All The Kewl Kids In Switzerland Still Drinking Expensive Wine

Two posts from Felix Salmon, here and here. Salmon:

Davos is great at throwing a couple of archbishops onto a panel with Niall Ferguson entitled “Restoring Faith in Economics” (geddit?) — but what I see none of in the programme is an indication that much if not all of the crisis was caused by the arrogance of Davos Man and by his unshakeable belief that the combined efforts of the world’s richest and most powerful individuals would surely make the world a better, rather than a worse, place. Excitement about the opportunities afforded by the Great Moderation (as the credit bubble was known before it burst), financial innovation, the rise of the bankers — Davos was ahead of the curve on all of them. And as the annual symposium of smug sermonizing became increasingly established, it served as a crucial reinforcement mechanism.

It’s not like CEOs and billionaires (and billionaire CEOs) need any more flattery and ego-stroking than they get on a daily basis, but Davos gives them more than that: it allows them to flatter and ego-stroke each other, in public. They invariably leave even more puffed-up and sure of themselves than when they arrived, when in hindsight what the world really needed was for these men (it’s still very much a boys’ club) to be shaken out of their complacency and to ask themselves some tough questions about whether in fact they were leading us off a precipice.

Now that it’s clear that many of them were leading us off that cliff, there’s still no sign of contrition, although you can be sure that a few fingers will be pointed at various past attendees who aren’t here to defend themselves. Is anybody here seriously examining the idea that Davos was institutionally responsible, at least in part, for the economic and financial catastrophe which befell the world in 2008? I’ll be on the lookout for that over the next few days. But I suspect that the preening potentates will be far too busy giving themselves the job of rebuilding the world to stop and ask where they went wrong in building the last one, and whether they might actually owe the rest of us a large collective apology.

And more Salmon:

One of the more annoying aspects of the Davos echo-chamber is the way in which people are constantly asking each other what “the mood” is this year; the result is an inchoate consensus that since the crisis is over, markets are up, and countries are growing again, there must be grounds for optimism and the kind of yes-we-can thinking in which the World Economic Form has always specialized.

I’m moving the other way, however, siding with the pessimists like Nouriel Roubini and Martin Wolf. They’re both convinced that the problems of southern Europe are both grave and intractable, although they differ in their prediction of what the consequences will be: Nouriel sees a good chance of the eurozone breaking up, while Martin sees the PIGS (Portugal, Italy, Greece, Spain) staying in the euro and ending up stuck in a long-term slump, able to neither cut interest rates nor devalue their currencies in an attempt to regain competitiveness. The only other option is an across-the-board cut in nominal wages, on the order of 30% or so. That’s something which is pretty much inconceivable, although Ireland seems to be trying to move in that direction.

Of course the one entity which will benefit from this is the Squid: Goldman Sachs seems to be taking the lead in trying to orchestrate a desperate and expensive sale of Greek debt to China. Expect more such desperate moves as the southern European macroeconomy continues to deteriorate; anybody who watched the world’s investment bankers swarming all over Domingo Cavallo in the final weeks of Argentina’s currency board will remember just how vulturish they can be in such situations.

Andrew Sullivan:

The theories of self-regulating markets that guaranteed no collapse turned out to be profoundly flawed – as most intelligent conservatives (Posner, Bartlett, et al.) have now observed. And the oh-so-clever mechanisms the bankers invented to give themselves more and more and more turned out – surprise! – to be mathematically flawed. And those of us who’d saved for retirement, paid our mortgages punctiliously, paid our taxes without armies of accountants to squeeze every last drop from Uncle Sam, and worked to build real things … we became their victims. That’s when the temptation for vengeance comes in. But when we then rescue them and burden ourselves with more debt, and they turn around and do all they can to restore the insanity that brought us all so low, and enrich themselves some more, we enter a new period.

I have no doubt there are many good men and women working in the banking sector. But the system is so corroded with vice, with selfishness, and, most importantly, with contempt for the common good, it needs real reform. I like what Obama has proposed and what the chairman of the Bank of England is now endorsing. I think the bailouts were necessary, just as I think the stimulus was necessary. But passing the toughest financial regulation bill we can at this point seems to me to be an urgent priority. The diffuse anger out there is a function of this deep sense of injustice – and it’s correct.

We need to make banking not just boring but as profitable as any other sector in the economy: no more and no less. We need to remove the mystique that led us to this morass. And we need to do it to rescue capitalism itself from its own hubris and naive belief that economics can operate in a vacuum without virtue.

Kevin Drum on Salmon’s second post:

For what it’s worth (and you can guess how much that is), I think I agree about Europe but I’m not quite so pessimistic about the U.S. The American economy seems unlikely to come roaring back to life or anything this year, and a midyear dip seems at least plausible, but overall I suspect we’re just going to see a long, hard slog to recovery, not a second disaster.

The wild card, though, is whether a disaster somewhere else will ripple across the globe and eventually touch off a disaster here. That’s certainly possible, and it’s part of the risk I think Tim Geithner took when he chose to rescue the banking system the way he did. It’s left the entire system in fragile shape, which is OK if nothing terrible happens in the next couple of years and everyone has time to earn their way back to full strength. But if something terrible does happen, we’re still not in very good shape to handle it. So let’s hope for a lack of disasters, OK?

Yaël Bizouati at Dealbreaker:

Everybody’s pissed off at everybody at the World Economic Forum. It’s not the love fest it used to be. Not even humanity-lover Bono is showing up this year.

Here’s a roundup:

Barclays President Robert Diamond would like to point out that everyone at the bank is “immensely proud” that the bank didn’t take any direct money from any government anywhere in the world. A word of acknowledgment would be much appreciated, thank you.

“I think that what goes unnoticed is that the banks which stayed strong and were well managed through this are angry at the banks (that) had poor management (and) were allowed to have poor management and ineffective regulations,” Diamond said.

Take that, all of you TARP-ed failures.

Meanwhile, George Soros -siding with his pal Roubini- is mad at Obama’s proposals, saying he’s not going far enough and the largest financial institutions may be “too big to fail” even under his plans to rein them in.

“Some of the banks will spin off investment banks that will still be too big to fail,” Soros said.

On the other hand, Deutsche Bank CEO Josef Ackermann said the Obama plan is BS as it will hinder global economic growth.

“If you have fragmented, small players in the financial sector, meeting the requirements of global trade and production, you will have a dichotomy which is not going to work and would not be for the benefit of the real economy at the end,” Ackermann said.

Vincent Fernando at Clusterstock:

Nouriel Roubini at Davos has announced in none too uncertain terms how he feels about Greece right now — it’s a lost cause that Europeans will be forced to back-stop.

CNBC:

“Greece is bankrupt,” Roubini told CNBC.com at WEF. “Look, they have to ask China to help them out.”

If the situation becomes dire enough the European Union will be forced to help bail Greece out because it’s such a threat to the monetary union, he said.

Gideon Rachman at Financial Times:

Jesus drove the money-changers out of the temple. Now the World Economic Forum has driven the wine-tasters out of Davos. In previous years, one of the highlights of the forum was a small but spectacular tasting of fine wines. But last year Klaus Schwab, the forum’s mastermind, decided that guzzling first-growth clarets was an inappropriate way of celebrating the global economic meltdown – and the wine-tasting was cancelled. We all hoped that this was a temporary abberation, but apparently not. The new Puritanism is here to stay – Davos wine-tastings are off the menu until further notice.

But you cannot deter dedicated wine-tasters that easily. Last night a wine-tasting was organised by former Davos employees who have formed a new organisation called the Wine Forum. It took place in a conference room in an airport hotel in Zurich at 6pm – a time and a location that was specifically designed to intercept delegates en route to Davos.

Jancis Robinson of the FT was mistress-of-ceremonies and the wines were provided by Krug, and Chateaus Cheval Blanc and Yquem. One of the malign results of globalisation is that these wines, which were once affordable to the likes of me, are now global brands cherished by the super-rich and so mesmerisingly expensive. I’ve never understood why the anti-globalisation movement doesn’t make more of this issue. The 1959 Chateau Yquem that we tasted last night now sells for about £1600 a bottle – each gulp that I took would have made a small contribution to paying off my mortgage. The Cheval Blanc 1998 is about £400 a bottle.

[…]

Under the circumstances, I feel remarkably perky. This morning I went to a really good session on geo-politics, which did what Davos does so well – bring together participants from all over the world; in this case from Beijing, Moscow, London, Cairo, Harvard, Afghanistan and Pakistan. Now I am off to a lunch with George Soros. This evening, I am meant to be moderating a dinner debate called “From Piracy to Pandemics – From Past to Present Dangers”, which seems to have been organised by somebody with a taste for alliteration. It says that the dress code is “smart casual”, but I think it would be more fun if the participants could be persuaded to come in fancy dress. Somebody should come dressed as a pirate; somebody else could come as a pig with flu. Now that the wine-tasting is no more, we need to think of new ways of enlivening Davos.

NYT’s Dealbook in Davos:

The Washington Post notes that while the industry and government leaders who descend on the Alpine village for the event have historically been confident about sharing their outlook on the future, they are far from reliable. The Post rounds up some of the the worst predictions by Davos attendees.

Among them, The Post says:

In 2001, Enron’s chief executive, Kenneth Lay, declared that his company was a “21st century corporation.” Enron filed for bankruptcy that December, and Mr. Lay was indicted for fraud in 2004 and found guilty in 2006.

In 2004, Bill Gates told the world “Two years from now, spam will be solved.” Enough said.

In 2008, former Treasury Secretary John Snow said that the United States recession would be ‘’short and shallow,” while Fred Bergsten, director of the Peter G. Peterson Institute for International Economics, declared: “It is inconceivable — repeat, inconceivable — to get a world recession.” They should think about starting their own stand-up routine.

The Atlantic’s Davos page

UPDATE:More Felix Salmon

Matthew Yglesias

Progress: We Still Don’t Understand How The Automatic Garage Door Opener Works

Robert Shiller in Financial Times:

Modern behavioural economics shows that there are distinct limits to people’s ability to understand and deal with complex instruments. They are often inattentive to details and fail even to read or understand the implications of the contracts they sign. Recently, this failure led many homebuyers to take on mortgages that were unsuitable for them, which later contributed to massive defaults.

But any effort to deal with these problems has to recognise that increased complexity offers potential rewards as well as risks. New products must have an interface with consumers that is simple enough to make them comprehensible, so that they will want these products and use them correctly. But the products themselves do not have to be simple.

The advance of civilisation has brought immense new complexity to the devices we use every day. A century ago, homes were little more than roofs, walls and floors. Now they have a variety of complex electronic devices, including automatic on-off lighting, communications and data processing devices. People do not need to understand the complexity of these devices, which have been engineered to be simple to operate.

Financial markets have in some ways shared in this growth in complexity, with electronic databases and trading systems. But the actual financial products have not advanced as much. We are still mostly investing in plain vanilla products such as shares in corporations or ordinary nominal bonds, products that have not changed fundamentally in centuries.

Why have financial products remained mostly so simple? I believe the problem is trust. People are much more likely to buy some new elec­tronic device such as a laptop than a sophisticated new financial product. People are more worried about hazards of financial products or the integrity of those who offer them.

James Kwak at Baseline Scenario:

The point of this metaphor is to convince you that, since houses and consumer devices like laptops have become immensely more complex in the last hundred years, financial products should as well – and the fact that they have not is a problem.

This is a perfect example of a misleading metaphor. No one today would want to live in a house from 100 years ago (not the house itself, but all the stuff in it, is what Shiller means), nor do we want to give up our laptops. Because most of our financial products were around 100 years ago, we must be missing out on all sorts of potential improvements. But nowhere does Shiller show – or even argue – that there is some underlying feature of financial products that makes them like technological products in this respect. In technology, for example, we have Moore’s Law – the observation that every 18 months (originally two years) the achievable density of transistors doubles – which implies that products can get smaller and cheaper. Shiller makes no equivalent claim for financial products. The point of our Democracy article was to argue that there is in fact no equivalent for financial products, because financial innovation is fundamentally different from technological innovation. You may not agree with us, but at least we argued the case, instead of relying on a metaphor.

I think metaphors are a great way to illustrate abstract concepts, especially to beginner audiences. I use them all the time. But their value is solely illustrative; they don’t ever prove a point. If you say A is like B, and you want to show that A has some attribute that B also has, you have to prove it without reference to B. A good example is Paddy Hirsch’s video comparing a CDO to a pyramid of champagne glasses; there, he walks you through why a CDO has the properties of a pyramid of champagne glasses, instead of simply asserting it.

Free Exchange at The Economist:

However one feels about financial innovation, it should be clear that it is fundamentally different from technological innovation. Technological innovation generally results in something that either demonstrably improves the way we do things (or enjoy things), or it reduces the cost of things we’re already doing or enjoying. Some financial innovations are like this. Most of the ones that are—like ATMs or online banking—are actually technological innovations.

Many other financial innovations aren’t really like this at all. They allow market participants to do things that they couldn’t previously do, but it’s often far from clear that this leads to any net increase in utility, and it certainly doesn’t seem to reduce the cost of finance overall.

Just to focus on consumers, I think it’s interesting to see how consumer product innovations have been different from those in consumer finance. Consumer technologies have largely been about making it ever easier to manage an increasingly large range of options. Even as products, like computers, cameras, appliances, and so on, have grown increasingly sophisticated, user interfaces have gotten simpler. Sitting here at my Mac, I can handle a remarkably large range of tasks and manage massive amounts of data in various forms, using little more than a mouse and the dock full of application icons at screenside.

Finance doesn’t work like that. It might be one thing if innovations were like the increasingly boggling array of wires and circuitboards inside an iPod, all of which serve to make it very simple to craft the perfect playlist or easily move through photos and videos using only an index finger, and which seem to get better and cheaper all the time. Instead, innovation is like those same wires and circuitboards dumped in front of consumers, who are then asked by a loan officer where he should start soldering. And at the end of it all, consumers aren’t sure what they’re getting and what they’re paying for it. To make it plainer still, when a consumer pays $300 for a new iPod, Apple makes money and the buyer is happy. When a consumer takes out a confusing loan or signs up for an account with overdraft fees that are applied when the bank juggles the times at which deposits and purchases are cleared, well, the banks make money, but buyers often feel bewildered or angry, or are unsure exactly what they’ll wind up paying.

Vincent Fernando at Clusterstock

Neil Collins:

There are examples of useful financial innovation – the cash machine and the credit card come to mind – but products which appear to reduce risk are not among them. Plain die-to-win protection is useful, simple and easy to understand, but has a thin profit margin, which is why the life offices would rather sell you an endowment policy, precipice bond or pension plan, products which have little to do with insurance. They are driven by the fees which can be extracted while putting the savers’ money through the mincing machine to construct the “product.”

Saving and investment is tricky, and it’s in the interests of the financial services industry to make it harder by adding complexity. For the ordinary punter, one rule should apply above all else: never buy a structured product.

UPDATE: Felix Salmon:

James Kwak has a great response to Robert Shiller’s FT op-ed about financial innovation. But his line at the end about how “for the sake of argument, I am willing to concede that these are useful innovations that would make people better off” has been misconstrued, and it’s worth pointing out that in fact they’re not useful innovations that would make people better off.

Why not? Mainly because, at heart, they’re all variations on the theme of doing-clever-things-with-as-yet-uninvented-derivatives. But that’s a theme which really shouldn’t have survived the financial crisis.

In 2003, Alan Greenspan famously said that ““what we have found over the years in the marketplace is that derivatives have been an extraordinarily useful vehicle to transfer risk from those who shouldn’t be taking it to those who are willing to and are capable of doing so.” But, as it turned out, they weren’t. Lots of people wanted to transfer risk, and precious few were genuinely willing and able to take it on: even hedge funds generally prided themselves on being lower-risk than the stock market as a whole.

The result was a system where derivatives were used to hide risks, and shunt them off, unseen, into the tails. A system where hidden risks turned out to be much more dangerous than if they’d all been out in the open all along.

And Salmon again:

Comment of the day comes from Chris:

“The person most willing to take on risk is the one unaware he is doing so. He charges no risk premium…

The resulting market equilibrium is that the guy who is unaware of the risk ends up loaded with it. Then the music stops.”

This is possibly a very beautiful and elegant explanation for the extreme profitability of investment banks. They charge their clients a lot of money to take risk off their hands, and then they transformed that risk, using sophisticated financial engineering, into instruments which didn’t, on their face, look risky at all, and which could easily be sold to risk-averse investors. Bingo, massive profits.

Financial complexity and innovation, on this view, are essentially tools of obfuscation. And it’s easy to hide risks when risk-averse investors want debt-like products which retain their face value: such instruments tend to have very low volatility, and so look and feel as though they’re low-risk, even if they’re full to bursting with enormous amounts of tail risk. The answer, as I’ve said many times in the past, is for risk-averse investors to be willing to take a small amount of explicit market risk, and to move towards safe equities (utilities and the like) and away from debt. Because if they go to an investment bank asking for safety, they’re likely to just get hidden risk in return.

Matthew Yglesias:

Conclusion: “Financial complexity and innovation, on this view, are essentially tools of obfuscation.” I don’t think we should say that financial innovation is “essentially” one thing or another. A lot of the financial innovation of the past thirty years was aimed at regulatory arbitrage. A lot was basically aimed at hiding the ball so as to better be able to mislead people (and in some cases the financial institutions themselves) about where risk lay. And it’s also true that if you look at shifts in the global economy over the long run, innovation has led to more efficient financial markets. It’s much easier than it was 150 years ago to find reasonable ways to finance moderately risky projects in capital poor areas of the world.

But I think the upshot of this isn’t that we need to be “against” financial innovation but that we need to be skeptical of the claim that any measure to reduce the pace of innovation is likely to bring economic disaster. We should try to stifle innovation aimed at exploiting loopholes in regulations or ripping people off. It’s pretty basic to see that there are good business opportunities in those fields and thus we should expect a lot of innovative activity to be aimed at exploiting those opportunities.

Megan McArdle:

But aren’t a lot of the most risk averse investors funds or insurance companies with limits on the kinds of assets they can invest in? I’m not sure we can fix this problem without knowing the answer to the question we’ve been asking for a year now:  why did the ratings agencies underestimate the tail risk, and is that reason fixable?

Arnold Kling:

What Felix omits in his short post is the unwilling risk taker known as the taxpayer. A lot of the trick of investment banking is to figure out a way to transfer risks to taxpayers. And the investment bankers have gotten really good at it, particularly in the last thirty years. That is why there are those of us on the right (Russ Roberts and myself, to name two) and those on the left (Simon Johnson and James Kwak,, to name two) who are skeptical of the incumbent regulators when they say that they can control moral hazard. Our view is that the moral hazard problem is much more profound than the regulators acknowledge.

Another really profound issue, which Salmon raises, is why so many people prefer debt-like contracts to equity-like shares in enterprises. If he were to read This Time is Different, by Carment M. Reinhart and Kenneth S. Rogoff (and perhaps he already has), Salmon would have even more reason to raise this issue.

My theory is that people have the illusion (and again, government policy can foster this illusion and sometimes make it come true) that they will not be victims of default. Every individual thinks, “Of course, if I see trouble coming, I’ll be able to get out (or be bailed out) before I take a loss.” When a default occurs, somebody will be left holding the bag. However, as individuals, none of us believes that that we are going to be the bagholder.

Ben Bernanke, He’s So Fine, He’s So Fine He Blows My Mind, Ben Bernanke! Ben Bernanke!

Phil Izzo at the WSJ:

Economists are nearly unanimous that Ben Bernanke should be reappointed to another term as Federal Reserve chairman, and they said there is a 71% chance that President Barack Obama will ask him to stay on, according to a survey.

Meanwhile, the majority of the economists The Wall Street Journal surveyed during the past few days said the recession that began in December 2007 is now over. Battling the downturn defined most of Mr. Bernanke’s term, which began in early 2006 and expires in January, and economists say his handling of the crisis has earned him four more years as Fed chief.

“He deserves a lot of credit for stabilizing the financial markets,” said Joseph Carson of AllianceBernstein. “Confidence in recovery would be damaged if he was not reappointed.”

The Journal surveyed 52 economists; 47 responded.

Free Exchange at The Economist:

Other economists are being careful to play it safe, pointing out the many shoes which might yet drop and noting that the severity of the recession might make forecasting unusually difficult. Those are fair points to make; while I’d say I agree with the the positive forecasts above, I’d also suggest that the margin of error is quite high. Much has gone right in recent months, but much may yet go wrong.

Vincent Fernando at Clusterstock

But what should Bernanke’s game plan (or exit strategy) be for all of this?

Randall Kroszner at Financial Times:

Leaving a financial crisis is like leaving an awkward social gathering: a good exit is essential. In 1936-37, the Federal Reserve made a colossal mistake in its “exit strategy”. This time round it is crucial that central banks get their timing right.

[…] The big challenge is for central banks to avoid deflation and provide the monetary accommodation to restore economic growth without igniting high inflation down the line. In the US, market-based measures of inflation compensation do not suggest market participants expect inflation to move to high levels in the next decade (see chart 2). However, late last year and early this year, markets worried that deflation could grip the US economy. The proliferation of new credit facilities, expanded swaps with other central banks, and reduction of the Federal funds rate target to nearly zero for an “extended period” helped mitigate the deflation fear. The Fed’s balance sheet grew more than two-and-a-half fold during 2008 to end the year above $2,300bn as many market participants borrowed through these facilities and central banks drew on their swap lines with the Fed (chart 3).

[…] As economies stabilise and recover, central banks will face the same challenge the Fed faced in the mid-1930s: when and how to reduce monetary accommodation and prevent the large accumulation of bank reserves on its balance sheet from being lent out, causing an inflationary expansion of money and credit. A fundamental misjudgment by the Fed was to assume that, as the economy revived, banks would manage liquidity exactly as they had prior to the banking crises earlier in the decade and hold only the legally required minimum. When the Fed sharply increased reserve requirements in 1936 and 1937 (see chart 1), banks responded by calling in loans to build a liquidity cushion above legal requirements, thereby sharply contracting money, credit and economic activity.

Just last autumn, Congress gave the Fed a new tool that will play a crucial role as it exits from its unusually accommodative monetary policy: the ability to pay interest on reserves. Previously, a recovery would mean more opportunities for banks to lend and so they would draw down non-interest-bearing reserves and expand credit and hence the money supply. Interest on reserves, however, can cut that logic short by providing incentives for banks to hold reserve balances rather than lend them out, as the Federal funds rate target rises. The Fed now has a greater control over the reserve choices of banks because it can raise the return on reserves relative to banks’ lending opportunities, and thereby better manage credit and money growth in a recovery. In addition, of course, the central bank can drain reserves directly from the system through reverse purchase agreements and the sale of long-term securities from its portfolio, among other means. The ability to pay interest on reserves also allows the Fed to offer term deposits to the banks, thereby committing the depositing bank to keep its reserves with the Fed for a specified period of time.

Tyler Cowen

Kevin Drum:

The basic idea here is simple: if the Fed raises the rate it pays on bank reserves, banks will park money at the Fed.  That reduces the amount of money they lend out.  Cut the rate and banks will pull their money out and find a better use for it.  Lending will increase.

Fine.  That makes sense and always has, as long as you trust the Fed to handle this particular monetary knob properly.  But what I still don’t get is why you’d turn this knob up during a crisis, as the Fed did last year.  That reduced bank lending at a time when credit had already dropped off a cliff and was threatening to choke off the economy completely.  Is there some triple bank shot (no pun intended) here that I’m not getting?  Did the Fed figure that banks just flatly weren’t going to loan out funds no matter what, so they might as well pay them interest as a backdoor way of recapitalizing them?  Or what?  I’m still confused.

And the last piece of Fed news, Daniel Indiviglio at The Atlantic:

As widely expected, the Federal Reserve Open Market Committee decided this week to leave the federal funds rate in the 0% to 0.25% range. And don’t expect that to change anytime soon. Its press release said:

“The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.”The Committee also isn’t too worried about inflation. It said:

“Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.
The prices of energy and other commodities have risen of late. However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time.”

I think that’s right, but I still worry that it might not have the political audacity to take the necessary action to keep inflation low once the economy really begins a full-fledged recovery.

Calculated Risk

UPDATE: Kevin Drum

David Rothkopf in Foreign Policy

UPDATE #2: More Drum

Matthew Yglesias

UPDATE #3: Bernanke is reappointed.

Calculated Risk

Kevin Drum

Matthew Yglesias

Brad DeLong

Simon Johnson