Despair in Paris

The New York Times ran an article recently on the failure of another utopian scheme: Vélib’, the Parisian bike sharing and rental program, which has recently come up against "a prosaic reality":

Many of the specially designed bikes, which, when the system’s startup and maintenance expenses are included, cost $3,500 each, are showing up on black markets in Eastern Europe and northern Africa. Many others are being spirited away for urban joy rides, then ditched by roadsides, their wheels bent and tires stripped.

With 80 percent of the initial 20,600 bicycles stolen or damaged, the program’s organizers have had to hire several hundred people just to fix them. And along with the dent in the city-subsidized budget has been a blow to the Parisian psyche.

“The Vélib’" wrote the French paper Le Monde, "was aimed at civilizing city travel. It has increased incivilities.” The failures of the bike scheme remind Parisians of other incivilities, like car burnings in the banlieues. This helps explain Parisian despair. The collapse of the Commune in the 19th century, the barricades of '68, now this?

The real question is whether there are lessons for the rest of us in all this. One has to do with scale. The exorbitant $3500 price tag is just one outward indication that the Vélib’ was created at the wrong scale. No one ever denied that Utopia would come at a price; but only in a centralized, government-run scheme could bicycles for everyday use cost $3500. The Vélib’ was doomed by grand ambitions, engineered and administered from the top down, with the government developing a scheme for good living and well being and then expecting human beings to conform to it.

Scale matters. How much greater the chances of success if, say, a household, or an apartment building, or even a city block, decided to pool their bikes, or buy some cheap used bikes, and then gave everybody a set of locks that opened with identical keys. The smaller scale experiment may not have had the same civilizing influence that the Vélib’ promised to have, and it could never have turned all of Paris green, but it probably would have worked.

Imagine a thief trying to steal a bicycle from an apartment building or a block where everybody had a stake in keeping the bikes available and maintained. Or imagine if someone within one of these smaller communities decided to turn the bikes for a profit on the black market. There would at least be a good chance of deterring or catching the thief; shame and other forms of punishment also work best within families and very small, close communities.

The Parisian experiment reveals a deep flaw -- in the experiment, because it was conducted on such a grand scale, but also in human nature; and the latter flaw should have been taken into account when constructing the experiment in the first place.

I know there are some people who will take issue with that last point, and say that what I am calling human nature is a social construct. Change the society, and what you took to be human nature will change with it. The trouble with this view is not just that it meets an objection to social engineering by calling for more social engineering, which means putting someone -- who? -- in charge of Hope and Change; the problem is also that it imagines we can step outside of history to do all this engineering, and then somehow populate our brave new world with creatures untainted by history -- as if there is a place that is really no place, a utopia.

But our lot is this imperfect world. No amount of engineering -- social, scientific, or social scientific -- will ever restore us to grace. That's no cause for despair; it's just a reminder that theory has its limits.

'Mr. Rajaratnam seemed in good spirits'

That was the report from a "friend" on October 20th. Whether Mr. Rajaratnam's good spirits have held up despite recent events -- which have ranged from the collapse of his firm, the Galleon Group, to accusations that he was funding the Tamil Tigers -- is less clear; but perhaps Mr. Rajaratnam knew all along that that he had friends out there, and that his friends would rise to his defense. No need to be glum.

Friends of Raj have included, so far, a number of prominent newspaper columnists and professors of law and finance, as well as, it would appear, the entire editorial staff of The Wall Street Journal.

Most are not defending Mr. Rajaratnam himself: nobody, not even his closest friends, have stepped up to declare him innocent or incapable of any wrongdoing. Instead, we are asked to consider that what the Feds call insider trading is really another form of market transparency, or alternatively, that it is, or ought to be, perfectly legal for outsiders to trade on information provided by insiders, even if those insiders betray their fiduciary duties in providing that information.

The latter of these arguments could amount to little more than this: if you tell me a secret, and I act on that information, you may have violated a trust, but I have not. I have only acted in my own self-interest, and what else can you expect me to do? Of course this conveniently overlooks the question how I induced you to tell me the secret, or how I colluded with you in violation of a trust. Any investigation of wrongdoing at Galleon will likely focus on whether there were inducements in Mr. Rajaratnam's network of informants and contacts, or what form collusion took. After all, we're not really being asked to believe that these were just friendly exchanges.

Or are we? Mr. Rajaratnam cultivated friends in high places and friends with access to proprietary information, to be sure. And as L. Gordon Crovitz noted in a piece that tries to blur the line between insider and outsider trading:

Information flows these days are increasingly about networks, including information about markets shared by members of various communities. Traders use Web sites to compare notes on companies and use social media like Facebook to share information, looking for an edge. Sophisticated traders such as hedge funds draw on more selected networks such as their investors.

The word "community" is doing a lot of work here it shouldn't do. And it's a little hard to imagine an entire hedge fund entrusted to the fortunes of six-degree, social media friendships. The role these informal exchanges played in giving Galleon the "edge" that Mr. Rajaratnam insisted upon is most likely negligible. Instead, it seems fair to assume, Mr. Rajaratnam and his associates depended on what Crovitz calls "more sophisticated" social information networks. (If you like acronyms, call them SINs). How sophisticated, and how social, remains to be seen.

The other argument, the argument about market transparency, is usually attributed to Milton Friedman (but originates, according to Stephen Bainbridge, with Henry Manne). Friedman summed it up when he quipped: "you should want more insider trading, not less. You want to give the people most likely to have knowledge about deficiencies of the company an incentive to make the public aware of that." The merits of this view aside -- and Bainbridge has argued persuasively that its merits are slim -- it paints a deliberately naive picture of the markets, with knowledgeable insiders merely lacking some incentive to inform "the public" of a company's deficiencies.

The public? It's difficult to say why Friedman should choose this word. No doubt about it, inside information about a company's shortcomings, or failures, or misdeeds can serve the public, or be a public good; and in a perfect world, or even a better world, there might be real incentives and protections for those who come forward with information about companies that serves the public interest. But in our world, in the real world, who among the public, broadly construed, the publicus, would benefit from this kind of information, or even know how to benefit from it?

It's a very small percentage of the public, and it is disingenuous to pretend otherwise. It's a "community," to use Crovitz's word. But the trouble is this: this particular community is like a gated enclave, restricted, shut off from the traffic and noise of the public world. Just Mr. Rajaratnam and friends -- nobody else; a very small, very closed circle, a social information network, to which only a select few are privy.

There are, no doubt, many such networks of friends and boon companions where the line between inside and outside is blurred: after all, friends don't let friends stay out in the cold. But these social information networks are still a long way from true transparency and public disclosure, or information that is a public good, even though we have all the technology we need to make information public. What we lack is the political intelligence to do it right, or maybe just the political will to do it at all.

Land of the Lotus Eaters (A Note from the Road)

Today for lunch in Liuzhou we had pork lung and pear soup, lotus root, eggplant in a delicious sauce, fish, duck, and tofu with beef and peppers, rice, and tea made from a fruit that tasted like raisin. It was 15 dollars for 6 of us and one of the best meals I've ever had.

Shooting went well at the AIDS clinic. The hospital looks like an old asylum, built a long time ago alongside the big river that runs through Liuzhou. We interviewed HIV+ AIDS counselors, the doctor who runs the small AIDS ward, and filmed counseling sessions with patients. We also did a pro forma interview with the head of the hospital, who was accompanied by a local party official. The official coached him a little and indicated his approval of the hospital chief's answers, but mainly he just sat there and watched, making his stupid presence felt.

The party bungled AIDS and is trying now to make it better; they are trying to gather real data as opposed to the manipulated data that makes it up the central government, single party chain. And now the Chinese government provides ARVs to all HIV+ Chinese. One obstacle encountered by groups like the one we are with (AIDS Care China) is that it's very difficult for them to raise money or register as an NGO; the party, our translator explained, discourages too much in the way of "civil society."

Loch right now is shooting a "home visit" to an HIV+ family, accompanied by two female counselors and our translator. They wanted to keep the group small, and the Westerners to a minimum, so Kevin and I were left behind. Loch is bringing a gift of cooking oil and some other household necessities. These are very poor people.

China is filled with them. It's huge, sprawling, teeming, chaotic, often bizarre. Many of the cities here in Guanxi province are new, as are the roads. Most people are friendly. You get the feeling everywhere that China is the future.I'm not so sure the future looks too bright.

But, here we are.

-from my Blackberry, in Liuzhou.