As a (very modest) runner, the ultimate message of the book is hopeful.  McDougall’s basic thesis is that human beings are designed to be distance runners.  This claim runs counter to essentially everything else that I have heard about running.  As I understand it the conventional wisdom is that running is a disaster for your body in the long term.  We are not meant to pound out mile after mile and it is only a matter of time before runners succumb to knee injuries, shin splints, and all the rest.  Having started to suffer my first semi-chronic running related pains, McDougall’s message is encouraging.  His basic argument is two fold.  First, he notes that folks like the Hopi and Tarahumara have traditions of ultra running and extremely low levels of running related injuries.  Tarahumara grandfathers are comfortably running 50 mile races through the mountains and canyons of the Sierra Madres, so why can’t we?!  At this point the story has more or less two branches.  The first is an evolutionary.  Humans, he says, evolved on the ancient savanna as ultra distance runners.  Compared to other large mammals we are an extremely slow bunch, but it turns out that we are much better at endurance running.  Our breathing apparatus is more efficient (unlike other mammals we can take more than one breath per stride), as is our temperature control (we sweat very efficiently).  Accordingly, he says, our ancient ancestors got meat by running antelope to death, a method of hunting that has been documented among African tribesmen.  The second part of the story is how modernity has ruined our natural running ability by making us sedentary and giving us running shoes.

The running shoe part is what most got my attention.  This is also where McDougall’s writing gets perhaps most controversial.  Essentially he claims that the entire running-shoe-industrial-complex is a racket based on snake oil.  There is no evidence that super expensive running shoes reduce injuries.  In fact, he argues, by changing our stride and causing foot and lower calf muscles to atrophy, running shoes cause injuries.  The natural implication of both story lines is that we ought to run barefoot.  We are naturally designed to run, and the artificiality of the modern running shoe messes up nature’s running miracle, the human foot.  I kinda sorta buy it.

First, the parts that I don’t buy.  There is an enormous amount of romanciticizing of nature and the natural man going on in this book.  The Tarahumara are presented as the quintessential noble savages who live lives of peace and spiritual fufillment.  Modernity taints and destroys their spiritual power.  The twist on the noble savage story comes from the claim that their nobility comes from running.  There are problems with story.  For example, pre-modern societies tend to have relatively short median lifespans and few old people.  Hence, the absence of many chronic injuries may simply be the result of the fact that something else manages to kill off people before they get really bad shin splints.  McDougall’s running-twist on the noble savage story at times becomes really melodramatic.  In his hands ultra running becomes a path to higher enlightenment and the solution to chornic social problems.  I like endorphins as much as the next guy, but this is laying it on a bit thick.

Now for the part that I buy.  Last year I was told that I pronate.  I was told the same thing by an orthopedist when I was a kid, and even had orthodic inserts in my shoes for a while.  At the advice of a running shoe salesman I got a pair of running shoes designed for pronating runners with heavy posts to keep my foot level.  The result was a disaster.  I was training for a half marathon and didn’t want to switch shoes.  Besides I wasn’t eager to shell out another $100 so soon for a new pair of shoes.  So I stuck with them.  I got blisters.  I got back pains.  I got pains in my hips.  Since I went back to simpler (and I might add cheaper) shoes, I have been a happier runner.  McDougall’s basic claim about how shoes lead to the atrophy of muscles that could prevent injuries makes sense to me.

I liked McDougall’s book and for all my skepticism after I finished it yesterday, I ran about three miles and change bare foot pushing my daughter in her stroller.  Of course, I had to walk the final mile or so to get home because I worked the skin off my left little toe and was left with blisters on four of my other toes.

Draw your own conclusions.

To get at what I mean, think for a moment about media coverage of the FLDS. To many a non-Mormon observer the FLDS look as though they are simply a bit of nineteenth-century Mormonism that has survived into the twenty-first century. To understand what nineteenth-century Mormondom was like, they suggest, one need look no farther than the Yearning for Zion Ranch in Texas and the world of Warren Jeffs. If one takes this view, then modern Latter-day Saints are cast in an awkward light. On one hand, one can argue that the FLDS represent a kind of undiluted essence of Mormonism, and the apparently well-adjusted Latter-day Saints that one meets in the modern world are — if you scratch just below the surface — just like the FLDS. Call this the Krakauer Thesis. Alternatively, one can deny that modern Latter-day Saints are just like the FLDS by asserting that contemporary Mormonism is at some deep level inauthentic and deceptive. Only by denying its essence has Mormonism become respectable and the denial of that essence is itself a deeply suspect act. Call this the Ostling Thesis. Nor is this tendency to see in the FLDS some disturbing essence of Mormonism confined to the Gentile journalists. One sees a certain kind of Mormon sympathy if not for Jeffs, at least for those modern polygamists who see themselves as following God’s will. Alternatively, one sees Mormons troubled by the FLDS precisely because there is a certain familiarity that leads them to adopt the journalistic narrative, namely that the FLDS represent some sort of authentic core of Mormonism, a core they find disturbing.

There are a number of problems with thinking about the FLDS as a kind of essential distillation of nineteenth-century Mormonism. First, it is important to realize that the modern polygamists have an independent history of more than a century (i.e.1890/1904-2009), a history that is much longer than that they claim to share with modern Latter-day Saints (i.e. 1830-1890/1904). Chronologically they are more of their own thing than they are of our thing. Another way of putting this, is that they have been apostate from The Church of Jesus Christ of Latter-day Saints long enough that their history has more autonomy and idiosyncrasy than the FLDS-as-essential-Mormonism allows. No where is this seen more clearly, I think, than when it comes to the issue of double-mindedness.

President Cannon’s praise of Edmunds from the Tabernacle pulpit reveals a man who both wished to maintain the distinctiveness of his faith and his Zion and at the same time wished to reach out to embrace — and be embraced by — the broader world. Cannon did not present Edmunds as utterly Other. There was a part of the Senator from Vermont that Cannon found attractive and wished to appropriate. This double-mindedness showed up in other ways as well. For example, while it is true that a Gentile traveller making his way through a remote Mormon settlement in the last half of the nineteenth-century might find himself followed and harassed by suspicious villagers, it is also true that Mormons of that day were often eager to impress and welcome outside visitors. Brigham Young, for example, was remarkably available to virtually any journalist or even tourist who made his way through Salt Lake City, and George Q. Cannon, as Utah’s territorial delegate, was always eager to gather testimonials from Gentile visitors to Utah who has been pleasantly surprised to find that the Mormons were not the monsters that they expected.

The place were this double-mindedness was ultimately resolved theologically, of course, was in missionary work. The nineteenth-century Mormons scattered their elders as widely as they possibly could to search for converts, and then they sought to gather those converts into the new Zion. Despite all of the fortress rhetoric of nineteenth-century Mormon sermons and the xenophobia that often poisoned Mormon-Gentile relations, the Mormon Zion was not in its essence an attempt to withdraw completely from the world. It was always also a point of engagement, a hope that there were those beyond the Great Basin who could be friends, who would listen, and who might come in to enrich the kingdom. In this sense, Zion was as much about openness as it was about fortresses.

One way of understanding the painful transition from polygamy to monogamy in the years from 1890 to 1904 is to simply see it as a capitulation to overwhelming force, a repudiation of an authentic kind of Mormonism for an inauthentic kind. Certatinly there is an enormous amount of truth to the story of force and surrender. On the other hand, the persistence of polygamy after 1890 and 1904 suggest capitulation to monogamy was not absolutely necessary. One could hold on to polygamy, as the odyssey of twentieth-century polygamists itself shows. What was impossible was to maintain the double-mindedness of nineteenth century Mormonism. To maintain polygamy one had to give up on any open vision of Zion. One sees the result in the apostate Zion that the FLDS offer. It is striking to me that one of the absolutely central elements of nineteenth-century Mormonism — an element more fundamental even than polygamy — is ultimately missing from the world of the modern polygamists. There is no missionary work to the world. Their source of converts lies entirely within either other polygamist sects or else amongst a tiny, tiny fringe of the Church. There are no young FLDS men in white shirts thrashing the nations for the pure in heart. They maintained polygamy, but only at the cost of giving up on the tension at the heart of Mormonism.

It is with The Church of Jesus Christ of Latter-day Saints that the essence of Mormonism — nineteenth-century and otherwise — lies. It is not just that we have keys, priesthoods, and prophets that the apostates lack. It is that they ultimately misunderstand the nineteenth-century experience of the Saints, seeing only the remote fortress against the world and never the Zion that sought to increase her borders and reach out the hand of fellowship to all those of good will whatever their creed. That last is NOT a bit of slick, modern PR.. It is a trope of Joseph Smith and Brigham Young. It is part of the essence of the Restoration.

A specific tradition sought to be maintained cannot be an important governmental objective for equal protection purposes, however, when the tradition is nothing more than the historical classification currently expressed in the statute being challenged. When a certain tradition is used as both the governmental objective and the classification to further that objective, the equal protection analysis is transformed into the circular question of whether the classification accomplishes the governmental objective, which objective is to maintain the classification.

As presented by the Court (and for all I know as presented by the attorneys defending the law), the argument sounds circular and absurd. As a technical matter the court was applying intermediate scrutiny, but as presented by the Court the appeal to tradition would seem to fail even a rational basis test.

To anyone with a familiarity with the history of the common law, the notion that the appeal to tradition is circular or vacuous is striking. The classical common law theorists of the seventeenth century – Coke, Hale, and Selden – thought that tradition was the primary justification for the law’s authority. Independent of the particular issue of same-sex marriage, the Iowa Supreme Court’s opinion shows how far our legal thinking has traveled.

It is, of course, always easy to dismiss the strange thoughts of the past as so much benighted nonsense, and to look at the seventeenth century appeal to tradition as a bit of rhetorical clap trap and nothing more. Certainly, there was more than a little bit of fiction in the appeal to immemorial custom. The appeal to tradition, however, was not without its reasons.

There are, it seems to me, at least three reasons for adhering to tradition because it is tradition.

One argument would be that the long continuation of a tradition indicates that the tradition commands widespread support. On one hand, law that follows tradition is thus more legitimate because it enjoys widespread consent, a consent evidenced not by the formal procedures of democratic institution but through the organic growth of social custom. On the other hand, as a practical matter setting the law in violent opposition to tradition threatens legal stability by cutting the law off from a deep source of intrinsic legitimacy.

The second argument is closely related to the first, and notes that traditional practices create expectations. The law ought not to upset those expectations. Doing so undermines one of the primary purposes of the rule of law, namely the creation of a stable set of expectations in which people can work out their lives free from the fear of violent shifts in how the state makes its power felt.

The third argument is that advanced by Burke. It rests on a skepticism about reason’s ability to create effective social practices from a priori principles. Burke, of course, was trained as a common lawyer in a day when the curriculum consisted mainly of painfully digesting Coke On Littleton. For him the fact that one could not articulate a simple and rational justification for an ancient practice was no reason for abandoning it. The process of organic social growth, experimentation, and survival had an inarticulate wisdom of its own, and it was a shallow hubris to suppose that we could dispose of it with a few syllogisms. The argument, of course, is difficult and dangerous, because sometimes tradition represents precisely the kind of viciousness condemned by the philosophes he so scorned. Or, as the Iowa Supreme Court put it:

[The appeal to tradition] can allow discrimination to become acceptable as tradition and helps to explain how discrimination can exist for such a long time. If a simple showing that discrimination is traditional satisfies equal protection, previous successful equal protection challenges of invidious racial and gender classifications would have failed.

And yet Burke’s argument is not without merit. It certainly counsels against the glib dismissal of tradition. After all, Burke’s prediction that the French Revolution – with its contempt of tradition — would produce a cartload of headless corpses and a tyrant has proved one of the more prescient moments in political philosophy.

At the end of the day, I think that the appeal tradition deserves a bit more respect than the Iowa Court gave it. It is not a bit of logically circular claptrap. Rather, the appeal to tradition is one of the well-springs from which the common law came and the memory of man runneth not to the contrary.

[Originally posted at Co-op]

]]> http://blog.nateoman.com/?feed=rss2&p=5769 http://blog.nateoman.com/?p=5764 http://blog.nateoman.com/?p=5764#comments Tue, 31 Mar 2009 20:21:48 +0000 Nate Oman http://blog.nateoman.com/?p=5764 Here is my theory du jour about the origins of the financial crisis, suggested by one of my students: blame it all on the true sale doctrine or rather on its evisceration.  Stick with me to the end, and I have some overly broad generalizations about expertise, property rights, and Hayek. 

The “true sale doctrine” is not a staple of the law school curriculum.  At best it makes a brief cameo in secured transactions and bankruptcy courses.  Notwithstanding this academic obscurity, however, its failure may have had a big role in the current melt-down of the banking sector and with it the world economy.  Here is the gist of the issue: 

Securitization is the process by which financial assets (essentially promises to pay money in the future) are transferred from their original holder to a special purpose vehicle such as an LLC or business trust, which then issues securities entitling the holder to some fractional right to the income from the transferred assets.  Hence, for example, a bank might transfer mortgage loans to an SPV, the SPV would then issue securities to investors, and the cash from the sale of these securities would flow back to the bank.  The investors in the securities have two ultimately inconsistent goals. 

First, they want to be certain that the underlying financial assets will actually perform.  The risk is that the loans held in the SPV’s portfolio will default and there will be no money to pay the holders of securities.  One way of getting around this problem is for the originator — that is the bank that initially sold the mortgage loans to the SPV — to provide “credit enhancements” in the form of letters of credit, put options, or the like.  All of these devices ultimately consist of a promise that the bank will pay the SPV the face value of the underlying mortgage loan if the actual home buyer defaults. 

The second thing that the owners of the securities want is a guarantee of “bankruptcy remoteness.”  They want assurance that if the originator goes bankrupt the transfer of the financial assets to the SPV will be treated as a sale, and the transferred assets will not be sucked into the bankruptcy proceedings. 

The true sale doctrine is supposed to mediate these competing goals.  Under ordinary commercial law rules (UCC 9-109 to be precise) a transaction that walks, talks, and acts like a loan will be treated as such, regardless of what you call it.  In a securitization transaction where all of the risk of default on the underlying financial assets is pushed back onto the originator the law empowers courts to re-characterize the sale of the assets to the SPV as a secured loan.  The idea is that in reality there has been no sale.  The originator has simply made a promise to the investors in the securities that their money will be repaid and the underlying financial assets are in effect collateral on the originator’s promise. 

In short the true sale doctrine is supposed to make sure that treatment of a transaction hinges on the real allocation of risk, not on the label that the parties choose to attach to the transaction.  In practice, the application of the true sale doctrine is a mess, but at least it makes all of the parties to the transaction sweat through an opinion letter.  They know that if the originator retains too much risk, much of the value of securitization will be lost.

Unless of course, the originator is a bank.  Banks get special rules, rules that don’t include the true sale doctrine.

Banks are not subject to the bankruptcy code.  Rather, in the event of insolvency, they are subject to the Federal Deposit Insurance Act.  Hence, the determination of whether the finacial assets securitized by banks are “bankrtupcy remote” is governed not by the UCC and its case law, but by the FDIC regulations promulgated in the CFR.  Among those regulations is 12 CFR 360.6(b), which states:

The FDIC shall not, by the exercise of its authority to disaffirm or repudiate contracts under 12 U.S.C 1821(e), reclaim, recover, or re-characterize as property of the institution or the receivership any financial assets transferred by an insured depository institution in connection with a securitization or participation, provided that such transfer meets all conditions for sale accounting treatment under generally accepted account principles, other than the “legal isolation” condition as it applies to institutions for which the FDIC may be appointed as conservator or receiver, which is addressed by this section. (emphasis added)

The italicized language essentially repeals the true sale doctrine for banks.  So long as your accountants call a transaction a sale, it will be treated as such regardless of the underlying distribution of risk.  Why does this matter?  Because potentially it allows the banks to engage in a massive amount of … er … lying, creativity, self-deception, what have you … on their balance sheets.  When the subprime mortgages were sold the banks got a lot of cash that the could use to buy stuff that was then carried on their balance sheets as an asset, propping up their capital reserves to comply with regulations.  The problem, of course, is that the underlying credit enhancements required by the securitization were a huge liability.  Under the true sale doctrine, on the other hand, these transfers would have been treated not as sales but as loans to the bank, and the bank would have carried the obligation as a liability.  The result was a huge incentive for banks to securitize subprime loans that they then in effect became the insurers of.

Now the folks at the FDIC who drafted this rule would no doubt respond with two arguments.  First, they would note that the 12 CFR 360.6(b) doesn’t totally abdicate inquiry into the loan-sale distinction, it simply punts it to the accountants rather than the lawyers.  The problem here, as I understand it, is that the accountants in effect said that if you have control over an asset you own it, even if the underlying risk of nonpayment resides elsewhere.  They did this because the accounting rule also required “legal isolation.”  In effect, the accountants punted that question back to the lawyers.  However, when the FDIC decided to make the accountants the arbiters of the underlying property rights they punted only to the part of the accounting rule that did not include the legal isolation test. 

The second response by the good folks at the FDIC, I am assuming, would be that the risk that was retained by the banks through their credit enhancement agreements with the SPV was itself accounted for on the balance sheets.  In effect, they said “Don’t worry about the fact that the allocation of that risk no longer effects property rights, our expert accountants can look at the contracts and tell you what they are worth in the abstract.” 

As it has happened, of course, the accountants valuation of banks’ liabilities have turned out to be catastrophically wrong, with the result that the dip in subprime mortgage performance, rather than giving institutions a bad quarter has sent them spiralling into insolvency.  On the flip side, the fact that lawyers rather than bankers were the door keepers for true sale status at non-bank institutions may be one of the reasons why securitization by these companies has not pushed them into insolvency like the banks.  In effect, the true sale doctrine created a counter-balancing incentive against the push that the institutions become total insurers of the assets they were purportedly selling.

Here is the theoretical pay off for those who have made it this far in the post.  There is a deep Hayekian point here about the best way of dealing with the allocation of risk.  The FDIC rules ultimately put their faith in expert opinion, in this case the accountants.  We didn’t need to worry about the risk the banks were taking on because the accountants, through an intellectually heroic feat of calculation could value that risk.  The true sale doctrine, in contrast, ultimately put its faith in a decentralized process driven by property rights.  The true sale doctrine meant that the allocation of non-payment risk to the bank would have a real impact on the value of the property rights represented by the securities issued by the SPV.  Push too much risk on to the originator, and you will be treated as a lender rather than a purchaser.  As anyone who has looked at the doctrine will tell you, of course, the loan-sale distinction is slippery, ad hoc, and often comes down to a guess about what the judge had for breakfast.  But at its heart, it was an attempt to match property rights to risk and let the market sort it out.  In contrast, the FDIC put its faith in experts.

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