Steve Reads

It’s reached the point where I almost can’t write about this country’s prosecution of the “war on terror” without getting physically sick to my stomach. But I feel like I have to ask one question: why shouldn’t suspected terrorists be treated like any other criminals?

That really is the heart of the entire dispute in this country. Well, not the heart of it. I think the heart of it probably has a lot more to do with fear of brown-skinned people, but let’s set that aside. Maybe the clearest way to say what I mean is like so: the set of proposed responses to terrorism seems to divide fairly cleanly between those who believe that the military should handle it, and those who believe that the criminal-justice system is perfectly competent to handle it.

I fall quite squarely in the criminal-justice camp, in large part because we’ve made such a profound mess by trying to handle this in a military way. Suspected terrorists have been housed at Guantánamo more or less explicitly because it’s beyond the reach of the law. Likewise with the air base at Bagram, in Afghanistan. Having been placed in a legal black hole, the U.S. government has felt entitled to do unspeakable things to them that have destroyed our reputation. (It’s not clear to me that the U.S. had a stellar reputation, human-rights-wise, even before the Bush administration. But let’s set that to one side. It is, in any case, clear that the Bush administration did nearly irreparable harm to whatever reputation we had.)

So it seems to me that swinging the pendulum back to the other side, where we treat suspected terrorists as ordinary criminals, is a perfectly reasonable thing to do after eight years of inhumanity.

And still, in any case: no one has explained to me why the criminal-justice system is not competent to handle all these cases. It handled the Unabomber and the original bombers of the World Trade Center; these, and others, are now housed in a supermax prison, from which they will never escape. If we’re actually afraid that they’ll escape, then doesn’t that say that we should fix the prisons rather than cast the suspected terrorists out into legal no-man’s-land?

Let’s add a word on terminology here: calling those housed at Guantánamo “terrorists” assumes that we’ve worked through enough procedure to know, beyond a shadow of a doubt, that they’ve done what they’re accused of doing. It is extremely dangerous to allow ourselves to think that way. A criminal trial before a jury of our peers, with the evidentiary protections afforded by the Fourth and Fifth Amendments, and with “beyond a reasonable doubt” ringing in our ears, is the gold standard in assigning guilt. We harm our own self-interest, and we weaken our system of justice, if we accept that the military knows best. So in my book, they’re “suspected terrorists” until an ordinary court has done its job.

If these people are actually guilty, shouldn’t we trust our criminal-justice system to prosecute them? If we don’t trust it to prosecute them and competently label guilt or innocence, then why do we trust it to assign guilt or innocence to run-of-the-mill murderers or rapists? Why did we trust it to competently try Tim McVeigh?

The answer seems fairly clear to me: we tried Tim McVeigh in a U.S. court because we had to: he was an American citizen captured within the United States, and was therefore subject to all the protections afforded to American citizens. Those housed at Guantánamo were captured abroad, and are therefore not subject to the same protections.

Of course, this makes life easier for the government: it’s a nice coincidence that what they want to do — torture some people — fits with what they’re allowed to do.

But we’re the United States. We don’t just do what we want to do. We abide by the rule of law even when we don’t have to. We don’t hold people in indefinite detention, even if we can. We don’t torture them, even if we can. We’re confident that our court system can correctly assign guilt or innocence, and that it will put convicted murderers to death or lock them up in solitary confinement for the remainder of their nightmarish days.

We’re a great nation because we don’t act as disgustingly as we’re allowed to. We tie our own hands because it’s the right thing to do. And because acting justly is in our own self-interest.

If you’ve read Murakami’s Wind-Up Bird Chronicle, you know you’re in the presence of a genius who just needs to get himself under control sometimes. He can juggle a million interesting objects at once — hammers, torches, scarves, chainsaws, other jugglers — but sometimes he just gets bored, and while the audience is staring up, jaws agape, he lets all those colorful objects drop and walks off to have a sandwich. That’s Wind-Up Bird in a nutshell. Yet I still think most people would really enjoy it, despite its suffering from attention deficit disorder.

After Dark isn’t like that, in no small part because it spans a single night; I like to think of this as a Murakami setting for himself what the economists call a precommitment strategy: he knows that he can run off the rails if he’s not careful, so he sets up a story to keep himself in check.

And what a fun story it is. We meet a charming musician named Takahashi as he ambles into a Denny’s, late one night, and intrudes on a quiet, studious girl named Mari Asai who’s poring over her books. As it turns out, Takahashi knows Mari’s sister Eri, who is at least some kind of astonishing looker and probably something more like a model. She’s the kind of girl whom Takahashi would go out of his way to talk to, if she would only give him the time of day. When Mari veers into his orbit, and Takahashi realizes who she is, he has no choice but to ask about her gorgeous sister.

What we, the readers, know about Eri is that she is asleep in the alternate chapters. We jump back and forth between the Takahashi-and-Mari thread and the camera-focused-on-a-sleeping-Eri thread. And I say “camera” literally: we’re watching her through a television, the camera end of which is inside Eri’s bedroom. Only, not really her bedroom; more like Eri on a bed in an otherwise empty room. Is it a jail cell? What is this strange room with the camera?

While she sleeps, craziness ensues in Mari’s world. Takahashi spends long enough with Mari to know a) that she speaks Chinese, and b) that she’ll be studying in that Denny’s all night. He steps out to practice with his band, and while he’s out he runs into a friend of his who runs a pay-by-the-hour hotel frequented by prostitutes and their johns — a “love hotel,” as they call it. Turns out there’s — surprise surprise — a Chinese prostitute in there, badly beaten and scared, and no one knows how to talk to her. Takahashi knows just the translator. He sends the hotel’s manager into Denny’s to pick up Mari, who gladly comes along to help. She was bored in the diner anyway.

In one world we have the beautiful sister, asleep in a strange room. In the other we have the bookish sister translating for a bruised prostitute. The story has one toe in a beautiful world, one toe in the filth. At times those worlds collide, or at least pass each other on the street with a curt nod. Laying on the seam between the two worlds is a cell phone that literally passes messages between them; it’s a very clever trick that can only make the reader smile. (This reader, anyway.)

At just over 200 fairly-large-print pages, with rapid-fire dialogue between charming or menacing characters, you’ll finish After Dark within a couple hours. Murakami sometimes writes candy, but it’s intensely nourishing candy. (In this I liken it to early Beatles albums.) It may be tempting to avoid Murakami, but it’s even more tempting to read him.

(as we were)

…has anyone asked him, since 2001, whether he feels that we would have had a moral right to torture Tim McVeigh? That seems like the most obvious question to me, and yet I’ll be damned if I’ve seen anyone ask him that. Are we allowed to torture foreigners only because they’re foreigners? Does Cheney really rest the moral case for torture on that?

Of course, I can’t expect that Cheney or any other torture supporters would shed that many tears to see McVeigh tortured. I doubt many Americans would, generally, if they expected that it would save further American lives. Down that road lies the ticking-timebomb scenario, and the question whether we would, under any circumstances, allow ourselves to become the sort of people we hate.

While we’re down that road, I’m surprised no one has asked Cheney: when else is torture justified? At the height of the Cold War, should we have tortured captured spies? Should we have tortured the Rosenbergs? How about anarchists like Sacco and Vanzetti? Or how about now? What about mass murderers, if we think they have something to divulge?

How far, exactly, are we willing to take this? What sort of morals are we willing to absorb, so that we can prevent the physical destruction of the homeland?

The Party seeks power entirely for its own sake. We are not interested in the good of others; we are interested solely in power. Not wealth or luxury or long life or happiness: only power, pure power. What pure power means you will understand presently. We are different from all the oligarchies of the past, in that we know what we are doing. All the others, even those who resembled ourselves, were cowards and hypocrites. The German Nazis and the Russian Communists came very close to us in their methods, but they never had the courage to recognize their own motives. They pretended, perhaps they even believed, that they had seized power unwillingly and for a limited time, and that just round the corner there lay a paradise where human beings would be free and equal. We are not like that. We know that no one ever seizes power with the intention of relinquishing it. Power is not a means, it is an end. One does not establish a dictatorship in order to safeguard a revolution; one makes the revolution in order to establish the dictatorship. The object of persecution is persecution. The object of torture is torture. The object of power is power.

…I feel required to make an arithmetic point in response to Dick Cheney:

What we did in the whole counter-terrorist area was extremely effective. And I think Obama needs to be careful because he appears to want to cancel out some of those most important policies. We were able to go nearly eight years without another major attack on the United States.

Under Clinton, we had one terror attack in 1993, a second about 26 months later, and then none for about 8.5 years, 5.75 of them while Clinton was sitting in the White House. So Clinton’s record of preventing terror is, depending upon when you stop the clock, better than Cheney’s. If you measure a president’s anti-terror prowess by the number of deaths on his watch, Clinton was about 17 times the president that Bush was. (If you add soldiers killed in Iraq, that ratio jumps to about 40.)

Before Clinton, had we ever had a terror attack? Depending upon how you define it, had we had any attack on the U.S. since Pearl Harbor? So then a long string of presidents, from Truman to George H.W. Bush, should have been loudly trumpeting their prowess at keeping the country safe. Cheney owes Jimmy Carter, among others, a debt of gratitude.

To put it more bluntly: Cheney, you’re boasting about the hypothetical deaths that didn’t happen, and the window when the country wasn’t attacked? How about the deaths that you did allow to happen? “We only let a few thousand New Yorkers and Washingtonians die” sounds like the soft bigotry of low expectations.

Yet another story describing derivatives as “complex”. Having now read a rather large amount in this area, I realize that we’ve been deceived: they’re not especially complex.

Take the term “sliced and diced,” for instance, which always gets applied to mortgage-backed securities. “Slicing and dicing,” I now realize, is a term used by people who don’t understand how mortgage-backed securities were packaged; it’s a substitute for actual thought. Much better to believe that mortgage-backed securities are beyond human comprehension, and that anyone who handled them was just fiddling with the levers on a machine he didn’t understand. I myself have used such terms on this here blog, and I freely admit that it was based on ignorance.

The best explanation of “slicing and dicing” that I’ve read is in “The Economics of Structured Finance”. The big question people seem to have is: how did subprime mortgages become AAA-rated securities? The answer is straightforward, and reasonable. In a word, it’s “tranching.” That is, no matter how bad a credit risk the mortgages are, you can assign them to securities that get hit first or last when a mortgage defaults. If I own a security in the lowest-rated tranche, I’ll get cleaned out more quickly than someone who owns a security from the highest-rated tranche. In a very real, non-mysterious sense, then, the lower tranche carries higher risk than the highest tranche. As such, the highest-rated tranche should carry a lower return than the lowest-rated one.

What is tricky is how to estimate these various risks, hence how to determine the returns they should carry. In turn, how risky a given mortgage is, and therefore how risky a given tranche is, depends on how correlated defaults are. If either all mortgages default, or none do, then the correlation is perfect and it doesn’t matter which tranche you’re in: you’re going to get cleaned out exactly when everyone else does. If they’re uncorrelated, then you can treat default risk like any other insurable risk. Finance has constructed some reasonable models over the last 40 years of what to do with correlations less than 1.

The trick is that you need data to estimate correlations. Since mortgage default was rare before this recent debacle, data for correlations was hard to come by. This is where we get the now-infamous Gaussian copula, which estimated correlations seemingly out of thin air. And as the “Structured Finance” paper explains, the risk that you’ll be cleaned out in a certain instrument (CDO-Squared) is highly sensitive to the correlation between mortgages.

The term “derivative” generally means “a security whose value changes when the value of an underlying asset changes”; the derivative derives its value from the other asset. A mortgage-backed security derives its value from an underlying mortgage. A security which gives you the right — but not the obligation — to buy a given security at a given time, is a derivative of that security, and is called an “option.” (An option that entitles you to buy is called a “call option.” An option which entitled you to sell is called a “put option.”)

There’s a set of results, by now classical, on how much you should be willing to pay right now in order to buy that security later on. How much, for instance, should you be willing to pay to buy a share of General Motors stock one hour from now at $100? Given that GM is, at this moment, trading for $1.59, your answer should be “not very much at all.” The reason is clear: GM stock is extraordinarily unlikely to reach $100 within an hour. Suppose you paid $1 for the right — but, crucially, not the obligation — to buy GM at $100 in an hour. You would not exercise that right, of course, because you’d be drastically overpaying. You are nearly certain to lose $1.

The lesson here is that the price you should pay for an option depends on how rapidly the stock price moves. If GM routinely swung between $150 and $1.50 in the course of a day, you might be more willing to pay for the right to buy at $100. So a lot depends, then, on knowing how much GM stock moves. What you want is the probability distribution of GM’s stock-price movements. A lot of the theory makes assumptions about the general shape of this probability distribution. It typically assumes that stock-price movements look like a bell curve, or “Gaussian distribution.” You can weaken this assumption in various ways. When all is said and done, though, you need to take some sort of guess about how rapidly the stock price will change between now and when the option is exercised.

But note in all of this that there’s nothing really complex happening. The pricing of options depends on various assumptions about stock-price movements which may or may not be true. The construction of a mortgage-backed security is not difficult, at least in outline: pool mortgage payments, then divide them into tranches that have lower or higher exposure to default risk. At least in hindsight, it turns out that assets were more correlated than people expected. That doesn’t make the securities “mysterious” or “complex”; it means people made mistakes. The worst that can be said is that they used the wrong models, which in turn means they made the wrong assumptions. Underlying all of this might be the assumption that home prices would rise forever. That’s it, so far as I can tell. A bad assumption leads to a bad model, which fails catastrophically in the real world. Therein lies your “complexity.”

I blame the use of this term on people who don’t understand a little bit of statistics. “Complex” is also one of those terms that allows people to avoid clarifying their thoughts. Ze Frank talked about this:

The cool thing is, anyone can do that. Just say, “Well, it’s a little more complicated than that,” and the amazing thing is, no matter what you’re talking about, you’re probably right!

You see it everywhere. Describing a food’s taste as “complex” gives you the appearance of erudition without your needing to actually say anything; most any food, except maybe pure sugar and pure vinegar, is complex, inasmuch as it’s not reducible to a single note. Describing your emotions in a particular situation as “complex” makes you sound like a deep person. (Stephen King somewhere describes an interaction with an undergraduate English major: she tells him that something “is, like, hard to put into words,” to which he replies that she “ought to, like, pick a different fucking major.”)

The point of any interesting discipline is to actually solve problems, not to stand in awe of their staggering complexity. That goes double when it’s something like the economy, whose functioning it is everyone’s job to understand, at least at some level. Treating economics and statistics as strange incantations from a rarefied priesthood is, we now know, a recipe for suicide.

It’s the first of May, people. Let Jonathan Coulton welcome you to it.