Posted tagged ‘Media Fail’

Dear Washington Post

September 6, 2016

Here’s another slightly edited dispatch from my ongoing off-social-media conversation with some political reporters on the obvious implicit bias I see in coverage of Clinton vs. Trump.  The reporters I’ve engaged publicly and privately don’t see it that way — and they are, I firmly believe, sincere and honest in that belief.  So the task, as I see it, is to build the argument story by story and (as possible) in analysis of the sum of coverage, that they’re wrong, and to do so in a way that honest and expert reporters can read, analyze, and, I hope, become persuaded by.

What caught my eye today was this article in the Washington Post, “Inside Bill Clinton’s nearly $18 million job as ‘Honorary Chancellor’ of a for-profit university,” by Rosalind S. Hellerman and Michelle Ye Hee Lee.  That story has received professional praise as a well reported deep dive — and it is!  Really.

School of athents

By that I mean:  it is definitely a long (2604 words) and detailed dissection of Bill Clinton’s involvement with Laureate University, a major international for profit higher-ed company.  The reporters play fair by the rules of the craft:  they show their work, and a reader can see where each individual fact comes from.

But does that make it a good story, an honest one, or one that within the larger story — that of the 2016 presidential election — meets basic standards of journalism as it serves readers interests?

Not at all.

That’s what I argued below in my note to one of my correspondents.  Here, the point is that the elite political press — like any group of people working on the same stuff in substantial isolation from the outside world — has its own professional criteria for excellence.  They’ve got a value system and an expectation or understanding of what represents good work or bad.  They’re not all wrong in that.

But as far as I can see from the outside, theirs is a bunker-dwelling, mostly technical standard: well reported = good, for example.  I don’t think that there is a conspiracy at the Times  or the Post, or CNN or what have you simply to shiv the Clintons.

But what I think outside the bunker (and please do recall:  a presidential campaign is a mind-and-body deranging experience; these folks really are working without access to a lot of the reality checks that could help) those of us who are looking at the coverage both closely and synoptically see the problem not as one of reporting, but of coverage.

That is, what matters is the way stories are assigned, framed, their narratives interpreted within each piece, how they’re edited and placed (2604 words!) affects the overall message readers and the electorate as a whole receive.

Thus, the ongoing and increasingly inexplicable failure of The New York Times to engage what should be a burgeoning Trump bribery scandal with state attorneys general and Trump U.  Thus all the stories on the Clinton foundation which (a) failed to show what was implied and (b) omitted crucial context, like the Bush Foundation headed by a Powell.  And thus today’s story, in which two good reporters distill what had to have been a substantial amount of work that taken all-in-all demonstrates that Bill Clinton made a lot of money while there was, in the words of the story itself, “no evidence that Laureate received special favors from the State Department in direct exchange for hiring Bill Clinton…”

What there was, instead, was a reason to ask whether or not such special favors might have taken place.  The answer was no.

There the story should have ended.  But because this was the Clintons, and this is the elite political press, it was impossible to accept that answer.  Hence what is a type specimen for how the press is getting this election wrong — with potentially disastrous consequences.

With that as prologue (I know…logorrhea…), my breakdown of the piece for my journalist-contact.  We began by marveling at the size of Bill’s fee — which truly is pretty astonishing:


I agree with you on the sum, though from where I sit, with my full time job in higher education (and a professor’s kid, and w. two professor-siblings and, and, and…) what bothers me most about that clearly outsize wage is that it is less of an outlier than it should be.  As I’m sure you know, top academic positions at a lot of places are now paid at seven figure levels.  A million or so/year as a college president  is different from $3.6 million/year as an honorary chairman, certainly.  But it’s also true (and a scandal) that higher ed, both non and for profit has headed down the same path for CEO and senior management compensation that large businesses have.  That’s troubling.

But what got me about the story was the contrast between the reporting craft you rightly recognize: meticulous, detailed pursuit of both individual incidents and the financial details…and the lack of any substance to the clear thrust of the story: that this was another example of soft corruption in the Clinton family.  You look at the lede and it clearly asserts a pay-off.  Clinton invites someone to a working dinner who is an FOB, who later hires Bill for lots of money.   (more…)

Dear New York Times…

September 2, 2016

Hey, folks.  Been spending way too much time on Twitter lately, ranting about coverage and the election, and hence have sucked up all the would-be blogging time.  But in doing so, I’ve managed to begin a conversation with some folks who actually perform such coverage.  One of them asked me to be specific about a charge they found hard to swallow:  that there is a systematic difference between the way Trump is covered and Clinton is in the major venues.

Rockwell fact and fiction

That correspondent and others pointed out, accurately, that at least since May, and in many cases before then, there have been major, damning, utterly critical stories about Trump.  Given that, wouldn’t complaints about, say, stories on Clinton’s emails or the alleged corruption inherent in the Clinton Foundation-State Department nexus suggest more a partisan reaction, hypersensitive about stories critical of the side I favor, rather than a measured accounting of the full coverage record?

My answer was and that while there are indeed such stories, and that many of the Clinton pieces that have enraged me are at some definition of accuracy perfectly on-the-beam.  But then I go on to say that the question of systematic bias is not about each single story.  Rather, it turns on the entire editorial apparatus of campaign coverage: how those stories are assigned, pursued, resourced, and extended past day one or two coverage, and how the facts within them are set up for interpretation.

That argument leads to an obvious and appropriate response:

Prove it.

It’s going to take me some time to do so across the range of questions I’ve actually received.  But there was a piece in today’s New York Times that provides a case study (the fancy name for anecdata) that offers an example of the gap between fine-scale factual accuracy and a truthful exercise in journalism

For the record:  what I’m attempting to do isn’t simply to say “You Suck!” to The New York Times, the first target of my logorrhea below, or anyone else.  It is to help smart and incredibly hard working people realize what’s often hard to notice deep in the weeds and the mud.  That would be exactly where one is in the maze — which would be the first step to navigating to somewhere better.

With that as prologue, here’s what I just wrote to one of my correspondents.  That reporter challenged me on several points, and I began what will be a multipart response by walking back, just a little,  my somewhat incendiary claim that current campaign coverage reminded me of the Times’ Iraq war lead-in coverage — to which I added my own desire to give a specific example of what I meant by a biased approach to a story.  So here goes, in a slightly edited version of what I sent in private:


…The Iraq War mention isn’t a perfect analogy, I’ll agree:  there’s no comparison to Judith Miller in the Times’ current campaign coverage, and there’s no sign I can see of the editorial or management errors that allowed her coverage (and other stuff too, TBH) such impact.

 The Iraq war serves for me, and I think many critics of the Times as a kind of existence proof:  the Times is capable of major failures that have huge consequences, which means, to me, that it’s important to be very vigilant.  I know this seems obvious, and perhaps even insulting to those inside the organization – but from outside the newsroom, it often appears that the NYT has a difficult time admitting errosr, especially those more complicated than a straightforward factual mistake.   A personal anecdote:  I had drinks some years ago with a NYTimes reporter (still there, not on the politics desk) and at one point in our conversation (late, after a number of rounds) he said something like NYTimes reporters don’t write stuff that’s not true; we get more scrutiny than you believe so we make sure it doesn’t happen. (Fallible memory, some years, but that was the gist).  And I’m sure the scrutiny is there (heck – here I am part of it.) But that was not a reassuring statement, as I think you can see. 

 I’ll get into this more below but my broad framework is that with exceptions, the way the thumb is on the scale (from my point of view) in NYT coverage of the campaign is not at the level you work, on the reporting day by day and the production of individual stories.  It is rather on the editorial apparatus that creates the framework for readers to interpret your coverage.

You ask for specifics – let me give you an example from today’s paper, “Emails Raise New Questions About Clinton Foundation to State Dept.”

[Edited to add:  Hmmm, didn’t realize how long this sucker was on the page. Continued after the newly inserted jump] (more…)

The Siberian Candidate

July 28, 2016

The Trump story of the morning appears to be a clumsy attempt to walk back yesterday’s folly/treason.  The ferret-headed Benedict Arnold now says he was just kidding.

In the reality-based universe this looks ridiculous, a twelve year old bully’s gambit to duck out of trouble when his mouth makes a promise the rest of him can’t back up.

In a political world described to the electorate but a media community that is either complicit (Fox, et al.) or cowed into ineffectuality (at best), it’s at least a solid move by Trump, and maybe more so.  He gets two main benefits out of what should be a candidacy-killing blunder.

The first is a refocusing of attention onto the Hillary email story, never mind that the actual hack — and the evil thereof –was not on Clinton’s server but was instead an attack against one of America’s two major political parties.  To all those — I spoke to one yesterday — who see Hillary as guilty, guilty, guilty, any means necessary to bring her down is just fine, and this story helps fuel that hunger while reminding everyone, yet again, that Hillary is the worst ever traitor/murderess/spy/arglebarglegabblegibberish….

The second, and even more potent benefit to Trump is the distraction his invocation of Russian spycraft offers the media.  This is classic misdirection. Focus on the more sensational, but ultimately off-the-point element of a story instead of the meat of the matter.

That would be, of course, how Trump has already, and will likely continue to pay off on Putin’s investment in his sorry ass.  Josh Marshall wrote an elegant bill of indictment a week ago, and Adam L. Silverman has gone into some detail on the extraordinary damage Trump is wreaking on more than a half a century of American geopolitics.

To do the TL:DR — Trump increasingly depends on Russian money as more and more of the major players in the western financial system have learned to their sorrow that he’s a litigious deadbeat.  That means that Trump doesn’t have to be a witting agent of the Kremlin; he’s already been bought and paid for (and, as Adam has noted, he’s long curried favor with/genuinely supported Russian authoritarians).


You can see how much vig he’s paid already:  threats to NATO and other allies, the signals he’s sending on Putin’s ambitions in the Baltic, Chamberlain-esque appeasement in his seeming willingness to accept Russia’s annexation of Crimea, explicit changes the GOP position on Ukraine in an unequivocal shift towards the Kremlin line.

Does Trump believe in any of that, independently of a Russian handler? Who knows and who cares.  The threat Trump’s Russian connections poses to US and world security exist whether or not he’s a dupe, a useful idiot, a debtor, or (easily the least likely, IMHO) an actual witting asset of the FSB.  The real story lies in two strands and two only.  First:  follow the money.  What does Trump owe to whom? Where does/can he lay his hands on cash these days?

Second:  look at what Trump has done and proposes to do.  Not the conditional BS — how great it would be if Putin hacked HIllary.  The real stuff, the weakening of the western alliance, down-the-line support for Kremlin actions and arguments.

This is a test of our political media, one I’m afraid is already being flubbed.  Trump is a good — no, a great — three card monte player.  The patter conceals the real action.

This is how a Siberian Candidate gets the job done.

For our part, it’s a matter of keeping the story alive as much as we can in every venue we can: calling representatives, hitting social media, writing letters to the editor, and above all, talking to voters who need help seeing what’s at stake in this election.

Image:  Giotto di Bondone, Judas Receiving Payment For His Betrayalbetween 1304 and 1306.

And I’ll Take Racist Media for $200, Alex

October 1, 2014

Alex:  What is the question that evokes the answer:  “A cartoon with a watermelon punchline referencing the President of the United States.”

We reply in chorus: “What was the racist garbage in the Boston Herald today?”

Again, this has been picked up in the comments, but it’s been making me crazy for a couple of reasons.  For the obvious one, I’m just going to outsource to Charles Pierce, who knows the Herald very well indeed:

 Let’s move along down my personal resume to The Boston Herald, where the current editors, whom I know well, today made me ashamed ever to have set foot in the place, let alone worked there for six years. They ran an editorial cartoon by someone named Jerry Holbert. In the cartoon…the White House intruder is in the bathtub while the president is brushing his teeth. The caption reads: “White House Invader Got Farther Than Originally Thought.” This is what the cartoonist, Holbert, has the intruder saying from the tub.

“Have you tried the new watermelon-flavored toothpaste?”

Pierce notes the hollow contempt for those of us disgusted by this in the non-apology that followed our outcry, the assertion that there’s not a racist bone in Holbert’s body, that he was just referencing his own kids toothpaste, and that, wait for it….

…we didn’t mean to offend anyone.  Take it away, Charles:

Of course, it was not meant to offend anyone. That was just a bonus. What it was meant to do was to appeal to the base prejudices of the elderly white suburban demographic to which the Herald has been pitching itself for three decades. It is racist hooey pitched to fans of racist hooey. Period. And, like so many other things, it is different with this president. It is different because there are no rules.

I got the remnants of my day job to get back to, so I’m just going to touch on the most clueless bit of attempted contrarian justification for this bit of garbage, this, coming from Jonathan Chait:

I don’t think the joke hinges upon black people liking watermelon. I think the joke is about the Secret Service’s security failures. Obama himself is not even the subject of the joke — his perspective is that of, or close to, the reader’s. The point of the joke is that White House security is so lax that a random person could wander into the president’s living quarters undetected and take a bath, and regard this as so casual he could chat about a commonplace topic as toothpaste.

Glad that’s clear.

Black people liking watermelon is certainly not the main comic premise of the cartoon

Well, that’s alright then, dear, isn’t it?

and was probably not intended as a secondary premise, either.

And you know this, how? Because you’ve peered deeply into Holbart’s eyes?  You’ve seen into his soul?  You know him to be a good man?

The cartoonist, Jerry Holbert, explained that he came up with watermelon because he was thinking of his kids’ Colgate watermelon-flavor toothpaste.

My kids. Yeah. That’s it!

Possibly he made a subconscious connection between a black president and watermelon.

Because, of course that’s what anyone would do when contemplating the first African American president.

But it seems very doubtful this was his intent.




Two things:  1 — when an experienced reporter falls back on “seems” you know they got nuthin.  They’re telling you what the wish to be true, not what they know, or necessarily even think is likely.

and 2:  Chait should know better, but has tangled himself up around race before, so may not, but racism, like sexism, or anti-Semitism or any form of bigotry and dehumanization of the other, is not about what is in someone’s heart.  It’s not a question of essence, of identity, of who someone is.  It’s all about what one does and says.  Action in the world defines both the sin and the good deed.

In this world, as opposed into that swelling in Chait’s spotless mind’s eye, Holbert used one of the oldest caricturers with which slave-holders benefiting from stolen lives and labor sought to limn African Americans as simple, lazy and unoppressed by their oppression.  It’s an explicitly racist trope, and everyone who’s reached the age of reason (Holbert is my age to the year) knows it.

Turner Slave-ship

Holbert may be certain that he has not one prejudiced bone in his body, but what he or Chait thinks about intent or the “real” import of this cartoon is utterly irrelevant.

The cartoon speaks for itself, and its creator, and its defenders…to the shame I fear they will not feel.

J. M. W. Turner “Slave-ship”  1840

For Our Own Good

August 22, 2014

If there was a golden age for American media, it was long ago and it was short.

Over at The Atlantic, Torie Rose DeGhett has an excellent, utterly unsurprising article about a photograph taken in the last hours in the first Gulf War.

The work of  the the then 28 year old  photographer Kenneth Jarecke, the image captures a fact of war hopelessly obscured by the shots that angered  Jarecke enough to postpone a planned hiatus from combat photography.  “’It was one picture after another of a sunset with camels and a tank.” — or, once combat actually began, gaudy displays of gee whiz toys, the disembodied beauty of missile exhausts, or bloodless shots of tires and twisted metal.  War as video game, or a spectacle for the folks back home.

Here’s DeGhett’s description of Jarecke’s riposte:

The Iraqi soldier died attempting to pull himself up over the dashboard of his truck. The flames engulfed his vehicle and incinerated his body, turning him to dusty ash and blackened bone. In a photograph taken soon afterward, the soldier’s hand reaches out of the shattered windshield, which frames his face and chest. The colors and textures of his hand and shoulders look like those of the scorched and rusted metal around him. Fire has destroyed most of his features, leaving behind a skeletal face, fixed in a final rictus. He stares without eyes.

Go to the link.  Look at the shot.

It’s a great photograph — great technically, and better as a work of art, in that it tells a story and commands empathy, all  in a single frame.  Most of all, though, it is essential journalism.  It said, clearly, what war costs.  It reframed — really, it guttted — the narrative of violence without pain that was so much the preferred description of the Gulf War in Washington DC.  Its viewers got to see what was done in their names.*

Or rather, it didn’t and they didn’t.  DeGhett documents the photograph’s journey from the battlefield to it’s near complete obscuration.  The in-theater Time photo editor sent it back to New York; Time passed and so did Life.  The AP in New York pulled the shot from the wire.  No one would touch it in the US, and in Europe, only the British Sunday paper The Observer, and the French daily Libération ran the image.

The key here, as DeGhett writes, is that there was no military pressure not to publish Jarecke’s photograph.  The war was over by the time his film got back to the facility in Saudi Arabia where the press pools operated.  The decision to withhold the shot from the American public was made by the American press, by editors at the major magazines, at The New York Times, at the wire service. The chokehold on information at the top of the mainstream media was tight enough back then that most newspaper editors, DeGhett reports, never saw the image, never got to make their choice to publish or hide.

You can guess the excuses.  “Think of the children!” For the more sophisticated, a jaded response:

Aidan Sullivan, the pictures editor for the British Sunday Times, told the British Journal of Photography on March 14 that he had opted instead for a wide shot of the carnage: a desert highway littered with rubble. He challenged the Observer: “We would have thought our readers could work out that a lot of people had died in those vehicles. Do you have to show it to them?”

Why yes, Mr. Sullivan, you do.

This is an old story, and as DeGhett notes, it’s not one that would likely play out the same way today.  It’s not as if, what with Twitter and ‘net journalism and the camera phones and all that, horrible images of value and images that are violence porn are not hard to find.  (As always, for each of us, YMMV in drawing the line.)  But her piece is still a very useful piece of journalism, for two reasons.  For one — the picture is really extraordinary, and it has a minatory value that exceeds the tale of the moment it was not allowed to tell.  When John McCain and Lindsay Graham and their merry band of bombers call for war here, war there, war everywhere — and even or especially when a situation like the rise of ISIS seems to a broader slice of our country to merit the attention of the US military — we should remember what such attention looks like on the ground.

For the other:  this reminds us what it looks like when the media — national press in particular — conforms its narratives to the needs of its sources, or even just to the wisdom that prevails among a handful of fallible, comfortable, Village elders.  They’re doing it still, as best they can — and their best is still pretty effective.  This shot is a reminder of that power, and the amoral disdain for the reader, the viewer, the citizenry with which that power is too often wielded.

Let me (as DeGhett does) give Jarecke the last word:

As an angry 28-year-old Jarecke wrote in American Photo in 1991: “If we’re big enough to fight a war, we should be big enough to look at it.”

*You’ll note the obvious.  Unusually for me, there is no image accompanying this post.  Jarecke’s photograph is under copyright and can be seen at the link.  No allusive work of fine art really works against that shot, I think, so, none is offered.






The Apostasy of Jennifer Rubin

November 9, 2011

Jennifer Rubin is one of those people one simply doesn’t need to read.  Not, or not simply because she’s never right; but rather because, almost always, she is boringly, predictably wrong —  in prose that saps one’s will to live, strung together into simulations of argument that one could lay out in advance  like squares for hopscotch.

But every now and then she rouses herself from her mission — the ongoing erosion of what remains of The Washington Post’s reasons to exist — to achieve true grotesquerie.

So it goes in the affair TBogg has already chronicled, in which Rubin retweeted this message of sweetness and light; the link there leads to a blog post that Der Stürmer would have been pleased to publish (Proper names changed, of course, though the message would have stayed the same.)

Nothing to see here, really — Rubin is simply one of many shills for the peculiar notion that to love Israel obligates one to revere every last folly and viciousness of its worst elements. That she would endorse/direct readers to a steaming heap of murderous racism seems merely to be part of her brief as she sees it.

TBogg focuses on the Post’s blithe defense of the whole affair, with its ombudsman trotting the old “it’s just an opinion” fig leaf.  (Does the Post require its ombudspeople to undergo chemical sterilization, or do they just recommend it?)  For me, I’m going to trot a bit of stuff I don’t usually draw upon, science writer that I am.

That is — atheist though I  also am, I’m one of the commitedly Jewish variety, and I’m not going to let Rubin’s “opinion” pass as anything like an acceptable statement from within the tradition.  I recall what my rabbi and friend pointed out to me one time when we were discussing the Palestinian-Israeli struggle.  He opened the Tanakh, found Isiah, chapter 19, and he read out these verses:

19:24 In that day shall Israel be the third with Egypt and with Assyria, even a blessing in the midst of the land: 19:25 Whom the LORD of hosts shall bless, saying, Blessed be Egypt my people, and Assyria the work of my hands, and Israel mine inheritance.

In the context of our conversation, the exegisis is, I think, pretty damn obvious.  That Rabbi — Ben-Zion Gold, for those of you who may have encountered him — survived the Holocaust, the only member of his family to do so.  He knows from hatred, and the way verbal violence — the rhetoric that describes the subhuman, vicious other — leads to physical destruction, murder in the land.

Rubin’s Ombudsman, and her editors at the Post, may give her a pass. They shouldn’t.  This stuff kills, or at least makes such disasters that much more likely.

But whatever (lack of) consequences Rubin may face in her professional setting, it seems to me that if she is going to purport to speak for anything remotely resembling Jews or Judaism, she has a lot of ‘splainin, or rather learning to do that I strongly doubt will ever take place.  And as for the Post …  I channel my inner Brad Delong:  Why, oh why can’t we have a better press corps.

Image:  Leonardo da Vinci, Study of five grotesque heads, c. 1494

Pretty Boy Floyd Had Nothing On These Guys

October 18, 2011

Towards the end of last week, John pointed out the clueless sociopathy of Jay John Carney’s view of insider trading as a victimless crime.  (Here, the string “Jay John Carney” should be read as “your liberal media at work.”) [Update:  oops.  Apologies to the distinguished White House press sect’y.  How do you spell brain bubbles, anyone?]

I just want to add that John’s reaction — that someone using private information to gain an advantage in a two-party trade has got a victim all lined up — is not merely obvious; it’s been studied.

That is: you can imagine a hand waving argument that because each party has their own reasons to enter a transaction, then even the “outsider” on an insider trade gains what he or she desires from the exchange, otherwise they wouldn’t make the deal.   Since that motivation is untouched by the knowledge that the counterparty possesses and they do not, what’s the problem?  That’s my rough approximation of the glibtard case, at least.*

The problems with this crayon-level argument are pretty plain, I’d say, the most glaring, to me, is that assumes that each choice exists only within the narrowest possible slice of time.  Or, as an economist friend of mine put it in response to Carney’s “reasoning” (sic!):

The argument that trades are voluntary so everyone benefits is clearly only true ex ante – that is to say on the basis of the original biased information.  The guy who gets stiffed clearly wouldn’t have made the trade if he’d had the same information as the insider.  You might as well make this argument to justify dodgy second hand car sales or street trading swindles.  The guy who buys a lemon from the dealer who has hidden its faults expected to make a gain but that doesn’t mean he actually does or that the dealer isn’t a crook.

Beyond any mere ridicule of the rich-people-can-do-no-wrong that defines the Village view, the point I think John was making is that insider trading has both individual victims — those who were cheated out of what they would have gained had there been full knowledge of what was going on for both parties to a trade — and systemic costs that we all bear.

Surprise! That turns out to be something people actually know something about

I’m not going to claim that the clutch of papers I turned up in a swift surf through the literature  is anything remotely like an authoritative review of the current state of research on insider trading.  But what struck me is how easy to come up with a bunch of different angles on the problems insider trading produces for markets as well as individual investors.  Here’s an old analysis — it dates from 1991, which amounts to not much more than a mathematical formalization of a penetrating glimpse of the obvious:

In the absence of insider trading, and as long as managers’ salaries arepositively corelated with their firms results,managers will make such choices efficiently, and consequently such choices have previously received little attention, we show that, in the presence of insider trading, managers may make such choices inefficiently…More generally, the analysis of this paper suggests that the extent to which insiders may trade in their firm’s shares has considerable effects on the agency problem in corporations….

…ya think?  Snark aside, the important point is that an insider’s actions don’t begin and end with the transaction. One set of victims in an insider trade are those who hold some share in whatever enterprise or instrument is being traded.  It’s not just that insiders have more information than a counterparty, but that they have power to affect what their companies do — which means their incentives no longer align with everyone else connected to that enterprise.  In other words:  direct victims of insider trades include not just counterparties, but shareholders (or analogous parties-of-interest) in any given setting.

Then there’s this study from 2003.  Here, Julan Du of the Chinese University of Hong Kong and Columbia’s Shang-Jin Wei report on the impact of insider trading on market volatility — basically how insider trades affect how fast (and how much) prices change on a market.

They conclude:

More insider trading is found to be associated a higher market volatility even after one controls for the volatility of the real output growth, volatility of monetary and fiscal policies, and maturity of the stock market. Moreover, the quantitative effect of insider trading on market volatility is also big when compared with the effect of the volatility of other fundamentals.

But who cares, or who should?

All of us. Wild changes in prices driven by insiders taking advantage of their privileged position undermine the entire purpose of capital markets.  Du and Wei again:

Market volatility affects the incentive to save and to invest. In almost any model with a representative agent maximizing utility under uncertainty, the more volatile the asset market, holding the average return constant, the less the agent will save, and hence the less the investment will be. A certain degree of market volatility is unavoidable, even desirable, as one would like the stock price fluctuation to indicate changing values across economic activities so that resources can be better allocated. However, precisely because stock prices are supposed to serve as signals for resource allocation, excessive volatility that is not related to economic fundamentals would diminish the signaling function and impede resource allocation.

Or, to translate out of econ-geek speech:  markets are supposed to allocate capital, sending investor cash to support productive investment.  Mess with that, and the sorting function of the market, “the invisible hand,” to steal a phrase, starts to fail.  Investment decisions are distorted and we end up with a less productive economy as a whole than we would have without the thumb on the scales applied by greedhead wealthy corporate insiders seeking yet more loot than they already possess.


All this is the long way ’round of saying that when our Galtian overlords f**k with market mechanisms in any of the splendid variety of ways they have schemed innovated, there are certainly individual losers involved.  But the more consequential reality is that messing with the financial markets threatens the real economy — and that’s where all of us live.  The foreclosure crisis begins as a financial disaster.  It brings us to ruin because now 15 million actual homes are underwater in cities and towns across the United States…and that guts the whole damn country.

It’s not that eleven years in jail is too much for one misunderstood genius.  Rather: just one financial felon behind bars is orders of magnitude too few.

*Here’s that case from the horse’s ass mouth — which would be Jay John Carney himself, from the piece to which John originally linked:

But are they [insider trader Raj Rajaratnam’s opposite numbers) really harmed? Of course not. No investor was ever induced by Rajaratnam to sell a stock. Stock market transactions take place impersonally, without regard to who is on the other side of a trade.

Saying that investors wouldn’t have sold if they had Rajaratnam’s information doesn’t make the sellers victims of Rajaratnam’s trading. Even if Rajaratnam hadn’t bought the stock, they still would have sold while being in a position of relative ignorance compared to him.


Images:  Francisco de Goya, Robbery, c. 1794

Jan Provoost, Death and the Miser, before 1529.