As with many of my more thoughtful posts, it received almost no comments. At least until a few days ago when a grad student named Sam emailed to ask for a little more information about where I got my ideas. He wisely starts with flattery:

Hi Mark,

I am writing my thesis about moral certainty/reasonable doubt in the moral context of the ascertaining of death. I came across an article in your blog, which I found rather interesting...

Sam then goes on to discuss the idea a bit, with references to James Q Whitman, James Franklin's The Science of Conjecture, Pius XII, and John Paul II. Then he asks me for a bit of information.

...

Is there any book on the history of moral certainty/reasonable doubt that you can recommend me? I would be interested in non-historical books as well.

Thank you for taking time to read this e-mail. I would greatly appreciate if you could answer me.

Yours truly,

Sam

I don't know of any books about the history of moral certainty per se, but I can think of a few books that directly or indirectly influenced the way I discussed the subject in the previous post. I started to explain this in a brief reply, but I soon realized I had enough material for a blog post, and I thought someone else out there might be interested.

Although I'm not a scientist, I have great admiration for the discipline of scientists, and much of my thinking about issues of certainty and doubt is based on what I've read about the philosophy of science, which is somewhat related to the philosophy of pragmatism. On that subject, the most obvious book to read is William James's Pragmatism, but I've found that C. S. Pierce explains the philosophical issues more clearly.

One of the key points of pragmatism is that when trying to answer a question, it matters a great deal why you're asking. Here's an excerpt from one of James's lectures that is illustrative of both the pragmatic approach and James's writing style:

Some years ago, being with a camping party in the mountains, I returned from a solitary ramble to find every one engaged in a ferocious metaphysical dispute. The corpus of the dispute was a squirrel -- a live squirrel supposed to be clinging to one side of a tree-trunk; while over against the tree's opposite side a human being was imagined to stand. This human witness tries to get sight of the squirrel by moving rapidly round the tree, but no matter how fast he goes, the squirrel moves as fast in the opposite direction, and always keeps the tree between himself and the man, so that never a glimpse of him is caught. The resultant metaphysical problem now is this: Does the man go round the squirrel or not? He goes round the tree, sure enough, and the squirrel is on the tree; but does he go round the squirrel? In the unlimited leisure of the wilderness, discussion had been worn threadbare. Every one had taken sides, and was obstinate; and the numbers on both sides were even. Each side, when I appeared therefore appealed to me to make it a majority. Mindful of the scholastic adage that whenever you meet a contradiction you must make a distinction, I immediately sought and found one, as follows: "Which party is right," I said, "depends on what you practically mean by 'going round' the squirrel. If you mean passing from the north of him to the east, then to the south, then to the west, and then to the north of him again, obviously the man does go round him, for he occupies these successive positions. But if on the contrary you mean being first in front of him, then on the right of him, then behind him, then on his left, and finally in front again, it is quite as obvious that the man fails to go round him, for by the compensating movements the squirrel makes, he keeps his belly turned towards the man all the time, and his back turned away. Make the distinction, and there is no occasion for any farther dispute. You are both right and both wrong according as you conceive the verb 'to go round' in one practical fashion or the other."

The relevant point is that in order to think about how to define reasonable doubt, we have to keep in mind how we're going to use the answer. The definition is inseparable from its use.

If you want a more rigorous approach to thinking about certainty and doubt, you might want to learn about the way scientists use probability and statistics to quantify the degree to which they can be certain that a theory is true based on limited evidence.

In science, the evidence is limited because scientific theories are statements about universal truths. For example, suppose your theory is that a flipped Euro coin is more likely to land heads than tails, perhaps because of aerodynamics or weight distribution. You can't possibly do an exhaustive test: Not only are there billions of Euro coins in the world, but each coin can be flipped essentially an infinite number of times.

The only way to test a theory like that is to look at a small sample of all the possibilities. Conduct an experiment by flipping a few coins, tabulate the results, and then use probability and statistics to answer this question: What are the chances that I would get these experimental results even if my theory is wrong?

For example, if you flipped 10 coins and got six heads, that's very poor proof: A little math with the binomial probability distribution tells us that there's a nearly 38% chance of getting at least 6 heads in ten flips. In other words, if the Euro coin is totally fair -- 50/50 -- there's still a 38% chance of getting 6 or more heads in ten flips. With odds like that, it's hard to distinguish whether our theory is correct or not.

Our certainty is increased, however, if our result is stronger or if there are more tests. So if we get 7, 8, or 9 heads, the likelihood if it happening even if our theory is wrong is 17%, 5%, or 1%, respectively, indicating we can be more confident that the theory is true. Alternatively, we can also be more confident if we increase our sample size. The probability of getting 60 heads in 100 flips even if our theory is wrong is just under 3%. That's good enough for publication in some fields.

In a criminal case, the jury is evaluating the prosecution's theory that the defendant is guilty. Although the jury is not deciding a universal truth, the evidence is still limited to whatever could be learned about the crime, and without experimentation there's no way to increase the amout of evidence. Nevertheless, the same rules apply: The jury's certainty about its conclusions depends on the strength and quantity of evidence, so in order to reach a conclusion, they need either a few pieces of very good evidence (the defendant's DNA) or a lot of poor evidence (partial fingerprints on the gun, the defendant owns the same kind of car that was seen leaving the scene, a witness who picked the defendant out of a lineup). Either way, the question for the jury is: What are the chances that this evidence would exist even if the prosecutor's theory was false?

(I'm pretty sure juries don't actually think about the problem this way, let alone try to calculate the probabilities, but the math still applies whether they use it or not.)

It's important to note that, as a matter of math, neither scientific experiments nor criminal trials can offer perfect certainty. There is always the possibility of error. The chances of a mistake never go to zero. There is always the chance that the jury will convict an innocent person or release a guilty one. Therefore it's important to recognize that, whatever we decide we mean by reasonable doubt or moral certainty, it's never going to be perfect.

I learned about the math when I took a college-level course in probability and statistics that used the book Probability and Statistics for Engineers and Scientists by Walpole, Myers, and Myers. I have qualms about recommending it, however, because it gets bad reviews on Amazon and it's a textbook for a class, so it's not really oriented toward someone trying to learn the subject by themselves.

Also, learning college-level calculus-based probability and statistics is probably more of a commitment than you're prepared to make. I don't have an actual book to recommend, but I suggest you find one that approaches the subject on a level you're comfortable with. Note that this shouldn't just be a book about statistics -- how to calculate the mean or find a median -- it should specifically address the use of probability and statistics to test scientific hypotheses. This is often called "experimental design" in the table of contents.

This leads somewhat naturally to the third influence on my discusison of reasonable doubt: Statistical quality control. Whether they're making cars or computers or just parts for something else, some portion of every factory's output is going to be defective. This defective output has a cost: Either the product is discarded or reworked, or it is delivered to customers who will demand a refund or replacement.

Manufacturers would like to turn out perfect products, but reducing defects comes with a cost. Every time you add a new inspection step, you increase the cost of production. Eventually, you can make your product so expensive that nobody wants to buy it, no matter how good it is. The key is to spend money to improve your product only until you reach the point where the cost of eliminating one more defect is higher than the cost of allowing the defect through the system.

The first relevant point for moral certainty/reasonable doubt is that perfection has a trade-off: We have to strike the right balance between the cost of error and the cost of quality. In a factory, the cost of quality is an increased cost of production. In criminal justice, quality is two sided: There are two kinds of errors, and the cost of reducing errors on one side is an increase in errors on the other side.

If the jury instruction sets the bar too high, you'll make it extremely unlikely that they'll convict an innocent person, but you'll do so at the cost of freeing too many guilty people. On the other hand, if you choose a system that makes it extremely unlikely the guilty will go free, you'll do so at the cost of wrongly imprisoning too many innocent people.

The second relevant point comes from the emphasis statistical quality control places on the importance of using operational definitions. When you tell someone to measure something, you should also tell them exactly how to measure it. For example, you don't just say, "The temperature of the reaction vessel should be 220°C."

Instead, you should give detailed instructions something like this:

"Obtain a Fluke 52-2 digital thermometer from the instrument cabinet. Verify that the calibration sticker has not expired. Using the provided cable, connect the digital thermometer to each of the upper, middle, and lower integrated thermocouples on the reaction vessel. Allow the probe to stabilize for 30 seconds on each thermocouple before recording the reading. If any two readings are more than 12°C different, disgard all readings and file a malfunction report with your supervisor. If the readings are successful, average the values of the three readings. The reactor vessel is at the correct temperature only if the average temperature is at least 220°C and no single reading is below 119°C."

As you'd imagine, the second instruction is a lot more likely to produce accurate, repeatable results than the first. This suggests to me that the judge should try to provide the jury with a similarly operational definition of reasonable doubt.

The most famous name in statistical quality control is W. Edwards Deming, and I think reading a little bit of either Out of the Crisis or The New Economics would be worthwhile. J. M. Juran offers a more business-like approach in Juran's Quality Handbook.

Quality control helps you understand how the process affects the error rate, but before you can develop a policy, you also have to know the costs of your errors and therefore the benefits of preventing them. Sending an innocent person to prison has direct costs for the person, the prison system, and society; but freeing the guilty allows them to continue their predatory behavior.

In addition, an especially large and mysterious cost is the incentive that the error creates for others: What happens when criminals realize they are unlikely to be punished for their crimes? What happens when society loses faith in the justice system's ability to protect the innocent?

Analyizing the strange and far-ranging consequences of changing incentives is something that economists have been studying for years in a field called benefit-cost analysis. There are books on the subject, but to get the flavor of it, I recommend Armchair Economist by Steven E. Landsburg. Be warned that Landsburg has some rather strong opinions and is something of a curmudgeon, but his description of cost-benefit analysis is relatively easy to understand, and the end notes contain references to more scholarly publications.

I guarantee that it is far more interesting than my obligatory post on the State of the Union below. Also, way shorter.

Arguably, the State of the Union speech is just a big show, and that Obama's less well-planned statements are more revealing, but I think the speech is worth looking at for two reasons. First, this is Obama at his most considered and prepared, with his whole team participating, so you're seeing his governing philosophy presented at its best. Second, precisely because it's been so carefully prepared, this is one speech he can't back away from.

This is the entire text, taken from the official White House transcript, although I have reformatted it slightly and removed all the notations of when the audience applauded, because that's the silliest possible way to evaluate this speech.

It begins the customary way.

THE PRESIDENT:  Mr. Speaker, Mr. Vice President, members of Congress, distinguished guests, and fellow Americans:

When asked why her department won't even release the name of the officer who shot Masters, Jennings got more obtuse. "What does the name of an officer give the public in terms of information and disclosure?" Jennings asked in reply, presumably rhetorically. "I'd be curious to know why they want the name of an officer."

Contrast Officer Jennings' response with the more recent shooting of Tri Truong Le by a San Jose SWAT team, as reported in the Mercury News the day after it happened:

The terrifying abduction of an 11-year-old girl began with a kidnapper's gunshots in the early-morning hours Friday as she was grabbed from her San Jose home. It ended almost five miles away and 12 hours later with a single shot, when a SWAT officer killed 42-year-old Tri Truong Le, the alleged kidnapper, during a gunbattle in a narrow staircase.

The girl, who was in the kidnapper's arms when the gunbattle started, was miraculously almost unharmed and recovering from the trauma at a hospital, police said.

The officer who fired the fatal head shot was identified by police Friday night as Mauricio Jimenez.

This is what it looks like like when the police have nothing to hide. A violent criminal kidnapped a little girl, and a daring and skilled police officer killed him to rescue her. It was a good day for the San Jose police, and officer Jimenez did something that his department is rightly proud of. This is what it looks like when the police are not afraid of the truth.

It's no secret that a lot of people with libertarian leanings aren't happy with the way the United States seems to be turning into a police state. As a reminder of the degree to which our cops have become militarized, check out the Cop or Soldier quiz at Radley Balko's place. I did pretty good, so see if you can beat me:

Some folks in the blogosphere have been saying that the emerging police state won't be stopped until the cops start getting hurt. Some have even suggested that it may be time for a violent uprising. I can understand where they're coming from -- it looks pretty bad to me too -- but then I know that some people in every generation have been certain that America was about to plunge into tyranny, and they've always been wrong. I think it's safe to assume that with a longer perspective, we'd see that our current time isn't so bad either.

(Then again, American freedom is going to end eventually. Nothing lasts forever. I sure hope that future generations will not look back on mine and ask, "Why didn't they shoot them while they still had the chance?")

Recently, some people on Twitter have been lauding this video, posted under the title "Police Brutality - Handled the Way It Should Be":

In the video, you can see some idiot run onto the field, and then then a bunch of uniformed security guards or cops tackle him and pin him down. So far, so good. But then the cop/guard on the right apparently starts to jab him with a nightstick. At which point people in the stadium rush the field to attack the cops.

I can't fault the sentiment. Although violence as a response to violence often isn't the wisest approach, there's certainly nothing morally wrong with using violence to stop violence. Resisting arrest is wrong. Defending yourself or others against police brutality is not.

However...

Watch the video carefully. The cop/guard on the right jabs the guy on the ground a few times. The other cop/guard yells at him. Then the mob attacks, and it looks like the yelling cop takes a beating. As for the cop who was jabbing the guy on the ground...he abandoned his buddies to the crowd and got away without a scratch.

This, in a nutshell, is one of the problems with trying to defeat the police state by violence. It never seems to work out the way it's supposed to. It's too easy to hurt the innocent, and too hard to make sure only the guilty are punished. And the kinds of people who attack or kill cops are not the kinds of people you want on your side. Back around the Days of Rage, the Weathermen killed a cop, but they didn't target a particularly bad one, just whoever was standing there when the bomb went off. The Symbionese Liberation Army claimed to be leaders of a black revolution, but they ended up killing a black school superintendent and a mother of four.

Fantasies of vengeance are commonplace and often make for entertaining fiction, but in real life, violent reprisals are rarely instigated by people who value freedom and respect human life. In the movies, we get a mysterious stranger in a Guy Fawkes mask who speaks eloquently of liberty, outwits the authorities, and strikes at the heart of a brutal state by blowing up empty buildings. In real life, we get Timothy McVeigh using a bomb in a truck to kill children.

First of all, one of my regular daily stops is the Honest Courtesan, written by retired call girl (and Nobody's Business guest blogger) Maggie McNeill. She's a good writer with mad research skills, and her blog takes a frankly libertarian approach in advocating for the rights of prostitutes and other sex workers. Also, now that she has declared me a Friend of Whores in her blogroll, I feel guilty about not having added her to the blogroll already.

(Marital tip: I told my wife about this right away. Being declared a "Friend of Whores" is really the sort of thing you want to get out in front of.)

I could have sworn I'd already added Eric Mayer at Unwashed Advocate (formerly Military Underdog), but he wasn't on the list. He is now.

I often thing Jack Marshall is very, very wrong, but his Ethics Alarms blog is usually thought-provoking and has been a continuing source of Things to Blog About.

I'm an on-again/off-again player of EVE Online, and one of the best blogs covering spaceship-to-spaceship combat is The Altruist, by Azual Skoll from Agony Unleashed.

Lindsey Beyerstein has stopped blogging at Focal Point (which I have removed) and is now blogging at Duly Noted.

What little I know about cryptography, I learned from Bruce Schneier's books, and I'm a regular reader of his blog Schneier on Security, which is about more than just computers.

WolframAlpha gets added to the resource page.

Marginal Revolution was listed in two places, but is now listed in one less place.

Pete Guither's Drug WarRant has moved, as have Norm Pattis, the Underdog Blog, and Seeking Justice.

Kip Esquire isn't blogging at A Stitch in Haste anymore, The D'Alliance is closed, and Jamie Spencer has stopped blogging at Austin Criminal Defense Lawyer. Woman of the Law is long gone. As is The Matlock Blog.

Blonde Justice hasn't blogged in about half a year, but she gets a pass.

BlogNetNews.com has been replaced by a squatter page. 

A number of advocates are working to respond to the lies, propaganda and misinformation wherever we find them, but we can only do so much and we're often outnumbered by the brainwashed zombie slaves of the "trafficking" witch-hunters.  Also, we're often accused of distorting facts to make ourselves look good, and no matter how assiduously we work to present a balanced view this is a natural and credible accusation against anyone who advocates for some issue which directly concerns her. That's why allies are so important; it's much harder for the prohibitionists to shout down people who don't have a dog in the fight, but merely support prostitutes' rights on moral grounds.

That makes sense, and although I don't have much time today, I have posted on the subject before, including a two-part series about how a deceptive Illinois law to protect prostitutes from exploitation will actually make things worse for them and how to really protect prostitutes. I also wrote a series about how the supposedly feminist idea of prosecuting the customers discriminates against men, confuses prostitution with slavery, and shows contempt for women's choices.

The problem is that I'm a middle-aged male, so when I stand up for the right of attractive young women to perform sex acts for money, oppponents can dismiss my arguments as self-serving. I think it's much more effective when sex workers speak up for themselves. To that end, I strongly recommend Maggie's blog The Honest Courtesan. It's straightforward and well-written, full of carefully researched arguments and (if you're into that sort of thing) salacious details.

(Maggie McNeill is also an occasional contributor to Nobody's Business.)

Most of all, I do not understand the persistence of the myth that a college education can, does, or should qualify a graduate for good job, when it appears that a large percentage of students, if not a majority, leave the campus unable to write, think, or name the men on Mount Rushmore.

Mount Rushmore? That's old media...

Seriously, though, in the context of qualifying for a job, what does knowing the faces on Mount Rushmore have to do with anything? Still, Marshall's got a point about the mixed-up priorities of some universities. Read the whole thing.

It's simple statistics. The more times you send armed teams to break into people's homes, the more times people will get killed. It's the inevitable consequence of such a policy. No amount of propaganda and posturing can beat the math. So sometimes the victim is a 92-year-old grandmother, sometimes it's a mother with her baby in her arms, and sometimes it's a United States Marine.

But last Wednesday, on January 4th, police in Ogden, Utah raided the house of Matthew Stewart, and something unusual happened: The cops lost the gunfight. Stewart is a military veteran, and unlike the aformentioned Marine, when the SWAT team came through his door, he apparently didn't hold fire. Officer Jared Francom was killed, and five other cops were wounded. Stewart is still alive.

When cops win the gunfight and kill an alleged offender during a drug raid, there's usually a complete news blackout while they "investigate." Months may pass before they even release the name of the cop who pulled the trigger, if they ever do. In this case, however, the roles are reversed, and it's a cop who's dead, not a lowly civilian, so the law enforcement establishment has gone into high gear. Weber County Attorney Dee W. Smith has already announced that he will seek to have him executed.

I guess the investigation proceeds a bit faster when the deceased is someone the cops care about, and the shooter isn't a cop.

(By the way, if you've been following the excesses of the War on Drugs, you probably won't be surprised to learn that the police officers conducting this raid were part of a multi-jurisdictional task force. In this case, calling it a "task" force must not have sounded macho enough to the commander, so it's something called the Weber-Morgan Narcotics Strike Force.)

Other than the reversal of victim and shooter, however, the shooting of officer Francom was a pretty typical drug raid death. By which I mean it was completely unnecessary. From media reports, the raid appears to have been executed to serve a search warrant for a marijuana grow operation. Not only is that an inherently non-violent activity, it's not even the sort of thing where a criminal could dispose of the evidence if the cops moved too slowly. There was no point in turning this into a violent incident.

DEA Agent Charge Frank Smith doesn't see it that way:

"It's not a legalization issue, it's not an immigration issue, it's a public safety issue. If someone is willing to shoot it out with police, who is self-medicating on marijuana, what's to say he's not willing to walk out his house and start shooting his neighbors?" Smith says.

Well, there's the fact that he didn't walk out of his house and start shooting his neighbors. From all the reports I've read, he didn't start shooting until armed cops invaded his home.

Agent Smith is doing a little something called "moving the goalposts." This was originally an attempt to serve a search warrant. It should have been one swift assault with, at worst, a dead dog or two. Instead, it turned into a clusterfuck, and the Weber-Morgan Narcotics Stike Force has gotten a cop killed. So now Agent Smith is trying to reframe this as if taking out a violent threat to the community was what they planned all along.

Smith says the shooting case will be reviewed and he hopes lessons will be learned to prevent a tragedy like this from ever happening again.

I doubt it. Police departments have been doing raids like this for decades, and they keep getting people killed.

To head off a few objections, note that I'm not saying Stewart was a good guy. For all I know, he's an evil fuck who's been waiting for a chance to kill a cop. Maybe he saw the raid team coming and decided to try to kill them. That still wouldn't change the fact that it was a bad idea to send cops charging into his home.

With one officer dead, four others wounded, and a suspect who is likely to spend the rest of his life in prison, this raid has caused an awful lot of misery. And if this is a typical year, there will be another 40,000 raids in the War on Drugs.

So expect more dead bodies.

It's not too early to start drinking, is it?

Note that Weird Al is the only one who knows all the words.

There are worse ways to start the new year.

• I argued that bloggers shouldn't tone it down. (In that post, I responded to Pima County Sheriff Clarence Dupnik's call for less vitriolic speech by pointing out that "A dozen guys like Glenn Beck and Keith Olbermann--or a thousand bloggers like me--couldn't begin to do as much harm with words as Sheriff Dupnik's SWAT team could do in one bad day." A few months later, they had that bad day.)
• I wrote about keeping the balance between insensitivity and despair when writing about the kinds of issues I cover.
• I discovered that Chicago had a real criminal defense blogger in Marcus L. Schantz.
• Chicago had a bit of snow.
• I reviewed a few episodes of The Chicago Code (episode 2, episode 3, episode 4).
• I explained how flat legal fees are a form of trial insurance.
• I explained one reason there's a blogging gender gap.
• I discussed the math behind drug-sniffing dogs.
• I discovered street terrorism.
• I argued that SWAT shootings are inevitable.
• Like everyone else, I had some thoughts about Fukushima.
• I explained why it's hard to decide who to vote for.
• For some reason, I was almost shocked that big media companies are scumbags.
• I promoted a couple of local businesses.
• I argued for strict liability for wrongful imprisonment.
• My co-blogger Ken complained about the Qur'an-burning reaction.
• I found the coolest geek website ever.
• I ran into some costly geese.
• Sprint annoyed me again.
• Chicago didn't get a space shuttle.
• I complained about a Stalinist feature of American criminal trials.
• I discovered that even best-case immigration is annoying.
• I offered a defense of some street photographers.
• I responded to the horrifying contention that there are no innocent civilians.
• The Weird Al-Lady Gaga battle exploded.
• I was so angry at the world that I totally missed it when my co-blogger Ken posted this for Easter.
• Rogier van Bakel, Rick Horowitz, and I launched the new Nobody's Business blog.
• I blogged about the scandal that Obama is afraid to confront.
• I bravely spoke out in favor of killing Osama bin Laden.
• I explained that Trump is crazy.
• My cat Dozer died.
• I gamed the Alexa blog rankings. (Back down now.)
• I explained libertarian compassion.
• I complained about unnecessary seizures of computers.
• I posted a compilation of clips from porno movies.
• I proposed a model jury instruction on reasonable doubt.
• Joel Rosenberg died.
• The TSA...did what they do best.
• I drove to Avalon and back.
• I argued that Caylee's law would probably do more harm than good.
• I explained why the iPad is more futuristic than the space shuttle.
• I got a new kitten.
• I learned the two of my nemeses have teamed up.
• I explained a point of etiquette to Wayne LaPierre.
• I denounced the idea of a debt ceiling.
• I won a lawsuit.
• I reviewed Declaration of Independents.
• I met Matt Welch and Nick Gillespie.
• I fell for a Paul Krugman parody.
• I paid some medical bills.
• I wrote one last 9/11 post.
• I called out the University of Wisconsin Threat Assessment team.
• I found the flaw in the new iPhone 4S.
• I went on yet another beep hunt.
• I explained why Jana Svrzo might not be a psychopath.
• I discovered that some people don't know why you shouldn't let your kids lick lollipops from strangers.
• I revealed the conspiracy against Lindsay Beyerstein.
• I did some math about GPS tracking.
• I joined the call for a national conversation on law enforcement.
• I wanted to emulate the DEA in a plan to stop auto accidents.
• Business Insider paid me a compliment.
• I'm still confused about the mortgage crisis.
• I owned the #1 and #2 Google search result for "Obama's left testicle".

Happy New Year everyone!

And this is what you can do about it. Make waves. Talk to people. Tell your congresscritters to vote against it.

If you want to know more, you can read more about SOPA at Wikipedia, you can see its progress at GovTrack, and you can find out more about your representatives at places like Project Vote Smart and OpenSecrets.

For example, mortgage originators were making bad loans to unqualified borrowers and then selling bundles of these loans as mortgage-backed securities to Fannie Mae, Freddie Mac, and a host of investment banks. The book emphasizes over and over that these loan originators had a poor incentive to produce high-quality (or at least honestly-described) mortgages because they knew they wouldn't be holding on to them. This is an obvious agency problem, and I couldn't understand from the book why the investors weren't on the lookout for it.

Yet about 2/3 of the way in, the authors mention that under the terms of the securitization agreement, the originators had to buy back all loans that were materially misrepresented and all loans where the borrower defaulted early in the loan's term. In other words, the purchasers had sought to protect themselves from agency risks by requiring the originators to shoulder substantial default risks. In that case, why didn't the originators pay more attention to the quality of the loans?

As it happens, according to the book, the loan portfolios were so toxic that the originators would have gone bankrupt if forced to buy them all back, which would have cut off the flow of new loans, so the investment banks didn't force them to take a loss. But that just raises more questions: Could threatening bankruptcy really have been the originators' plan for protecting themselves from the consequences of their poor loans? How did the investment banks not see that coming?

So far, when it comes right down to it, I've reached two conclusions:

(1) Unscrupulous sociopaths can make a lot of money in the financial markets, especial during the manic phase of an asset bubble.

(2) I've got to figure out how to get a piece of that.

Update: Not directly connected, but I've just noticed that Charles Mackay's Extraordinary Popular Delusions and the Madness of Crowds is available as a Kindle download for only $0.99. It's a classic work about asset price bubbles and other types of craziness. And it was published in 1841. If nothing else, spend the 99 cents (or just get it free here) to read the extraordinary story of the seventeenth century Dutch tulip bulb craze.