By Cathy O’Neil, a data scientist. Cross posted from mathbabe
There have been lots of comments and confusion, especially in this post, over what people in finance do or do not assume about how the markets work. I wanted to dispel some myths (at the risk of creating more).
Read more...Yves here. This is an important piece, in that it bucks conventional wisdom about growth and economic development in several ways.
Read more...A major intellectual blind spot in academia and among policy makers is the belief that making markets more liquid is always and ever a good thing.
Read more...A new paper that analyzes the activities and effects of high frequency trading reaches some damning conclusions.
Read more...By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Cross posted from New Economic Perspectives
Austerity has driven unemployment among young Italian adults to over 35%. The result is that Italian university graduates are emigrating. This loss of Italy’s greatest source of future productivity gains is particularly crippling because Italy has far fewer university graduates than most developed nations.
Read more...Philip Pilkington is an Irish writer and journalist living in London. You can follow him on Twitter @pilkingtonphil
Perhaps the most effective myth that mainstream economists have propagated over the course of the last century is the idea that the majority of prices in an advanced capitalist economy are set by the interaction of supply and demand in a market for scarce resources. Perhaps the second most effective myth they have spread is that this interaction tends toward equilibrium and stability.
Read more...It’s frustrating to know that there’s a simple solution to a serious problem but no one seems willing to do the obvious.
Read more...By Rajiv Sethi, Professor of Economics, Barnard College, Columbia University & External Professor, Santa Fe Institute. Cross posted from his blog
Sheila Bair’s new book, Bull by the Horns, is both a crisis narrative and a thoughtful reflection on economic institutions and policy. The crisis narrative, with its revealing first-hand accounts of high-level meetings, high-stakes negotiations, behind-the-scenes jockeying, and clashing personalities will attract the most immediate attention. But it’s the economic analysis that will constitute the more enduring contribution.
Read more...There’s an interesting sign of homebuyer champing at the bit to lever up again with all the “housing has bottomed” talk in a New York Times article last week, “Scrutiny for Home Appraisers as the Market Struggles.” The headline signals the new complaint about appraisers: they aren’t rubber stamping deals entered into by willing buyers and sellers! They are therefore holding back the housing market!
While this frustration among housing enthusiasts is a squeaky wheel in the housing market that probably does warrant comment by the Grey Lady, there are more serious market failures in appraisal land that also deserve attention.
Read more...During the Microsoft antitrust case, some institutional investors were keen for Microsoft to lose, and not because they were short its stock. They felt that Microsoft being in both the operating systems business and the applications business had become a negative. They believed that separating the two businesses would not only produce higher multiples over time for each as “purer” plays, but having each new business more narrowly focused would be better for growth in the long term.
We have a similar discussion taking place regarding the big banks, and the pro-breakup case is even stronger there than for the software giant.
Read more...We’ve been mystified with the housing bull argument that things really are getting better. While real estate is always and ever local, and some markets may indeed be on the upswing, there are ample reasons to doubt the idea that an overall housing recovery is in. For instance, the recent FHFA inspector general report stated:
Read more...There is an important study in the Archives for Internal Medicine last month, which escalates an ongoing row as to whether patient satisfaction is in any way correlated with positive medical outcomes. The answer is yes, and the correlation is negative.
This finding is of critical importance, not just in understanding why American medicine is a hopeless, costly mess, but also as a window into how easy it is for buyers of complex services to be hoodwinked by their servicer provider, whether via the provider being incorrectly confident about his ability to do a good job or having nefarious intent.
Read more...There has been so much news on the mortgage beat the last few weeks that I managed to neglect one of my missions, which is my personal Ben Stein watch on Adam Davidson, who operates as the Lord Haw Haw for the 1% in his column in the Sunday New York Times Magazine.
His latest piece, “Why Are Harvard Graduates in the Mailroom?” is more accurately titled “In Praise of Exploitation.”
Read more...Yves here. No one should be surprised that Bloomberg is reporting today that Goldman is aggressively lobbying for a Volcker Rule waiver for its role as a sponsor of and investors in “credit funds.”
By George Bailey, who has worked in senior compliance roles at a Big Firm You’ve Heard Of and is also a member of Occupy the SEC
Today is “Volcker Day” and Paul Volcker was on a tear.
Read more...Yves here. I hate to throw a spanner in the works, but as much as Varoufakis’ view may sound persuasive, I strongly suggest you read Andrew Dittmer’s translation of a very important paper by Claudio Borio and Piti Disyatat of the Bank of International Settlements, “Global imbalances and the financial crisis: Link or no link?”
Yanis Varoufakis is a Greek economist who currently heads the Department of Economic Policy at the University of Athens. From 2004 to 2007 he served as an economic advisor to former Greek Prime Minister George Papandreou. Yanis writes a popular blog which can be found here. His latest book ‘The Global Minotaur: America, the True Origins of the Financial Crisis and the Future of the World Economy’ is available from Amazon.
Interview conducted by Philip Pilkington
Philip Pilkington: In your book The Global Minotaur: America, The True Origins of the Financial Crisis and the Future of the World Economy you lay out the case that this ongoing economic crisis has very deep roots. You claim that while many popular accounts – from greed run rampant to regulatory capture – do explain certain features of the current crisis, they do not deal with the real underlying issue, which is the way in which the current global economy is structured. Could you briefly explain why these popular accounts come up short?
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