Several readers sent me links to a Brad DeLong post which they took to be a rebuttal to a takedown I did of a recent Ezra Klein piece.
Since DeLong did not link to or mention my post, I doubt his piece had anything to do with mine. But his post is noteworthy for a completely different reason: it illustrates how economists have refused to learn much, if anything, from the crisis. And in some ways, I feel bad about taking DeLong to task on this. He’s been far more willing than the overwhelming majority of mainstream economists to admit how seriously he and the profession got things wrong. And yet he seems unwilling or unable to look hard at conventional thinking in the discipline and free himself of it. DeLong and his colleagues are proving Thomas Kuhn right (I confess to liking Max Planck’s formulation, “Science progresses funeral by funeral.”)
DeLong nevertheless puts up a straw man from Klein’s post that we addressed in our takedown. Klein argued that the crisis was “scary” and continued:
The complexity of the system far exceeded the capacity of the participants, experts and watchdogs. Even after the crisis happened, it was devilishly hard to understand what was going on.
To the extent it has been hard to figure out what happened (and I submit that the mechanisms that turned what would otherwise have been a contained subprime meltdown into a global financial crisis actually are not that hard to understand), it is because the perps and the regulators have made sure some of the key drivers have not been investigated and continue to be opaque and complex, which allows the financial services industry to continue looting. For instance, it is simply inexcusable that after the collapse of Bear Stearns that there was not a full bore coordinated effort among international regulators to get to the bottom of credit default swaps exposures (CDS were the reason Bear, a firm that most would have judged to be non-systemically important, was rescued).
But who is doing what to whom in the CDS market still continues to be a mystery, even though the AIG bailout made it clear that it would be government backstopped and hence is a matter of public interest. Indeed, one of the reasons presented by Angela Merkel, among others, for why Greek debt can’t be restructured is the bugaboo of the CDS exposures. They’ve now become a preferred vehicle for holding governments hostage, which server the big end of the banking industry just fine.
In general, the failure to have regulators to demand data from the major banks and do decent post mortems is a mind-boggling dereliction of duty. At a minimum, every bank that took money from the authorities should have been required, as UBS was, to bring in independent experts and produce a report of why they screwed up so badly that they wound up on life support. That wouldn’t be comprehensive, but it would have provided a foundation for further investigation (and cross checking the explanations would have been intriguing).
Back to DeLong. He takes up a spurious argument that Klein used, that someone has to have predicted how the crisis would unfold in considerable detail to get credit for getting it right, and that it is necessary to meet that standard to ward off future crises. This was Klein’s argument:
Some people managed to connect the right dots, in the right ways and at the right times, but not so many, and not through such reproducible methods, that it’s clear how we can make their success the norm.
We described why that was an unreasonably daunting standard (you just need to be able to project that trends in motion are going to produce very bad outcomes, and not the particular path they will take), and that there are measures that could be taken now that don’t require near magical degrees of foresight to reduce the risk of future blow-ups considerably. And in the bad old days, when regulators weren’t cowed by banks, they were willing to knock heads when leverage levels got out of line. In the 1970s, the Fed spoke to the major Wall Street players and told them to quit arranging leveraged takeovers, or There Would Be Consequences. In 1987, Treasury announced that it was considering taxing highly leveraged transactions as a warning shot across the industry’s bow (some have contended that that move was one of the triggers of the 1987 crash, but Robert Shiller’s research has disproven that belief).
But DeLong does not merely follow Klein’s spurious logic; he also raises the bar. He implies that someone had to be able to predict “where we are now” (which is not at all the same as seeing as of early 2007 that Things Were Going to End Badly, probably Really Badly). Huh? The objective of this exercise is to figure out how to substantially reduce the odds of the really awful event of a global financial meltdown, not to predict single precise endpoints at the end of a long sequence of decision and event nodes. So the goalposts have now been moved onto an entirely different playing field.
But his list of what he thought you had to see to anticipate where we are now gave me real pause. DeLong can’t even come up with a good tally of drivers in retrospect:
1. That a global savings glut and a period of low interest rates would produce a housing boom.
2. That the housing boom would turn into a housing bubble.
3. That the housing bubble would lead to a collapse of mortgage underwriting standards.
4. That risk management practices on Wall Street would have been nonexistent.
5. That the Federal Reserve would not be able to construct its usual firewall between finance and the real economy.
6. That the Federal Reserve would not feel itself empowered to take the emergency steps to stabilize demand needed during and in the immediate aftermath of the financial crisis.
7. That the incoming Obama administration would come out of the gate with too small an economic recovery package.
8. That politics would prevent the Obama administration from being able to take a second bite at the apple.
9. That the Obama administration would then give up on pushing the envelope of its powers to try to generate a strong recovery.
10. That the intellectual victory of Keynesian approaches on the level of reality–forecasting and accounting for the course of the Little Depression–would be accompanied by a non-intellectual defeat of Keynesian approaches on the level of politics.
On 1-3, we’ve debunked the global saving glut thesis on empirical grounds. First, the average global savings rate over the 24 years ending in 2008 was 23%. It rose in 2004 to 24.9%. and fell to 23% the following year. It seems a bit of a stretch to call a one-year blip a “global savings glut”. Second, credit growth in the US was well out of proportion to what can be explained even by the massive growth of foreign exchange reserves in China and other Asian trade partners.
The Bank of International Settlements provides further ammo in support of our view. The abstract of a May 2011 paper (hat tip Richard Smith) by Claudio Borio and Piti Disyatat (note that Borio, along with William White, was warning central bankers before 2003 of the dangers of the rise in global housing prices, so since Klein and DeLong seem to value prescience, they might pay heed to him):
Global current account imbalances have been at the forefront of policy debates over the past few years. Many observers have recently singled them out as a key factor contributing to the global financial crisis. Current account surpluses in several emerging market economies are said to have helped fuel the credit booms and risk-taking in the major advanced deficit countries at the core of the crisis, by putting significant downward pressure on world interest rates and/or by simply financing the booms in those countries (the “excess saving” view). We argue that this perspective on global imbalances bears reconsideration. We highlight two conceptual problems: (i) drawing inferences about a country’s cross-border financing activity based on observations of net capital flows; and (ii) explaining market interest rates through the saving-investment framework. We trace the shortcomings of this perspective to a failure to consider the distinguishing characteristics of a monetary economy. We conjecture that the main contributing factor to the financial crisis was not “excess saving” but the “excess elasticity” of the international monetary and financial system: the monetary and financial regimes in place failed to restrain the build-up of unsustainable credit and asset price booms (“financial imbalances”). Credit creation, a defining feature of a monetary economy, plays a key role in this story.
And in 1-3, DeLong also has the causality backwards: the fall in underwriting standard preceded and helped produce the bubble. It was the result of an ugly combination of the bad incentives produced by securitization and deregulation, turbo charged by the mortgage-industrial complex’s increasing clout in DC, which led to more subsidies and aggressive efforts to beat back every effort to promote more responsible behavior. The new Gretchen Morgenson/Josh Rosner book Reckless Endangerment chronicles in gory detail how the decline in standards and safeguards considerably antedate the bubble.
As to 4, that Wall Street has not much in way of risk management, that just proves one of my chief beefs about economists: their distaste for research, particularly the qualitative kind. Had DeLong and his ilk spoken to a few people who understand how these firms work, they could easily have disabused him of that notion. This discussion, for instance, is from Richard Bookstaber, author of A Demon of Our Own Design, who headed risk management at Morgan Stanley:
…the risk manager is always at a disadvantage when dealing with the trading desk.
First, the traders obviously know their market better than the risk manager can ever hope to. So if a concern gets elevated to the point of an us-versus-them debate with the traders on one side and the risk manager on the other, the traders will be able to run circles around most risk managers…
Second, for each blowup that occurs, there will be ten cases where there was a legitimate concern but nothing happened. That is, if measured based on the realized outcome, the odds are the risk manager will be wrong more often than he is right. So there is the risk of looking like the boy who cried wolf.
Another point which is not expressed in the set of conversations above is that in most large firms the risk manager makes himself too busy to really focus on risk management. If he lets himself get sucked into making the role look weighty, he will end up spending his time running an organization, worrying about having adequate face time with senior management, and elbowing his way into all the right meetings.
By the way, Bookstaber published that at the beginning of December 2007, so this is not a post crisis reassessment. And he didn’t include the fact that the staff and managers in risk management are less well paid than traders, so they have every reason to try to curry favor with them rather than be tough if they think they might be able to jump the fence.
Let’s go to 5, ” Federal Reserve would not be able to construct its usual firewall between finance and the real economy.” This isn’t clearly drafted, but I think he means that the monetary policy should be able to buffer the real economy effects of abrupt moves in the financial markets. But Keynes debunked that, although that has been excised from macroeconomics since its implications are disastrous to the equilibrium theories to which the economics profession has become addicted. He discussed that when liquidity preferences change (less politely, when investors freak out and run for safe havens) making money cheaper is not going to induce a shift in behavior. The Fed has done a ton more than that, but its creative measures now look an awful lot like pushing on a string.
As to 6, which argues the Fed should have tried to goose the economy, Keynes again argued otherwise (I know some readers hate the idea of stimulus, but put that aside, we are discussing the efficacy of various paths to that end). Businessmen won’t invest or hire more people just because monetary conditions are lax; they need to feel their is a realistic prospect that their risk-taking will bear fruit. I’ve never been happy with this, “Well if we can’t provide enough/any fiscal stimulus, let’s let the Fed do what it can” posture. Not only is this certain to be somewhere between minimally to not effective (save in boosting our export sector by depreciating the dollar, but we can’t go very far down that path without inducing protectionist responses), with the dollar as one of the preferred vehicles for carry trades, it has perverse effects on other economies (among other consequences…).
The rest of DeLong’s points are political rather than economic.
Even though I’m sure this was a throwaway post, it’s still disconcerting to seem someone as smart as DeLong opine confidently about the crisis yet go so wide of the mark.
Now since DeLong has aligned himself with Klein’s argument, it is all too easy to see them both as So Loyal to Team Dem that They Will Take a Bullet for Bad Causes. Klein, as we pointed out, has staunchly defended some of the worst warts in the Obama health care plan; DeLong, among other things, can be relied upon to protect Larry Summers’ back. In fact, a DeLong defense of a Summers Financial Times op-ed led to our first row conversation.
But I see a big difference between the two of them. Even though I question DeLong’s views, he seems in large measure to be a prisoner of the way the economics frames problems and its peculiar approach to what little the discipline does in the way of empirical research (this is a long-standing problem; Nobel Prize winner Vassily Leontief quit doing any kind of economic research out of his frustration on this very issue). And he is further disadvantaged by being on the wrong coast to have much interaction with the sort of bankers that played a role in the crisis. DeLong’s failings, in other words, are largely those of imagination.
It’s harder to imagine, by contrast, that Ezra Klein does not know better. His arguments are often so strained and specious that he can’t not recognize that they are exercises in porcine maquillage. And his reaction to Inside Job was a tell. The movie put corruption front and center as a cause of the crisis, and that seemed to evoke a visceral response from Klein, who resorted to a new version of the “whocouldanode” defense. As gregw571 wrote in the comments on Klein’s post:
Here’s the deal, Ezra, the world in which you averted your eyes to in “Inside Job” is the world you write about everyday.
The perverse incentives (groupthink, peer pressure, the tribalism of DC, tribalism of Wall Street, the revolving door, regulatory capture, the go along to get along, don’t burn sources, don’t make waves, do the bidding of Wall Street because an election is coming up, don’t have a transaction tax for fear of appearing to be anti-business or anti-Wall St., don’t regulate derivatives for fear of appearing to be anti-business or anti-Wall St.) they are in play in 2011 the way they were in 04, 05, 06, 07, 08, 2009, 2010. Ferguson described your world and you don’t like it…
DC is corrupt, the financial and cultural incentives are to get it wrong.
But in the end, differences in character may not make all that great a difference in outcomes. With the economics discipline in in the thrall of a dubious orthodoxy, we put ourselves at risk if we place our trust in them.
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I would paraphrase that as Medicine progresses funeral by funeral.
This is true of all disciplines, without exception, and throughout time.
There are exceptional individuals, generally outsiders. When they are not ignored, they end up worshiped for the wrong reasons. Linus Pauling comes to mind, as does Albert Einstein, as well as Yves Smith. But these people are very few in number, and invariably reviled, if not misunderstood generally.
What keeps all this in line, aka The Hope of the World, is that from time to time reality intervenes, sweeps out the old (funerals) & levels the field.
The exception is modern astronomy, where reality never intervenes and the most staggeringly absurd theories have been jerry-rigged over time. Economics will never be that bad.
On the other hand, who cares what the Sun is made of. Money is a necessity of life.
On the other hand Astrology is just another case of invisible hand thingy. Try over one hundred billion galaxy’s in the know universe, astrology does not take it *all* into account, nor does it try…why…ology, ism, thingy?
I’m happy to say I don’t know (evolving theory), rather than count on opines by those that comfort scared people…too easy to jerk around…cold reading et al.
BTW money is easy to live with out, but, with out the sun its all over, for all life. So it behooves us to understand it…eh.
Skippy…expand screen, use HD and think, what numbers are involved, who we think we are, possibility’s with in such numbers, how many stars with in an average galaxy, how many planets with in those stars, etc, etc…we are very small….very small…what are the past consequences of Humanity being so big in our heads…eh.
link: Deep Field.
http://www.youtube.com/watch?v=oAVjF_7ensg
There is also the “Merry Christmas Mr. Lawrence” version, where the best and brightest cancel each other out-kill each other off, leaving inferiors to politicize and manipulate consequences…look around at here and now.
“I confess to liking Max Planck’s formulation, “Science progresses funeral by funeral.””
Years ago I read about a psychologist who tested Planck’s doctrine, by examining whether the evidence showed that old scientists were more obstinate in sticking to their beliefs than young. He concluded that Planck was wrong.
It’s not just economics that gains from empirical research.
There is a difference between new ideas (in isolation) and new frameworks (methods for organizing information). Kuhn’s theory of scientific revolutions has good empirical support. Moreover, it does not have to do with age per se, but with having been trained in a certain framework. Presumably a newly minted would be as invested in a paradigm as someone in their 60s.
And of course Kuhn is describing a *trend*. There are always a few of the people trained in the old paradigm who are able to make the paradigm shift. But only a few.
Theory is not belief, observations reproduced is not belief, if any thing, belief has held a knife at sciences throat…why.
Skippy…the conjurer needs belief, with out it, only naked lust remains, serve me.
As with the original YS/EK thread, I want to start by stating I like Delong. I like Yves. It’s possible.
That said, I think there is less distance between the two of them than is made out here. Both agree that there are huge deficiencies in current economic theory. I’m not sure Delong is as much an apologist for Rubin/neo-liberal economics as Yves alleges – I hope not, but Yves is a) very smart b) been reading Delong longer and more closely than I, so I’ll take it as a working hypothesis. Let’s just say I hope she’s wrong – again, I cite the Krugman principle – if PK endorses/cites person A’s work, it can’t be too awful.
What I think Yves’ (trenchant) criticisms of Delong actually reflect are what we might call the “Leslie Groves/Robert Oppenheimer” divide. Yves is a financial professional who has had responsibility for running large financial organizations and making them work; Delong is an academic who, when confronted by a conundrum, is content to sit back and stare at it for years if need be waiting for an idea on how to approach it.
Yves’ mindset is that of a professional engineer, or a manager with an engineer’s approach: don’t just tell me what we don’t know; tell me, based on what we don’t know, what we *can* safely accomplish and, even more importantly, tell me what monitoring and control systems we need to build to manage the system uncertainty that is the result of what we don’t know. And if a system can’t be made to operate safely, we shouldn’t build it. Period.
I think Yves’ has a certain impatience with sloppy thinking that I’ve seen in almost all first rate minds and in all top-drawer organizations. I used to tell new co-workers at Cisco Systems (back in the early days, before it got bozo’d up by John Chambers) that they should always think before they spoke, because if they ever said one stupid thing, that would be their reputation for the rest of their career there. Not the nicest places to work but it goes with the territory.
I’m sure Yves’ would be the first to say she doesn’t need anyone to defend her. But I want to respond to what I think were unfair charges of ad hominem arguments made in her take down of Klein’s piece and now here. The people who make these allegation should understand the term better before hurling it about. Tartness and asperity does not equal ad hominem.
It’s obvious Yves’ doesn’t suffer fools gladly, and she isn’t shy about saying if she thinks someone is missing a point. She’s said it in a response to one of my posts on another topic (I still feel I was write, BTW, but I don’t think there was as much distance between our two positions as perhaps she did). In any case, I think RN’s comments about “pushy b(&#ch” were as contemptible as they were contemptuous. I’m not a “sensitive” guy and I cringe at extreme feminists, but to use such a gender-laden epithet only confirms what women for decades have complained about double standards in the workplace. If you don’t like her aggressive manner, just stick with equal opportunity put-downs and call her an “ass#$le” and leave it at that. And go to another blog.
Cheers,
Phichibe
Both agree that there are huge deficiencies in current economic theory.
After this false equivalence, your comment only gets more muddled. Are you an economist?
How is this relevant to economics? We’ve learned this lesson over and over and over going back to tulip bulbs. It’s always “different this time”, though it never is — except for the part of the bloodsuckers at the top becoming immensely richer at everyone else’s expense.
“Surgeons know nothing and do everything, internists know everything and do nothing and pathologists know everything a day late.”
Yves,
You are too nice to Delong. Just because he currently lives/works on the West coast does not excuse him from knowing the DC mentality. He has been there and continues to be a shill for the current imperialist corporatocracy/fascism or whatever morally vacuous tripe passes for economic and social control by the inherited rich.
I thought like you for a time that he and Thoma were salvageable but they continue to circle the wagons around an indefensible core. It will be interesting to see if the cohesion of economists continues of if one or more will publicly admit the major holes in their theories from excluding American imperialism. Where are the studies of the past 50 years of American systemic raping of the world’s natural and human resources? Where are the studies of the monopoly power of the energy, agriculture, as well as financial sectors? Just because reality isn’t written about by the anointed doesn’t mean it isn’t going on.
I’m nice to him only in relationship to Klein :-)
I could have been more savage, but DeLong actually has more than once expressed what amounts to dismay and befuddlement about the crisis, so I do want to acknowledge that, since economists so rarely admit error or display any humility. And he’s not dumb in the intellectual sense, so I can only conclude that the economics discipline has made him less intelligent than he would otherwise be.
DeLong has always been an establishment shill and there is no reason to read anything he says ever. Economics seems to produce nothing but toadies and opportunists these days. Perhaps it is the lure of mathematics for those who cannot do physics. Economic cheerleading keeps them from confronting personal failure, unemployment, etc.
“economics seems to produce nothing but toadies and opportunists these days. Perhaps it is the lure of mathematics for those who cannot do physics. ”
bingo.
my anecdote-based overgeneralization—the really smart, money-driven, quants go to quant shops. the really smart non-materialists go to basic research like theoretical physics/astronomy. the leftovers go into economic academia.
sorry if this offends, but it’s true.
There are some clever maths involved in theorizing. One can publish a paper, then continue to publish with various mathematical perturbations, thus gaining tenure and fame and all that.
but in the end it’s just math-turbation
I second your mild respect for DeLong’s humility Yves. He could act exactly like Steve Leisman kissing ass and guaranteeing himself a prime seat at the crumbling empire.
In that vein, you should probably mention his closing statement, “But I am not sure the story is complex, exactly…”
Yves, how long have you written persuasively and publicly on these very issues in counterpoint to Professor DeLong’s views. Surely he understands your intellectual tour de force on this debacle that has consumed half a decade. He is at least displaying wilful ignorance when he parses out such an anemic analysis without even acknowledging your processes and others who share your views. This is more than a mind hobbled by a profession with its head in the sand. You skewer ezra klein and yet you vacillate on the indictment of DeLong. Is he not at the University of California at Berkeley ? This is a powerhouse in the status quo of American politics and power. Berkeley is home to Lawrence Livermore Laboratory which is THE keeper of the flame for the Strategic Nuclear Hitting Power of the most powerful nationstate in the history of Mankind. I hope he will have the decency to address your views directly and tell us all how he can provide a cogent expression of rebuttal to your analysis.. This is the test of intellectual rigor and a measure of his adherence to the pursuit of clarity over addled confusion.
Ahem, I know you meant that to be kind but it’s a little over the top.
I’m not a card carrying economist, so DeLong feels no need to acknowledge me. He did ask for a review copy of ECONNED but that does not mean he read it.
Yves’s analysis of DeLong is essentially right. It matches mine, anyway.
Unlike Krugman, who had some epiphanies back in the late 90s and early 2000s and therefore basically sees clearly what’s going on, DeLong can read Krugman, respect Krugman, try too understand Krugman, and still not see that Krugman is right. This indicates that DeLong’s problem is that he is *stuck in a failed worldview*, unable to break out of it. DeLong keeps painfully correcting himself each time new facts come out, and yet still making the wrong predictions for next time. DeLong’s the sort who you can easily imagine will eventually come around.
In contrast, someone like Ezra Klein? Maybe he’s stuck in a failed worldview, but he has to deny SO much of reality to remain stuck in that failed worldview that it starts to seem implausible. Almost Republican levels of cognitive dissonance. Really *inexcusable* levels of denial of reality, ones where it’s hard to imagine how it’s maintained.
psycho,
it has been written about…William Blum was Philip Agee’s
cohort..
Yves: How many people understand Keynes? How many have read his work, in entirety? Not I, BTW. John Maynard’s good name gets thrown around a lot, often in denigration, but I don’t get the sense that too many people know much about his work.
I would suggest that the biggest problem with someone like DeLong is that he can’t be bothered to — and does not feel it’s necessary to — try to construct even a qualitative account of the crisis. I am not sure whether this is because he feels that he should be able to formalize anything he posits immediately, and that he should ignore everything he can’t formalize, or because he simply feels that models are prior to the world, but the methodological disrespect for the real world is one of the most dangerous habits (macro)economists have. (Never mind the additional fact that DeLong only really looks at US ’causes’, and that he ignores anything happening outside the borders, pretending economies are closed systems.)
…how does “capitalism” compete with nationalism??
Even though I question DeLong’s views, he seems in large measure to be a prisoner of the way the economics frames problems and its peculiar approach to what little the discipline does in the way of empirical research
If that were true, it would be willful ignorance, which is just as culpable as conscious lying.
The fact is that it’s impossible for system economists to do much empirical research because reality has a pro-democracy, anti-criminal bias, and therefore runs directly counter to the lies criminals like Delong are paid to propagate.
As for how specific a prediction needs to have been, that’s a particularly stupid and worthless lie. (If I were a bankster, I wouldn’t think I was getting my money’s worth for that one. Who could it possibly convince?)
All anyone ever needed and needs to know is that the finance sector is organized crime which serves zero constructive purpose and has no activity and no goal other than robbery and destruction. So it follows that only one prognostication will ever be correct: If we allow this crime network to continue to exist, it will rob us and corrupt what’s left of our society until we’re reduced to slavery. If we want the assault to end, we have to eradicate the crime network once and for all.
I rarely comment on DeLong’s blog, but he is reputed to delete critical comments. If so, that says a lot.
He censored some of mine – but only ones that disagreed with the tenor of his views.
Exactly. That’s why I gave up reading his site. I saw him censor posts on both left and right which were entirely reasonable, but didn’t agree with his views.
As I noted below, he also censored some perfectly reasonable comments of mine because I argued a different position than he did. I am actually flattered he censored me because it means my argument hit too close to home that DeLong would rather censor it than rebut it.
I don’t necessarily assume that Ivory Tower economists are presumptively “criminal.” I think it was easy for them to become intellectual prisoners of the narrow academic paradigm(s) in which they were trained, starting at 18, leaving them with little sense of reality outside this paradigmatic bubble. You see such narrow, one track minds in academia all the time, in all disciplines.
However, when reality dramatically and violently punctures this insular academic bubble and academic economists fail to reassess their fundamental assumptions, and begin proactively participating in what is obvious to everyone else is a massive cover up, then–that is, *now*– they *make* themselves criminal.
Things that may not have been clear before about the financial sector (and the government) from a distance *are* clear now, and the ongoing professions of befuddlement don’t pass the sniff test.
I’d sooner believe that Ezra Klein is befuddled than DeLong. I’d also sooner believe that Klein has pressures on him to participate in the cover up, whereas DeLong has the protections of academic tenure, which should give him the basic economic and professional security to ask pointed questions of the profession, the industry, and the government.
It is that such questions are not forthcoming even now that is so revealing of the level of corruption that we can apparently continue to expect–from all corners of the establishment, from every major American institution.
Or to put it another way, you think most economists are criminal because they don’t share your broadly humanistic world view.
I’m saying DeLong, et al are making themselves criminal to *even* those who fervently believed in the status of their 401K plans, “rock the vote,” and the basic legitimacy of the American government.
Which is pretty d*mn criminal.
hmmmnnn…
the well documented history of resource extraction over the last 50 years (U.S. imperialism) provides inescapable conclusion.
Yes, well we know Attempter has no audience in DeLong’s market. But if he keeps it up, DeLong won’t have an audience in DeLong’s market either.
Which is where it gets interesting.
He censored some perfectly reasonable comments of mine. It took me a while to figure out he was doing it, so I complained by making a comment in the section where he lays out his amorphous commenting “rules.” I objected to the subjective and cowardly manner in which he was censoring the debate in his comment section. He actually deleted that criticism as well, and e-mailed me. My tone was too strident, it seems. I pointed out that I actually spent a lot of time crafting my comment, and linked to a source backing up my point, and that I was not attacking anyone personally or acting “rude” as he alleged, but merely rebutting one of his points.
He can evidently dish it out but can’t take it. He’s an intellectual coward and intentionally obtuse sounds like a good description of him.
YS: “…the failure to have regulators to demand data from the major banks and do decent post mortems is a mind-boggling dereliction of duty.”
I would not call what happened in relation to the stress tests, dereliction of duty; I would label the activity by another name, treason.
Dereliction of duty occurs when orders are willfully disregarded and/or performed in a negligently and culpably inefficient manner.
The common — and only real defense — against these charges is ineptitude.
Clearly, there was nothing inept about the stress tests. Quite the contrary, by all reasonable expectations, they were carried out — by the parties involved — in an extremely rapid and efficient manner (they were a veritable fucking Blitzkrieg), and to the great (dis)credit of all the participants, every predetermined objective was met.
—————–
For the helluva it, I ask again, my favorite (rhetorical) question …what is treason?… knowing, there is no such thing in Washington.
If you are a Beltway insider, and you are not committing treasonous acts, it can only mean you are willfully, not following orders, you are therefore, in dereliction of duty, and your only practical defense, is ineptitude.
(Or that your a Marxist)
ReichthugliCON Texas Senator Phil Gramm
Snuck legislation into end of Clinton era work, making it illegal to audit banks…which is reason for “stress tests”
rather than..
We construct our philosophies, our ideaologies, our worldviews – and if you have been taught a certain viewpoint, or even worse, have come to it by your research and thinking…well, it is humiliating to acknowledge that you just weren’t as smart as you thought you were or open to preceiving reality as you should have been…I know.
I think the reason for the crisis is pretty simple – financial institution managers get huge bonuses for making loans and take no losses when the loans go bad. The theory of shareholder oversight and the reality of shareholder oversight are two differnt things.
Yves book “ECONned” begins,
“In theory, theory and practice are the same…
in practice, they are different..”
Kevin Phillips’ books, “American Dynasty” and “American Theocracy”, note that circa 2001, “derivatives markets” totaled $800 Billion…but by 2006, Robert Johnson, ex-Senate Banking Committee appointed chairperson, notes “derivatives markets” valued $600 Trillion…
Yves’s blog once asked, “Why did big banks WANT subprime mortgages”…
Follow the $$$$$
You can’t make this stuff up:
http://www.bankingtimes.co.uk/2011/06/25/ex-lehman-chief-risk-officer-appointed-world-bank-treasurer/
Ex-Lehman chief risk officer appointed World Bank treasurer
The World Bank has appointed Madelyn Antoncic as its new vice president and treasurer.
Ms Antoncic served as Lehman Brothers’ chief risk officer from 2002 to 2007 and following the collapse of the bank, stayed on for a year as managing director and senior advisor at the Lehman Estate, helping to maximise value for creditors.
Yves has already posted about this example of “failing up.” Maybe you missed it?
If you tell someone to please let someone else drive, you are drunk, you are not making any claim to understanding the order of events which may befall them (will they hit the mailbox at the end of the driveway? Will they swerve too hard coming around a curve? etc). Simply that the prospect for an unhappy ending is greatly increased, and changing course a little will decrease the prospects for disaster. Isn’t that the only meaningful measuring stick of prediction?
And at least empirically, isn’t the World Bank’s job to maximize value for creditors?
My God are you an arrogant B#*th.
“DeLong’s failings, in other words, are largely those of imagination.”
I mean, come ON.
Delong regularly publishes a “smackdown watch” pointing out his failures and weakness.
You arrogantly trash others never ever admitting you could ever be wrong about anything.
But the reality is you see things through your tunnel vision banking goggles and miss SO much.
Your snobbiness is just the disgusting frosting on the cake.
IMO
I agree with the gist of RN here, but not the specifics. If you read YS very carefully, you will find she is mostly correct in her assertions. Strike “mostly”. But the tone of it causes at least me and I think others to have to do the close reading, and come away with the opposite impression that YS may have intended.
One of the things about professional writing is that you really need to make the tone match the argument. Otherwise, readers will misconstrue you from time to time. This happened to me when I read “Econned”. What a great book! – lots of great stuff. But she bashes various people, among them Krugman for this and that minor transgression. Minor imo. Krugman is on record as having gotten a lot of the run-up to the crisis right. I complained in this space about her trashing of K. YS trashed my trashing. I looked, and, by George, she was right. Specifically she was right… On pages 32+ she constructs a very tight argument that poor K did/does not know his derriere from first base about oil futures. Fair enough. She even acknowledges that K got a this and that right. But the overall tone is that K and his evil models (or, actually his application of his models was stooopid.
And that’s the impression of her impression that I, the reader, was left with.
If I, the truly great writer, had been doing this I would have taken more pain to illustrate the very small level of K’s “failure” to correctly assess futures in jacking up the oil price, compared to the very large, because of it’s very unusual, success of his getting most of the crisis stuff right.
BTW, K has been consistently right imo in discussing recently the non-applicability of oil prices to general inflation. I bet that back in ’08 that was his real point anyway.
Having read all Krugman’s books, his editorials for years,
(New York Times subscription), and “ECONned”, and others including Kevin Phillips, Steglitz, etc, etc, Krugman missed
the oil bomb till recently-could have viewed his own paper’s
work by Gretchen Morgenson beginning in 2004 as illumination…
Morgenson documented speculators selling oil futures back and forth to one another, specifically to drive prices from Clinton era $1.00 per gallon, up to nearly $4.00 per gallon.
Geisst’s book, “Wall Street-A History”, documents this game
played in the late 1800’s…just a form of monopoly..
“But the overall tone is that K and his evil models (or, actually his application of his models was stooopid.”
I’m sorry, but it was stupid. I am in no way any kind of market expert and even I knew Krugman was wrong from channel surfing CNBC.
The guy has a singular agenda and that agenda is pumping up his investment portfolio. I’d like to know what that portfolio looked like when he was pimping the healthcare financing industry’s insurance bill, for example.
Detailed financial disclosure should be required for everyone with any kind of public platform.
What an ignorant comment.
Krugman doesn’t give a damn about his own money; he has plenty to live comfortably forever.
He’s mostly worried about the entire system of government being deliberately collapsed by the Republicans (making his money and tenured position rather worthless) and he’s been quite open about that.
It’s true he missed the oil price manipulation, but he wasn’t even paying much attention to it. And as usual, he was right when it comes to the big picture: oil prices were being driven straight up by fundamentals (and still are), oil prices have nothing to do with general inflation, and finally, as he’s said more than once, if you want to know whether current oil prices involve speculation, *look at the stockpiles*. The man really does keep it empirical, quite consistently.
RN,
DeLong is a tool, a bright tool — but a tool. I certainly understand the basis for the core of your attack on YS, but ad-homonym attacks does not mean the argument is false. And while YS’s comments where in the form of a logical critique of what is clearly a poor argument, yours are just plain nasty and childish. Your post dropped the IQ of this thread by an order of magnitude.
You should be ashamed, but I suspect you are not – sad really.
Come on Brad. Couldn’t you at least use your own name on this comment? — I mean RN….trying to nurse your reputation back to health, are we???
“Delong regularly publishes a “smackdown watch” pointing out his failures and weakness.”
Awwww….. Isn’t that special….
FOR YEARS Delong had commenters explicitly warning him, in detail, of where and how his cloistered little assumptions were silly. And he’s had some stellar commenters there, too — check out posts from guys like John Emerson and Bruce Wilder. (You’ll have to settle for the ones that Delong **didn’t** toss down the memory hole. For a guy who claims to be “grasping reality” — talk about smug! — he sure is zealous about purging opinions that don’t fit in with the theology.)
To my mind, there’s no better assay of how retarded Delong’s judgement really is than looking at whom he’s recommended and praised. That list includes Greenspan, Rubin, Summers, Geithner, and Bernanke. Hell, it was only around 2009-2010 that Delong **began** to suspect that perhaps Maestro Al wasn’t all that. It’s a safe bet that sometime around 2025 Delong will wheeze out some retrospective “I begin to wonder if perhaps Geithner was a little too close to the banking sector — maybe”.
Delong’s blog performs the public service of illustrating just how obtuse his “science” really is. And yeah, every now and then he scratches his chin and acknowledges that perhaps the dogma is wanting. So in that respect he’s a little more self-aware than the typical economist. I call that damning with faint praise.
By the way, RN’s tone doesn’t surprise me. In addition to the Emersons and Wilders, Delong’s comment section is infested with a host of believing Dem/Obama apologists, who like Delong are deeply impressed by — themselves. Before the 2010 election debacle, this crowd routinely condescended (at best) to anyone who suggested that perhaps Hope’n’Change wasn’t delivering what counted, and that there’d be consequences as a result. Nowadays they mostly whine about those mean old Republicans, and how they never play fair. Never mind that GOP tactics haven’t changed a jot since at least the days of Lee Atwater. Losers.
Yeah, the first time I saw one of his pieces was when I encountered this post. Needless to say, it did not do much for my opinion of Brad.
Yep. His praise of Greenspan was sickening.
The only thing your comment convinces me of is that you are a boor.
My, aren’t we being substantive today. Is this really what you would consider a “rebuttal”?
Unlike most academic economists, I take considerable care when I write to signal my degree of certainty in my argument. When I’m sticking my neck out, I let readers know that and typically invite comment and input.
That’s generally true and in the cases when it’s not, you readily admit uncertainty or correct yourself when called out on it. If you didn’t I’d have stopped reading the blog a long time ago.
The commentariat here does not let me get away with much :-)
But that’s actually very useful, it helps me debug arguments. Sometimes I’ve been in a hurry and done stuff on memory (and missed/omitted key elements in a bad way) or overreliant on sources who had blind spots or biases that was not aware of. That’s a biggie, it’s a classic problem with journalism “you are only as good as your sources.” But the onus is on me to be attentive to that risk.
Far better I think to believe the kind of capitalism we have is actually an Agency Problem stemming from our innate difficulty in wisely choosing between “self’ and ‘other’ interest. Knowing this suggests we put checks and mechanisms in place to countervail this disposition and that will be as inviolate to corruption as humanly possible. In plain terms we need a ‘Visible Hand’ not an ‘Invisible’ one.
Santa Claus, the tooth fairy, a practical economist, and an old drunk are walking down the street together when they simultaneously spot a hundred dollar bill. Who gets it? The old drunk, of course, the other three are mythological creatures.
—
In the 1970s, the Fed spoke to the major Wall Street players and told them to quit arranging leveraged takeovers, or There Would Be Consequences.
—
If my car is running rough, I expect my mechanic to open up the hood.
They guy down at Ayn Rand’s Tire and Lube would instead lecture me on the operational theory of the internal combustion engine in an effort to convince me that there can’t possibly be a problem.
Krugman calls it ‘determined ignorance’.
While Krugman will go into endless pontificating about how The car would run JUST FINE if you put more gas in it — it is running rough because you don’t have enough gas. Keep pouring on the gas, don’t worry that it is spilling on the ground STOP WORRYING ABOUT THE FACT THAT GAS IS FLAMMABLE – KEEP POURING ON THE GAS. The only reason the car isn’t running well is that you have lost faith in the MORE GAS THEORY. It’s all your fault!
Oh, the car exploded? Well it’s all your fault for not pouring on the gas FAST ENOUGH, if you had then the car would be running fine now.
Find me a period in which Republicans haven’t screamed for tax cuts.
Now, go back to the 90’s and find me a Krugman article calling for large deficits.
One of these is guilty of the ‘more gas is always good’ theory and it isn’t Krugman.
yea!
Krugs and Keynesianism are not without flaws but those who attack them with vigor are a) have an agenda, or b) don’t understand the issues.
You will probably be surprised that I agree relative to Rethuglicans. This is not a political issue the Krugman is an idiot independent of his politics. We all loose when we equate compitance with political party. There are plenty of idiots and corrupt thugs in both parties.
You’re still wrong about Krugman. You can read Keynes, or you can read the Modern Monetary Theorists — they present the situation in different ways, but they come to the same practical conclusion.
Government-issued debt denominated in government-issued currency isn’t real debt; it’s not like personal debt. (Note that the issued-own-currency is the key part here.) The only danger in issuing arbitrarily large amounts of it — apart from crazy Republicans inventing a fake default — is inflation. And moderate inflation is *desirable*, because deflation causes massive unemployment.
Brad is a very political, and wants to get back to Washington.
I agree with Yves.
Thoma is different. I like Mark, and respect his integrity.
Delong has two good qualities. He has tried to mount an offense against that horrible Johnny Yoo, architect of American torture, part of the Great Patriotic Spending Program who works at the same school as he, and recently he has been posting music videos of Grace Potter & the Nocturnals. It hasn’t occurred to Delong that elite schools, even public schools like Berkeley, collect elites from Washington. In this way Delong and Yoo are in the same candidate school.
Otherwise he is an officer of the Rubinistas, the disastrous cover of academic economics for lots that has gone wrong. He regularly defends the indefensible, Rubin, Summers, Bernanke, Geithner, Greenspam. It’s an example of don’t count on a man understanding a problem when his paycheck depends on not understanding it. A good understanding of the depression would reconsider the value of economics, a lowering of that leading to a lowering of economists’ clout and their pay. He works in an industry where costs are rising at a multiple of the (fictional) CPI in a bankrupt state.
WASHINGTON DC GOVERNMENT ECONOMIST HUNTING REGULATIONS
1. Any person with a valid Washington DC hunting license or a Federal Income Tax Return may harvest government economists.
2. Taking of economists with traps or deadfalls is permitted. The use of currency as bait is prohibited.
3. Killing of economists with a vehicle is prohibited. If one is accidentally struck, remove the dead economist to side of the road and proceed to the nearest car wash.
4. It is unlawful to chase, herd, or harvest economists from limousines, Mercedes Benz’s, the Metro, or Porsches.
5. It shall be unlawful to shout “research contract” or “I need a policy consultant” for the purpose of trapping economists.
6. It shall be unlawful to hunt economists within 100 feet of government buildings.
7. It shall be unlawful to use decision memos, draft legislation, conference reports, or RFP’s to attract economists.
8. It shall be unlawful to hunt economists within 200 feet of Senate or House hearing rooms, libraries, whorehouses, massage parlors, special interest group offices, bars, or strip joints.
9. If an economist is elected to government office, it shall be a felony to hunt, trap, or possess it. It will also be a shame.
10. Stuffed or mounted economists must have a DC Health Department inspection certificate for rabies and vermin.
11. It shall be illegal for a hunter to disguise as a reporter, drug dealer, pimp, female congressional aid, sheep, legislator, policy maker, bookie, lobbyist, or tax accountant for the purpose of hunting economists.
This is all about Cargo Cult Science.
Richard Feynman absolutely nails it in the following–outstanding– speech.
http://www.lhup.edu/~DSIMANEK/cargocul.htm
The next time you get into a spat with these pseudo-scientists, just simply refer readers to the speech. Plus, you’ll have the advantage of exploiting all economists’ inherent inferiority complex with regards to physics.
“Of course you ‘could have been a theoretical physicist’. But after witnessing just one Supply-Demand curve, you got ‘hooked on economics instead’. Yeah, OK.”
[This speech also pertains to the laughable trash studies this blog is constantly referring to in support of some dubious thesis….But no matter, it’s the perfect antidote to the Klein-Delong garbage.]
Sadly, this is one of the only coherent comments on this post.
It’s very interesting to read the Feynman essay after reading the comments here. Talk about scientific integrity of the commentariat! I haven’t see so much armchair psychology since the sh*tshow that was the Jungian Armchair Psychology Conference at the University of Hubris.
Talk about people who don’t want to investigate why the rat is running into the first door. They already *know*!
Of course, they actually know little to nothing about the rat, the maze or, I guess, anything for that matter, but don’t let that stop them from ascribing the motivation of greed and a ferret-like Glickian careerism to DeLong. What could go wrong??? Hey, the springs of conduct are subtle and…oh no one cares…why do I bother?
Anyway, there is a much simpler retort to DeLong:
***Saying that you could not have predicted everything that happened is NOT the same thing as saying that every choice you made had a rational basis in the facts at your disposal.***
What underlies DeLong’s assertion is, yes, here it is again, a FALSE DICHOTOMY.
Look, the price-to-rent ratio was completely abnormal in the housing bubble. Yes, at any given time, it is possible that something abnormal could actually be a “new normal.” No one can ever say so for sure. BUT DOES THAT MEAN THAT IS THE MOST LIKELY EXPLANATION? Of course not.
The response to the symptoms in the economy was woefully inadequate, and we should search for reasons for this result. Yves is onto something with incentives, I believe. I don’t think this is rocket science or hasn’t been suggested before.
Anyway, it’s far too easy to say Hoocoodanode. No one can predict the future, but I don’t like your odds if you jump off a 12-story building with no chute and only asphalt below.
Anonymous Jones: “Sadly, this is one of the only coherent comments on this post.”
You missed this one:
“Three or four drops of height have nothing to do with savageness.” — Marcel Duchamp
Best version, imo.
http://www.youtube.com/watch?v=2EwmN14dCpQ
Feynman against Brad “Cooter Burger” DeLong. Excellent.
Cooter Burger might say “The bonds aren’t in default; I have a study that proves it!”
Thanks for the link to Feynman. So refreshing. By this definition of freedom:
“So I have just one wish for you–the good luck to be somewhere where you are free to maintain the kind of integrity I have described, and where you do not feel forced by a need to maintain your position in the organization, or financial support, or so on, to lose your integrity. May you have that freedom.”
… no professional economists are free.
I’m an economist, and I don’t take umbrage with Yves’ words, because they are, for a large subset of economists, absolutely true. The exception are the business economists who work in the real world (my job) and do honest work for an honest wage. :-)
DeLong, Krugman, Friedman and their ilk richly deserve criticism: they have become apologists for the indefensible.
When someone asks me how the whole catastrophe developed, I simply refer them to Kipling’s God of the Copy Book Headings. Understand Kipling and the rest falls into place. It’s the sophisticates who truly believe that they can change human nature, who truly believe that they can make markets behave the way they want them to (markets are mechanisms: they find a new market-clearing price point in ways never expected, and the way to corporate bankruptcy is indeed paved with good intentions).
The problem isn’t your honest working economist, the guy who is crunching numbers and working to help companies avoid risk, to find arbitrage opportunities and to work out demographics, incomes and distributions to learn who is your customer: the problem is the academic economists who have never worked a day in their lives. They’re the ones who richly deserve criticism, especially when they build fantastical structures that have no bearing whatsoever to reality in this space-time continuum.
And yes, I have read Keynes. It’s an easy read, really, and he’s got a lot of good to say: as always, the idea has been perverted beyond recognition.
The exception are the business economists . . .
You are dreaming. WAKE UP. There is no exception. Economists as a whole failed us.
Economists as a whole are ignoring the moral and ethical failings of the profession and hoping (like the politicians and bankers) that it’ll all just blow over.
All variations of “no one could’ve foreseen the crisis” is a cop-out and all variations of “but we do god’s work” is an insult.
Do you think that economists that keep their head down and just do their job while everything falls apart around them are justified in proclaiming afterwards that they were not part of the problem?
You#re being way too simplistic. I don’t work out in the public, so desperate to be on TV that I’d say anything. While I will not go into details, suffice to say that if you’ve seen a recent downgrading of US sovereign ratings, you should be able to realize that there are people out there telling you what is going on (and yes, I had something to do with that).
Sure, we didn’t see the severity of the recession coming, but we saw it coming: there are forecasters out there with excellent track records, but you know what? They don’t crow about it. They don’t need to, because they have serious customer bases that pay them to do the job right. Success doesn’t necessarily mean being in the news and quoted in the papers: success in this business is having customers, meeting payrolls and expanding the business.
Are all lawyers shysters? Are all accountants swindlers?
Wishful thinking that everything is going to be fine after a devastating event is human. If you say that despite knowing that it won’t be, you’re a charlatan. I know that I haven’t pulled any punches or avoided telling our customers the awful truth, and that honesty has paid off. The awful truth is simple: we will be paying, in the industrialized West (and to varying degrees), for the sins of at least the last 30 years of making promises that can’t be paid for.
If you think balancing the budget is hard now, just wait for interest rates to rise. Employment is not going to recover until the dollar sinks further and industrial production expands strongly (and I’m not talking going to $1.50/€, but more like $2.50/€ to regain that kind of competitiveness). Economic growth won’t recover until the misallocation of capital is written off, i.e. the sins of cheap money and the resulting foolish decisions to invest (Xanadu, anyone?), and that will take years at best, if not a lost decade.
Margaret Thatcher was right: at some point you run out of other people’s money. What was true for socialism is just as true as permanent deficit spending and unfunded obligations. It’s going to be very, very ugly the next 5 years before it starts to dawn on people that you really, really can’t live your life leveraged to the max and unwilling and unable to save. You can’t take on massive debt and expect that you can still live the life of luxury.
A good economist will be able to quote Kipling’s God of the Copy Book Headings because he understands how the world works. The rest won’t even know who Kipling is, or think he writes a financial newsletter.
Thanks for the reply.
The failings of lawyers and accountants does not rise to a SYSTEMIC level.
Certainly there are some economists that are more ethical than others but “I do what I can” doesn’t cut it. Like climate change, the problem can not be tackled by individual action.
Economists who are best placed to assess the risks are also the ones that are most compromised. One can not expect that these economists will voluntarily jeopardize their career absent a previously established ethical standard – the violation of which can be MORE detrimental to their career. Thus, it is up to economists as a whole to hold their colleagues to an appropriate standard. Failure to do so means that all economists are tainted by the ethical failings of “a few bad apples.”
As the “engineers of the economy,” economists as a group understand economic/financial risk better than most. Shouldn’t that entail some duty to society? Doesn’t it make sense that economists provide some counterweight to the business execs who always want to play down risk, and, like lemmings, chase risk to the detriment of society?
And who can judge if an economist has failed in this duty better than other economists? Until economists themselves step up to this responsibility, all we will (continue to) get is pointing fingers.
A case in point is Financial Services reform. How many economists have spoken out about the inadequacies of reform? Resolution authority is a joke because TBTF institutions are likely to get into trouble as a group. And increasing capital levels, without real reform and real supervision is only pouring fuel on the fire. With a larger capital cushion, many bankers will gain a false sense of security and an increased appetite for risk.
PS
Fom the minutes of the Executive Committee Meeting on Jan 6, 2011, of the American Economics Association:
“After an extensive dis
cussion of the appropriate role of the Association
in matters concerning the ethical behavior of
economists, it was VOTED to create an ad hoc
committee to consider the Association’s exist-
ing disclosure and other ethical standards and
potential extensions to those standards.
”
And in their meeting of April 15, 2011:
Ashenfelter reported that the members of the Association’s new Ad Hoc Committee on Ethical
Standards for Economists had now been appointed (Chair Robert Solow, members Derek Bok,
David Card, William Nordhaus, and Nancy Stokey).
All economists should support these efforts. But if financial reform is any guide, we will just get meek reforms and can-kicking.
Oh give me a break.
Enron was the direct result of bean counters and lawyers being in control, and the whole mark-to-market fiasco, heavily pro-cyclical and extremely destructive, is both systematic and directly the result of bean counters and lawyers being in charge, fully ignorant of the damage that they cause. Sheesh.
Further, you’re saying if one egg goes bad, go out and kill all the chickens and that eggs are inherently bad. Sorry, the real world doesn’t work that way. You can’t blame all doctors for the quack; you can’t blame all policemen for the corrupt ones. It’s also a logical fallacy, the fallacy of composition: what may be true of one or more doesn’t mean it is true for all.
Further, there were and are economists who warned about the problems. But if you can’t make those who make the decisions listen to them – economists are well known in the financial services industry as dismal nay-sayers, pointing out problem after problem – then you put economists in the position of Cassandra.
What you really should be lamenting is the lack of business economists in most corporations: they were largely eliminated in the 1980s and 1990s as lawyers and bean counters decided that they knew better. We can see what has happened. Getting good grades in micro and macro when you were pursuing an accountant’s degree doesn’t make you an economist, but that certainly hasn’t prevented many from making very bad mistakes based on a fleeting and sub-standard understanding of economics.
And don’t expect a thing from the AEA, as they are mainstream academics dedicated to the status quo. More interesting ideas will come from the WEA, the recently created World Economic Association.
Enron was bad, but it didn’t threaten the world financial system. I’ve argued that ALL economists can help to prevent future potential financial meltdowns by enacting an ethical standard and that failure to do so would be a black mark on ALL economists. This does not entail “killing all all the chickens” (but thanks for the laughs). And your comment that: You can’t blame all doctors for the quack; you can’t blame all policemen for the corrupt ones actually supports my point – these professions have ethical standards so that a failure to meet these standards means expulsion of the “bad apples” so that the integrity of the group is protected.
Efforts to create an ethical standard for economists are likely to focus on the integrity of their research. “Inside Job” revealed that some economists were misrepresenting their affiliations and research sponsors (passing off paid research as an independent opinion). Absent an ethical standard, the public is likely to see the silence of the economics community as an acceptance of such transgressions.
The willingness to enact an ethical standard shows that economists are thinking of themselves as more of a professional group than an interest group. But this also leads to the question of whether a stronger ethical code is justified by recent events.
It can be reasonably argued, I think, that economists have a duty of care that becomes most acute – and most fraught – in matters of systemic risk. Generally an economist’s duty of care is owned to their employer but in matters of systemic risk, that duty conflicts with a more compelling one: that of protecting society from the disaster of a financial system breakdown. Yet this higher duty is also most diffuse – and therefore most easy to shirk. Who has standing to hold an economist to this duty? Who has the knowledge and understanding to see that it is applied fairly and properly? Answers to these questions put the economics community in the spotlight.
The dangers of a 2008-type meltdown were previously unrecognized by economists who insisted that the much ballyhooed “invisible hand” would right markets under just about any scenario. Thus, as a group, they recognized no larger obligation. Yet, professional economists and professionals with economics training were at the center of the storm – not just the *academics* that you complain of. I think its safe to say that most of the major actors and the people in positions of authority that they interface with (at TBTF banks and Regulators) had a substantial amount of economic training and many of them, and their colleagues, hold their affiliations with economic or economic-related associations in high regard.
Currently, Greenspan, who ignored or neglected to fully explore the warnings (even after it was made clear in FOMC discussions) can still call himself an economist in good standing. As can Madelyn Antoncic, Lehman’s former Chief Risk Officer (2002-2007) and a former economist for the Fed, who has just moved on to a prestigious position as World Bank Treasurer (see the link earlier in the thread) and Glen Hubbard, Dean at Columbia Business School, whose ethical lapses were brought to light by “Inside Job.” Not to mention economists at rating agencies, Freddie and Fannie, etc.
These examples are not only academic economist (political interests, mostly left-leaning) that you have take issue with, and include corporate economists (mostly working for TBTF banks, GSEs, Rating Agencies, the Fed, etc.). But wouldn’t it say something (good) for the profession, and stand as a future warning to others, if a strong-form ethical code resulted in barring those who have failed society from being members of economic societies and professional groups? At the same time, allowing such individuals to continue to be members in good standing makes it seem as though the profession condones the self-interest of their members over the greater good. In many cases, being denied membership in an economic group(s) may be the only censure or reproach that these people face (prosecutors don’t even want to bring cases when an understanding of complex issues like financial risk is important to the case). Although a relatively mild rebuke (compared to prosecution), action by an economics professional group(s) may be sufficient to block a promotion (“failing up”) or profiting from a debacle (e.g. consulting, speaking fees).
In conclusion, the recognition of the need for an ethical standard by AEA demonstrates their understanding that ALL economic practitioners have a stake in the ethical conduct of other economic practitioners. It is not enough to say that you, yourself, are a “good” economist while essentially remaining silent as colleagues in economics use their association and knowledge of economics in a devious and/or destructive manner. A natural and appropriate extension of any code would cover the actions of members that work on systemic issues.
John F. Opie — Thanks for your remarks.
I have a question: What exactly does a “working” economist like yourself do? Can you give a layman-level answer? The National Association of Realtors had credentialed economists who routinely debased their reputations, and were nothing more than marketing shills. But you’re not talking about that crowd. But even in the hands of honest and skilled practitioners, the predictive utility of economic theory seems a little, well, underwhelming. So I’m genuinely puzzled about who would pay for economic forecasting.
I hope I’m not offending; it’s an honest question, asked in good faith.
Put simply, supply-side economics, of seeing where the value added is actually created, rather than how it is used. I know that supply-side economics has a bad reputation (richly deserved because of some bone-headed policies that wrapped themselves in the name), but it really is nothing more than knowing where growth is happening, both at the industry level and regionally. Having a solid set of numbers means that companies can actually design products that meet the needs of these industries. Of course, it is also a lot of work.
Forecasting is a necessary evil. Y’all can laugh and point out how far everyone was off, but if you have ever worked in strategic planning, you know how difficult it is to make decisions based on little knowledge. You have forecasters out there who won’t tell you how they did their forecast and why the numbers really changed (because they blindly believe their models), and then you have forecasters who really understand their models, understand the numbers, and can give you a solid path to base your own forecasts and models. No one in the business believes that you’re going to be 100% accurate (shucks, 80% would be good) and good customers know the variances involved, but unless you are using forecasts for planning purposes, you are flying by the seat of your pants and betting the future of the company on naive expectations.
It’s also hard work. You have to be really good at econometrics, be able to construct models based on economic theory, but also in reality, be able to write well as well as program computer code. Then there are presentations to help explain what the hell is going on from your perspective, and new product development is a must if you are not going to become a one-product company.
First and foremost, though, you are providing services to the business community. We have over 1000 customers world-wide, largely financial and industrial companies. The work I do goes into active management of $15bn, directly, and we warned our investors about subprimes back in 2004.
Economists working in ANY kind of political office (and I worked in a trade association in DC for 3 years, they’re just as political as anyone else) may not start out as hacks, but they usually end up as one. It’s a hazard of the trade: they have been seduced to replace facts and numbers with ideology and spin.
And no, we did not see this recession coming the way it did. We did see it coming, but didn’t understand the severity facing the system (largely because none of us had read Yves’ book!). We’re learning how to do this better.
Some of y’all might think that economists are lovely folks to bash, and I probably won’t convince you otherwise. But there are exceptions, but I am firmly convinced that they are relatively few and far between, as the orthodoxy rules.
Add to that those calling themselves economists, but who are in reality lawyers and bean counters, and the trashing of the profession gets really easy when those making economic policy have no idea of what they are doing because they are incapable of thinking things through to their logical conclusions and don’t really understand market mechanisms.
Then again, there are plenty of economists who can’t do that as well. But cut those of us out there who are doing the real work some slack and don’t put us into the barrel of shark bait.
Or are all lawyers ambulance chasers? Are all accountants swindlers and cheats?
Completely nuts.
Krugman’s been a better source of information for a businessman than any “business economist”. “Business economists” are generally poor because they never look beyond their narrow field to see the possibility of change outside their very narrow field; there’s a reason Krugman’s blog is “Economics *and Politics*”.
You may have read Keynes, but you clearly didn’t understand his writing. You actually think Thatcher was right… shows you don’t understand money at all. You think the downgrading of US debt by a group of *already discredited* ratings agencies demonstrates anything more than a political act… you are living in a tiny little bubble.
And honestly, describing supply-side economics as “seeing where value is created”?… that isn’t economics, this is just industrial sector analysis. You admit yourself that you didn’t see the recession coming.
*AND KRUGMAN DID*. You should actually pay attention to Krugman. I suggest starting with his early, 2004 work.
Otto,
We all see where the “Free market regulating itself” has taken economics. You must not study history=William Blum’s,
“Killing Hope”..or Perkins’, “Confessions Of An Economic Hit Man”…
Those of us who studied September 11th (1973) expected this
to be turned upon Americans…
All one had to do, was track deregulatory legislation during Bushit..and arrange finances accordingly. We did, but so many around us had no idea…some still don’t.
Simply blabbing that Keynes was a no-good doesn’t cut it with me. I like him. He had the temerity to broadcast that money was a catalyst that could be used for the common good. He was smart enough to see that money embedded the potential to be used wisely to order us all around to do stuff to safeguard our species and planet’s survival. Clearly trying to carry on pretending that the Invisible Hand is the best self-organising device ever doesn’t cut it any more after two severe recessions in eighty years. A capitalist Agency Problem exists and we need to deal with it promptly and not bury our heads in dubious Neo-Classical economic theory.
Keynes is spinning in his grave over the illogical twaddle that is ascribed to him.
The authors begin by re-examining utility theory in order to establish a stable foundation to their work in risk quantification and a markets hypothesis.
This fresh perspective offers a truly heterodox methodology, abandoning the assumptions economic and financial theory have depended on for decades. Introducing the updated utility theory into post modern portfolio theory has enabled the authors to demonstrate ex ante efficiency, rather than ex post optimization.
The current financial crisis, as well as historical ones, could have been avoided if market participants had a better theoretical framework from which to operate. This work offers such a framework with the guiding principle that the inherent uncertainty of markets cannot be modeled away with convenient assumptions.
http://amzn.com/1460933788
Come on folks,
the “current crisis” was the offspring of corporate-lobbyist dictated deregulatory legislation..it was easy enough to follow that many of us protected ourselves…
even though we couldn’t protect others…
It’s rather amusing that economists, who work in a field where result reproducibility and predictability are not much better than in astrology, demand such impossible standards. Both Quantum mechanics and Chaos theory lead one to believe that the absolute best one can expect of a future (say 1000 years in the future (-:)) theory of economics would be the ability to make good probabilistic estimates of potential outcomes. If P(everything will be hunky dory) is .01% and P(there is a really big tsunami about to hit the world economy) = .85%+, then I think that is predictability of a very high order. I think a number of qualified people got and published (or profited by) those results in the 2003-2007 period.
..regardles of “predictability of future economics”…
computers will be running it…
I am more sympathetic but not necessarily pleased. It is more complicated than housing. We have been conducting a neolibral experiment of deregulation and free markets. Paraphrasing Keynes, the deregulated markets of men acting in their self-interest can stay irrational longer than we can stay solvent.
“the deregulated markets of men acting in their self-interest can stay irrational longer than we can stay solvent..”
here here..
“Some people managed to connect the right dots, in the right ways and at the right times, but not so many, and not through such reproducible methods, that it’s clear how we can make their success the norm.”
One word: Minsky.
I have stayed away from DeLong for his mushiness and Klein for his need to continue to whore for the Washington Post, a third rate rag, just like the WSJ. Keynes is tough to read and grasp, I don’t care what anybody else says, partly because of the language and the circumstances of his times (1920 and 30s), but his differences and condescension toward Hicks and similar. Here is a man trying to construct high theory from micro-economics, not easy.
Your writing and language however elicit the response, “whew” and some admiration
Personally, I think we should make an Economics Game Program for economists to play. It would be the kind that is web based and all economists can log on to and run virtual economies. The winner is the one that builds Nirvana.
Actually, there should be two game programs since neoclassicals and New Keynesians don’t play well together. So there should be a “saltwater” pool and a “freshwater” pool. This way they can play by the rules they were taught and won’t be disadvantaged by things working in an unexpected way. Let’s be fair, shall we?
This way we can keep them busy and out of our hair. A Nobel prize can be given to the winner each year. Steve Liesman, whom is a reporter, not an economist, can do the sound effects.
Then we could re-deploy their salaries to filling potholes or tax cuts, depending on which group we get the savings from.
“Science progresses funeral by funeral.”
Oh and an epitaph for good measure…
‘Here lies Brad DeLong: Dinosaur, Functionary, Naval-Gazer. May he rest in peace.’
Yves,
A re-reading of your April 2008 ‘conversation’ with DeLong reads SO well, I’m surprised DeLong would ever dare to debate/argue with you again!
Yves,
I think there was a ‘savings glut’ in the US. And I think it did contribute to both the stock market bubble and the housing bubble.
Here’s the thing though. It was the Clinton Administration’s fault that this glut occurred. And who was in that Administration? Why Mr. DeLong, of course.
It was his and his colleagues ineptitude that led to the glut. They thought — perversely and contrary to all historical/empirical evidence — that running a government surplus would increase saving. It didn’t. It led to a savings glut — just like it always has in history.
Randy Wray ran a piece on this a while back. He termed these policies the ‘perfect fiscal storm’ and contends — rightly, I think — that they played an enormous role in the crisis:
http://neweconomicperspectives.blogspot.com/2011/06/recent-usa-sectoral-balances-goldilocks.html
DeLong himself was an unwitting perp in this whole mess. That needs to be front and center anytime you argue with him. Because I understand he has a shaky ego as shown by his moderation policies. So you can bet he reads your posts about him even if he pretends to ignore them.
I have a slightly different take. The savings glut was in China. Savings are simply funds to be lent looking for returns. We had a debt glut from borrowing from China’s savings glut so we could buy more products creating 10% growth in China and even more savings to recycle. Globalization has made traditional thinking complex. The fact that the products were American made in China makes no difference. I remember Greenspan fussing over a possible market distortion if there was an American savings glut, so he destroyed the economy.
Rather embarrassingly I have just completely misunderstood the word ‘glut’. Sorry about that. Late night. But that’s no excuse.
Anyway, the above narrative stands. DeLong and the Clinton Administration bear a great deal of responsibility for the savings DEFICIT in the US that fueled private sector borrowing and thus the crash.
As for the idea that the trade deficit caused the build up of debt, I think it’s more likely that the causality is the opposite: the build up in private sector debt led to a much higher trade deficit (think about it, people borrow money PRIOR to purchasing Chinese goods — banks extend credit, THEN the people buy the plastic dolls or whatever).
I reckon it was the Clinton government surpluses that pushed people toward private borrowing in the first place. This led to debt bubbles and this in turn led to the Chinese borrowing.
I thought his penis did that?
Kline sucks
DeLong sucks – well, maybe not so much, but definitely
Krugman sucks
Watching the commentariat here is perhaps watching the formation of a new physical phenomenon: As call-em-out blogs become more successful they all reveal themselves to be analogs of ZH.
And I’m part of it. Yikes.
Actually, I don’t think that’s what’s happening.
I regularly come down very hard on people who are wrong in way that matters from a policy standpoint (it’s astonishing when you parse it, but the overwhelming majority are defenses of the bailouts, not the weak form of Something Had to be Done, but the strong form of What We Did Was Necessary and We Really Had No Choice, when there were lots of other alternatives besides Doing Nothing). Targets that have been dealt with at least as harshly as Klein and DeLong include Geithner, Obama, John Walsh, Tom Miller, Paul Jackson of Housing Wire, Joe Nocera (on bad days). Gretchen Morgenson (ditto), William Cohan, Charles Calomiris (winner of the Frederic Mishkin Iceland Prize for Intellectual Integrity). We’ve gotten either no or weak complaints about our take no prisoners style on those posts.
But this thread devolved big time with a fair number of people protesting at my tone and accusing me of ad hominem attacks, bitchiness,, etc. (sorry, logical but acid is not ad hominem).
So this appears to be the result of tangling with the Dem Nice Police.
An e-mail from Mark Ames (of Exiled fame):
It’s just more depressing proof that the liberals/progressives are not serious about changing things, and barely worthy of anyone’s time. Your time, that is.
Anyone at this point who’s more worried about maintaining the high school civics class rules of etiquette than about working and debating these problems through in a serious and merciless way should shut the fuck up and go comment on some site for aspiring caddies or chamber maids. This is all very serious stuff, these are debates that essentially decide how much misery and pain is spread about, or reined in; how long people will live, and how much opportunity they might have to make something of this life or be crushed without hope of having a chance. And these progressive comment-gnomes are more concerned with hurting Ezra’s and Brad’s feelers? Agh.
The basic fundamental problem–what scares these rotted progressives–is the possibility that everyone might not be friends at the end of the day. That means more to cprrupt frauds than anything. So really, this focus on etiquette over existential debate shows a complete lack of seriousness–they should get the fuck out of the debate and go back to some activity more suited to their tastes–mountain biking or blogging about food or whatever it is these “progressives” really care about.
You’re challenging power and the monopolization of life; they’re upset by your manners? Are you sure you want to grant these worthless organ grinders access to commenting?
+1
I love the phrase “rotted progressives”, because that captures their situation perfectly: zombie socialists. They don’t realize that they are dead.
Yves,
Re: “…the failure to have regulators to demand data from the major banks….”
Am I to understand that the FDIC is ignorant of, say, BofA’s CDS exposure to PIIGS sovereign debt?
TYIA
One of the myths we have is that academia is a bastion of free and radical thought. It is, in fact, a purveyor of the status quo. Consider its funding: public money, corporations, rich sugar daddies. Or its hierarchical structure. One does not establish a career there, achieve tenure, get promoted by rattling cages and rocking boats. By the time, someone has the stature and security to do so they don’t because they have spent their career not doing it, they have been indoctrinated not to do it.
Now, of course, academia is a social system. It isn’t completely homogenous. There will always be outliers. But look at economics. Delong and Krugman are about as far left as the academic mainstream goes in economics. It’s why I call them Establishment liberals. There are only a handful of liberal economists that are out there beyond them, Jamie Galbraith and Dean Baker, for example. But even among these non-mainstream liberals, none make kleptocracy their central theme, and almost none even mention it at all. As I often say here, kleptocracy is the fundamental political and economic reality of our times. It is not in the system. It is the system, and not just here but every major economic bloc: China, Europe, the emerging markets. Each has its own version. Yet virtually no one in economics will grapple with kleptocracy or treat it as the core concept it is.
I think this is why we get frustrated by even the economists who saw, Delong notwithstanding, the housing bubble and the meltdown coming. These weren’t impersonal events lacking any agency. They didn’t just happen. They were looting and theft committed by looters and thieves. This is not a regulatory problem but a criminal one. It can not be solved by reform or a “what Obama needs to do”. Obama and the rest of the political Establishment are in on the heists. Even among the non-mainstream liberal economists there is a pretend quality to their writing, that both the political and economic systems are still fundamentally sound, that the meltdown was a failure of capitalism but not the failure of capitalism.
I think there is a willingness among some here to take an analysis and follow wherever it leads, but I see no such willingness among any economist. There is always some point where they just stop. For Krugman, it is anything that poses a fundamental challenge to the Establishment to which he belongs. For most, it is understanding the political dimension and its impact on economics, not just policymaking but its legislating as well. And as I said, kleptocracy and the future of capitalism are for virtually all of them taboos.
Hugh:
This is what happens to countries/empires/civilizations which reach an apex. They’ve been successful for so long, that nobody in the establishment even believes in things such as crime or corruption, even though the masses can recognize it easily.
It simply doesn’t enter into their heads that all of these banks, the people in them are literally criminals who don’t give a care about anyone. They aren’t capable of processing that.
America is finished, man. It’s too obvious to even discuss anymore.
“As I often say here, kleptocracy is the fundamental political and economic reality of our times. It is not in the system. It is the system, and not just here but every major economic bloc: China, Europe, the emerging markets. Each has its own version. Yet virtually no one in economics will grapple with kleptocracy or treat it as the core concept it is. ”
If I had to name the central persistent flaw in Delong’s worldview (and by extension, that of practically all economists), it’s his almost willful neglect of POWER relations. Granted, they’re impossible to quantify — but that doesn’t make them any less real. In fact, they’re central: It’s institutions and traditions and social relations that are the foundations of commerce, and most emphatically NOT the other way around.
So Delong is consistently blindsided when credentialed scutboys like Geithner, Summers, etc., do things that don’t align with the public good. You’d think that after the half-dozenth time he’d begin to wonder about who is buddies really are, and who and what they’re really working for. But Delong usually only gets to that epiphany years after it’s been obvious to the rest of the world.
Economists dont believe in power.
Krugman has actually described as criminal what you (accurately) describe as criminal. He has specifically analyzed (back in 2004, in _The Great Unravelling_) the essentially revolutionary nature of the Republican Party, and the essentially “What, me worry” nature of the Democratic establishment in reaction to that. He does consider inequality to be of crucial importance.
I think he doesn’t push this stuff in his columns for political reasons. Overton Window stuff. With his NYT column, he’s trying to get ideas across to people who simply wouldn’t listen to Yves. And he’s *still* perceived as “crazy left”. (I haven’t seen him disagree with Jamie Galbraith since 2000, just to make an example here. He’s more left than you think he is and more anti-establishment than you think he is. He wasn’t always, and he admits that.)
Academia allows for freedom of thought. To some extent. But it sure doesn’t guarantee it. The academics who do challenge the system *are* outliers, as you say. But this isn’t an indictment of academia! Because look at other fields, such as business: those who challenge the system in other fields are not outliers, they are *non-existent*, they are eliminated, they are crushed. And that is what academic freedom exists for: to make sure that the outliers are allowed to survive.
Of course the Republicans are trying to destroy academic freedom, too.
Yves,
Unlike the majority who post here, I am an economics and financial world ignoramus. Reading you, however, is like getting a useful degree in both (ditto Bill Black’s site). I do understand words and their power. Your response to Klein on WaPo under your greg??? moniker had moral force. So does your stuff here, and that rarity drives me back here day after day.
Thank you.
I think that you are seeing agreement with Klein when there is none.
I read it, and thought he was being sarcastic.
He rattles off 10 things, and says “hoocoocanode”. and then ends with, “But I am not sure the story is complex, exactly…”
“I read it, and thought he was being sarcastic.”
You should read it again. Delong is **not** writing tongue in cheek.
I think you guys (commenters, not Yves) are in danger of becoming Mises Institute version 2.0 with your harsh words for Delong et al. Taking huge pleasure from the intellectual defeat of others is a trait I thought was reserved for the hard right.
Yves is right that Delong is more bound by decades of orthodox teaching than anything else, and it’s the same deal with Krugman. And a couple of people were criticisng Mark Thoma?? Probably one of the least offensive writers on the net.
Delong has some great posts on economic history and liquidity preference, Krugman uses a lot of evidence and is great at calling out the right, and even Ezra Klein isn’t a bad or stupid guy, just a useful idiot.
I have plenty of criticism for these guys, but I’m not sure swearing about them and insisting they are somehow paid off is productive or accurate.
It’s not like these views just occured to us today. Klein and Krugman have long been shills. Delong is currently featuring the wh*re Jinathan Gruber on his site. I don’t care if somebody gets their feeling hurt.
” The fact that really rich people have an overwhelmingly larger percentage of national income than anyone else doesn’t bother me at all, because the really rich people in return get shitty lives where they are forced to play golf and live in mansions in Dallas.”
http://www.sadlyno.com/archives/35210.html
They’re all Mattie, Cahal.
The term that accurately covers your comment is agnotology. Look it up.
Are we sure we are sure that we are sure these folks are part of the problem and not part of the solution? Maybe we could study it for a decade or so.
Re: The term that accurately covers your comment is agnotology
Wow, great word. Thanks!
psychohistorian,
Thank you for that. Love it.
Nobody is taking “huge pleasure”….you are misinterpreting our *dismay* at DeLong’s cargo cult scientific approach.
Here is what I have learned today:
1) Yves Smith and her army of commenters are right about everything.
2) If you think they are wrong, you are wrong.
(Not sarcastic btw).
So you have a hard time with forming logical debates and justifying your position based on rational argument.
AND IT EVERYONE ELSE’S FAULT FOR BEING MEAN!
Maybe you opinion isn’t very well formed and in conflict with logic and empirical evidence? NAAAAH.
I think you have reading comprehension problems, because that is not what I said at all. Go back and read it – pay attention to the last sentence.
I was clearly agreeing with you, but then who’d want that to get in the way of some unfounded attacks? Jees.
Economic bloviators are the sports commentators (color) of the financial world. Hay if you cant model dynamic systems in real time, well your making a best estimate guess, hence boom bust cycles (got it wrong x human deception).
Skippy…Try modeling lies[!]…lmao.
Planck was wrong.
Good post Yves.
I agree with you general characterization of economists: they operate too much from 20,000 feet and not nearly close enough to the ground.
As for Ezra’s review of “Inside Job”: I’m with him. That movie does not edify.
Ferguson badly embarrasses himself in one scene in “Inside Job” when he asks a former employee of Moodys the following leading question: “So, Bear Stearns was a AAA-rated company, right?”
The interviewee recoils and half-laughs at the mere idea of such being true. That was a “tell” that Ferguson does not know his terrain, although the influence of his friend economist Simon Johnson was certainly helpful in shaping the raw material of the meltdown into a coherent film.
“Ferguson embarrasses himself?” Wow. Get your priorities straight, will you?
I’d really like to find whoever coined “savings glut” and have them offer a public apology on national TV. The mere term suggests that there are not enough productive enterprises to fund. I mean never mind that banks are never actually reserve constrained. I honestly wonder if Bernanke, Krugman et alt even understand this basic fact. I know that no one in the place I got my degree in econ knew any better and they went to some of the so called “good” schools. The profession is often an embarrassment. That people like DeLong even consider that there could be a savings glut tells you how much they just swallow whole the verbiage of the alan greenspans of the world. I can’t even begin to comment on the rest of. That the man is tenured in econ, and believes in this mythical savings glut is beyond contempt. I’m with Yves on this, one should not suffer such fools if the fools cannot even take time to accurately analyze what they are commenting on.
Seems a bit odd to me that an entire post regarding the financial crisis, its causes and even mentions Gretchen Morgenson’s book doesn’t once explicitly mention Fannie Mae or Freddie Mac.
Please note that my book Keynes Hayek: The Clash That Shaped Modern Economics is published by W.W.Norton in October.
Professor John B.Taylor of Stanford and the Hoover Institution says that: “Nicholas Wapshott brings the Keynes-Hayek fight of the 20th century back to life, making the clash both entertaining and highly relevant for understanding economic crises of the 21st century.”
Read an extract at: sites.google.com/site/wapshottkeyneshayek/
Nicholas Wapshott