The Moral Psychology of Finance and Virtue Economics (a hasty note)

(Other pressing engagements restrict me from saying more about this topic now, but I plan to turn and write something, at least as an introduction, later in 2009. It seems to me a quite important perspective in the current legal, economic, policy, and intellectual environment of the financial crisis, and one that has not so far emerged in its own right. I might make some unannounced revisions to this at some moment, as it mostly constitutes notes to myself. I’m afraid I buried the lede, though, and don’t have time to correct it now - sorry! - the important stuff is halfway in and then to the end.)

As economics absorbs psychology and expands to create behavioral economics (the intersection of actual behavior and posited rational behavior), it will inevitably wind up having to address a third large area. This third area has sometimes been called ‘moral psychology’ - the study of moral concepts that have to do with the emotional and affective propensities, capacities, and behaviors of human beings. Perhaps not really a discipline, it partakes partly of philosophy of mind and moral philosophy, insofar as it is about elucidating the meanings and concepts of affective states, including the virtues but also including crucial concepts of human psychology, such as trust, friendship, love, hate, and many more. It also partakes, for obvious reasons, of psychology - and yet psychology, because of the disruptions to the discipline of the past fifty years (starting with the collapse of Freudianism), has had difficulty taking part as it sorts its methodologies out.

Can I give any concrete examples of moral psychologists? The writers in moral philosophy who have analyzed the virtues have, to one extent or another, almost of necessity written to some extent in moral psychology - Philippa Foot, for example, or many writers in virtue ethics, notably Rosalind Hursthouse. It also includes writers in virtue ethics and law - Larry Solum, who many of us know for his Legal Theory Blog and as a jurisprudentialist and theorist of intellectual property, is, in my humble view, most important in the long term for his work on virtue ethics and judging. But moral psychology has also included, for reasons also obvious, writers on the morality of punishment, forgiveness, praise and blame, desert, thankfulness, and so on. Some of the most important - the great philosopher of morality, famous for his work on punishment, Herbert Morris, has written extensively on philosophy and psychoanalysis and Freud, and who continues to teach at UCLA on the moral emotions. The link among all these is the willingness to look not merely at actions and acts, but at the interior subjective state as a source and matter of morality, upon affect and affection, that necessarily require a view of mind, emotion, and feeling.

Lawyers and law professors have long shown great propensity for moral psychology - in the distinctions of intentionality in the criminal law, for example, or distinguishing between kinds of performative utterances, and so forth. Taking a book not-quite at random from my shelf, Ian Ayres’, et al., Insincere Promises (Yale 2005). Although you might have thought it would begin with a disquisition on rationality, promising-and-defection games (important, of course), instead it begins with a fastidiously subtle discussion of promising as a performative act, a rigorous linguistic account of mental states in promising sincerely and insincerely. Lawyers are good at moral psychology. To some degree, however, in the infatuation of academic law with rationality games of economics, moral psychology has been devalued as, well ... the humanities.

Affective moral psychology has been au courant for at least a generation now in academic moral philosophy; nothing new there. Behavioral economics is quickly coming into its own. Two things seem to me to have gone unremarked, however, each of which deserves far greater attention.

One is that this rising field of behavioral economics stands in need of far greater attention to and from moral psychology - specifically from philosophers who, trained in the careful distinguishing of moral concepts but also attuned to affect, are able to disentangle such concepts crucial to the new disciplines, but frankly not carefully thought out, such as trust.

I will return to ‘trust’ in a moment. But first note that this attention from philosophers is different from another kind of attention that seems to flow in fits and starts across successive academic generations - the philosophy of economics more generally, meaning by that mostly the philosophical concepts of value and comparison. The philosophy of economics (the field I would be most inclined to study in philosophy and intellectual history were I starting all over) has had some great contributions in recent decades - Elizabeth Anderson, Martha Nussbaum, Amartya Sen, Cass Sunstein (particularly his contributions on incommensurables and on analogical reasoning). Yet it tends to stop and start over the long term. We need more discussion of these core concepts in economics, more attention from philosophers, not less - but I mean something much more specific in referring to moral psychology: philosophy of economics only sometimes addresses itself to questions of affect.

Rising awareness of the specificity of finance, and the role of such things as passions, greed and fear, virtue and vice, rationality and irrationality - naturally these are the first subjects for the new behavioral economics and behavioral finance. But notice how quickly these subjects turn to topics in moral psychology. The great finance economist Robert Schiller, for example, had an opinion piece, drawn out of a new book, in the Wall Street Journal a few days ago (WSJ, Opinion Page, January 27, 2009) that specifically asserted ‘trust’ as a condition of financial markets. Yet it was striking how undeeply conceived the concept of trust was in the essay - it was nothing more than ‘confidence’ in one’s fellow participants.

Whereas the essay seemed to rely upon a quite different idea than merely mutual confidence giving rise to animal spirits, in Keynes’ famous term. It seemed to rely not on trust in one’s fellow market players, but instead the much more psychologically and philosophically nuanced idea that in a society governed by the neutral rule of law, while one might need a certain amount of mutual confidence in the willingness at one point or another in the business cycle to take risks, one did not need to have any great trust in one’s fellow market participants, but instead trust in a set of public institutions to enforce agreed upon relationships between otherwise not-greatly-trusting participants in markets. This is, after all, what separates out public trust societies from cousin-loyalty societies - and the implications of wherein you place your trust have enormous implications for what and how you regulate in order to maintain that necessary trust. If one stops to parse the concepts, trust involves a mutuality, or assumption of mutuality, that confidence need not - it might, as my reference to ‘mutual confidence’ suggests, but it need not. Trust is psychologically and conceptually - evidenced in the nuances for how we use the terms, which is to say, partly as synonyms but partly not - deeper and more inherently ‘mutual’ than confidence: these apparently minor or subtle differences have considerable implications, perhaps surprisingly, for what Schiller’s essay might propose to regulate or not, as a matter of public policy.

This is a small example, of course, and one that does not especially deal with affective aspects of trust - but it is illustrative of the general problem that finance economists have not necessarily thought all that deeply about affective concepts, let alone how an affective, interior, intersubjective concept like trust can be distinguished from other closely related, and yet different (and with different implications, sometimes very large, for how to regulate) concepts in moral psychology - or operationalized as testable propositions in empirical behavioral economics. I would guess that Professor Schiller has probably not read Francis Fukuyama’s under-appreciated book on precisely this subject - and a very fine work of moral psychology by a non-philosopher - Trust: The Social Virtues and the Creation of Prosperity.

The second unremarked thing follows closely on this. It is that finance, in particular, stands in special need of dialogue with moral psychology. Why finance more than economics generally? It is because finance, and finance theorists, are discovering with astonishing rapidity in the dislocations of markets today that markets do not always follow impersonal rules of economic rationality - there are limits upon efficient markets (I say this as a believer, not a revisionist), there are empirical behavioral tendencies that can undermine markets that regulation needs to take into account - and there are important conceptual issues about empirical behavior that need to be understood even in the real-world act of establishing regulation. Trust is a good example - if you think that trust in financial markets is mostly about trust in your fellow participants, as even Greenspan seemed to suggest in his latest Congressional testimony, then you will have one view about regulation. If you think it is about trust in the neutrality of public institutions leading to the enforcement of contrast irrespective of the identity or propensity or affect of other market participants, then you will have a quite different view of regulation. The conceptualization of what is at bottom a concept, a concept with feet planted in multiple disciplines, but ethics and psychology being two of them - that conceptualization really matters. It matters in particular in finance.

Why finance, then? Because in many other parts of economics, the operation of brute self-interest or else the truly impersonal operation of institutions is sufficient to establish and ordain behavior. You don’t need to reach deeply into psychological, let alone moral, concepts, provided (typically) that the law is sufficient to enforce external rules. Finance, by contrast, to the degree that that economists such as Schiller are themselves today asserting that the nature of markets permitting mass participation by individuals, and not just by impersonal institutions, invokes the psychology of both individuals and masses (that is, without saying more about it, both psychology and sociology - sociology, that is, and not merely psychology, in such matters as legitimation of public institutions such as financial markets), then finance is different. It is different in part because of the different role of psychology - and concepts that rely upon affect and upon concepts and understanding of moral affect, greed and fear, virtue and vice, reward and punishment, praise and blame, shame and guilt, anxiety and relief, euphoria and melancholy, animal spirits and animal passivity, affection and disaffection. Those are especially present in mass market finance, as the behavioral economists well know today - but that betokens a far closer examination of the underlying concepts and their meaning. This is a job for moral psychology.

And so ... the moral psychology of finance. Perhaps even a new, and slightly different field ... virtue economics? Why not?

(I see from comments that some people are taking ‘virtue economics’ to mean ‘economics as influenced by distributive morality’ - that field is already highly worked out, and I intend something different here. By ‘virtue economics’, I mean not questions of distributive justice, but instead the conceptual meanings, distinctions, and elucidation of psychological states, emotions, feelings, and affect, as they interact with economics and financial economics particularly.)

I don’t have time at this point to say more. But if we were going further, we might turn to consider not just moral psychology and finance, but also sociology and finance. It is not irrelevant to say that with respect to public financial markets, there is a certain kind of legitimation crisis underway. That is a concept alien these days not just to the economists, but in large part even to the political scientists. But, really, how is one to understand the problem of trust or confidence in public markets in which one invests one’s life savings without a deep concept of ... legitimacy?

What's good and what's bad about transnational governmental regulatory networks? The instant answer about legitimacy...

I was asked by a friend the other day about my (evolving) views of transnational governmental regulatory networks - the kind of networks championed by Anne-Marie Slaughter, for example, in her book A New World Order. In my lengthy review of that book, I criticized such networks as seeking to “square the circle” of global governance - global governance without actual global governance. I think that critique is correct, but I also think I should be clearer about the virtues of such networks - provided that they limit themselves in important ways.

There are problems with such networks from an accountability and transparency standpoint. The recent, very good SMU conference I attended back in November had a talk by someone who had been part of such a network that dealt with certain banking issues, and she thought the network great - until she became an academic and tried to study it and discovered that no one would so much as talk to her, let alone show her documents that, indeed, had important implications for policy.

But accountability and democratic legitimacy have become somewhat confused in the literature on networks, governmental and NGO advocacy networks. They are, after all, separate things and separate political/moral values. You can have democratic legitimacy and yet have very poor accountability mechanisms. And you can have excellent accountability mechanisms, yet not through democratic mechanisms, but instead through legally enforceable governance standards, courts of law, efficient bureaucratic oversight, etc. So saying that intergovernmental regulatory networks of the kind praised in A New World Order often lack transparency or accountability is important, but it is not always, and not always most importantly, because of a lack of democratic legitimacy. The question of democratic legitimacy is there independently. So is the question of accountability. (I discuss this in an upcoming review essay in the American Journal of International Law, reviewing a book, NGO Accountability - I think it will be the January 2009 AJIL, but AJIL is a bit backlogged.)

Nonetheless, insofar as these regulatory networks are limited to doing what they are able to do under the grant of bureaucratic - usually executive - authority within their own (democratic - which raises a separate problem) states, I do not have a problem as such with their democratic legitimacy. There might be problems with their regulatory reach, and this might be magnified in a transnational setting with less transparency. But in principle, I do not see this as very different from the fact that national agencies might have similar overreach and democratic deficit problems.

Notice how admirably conciliatory I am being today of these networks. And that is important to stress, because I do indeed see them as having a genuinely legitimate role, within certain bounds, for precisely the reasons their advocates have said. By contrast with the NGOs, they are able to partake of the (we hope) democratic legitimacy of their national governments. But to do that, however, requires that they act within the terms of that national legitimacy.

That last condition limits them to a coordinating function. It might be very robust coordinating function - meaning one in which the several members exercise great pressure to keep players 'in the game' and to prevent defection from a collective action system. But it is still a coordination among sovereign states, in which, if one is willing to pay the price in reputation, future dealings, etc., there is no fundamental legal mechanism to prevent a member from departing the system. If Lincoln aptly defined sovereignty as "a political community, without a political superior," then a coordinating group of sovereigns must accept that it is not a true ‘partnership’, with the power to prevent departures. On the other hand, the group can offer collective benefits to offset the burdens.

This then leads to what seems to me the fundamental problem with these networks. It is not the networks as such - it is what they are imagined to be in a certain liberal internationalist imagination, including how they are praised in A New World Order. It is the fundamental idea that over time, as a matter of simply history taking its (and what I would call its Whig History) course, governance within networks, and among networks, will "densify" until they coalesce into something that is more than just coordinated networks of various bureaucratic functions. Over time, these mechanisms will solidify into true networks of governance.

Now, I am highly skeptical of that as an empirical historical proposition about the future. But I am equally skeptical of it as a moral/political proposition, precisely on grounds of democratic legitimacy. And on this matter of morals, I suppose I also part company with the "new sovereigntists," at least in their 1990s original form. In that original form, the emphasis was on sovereignty, essentially for its own sake and own value. My emphasis - and I believe that people like Jack Goldsmith and Jeremy Rabkin have come my way in the last decade - is not on sovereignty as such, but on democracy and democratic legitimacy, for which sovereignty provides a crucial vessel for its defense. It is not sovereignty as such I wish to defend; it is democracy and (liberal, that is, including the rule of law, fundamental individual rights, etc.) democratic societies, for which sovereignty is a means of its defense, not the thing to be defended as such.

I understand that if one is a true liberal internationalist, you cannot really be satisfied with resting upon coordinated transnational actors; you want true global governance. And it is natural to want to see these things as growing into that governance. I also cannot over-stress how much I admire A New World Order for being willing to say flatly that NGOs cannot offer that legitimacy, only governments can. (The NGO advocates and their intellectual defenders have moved to a kind of weirdly obscurantist position of calling for "norm entrepreneurship" as a vehicle for eventual governance, but that is mostly a way of eliding the legitimacy question.)

But I do not accept that one can make the jump from coordination to governance without sacrificing the principle of democratic legitimacy. The effect of this, in today's world, is that it is an argument not so much over the existence of transnational regulatory governmental networks today, but rather over what they might become in the future. It is mostly an argument about anticipations and hopes for the future. However, if you are committed to them becoming all these wonderful political things in the future, you might well wind up ruining them and their narrow, bureaucratic functioning within a narrow, bureaucratic mandate today. Why? Because imagining their expanded political role in future governance leads to overplaying the narrowly regulatory role which gives them a certain legitimacy today precisely because they are perceived as narrow in activity and ambition. Alter that perception, and you raise significant legitimacy issues for the activities they might carry out today reasonably successfully.

NYT Room for Debate blog on Guantanamo policy

I was invited to participate in one of the New York Times’s group blog discussions, Room for Debate, this one on Guantanamo detainee policy. It is a pretty interesting group of discussants - David Cole, Andy McCarthy, Ben Wittes, Diane Amann, Deborah Colson, Glenn Sulmasy, and me - and the posts are quite substantive.

(So now I feel a little bad about all those mean things I said about the NYT in earlier posts here. Sort of. Well, not so much. Actually, my analysis of the Times’s business model is still right.)

Executive Order on CIA interrogation - "in any armed conflict"

(I am cross-posting this from Opinio Juris.)

I am unclear as to one thing in the Executive Order issued by President Obama regarding interrogation practices.  The text of the Executive Order is here.  It provides that the CIA must conform to the Army manual with respect to interrogation techniques, but says (bold-face added):

(b)  Interrogation Techniques and Interrogation-Related Treatment.  Effective immediately, an individual in the custody or under the effective control of an officer, employee, or other agent of the United States Government, or detained within a facility owned, operated, or controlled by a department or agency of the United States, in any armed conflict, shall not be subjected to any interrogation technique or approach, or any treatment related to interrogation, that is not authorized by and listed in Army Field Manual 2 22.3 (Manual).  Interrogation techniques, approaches, and treatments described in the Manual shall be implemented strictly in accord with the principles, processes, conditions, and limitations the Manual prescribes.  Where processes required by the Manual, such as a requirement of approval by specified Department of Defense officials, are inapposite to a department or an agency other than the Department of Defense, such a department or agency shall use processes that are substantially equivalent to the processes the Manual prescribes for the Department of Defense. 

 
I am unclear why the language “any armed conflict” is included.  Why would the Executive Order not direct the CIA to conform to such techniques as limited to the Army manual under all circumstances?  The CIA does not act solely in the context of armed conflict; on the contrary, although it sometimes acts in armed conflicts, of course, its domestic law authorization extends to non-armed conflict situations as well, provided various domestic legal provisions are met.  

I understand of course that under Supreme Court rulings, the US is in an armed conflict with Al Qaeda - the specific legal meaning in domestic law of the global war on terror - and that this was the mechanism by which the Court applied Common Article Three standards.  (That holding has always seemed to me quite unjustified as a matter of the text of the Geneva Conventions and the history of Common Article Three; I regard it as an instance of the Court, without a lot of expert knowledge or briefing, grabbing onto a legal text that allowed it to prescribe and proscribe the conduct it wanted, result oriented jurisprudence.  But okay, water under the bridge.)  The Court has ruled that as a matter of US domestic law, the US is at war with Al Qaeda everywhere, and in the conclusion that it is a war, all branches of the USG have concurred.  As far as US law is concerned, it’s war with Al Qaeda and the meaning of the Executive Order is clear on this point.

 
But a couple of things.  One, not everyone agrees that as a matter of international law, IHL, the US is legally at war with Al Qaeda in the sense of a global, everywhere in the world, armed conflict governed by IHL.  So far as I last understood the ICRC view, it did not believe this.  On the contrary, the last time I was in a public meeting with the ICRC, for example - at SAIS here in DC - its view was that as an international law matter, the US was involved in two wars, one taking place in the theatre of Afghanistan and the other in the theatre of Iraq.  It was simply not factually the case that there was a “global war” underway in a legal sense; although it plainly welcomed the result reached by the Supreme Court in deeming Common Article Three applicable, so far as I have understood it has not accepted that there is a global war in a legal sense.  And, let me add, that is my view as an international law matter as well; I distinguish between the strategic virtues of seeing a global war and the legal facts.  

Suppose, however, that the Obama administration were also to reach this conclusion about the issue of whether there is, as a matter of international law, a global war that reaches to all agents of Al Qaeda?  I.e., conclude that there is no global war?  What would be the reach of the Executive Order?

Well, that’s pretty easily handled by the lawyers.  I just don’t understand why the limitation.  More importantly, however, even in the context of jihadist terrorism, it is not the case now and will certainly not be the case into the future that future terrorists will always and necessarily be part of or affiliated with Al Qaeda.  The whole idea of affiliation in a membership or ‘corporate’ sense has been eroding in favor of far looser networks of ideology.  Not to mention covert action in the future that has nothing to do with jihadists.  If that is the case, then sooner or later, folks picked up by the CIA will not be part of “any armed conflict.”  Will the CIA be limited to the Army manual in those circumstances, given that they will not necessarily be picked up in the course of an armed conflict?  Why the limitation?

I suppose I might be missing something really obvious here, so I would welcome anyone explaining the reason for this limiting “in any armed conflict” language.

Thanks to Larry Solum for the shoutout

That was very nice of Larry Solum to post a mention of my new paper, The Assumptions Behind the Assumptions in the War on Terror, on the Very Great Legal Theory Blog. Even nicer of him to call it highly recommended! Alas, I’m not so sure I highly recommend it, though. I picked an easy target and then scattered shots all over the place. There are some important things in there, but I don’t think it’s the best organized or written thing I’ve done.

But I think the topic is hugely important, and I plan to pursue it in a series of articles or some kind of venue.

One perhaps overlooked part of the article, however, is the comparison of cost benefit analysis comparisons in private business settings versus public governmental settings. As the article notes, in the private firm setting, the comparisons are automatically self-constraining - meaning that you don’t wind up comparing completely wacko things, or in other words, private firms automatically tend to limit their comparisons to things that are in some real sense comparable - because they have no special obligation or necessity to be involved in any particular line of business.

Government, on the other hand, doesn’t have that luxury - it must be involved in radically different forms of comparison because it has to be involved in the provision of things that involve different and plural values. The mechanisms of comparison developed for private firms, however, tend to be developed - NPV, etc. - within a constrained universe of things to be evaluated and compared, in a way that is not true of public institutions. This isn’t exactly news, of course; public management theory has recognized this difference between it and private firm management decision theory for a long, long time. But I don’t see the distinction showing up so much in the law and economics literature as I would have thought.

This is one of those observations that tends naturally to occur to someone like me, of that small subset of people who do both finance law and national security and public international law. There is something peculiar, at least to a finance professor like me, to seeing a technique that has a routine, less than transcendental meaning within the world of private business, ratcheted up to be a kind of philosophical talisman to be applied to, well, everything. Tools like NPV have meaning - says this finance law professor - only within bounded universes in which something else sets the terms of what can be meaningfully compared. NPV depends upon exterior concepts of meaning; it does not generate them itself.

Assumptions Behind the Assumptions in the War on Terror: 'Event-Specific Catastrophism', Cost-Benefit Analysis and Its Limitations

I have just posted a new article up to SSRN: The Assumptions Behind the Assumptions in the War on Terror: Risk Assessment as an Example of Foundational Disagreement in Counterterrorism Policy, 54 Wayne Law Review 5505-535 (2008).

Here is the abstract posted to SSRN:

This 2007 article (based around an invited conference talk at Wayne State in early 2007) addresses risk assessment and cost benefit analysis as mechanisms in counterterrorism policy. It argues that although policy is often best pursued by agreeing to set aside deep foundational differences, in order to obtain a strategic plan for an activity such as counterterrorism, foundational differences must be addressed in order that policy not merely devolve into a policy minimalism that is always and damagingly tactical, never strategic, in order to avoid domestic democratic political conflict.

The article takes risk assessment in counterterrorism, using cost benefit analysis, as an example of a foundational disagreement that cannot easily be elided. Examining an extreme, indeed crude, recent example of cost benefit analysis applied to the risks of terror and the costs of counterterrorism - John Mueller's widely noticed Overblown - the article suggests that cost benefit analysis, at least applied in this way, runs roughshod over other important values in counterterrorism policy, such as justice, but in addition, makes radical yet unstated assumptions about what cost benefit analysis seeks to compare in establishing counterterrorism policy or estimating the risks and costs of terrorism - unstated assumptions that, in fact, assume the conclusion.

The article notes that cost benefit analysis tends to promote a policy-minimalizing "event specific catastrophism" - seeking above all to prevent simply the next, serial terrorist attack, with however no greater strategic vision. Indeed, the article says in conclusion (as Philip Bobbitt has noted) cost benefit analysis is "relentlessly tactical," not strategic; it also tends toward serial 'event specific catastrophism' as its analytic frame; and it is a method of evaluating proposed courses of action, not generating them, and hence promotes a strategically questionable tendency to reaction as a response to terrorism.

This article presents these ideas in brief fashion, however, as the first draft in a larger project on cost benefit analysis and counterterrorism, and it does so by reference to a book that is unabashedly crude in its approach to both cost benefit analysis and terrorism/counterterrorism. The critical project will extend beyond this particular article, which is in effective a a first pass at developing a critique. It is also an article that does not extend beyond events of early 2007 (when the original address was given) and should be read in that light.

I don’t think this is the smartest piece I’ve ever written, alas. I’m treating it as the first draft of a larger, but important, project on the limits of cost benefit analysis. Mueller is popular, in all the vulgar bad senses of the word, and in that sense an easy target. But the vulgarity of Mueller’s analysis has certain advantages, in that it makes every conceivable mistake, openly and notoriously. But I think much of the critique also applies even to much more cautious formulations of CBA as the driver of policy in responding to terrorism. Here is the conclusion, by the way, slightly rewritten to stand alone, as something I shared with the Hoover Task Force last week:

Kenneth Anderson, The Assumptions Behind the Assumptions in the War on Terror: Risk Assessment as an Example of Foundational Disagreement in Counterterrorism Policy
(Wayne Law Review, 2008)

(Slightly modified conclusion from the not-final draft galleys.)

V. CONCLUSION: OF STRATEGY AND TACTICS

This essay has made five over-arching points.

First, US responses to terrorism—whether one calls it generically
counterterrorism policy or a war on terror or anything else—depend on
certain underlying assumptions, what this essay has called the
‘assumptions behind the assumptions’ in counterterrorism. Cost benefit
analysis is a core ‘assumption behind the assumptions’ lying below the
surface of operational counterterrorism policy.

Second, cost benefit analysis itself depends upon further
assumptions. These further assumptions have a large impact on the
otherwise apparently straight-forward comparative approach to weighing
up policy options in the face of risk and uncertainty. These further
assumptions embedded, but not necessarily transparent, within cost
benefit analysis include, among others, the difficulties in ensuring that
the analysis compares apples-to-apples or oranges-to-oranges. In a social
and political world of multiple and plural values, this is far more difficult
than it would be, for example, in the case of financial analysis in the
private marketplace, where, at least in principle, comparisons can be
reduced to the common denominator of money. Not all values in our
social world can be reduced to a common denominator.

Third, although cost benefit analysis can provide important data
for making moral judgments about such fraught matters as how to
respond to terrorism, it does not finish the moral discussion—at least not
for most people in American society. Beyond whatever advice cost
benefit analysis might give, most people are ‘permissive deontologists’
when it comes to matters of how to respond to purposive and intentional
actions such as murder and terrorism. For the same reason—justice—we
devote far greater resources to the pursuit of criminals than cost benefit
analysis might plausibly justify, we are also inclined to devote more
resources to responding to and preventing terrorism. Arguments from a
cost benefit analysis that suggest that we devote too many resources to
counterterrorism would also apply with equal force to the argument that
we allocate too many resources to the criminal justice system for the
pursuit of ordinary criminals.

Fourth, similar observations about the overreaching tendency of cost benefit
analysis, under an apparently simple exterior, can be made with respect
to ‘commensurability.’ As noted earlier in the essay, this is a point
closely related to, but still different from, the observation that we, as a
society, embrace plural values that are not reducible to one common
denominator. cost benefit analysis relies upon the comparison of
‘opportunity costs,’ but the comparison of opportunity costs depends
upon them being genuinely available ‘opportunities’—social choices that
might genuinely be made. Whether an opportunity is genuinely an
opportunity in our existing social world or not is a question of social fact
about the world. Arguments from cost benefit analysis that rely upon
opportunity cost comparisons involving socially or politically
implausible opportunities—opportunities from another, alternative
world, so to speak, not our real one—are of much less importance than
their conclusions might seem. Again, such arguments overreach.

This essay has focused on the writings of one particular analyst, John
Mueller, and his book Overblown, as an example of the deeply flawed
use of cost benefit analysis. It is a more than fair point to respond that
using Overblown as the case study in the ills of cost benefit analysis is
the worst kind of strawman argument. On the one hand, the book has
been widely noticed, cited, and relied upon for argument by important
journalists and policy analysts, such as journalist James Fallows.62 On
the other hand, serious academic students of cost benefit analysis would
recoil from the sweeping, breezy assertions and conclusions made by the
book, on all the objections raised above and perhaps more. The reason
for making it the target in this essay is not in order to suggest that it
stands in for much more serious cost benefit analysis. It does not.

But, Overblown is illustrative of the basic errors that can and might
arise from failing to take into account the underlying assumptions of cost
benefit analysis—and the illustration is far easier to see in a crude form
of cost benefit analysis, rather than a more careful and hedged version of
it. The point of this essay is not to undermine the case for cost benefit
analysis in responding to terrorism—far from it—but instead to help
define the subtle limits upon the method and the matters that must be
drawn out carefully and explicitly in order to ensure that comparisons are
indeed comparable, particularly with respect to counterterrorism policy.

It is therefore useful to start with a view, claimed on its own terms to be
generated by cost benefit analysis, that America’s approach to terrorism,
far from trying to wipe out its perpetrators or even devote much in the
way of resources to prevent it from taking place, might instead merely
“center around creating the potential to absorb its direct effects,” and
“mitigate its longer range consequences.”63 The very boldness of the
claim, and the fact that the claim reached such radical conclusions
through the application of cost benefit analysis, puts squarely on the table
what the method can do, cannot do, and what assumptions it relies upon.
There are sophisticated and defensible applications of the method to
counterterrorism,64 but as a starting point for considering the method’s
assumptions, sometimes the crudest, least methodologically protected
example provides the most illustrative value (provided that the critic
understands that the baby of cost benefit analysis cannot, therefore, be
thrown out with the bathwater, as it were).

Fifth, one final observation can be made about cost benefit analysis and its
underlying assumptions. It is an observation particularly pertinent to its
application to terrorism and counterterrorism. The nature of cost benefit
analysis is essentially reactive. It is—and this point deserves an essay all
its own with respect to national security and terrorism policy—a method
of evaluation, a mechanism for evaluating proposed courses of action,
not for generating them.65 As a method, it is, in Philip Bobbitt’s phrase,
“relentlessly tactical.”66 Cost benefit analysis does not propose solutions;
it evaluates solutions offered by other processes. It is not a strategic form
of thinking.

The fundamental limitation of cost benefit analysis, in other words,
lies not so much in its own assumptions, but in the limits of what it does and does not do.
The long-term US response to terrorism—counterterrorism policy, the
war on terror, however one wants to frame it—requires a strategic form
of thinking. We will not agree on what the strategy should be, which is
why, as a democracy, we have majoritarian processes to sort out the
agreements and disagreements, and come to a form of action. Cost
benefit analysis can provide indispensable information for arguing over,
and finally formulating, strategic approaches. But it will not come up
with those strategies in the first place. And that, in the end, is its true
limitation.

Thanks for MLK

Like many people, I reread MLK’s ‘I have a dream’ on MLK Day. But today I also reread the Letter from Birmingham Jail. Here is hoping all of you have a peaceful and lovely MLK day. As far as I can tell, things are pretty hopping and jolly down on the Mall here in DC; it seems like a lot of cars and buses have parked up on American University campus in order to take the Metro bus downtown. But all is very quiet out here on the edges of DC in Spring Valley. I don’t have the stamina to deal with either the crowds or the cold on the Mall and am just hanging out at home. The semester is finally beginning for real in the last half of this week, or at least that’s how it seems. Everyone have a good holiday.

Asylum?

I wonder if the time has come for the United States to offer political asylum to the Jews of Canada, Britain, France, Belgium, the Netherlands, and elsewhere in Europe?

The NYT and the information theory of the leisure class, part 1/4

(Welcome Instapunditeers!  This is a long essay, put up in four successive posts, on the business model of the New York Times and how it can be seen to follow certain parts of Veblen’s theory of the leisure class. An abbreviated version of it was published at Pajamas Media online. This long version goes into more discussion of pricing under conditions of conspicuous consumption and luxury goods.)

The Information Theory of the Leisure Class, or,

A Requiem for my New York Times Home Delivery

I

Is it the politics, or is it the business model, and are they the same thing?

I am about to drop my Washington DC home delivery subscription to the New York Times. We’re going online for free.

Most readers surely wonder not why I would drop it, but instead why I hadn’t done it years ago or why I ever had it in the first place. It’s not cheap. It runs $53 a month – over $600 a year. But cut me a break – my wife is a native New Yorker, and even after a dozen years in DC, the Times is still the hometown paper.

It’s not the political content of the paper that is causing us to drop the subscription. Sure, I’m irritated that subscribing to the Times probably counts legally as a Democratic Party donation. I’m annoyed not so much by the Times’s relentless cramdown of its politics on the news pages, but the risible manqué that its “opinions” are “facts” – along with its suppression of discussion even remotely unfavorable to its candidate in this just-past election cycle. But this has been said a thousand times: what’s new in that?

Besides, I believe in reading widely across the political spectrum – this being one of the asymmetries between right and left wing intellectuals. The issue at bottom, with respect to keeping or not the hard copy subscription, is not the New York Times’s politics, but rather its business model and what it is doing to the content as a function of the newspaper’s price. The politics and the business model are intertwined in the creation and publication of content, true, but they are still not quite the same thing.

This, of course, against the well-publicized backdrop of the New York Times Company’s economic woes. Its corporate debt downgraded a few weeks ago to near junk status. Share price down around $7 today. Plunging revenues even outside the current recession. A sale-leaseback of part of the Times’s stake in its (overly-opulent) midtown headquarters (a wonderful real estate investment in better times in Manhattan, which will come again, but a great investment only if the Times mostly decamps to New Jersey). Some $400 million in debt repayment due in April. No, the Times is not indebted to remotely the same extent as, say, the now-bankrupt Tribune group under Sam Zell. The Times’s many enemies should give up the fantasy that it is somehow about to go under; it’s not. It has many problems, starting with Pinch Sulzberger deciding to break the unwritten pact of family-controlled-but-publicly-traded newspapers, viz., that the family would use its control only for editorial content, not to enrich itself at public shareholder expense. The rapacious Sulzberger family has been willing to keep Pinch in power provided that he continue paying out completely unsustainable dividends, at the expense of share price and value; well, even the dividend has finally been slashed. The New York Times Company might be ripe for a buyout by a private equity group, if the family were to splinter sufficiently – no one should doubt that the brand name has huge value, or that it is currently substantially discounted, weighed down by inept and greedy family management and the broader newspaper economic crisis. I have close friends who work at the Times, and I do indeed worry about them, their careers, and their families.

(Continue to part 2/4.)

The NYT and the infomation theory of the leisure class, 2/4

(This is the second of four posts, putting up a long essay on the business model of the New York Times ... a short version of this was published by Pajamas Media online.)

II

From newspaper to daily magazine

I used to be a shareholder, by the way, and a close reader of the New York Times Company’s endlessly disheartening financials. Not very many shares, please; I am not, as the assassin says to Mal in Serenity, a complete moron. Eventually economic reality must set in – even for this finance law professor who owned the shares as a finance class teaching aid (economic sectors in crisis make for good classroom examples). I finally sold at a hefty loss over the summer.

In the 90s, the Times bet that it could become the general newspaper of elites across the United States – become in the category of a general newspaper what the Wall Street Journal had already become as a national business paper. Falling printing costs and new forms of communication brought the costs of distributing the paper nationwide down sufficiently far that regional production and distribution were within striking distance of costs of the metropolitan NYC paper. Combined with a rising urban elite in many city centers, the national newspaper strategy was not a mad dream. I certainly thought it a smart strategy at the time. Elite regional papers, such as the Los Angeles Times, were justifiably frightened; the Washington Post Company did the smartest thing of all and diversified a few years later out of media and into the Kaplan test prep cash machine.

Content was already shifting. The Wall Street Journal, by contrast, always had to remain anchored in the core presentation of semi-specialized facts and data to satisfy a hard nosed business audience, but it wrapped that staid, fact-oriented newspaper around a conservative, polemical editorial page, while keeping them emphatically separate, and so got two national audiences for one paper. The Times could not do that. It correctly understood that its new, national target audience was what David Brooks famously called the Bobos, the market oriented yet professional, bourgeois yet bohemian, affluent and self-regarding, self-involved elites of the major cities. They didn’t seek facts as such from the New York Times. They already had the ones that really mattered from other, more specialized sources. The only factual area where the Times retained an edge was in foreign reporting, but years of shutting down foreign bureaus and cutting correspondents had largely depleted that competitive advantage, to the extent that this new readership cared about it.

What the Bobos sought instead from the Times was a cultural attitude, confirmation of who they were. The Times, for them, was less about sense than sensibility. The tendency of contemporary baby boomer journalism to narration, reportorial self-expression, and Dickensian sentimentalizing was already pronounced; call it the Long March of the New Journalism through the Institutions. The result was a New York Times that gradually began turning its news pages, and especially the front page, into a magazine.

Magazines are good things. At their best, they are ‘informed opinion’ – each of those, however, a separate qualification. But magazines are not driven by a fundamental, baseline assumption that a story, or a front page, or a newspaper is worth reading each and every day just because the facts are the facts and you need to know what’s going on. A caricature, of course; every newspaper understands that it needs a certain amount of sensation beyond the straight facts. Still, the ultimate justification of a daily paper is “this happened.” A good magazine, by contrast, is not about the value of contemporaneous facts as such, but instead some form of post-hoc analysis – sometimes deep and sometimes not and sometimes pure entertainment – but always something that draws you in beyond the bare fact that the facts are the facts. (As for television “news” – the nature of the medium is visceral imagery, not facts; it is finally just about shocking sensibilities, including via the ubiquitous talking heads, whose principal function is to appear to talk – their mouths move, sounds come out – but actually merely to emote: sensibility, once again, not sense.)

In the Times’s new business model for content, the newspaper is really a magazine and opinion is the draw. Value is supposedly added by publishing stories that are carefully calibrated to the pre-held sensibilities of the consumer-reader. And yet, in order to preserve the idea that this is still a newspaper, the opinions are presented not as a magazine would, but as a daily newspaper does – as verisimilitude. Confirmation bias reigns; this is true at conservative as well as liberal media outlets, of course, but the difference is political dominance of the mainstream media oligopoly, as Noam Chomsky might say. The New York Times as facilitator of elite onanism; high-gravitas journalism as convenor of the elite circle jerk. Opinion as news, offered daily as fact. Readers are no doubt yawning at this ‘discovery’; tell me something I don’t know.

But one bit of collateral damage from the magazinification of the Times is the New York Times Sunday Magazine – the Times has a magazine, and a very good one (for which I have occasionally written). Yet it is tough these days to distinguish the writing in the news pages from the writing in the Magazine, though the latter is better edited. If I were Gerry Marzorati, editor of the Magazine, I think I would be mightily pissed that the newspaper had taken over my gig on a daily basis and stupidly de-valued my weekly niche product by deciding to compete with it.

III

From daily magazine to online cocooning

Come the Internet Age. The magazine model remains in place, but the national strategy is dead in the water. Virtually every strategic piece is upturned. Costs may have fallen for regional and local printing and distribution – but not as far as costs of distribution on the Internet. Print ads are going downhill, too – long term, not just in the recession – because readership is migrating to the Web. And because, ominously, so is consumer purchasing. It’s disintermediation – middlemen getting cut out and, at least as far as advertisers are concerned, precisely the same economic transaction taking place – look at pretty girl in cute clothes and then buy some, click – but in a much more cost effective way.

And the coolness factor of having the Times in, say, Austin, is rapidly evaporating; who cares about having any hard copy newspaper? My students certainly don’t. There is a national general-interest magazine and it is called the Internet – or at least your political part of it, red or blue. The Times is left with declining stock values, questionable bonds, a glamorous headquarters building, hefty payroll costs, fleeing advertisers, declining subscriptions, a failed national strategy, a Boston Globe barely on life support, opinion based content, the possibility of serious competition even in Manhattan from a revamped Wall Street Journal, and a brand name that increasingly means to its readers, “Be not afraid – we won’t challenge your world.”

The brand name will survive, of course, even as the Times collapses back into a metropolitan New York paper that, to be sure, has legacy political clout nationwide and disproportionate impact on the national media’s vertical oligopoly. More parts of the ‘paper’ will migrate to cheaper environs on the Web. Whole sections, along with a proliferation of blogs and reader communities. Sometimes this interactive reader model is useful – primarily in material with a close connection to readers’ personal lives anyway, such as the personal health sections or John Tierney’s consumer-oriented Science Lab.

As touching political news stories, however, these interactions do little to increase factual content, and instead promote merely inter-reader emotional solidarity even as they present themselves as the online “debate.” Under the guise of open debate, they are in fact mostly production forums for confirmation bias, as Cass Sunstein pointed out as a general problem of online forums in Republic.com 2.0. Times reporters will be pressed to produce ever more words for these forums and moderate them – productivity starting to be measured by word counts and the variety of forums able to recycle the same limited factual content – at the expense of time actually to pursue expensive, off-line, value-added, new facts.

As this migration takes place, too, the economics of the paper will shift accordingly. From a revenue generation standpoint, the difference between the print paper and the online paper is not simply as a channel of distribution, it is a fundamental matter of what different advertising streams pay. Notes the Times’s media columnist David Carr, more than 90 percent of the newspaper industry’s revenue still “derives from the print product.” (NYT, October 28, 2008) A single newspaper ad in the printed newspaper might pay the newspaper “many thousands of dollars” – whereas the equivalent online ad might bring in a mere “$20 for each 1,000 customers who see it.”

(Continue to part 3/4.)

The NYT and the Information Theory of the Leisure Class, Part 3/4

(Third part of a long essay posted here in four parts, on the New York Times and its business model, such as it is.)

IV

Opinionification = commodification

So what? Well, this goes a long way to explaining the Judith Warner phenomenon at the Times. Warner is one of the new breed of online blogger-writers at the legacy media. John Podhoretz calls her America’s “most embarrassing online columnist,” purveyor of inanities we might charitably call mommy-feminism-lite. But reaching deep inside yourself to access your Warner-nature as a source of public authority, it turns out, requires little to no factual or reportorial effort; she is, therefore, in the Times’s new business model, remarkably productive. More productive, alas, than David Carr – because what she (re-)produces is group, indeed class, solidarity. The Times as though transformed into a string of middle-school mean-girl text-messages to Warner’s nationwide posse: a nearly flawless harbinger of what the economics of “$20 for each 1,000 customers” brings. Does the Times pay her? Why? The problem beyond Warner, however, is that “embarrassing” and “online columnist” are something of a redundancy (let’s be honest) even for a Web enthusiast like me who understands fully and celebrates how the Internet has managed partly to pry open the oligopoly of the MSM.

Facts are expensive; opinion cheap. And confirmation-bias-cocooning – cheapest of all. But newspapers made a fatal mistake deciding their competitive advantage lay somewhere other than facts. Facts not easily available, facts not already priced into the information stream. Once facts are out there enough to be part of the opinion stream, they have already been discounted to near zero and priced accordingly. No one will pay for them at that point. Developing new facts is expensive. If it weren’t, it wouldn’t likely add value in what is a surprisingly efficient information market – at least in that part of the information market in which people care about accuracy.

You do have to figure out what kinds of facts people will pay for, true. But you don’t remain profitable going after the least-value-added line of business available. And, worse, you don’t remain profitable trying to compete with people willing to do it for free in an environment of zero barriers to entry. Opinionification is commodification. And commodity pricing will not pay the rent in Manhattan.

Anyhow, the idea that newspapers would have a competitive advantage on the Internet merely in offering opinions was always complete madness. More precisely, it was always completely ego-driven madness. Do the “professionals” have an advantage in writing quality, and does the reading market actually value that edge? I understand the pain and wonderment of the newspaper reporter who, after toiling in mere facts for decades, finally ascends to a column on the opinion page; you have to believe that the opinion-columnist is a higher calling, or requires greater experience, expertise, skill, writing ability, something. Whereas facts, new facts, relevant new facts – those are premium priced, while even extremely skilled opinion writing is today, on the web, a mere commodity, priced as such. The sad truth is that the vaunted columnists of the Times and elsewhere are lucky to have ascended to their opinionating posts – because there are any number of writers as good as they, as prose stylists and thinkers, and experts too, who do it for free because, after all, their day job is … lawyer.

But at least the folks on the opinion page are on the opinion page. The issue is not the Times’s opinions, it is that the Times’s news pages assert its opinions as facts. And then (mirabile dictu) it seeks to price those opinions as facts. This is, in effect, the Times’s way out of the trap of commodity pricing: re-brand your apparently not-so-valuable commodity into a ‘luxury good’ and then sell it at a premium price. Talk about chutzpah.

This puts us squarely in the land of Thorstein Veblen. It puts us squarely in the land of The Theory of the Leisure Class. Conspicuous consumption, and the pricing of luxury and prestige goods as an exception to the usual rules of supply and demand. The Times’s core subscribers (which is to say, its core confirmation-bias readers) follow a Veblenesque “prestige goods” pricing model. They are thus – or so the Times must hope – more willing to pay higher prices for the Times’s opinions-asserted-as-facts, in no small part because having paid higher prices is a social signal that they must be … true. Or, if not true, then at least a sign of sophistication, sophisticated consumption which, after all, is more important than truth. Indeed, the more heavy-handed the cramdown of political opinion, the happier this readership is. It is ideological satisfaction that the Times must hope will somehow, some way, translate into greater reader loyalty and the willingness to pay above-market prices for mere opinion.

(Continue to part 4/4.)

The New York Times and the information theory of the leisure class, Part 4/4

(This is the concluding section of a long essay I am posting online, “The Information Theory of the Leisure Class, or, Why I am Dropping My NYT Home Subscription.)

V

Price in the land of the leisure class, or, Veblen puts lipstick on a pig

Thus the ordinary connection between price and quality, supply and demand, evaporates, as with other ‘leisure class’ goods. Subscribing to the Times is like buying expensive, but not such high quality, chocolates in Paris, where you do it for the sake of making a gift back home in genuine Parisian wrapping paper, instead of merely buying a higher quality chocolate in Trader Joe’s for genuine gourmet value.

Hence dropping Times home delivery is, for my family and me, the way one minor individual subscriber re-establishes the connection of price to quality. I’ve decided against conspicuous consumption; I’ve decided to pay the actual value of the goods online, by going online. Pay, that is, exactly the value that the Times itself puts on it as factual information, rather than a prestige good. There is a substantial psychic cost to me in doing this, by the way – and not just to my New Yorker wife, losing the paper connection to home. I’m an academic – and as a conservative academic (heaven forfend), there is a genuine prestige benefit to flaunting my paid-for, pulp-paper, hard-copy, print edition of the New York Times at my university office and around, thus showing my colleagues that I am broad-minded enough to pay for the damn thing, something they wouldn’t bother to do and, anyway, they wouldn’t ever consider subscribing to the WSJ or the Washington Times, and as for the Weekly Standard, I doubt they’ve even heard of it. Losing that is a genuine cost in conspicuous academic consumption.

Yet the Times’s preferred path out of the wasteland of commodity pricing of its opinion and into the promised land of premium pricing that same opinion depends crucially upon being able to repackage its cheaply produced opinion pieces as facts, worthy of respect, and pricing, as such. If the mask of facticity falls, so finally does the price. It will eventually be reflected directly in fewer premium print subscriptions or indirectly as the lower price online advertisers are willing to pay or as some other loss of value. It will show up, somehow, some way.

Note that the contrast with the Wall Street Journal news pages could not be greater. The WSJ would pay a stiff price in readership for errors in business news, including ideologically driven ones. It is helped by its long-time strategy of wrapping, as the Economist once observed, a relatively opinion-free newspaper, well written but deliberately low-affect, around an ideologically-driven conservative magazine on the opinion pages. In that regard, unlike the Times, it has the best of both worlds. In this, it is helped by its policy of allowing the op-ed pages some amount of independent factual reporting, in the manner of a true magazine – which reduces the temptation to do it in the rest of the paper. In the WSJ’s news pages, especially the core business news, the quality of information drives its price, which is to say that it has so far eschewed the Times’s Veblenesque prestige pricing model. Murdoch could change this at the WSJ, but so far he has not.

And yet note, too, that in today’s financial crisis, the Times’s regular business reporters and writers have impressively risen to the occasion. Times editor Bill Keller was not wrong recently to boast about the Times’ Business pages’s superb reporting and explanations. What explains this sudden influx of factual quality? Well, when what’s at stake are not superfluous luxury goods, but the readers’ own money, facts suddenly matter once again, even to bankers (or ex-bankers) in Manhattan. Veblen is out, ordinary value for price back in, when it comes to the facts about money that matter to readers, not just attitude.

Even so, certain political topics, without which the financial crisis is incomprehensible, remain firmly in the cocoon, to be mentioned blandly and vaguely if at all, starting with Barney Frank, Christopher Dodd, Chuck Schumer, Barack Obama, and their relationships to Fannie Mae lobbying money, Friends of Angelo special mortgages, etc., etc. Apparently the Times has decided that never again – never, ever, ever, ever again – will it repeat the ideological ignominy of having pop up, ten years later, a precisely-worded news story such as Steven A. Holmes’s from 1999, embarrassingly putting the Times’s imprimatur on a devastatingly prescient, witheringly factual assessment of where Democratic Party politicization and cronyization of subprime mortgages and Fannie Mae would lead – and did.

VI

Who will pay for reporting of facts?  Who, indeed?

Which sadly puts in a somewhat different light what Carr says, correctly and ominously, that the difference between “print dollars and digital dimes – or sometimes pennies – is being taken out of the newsrooms that supply both.” Very true. It is also true that the blogosphere is not about developing new facts. It happens, but only very, very occasionally. The blogosphere is about (in Carr’s well-chosen word) annotating the mainstream media. But if that’s the case, why then has the Times decided to join the annotators, rather than making its stand (as Instapundit's Glenn Reynolds has urged legacy newspapers to do) on the value of the facts as such, and figuring out what and which and how and to whom to sell them? Carr skips over those questions and asks instead, regarding those peculiarly missing facts, who in the brave new world of Web economics will pay for the “phone calls that reporters have to make?”

Fair question – if it’s really about facts. But I received a phone call a few months ago from a Times reporter, one William Glaberson, who writes front page stories on Guantanamo, calling with a perfectly legitimate, although dry-hole, query about proposals for terrorism courts. Fine. What he actually said in the phone call, however, was, “So you would agree that …” – followed by a lengthy, convoluted paragraph of all sorts of “facts” and assertions that he had already worked out in his own head and intended for me to agree to, in his language, so that he could stick it in his obviously already preset narrative. But, sorry, that was as obviously dubious as it was his seemingly normal modus operandi. The phone call, which Carr wonders who will pay for, turns out, in the world of the Times, only-too-easily to be an exercise in confirmation bias, not the discovery of new facts. Not necessarily, of course – but if your pricing model skews toward Veblen-prestige goods pricing, you skew your information gathering away from the Very Great Reporter Gretchen Morgenson of the business pages and toward the not-so-great Magazine Opinion Writer William Glaberson, and finally you give it up altogether for the Online Nurse Judith Warner. So, if you ask me whether it matters that the Times has a way to pay for that phone call or, for that matter, pay Glaberson, the answer is no. The Republic will not fall if Glaberson has to make an honest living in advertising or Warner has to go back merely to raising her children without a national mouthpiece through her womb.

It would be nice if the world were as Carr implies it: the heroic Times struggles to do its fact collection against a bitter economic world that does not value “the facts” and is barely willing to pay for its valiant efforts. There is indeed a demand-side problem – if your target audience seeks confirmation bias first, and especially if you have nurtured them on that view of a newspaper, they will not be very willing to pay for “mere” facts. And so they are not. Yet the Times threw in the “fact” towel before the battle was even joined, saw the future and decided it was in opinion writing asserted as fact in order both to charge a higher price than a mere opinion magazine could charge and seek to satisfy, at least superficially, the fact-based raison d’etre of the daily newspaper. It looked at its ‘elite’ readership and concluded that, at bottom, those readers were not very interested in facts, much less in paying for them. Instead they wanted high falutin’, high-gravitas chat based around politics. And so the Times has proceeded to offer it.

As a business model – not politics – I’m skeptical this can work on a daily basis. There are reasons why magazines appear weekly or monthly, not daily. As politics – well, the Times’s relentless cramdown of skewed, confirmation bias opinions-as-facts this election cycle represents one of two things. The cramdown might so annoy that segment of its readership that still cares about facts on the traditional basis of them being, well, true that it recalculates price in relation to facticity and drops the paper subscription, crippling the business model even further. In that case, I sincerely hope that the Times’s and its employees think the political self-satisfaction was worth it. Or, alternatively, the cramdown might handsomely pay off in cementing the emotional bond ever more closely with the core subscribing, offline readership and allow it to raise the price, directly and indirectly, to a smaller, wealthier, more devoted leisure class audience. But is there really room for a daily New Yorker?

VII

I’d pay good money for a grey, affectless, fact-driven newspaper that’s

not a magazine and not an online cocoon – would you?

Which means, in the end, that my family and I are (until tomorrow, that is) subsidizing through our annual print subscription, at $600 post tax dollars, a publication that the Times itself is already moving to discount to the content quality of an online publication sustained by zero online subscription costs and the pennies of digital advertising. It is also true that the Times’s online ‘look’ is magnificent – it has invested heavily in recreating as close as anyone has come to the genuine look and feel of the print edition, and with many hyperlink advantages. It is much more like a newspaper than the online WSJ site; WSJ.com makes money from subscribers, but that’s precisely because its web presence is not as a newspaper but as an indispensible research tool for the business world. It is systematically organized, and it feels like what it is – a highly organized database. The Times’s site, by contrast, feels like the newspaper – a place to browse.

This is to say, however, that the Times online is a wonderfully successful, fabulously designed … website. If the economics of moving online were merely about the form of delivery, none of this would be particularly momentous; win-win for newspaper and subscribers, cheaper cost of distribution for producers and, for increasing numbers of consumers, more convenient form of delivery. But it’s not. It’s about advertising revenues, subscription revenues, and what the economics of no-subscription revenues (zero) plus online advertising streams (pennies) will support in the way of content. Which came first – the chicken of opinionification or the egg of the loss of paying readers like me, not willing to pay for mere opinion? Who knows. But my family is leaving the Veblen-world of conspicuous consumption of the hard copy Times. It’s time for us to treat ourselves the way the Times so clearly sees us – as readers of the online edition for free. It’s a future, I regret to report, in which the Judith Warners, not the David Carr’s, are the opinion divas, and in which facts, to the extent they are still gathered, are carefully marshaled in support of predetermined emotional conclusions that bolster the biases of the online audience.

Whether the world would support a paper, online or on paper, devoted to entirely affectless statements of fact, sustained only on the basis that this is the news, I do not know. I wish someone would try. Let’s try a daily paper defined by its greyness, sustained by its lack of emotional content, nurtured by its utter indifference to sensibility over sense. Today’s Times regards itself as a magazine of upper bourgeois elite sentiment and sensibility, increasingly fact-lite, and destined to live under the economics of the Web. The Times thinks even less of its readers, curiously, than I do. But given that it has discounted the content, I may as well discount the price.

END

Kenneth Anderson is a law professor at Washington College of Law, American University, Washington DC. (This article was written in November 2008, published in abbreviated form by Pajamas Media in November online; I have updated it and altered it somewhat as of January 2009.)

Joe Nocera's outstanding NYT magazine article on financial risk

Kudos to Joe Nocera for his splendid NYT magazine article, January 4, 2009, “Risk: What Led to the Financial Meltdown.” (Note that it begins with a quote from Peter Bernstein’s also splendid 1990s book, Against the Gods, which I reviewed for the TLS back when the book first appeared.)

Happy New Year!

The Christmas tree has just gone down, thanks mostly to my wife and very little thanks to me. And, a little late, here’s to 2009 being a very good year.