Hammering NAFTA

In Mexico City yesterday, signatories of the North American Free Trade Agreement (NAFTA) were highly critical of statements made by Democrats Hillary Clinton and Barack Obama during their Tuesday debate indicating they would "opt-out" of the trade pact.

"I will say we will opt out of NAFTA unless we renegotiate," said Clinton.

Obama concurred: "We should use the hammer of a potential opt-out."

But as Michael Luo points out today in The New York Times, despite the harsh rhetoric, the candidates have staked out nuanced positions on NAFTA. Luo quotes David Gergen, an adivser to President Bill Clinton as saying that Senator Clinton was "extremely enthusiastic" about the trade agreement while it was being crafted. As recently as 2004, she claimed that NAFTA had been "good for New York and good for America."

Obama, for his part, while consistently hammering NAFTA, has not differed from Senator Clinton at all when voting in the Senate on trade issues. As Eduardo Porter notes in his article, "Nafta Is a Sweet Deal, So Why Are They So Sour?," the real benefits from a dismantling of the agreement would accrue to powerful industrial and agricultural special interests "who survive behind protective barriers." Specifically, American Big Sugar and Mexican corn farmers.

So why are Clinton and Obama itching to prove just how much more opposed to NAFTA they are then the other guy?

It's Ohio, stupid. The hotly contested state has lost hundreds of thousands of manufacturing jobs in the last five years.

In Ohio, which has lost nearly 225,000 manufacturing jobs since 2001, NAFTA is an easy target. For many working-class Ohioans – and the voters Sens. Barack Obama and Hillary Rodham Clinton hope to win in Tuesday's critical primary – it stands as a symbol for much that troubles their state. Against that backdrop, say experts, it's not surprising it's become a political piñata.

The Moral Instinct's Primary Colors

If you could flip a switch to save people riding a runaway trolley, would you do it? What if by flipping that switch, you might kill an innocent bystander? Now, what if the only way you could stop the trolley was by throwing a person in front of that train?

Steven Pinker's excellent piece today in the New York Times "The Moral Instinct" explores these scenarios and suggests that most people would have a problem with that final scenario. Even though you could save people by sacrificing one person, most people have a problem with being responsible for harming one. But it is tough for people to express why this is so.

It turns out that people have an innate moral sense, according to Pinker's article:

When anthropologists like Richard Shweder and Alan Fiske survey moral concerns across the globe, they find that a few themes keep popping up from amid the diversity. People everywhere, at least in some circumstances and with certain other folks in mind, think it’s bad to harm others and good to help them. They have a sense of fairness: that one should reciprocate favors, reward benefactors and punish cheaters. They value loyalty to a group, sharing and solidarity among its members and conformity to its norms. They believe that it is right to defer to legitimate authorities and to respect people with high status. And they exalt purity, cleanliness and sanctity while loathing defilement, contamination and carnality.

According to psychologist Jonathan Haidt, a universal sense of morality can be broken down into five primary moral "colors:"

The exact number of themes depends on whether you’re a lumper or a splitter, but Haidt counts five — harm, fairness, community (or group loyalty), authority and purity — and suggests that they are the primary colors of our moral sense. Not only do they keep reappearing in cross-cultural surveys, but each one tugs on the moral intuitions of people in our own culture.

Photo by slack12.

Nos-RATO-damus?

Stocks got a pummelling this afternoon, in part due to uncertainty in international currency markets. From the New York Times:

Investors were alarmed by a report this morning that a top Chinese government official said China would shift its foreign currency reserves away from the “weak” United States dollar, further eroding confidence in the currency and sending it to a new low against the euro.

Just a few weeks ago, in one of his last speech's before handing the reigns of the IMF over to Dominique Strauss-Kahn, Rodrigo de Rato warned of a potentially unsettling plunge in the greenback's value.

Up to now, movements in exchange rates have been orderly and in line with fundamentals. But there are risks that an abrupt fall in the dollar could either be triggered by, or itself trigger, a loss of confidence in dollar assets.

Are we watching Rato's dire prediction unfold before our eyes? Events like today's add weight to Thomas Palley's call for managed exchange rates. If, as Palley suggests, the US is getting out-gamed by savvier players in currency markets (ahem, I wonder who that could be), then perhaps it's time to start considering "outdated" approaches. Especially if they can restore a measure of fairness to the current exchange rate system. Thus far, the pain of the credit crisis in the US has been somewhat offset by the continued buoyancy of financial markets. But there will be a rising chorus calling for change if the so-called "real economy" starts to get sucked under. That corner may have been turned today.

NY Times: Japan Is, Like, So Weird

On Saturday on my way back to New York I picked up a New York Times at the Providence Amtrak station. I know Saturday newspapers are less read but the silliness on the front page cannot go without comment. Two articles about Japan that day were:

"Fearing Crime, Japanese Wear the Hiding Place" on the front page, written by Martin Fackler.

and

"A Font of Commentary Amid Japan's Taciturn Royals" was Saturday's profile, written by Norimitsu Onishi.

What is the average reader to make of this country Japan?

The hiding place article describes a Japanese clothing maker who fashions outfits to resemble vending machines and mailboxes so Japanese can hide from criminals. Notice the headline is "Japanese wear the hiding place" just like ninjas. Is this ninja behavior a widespread trend? No. Although the designer has sold only 20 costumes, it merits a front page article. The point of the piece? The designer "said that while her ideas might be fanciful, Japan’s willingness to indulge the imagination was one of its cultural strengths." I can picture the Times editors fishing for a point.

The royals article profiled Japan's Prince Tomohito of Mikasa. Onishi portrays the prince as an alcoholic nihilistic recluse. The prince's duty? "The royals, he said, could fulfill their duties simply by 'waking up in the morning, eating breakfast, eating lunch, eating dinner, then going to sleep, repeating that 365 days a year.'" I don't know many people in Japan who know or talk about the prince. But I know people were reading these articles because they were both among the top ten most emailed list on Sunday. The oddball stereotype of Japan is alive and well.

Now, I understand that these two fluff pieces are meant to entertain. They were a lot of fun, but I could put them in context because of my firsthand experience with Japan. I also find it ironic that one of the themes of the Brown University conference I was returning from was that mainstream media treats its readers like simpletons. (If you want to read quality reporting in English about Japan, read Sebastian Moffett of the Wall Street Journal.) It makes me worry about the countries I don't know much about. Can I trust newspapers to give me an accurate portrayal?

I just hope newspapers aren't creating a nation of Vinnie Barbarinos, the TV personality famous for his insight, "It's like so weird."

Schools as Shapers of Culture and Ethics

I was reading Peter Berkowitz's op-ed in the Wall Street Journal "Ethics 101" about the duty of universities to consider the ethical issues surrounding education. The (very pointed) ethical questions he gives include the following:

• Is it proper for university disciplinary boards, often composed of faculty and administrators with no special knowledge of the law, to investigate student accusations of sexual assault by fellow students, which involve crimes for which perpetrators can go to jail for decades?
• Should universities have one set of rules and punishments for students who plagiarize or pay others to write their term papers, and another -- and lesser -- set for professors who plagiarize or pay others to write their articles and books, or should students and faculty be held to the same tough standards of intellectual integrity?
• How can universities respect both professors' academic freedom and students' right to be instructed in the diversity of opinions?
• What is the proper balance in hiring, promotion, and tenure decisions between the need for transparency and accountability and the need for confidentiality?
• What institutional arrangements give university trustees adequate independence from the administrators they review?
• Is it consistent with their mission for university presses to publish books whose facts and footnotes they do not check?
• In accordance with what principles may a university bar ROTC from campus because of the military's "don't ask, don't tell policy" concerning homosexuals, while inviting to campus a foreign leader whose country not only punishes private consensual homosexual sex but is the world's leading state sponsor of terrorism, and who himself denies the Holocaust and threatens to obliterate the sovereign state of Israel?

Point taken.

But the incorporation of ethics into professional schools' curricula is still lacking. I came across a gem of a New York Times op-ed written by Robert Shiller (author of Irrational Exuberance) in 2005 titled "How Wall Street Learns to Look the Other Way." The "how" is in the lack of ethics training in business schools.

A couple of nice excerpts:

And, as with any situation in which we are puzzled by how a group of people can think in a seemingly odd way, it helps to look back to how they were educated. Education molds not just individuals but also common assumptions and conventional wisdom. And when it comes to the business world, our universities - and especially their graduate business schools - are powerful shapers of the culture.

That said, the view of the world that one gets in a modern business curriculum can lead to an ethical disconnect. The courses often encourage a view of human nature that does not inspire high-mindedness.

Consider financial theory, the cornerstone of modern business education. The mathematical theory that has developed over the decades has proved extremely valuable in general. But when it comes to individuals, the theory runs into some problems. In effect, it portrays people as nothing more than "maximizers" of their own "expected utility." This means that people are expected to be totally selfish, constantly calculating their own advantage, with no thought of others. If the premise is that everyone would steal the silverware if he knew he could get away with it, and if we spend the entire semester developing the implications of this assumption, then it is hard to know where to begin to talk about ethics.

Ultimately, the problem at the university level is a tendency toward overspecialization. Each professor gains expertise in a certain kind of research skill; that is how subject matter is defined. The specialty of financial theory has largely come to be defined by skills manipulating a narrow class of mathematical models of purely selfish behavior. Business ethics is just another academic specialty, and can seem as remote as microbiology to those studying financial theory.