The New York Times Book Reviews of November 1, 2009 (tomorrow at the time of this post) offers three very revealing reviews that deal with the general theme of economic theory and practice. If you care to think about such things these reviews will make for good reading.
There is one about the life of Ayn Rand, whose comic book ideology and powerful ego served to capture the fancy of many a naive but intelligent youth, including one as distinguished as Alan Greenspan - the one who, in recent years, managed to play a role in royally screwing up the American economy.
Ayn Rand
The second one is about the professional career and successful acquisitiveness of Jamie Dimon who helped to build that monstrous corporate entity called "Citigroup" and who currently is at the helm of JP Morgan Chase bank.
Jamie Dimon
The third is a review of two books about the life and the contributions of John Maynard Keynes to economic theory and practice. He is the economist to turn to when your favorite ideology again fails.
Keynes
Draw your own conclusions. Mine are particularly simple and it astounds me that I had to become an octogenarian before I could clearly express them. I cannot explain that except to concede that I am a slow learner. Perhaps you can do better.
Ego is probably ubiquitous in humans, at least in the ones I know anything about. Mine now takes the form of simply wanting to understand things as well as I can, but it can take many forms - even in scientists. However, while ego can motivate science ego cannot replace science and it needs to be carefully restrained.
Acquisitiveness is to be found in varying degrees but it is a widely distributed trait that has not spared the subspecies called "bankers." The book about Jamie Dimon, a very successful banker, may to some extent explain why bankers should not be the final arbiters of financial regulation.
Ideology is for the simple minded and for manipulators and exploiters of the simple minded. By confining their ideas to one small ideological box it spares them the arduous labor of thought and gets in the way of real progress. It is much to his credit that "Keynes’s political views were dominated by a pragmatism similar to what Clarke describes, where the best is the enemy of the good. Keynes was no socialist, but also no free-market ideologue. He was interested in what worked."
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Saturday, October 31, 2009
Saturday, June 6, 2009
Real Markets 101: Some serious views
For those of us who are not professionally involved in today's financial and investment infrastructures they represent opaque and sometimes threatening circumstances. A little light reading can alleviate this feeling although I cannot promise mastery of the subject. Here are a few selections, by way of internet links, that I have found helpful. First, an important quote attributed to Keynes.
"The market can stay irrational longer than you can stay solvent."
John Maynard Keynes
Deregulation, Free Markets and Econ 101
Notice that the following article was written in 2006, well before the financial meltdown.
Greenspan
Another major player:
Phil Gramm
When I was still a graduate student (long ago), I had an intelligent and seriously religious room mate who observed that "religion is an act of conscious blindness." I never knew how close politics is to religion until I found the following op-ed. Notice the date.
Phil Gramm Is Right
In all fairness, here is a conservative view from the Heritage Foundation.
Meltdowns and Myths
And here is an expert's video view of the facts, which I repeat.
incredible
To round out this introduction, I have included a current NY Times financial article.
Poking Holes in a Theory on Markets
My own view at this time is that the markets are not fully informed nor fair nor adequately regulated and that various advisory services manipulate their clients with mixtures of greed, fear, and inflated claims. The amateur is indeed a minnow among sharks. Caveat emptor! However it is possible to find Internet sites which present a variety of voices.
Although the markets bear little resemblance to the idealized markets, the ones with those wonderful invisible hands, they do resemble the ideal in at least one way: virtually everyone is trying, first and foremost, to feather his own nest. Under these conditions, like Yossarian in Catch 22, you would be a fool not to do the same. This requires of the non-professional an extreme defensive posture. I am reminded of the early cold war nuclear defensive posture: put your head between your legs and kiss your ass goodbye.
Draw your own conclusions.
"The market can stay irrational longer than you can stay solvent."
John Maynard Keynes
Deregulation, Free Markets and Econ 101
Notice that the following article was written in 2006, well before the financial meltdown.
Greenspan
Another major player:
Phil Gramm
When I was still a graduate student (long ago), I had an intelligent and seriously religious room mate who observed that "religion is an act of conscious blindness." I never knew how close politics is to religion until I found the following op-ed. Notice the date.
Phil Gramm Is Right
In all fairness, here is a conservative view from the Heritage Foundation.
Meltdowns and Myths
And here is an expert's video view of the facts, which I repeat.
incredible
To round out this introduction, I have included a current NY Times financial article.
Poking Holes in a Theory on Markets
My own view at this time is that the markets are not fully informed nor fair nor adequately regulated and that various advisory services manipulate their clients with mixtures of greed, fear, and inflated claims. The amateur is indeed a minnow among sharks. Caveat emptor! However it is possible to find Internet sites which present a variety of voices.
Although the markets bear little resemblance to the idealized markets, the ones with those wonderful invisible hands, they do resemble the ideal in at least one way: virtually everyone is trying, first and foremost, to feather his own nest. Under these conditions, like Yossarian in Catch 22, you would be a fool not to do the same. This requires of the non-professional an extreme defensive posture. I am reminded of the early cold war nuclear defensive posture: put your head between your legs and kiss your ass goodbye.
Draw your own conclusions.
Monday, February 23, 2009
What We Can Learn From The Gecko
I tend to be more pragmatic than ideological but there are limitations to that. Pragmatism is very useful in solving problems but first the problems and the goals need to be defined. It is our human values that help to define the problems and the goals.
So it is with me. I have been a spectator to the slow motion train wreck that is minimally regulated American capitalism. That train wreck is observable fact. First, the lively interplay between wealth and politics made for some questionable decisions, particularly, in globalizing the race to the bottom with respect to cheap labor. That caused many of our manufacturers to fold their tents and silently steal away across the Pacific or South of the border. Slowly at first but then at an increasing pace, the USA has lost much of its manufacturing capacity. Also, the taxes on the wealthy were reduced so that an ever greater fraction of the nation's wealth has been concentrated in a few hands.
The globalization of financial transactions and international banking paralleled these developments. More recently, we have been told that we now have the "ownership society," meaning, I suppose, that if you must actually work for a living then you are on your own.
None of this matters much unless you care.
The key to stabilizing capitalism has not yet been discovered. It seems to progress by means of a sequence of "bubbles" followed by crashes. Peoples' lives are seriously disrupted when they lose their jobs, lose their homes, or lack medical care, or cannot afford their children's education. It has happened before and now it has happened again.
John Henry
Well, we humans sure have got rhythm but the best and the brightest can't manage an economy in the common interest.
These truths are self evident. The gecko knows.
The latest crash is more severe than most. It came at a time when the government had been deprived of revenues by massive tax cuts and bled white by wars, when the physical infrastructure of the nation had been long neglected and was crumbling, when fossil energy was peaking and needed rapid replacement, and when many of our institutional traditions were antiquated and failing.
The cruelest cut of all was not something I had expected. I have long been aware that when torrents of money pass through human hands the owners of those hands develop sticky fingers. I had not believed that it could get so bad. Some members of that highly respected and magnificently rewarded class, the top level bankers and investment bankers have engaged in a reckless race to the bottom with respect to risk management. They fouled their own nests and, with that, they sabotaged the entire international financial machinery. Even the gecko knows that.
Now, we are told that those same great guys trust our common treasury to save them and they will tell us how. That's where the gecko comes in.
The gecko is an animated figure, just a few inches tall, who appears in various entertaining commercials for the GEICO auto insurance company. In the latest of these we see the gecko's boss (a middle aged white male, of course) telling him about the importance of trust to their business. The boss suggests a new commercial in which he will fall backward and trust the gecko to catch him. He then stands up and begins to fall backwards toward the gecko, who is visibly in fear of being crushed. The commercial ends at that point.
It seems to me that the gecko is a very clever fellow and that this is an allegory about saving the really big, very insolvent banks. Can our treasury save them or will it be crushed. Are they too big to fail or too insolvent to save? Will we be left with "zombie banks" that persist but cannot do much lending?
No need to speculate. Like it or not, we shall see. The psychological economists have pointed out that markets are not entirely rational and will not therefore be acceptably self regulating. To put it another way, hog farms have a bad smell, even on wall street.
Stretching it a bit, there is also an allegory about the recent behavior of our financial bigwigs based upon drunk driving.
Wreck on the Highway
Since this was written I have heard President Obama's speech to the joint session of Congress and to the nation. I have also heard Bobby Jindal's response. Obama's speech was highly optimistic but he had a lot to say. Will some friend of Bobby Jindal please suggest to him that if one has nothing even remotely useful to say it might be best to shut up.
So it is with me. I have been a spectator to the slow motion train wreck that is minimally regulated American capitalism. That train wreck is observable fact. First, the lively interplay between wealth and politics made for some questionable decisions, particularly, in globalizing the race to the bottom with respect to cheap labor. That caused many of our manufacturers to fold their tents and silently steal away across the Pacific or South of the border. Slowly at first but then at an increasing pace, the USA has lost much of its manufacturing capacity. Also, the taxes on the wealthy were reduced so that an ever greater fraction of the nation's wealth has been concentrated in a few hands.
The globalization of financial transactions and international banking paralleled these developments. More recently, we have been told that we now have the "ownership society," meaning, I suppose, that if you must actually work for a living then you are on your own.
None of this matters much unless you care.
The key to stabilizing capitalism has not yet been discovered. It seems to progress by means of a sequence of "bubbles" followed by crashes. Peoples' lives are seriously disrupted when they lose their jobs, lose their homes, or lack medical care, or cannot afford their children's education. It has happened before and now it has happened again.
John Henry
Well, we humans sure have got rhythm but the best and the brightest can't manage an economy in the common interest.
These truths are self evident. The gecko knows.
The latest crash is more severe than most. It came at a time when the government had been deprived of revenues by massive tax cuts and bled white by wars, when the physical infrastructure of the nation had been long neglected and was crumbling, when fossil energy was peaking and needed rapid replacement, and when many of our institutional traditions were antiquated and failing.
The cruelest cut of all was not something I had expected. I have long been aware that when torrents of money pass through human hands the owners of those hands develop sticky fingers. I had not believed that it could get so bad. Some members of that highly respected and magnificently rewarded class, the top level bankers and investment bankers have engaged in a reckless race to the bottom with respect to risk management. They fouled their own nests and, with that, they sabotaged the entire international financial machinery. Even the gecko knows that.
Now, we are told that those same great guys trust our common treasury to save them and they will tell us how. That's where the gecko comes in.
The gecko is an animated figure, just a few inches tall, who appears in various entertaining commercials for the GEICO auto insurance company. In the latest of these we see the gecko's boss (a middle aged white male, of course) telling him about the importance of trust to their business. The boss suggests a new commercial in which he will fall backward and trust the gecko to catch him. He then stands up and begins to fall backwards toward the gecko, who is visibly in fear of being crushed. The commercial ends at that point.
It seems to me that the gecko is a very clever fellow and that this is an allegory about saving the really big, very insolvent banks. Can our treasury save them or will it be crushed. Are they too big to fail or too insolvent to save? Will we be left with "zombie banks" that persist but cannot do much lending?
No need to speculate. Like it or not, we shall see. The psychological economists have pointed out that markets are not entirely rational and will not therefore be acceptably self regulating. To put it another way, hog farms have a bad smell, even on wall street.
Stretching it a bit, there is also an allegory about the recent behavior of our financial bigwigs based upon drunk driving.
Wreck on the Highway
Since this was written I have heard President Obama's speech to the joint session of Congress and to the nation. I have also heard Bobby Jindal's response. Obama's speech was highly optimistic but he had a lot to say. Will some friend of Bobby Jindal please suggest to him that if one has nothing even remotely useful to say it might be best to shut up.
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