Monday, September 1, 2008

Assorted Links/Thoughts

1. How Good Are Experienced Presidents? Examines the historical data on governmental experience vs. presidential greatness. If the Obama campaign takes the bait on Palin and focuses on her extreme inexperience, we'll be hearing even more about the importance of "experience" to being a good president. I hope the Obama campaign is smart enough not to mount an all-out attack on Palin's inexperience. Use it purely defensively—that is, whenever McCain tries to argue that Obama lacks the requisite experience to be president. The high command of the Obama campaign is top-shelf though, so I trust they won't run full-speed into an argument over experience. 2. Tom Friedman: China must become America. Friedman continues to set world records in shark-jumping. Now he thinks China must "gradually develop a cleaner, knowledge-based, service/finance economy. It has to move from 'made in China' to 'designed in China' to 'imagined in China.' In short, the economy here has to become greener and smarter." How about instead, we just give China our finance sector? 3. Experts Recommend Books to Help Explain What's Going On in the Economy. Curiously, not one of the 14 experts recommended Mohamed El-Erian's terrific new book, When Markets Collide, which specifically tries to provide a framework for understanding the ongoing transformation of the global economy. Best pick goes to Mark Cuban:

No recommendation. Cuban says: "I don't think there is such a book. In my humble opinion, people who actually believe they can understand all the issues are the ones that got us to where we are today. In reality, there are so many variables and so little data, it's all a guess. I don't think a book exists that can explain it. Is there a book out there called 'No One Has a Clue What Is Going On and the Whole World Is Guessing'?"
True story. Worst pick (or, more accurately, worst reasoning) goes to Greg Mankiw, who recommends Milton Friedman's Capitalism and Freedom, and stresses that "[i]n this difficult economic time, it is important to keep first principles firmly in mind." Maybe it's just me, but "keep[ing] first priciples firmly in mind" sounds an awful lot like "clinging to ideology."


Dan in Euroland said...

I think Mankiw hits the target, and that you are being unfair to both Mankiw and Friedman. At least you lack theoretical and empirical grounds for your criticism. "Crises" like the current financial blip tend to lead to idea traps and harmful regulation that only has negative consequences. Plus the "ideology" of M. Friedman has been a boon for humanity. Just out of curiosity have you read "Capitalism and Freedom"? I don't mean that facetiously, the leftists I know have typically found Friedman much more reasonable than the Naomi Klein caricature that is so often presented.

Economics of Contempt said...

I lack the "theoretical and empirical grounds for [my] criticism"? What exactly do you think my criticism was? I have a Masters degree in economics and have spent considerable time in finance, so I'm pretty sure I have the requisite theoretical and empirical knowledge to say that in a severe credit crisis caused partly by lax regulation (a point on which even conservative economists agree), the best thing to do isn't to read a book written 40+ years ago that disparages nearly all forms of regulation.

I've read Capitalism and Freedom, along with nearly everything else Friedman wrote, and if you'd read around a bit, you'd see that I've written several posts about how I think Naomi Klein is a loathesome and, frankly, unintelligent individual. Friedman was one of the great academic economists of all time, but everyone knows that his popular writing was pure political advocacy. Such political advocacy may have been appropriate for the 1960s, but this ain't the 1960s, son.

Don't come in here with the stupid "the free market has been a boon for humanity!" argument. I understand market economics quite well, and nowhere did I say that the spread of market economics hasn't been historically beneficial. I also understand that market failures sometimes require a policy response -- something Friedman also understood (see A Monetary History), but rarely mentioned in his popular writing.

The fact that you think the current financial crisis is a mere "blip" just shows how little you understand financial economics. Perhaps you should find a site more suited to your level.

Anonymous said...

It seems to me that one contributing factor to our current financial troubles may in fact be the proliferation of regulations. Gaming the system becomes one avenue to at least temporary personal success.

Enron's business plan was based on gaming the system. When they ran into trouble they kept on trying to game the system.

The responses have all been to tighten and extend the regulations, which only makes the syndrome worse.

Do you do your own taxes? Do you understand your taxes? Are you sure that someone else, in a similar financial situation and with a better understanding (or a more aggressive accountant) does not pay dramatically less?

Then there is the fact that most of these executives are insulated from the consequences of their failure.

"People who go broke in a big way never miss any meals. It is the poor jerk who is shy a half slug who must tighten his belt."
- Robert A. Heinlein, Time Enough for Love said...

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Thoughts of cource.

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