Thursday, October 16, 2008

Epistemology & Education

For a couple of generations, what we as a country have basically understood to be true has been controlled by the television, which is to say, a handful of media companies. This was all at-least-tolerable until the FCC repealed the Fairness Doctrine in the 1980s and news organizations were under no instruction to provide competing viewpoints.

The democratization of media represented by fantastically easy web publishing of word and video marks a turn. The opportunity here is only present if Americans (all of Western culture, perhaps?) relearn how to evaluate information presented to them, a skill that seems to have been lost through the days of perceiving the television as a viable authority. According to a UCLA study, we are:

The researchers said that, compared to simple reading, the internet's wealth of choices required people to make decisions about what to click on in order to get the relevant information.

You could easily replace the word "relevant" with "accurate."

What this means is that our information intake might not be decided by questions like "Does that station lean conservative or liberal?" but moreso, "where did that reporter get his information?" To push progress along, some educational institutions are moving toward less emphasis on knowledge -- after all, most knowledge is available just on the other side of the Google -- and more emphasis on judgment and evaluation of evidence.

Coincidentally, while watching the debate last night, it occurred to me that one reason why Barack Obama has been considered a gifted speaker, and has been considered a winner by many in all three debates, is that he has held a job that puts him among limited company with past presidents: an educator.

Wednesday, October 15, 2008

As you've no doubt been told,

There's a mortgage/subprime/credit/stock crisis! Run! The US Treasury has indicated that seven hundred billion dollars will be available for investment banks, and is now planning on giving more in exchange for an equity stake.

You've probably been told that the banks need money because people took out loans they couldn't afford to buy houses that were too expensive. When we refer to a "bubble" it means that an asset is overvalued, and people are willing to pay more than a thing is actually worth. If one buys a house at the peak of a bubble, later discovers that they can't afford payment (or the interest rate, and thus the payment size, rises), they have to foreclose, the house defaults to the bank, and the bank thus owns an asset that is worth far less than the amount they were expecting to receive over time for it from the homebuyer. If you own a stake in any investment, you've probably seen your investment drop as a result of this realization: banks are discovering that what they own isn't worth what they thought it was.

You've probably been paying attention to all this.

However, in most cases, it's being framed as a "loss," as in, "I just lost several thousand dollars in my investments!" A better term might be "discovered to be fraudulent," as in, "I just discovered that several thousand dollars of my investments were fraudulent!" If we are to believe in free markets, then part of the belief is that an individual can choose to give their money to investment firms that make bad decisions, and that we are, to the extent of our investment, also morally culpable for the mistakes that they have made.

The problem is: the loss exists. When the government sends money in to foot the bill, then they bear the loss. They either make up the loss by raising taxes (we get the loss) or by... doing nothing and letting the sudden appearance of 700 billion cause massive inflation... and we thus receive the loss again.

If there's reason for government intervention at this point (at least, a government that generally believes in the free market), it would be to rescue businesses and individuals who rely on regular credit from the banks that are now short on capital to loan them. However, instead of sending the money as a bailout to banks, it might make more sense to offer such loans directly.

Thus far, most solutions have been discussing how to manage the problems that have arisen. Now that stocks are picking up (slowly, perhaps temporarily -- Paul Krugman reminds us that many foreclosed homes are still on the market), some people have taken a breath to discuss why this came about.

Why were people unable to afford the homes they thought they were?

Robert Reich discusses how Americans have lived beyond their means. Specifically, the living hasn't gone up, the means have gone down:

Since the year 2000, median family income has been dropping, adjusted for inflation. One of the main reasons the typical family has taken on more debt has been to maintain its living standards in the face of these declining real incomes.

It's not as if the typical family suddenly went on a spending binge --- buying yachts and fancy cars and taking ocean cruises. No, the typical family just tried to keep going as it had before. But with real incomes dropping, and the costs of necessities like gas, heating oil, food, health insurance, and even college tuitions all soaring, the only way to keep going as before was to borrow more. You might see this as a moral failure, but I think it's more accurate to view it as an ongoing struggle to stay afloat when the boat's sinking.

It is true that the average American has as much stuff as ever, and that if we paid the true cost of the creation and disposal of this stuff, we'd discover that it was not worth the cost. We'd discover that this contributes to an economist's view of standard-of-living, but a human being's view. But as Reich asserts, it's not the stuff as much as the necessities. One necessity in particular is health care:

About 30 percent of people said they filed for bankruptcy because of an illness or injury, even though most of them had health insurance when they first got sick.

When bills are too much to afford, which do you give up, your health, or your house?