The Spines of Usury

It was ’97. We were out east near the Cambodian border, knee deep in melting baht and desperation. Every morning we dug the mindworms out of our imported Canadian breakfast cereal and threw them in the camp recycling bucket, and we thought we were doing it pretty tough. We were a bunch of chump accounting grads, Asian studies majors and rag-tag thaumaturgists. The IMF sent us, though they hid our budget under a line item for car parking or reports on stochastic models of dam finance costs adjusting for GDP on normalized time scales, or some such thing. We were their economic psychics, the frontline team sent in when things got rough.

The people out there had it pretty bad that summer. They were copping a heck of a psychic backlash, all those loans and deals and pacts broken, all those prayers gone awry and financial gearboxes thrown into reverse. The folks out east are serious Buddhists so their karmic buffers were usually strong, but too many surprises and a massive currency devaluation take their toll on anyone.

We’d been going hard at it for a few weeks, trying to balance ledgers and keep the local monks onside. What we called the camp was really a sprawling two storey Thai hotel on the outskirts of town, depressingly cheap to book out in its entirety for as long as the team was there. That afternoon I had gone up the small mountain nearby with the diviners. It was a national park, and approaching the peak was a mix of temple ruins from the many Siamese wars, topped by two or three more contemporary TV broadcast towers. The ley lines were fantastic up there, and we were picking up a lot of crisis metrics that way. When I got back in the evening Dave threw the paper down in front of me while I was spooning up Pad Thai. We’d usually read the FT – great horoscopes – but this was one of the many local papers, tabloid headlines and lurid photographs of car accidents and celebrities. There on page five was an unfortunate woman impaled on a kind of spear. She was a shopkeeper from a nearby town.

“Not really the local gangster style,” I said.
“Look closer,” said Dave. “Look close at the shaft.”
After a while I saw something. There were a series of fine decorations all along the shaft, like small strands of rope, or thick hair.
I looked at Dave expectantly until it was clear to him I had no idea.
“Fucking manticores,” he said.

Our agreement with the local monks, combined with our own internal regulations, meant our rules of engagement allowed for the following equipment: 1 notebook, 2 blue pens and 2 red pens, 1 pocket calculator, 1 large bottle of water, 1 copy of the Diamond Sutra and 1 personally significant religious symbol, politely displayed or concealed. Our early research had indicated ghosts as a big risk. All the sources still say it is a major ectoplasmic hotspot, but I only saw one ghost the whole time I was there. He was an eight foot tall purple man with a machete stuck through his chest. He gave me a sheepish wave and that was the last I saw of him.

I was working with a farmer, Mr Koichai Rattanathunat, who lived on the edge of town. He ran a pretty big operation, and was pretty rich for the area, or he had been. He had taken out some commercial loans with a local bank that got most of its funding from the international bond market. It had been a bad season, and a couple of weasel clauses and a few mills of rat’s blood in the contracts meant he was effectively USD funded. Suddenly one morning he went from profitable to six feet underwater.

The first sign I had of the repo man was the ceiling of the house imploding inwards. It was a twelve foot manticore, with black Oakley sunglasses stretched across its broad, garbage can lid face, and built like a brick shithouse with wings. It strolled across the open living / office area, reaching out casually with its front left paw to slap me in the chest and send me flying across the room into the wall. It walked on up to Mr Rattanathunat and fired seven short spines, hand length, into his face and chest. He was meat at that point. Poisoned meat, what’s more.

The manticore strolled over to the back door and muttered something in guttural accented Thai my way. I didn’t catch anything except “foreigner” and that he’d dropped the polite “khap” at the end of the sentence. Then the manticore smashed through the door and flew off.

We had some paladins in the department, but they were all being seconded to Interkarmapol in Bangkok. They were dealing with the vampire problems that always come with any big global turnout, be it crisis, G7 meeting, or whatever. I’m sure it all seemed pretty serious from their side, but I read the reports later and it was mostly anticoagulant and mood lighting. Meanwhile we were getting the shit kicked out of us and small businesses were dropping like flies.

Now I don’t rightly know that Dan Cobb was the one solved our manticore problem. I did get to see him in action once, though, right about that time.

Sammy Chan was actually from Laos, but had stuck with his Han-derived surname when he migrated around the time of the Indochina war. He ran one of those Thai cowboy ranches, where businessmen who’ve watched too many dubbed John Wayne movies come up from Bangkok to ride horses and chew tobacco for a week. It had done a good trade for a few years but now all the bookings had dried up and cancelled overnight. The saddles, bridles and hats were all imported from the US as well. Sam was at a point where it was not so much deciding whether to shut up shop as when, and how much of a mess it would make. I had gone out there for a few days, and over the course of it Sam confided in me that some of his less savvy ancestors had run up heck of a credit card debt on the gold Visa cards he’d burnt for them during the boom. Dan turned up around lunchtime on the second day, asking if he could help out.

We sat out on the verandah of the otherwise empty saloon bar Sammy had set up there, bringing Dan up to speed on the situation, but also running off on a few conversational tangents, grim and resigned by turns. The bar overlooked the ring where chubby rice salesmen had so recently taken turns on patient, but not too patient, imported horses. In some ways the tangents were the most important part of the conversation for Sammy. He knew this business was gone, at least for a while. He needed new ideas most of all, and while Dan didn’t have any business plans to hand over, he always had interesting angles on events.

We were pretty deep in this conversation when I saw the bat-winged shadow flit across the rodeo ring. I tackled Sammy to the floor as a four foot spine thudded into the wooden post behind us. I looked back to check if Dan was ok, and he had already taken cover at the edge of the bar. He moved fast for such a big man and must have seen the monster before I did.

Sammy groaned and clutched at his chest. I was thinking I’d cracked his rib or given him a heart attack or something when he rolled over cleanly and pulled a god-damned 13 inch silver plated Colt revolver out of his jacket. He started to wave it towards me, still confused by what was going on, though I noticed he hadn’t cocked it yet. I looked pointedly out over the ring where the manticore was swooping by for another pass, and another spine shot just over my head, like a flash of lightning in a summer cloud.

She had streaming blonde-brown hair, this manticore, and she grinned the beautiful smile of the predator pouncing on its prey. I dived behind a hastily upended table. It was a difficult angle, with the long awnings of the verandah, but she was happy to toy with us from an unreachable distance, as she fired some short spines into the table, splintering half of it into uselessness. Sammy let off a shot. It zinged into the sky without even touching her leather and Kevlar vest. Nevertheless, a new look of seriousness fixed itself on her face and she flew up out of visibility as Sammy let off another shot. Damn it Sammy, I thought, if you were packing, couldn’t you have carried an Uzi?

I ran to a new position behind another table while wondering if I could be any more useless. Sammy also shifted around, then went back to stillness. I’d lost track of Dan. I wondered if he’d gone for help. I breathed. We waited.

The manticore, when she came back it was in a screaming dive bomb where she pulled up just enough to skim off the table we were originally at, crash through the tables in the centre and land at the open space near the entrance, slowly spinning and firing hand-length spines all the way. Just before landing, though, where she would have been facing us, ready, she somehow crumpled. She landed on her right legs and they rolled underneath her, and instead of stopping in an alert crouch, she slid through like a motorbike accident and her neck hit the doorway with a sickening crack. She didn’t move after that.

We walked up, on guard, but she was dead. A pen had stuck deep into her left nostril, all the way into her brain. Dan must have thrown it somehow as she made her charge.

The pen was green. Dan Cobb never was much of one for following the rules.

Soon after that, the manticores stopped hassling people. I figure Dan did more than his share.

You know I heard Dan Cobb once beat Tim Geithner at tennis left handed. They played at one of those hotel courts in Hong Kong, twelve stories up, on a bad smog day. Geithner broke back a few times, but he went down in straight sets.


Something has been bugging me about John Lanchester’s followup to his very clear and accessible overview of the banking crisis in the LRB. His second piece, Let’s Consider Kate, is rather less satisfying.

The Other

The central argument becomes an analogy between an example of household finances (Kate) and the operation of a large bank. Yet one of the great lessons of economics is that money and production behave differently at great scale. Take Keynes’ paradox of thrift: an individual will need to rein in spending in a time of reduced income to avoid penury, but when everyone in an economy including the government itself is doing it, it compounds the pain. The government, having a different relationship to money and inflation, can act to reduce the pain for everyone and return the economy to overall growth by enduring debt and stoking inflation in bad times (up to a point). Likewise Ricardo’s comparative advantage, likewise Milton Friedman’s points on the velocity of money and the role of inflation – they all operate at scale, not at the kitchen table. A large bank also operates at scale and is intimately connected to the creation of money – perhaps it might work a bit differently too. Isn’t this true of most great ideas – that they do not cleanly fit our folk intuitions?

The natural accompaniment of such puppet show characterization is a hand-waving oversimplification. So we colour in one-third of the banking system in dark colours and call it Other. It’s not that raising equity requirements to proposed Basel III levels, if that’s the suggestion, is even a bad idea. It’s that kitchen table economics doesn’t scale, any more than kitchen table physics scales to describe nuclear fusion inside the Sun; and we need something more sophisticated than kitchen table Financialism to fix it.

My whole point about this system is not that it is a misrepresentation of some Oriental essence — in which I do not for a moment believe — but that it operates, as representations usually do, for a purpose, according to a tendency, in a specific historical, intellectual, and even economic setting. — Edward W. Said, Orientalism

A Marketplace in Ispahan - Edwin Lord Weeks. 1885

The Marketplace

Dismal, But Scientists Nonetheless

A continuing critique of economists throughout the global financial crisis has been of tunnel vision. Ideological, free market blinkers, meant economists missed the inflating bubble and fixated on irrelevancies while sailing us happily over a cliff. A fair sample of it can be found in this New York Times article from March 2009, quoting that old favourite, JK Galbraith:

“It’s business as usual,” he said. “I’m not conscious that there is a fundamental re-examination going on in journals.”

John has pointed out that this is more of an open academic secret than a staggering revelation, with William Buiter’s summary of the shabby state of the art serving as an example. Buiter used to be on the monetary commitee for the Bank of England; he’s pretty Establishment so far as economics goes, and you can see him merrily pointing holes in both Keynes and neoclassical models here.

These gaps, or gaping holes, do indeed make policy development horribly difficult, and the lives of politicians harder. This melds with old critiques of economists as somehow wooly or less than scientific. If you use Kuhn as a starting point, though, this pigheaded devotion to a model until its contradictions with reality become unmanageable is not a bug, but a feature, and a feature of science, what’s more.

Kuhn provided the terms paradigm and paradigm shift to the history of science (and a thousand failed dot com business plans), to describe the dominant worldview of normal science and the process by which it changes. A paradigm encompasses theory, conventional practice, instrumentation, and a domain of set problems and unsolved problems for the field. Different paradigms are not just competing theories but competing worldviews because they are in some sense incommensurable; proponents will often argue past each other.

It is the narrowing of focus provided by a successful paradigm that makes the activity of normal science so productive. With a professional consensus on worthwhile problems, tremendous attention and progress can be made on those problems very rapidly. Elements widely outside those areas become seen as philosophical, or at least part of a neighbouring academic discipline rather than the discipline defined by the paradigm.

Kuhn also points to why the neoclassical model is not yet academically dead. In his analysis, paradigms are always replaced by one or sometimes two victorious alternatives. Economics today (I would assert) is at a stage of one hundred flowers blooming; alternative paradigms are propagating but they are fairly wishy-washy for the most part. In part this is because some of them – Post Autistic Economics comes to mind – explicitly reject a quantitative or model centric worldview. It might be an interesting and successful policy or philosophical school but it is unlikely to meet with scientific success because it is not scientific. The trigger might be theoretical – some new technique to deal with the nasty math behind rational agents and complete markets, perhaps. Or the trigger might be empirical – the wealth of data coming out of computational sociology from social networking sites, perhaps. I’m too far away from the field to really pick a winner. But until there is a killer new paradigm which lets technical economists address a new range of technical issues or get a different traction on reality with them, I’d suggest the New Classical Model will continue to prevail.