has ruled out legal and political sphere since Reagan.

Law and Econ's premise was that "equality before the law" required that
the law be purged of subjective assessments. For example, DoJ review of
two similar mergers should result in two similar outcomes - not approval
for one and denial for the other.

To this end, they set out to transform the standards for anti-monopoly
enforcement from a political judgment ("Will this merger make a company
too powerful?") to an economic one ("Will this merger make prices go up?").

It's true that "Is this company too powerful?" is a subjective question
- but so is "Will this merger result in higher prices?"

After all, every company that ever raised prices after a merger blamed
something else: higher wage- or material-costs, energy prices, etc.

So whenever two companies merge and promise not to raise prices, we have
to make a subjective judgment as to whether to trust them. And if they
do merge and raise prices, we have to subjectively decide whether
they're telling the truth about why the prices went up.

Law and Econ's answer to this lay in its use of incredibly complex
mathematical models. Chicago economists were the world's leading experts
in these models, the only people who claimed to know how to make and
interpret them.

It's quite a coincidence how every time a company hired a Chicago Boy to
build a model to predict how a merger would affect consumers, the model
predicted it would be great.

A maxim of neoliberal economics is "incentives matter" - and economists
have experience to prove it.

The Chicago School became a sorcerous priesthood, its models the
sacrificial ox that could be ritually slaughtered so the future could be
read in its guts. Their primacy in models meant that they could dismiss
anyone who objected as an unqualified dilettante.

And if you had the audacity to insist that the law shouldn't limit
itself to these "empirical" questions, they'd say you were
"politicizing" the law, demolishing "equality before the law" by making
its judgements dependent on subjective evaluations rather than math.

That's how we got into this mess, with two beer companies, two spirits
companies, three record companies, five tech companies, one eyeglasses
company, one wrestling league, four big accounting firms - they merged
and merged, and the models said it would be fine, just fine.

These companies are too powerful. Boeing used its power to eliminate
independent oversight of its 737 Max and made flying death-traps, and
then got tens of billions in bailouts to keep them flying.

What's more, these companies are raising prices, no matter what the
model says. The FTC knows how to clobber two companies that get together
to make prices higher, but if those companies merge and the two
resulting *divisions* do the same thing, they get away with it.

The only "price-fixing" the FTC and DoJ know how to detect and stop is
the action of misclassified gig-economy workers (who are allegedly each
an independent business) who get together to demand a living wage. In
Law-and-Econ terms, that's a cartel engaged in price-fixing.

That means Lyft and Uber can collude to spend $200m to pass California's
Prop 22, so they can pretend their employees are contractors and steal
their wages and deny them workplace protection - but if the workers go
on strike, *they're* the monopolists.

In Law-and-Econ land, the way those thousands of precarious,
overstretched workers should resist their well-capitalised bosses at
Uber and Lyft is to form a trade association, raise $200m of their own,
and pass their own ballot initiative.

As I wrote in the column: "Discarding the qualitative is a qualitative
act. Not all incinerators are created equal: the way you produce your
dubious quantitative residue is a choice, a decision, not an equation."

There is room for empiricism in policy-making, of course. When David
Nutt was UK Drugs Czar, he had a panel of experts create empirical
rankings for how dangerous different drugs were to their users, their
families and wider society.

From this, he was able to group drugs into "drugs whose regulation would
change a lot based on how you prioritized these harms" and "drugs whose
ranking remains stable, no matter what your priorities."

Nutt was then able to go to Parliament and say, "OK, the choice about
who we protect is a political, subjective one, not an empirical one. But
once you tell me what your subjective choice is, I can empirically tell
you how to regulate different drugs."

Nutt isn't UK Drugs Czar anymore. He was fired after he refused to
recant remarks that alcohol and tobacco were more dangerous than many
banned substances. He was fired by a government that sat back and
watched as the booze industry concentrated into four companies.

These companies' profits are wholly dependent on dangerous binge
drinking; they admit that if Britons were to stop binge drinking, they'd
face steep declines in profitability.

These companies insist they can prevent binge drinking, through "enjoy
responsibly" programs.

These programs are empirical failures. The companies insist that this is
because it's impossible to prevent binge drinking.

So Nutt made his own program, and performed randomized trials to see how
it stacked up against the booze pushers' version.

Nutt's program worked.

It was never implemented.

Instead, he got fired, for saying - truthfully - that alcohol is an
incredibly dangerous drug.

The four companies that control the world's booze industry have enormous
political power.

So here we have the failure of Law-and-Econ, even on its own terms.
Instead of creating an empirical basis for policy, the Law-and-Econ
framework has created global monopolies that capture their regulators
and kill with impunity.

That's why it's so significant that Amy Klobuchar's antitrust proposals
start by getting rid of the "consumer welfare" standard and replacing it
with a broader standard: "Is this company too powerful?"



🧊 This day in history

#20yrsago Linus Torvalds responds to Craig Mundie on open source

#15yrsago Danny Hillis on how games are(n’t) like a theme park

#10yrsago Minnesota GOP leader declares war on Neil Gaiman

#10yrsago Rental laptops equipped with spyware that can covertly
activate the webcam and take screenshots

#10yrsago John Ashcroft assumes charge of “ethics and professionalism”
for Blackwater

#5yrsago The Planet Remade: frank, clear-eyed book on geoengineering,
climate disaster, & humanity’s future

#5yrsago US government and SCOTUS change cybercrime rules to let cops
hack victims’ computers

#5yrsago Chinese censorship: arbitrary rule changes are a form of
powerful intermittent reinforcement

#5yrsago After advertiser complaints, Farm News fires editorial
cartoonist who criticized John Deere & Monsanto

#1yrago XML inventor quits Amazon over whistleblower firings

#1yrago The failure of software licensing

#1yrago Pandemic could make Big Tech our permanent overlords

#1yrago Hospital CEOs making millions amid cuts


🧊 Colophon

Today's top sources: Naked Capitalism (https://www.nakedcapitalism.com/).

Currently writing:

* A Little Brother short story about pipeline protests.  RESEARCH PHASE

* A short story about consumer data co-ops.  PLANNING

* A Little Brother short story about remote invigilation.  PLANNING

* A nonfiction book about excessive buyer-power in the arts, co-written
with Rebecca Giblin, "The Shakedown."  FINAL EDITS

* A post-GND utopian novel, "The Lost Cause."  FINISHED

* A cyberpunk noir thriller novel, "Red Team Blues."  FINISHED

Currently reading: Analogia by George Dyson.

Latest podcast: How To Destroy Surveillance Capitalism (Part 05)

Upcoming appearances:

* In conversation with John Scalzi (Gaithersburg Book Festival), May 7,

* Interoperability and Alternative Social Media, Reimagine the Internet,
May 12, https://knightcolumbia.org/events/reimagine-the-internet

* Book launch for Aminder Dhaliwal's Cyclopedia Exotica (Indigo), May 1,

* Seize the Means of Computation, Ryerson Centre for Free Expression,
May 19,

Recent appearances:

* Podcapitalism Podcast

* Talking "Robot Artists & Black Swans" with Bruce Sterling

* The Right to Repair Movement, Monopolies, and Solarpunk

Latest book:

* "Attack Surface": The third Little Brother novel, a standalone
technothriller for adults. The *Washington Post* called it "a political
cyberthriller, vigorous, bold and savvy about the limits of revolution
and resistance." Order signed, personalized copies from Dark Delicacies

* "How to Destroy Surveillance Capitalism": an anti-monopoly pamphlet
analyzing the true harms of surveillance capitalism and proposing a
(print edition:
(signed copies:

* "Little Brother/Homeland": A reissue omnibus edition with a new
introduction by Edward Snowden:
https://us.macmillan.com/books/9781250774583; personalized/signed copies

* "Poesy the Monster Slayer" a picture book about monsters, bedtime,
gender, and kicking ass. Order here:
https://us.macmillan.com/books/9781626723627. Get a personalized, signed
copy here:

Upcoming books:

* The Shakedown, with Rebecca Giblin, nonfiction/business/politics,
Beacon Press 2022

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