Thu Jul 31st, 2008 at 11:42:34 AM EST
I'm confused about the present meltdown, the blame is focused on risky loans and those who facilitated them, but I think the problem lies elsewhere.
In the old days, if you wanted to borrow money you went to the bank, and if your prospects were good enough, and you had adequate collateral, they lent you the money. The money they lent you was obtained from depositors. The bank made money by paying interest to the depositors which was less than they charged to borrowers. When everything worked right, everyone came out ahead, and the banker was ensured a steady income. Banks were low growth businesses. Many were even mutual savings associations which meant they were owned by their depositors.
Thu Jul 31st, 2008 at 03:20:56 AM EST
The myth of Ricardo is that each country does what it is best at and then trades with its neighbors. Each produces at the lowest cost, since it is an expert, and everyone benefits. This may have been true in some limited areas when countries were at similar levels of development so that labor cost difference were due to specialization and not to the general standard of living.
Factor in natural resource and climate benefits and it makes for a good theory. Recent developments have led to questioning the model. So the question is not should a society be self-sufficient, but can it?
Diary rescue from July 18 by afew
Mon Jul 28th, 2008 at 03:47:33 PM EST
John Edwards has spoken frequently of the "Two Americas" so what I'm about to say isn't totally original. His focus has been on how much the "haves" have and how little the rest of us don't.
I want to focus on what the haves have that the rest of us don't.
Wed Jul 16th, 2008 at 12:09:06 PM EST
There was a comment on my Grump diary about the EU Constitution, given my poor opinion of European leaders, so I thought I write one (as requested).
OK, I'm not actually going to write one, just highlight the problems (as if you all didn't know already).
Tue Jul 15th, 2008 at 04:50:51 PM EST
Perhaps it's the hot weather, but I think the meltdown in the financial markets has something to do with it. I've been involved long enough that I've lived through several of these ups and downs before, but this time seems different.
In no particular order, my complaints:
Sun Jul 6th, 2008 at 05:30:09 PM EST
One of the stories of our age has been that there was a cultural revolution which started during the Nixon era and reached its culmination with Reagan. There are three parts to this view of history.
- Conservative "values" became the majority viewpoint in the nation
- Evangelical Christian views on social issues were made into policy
- Libertarian style economic policies became the norm
The press and many politicians have certainly acted as if these were widely accepted ideas. Recently, as the age of Rove winds down, people have been discussing the fall in the power of the GOP and implicitly equating its political power with the conservative themes listed above.
Sat Jun 28th, 2008 at 08:57:20 AM EST
The justification for enhanced security and the extra limits on civil liberties is not primarily to prevent physical attacks, but to defend our "way of life". As George Bush said, "they hate us for our freedoms".
One can debate the best methods to prevent physical attacks, but these are usually similar to defending against any form of lawlessness. Some combination of policing, intelligence gathering and observation. Any police official will explain that the goal of preventing, say, all armed robberies is impossible, the best one can do is to keep the level as low as possible. To expect otherwise in the case of politically motivated violence is unrealistic.
So to defend "our freedoms" the first thing that a society should do, one would think, was to maintain those freedoms that already exist. Otherwise the "terrorists have won". How has the record been in the US so far? I'll list just a handful of disturbing examples where the infringements on civil liberties have led us towards a society just like the ones we claim to oppose.
Thu Jun 26th, 2008 at 11:26:31 AM EST
This is an attempt to start an occasional feature where interested visitors can highlight books that they think might be of interest to a wider audience.
I don't think there are any ground rules, the books could be recent or classics, fiction or not, and in any language with or without translations.
I guess there could even be suggestions for books to avoid. Right now in the US there is a rash of what I call BSO's (book shaped objects) which are appearing at a great rate to piggyback on the implosion of the Bush regime, or to justify the author's role in it. I've read a few and not one should have been more 1500 words long.
Fri Jun 20th, 2008 at 06:56:58 PM EST
The US congress has been updating its surveillance policies again and has finally succeeded in removing the last shred of civil liberties based upon prior law. There are a few groups which understand the importance of ensuring the privacy of the average person and have been objecting to the wholesale intrusion on this privacy, but I think this is not the most important violation.
For example, there is some concern about getting a court-issued warrant before surveillance can take place. This is based upon the provision in the fourth amendment:
Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.
However, in practice this is a sham requirement. The FISA court set up to "protect" the rights of those being spied upon has approved all but a handful of such requests, so whether a warrant is "required" these days makes no difference in practice.
Wed Jun 18th, 2008 at 08:14:00 AM EST
The other day I floated an idea about having a spot for short items - something less than a full diary and more than a comment in a open thread. Here's my attempt at such an idea. [Actually this turned out a bit longer than I intended...]
The market for gas guzzlers in the US has collapsed. On a radio show this morning one such owner (8 mpg) said that the original prices was $50K, he had paid $40K for a used one off lease a few years ago, and was now thinking of selling it. The "book" value or nominal resale historically for the vehicle was about $25K given the additional age, but that dealers would only offer him $8K.
My suggestion: a government program to have car makers accept such unsalable vehicles in exchange for a much higher mileage alternative with two incentives. The one for the seller would allow him to claim a "casualty" loss of the difference between the historical trade-in value and the new reality. Let's say in this case $17K (25-8). This loss could then be declared on the seller's income tax along with other traditional casualty losses.
The car maker would have to give a higher than current trade in allowance subject to two conditions: the gas guzzler would have to be scrapped and the replacement vehicle would have to be new and meet certain performance standards. In exchange the car maker would also get some sort of incentive from the government. This could be in the form of a tax credit or something similar.
The net effect: gas guzzlers get off the road quicker, new car sales get a boost and fuel consumption declines.
Tue Jun 10th, 2008 at 06:52:54 PM EST
In a news story today several ISP's have agreed with the Attorney General of New York to filter content which promotes child "pornography". This is the first time that ISP's have agreed to censorship not forced upon them by an authoritarian regime.
There has been much criticism, for example, of Google for agreeing to filter search results to conform to Chinese demands, but the actual blocking of traffic is handled by the government-controlled network providers. Google doesn't filter content, it only makes it harder to find. This new agreement is something else.
Until now the telecom companies have always maintained that they are "common carriers". They provide the road and what sort of vehicle you drive or where you are going is of no concern to them. This kept them away from some very ticklish political situations. There was supposed to be a complete separation between content and delivery.
Fri Jun 6th, 2008 at 10:55:32 AM EST
I've long complained about the lack of any economic models which weren't predicated on capitalist principles.
Even when the government of a country claims to be "communist" or "socialist" the individual enterprises are run along capitalist lines. All that changes is where the source of capital comes from and where the "profits" go.
So it is encouraging to see this first essay by a well-known economist questioning the need for capital formation as a prerequisite for economic growth.
Sat May 31st, 2008 at 09:54:56 AM EST
My recent comment on the problem of the "tyranny of the majority" in a democracy with regard to conservation led to a request that I expand this into a separate diary.
Here's a recent essay of mine on an allied subject, measuring how "democratic" a society is.
I still maintain that democracies lead to better overall economic conditions and more equity, but there are many degrees of democracy and some states are far from the ideal.
One can look to the current situation in the US where universal health care has been favored by the vast majority of the population for over 60 years, but has been thwarted by special interests. Hardly a fully functional democracy.
Thu May 29th, 2008 at 04:48:34 PM EST
Sorry, this is a bit indirect, but here's a copy of a book review of James Galbraith's new book:
Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too, by James K. Galbraith. New York, London, Toronto, Sydney: Free Press, 2008.
The copy is from economist Mark Thoma's blog where there is also a lively discussion going on. (The original review seems to be behind a pay wall.)
Fri May 16th, 2008 at 07:23:11 PM EST
As some of you may know I have a web site where I post many of my essays. This way I can refer back to them when I want to quote myself and also give others an opportunity to read them regardless of how long ago they were created.
Recently I decided it would be nice if I gathered up the collection and made a hard copy of them. I explored several ideas. First I thought of printing out the web pages using a browser's print page capability. This seemed somewhat slow and would consume a great deal of expensive ink and paper.
Fri May 16th, 2008 at 10:44:30 AM EST
The foundational principal of the UN is that what occurs within a state is a "domestic" problem and not subject to international interference. This was, of course, the "dictator job protection" requirement demanded by some of the worst examples at the time.
Over the past twenty years we have seen numerous example of entire countries brought to ruin by insane leaders who have used this principle as a shield. There is a slight difference between the modern version and the earlier cases. Crazed dictators like Stalin or Hitler had extra-territorial ambitions which (theoretically) gave a justification for intervention by third parties. And they were doing their most harm before the lessons of WWII were formalized. Once the concepts of crimes against humanity, war crimes, and genocide were formalized the framework changed.
Mon May 12th, 2008 at 09:47:04 PM EST
The US government (and many others) is divided up into three branches: executive, legislative and judicial. This was a bit of an innovation when it was created since previously the concept of government as separate from power groups was not as clear.
A traditional society had some version of a royal ruler who was assisted by courtiers and appointed ministers. Judges and the rest of the legal system was devoted to settling disputes between people, not matters of state. In addition there was frequently a strong religious sector with its own source of funds and hierarchy.
As time went on and the excesses of royalty become burdensome to the large landowners various types of legislative bodies were introduced, their ability to promote policies at variance to the will of the ruler was not assured.
Mon May 5th, 2008 at 11:53:34 AM EST
For those not familiar, Herman Daly is one of the fathers of the "ecological economics" movement. The basic premise is that the world is finite and the present economic systems that depend upon depletion of natural resources can't go on for ever.
What is needed is a transition to a steady-state economic system. He has presented a paper summarizing his thinking at a recent conference which has been picked up by the Oil Drum blog.
Here's the link:
Sun Apr 27th, 2008 at 11:53:59 AM EST
I'm not one who likes to base an argument on historical analogies too much, but sometimes it makes for a useful framework for a contemporary issue.
Before WWI and WWII there were a series of regional conflicts and internal unrest in some of the states later involved in the conflicts which foreshadowed the larger wars to come. What they all had in common was that they were really proxy wars for the major power realignment that was underway.
It is possible that we are seeing something similar at present. The conflicts in much of Africa make little sense unless one can figure out which super power is favoring which local faction. A similar situation seems to hold in Latin America and East Asia as well.
Mon Apr 14th, 2008 at 09:45:18 AM EST
There has been a lot of discussion lately about moral hazard. This is the idea that if people get rescued when doing risky things they will be more inclined to do them in the future, as will others who see the results.
A good example is mountain climbing. Climbers know that they will be rescued and many thus engage in risky behavior. The US Parks service has tried to control this by requiring people to register before climbing and making unregistered climbs illegal. The penalty isn't specified on the web site. Imagine how much such risky behavior would decline if the penalty was that such climbers wouldn't be rescued if they got into trouble!
Moral hazard has become a popular topic in financial circles of late as financial firms get bailed out by central banks when their risky behavior goes wrong. The argument given to defend this rescue is that not doing so would drag others down as well.