Russ Roberts tells a different story.
Russ Roberts tells a different story.
And so the debate about the state of modern macroeconomics continues. As the rhetoric escalates, perhaps it’s worth digging through the archives for real insight, instead. Here’s Robert Lucas in his 2003 keynote address to the History of Political Economy conference:
Over at The Atlantic, Richard Posner writes:
I am concerned with the fact that academic economists, when they become either public officials or public intellectuals (like Krugman), leave behind their academic scruples.
In a later paragraph, he expands on his theme, turning to:
I’ve been struck recently that as I talk to most economists, they think that the case for a further fiscal stimulus is pretty solid. At least that’s what I hear in the hallways and seminar rooms. But that’s not what I hear in the media; for some reason the most outspoken economists are the anti-stimulus folks. And so I did a short piece for Public Radio’s Marketplace yesterday on the need for more fiscal stimulus.
I thought it worth taking a closer look at the main arguments against the stimulus:
In an article headlined “The Man Who Crashed the World” Michael Lewis profiles Joe Cassano, the former head of A.I.G.’s Financial Products unit. Lewis interviewed employees at the beleaguered F.P. unit and writes that most believed that “if it hadn’t been for A.I.G. F.P. the subprime-mortgage machine might never have been built, and the financial crisis might never have happened.”
Violent crime in New York has decreased steadily even as the recession has deepened, further disproving the conventional notion that crime increases in recessions.
I was reading John Steinbeck‘s Cannery Row last night, and I was really struck by how the following passage speaks to the forces behind our current economic predicament: “It has always seemed strange to me,” said Doc. “The things we admire in men — kindness and generosity, openness, honesty, understanding, and feeling — are the concomitants of failure in our . . .
| You’re so frustrated by the stock market that you want to break something, so you insert a coin into this objet/vending machine, which slowly spins out a piece of china until it drops to the ground, shattering. But the market (like all complex human systems) is more like these sculptures by Michael Kontopoulos, which whack themselves into instability, teeter . . .
| “I think we will look back in 10 years’ time and say we should not have done this, but we did because we forgot the lessons of the past, and that that which is true in the 1930’s is true in 2010.” That’s Sen. Byron Dorgan (D.-North Dakota), from a 1999 Times article on the repeal of the Glass-Steagall . . .
| As the economic slowdown wallops the “world’s factory,” some people think China is like the Soviet Union in the 1980’s, or like Japan in the 1990’s. James Fallows has a more sobering comparison: America as it entered the Great Depression. If so, is the upcoming production of Das Kapital — The Musical China’s answer to The Cradle Will Rock? . . .
| When Stephen Colbert promised to lead an angry, pitchfork-wielding mob to A.I.G. headquarters last week, he was joking. The actual angry mob that stood outside A.I.G. headquarters yesterday chanting “shame on you” wasn’t. Nor are the literally bus-loads of protesters scheduled to visit A.I.G. executives’ homes in Connecticut this weekend. No wonder the company has issued a security memo . . .
| Say you’ve just bought a new suit to spruce yourself up on the job. The next morning, your boss calls you into his office, compliments you on your fashionable duds, and with a heavy heart, lays you off. To address this very situation, the Jos. A. Bank menswear chain is running a “Risk Free Suit” promotion. Buy a suit . . .
| During the boom economy, we took on historically unprecedented debt to finance our pursuit of the American Dream, all the while losing faith that we could achieve it. Now that the Wall Street party is over, we’re starting to dream anew. Vanity Fair contributing editor David Kamp has more, in an essay accompanied by some stunning photos of American . . .
Dear Secretary Geithner, I’ve been out of touch. Sorry. I spent the last month on grand jury duty, putting Manhattan’s poor minorities behind bars. I needed a little time to recover. As promised, this is the first in a series of friendly dispatches. Advice, if you will. Learned counsel. Wisdom from the streets (as opposed to “The Street,” where wisdom . . .
| Via Andrew Sullivan: romance novel sales are up — after generating $1.375 billion in revenue in 2007. Expect these numbers to rise, even as other areas of the entertainment industry suffer, because romance novels tend to do better in economic downturns. O.K., so if we’re spending the recession fighting off zombie banks, can we expect a big spike in . . .
| White House economic adviser Lawrence Summers recently summed up our economic trouble this way: “Greed gives way to fear. And this fear begets fear. That is the paradox at the heart of the financial crisis.” Daniel Gross sees the economy hunkering on a ledge, and he has one word of advice: “Jump!” [%comments]
Aaron Zelinsky is a Yale law school student with a knack for coming up with interesting ideas. Last year, I blogged about his proposal for fighting steroid use in sports if the governing bodies really cared. Now, on the Huffington Post, he has an interesting angle on how the federal government might stop the A.I.G. bonuses that have everyone so . . .
| When the owner of a translation agency asked his international acquaintances how the recession is treating them. In Latvia, there was sarcasm: “Everything’s just peachy. The government resigned last week. … Prices rise so fast you can actually see the difference from one month to another. I miss living in the U.S.” In Russia, there was bitterness: “I see . . .
At the end of their latest radio piece on the financial crisis, Alex Blumberg and Adam Davidson make a great point about uncertainty in the nationalization debate: Of course, if [Tim Geithner and the Obama administration] were planning to take over the banking system, they wouldn’t announce it beforehand. They’d probably say exactly what they’re saying right now, wait ’til . . .
Icelanders love taking insane risks. In 1973, when a volcanic eruption threatened to wipe out a town on the island of Heimaey, they bet they could stop the lava flow by shooting it with millions of gallons of frigid Icelandic sea water. Unbelievably, they won. Nobody in human history had beaten a volcano before, and nobody’s done it since. That’s . . .
Is the message of this Barclay’s ad: “The banking industry is going down the tubes anyway, bringing all aspects of society with it, so you might as well have fun on the way down”? (HT: Andrew Sullivan)
Dartmouth’s Eric Zitzewitz is one of my favorite co-authors, and a whiz at tracking financial markets. And when he mentioned to me last week that a close look at the options markets told an interesting tale of fear, I asked him to share his observations. Here goes. Quantifying the Nightmare Scenarios By Eric Zitzewitz A Guest Post There’s no shortage . . .
As the stock market continues to search for a bottom, it’s worth another look back at how we got here. Back in September, University of Chicago professors Douglas W. Diamond and Anil K. Kashyap explained for our readers the trouble with Lehman Brothers and A.I.G. Lehman’s trouble began with the collapse of the housing bubble. But where did that come . . .
When President Obama told Congress this week that his stimulus package wasn’t about helping banks but about helping people, he could have been talking about a former sound designer in Hollywood named Bob. Bob is bankrupt. He went bust in September, and this month he began a blog chronicling his own economic recovery. The U.S. might be too big to . . .
Our friend James Altucher, in an interview at Yahoo!’s Tech Ticker, talks about visiting Bernie Madoff and his son Mark back in early 2005 to pitch them his fund of funds: I had a fund of what’s called PIPE [private investment in public equity] hedge funds. And I went through the whole pitch. My returns were great, they were very . . .
A while back, I wrote about the Game Theorist blog, in which my friend Joshua Gans writes about his adventures as an economist-parent (or equally, as a parent-economist). Each role seems to teach him something about the other, and his passion for both is infectious. He has collected much of this material in his new book Parentonomics, which has recently . . .