Executive Compensation and Capital Markets

There is a substantial discussion these days about the need to reform executive compensation in the financial industry. In particular, recently The Wall Street Journal headlined a story about the Federal Reserve Board's thinking on the subject. I tend to agree that there needs to be restrictions on the composition of executive pay. I don't think that it would be constructive to impose absolute caps on the levels of pay. Don't get me wrong, I feel as much envy and moral outrage at the centi-millionaires created by Wall Street as anyone. It inflames every fiber of my egalitarian soul. However, it is impossible to ignore the fact that incentives matter throughout the economy.

To understand the direction that control of executive pay should go, a brief history lesson is in order. The corporate form of organization, as it exists today is largely a product of the 19th Century. The corporate form permitted investors to pool their capital in large and risky ventures while at the same time insulating them from some of the risks of those ventures. However, as documented by Gardiner Means and Adolph Berle in their classic, The Modern Corporation and Private Property, over the course of time the stockholders (owners) lost effective control of their property to the day to day managers of the corporations. Some, but only some, of these abuses were palliated by the Securities and Exchange Act and subsequent regulation.

Economists who look for incentives the way that the superstitious look for four leaf clover, next suggested that what was needed was to provide executives with incentives that aligned with the interests of the shareholders. This solution had two parts. First, an active market for "corporate control" where malfeasant or non-feasant corporate managements were replaced with more effective managements through hostile takeovers of offending corporations. The other strand of the solution is the creation of equity based compensation for executives. The idea was that executives will want to see increases in stock prices since they benefit directly from them when they are awarded company stock as a share of their compensation. This, of course, benefits shareholders too, since in modern times much more of the return to an equity investment comes in the form of increased stock price than dividend income. (More on this later.)

On the surface these ideas look good. The market triumphs yet again! The problem is that shareholders don't really exercise any direct control over executive compensation. The Boards of Directors of the firms exercise this control. Who sits on board of directors? Three groups, executives of the firm, distinguished business executives from other (non-competing) firms, and other distinguished notables including the odd academic economist. Now the self-interest of the first two of those groups lies a lot more in the area of pumping up executive compensation than it does in taking care of shareholders. The final group is typically a minority and basically intended as window dressing. Since membership in a corporate board is lucrative and not very taxing, they are unlikely to rock the boat, if it means being thrown off the gravy train.

The result is generous stock option programs (and not only for financial firms) tied to goals that are easily achieved. Even if the benchmarks aren't achieved boards are very considerate of the self-esteem of their executive subordinates and often reset the goals to something more achievable. There is an even more egregious feature to stock options. As the exercise dates approach, executives have powerful incentives to juice up the reported performance of the company to make the shares they are about to receive even more valuable. This is a variant of an old stock market scam known as "pump and dump" wherein a group gets control of stock in some obscure firm and proceeds to spread rumors that increase demand for and thus the price of the stock. Thus stock based compensation becomes an exercise in "heads I win, tails you lose." Managers are incentivized to seek out gains which are both risky and likely to pay off in an extremely limited time period. They want and need to raise stock price in the short run, the long run consequences be damned.

In an ideal world, shareholders of corporations could stop this nonsense and tell executives something like this, "We will reward your efforts for our firm with a generous salary that reflects the responsibilities and prestige of your position. Because we want you to have incentives to do the best possible job for us, the shareholders, your bosses, we will provide bonuses to you that reflect your accomplishment in making us wealthier. However, our interest is in long run growth of capital and income from our investments, so your bonus compensation will be deferred until well after you have left our employ." However, as noted above, shareholders have been systematically stripped of their rights vis a vis management, which means to achieve a sensible reform of executive compensation government must be involved.

What are the elements of such a reform? There are two different sorts of reforms required both with executive compensation and in taxation.

In some ways, the the executive compensation reform is the easiest. Bonuses for executives should always be deferred until the executive leaves the labor force. The motive for wealth creation is to provide income for life after active labor market participation, so this should be uncontroversial.

The other principle is that the deferred compensation should be split into two tranches. One tranche would be invested in an index fund tracking the overall composition of world equity markets with dividend reinvestment. This tranche would meet the argument that managers must dispose of some of their stock awards in order to diversify away from excessive concentration of their wealth in their employer. With diversification thus achieved there will be no need for the executives to sell their awards. The other tranche would be divided among the different instruments that the firm uses to acquire its capital. (I.e if the firm had 40% equity capital and 60% debt, the executive would receive awards reflecting that distribution.) This new approach to bonuses limits the incentives for executives to excessively leverage the firm in hopes of generating out-sized returns to equity.

The capital markets and taxation portion of the reform starts with a controversial step. I would propose eliminating the taxation of corporate profits. I can imagine my fellow progressives heads exploding as they read this, but let me explain. There are two benefits to this, the first as noted above is that instead of paying dividends out of profits, corporations retain earnings which leads to higher stock prices. This is encouraged by the favorable treatment of capital gains which are taxed at a lower rate than ordinary income. For this reason, along with elimination of corporate profits tax, there should be a very high tax on any retained earnings. Thus dividends would once again be the principle source of reward for shareholders and subject to regular income taxation. This change would result in improvement in capital markets because firms would have to go to capital markets regularly to raise funds for new projects. Having multiple eyeballs on a firm's projects is likely to lead to better results than the corporate empire building that often lies behind projects funded by retained earnings.

The other benefit of this is that eliminating corporate profits taxation will begin to refute the pernicious idea of corporate personhood. If tax liability attaches, as it should, to the owners of a firm and not to a legal fiction, it becomes more difficult to assert that the corporation is a legal person entitled to the same rights as natural persons.

My Grandson and God

Due to parental scheduling conflicts, I was schlepping my 5 1/2 year old grandson to athletic practice the other day. On our way home, he asked me, "Is God magic?"

This is a tough subject for me. Our family is almost entirely secular in outlook. (I don't know where the God talk is coming from (probably just the regional culture) but it has been popping up a lot lately.) I, personally, am a theistic agnostic. (I.e. I believe there is a god, but don't know what that implies for worship, prayer, etc.) However, I respect sincere religious belief, even when I don't comprehend it. Consequently when God comes up with the grandson, I treat the subject with respect and sympathy. (Sorry atheist chums!)

So I answered that God is supernatural. That God exists outside of the world that we can see or hear. This seemed to satisfy the boy. However, I can't say that it satisfied me.

It is true that our ordinary conceptions of God are supernatural, existing outside of the physical, empirically accessible world that we inhabit. However, religious believers insist upon the existence of miracles where God actually does act in the physical world. They, in fact, take these miracles as proof of their faith. The miracles they cite also tend to over-ride aspects of physical reality of which the believers disapprove. As an empiricist, I have to ask myself how that is different from magic, defined as some action in the physical world not capable of explanation in terms of physical causes? I am reminded of the Arthur C. Clark quote to the effect that any sufficiently advanced technology is indistinguishable from magic. In other words, our current understanding of the world would not provide us with an explanation. Anyone visiting the United States from the 15th Century would certainly consider much of what is daily commonplace to be magical.

Meditating about religion and magic while walking the dog the next morning, brought to mind Heinlein's Stranger in a Strange Land. There is an episode in the novel where the main character who was raised by Martians, finally appreciates the nature of his humanity. After this epiphany, his first impulse is to share the knowledge which he gained as a Martian foster child. Knowledge which is "magical" from the point of view of existing earth society.

Where does this take us? Remembering that I am economist, I fall back on a fundamental premise of my profession, "There is no such thing as a free lunch." (Incidentally, a favorite aphorism of Heinlein's) It is in human nature to seek "magical" solutions. We desperately want solutions that cause us little pain for much gain. The sad fact is that religion too often offers the "magical" solution as an alternative to the hard work of providing actual solutions. I can't reject religion out of hand as some of my friends do, to much of beauty and value has been created in service of religious impulse (e.g. Gothic cathedrals, Buddist stupas, Japanese Shinto shrines) for me to think religion irrelevant. But we sure could use a lot less "magical thinking."

Rationality and Opportunity Cost

UPDATED BELOW

Paul Krugman has an article in this week's New York Times magazine about the disarray in macroeconomic theory. In simplest terms, neither the New Classical nor New Keynesian economic theories are able to explain how the American economy got into its current parlous condition. Krugman identifies, correctly, the root of these problems in the economics profession's insistence on grounding economic models in perfectly rational behavior.

As he points out, a brave band of the economics tribe has insisted for years that such approaches to behavioral modeling are deeply flawed. The basis for this assertion is (wait for it) observation of consumer and investor behavior that is (gasp) irrational. However, as a professor in my own economics doctoral program observed, "You can't bash a theory with facts, you bash a theory with another theory." The purpose of this post is to point out that the hyper-rationality in behavior which is the foundation of modern macroeconomic (and other economic) theories is based upon a profoundly uneconomic assumption.

The basic premise of theoretical economics is that scarcity is an inescapable fact of human existence. The resources available to perform useful tasks and create useful artifacts fall far short of the total number of useful tasks and things that we can conceive. In short, to quote Bob Seeger, we must decide, "what to leave in, what to leave out."

Two observations follow from this. First, societies develop mechanisms to facilitate making those difficult choices. (Ours is a market economy where the tasks and things are chosen by consumer's willingness to sacrifice the resources they command to see those tasks accomplished and those things created. As a card-carrying economist, I have to approve of this and do.)

The second observation is that there is pain involved in making choices. By choosing to produce left-handed cement stretchers, we commit resources that we can't then use for other desirable projects such as reversible doohickeys. We accept that pain as the opportunity cost of the choice. Scarcity shackles all of our actions with opportunity costs.

The great Nobel Laureate Ronald Coase pointed out over seventy years ago, that even desirable activities like pursuing gains from trade through market transactions have opportunity costs. (These are what are today termed transaction costs.)

The problem with rationality

Rationality in economics involves the assumption that individuals will adopt the most effective methods for achieving their goals. (Utility and Profit Maximization) One of the benefits of the rationality assumption for economic theory is that it permits employing the sophisticated mathematical tools in modeling maximization processes. However, there is an unexamined cost in doing so. (Remember, everything we do has an opportunity cost.)

The rationality assumption as usually employed has the effect of assuming that many of the opportunity costs of decision-making are zero. As noted above, this is a profoundly uneconomic assumption. Specifically, the first assumption about decision-making is that the costs of acquiring information are essentially zero. (There are some Industrial Organization models that do incorporate informational costs but the impact on theory seems to be quite limited.) The second assumption is that information processing capacity is unlimited and costless. Once again this assumption flies in the face of the foundation principle of scarcity. In the same vein, it is assumed that information storage capacity is unlimited and costless. Finally, the assumption is made implicitly that decision makers apply the appropriate model to the decision at hand. Where did that model come from? Apparently it dropped like manna from heaven (i.e. costlessly) into the cerebrum of our hyper-rational decider.

The prime example repeatedly cited by both Krugman and Brad Delong of this uneconomic modeling is the Efficient Markets Hypothesis, or at least its stronger versions. The logic of the weaker versions where price discrepancies are quickly eliminated through arbitrage is mostly unassailable. This does require that 1) individuals recognize the discrepancy, requiring both information and processing capabilities which are not free and 2) have sufficient liquidity to exploit those discrepancies, a point Krugman mentions in his article. It is worth noting here that one of the reasons economists like easily accessible, transparent, and liquid markets is that the operation of supply and demand in such markets generates information about opportunity costs in the form of prices which help decision makers get their decisions right.

The stronger version of EMH postulates that the price of a security at all times reflects all of the publicly available information about the present value of that security in terms of its future income flows. The problem with this is mentioned above, is there any guarantee that the model used to value those future income flows is the correct one? If the model is largely reality based, I'm sure that the price of securities comes very close to proper valuation. The difficulties arise where there is some "irrational exuberance" e.g. the Internet bubble when the mere existence of the Internet was going to change everything and the values of traditional "bricks and mortar" retailers consequently tanked.

In summary, an assumption of rationality completely unbounded is an assumption that ignores that problem of scarcity. In particular, it misses that most fundamental scarcity of all which conditions all others, the scarcity of the information and knowledge needed to make correct decisions.

Brad Delong links to Barry Eichengreen who discusses thinks in a similar vein and cites literature, something I avoid in a blog post.

Are We Headed Towards Another "Era of Good Feeling"

Brad Delong had a post on the political role of bi-partisanship and the role of think-tanks in a highly partisan political environment. Of course, the denizens of The Village regularly decry the erosion of the spirit of bi-partisanship in policy making. This got me thinking about what features of the American constitution lead to a bi-partite politics. It also lead me to consider the era of American politics where politics was monopartisan.

The "Era of Good Feeling" extended from the early 1800s when the Federalist party collapsed as a national political force to the mid-1830s when opposition to Andrew Jackson lead to the emergence of the Whig party. My speculation about this caused me to consider, could we end up with monopartisan politics again.

In Brad's blog I commented:

I believe the roots of bipartisanship lie in the peculiar institutions we American's employ for electing our President. In order, to be elected one must assemble a coalition sufficient to garner electoral pluralities in enough states to represent a (sort of) majority of the population. Historically such broad coalitions represented diverse interests some of whom could be accommodated in bargaining to secure support from both parties.

The Democratic party (ne Republican) created such a dominant coalition in the early 19th Century because the Federalists were committed to an aristocratic republic. Such a republic based upon networks of elite patronage was transferred almost intact (absent the monarch) from the Whig politics of Great Brittain in the 18th Century. However, as Alan Taylor's William Cooper's Town: demonstrates this model collapsed in the election of 1800. No plausible alternative developed for almost thirty years until the "gut hatred" of Andrew Jackson lead to the emergence of the Whig party.

Since that time there have been two more or less balanced factions in national presidential politics, although one or the other party has been able to dominate for extended periods. (E.g. the Republican party from 1868 to 1884 and again from 1896 to 1929, or the Democrats from 1932 through the late 1960s)

The period of the 1950s and 1960s remains the dominant image of bi-partisanship in the minds of many, since the Cold War consensus permitted and encouraged alliances across parties.

The post-1968 realignment started as I noted in commenting on Brad's blog:

Starting with the Southern strategy of Richard Nixon, the Republican party went all in on the strategy of representing culturally conservative whites as an interest group. This demographic is declining nationally. Much of the rest of the population has moved on to other issues. It strikes me as not inconceivable that we are heading for another period like the "Era of Good Feeling" wherein there is only one truly national party. As that era (1812-1832) demonstrates 1) politics doesn't cease, it just takes the form of interparty squabbling. 2) an eventual realignment will result in a second,rightish coalition.

Of course, there were more than southern racial conservatives in the Republican coalition of the era. As Brad noted in a later post:

One way to look at Nixon's "Silent Majority" strategy was that it involved the redefinition of lots of people as "white"--people who wouldn't have been "white" even thirty years before, back when they were seen as not-quite-real-American ethnic immigrants living in ghettos and serving the corrupt Democratic political machines against which the Republicans fought--probably entangled in organized crime, too.

Given the fact that this demographic is, as noted above, declining, Karl Rove deserves credit for recognizing that Latinos were a rising demographic whose innate social conservatism made them potential members of the Republican coalition. Since the Republicans appear to have decisively blown that opportunity, it appears that an "Era of Good Feeling" with only a one and a half party system is at least plausible.

What this means for legislative process is well summed up by another of Brad's posts:

Paul Krugman's line is that bipartisanship as a legislative and an electoral strategy could work only as long as the ideological lines of party cleavage were blurred, which would be the case only as long as there were (a) a larger number of relatively liberal northerners who voted Republican because Lincoln freed the slaves, and (b) a large number of relatively conservative southerners who voted Democratic because Lincoln freed the slaves. Once the parties realigned, zero-sum partisan loyalties would dominate: centrist legislators would think hard whether it was more important to vote for a bill because it was good for America or vote against it because then you could paint the opposite-party president as a failure and pick up seats in the next election, and make their decision. Influence over policy can no longer be found by placing yourself in the center: you wind up lying next to a squashed armadillo with a yellow stripe painted down your back.

For now though the smart money is building your coalitions from the left towards the center.

The Efficient Krugman Hypothesis

Proposed Wikipedia entry
The Efficient Krugman Hypothesis

This hypothesis originally proposed by Professor J. Bradford DeLong of the University of California, Berkeley has two versions, strong and weak.

The Strong version is:
Proposition 1: Paul Krugman is always right.
Proposition 2: If your analysis indicates that Paul Krugman is wrong, see Proposition 1.

The Weak version:
Proposition 1: Paul Krugman is always right.
Proposition 2: If your analysis indicates that Paul Krugman is wrong, recheck your analysis for errors.

Curiously in contrast to the case of the Efficient Markets Hypothesis, the Stronger version of the Efficient Krugman hypothesis has substantially greater empirical support.

Mirror Neurons, Learning, and Culture

FIRE UP THOSE MIRROR NEURONS! LETS LEARN SOMETHING!

Mirror neurons for those of you who haven't heard are specialized neurons within the brain which fire under two circumstances. First, when an individual takes some action. For instance, grasping a piece of fruit. They also fire when another individual is observed taking an action. I.e. Watching another ape grab a piece of fruit.

These neurons were discovered by almost two decades ago by a group of Italian neurophysiologists. And the ape reference was not gratuitous, the first subjects found to possess mirror neurons were macaque monkeys. Given the close evolutionary relationship between humans and primates a natural question arises, "Do humans have mirror neurons?" Recent evidence suggests that the answer is Yes. In this piece, I'm going to suggest some implications of the presence of mirror neurons in humans for the evolution of human society.

First a definition, a culture is a suite of behaviors shared by a more or less extensive group of human individuals. Such cultures are often identified by the physical artifacts that they produce through those behaviors. In fact, when archaeologists characterize a culture they use such artifacts almost exclusively, e.g. stone and bone tools, ceramics, cremated burial remains. They are constrained to do so since most behaviors don't leave durable traces. Anthropologists and sociologists have an easier time of it, in at least some ways, since they can observe actual behaviors.

Cultures possess three common features. First, the behaviors they encompass are reinforced by the other members of the culture. Second, those same behaviors identify differences from other exterior cultures. Finally, the suite of behaviors which define a culture must, at least initially, have contributed to the reproductive fitness of the members of the culture. The reason for this is simple, behaviors that reduce reproductive fitness fall out of the meme pool. The behavior of chasing mammoths over the cliff improves the nutritional status of all of the members of the culture which adopts it and thus their survival chances. The behavior of following the mammoths over the cliff has precisely the opposite effect.

What does this have to do with mirror neurons? Well, where do those behaviors come from? and how do they propagate through a group of people? My hypothesis, to put it formally, is that mirror neurons are what enable the development of human cultures.

The model looks something like this:
Look! Oog has found a new way to get our favorite snack food, termites. See, he's sticking a twig into the termite mound and the silly buggers bite onto it. Then he just pulls the twig out and enjoys the delicious, protein rich, crunchy snack.

Maybe Oog shares his termites with a particularly attractive female that he's had his eye on. Alternatively she shares her termites with a cute male she's had her eye on. This will boost his/her evolutionary success.

Oog and Mr/Ms Oog's kids watch mom and dad to find out how to fish for termites. Other members of the community do too. They can do this because mirror neurons create the spark that transmits the behavior throughout the group. And voila, you now have a termite fishing culture established.

The example is drawn from the actual observed behavior of chimpanzees in the wild. In point of fact, a number of distinct chimp cultures have been identified in western and central Africa. Given the substantial advantages that modern humans possess in gray matter, it really isn't a stretch to believe that the learning process described above occurs over and over again in the creation of a human culture.

Misreading Economic History

Greg Clark had an essay, "Tax and Spend, or Face the Consequences," in yesterday's Washington Post. The point he makes will be agreeable to many progressives. His argument for that point is appalling. The brief argument is that technological progress will rendered low skill workers redundant. Since these individuals will no longer be capable of earning incomes through supplying labor, massive transfer programs will be needed to spread the fruits of technological advance and economic growth to the masses. This argument reflects discreditably on the excellent economic historian whom I know Dr. Clark to be.

He frankly labels his vision "dystopian" and that was precisely my first reaction to the piece. I was reminded of science fiction stories that were common in the 1960s and 70s where society was divided between a class of welfare dependent "proles" and a productive class of "taxpayers." This particular vision was particularly prevalent among the more conservative/libertarian authors. The further text was that the "proles" were manipulated by left-wing politicians while the responsible "center" looked out for the interests of the "taxpayers." The literature was a response to the widely circulated view the "technological unemployment" caused by mechanization of factories was the wave of the future.

There is no doubt the low skill workers, particularly those in long developed economies have had a hard time recently. This is a consequence of the growth of international trade and the entry of a billion low skill workers into the world economy (i.e. China and India have abandoned autarky and joined the world trading system.) However, there is no big pool of labor left to enter the world economy, thus the negative impact on low skill wages will be slowly dying out in the future.

Clark is particularly negative about the prospects of education for raising the skill levels and thus the employability of the traditionally low skilled. (Consumer Alert: I am a college professor, so have a vested interest in education.) It is also undeniable that American public education has collapsed over the past 40 years. However, this is not a consequence of any sort of "Bell Curve" unequal distribution of intellectual abilities. It is a consequence of declining support for public education because of desegregation. To imply that education cannot be a part of resolving employability issues is to suggest that individuals won't respond to incentives. I don't think Professor Clark had this in mind. If education and the attendant skill enhancements which are concurrent with education manifestly improve productivity and lifetime income, we should expect to see education having exactly this positive effect.

Beyond this, any economic historian should appreciate (to a degree greater than any other flavor of economist) that human creativity should never be taken for granted. The reason economists are merely indifferent forecasters is that when stresses are placed upon members of a market economy, new creative responses arise which invalidate most projections from past behavior. And creativity is a resource that even sophisticated artificial intelligence programs and voice mail protocols cannot produce. Since knowledge, however acquired, is the lever of creativity, I suspect that Professor Clark's pessimism is misplaced.

The idea that taxes should be more progressive, and that active redistribution is necessary for the long run well-being of society is incontestable. But that redistribution should take that form of widening and deepening the opportunities for education precisely to unlock the creativity of the American populace.

The Market Economy versus Capitalism

I've been sitting on this a while, hoping to get back to it and extend and polish it. Haven't found the time, so here it is warts and all.
1) Markets are inevitable.
As long as tastes are not uniform, and goods and resources are not distributed to those who value them most, individuals will benefit from the opportunity to trade with one another. Trading in markets is such a natural impulse that societies which oppose markets have to go to incredible lengths to suppress them, usually with minimal success.
2) Markets are moral.
a) Market exchange is morally superior to exchanges mediated through coercion or deception. Is there really any doubt that it is better for individuals to be able to freely make choices rather than act under some real or imagined compulsion.
b) Because market exchange is base upon an equivalency of values exchanged, it creates a sense of equity in market participants.

3) Markets promote economic efficiency.
By establishing the opportunity costs (the sacrifice necessary to acquire) goods, prices established in markets promote movements of resources towards their best use.

4) Well functioning markets require a legal/regulatory framework that :
a) Promotes a "level playing field" i.e. does not favor particular activities and disadvantage others.
b) Prevents/limits transactions based upon coercion or deception.

5) A capitalist economy is a market economy where government functions as "the executive committee of the bourgeoisie" per Karl Marx's description.
The difficulty is that while single minded pursuit of self-interest is an excellent strategy for success in business, pursuit of self-interest in societal rule-making creates all sorts of difficulties.
The recent experience with deregulation of financial markets is an exemplar of this. Regulation has many defects, including stifling innovation. However, financial innovations have the side-effect of potentially increasing the risks of the economies payment systems. If the risks grow large enough they can threaten the very stability of the system.

Ecology and Rhetoric

This post deals with two things that I have absolutely no professional training in. I also haven't surveyed the literature to determine whether this is novel, but I suspect in might be. Why, because of what C.P. Snow called the Two Cultures. These are roughly speaking the sciences and the humanities. I therefore believe that no one has likely considered the relationship between ecology and rhetoric, but I would be happy to be corrected.

The term which I find particularly interesting from a rhetorical point of view is "invasive species." Here's what Wikipedia has to say about them. What interests me about the term in the value set that it appears to incorporate. Specifically, most of us are likely to have the notion that an invasion is a bad thing. (I except certain former officials of the Bush Administration.) Consequently, our knee-jerk reaction to hearing the an invasive species has established itself in a particular locality is probably negative.

Now current theories of speciation, suggest that geographic and/ or reproductive isolation are necessary for a new species to emerge. The late Stephen J. Gould suggested, in fact, that speciation might occur through a process of punctuated equilibrium. What does this mean for ecology? Unless a species never leaves the biome where it evolved by whatever mechanism, it must be invasive at some point. If a newly emerged species is fitter in an evolutionary sense than the parent species, or the species that fill the same niche elsewhere it will spread at the expense of those species.

Now, living in the South, I am well aware of the toll that kudzu lays upon native species. However, the problem with such introductions is not the species itself, but the absence of the controls that have evolved in its native biome.

In the sense that the term is often used, humanity could be considered an invasive species everywhere in the world except for Africa south and east of the great rift system. Now perhaps invasive species carries exactly the appropriate connotation needed for ecology. However, I really think a more appropriate term is "exotic species."

Hello, Blogosphere

I know, I know, I'm late to the game. Everybody really cool already has a blog, so nobody will ever pay attention here. Oh well (sigh!)

I have been bedeviled over the years with little snippets of ideas that I can't use professionally, nor can I use them in other places. But I personally think that they are interesting and worth at least getting out into the world. Maybe some of you will agree with me.

About the title: It refers to the late Douglas Adams classic Hitchhiker's Guide to the Galaxy series. Reading science fiction has been a serious influence in my life. However, there is an additional element here. Perhaps because of ADD, perhaps just because I'm flaky, I have a really hard time focusing on just one narrow specialty area. My professional training is in Economics (all the way to Ph.D.), I have an avocational interest in politics. But I'm also fascinated by science. I am also a bush league philosopher and amateur historian. In any case, the program of this blog (such as it is) will be to explore broadly across the realms of human knowledge. If I can make this half as interesting as I invariably find Brad Delong's I will be well pleased. Many of the ideas I expect to post came to me while I was walking my big brute of a dog in the predawn hours.

About me: I am a late middle-aged (God, I hope that sixty really is the new forty. Not there yet but anticipating with some trepidation.) college professor. I was born in Ohio where my father's family (or parts of it) has lived for 200 years. My mother's family background is a Yankee father (Maine) and a Southern mother (North Carolina) who were married long enough ago that it was considered a mixed marriage. I've been married thirty years to the same woman and have a son and two grandsons who currently live in the same town as I do. I teach at a public university in a southern state. I find somewhat to my dismay that I have lived here for over a quarter of my life. Although I live in the south, I am definitely not a southerner.

Politically, my most defining belief is that I am radically egalitarian. By this I mean that in my view, Human potential is more or less equally distributed. Thus I see the role of society as enabling individuals to reach their full potential. This implies a certain degree of libertarianism in terms of letting individuals make their own decisions, even when I regard their decisions as foolish ones. It also implies that I feel implacable hostility towards any elements of society which impose artificial limitations upon people's attempts to realize their potential. Consequently I consider both racism and sexism to be vile. This, would place me left of center. I am also committed to democratic governance. (Note the small d, I am also a large D democrat but that is a different issue.)