All Posts Tagged With: "economics"
Free Speech on Campus and Sham Economists
Free speech advocates on campus did a great job beating back the bureaucratic gulags that sought to censor faculty and University of Illinois employees from expressing political beliefs. President White sent out a University-wide email softly retracting the censorship attempts of the University’s Ethics Office.
One of my academic heroes is Stanley Fish. His only regrettable trait is being employed by the New York Times. Fish’s was formerly employed by the University of Illinois-Chicago and he spoke on campus a few years ago. His relationship with Illinois has led him to pay attention to our situation and to write about it in the New York Times.
Paul Krugman is Britney Spears. Just as Spears produces awful pop music, so too does Krugman produce awful, biased economic analysis. I will not pretend to be intimately familiar with the esoteric academic economic literature, but my instinct (and Prescott’s as well) is that Krugman’s contribution falls short of the incredible accomplishments that have earned the award in the past. Awareness of economies of scale and application of their principles to international economics seems like a trivial and logical step – not an innovation deserving of the award.
There is a zero percent chance that he would have won the Nobel Prize without being a prominent liberal columnist at the New York Times. I actually support attempts to popularize economics in mainstream media and believe that Krugman should be commended for doing so. However, the award is specifically given for a contribution to the field of economics, which I do not believe includes popularizing it. The Nobel Committee granted the award under the guise of his yawnable economic contributions:
By having integrated economies of scale into explicit general equilibrium models, Paul Krugman has deepened our understanding of the determinants of trade and the location of economic activity.
In a slightly technical post, I have criticized Krugman’s commitment to economic truth in the past. If you support Krugman’s winning of the award, you will find some ammo in Greg Mankiw’s post.
Yesterday’s Follies
Nobody likes the guy who predicts calamity, especially when he turns out to be right. Beginning in 2004, I began to predict that the stock market was overvalued and was set up for a sizable fall. I said there was too much debt amongst consumers. Read more…
Son of Why the World Is Not About to End
So, it’s Tuesday afternoon and the birds are singing outside my window as a chill September breeze slides over my arms. Cars on Springfield Avenue drive by full of gasoline that’s down to $3.50 per gallon and readily available. People all over town go to work as they do every day, the Dow was up 250 points, and no citizens on the sidewalks seem in the least bit panicked. Pissed, perhaps, but not a bit panicked.
For over seven years, I’ve been talking about the coming crisis in the financial markets. In the last year, Prescott joined me in this publicly, although he says (and I have no reason to discount him) that he had realized that there was going to be a problem around 2004 or so. The purpose of this article is to explain why this happened, why more government interference is going to be a disaster, and why this is a golden opportunity to not only make America stronger, but also freer as a nation and more equal as far as its citizens’ compensation goes.
A better bailout
A friend of mine spent a semester interning at the Center for Economic and Policy Research, an economic think tank in Washington, DC. She was convinced that Dean Baker is a brilliant economist, and because of my respect for her judgment, I often read his columns. Take a look at his latest, posted at Huff Po. Here’s a key element that may become part of the bailout plan:
How do we go about getting the banks in order? Almost every economist I know rejects the Paulson approach and argues instead for directly injecting capital into the banks. The taxpayers give them the money and then we own some, or all, of the bank. (That’s what Warren Buffet did with Goldman Sachs.)
The Bailout Debate
I’ve already stated here a couple times that I don’t fully understand what’s going on with the financial crisis, so I’ll try not to get too cocky in my commentary on it. But I will say that it seems to me that the people in charge of explaining this to the American people are doing a really crappy job of it. The media (at least, the cable news media) has been presenting the situation as a choice between two alternatives: (1) “bailout,” or (2) “no bailout.” Except that this doesn’t seem to be where the real debate is. As I understand it, the real issue is whether to add some combination of the following provisions to the current bailout plan:
- Creating an oversight board and some sort of judicial or administrative review.
- Taking an equity stake in institutions participating in the program to protect taxpayers.
- Limiting executive compensation.
- Tying the program to a second stimulus package.
- Forcing Treasury to renegotiate mortgages for homeowners once it buys them up, in order to stabilize the housing market.
There seems to be near-universal agreement on #1, even among the administration. The rest seem to be where the real debate lies. I’m not entirely clear on which of the above provisions are included in Dodd’s proposal (PDF), but for sure the first three are, I think #5 is, and I think #4 is not.
As far as I can evaluate these things, #1 strikes me as obviously necessary, #2 and #5 strike me as deal-breakers that Congress should force the administration to accept, and #3 and #4 strike me as good ideas to push for but not necessarily deal-breakers.
But again, I’m not going to pretend I know what I’m talking about. What is frustrating, however, is that if all I did was watch the news, I wouldn’t be able to explain even the parameters of the debate, let alone get a feel for where I stand. Obviously this is complicated stuff, and it’s difficult for anybody to explain it clearly, and it would be even more difficult to get Americans to pay close enough attention to understand things. But I’d feel better if I at least got the impression that these people were making an effort.
Anyway, here are a few sources that have been more useful to me than the TV: Paul Krugman, Calculated Risk, Greg Mankiw, Ezra Klein, and this post from Matthew Yglesias.
McCain vs. Obama on Tax & Economics
Thanks to Professor Kaplan of the Illinois Law School for sending this fairly easy to read and neutral summary of the various tax and economic policies (mostly tax) of McCain and Obama. It does a good job of displaying their differences side by side and discussing the potential impact of their positions. Will the differences between the candidates in tax and economic policies have an actual impact on the economy? I’m unsure of the degree to which campaign proposals translate into real world change. In other words, how much actual difference exists between the candidates?
On a somewhat unrelated note, I hear that some libertarians (Tom) wish for a McCain victbry simply on the basis of the gridlock that it would create. They favor gridlock because it will theoretically slow Congressional spending. I’m not sure that I agree with the prediction of gridlock. It seems that government, like corporations, will craftily find the loopholes and will spend regardless of the formal impediments.
Wandering the Economic Malaise
Are we in an economic crisis? There are many opinions on this subject, and unfortunately, many of them correspond to the commentator’s political opinions. Liberals are more likely to say that the economy is awful and in a state of ruins, implying that Bush is responsible and that a change of parties in the White House is needed. Conservatives are more likely to say that select stories about the economy are making it appear to be in a state of crisis, but that the overall market fundamentals are sound, conversely implying that a Republican White House can manage the economy.
But by placing some of the burden on the shareholders and bondholders of the big financial institutions, financial regulators have at least forced some discipline onto the system, making bankers and investors think twice before they once again head off to the races. By allowing firms that took excessive risks to fail, regulators also reduce the political pressure to overregulate the system in the aftermath of the crisis.
Columbia Economics Professor and Nobel Prize Winner, Joseph Stiglitz, has long been among the liberal economists (Paul Krugman, as well) who blame all the world’s ills on President Bush. I normally believe that Stiglitz has lost his sanity as he ages, but I appreciated some parts of his CNN article, “How to Prevent the Next Wall Street Crisis“:
Consenting adults should be given great freedom to do whatever they want, but that does not mean they should gamble with other people’s money. Some may worry that this may stifle innovation. But that may be a good thing considering the kind of innovation we had — attempting to subvert accounting and regulations.
There isn’t any recession. The latest figures show that we clearly were not in one as of midsummer, whether you use the rule-of-thumb definition – two consecutive quarters of GDP shrinkage – or the looser concept of a sustained and significant economic decline. The economy shrank marginally (-0.2%) in the fourth quarter of 2007, but otherwise it’s been growing steadily for years. In the most recent quarter it grew at a vigorous 3.3%, fueled not by government stimulus checks but by a strong rise in net exports. The OECD has just raised its forecast of U.S. growth for the full year from 1.2% to 1.8% – not blistering, but still the fastest growth of all the G-7 countries.
Nobody Agrees With McCain
Five former secretaries of state support talking to Iran, including current McCain adviser Henry Kissinger.
This is on the heels of Alan Greenspan saying he opposes McCain’s tax plan.
This came after Iraqi PM Maliki called for a timetable for withdrawal of US troops, which was then kinda-sorta backed by President Bush, though still opposed by McCain.
Oh, and that was after Bush sent a senior diplomat to Iran.
Which I guess makes both Kissinger and Bush naive and irresponsible, Greenspan an opponent of economic growth, and Bush somebody who would rather lose a war than lose an election (?).
Is this what they’re talking about when they call McCain a maverick? Because I’d just call it being on the conservative fringe of a bunch of major issues.
The Complexity of Economic Data
Many people declare with great certainty that the American economy and its participants are in shambles. Because Bush has been President since 2000, it has usually been Democrats who have taken the most pessimistic views of the economy. If a Democrat had been President since 2000, I have no doubt that Republicans would be equally pessimistic. The problem is that economic data is incredibly malleable, and therefore, incredibly difficult to draw firm conclusions from.
Persons aged 16 years and older who had no employment during the reference week, were available for work, except for temporary illness, and had made specific efforts to find employment sometime during the 4-week period ending with the reference week. Persons who were waiting to be recalled to a job from which they had been laid off need not have been looking for work to be classified as unemployed.
Critique on Obama’s Econ Plan
So, due to my lack of consistent internet access, I have been unable to put the post on a review of Obama’s economics plan. So instead, I am going to rely on someone to do it for me. This piece by Michael Boskin that ran in the Wall Street Journal seems to be a nice jumping off point for a conversation. The portion that I especially appreciated in this column, and I believe I have mentioned this idea in a comment somewhere, is the apparent dichotomy of Obama’s professed desire to “improve the United States standing in the world” and his stated plan to compel our trading partners to renegotiate international trade standards and treaties. Treaties which the United States, in many cases, were adamant supporters.
(SPECIAL NOTE TO BRIAN: This is how you do a short post that states disagreement with another person’s side and can lead to discussion, without throwing a hissy fit.)