Politeía Digest

Quis custodiet ipsos custodes?

Sunday’s New Yorker (V)

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California Postcard

Friends Like These

Last Wednesday, the same day that Mark Zuckerberg, the founder and C.E.O. of Facebook, announced that the company would revoke its controversial new anti-privacy privacy settings, Chris Kelly, the company’s former chief privacy officer, was in Los Angeles, killing an hour in a hotel lobby. Kelly, who has the stolid aspect, graying temples, and sober fashion sense of a Midwestern banker, is thirty-nine. When he was hired by Facebook, in 2005, he was the second-oldest person at the company; the next-oldest was twenty-eight. He resigned in March, and is now running, as a Democrat, for attorney general of California. (The primary is June 8th.) Kelly has never held elective office before, but at Facebook he was, in a sense, the “top cop” of a large and unruly community. “There are versions of every serious crime you can imagine attempted on a network like Facebook,” he said. “Any network of five hundred million humans will have a number of them trying to do bad things to each other at any given time.”

Kelly started at Facebook after his friend Sean Parker, one of the founders of Napster, introduced him to Zuckerberg; at the time, there were twenty-five employees and two and a half million users, all of whom, by Facebook law, had an e-mail address ending in .edu. During Kelly’s tenure, the site expanded rapidly, and the question of what constituted private information and what was public grew contentious. First, there was Beacon, an advertising program that posted updates on users’ pages whenever they ordered movie tickets on Fandango or, as in the case of a Massachusetts man, bought a diamond ring. (“Who is this ring for?” the man’s wife wrote him in an instant message when she saw it in his news feed. “What ring?” he replied.) The program prompted a class-action lawsuit, and Facebook discontinued it in 2009. (Kelly says that he was uncomfortable with Beacon from the start.) Then, last summer, Facebook revised the privacy settings to introduce new controls over the dissemination of information, some of which resulted in even more user data becoming visible on the Internet. Read more in The New Yorker.


Learning by Degrees

A member of the Class of 2010—who this season dons synthetic cap and gown, listens to the inspirational words of David Souter (Harvard), Anderson Cooper (Tulane), or Lisa Kudrow (Vassar), and collects a diploma—need not be a statistics major to know that the odds of stepping into a satisfying job, or, indeed, any job, are lower now than might have been imagined four long years ago, when the first posters were hung on a dorm-room wall, and having a .edu e-mail address was still a novelty. Statistically speaking, however, having an expertise in statistics may help in getting a job: according to a survey conducted by the National Association of Colleges and Employers, graduates with math skills are more likely than their peers in other majors to find themselves promptly and gainfully employed.

The safest of all degrees to be acquiring this year is in accounting: forty-six per cent of graduates in that discipline have already been offered jobs. Business majors are similarly placed: forty-four per cent will have barely a moment to breathe before undergoing the transformation from student to suit. Engineers of all stripes—chemical, computer, electrical, mechanical, industrial, environmental—have also fared relatively well since the onset of the recession: they dominate a ranking, issued by Payscale.com, of the disciplines that produce the best-earning graduates. Particular congratulations are due to aerospace engineers, who top the list, with a starting salary of just under sixty thousand dollars—a figure that, if it is not exactly stratospheric, is twenty-five thousand dollars higher than the average starting salary of a graduate in that other science of the heavens, theology.

Economics majors aren’t doing badly, either: their starting salary averages about fifty thousand a year, rising to a mid-career median of a hundred and one thousand. Special note should be taken of the fact that if you have an economics degree you can, eventually, make a living proposing that other people shouldn’t bother going to college. This, at least, is the approach of Professor Richard K. Vedder, of Ohio University, who is the founder of the Center for College Affordability and Productivity. According to the Times, eight out of the ten job categories that will add the most employees during the next decade—including home-health aide, customer-service representative, and store clerk—can be performed by someone without a college degree. “Professor Vedder likes to ask why fifteen percent of mail carriers have bachelor’s degrees,” the paper reported.

The argument put forth by Professor Vedder (Ph.D., University of Illinois) is, naturally, economic: of those overly schooled mail carriers, he said, “Some of them could have bought a house for what they spent on their education.” Another economist, Professor Robert I. Lerman, of American University (Ph.D., M.I.T.), told the Times that high schools, rather than readying all students for college, should focus on the acquisition of skills appropriate to the workplace. According to the Times, these include the ability to “solve problems and make decisions,” “resolve conflict and negotiate,” “coöperate with others,” and “listen actively.” Read more in The New Yorker.

The Balance Sheet

The Flaky Stock Market

Another flaky session in the stock market today: after opening in positive territory off the news of a genuinely terrific jobs report (pdf), the market started tumbling, and at one point was down as much as three per cent, before getting all the way back to even, only to then slide again. Still, this is obviously nothing compared to yesterday’s bizarre late-day sell-off, when the Dow fell nine hundred and ninety-eight points in a matter of minutes. It’s still not clear exactly why the sell-off started. There seems clearly to have been some kind of technical error in entering trades, although the rumor that someone entered “billion” when they meant “million” still hasn’t been confirmed. But what does seem clear is that the plunge was exacerbated by the markets’ heavy reliance on computerized trades—both explicit “stop market” sell orders (that is, orders to sell a stock once it hit a certain price) and algorithmic trades that dictate buying and selling depending on different market factors. Nina Mehta and Chris Nagi at Bloomberg have an excellent piece showing how the fragmentation of markets—instead of most trades all going through a centralized market, like the NYSE, trades are now routed to various other markets when volume spikes—may have propelled the plunge, by making it seem as if there were no buyers for any of the sell orders.

n principle, more trading and faster trading should be a good thing, making markets more liquid, allowing them to react to new information more quickly, etc. The problem is that the way trading has gotten quicker is by relying more and more on computers, which in turn means that many (perhaps most) trades are based not on fundamentals—which is what you want investors to be looking at—but on price movements. In normal times, this doesn’t matter much—the price movements are reasonably random and therefore the computerized trading doesn’t move the market in one direction or the other. But when things go wrong, you can get immense moves up or down. That’s why, in contrast to Felix Salmon, I don’t think yesterday’s crash is evidence the market is irrational. It’s more that it’s a-rational: the computers aren’t panicking or herding. They’re just following simple rules. I think this is bad for the collective intelligence of the market, which really depends on diversity of thought and independence of action. But what happened yesterday isn’t, I think, quite the same as the crash of 1929 or the stock-market bubble of the late nineteen-nineties. It’s an example of the dangers of a-rationality (to coin a word) rather than irrationality.

Having said all that, the thing that’s most striking about what happened yesterday is how quickly the market recovered. Within a matter of minutes, it was back around where it had been when the sell-off started (but still well down on the day, of course). If there’s any comfort to be drawn from yesterday, it’s that the market recognized a senseless move reasonably quickly and acted to correct it. That’s not entirely reassuring, but given the general volatility out there, it’s something.


Written by Theophyle

June 6, 2010 at 9:29 am

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