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Bloggingheads 04-07-2009 12:08 PM

Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 

claymisher 04-07-2009 12:46 PM

Re: Trust Us, We're Experts
 
Never mind the sarcastic comments, look at the title of the episode!

bjkeefe 04-07-2009 01:24 PM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
Megan again? What, has it been four days already?

Ray 04-07-2009 02:21 PM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
So...it takes a small group of elite, smart, hard-working people with a very specific skill set to create a calamitous situation that no one is responsible for?

Plus, that old black Congresswoman is crazy! And ignorant!

willmybasilgrow 04-07-2009 02:39 PM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
BJ and Ray's comments - laughing!!

Good ones.

Here's my vote: same topic, Megan and Glenn Greenwald.

PLEASE!!!!

willmybasilgrow 04-07-2009 02:46 PM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
In addition to academics, there are people who work in multilateral institutions like the World Bank, IMF and IFC, not to mention overseas organizations, who have financial market experience. Many of them are American citizens. I'm sure Wall Street and universities are not the only places you can draw from.

popcorn_karate 04-07-2009 02:51 PM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
Megan,

your comparison of wall street bankers to heroin junkie, alcohol abusing, homeless people was beautiful!

both sets of people are so hopeless, clueless, and insensitive to incentives that we just need to clean-up their problems and not worry about the moral hazards involved.

now, if we could just get police departments treat bankers like they do the panhandlers...

ginger baker 04-07-2009 05:15 PM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
At some point it becomes obvious that narrow vocational expertise becomes not just myopic in scope and judgment but willfully impotent and irresponsible. It applies especially to economists and public policy wonks who are blinded by their so-called "pragmatic" obsessions which not only exclude a wider perspective but actually conceal their own politics. "Rules" are operating procedures are endemic to political power....it cannot be denied. It must however be smashed.

Stapler Malone 04-07-2009 06:11 PM

Moral Hazard
 
Megan knows the Econ 101 Lexicon better than I, but I feel the need to pick a nit here. The way she glossed "Moral Hazard" seems to me misleading. Starting it off with "if you buy insurance..." obscures the elemental part of Moral Hazard, which is that you do riskier things because someone else is paying the downside risk cost. Yes, buying fire insurance can lead to Moral Hazard, but insurance just transfers some of the downside risk, you still pay for some of it (premiums, etc). You can have Moral Hazard without any of this buy-in. Indeed, that seems to me the purer form (see: the risk-happy way teenagers drive because their parents bought insurance)

pampl 04-07-2009 07:16 PM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
Quote:

Originally Posted by ginger baker (Post 109473)
At some point it becomes obvious that narrow vocational expertise becomes not just myopic in scope and judgment but willfully impotent and irresponsible. It applies especially to economists and public policy wonks who are blinded by their so-called "pragmatic" obsessions which not only exclude a wider perspective but actually conceal their own politics. "Rules" are operating procedures are endemic to political power....it cannot be denied. It must however be smashed.

I don't think any of that is true. Do you have examples or evidence you could give?

nikkibong 04-07-2009 07:57 PM

Re: Moral Hazard
 
"Moral hazard," along with "meme," is one of those formerly elucidating terms that has been used (and abused) far too often by English speaking, um, "intellectuals," so much so, that I nearly wretch every time I hear it.

bramble 04-07-2009 08:32 PM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
These two make a good pair: both fence-straddlers when paired with more partisan interlocutors. Together, they seem to bring out their differences.

On the downside, they are a bit too dull for me to pay close attention to them today.

uncle ebeneezer 04-07-2009 08:57 PM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
Yeah, I tried and just couldn't get into this one. I love Noam, and sometimes like MM, but I think I'm just burnt out on financial discussions right now.

ginger baker 04-07-2009 08:58 PM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
"I don't think any of that is true. Do you have examples or evidence you could give?"

CEO's who pursue the narrow economic interests of stockholders at the expense of the public good? Scientists doing lab research under controlled environments? Want examples, just look around. More perversely, just think of network news and typical beltway pundits giving us the petty "objective" analysis which is forgotten a week later. Ever read Thomas Kuhn? Max Weber? John Dewey?

The bottom line is that professional requirements tend to constrain the scope of inquiry & discussion. That's what "disciplines" do. So in times of systematic problems, systematic thinking is required.

osmium 04-07-2009 10:27 PM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
Quote:

Originally Posted by ginger baker (Post 109473)
At some point it becomes obvious that narrow vocational expertise becomes not just myopic in scope and judgment but willfully impotent and irresponsible. It applies especially to economists and public policy wonks who are blinded by their so-called "pragmatic" obsessions which not only exclude a wider perspective but actually conceal their own politics. "Rules" are operating procedures are endemic to political power....it cannot be denied. It must however be smashed.

And here I thought division of labor gave us the 20th century.

claymisher 04-07-2009 10:34 PM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
Quote:

Originally Posted by uncle ebeneezer (Post 109494)
Yeah, I tried and just couldn't get into this one. I love Noam, and sometimes like MM, but I think I'm just burnt out on financial discussions right now.

I know what you mean. I'm burnt out too. I've come to the conclusion that the problem is too big for any one person to understand. I've been reading a blog called Economics of Contempt which is written by a securities lawyer, and he's always pointing out howlers by A lister. Same with rortybomb, who's a risk-management guy. Simon Johnson from the IMF too. The best that the smartest and least ideologically pre-committed writers (Felix Salmon, eg) can do is to just link to them. But no obvious solution has emerged so far.

piscivorous 04-07-2009 11:56 PM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
How about this one Chinese financier Le Fang Wei indicted in plot to send nuclear materials to Iran I know it is not really on topic but it does show their cluelessness.

x9#z6 04-08-2009 01:48 AM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
Why not have institutions that are too big to fail and therefore implicitly require government backing pay a fee for this service same way you pay for your car insurance?

rfrobison 04-08-2009 01:51 AM

Re: Moral Hazard
 
Quote:

Originally Posted by nikkibong (Post 109484)
"Moral hazard," along with "meme," is one of those formerly elucidating terms that has been used (and abused) far too often by English speaking, um, "intellectuals," so much so, that I nearly wretch every time I hear it.

Indeed. And to add to my list of verbal pet peeves, how about: "meta-narrative" (or meta-anything, for that matter)? These are fluff words that people toss out in order to sound intellectual and they end up doing the opposite.

Grrr!

x9#z6 04-08-2009 02:07 AM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
I like Megan's drive to explain financial crashes as a stochastic process, however, her implication that we should just throw our hands up in the air (hey it's all random anyway) and forget about regulations is wrong. More or less regulation should, in part, determine the frequency of these events. I for one am for less frequent.

JonIrenicus 04-08-2009 03:30 AM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
Quote:

Originally Posted by bjkeefe (Post 109453)
Megan again? What, has it been four days already?

make it every 3 days, she is one of my favorites

DenvilleSteve 04-08-2009 07:31 AM

finance generals fighting the last war
 
I think the expression about generals fighting the last war applies here.

Going forward, the fear for the economy is the fed is inflating the money supply and the democrat's government is running $trillion+ annual deficits. I am more interested in a discussion of the crises to come instead of crises past. ( if financial institutions become too big to fail, simply force them to break up when they reach that threshold. done. move on. )

Government deficit spending is immoral. it is an imposition of a debt obligation by the majority democrats on the minority republicans. Republicans from New England have no representation in the house of representatives. What right does the government have to impose a debt obligation on a people who have no say in that government?

bjkeefe 04-08-2009 09:34 AM

Re: finance generals fighting the last war
 
Quote:

Originally Posted by DenvilleSteve (Post 109534)
Republicans from New England have no representation in the house of representatives.

For which they have no one to blame except the Republican Party. You can hardly expect people to vote for an unappealing message, not to mention a track record of incompetence. As much as you might like to blame everything on the "Democrat Party," it's been the GOP since Reagan that has been the party of fiscal irresponsibility, and the current Congressional Republicans continue to show no sign of maturity. Their obsession over trivialities in the stimulus bill and their "alternative budget" proposal were beyond jokes.

Kandigol 04-08-2009 10:15 AM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
Very interesting, very good discussion, even for the economically non-initiated.

Simon Willard 04-08-2009 10:51 AM

Re: finance generals fighting the last war
 
Quote:

Originally Posted by DenvilleSteve (Post 109534)
...the fear for the economy is the fed is inflating the money supply and the democrat's government is running $trillion+ annual deficits. I am more interested in a discussion of the crises to come instead of crises past.

If you think you can predict the future, you should act on it. Not only will you come out ahead, but you will have a stabilizing effect on the entire system. I'm not being sarcastic; I share your fear. Huge deficits imply future inflation, so take out a big 30-year loan on a big house.

Looking toward the future is very important. This whole crisis would have been attenuated if only more of the bankers had better instincts about the future.

Quote:

Originally Posted by DenvilleSteve (Post 109534)
If financial institutions become too big to fail, simply force them to break up when they reach that threshold. done. move on.

I agree. In fact, break up any big company.

Quote:

Originally Posted by DenvilleSteve (Post 109534)
Government deficit spending is immoral. it is an imposition of a debt obligation by the majority democrats on the minority republicans. Republicans from New England have no representation in the house of representatives. What right does the government have to impose a debt obligation on a people who have no say in that government?

You are right again, but you have identified the wrong victims. Our children, the poor and seniors will suffer greatly from the inflation to come.

Simon Willard 04-08-2009 10:57 AM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
Quote:

Originally Posted by x9#z6 (Post 109531)
I like Megan's drive to explain financial crashes as a stochastic process, however, her implication that we should just throw our hands up in the air (hey it's all random anyway) and forget about regulations is wrong. More or less regulation should, in part, determine the frequency of these events. I for one am for less frequent.

I'm not sure that's quite the right attitude. I want more frequent crashes, but smaller crashes. I want daily crashes! Daily booms and busts. That's what keeps things in equilibrium, and fairly priced. Regulation can help do this when it promotes transparency.

bjkeefe 04-08-2009 11:21 AM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
Quote:

Originally Posted by JonIrenicus (Post 109533)
make it every 3 days, she is one of my favorites

I direct your attention to a fine post by graz that I wish he had placed in this thread.

AemJeff 04-08-2009 11:40 AM

Re: Moral Hazard
 
Quote:

Originally Posted by rfrobison (Post 109530)
Indeed. And to add to my list of verbal pet peeves, how about: "meta-narrative" (or meta-anything, for that matter)? These are fluff words that people toss out in order to sound intellectual and they end up doing the opposite.

Grrr!

I have to "grrr" back at ya. "Meta" has a specific meaning (it makes a level distinction, and points out degrees of self-reference) and just generally serves an extremely useful purpose. Misuse of the term, on the other hand, is just as irritating as you say. Conflating perfectly well-formed usages with pretense and damning all of it clouds the issue at least as much as the annoying misuse does.

nikkibong 04-08-2009 01:49 PM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
Noam, you're a married man!!!!!

http://bloggingheads.tv/diavlogs/188...2:43&out=22:48

piscivorous 04-08-2009 02:12 PM

Re: finance generals fighting the last war
 
Quote:

Originally Posted by DenvilleSteve (Post 109534)
I think the expression about generals fighting the last war applies here.

Going forward, the fear for the economy is the fed is inflating the money supply and the democrat's government is running $trillion+ annual deficits. I am more interested in a discussion of the crises to come instead of crises past. ( if financial institutions become too big to fail, simply force them to break up when they reach that threshold. done. move on. )

Government deficit spending is immoral. it is an imposition of a debt obligation by the majority democrats on the minority republicans. Republicans from New England have no representation in the house of representatives. What right does the government have to impose a debt obligation on a people who have no say in that government?

I would agree that the massive print spree that we are undertaking is likely laying the foundation for the next financial slow down. It will take some artful managing to avoid what has historically been the response to a too active printing press; and being inflation. From what I have seen so far I don't believe that this particular crew is capable of it so I would agree we are headed into a long term inflationary spiral.

I would have to disagree that knee jerk reaction that all deficit spending is immoral. Was it immoral for President Eisenhower to use deficit spending to build the interstate highway system. Was it immoral for President Roosevelt to use deficit spending to bring electricity to all rural America? Infrastructure structure spending, that will benefit multiple generations, by it's very nature should be financed by all of the generations that are likely to benefit from that infrastructure. Deficit spending to rescue a bunch of companies, individuals and institutions on the other hand seems to me to be boarding on immoral if not evil.

AemJeff 04-08-2009 02:30 PM

Re: finance generals fighting the last war
 
Quote:

Originally Posted by piscivorous (Post 109561)
I would agree that the massive print spree that we are undertaking is likely laying the foundation for the next financial slow down. It will take some artful managing to avoid what has historically been the response to a too active printing press; and being inflation. From what I have seen so far I don't believe that this particular crew is capable of it so I would agree we are headed into a long term inflationary spiral.

I would have to disagree that knee jerk reaction that all deficit spending is immoral. Was it immoral for President Eisenhower to use deficit spending to build the interstate highway system. Was it immoral for President Roosevelt to use deficit spending to bring electricity to all rural America? Infrastructure structure spending, that will benefit multiple generations, by it's very nature should be financed by all of the generations that are likely to benefit from that infrastructure. Deficit spending to rescue a bunch of companies, individuals and institutions on the other hand seems to me to be boarding on immoral if not evil.

Wow, Pisc. You almost made a good point in that second graf, but, then you fell right off the cliff at the last moment. Please explain the distinction between the national economy and "a bunch of companies, individuals and institutions."

Sheesh.

popcorn_karate 04-08-2009 02:53 PM

Re: finance generals fighting the last war
 
pisc was making a distinction between infrastructure and bailing out companies. It seems like a valid distinction to me.

You could make the argument that we are spending on our financial infrastructure - but that is a bit of a stretch.

AemJeff 04-08-2009 03:04 PM

Re: finance generals fighting the last war
 
Quote:

Originally Posted by popcorn_karate (Post 109566)
pisc was making a distinction between infrastructure and bailing out companies. It seems like a valid distinction to me.

You could make the argument that we are spending on our financial infrastructure - but that is a bit of a stretch.

He was, I agree. His implicit assumption that it's a binary choice is false. The mostly implicit indication that one of those choices is better, prima facie, is, at best, arguable.

Pisc likes arguments in the form of broadsides. I like to point out the flimsiness of that approach.

rfrobison 04-08-2009 07:04 PM

Re: Moral Hazard
 
Quote:

Originally Posted by AemJeff (Post 109546)
I have to "grrr" back at ya. "Meta" has a specific meaning (it makes a level distinction, and points out degrees of self-reference) and just generally serves an extremely useful purpose. Misuse of the term, on the other hand, is just as irritating as you say. Conflating perfectly well-formed usages with pretense and damning all of it clouds the issue at least as much as the annoying misuse does.

That's a perfectly legitimate point, Jeff. I used "moral hazard" the other day in a context (and hopefully) manner that was appropriate. I guess the heart of my complaint is when people use high-fallutin' terms, either because it's part of their professional jargon, or because it sounds impressive, when a simple layman's term will do--though long-winded explanations are a pain in the neck as well. That strikes me as a simple courtesy to the uninitiated.

DenvilleSteve 04-08-2009 07:27 PM

Re: finance generals fighting the last war
 
Quote:

Originally Posted by piscivorous (Post 109561)
I would have to disagree that knee jerk reaction that all deficit spending is immoral. Was it immoral for President Eisenhower to use deficit spending to build the interstate highway system. Was it immoral for President Roosevelt to use deficit spending to bring electricity to all rural America? Infrastructure structure spending, that will benefit multiple generations, by it's very nature should be financed by all of the generations that are likely to benefit from that infrastructure. Deficit spending to rescue a bunch of companies, individuals and institutions on the other hand seems to me to be boarding on immoral if not evil.

I would not be surprised to learn that the interstate highway and electrical grid projects paid for themselves within 10 years. The current day equivalent is the wiring and routers for the internet. Likely already paid for.

There is no reason to borrow to pay for infrastructure repair and upgrade, however. And I dont see how borrowing to spur the economy works at any amount. But if they are going to do it they have to pay it back by the end of obama's first term.

I am an eternal optimist that republicans will arrive on the political scene to propose spending cuts to balance the budget. None of this Eric Cantor crap where he proposes a democrat lite alternative because even he thinks we have to spur the economy out of the recession.

pampl 04-08-2009 07:36 PM

Re: finance generals fighting the last war
 
Quote:

Originally Posted by DenvilleSteve (Post 109586)
There is no reason to borrow to pay for infrastructure repair and upgrade, however. And I dont see how borrowing to spur the economy works at any amount. But if they are going to do it they have to pay it back by the end of obama's first term.

Nitpick: this is completely false.

mikeo 04-08-2009 09:32 PM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
Can we have a four day gap in between your posts? thx man

bjkeefe 04-08-2009 09:42 PM

Re: Trust Us, We're Experts (Noam Scheiber & Megan McArdle)
 
Quote:

Originally Posted by mikeo (Post 109599)
Can we have a four day gap in between your posts? thx man

Heh. Sure. If each of my comments are read out loud, and they each get to be 75 minutes long.

[Added] Also, you have to agree that on the day that I post, no one else gets to post for the next 24 hours.

AemJeff 04-08-2009 11:19 PM

Re: Moral Hazard
 
Quote:

Originally Posted by rfrobison (Post 109580)
That's a perfectly legitimate point, Jeff. I used "moral hazard" the other day in a context (and hopefully) manner that was appropriate. I guess the heart of my complaint is when people use high-fallutin' terms, either because it's part of their professional jargon, or because it sounds impressive, when a simple layman's term will do--though long-winded explanations are a pain in the neck as well. That strikes me as a simple courtesy to the uninitiated.

Fair enough. The single biggest influence on how I think (to the extent that that's an issue for anybody... pausing to allow the sound of crickets to assert itself in the silence) was almost certainly Douglas Hofstadter's Gödel, Escher, Bach, which, among other things, is a pretty detailed study of the idea of self-reference. I've been using and abusing "meta-" for decades, so I may be a little touchy...

piscivorous 04-09-2009 01:10 AM

Re: finance generals fighting the last war
 
Quote:

Originally Posted by DenvilleSteve (Post 109586)
I would not be surprised to learn that the interstate highway and electrical grid projects paid for themselves within 10 years. The current day equivalent is the wiring and routers for the internet. Likely already paid for.

Yes they have paid for themselves many times over. But I don't think the analogy is incorrect. Both the interstate and rural electrification were government (politically) directed and driven. The wiring of the US has been and still is essentially private sector driven. Yes the government through law and dictate set some some requirements, but are so far behind the technological curve that they are generally functionally obsolete. A proper analogy would be for the government to drive forward with bringing high speed internet to all of America. There are satellite services now that if expanded could accomplish that in 5-10 years instead of running glass; a decades long adventure that will be supplanted anyways.

Quote:

Originally Posted by DenvilleSteve (Post 109586)
There is no reason to borrow to pay for infrastructure repair and upgrade, however. And I dont see how borrowing to spur the economy works at any amount. But if they are going to do it they have to pay it back by the end of obama's first term.

I would agree that repair should not be financed. But there are upgrades that need to be financed. The changes we need to make to the national electrical grid are not so much for today but for the benefit of the children being born today. I lived in Ft. Worth, Tx in the late 80s early 90s. Ft. Worth was one ot the leed cities in the interstate program. The main exit to the city coming from Dallas was one of the earliest cloverleaf interchanges built. Doing 25 mph could be an interesting experience, the turns were so tight. It was packed to the edges with industrial commercial property and housing projects. Redoing this interchange was not a project that you could pay for out of the cash till.

Quote:

Originally Posted by DenvilleSteve (Post 109586)
I am an eternal optimist that republicans will arrive on the political scene to propose spending cuts to balance the budget. None of this Eric Cantor crap where he proposes a democrat lite alternative because even he thinks we have to spur the economy out of the recession.

While Americans are now paying the price for living an over leveraged life style we have a political class that has failed to grasp that concept and believes that evermore borrowing will solve the problem. This fancy bank bailout scheme of Secretary Geithner's will windup being a transfer of tax dollars to the institutions that gambled and lost. A select group of wealthy investors will pocket most of what gains there are likly to be so the only losers are who! Yes it should help recapitalize the banks but I'm a keep it simple kind of guy and would prefer that it be handled in a more forthright manner.


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