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Saturday, February 27, 2010


Andrew Samwick is frustrated with his party:

Have Republicans Forgotten the Purpose of a Political Party?, by Andrew Samwick: Leave aside the broader health care reform debate and what the Democrats want out of this process.  Why are the Republicans not using their elected offices to advance policies that serve their own supporters?

Their main voting constituency is middle class (or higher) white families in the suburbs, particularly the husbands and fathers in that constituency.  They don't face the raft of problems that others do in our society.  But one big problem that they do face is that something beyond their control happens to someone in their family.  Medical catastrophes have to rank high on that list -- they certainly do for me.  If a member of my family were to be afflicted with an expensive medical condition, then I am financialy viable only for as long as I stay insured with my current employer.  Put simply, there are gaps in private insurance markets that leave such families exposed.  This is plain to see and should be the focus of Republican efforts on health care reform, along the lines that I have discussed over the past six months (most recently here).

 Paul Krugman  sums it up pretty well:

What really struck me about the meeting, however, was the inability of Republicans to explain how they propose dealing with the issue that, rightly, is at the emotional center of much health care debate: the plight of Americans who suffer from pre-existing medical conditions. In other advanced countries, everyone gets essential care whatever their medical history. But in America, a bout of cancer, an inherited genetic disorder, or even, in some states, having been a victim of domestic violence can make you uninsurable, and thus make adequate health care unaffordable.

You don't succeed as a political party by denying other political parties the opportunity to craft policy that serves their constituents.  You succeed as a political party when you craft policy that serves your constituents.  Even naked self-interest by the two political parties should be generating better results than what we are seeing.

Dean Baker is frustrated with the media (surprise):
Dean Baker, Open Mic: Fannie Mae lost another $15 billion in the last quarter. The media has done a truly horrible job reporting on this loss and the losses from its sister institution Freddie Mac.
Fannie and Freddie buy mortgages from banks. This is all they do. If they are losing money, this means that they paid too much money to the banks for these mortgages.
This is exactly what the original TARP program was designed to do. The large ongoing losses at Fannie and Freddie mean that the Treasury Department is effectively running TARP through Fannie and Freddie. However, it is doing this with a complete end-run around Congress. There are no restrictions whatsoever on the Fannie and Freddie TARP money. The Treasury can give as much money to Lloyd Blankfein, Jamie Dimon and the rest of the banker crew with no accountability whatsoever.
It is interesting to ask where the Tea Partiers are on this one. Apparently they have no problem with "big government" handing tens of billions of taxpayer dollars to rich Wall Street bankers. They only get upset when they think that some of their money might be used to provide poor people with health care. There's nothing like principles in politics.

John Quiggin is frustrated with zombies:

Invulnerable zombies: the Efficient Markets Hypothesis. by John Quiggin: Discussion on my last post on reanimated zombie ideas in economics touched on a lot of the themes I want to talk about in this one, about the efficient markets hypothesis and why this undead monster can never be laid to rest. (Warning: favorable references to Popper ahead!).
The ultimate zombie is one that is completely invulnerable. Neither special bullets nor hammer blows nor even decapitation can finally lay this undead being to rest. But dramatic logic requires that a zombie invulnerable to external threats must be subject to a subtle, but ultimately terminal, flaw that ends in its own destruction.
Ultimate zombies arise quite commonly in science and economics in the form of ideas that are immune from refutation. The classic examples arise from the popularized versions of Freudian psychology, centered on the Oedipus complex, named for the Greek tragic hero who unknowingly killed his father and married his mother. If a son hates his father, this is, obviously, evidence of the Oedipus complex. But, if he loves his father, this is explained as a repressed Oedipus complex. With rules like this, Freudian psychology can never be refuted.
But as a string of philosophers of science, being with the late Karl Popper, have shown, a theory that can’t be refuted by any conceivable evidence isn’t really a theory at all. All it says, in the end, is ‘anything can happen, and probably will’.
The global financial crisis, along with the earlier dotcom crisis has shown that, on any ordinary understanding of its terms, the efficient markets hypothesis can’t be right. Despite reaching a scale and sophistication unparalleled in history, global financial markets have shown themselves subject to the same manias, bubbles and busts that were seen in the Dutch tulip craze of the 17th century.
So supporters of the efficient markets hypothesis have sought a redefinition that would make it invulnerable to refutation. Their central argument is one that has already been discussed  - if it is possible to diagnose the existence of a bubble, then it is possible to make arbitrarily large profits betting against it. And if someone like Warren Buffett has in fact done this, that can be put down to luck. Only if everybody can make money betting against the market can the EMH be wrong. But of course, it’s impossible for everyone to bet against the market – the market is just the aggregate of bets....
As far as macroeconomics is concerned, the experience of the Great Depression and of the current Global Financial Crisis ... is pretty strong evidence that neoliberalism is not the right policy, at least not for all occasions and not in the forms that prevailed in the 1920s or the 1990s.

But the ultimate response to this invulnerable zombie must be the same as Popper on Freudian psychology. If the Great Depression, the dotcom boom and bust and the current Global Financial Crisis are all consistent with the efficient markets hypothesis, the hypothesis can’t tell us much of interest about anything. At most, it says that even when markets are way out of line with economic reality, it is hard to exploit this fact to make a profit. Most of us (me and Krugman at any rate) already knew that, and confined ourselves to getting out of stocks when they seemed absurdly overvalued. 

Update: Paul Krugman is also frustrated with the media:

You’re So Vain, by Paul Krugman: Jonathan Chait and Robert Waldmann, in slightly different ways, highlight a crucial dynamic in American political debate: the extent to which public figures are punished for actually knowing what they’re talking about.
It goes like this: Person A says “Black is white” — perhaps out of ignorance, although more often out of a deliberate effort to obfuscate. Person B says, “No, black isn’t white — here are the facts.”
And Person B is considered to have lost the exchange — you see, he came across as arrogant and condescending.
I had, I have to admit, hoped that the nation’s experience with George W. Bush — who got within hanging-chad distance of the White House precisely because Al Gore was punished for actually knowing stuff — would have cured our discourse of this malady. But no. Why not?
Chait professes himself puzzled by the right’s intellectual insecurity. Me, not so much. Here’s how I see it: in our current political culture, the background noise is overwhelmingly one of conservative platitudes. People who have strong feelings about politics but are intellectually incurious tend to pick up those platitudes, and repeat them in the belief that this makes them sound smart. (Ezra Klein once described Dick Armey thus: “He’s like a stupid person’s idea of what a thoughtful person sounds like.”)
Inevitably, then, such people react with rage when they’re shown up on their facts or basic logic — it’s an attack on their sense of self-worth.
The truly sad thing, though, is the way much news reporting goes along with the condescension meme. That’s Waldmann’s point. You really, really might have expected that the Bush experience would give reporters pause — that they might at least ask themselves, “Isn’t it my job to ask whether a politician is right, as opposed to how he comes across?”
But NOOOO! [/Belushi]

I'm frustrated with, among other things, Congress. "Action from Congress to stimulate jobs has been woefully inadequate."

What are you frustrated about?

    Posted by on Saturday, February 27, 2010 at 09:36 AM in Economics | Permalink  Comments (70)


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