Wall Street thread made me think.
I think we are entering a period when a perhaps decisive discourse/clash between various ways of economic thinking wil take place.
I know, these discussions never went away formally, but were the major sides REALLY that different in practice? Seemed like a general balance between "free market" and a welfare state stabilized.
Now we know, it stabilized on cross-loaning and virtual money, which was pissed away and stolen freely by governments, businessmen, and the general public.
This system is now increasingly challenged from both sides - some want drastically more redistribution and state oversight, others drastically less. The topic of a drastic change is back on the -mostly- mainstream table once again after quite many decades.
And I am not only talking about the Hipsterify Wall Street or the Teabaggers, but also more drastic proposals in terms of the EUs future and such.
Discuss, or tear apart.
Well I don't know. I think entrenched interests profit from the system too much for any effective political challenge besides the frustrated screams of the dispossessed. Any political party who tries to challenge the system will be shouted down as extremist and insane and so forth.
No. Coddled western societies have allowed themselves to indulge in idiotic philosophizing and politicizing when real economics keep paying for their societies.
We, the grown ups, are paying for the idiots who keep increasing in number. We are not getting differing economic views. We are rather coming to a point where the effects of the abdication of responsibility for the economy by the masses is being noticed by the masses.
I think the big question is if the masses will acquire economic literacy by learning from others or if they will acquire it by learning from experience.
I don't think that there actually are real and/or meaningful differences. There is a school of thought that represents the best of what we currently know about macroeconomics, and there is a brand of charlatanism being pushed by people who profit from that charlatanism being thought of as a legitimate economic theory.
Quote from: Viking on October 18, 2011, 08:12:22 AM
No. Coddled western societies have allowed themselves to indulge in idiotic philosophizing and politicizing when real economics keep paying for their societies.
We, the grown ups, are paying for the idiots who keep increasing in number. We are not getting differing economic views. We are rather coming to a point where the effects of the abdication of responsibility for the economy by the masses is being noticed by the masses.
I think the big question is if the masses will acquire economic literacy by learning from others or if they will acquire it by learning from experience.
Wait wait...what is this historical epic when the masses were savvy with economics and ran the economy?
Quote from: DGuller on October 18, 2011, 08:17:05 AM
I don't think that there actually are real and/or meaningful differences. There is a school of thought that represents the best of what we currently know about macroeconomics, and there is a brand of charlatanism being pushed by people who profit from that charlatanism being thought of as a legitimate economic theory.
:yeahright:
in an easy-to-digest format:
http://www.youtube.com/watch?v=d0nERTFo-Sk
http://www.youtube.com/watch?v=GTQnarzmTOc
Quote from: Valmy on October 18, 2011, 08:21:24 AM
Quote from: Viking on October 18, 2011, 08:12:22 AM
No. Coddled western societies have allowed themselves to indulge in idiotic philosophizing and politicizing when real economics keep paying for their societies.
We, the grown ups, are paying for the idiots who keep increasing in number. We are not getting differing economic views. We are rather coming to a point where the effects of the abdication of responsibility for the economy by the masses is being noticed by the masses.
I think the big question is if the masses will acquire economic literacy by learning from others or if they will acquire it by learning from experience.
Wait wait...what is this historical epic when the masses were savvy with economics and ran the economy?
I think it was the same era when a man could hold open a door for a woman and not get slapped, and when cigarettes gave you chest hair rather than cancer.
Quote from: Warspite on October 18, 2011, 08:28:00 AM
I think it was the same era when a man could hold open a door for a woman and not get slapped
That only happens if he uses it as an opportunity to pinch your bum.
Quote from: Tamas on October 18, 2011, 08:01:55 AM
...
This system is now increasingly challenged from both sides - some want drastically more redistribution and state oversight, others drastically less. The topic of a drastic change is back on the -mostly- mainstream table once again after quite many decades.
And I am not only talking about the Hipsterify Wall Street or the Teabaggers, but also more drastic proposals in terms of the EUs future and such.
First of all I am tired of hearing these OWS protesters dismissed as grungy youngsters when there are numerous reports of good standing citizens protesting alongside them. <_<
-----
As for your question - this is nothing new - merely the old opposition between 'liberty' and 'equality' that is surfacing again. Since the fall of the USSR the US has been trumpeting the superiority of its model...whose limits we now have reached.
G.
Quote from: Valmy on October 18, 2011, 08:21:24 AM
Quote from: Viking on October 18, 2011, 08:12:22 AM
No. Coddled western societies have allowed themselves to indulge in idiotic philosophizing and politicizing when real economics keep paying for their societies.
We, the grown ups, are paying for the idiots who keep increasing in number. We are not getting differing economic views. We are rather coming to a point where the effects of the abdication of responsibility for the economy by the masses is being noticed by the masses.
I think the big question is if the masses will acquire economic literacy by learning from others or if they will acquire it by learning from experience.
Wait wait...what is this historical epic when the masses were savvy with economics and ran the economy?
The epoque with the economics savvyness of the people is the one immediately following an economic catastrophy or an economic miracle. Edwardian Englishmen were dogmatic free traders, post-WWII Germans were dogmatic sound moneyists.
It's not really an golden age of economic literacy, but I suggest that economic literacy is a function of recent economic change.
We are not entering an age where an alternative to liberal free market economics is being proposed, rather that were are in a situation where there is anger at the inability of the market to provide the value that people have assumed would be provided.
There's still only the same two groups: the non-hackers who want others to pay for them and the contributors who keep society in business.
I heard one of the protestors interviewed yesterday and I think he nailed it (by the way this was a real homeless person who had lost their job and cant afford to live in this city anymore). When questioned as to what he and the others were protesting he said he didnt know for sure. There are just a lot of unhappy people that dont see much of a future.
I dont think this has anything to do with fundamentally different economic views. The big debates around the world now are how much money should go to various budget line items or not. That may change is some leader emerges who proposes a plan which incorporates an alternative economic model but has happened yet and likely wont. Most of the protestors seem to be people that want to reform the current system in some way not people who want to tear it down.
ie For every Grallon there are an uncountable multitude.
Quote from: crazy canuck on October 18, 2011, 11:43:05 AM
... Most of the protestors seem to be people that want to reform the current system in some way not people who want to tear it down.
ie For every Grallon there are an uncountable multitude.
And since we know things won't change until they bust - I shall be proven right in the end. <_<
G.
Quote from: Grallon on October 18, 2011, 12:55:03 PM
And since we know things won't change until they bust - I shall be proven right in the end. <_<
G.
If you define "bust" as the world melting when the Sun expands to the point that it envelopes the Earth then yes I suspect you will be proven correct in the end.
Quote from: crazy canuck on October 18, 2011, 12:59:10 PM
If you define "bust" as the world melting when the Sun expands to the point that it envelopes the Earth then yes I suspect you will be proven correct in the end.
Be in denial if you must. *shrug*
G.
Quote from: Grallon on October 18, 2011, 01:14:49 PM
Quote from: crazy canuck on October 18, 2011, 12:59:10 PM
If you define "bust" as the world melting when the Sun expands to the point that it envelopes the Earth then yes I suspect you will be proven correct in the end.
Be in denial if you must. *shrug*
G.
You as well with your dreams of the streets running with rivers of blood. This isn't Revelations. :rolleyes:
Quote from: garbon on October 18, 2011, 01:17:24 PM
You as well with your dreams of the streets running with rivers of blood. This isn't Revelations. :rolleyes:
I dunno, I'll believe the End Times are upon us - if the Leafs win the Stanley Cup.
Quote from: Malthus on October 18, 2011, 01:19:49 PM
Quote from: garbon on October 18, 2011, 01:17:24 PM
You as well with your dreams of the streets running with rivers of blood. This isn't Revelations. :rolleyes:
I dunno, I'll believe the End Times are upon us - if the Leafs win the Stanley Cup.
Well, the Winnipeg Jets are back in the NHL... :ph34r:
Quote from: Malthus on October 18, 2011, 01:19:49 PM
Quote from: garbon on October 18, 2011, 01:17:24 PM
You as well with your dreams of the streets running with rivers of blood. This isn't Revelations. :rolleyes:
I dunno, I'll believe the End Times are upon us - if the Leafs win the Stanley Cup.
I refer you to my earlier comment regarding the Sun enveloping the Earth...
At least you say the sun enveloping the Earth. There isn't anyone more obnoxious than assholes who say "until the sun goes supernova." Ignorant fucks.
Re: the OP, yes. And I was there way before it was cool. It's no fun to be a Kassandra. <_<
I don't think there is that much of a difference really. I think there's a sense that the old model in the UK and US is more or less broken and there's not yet a replacement. I don't think there are any coherent real, meaningful different economic views out there yet. There are fumbling grasps towards that but we're still in a crisis. I don't think any differences will really emerge, or debate get really going when the world's economy is still in fire fighting mode.
But I'd add that there I think the debates will take place within the context of a generally free market economy. But I remember worrying at the start of the crisis that it would lead to protectionism on a large scale, to countries turning in on themselves, to a failure and collapse of international cooperation on the economy.
If you look at the West I think we're closer than ever. The differences between the UK and US when Bretton Woods was being worked out, or between the US and Europe in the 70s are far wider than what we have now. The debates were far more contentious. The real, meaningful difference is in world power, the economy worries about sub-par growth figures from China. How long we can continue with a system in which the IMF's money is mostly going to developed Europe being paid for, in large part, by the developing world isn't clear.
Quote from: Ideologue on October 18, 2011, 02:39:50 PM
At least you say the sun enveloping the Earth. There isn't anyone more obnoxious than assholes who say "until the sun goes supernova." Ignorant fucks.
Whether the Sun will ever envelop the Earth is a matter of some debate. I've seen modeling for both.
Quote from: Grallon on October 18, 2011, 01:14:49 PM
Quote from: crazy canuck on October 18, 2011, 12:59:10 PM
If you define "bust" as the world melting when the Sun expands to the point that it envelopes the Earth then yes I suspect you will be proven correct in the end.
Be in denial if you must. *shrug*
G.
Give us a date then. Or at least a time frame.
Quote from: Neil on October 18, 2011, 07:13:28 PM
Quote from: Ideologue on October 18, 2011, 02:39:50 PM
At least you say the sun enveloping the Earth. There isn't anyone more obnoxious than assholes who say "until the sun goes supernova." Ignorant fucks.
Whether the Sun will ever envelop the Earth is a matter of some debate. I've seen modeling for both.
Well, close enough for a colloquialism. It'll certainly sterilize it (but of course that will occur a few billion years prior as it brightens; iirc, the time limit is about two billion years for any life that relies on liquid water). I mean the folks who think the sun will straight-up explode, instead of swell and shed its outer layers as a planetary nebula in the process of becoming a white dwarf.
It's going to be beautiful.
:)
Not if nobody's around to see it.
Quote from: DGuller on October 18, 2011, 08:17:05 AM
I don't think that there actually are real and/or meaningful differences. There is a school of thought that represents the best of what we currently know about macroeconomics, and there is a brand of charlatanism being pushed by people who profit from that charlatanism being thought of as a legitimate economic theory.
Would you mind expanding on this?
It seems to me in a very general way that two things can be stated about economies:
1) no amount of risk management can properly account for black swans. That's why they're black swans; they're unknown unknowns, to steal Rummy's poetry. You can mitigate some things - maybe even most things - but some things are unforseeable and potentially worse than could be forseen.
2) economic strategies that work well in bullish markets may not be the same strategies that work well in bearish ones...and the strategies that seem to work acceptably in either may not work at all in a complete unforseen catastrophe. See #1. If anything, the turbulent nature of the global economy is at least itself a partial endorsement of *both* laissez-faire notions and at least somewhat Keynesian interventionism, depending on the market conditions at the time - and also depending on the muscularity of the regulations in place.
Quote from: Peter Wiggin on October 18, 2011, 11:58:35 PM
Not if nobody's around to see it.
By that point, we should all have been brute force resurrected.
You don't really see black swans in the economy though. Maybe the only one I can think of in recent years is the fallout from the 9-11 attacks.
Quote from: Peter Wiggin on October 18, 2011, 11:58:35 PM
Not if nobody's around to see it.
Season 1 (I think episode 2) of the Dr. Who reboot proves you wrong.
Quote from: Neil on October 19, 2011, 08:33:05 AM
You don't really see black swans in the economy though. Maybe the only one I can think of in recent years is the fallout from the 9-11 attacks.
O_O 9/11. The tsunami. Deepwater Horizon. How deeply the Euro crisis would affect the global economy. That's just off the top of my head.
Quote from: fahdiz on October 19, 2011, 11:03:07 AM
Quote from: Neil on October 19, 2011, 08:33:05 AM
You don't really see black swans in the economy though. Maybe the only one I can think of in recent years is the fallout from the 9-11 attacks.
O_O 9/11. The tsunami. Deepwater Horizon
9-11 I mentioned. I just don't think that the natural disasters or the oil spill had an especially major impact.
QuoteHow deeply the Euro crisis would affect the global economy. That's just off the top of my head.
No, that was extremely predictable. That's like saying that the subprime meltdown was a black swan.
They were both black swans for a lot of people who went about their business ignoring the problems, even if it was directly related to the issues.
Quote from: fahdiz on October 19, 2011, 11:03:07 AM
Quote from: Neil on October 19, 2011, 08:33:05 AM
You don't really see black swans in the economy though. Maybe the only one I can think of in recent years is the fallout from the 9-11 attacks.
O_O 9/11. The tsunami. Deepwater Horizon. How deeply the Euro crisis would affect the global economy. That's just off the top of my head.
If a major corporation - much less a government - doesn't have risk management programs in place for those sort of eventualities then they're not doing significant risk management at all IMO.
I mean my wife is doing her actuarial exams, and one of the assignments is advising a grocery chain on how to manage risks in the eventuality of a major pandemic.
You can't necessarily predict if and when a pandemic will hit (or other natural catastrophes), but you certainly can assess the risk and plan to mitigate them.
And yeah, if you don't prepare for systemic failures like the Euro crisis then you're not managing risk at all.
Quote from: Neil on October 19, 2011, 08:33:05 AM
You don't really see black swans in the economy though. Maybe the only one I can think of in recent years is the fallout from the 9-11 attacks.
That's the thing about black swans. You don't see them coming up. You only rationalize them in hindsight.
Quote from: Razgovory on October 19, 2011, 02:14:20 PM
Quote from: Neil on October 19, 2011, 08:33:05 AM
You don't really see black swans in the economy though. Maybe the only one I can think of in recent years is the fallout from the 9-11 attacks.
That's the thing about black swans. You don't see them coming up. You only rationalize them in hindsight.
Yeah, but if you think about the economic crisis, everyone knew that it was going to happen except for the suckers who were being played by their bankers.
Incidently, I'm reading the Black Swan right now. I just got it in the mail the other day. It is interesting.
Quote from: fahdiz on October 19, 2011, 12:58:00 AM
1) no amount of risk management can properly account for black swans. That's why they're black swans; they're unknown unknowns, to steal Rummy's poetry. You can mitigate some things - maybe even most things - but some things are unforseeable and potentially worse than could be forseen.
Black swans are not the issue - capitalist economies don't experience financial crises because of unexpected, extreme low probability events; rather capitalist economies are inherently prone to cycically recurring financial crises. It is a certainty that it will happen; the only uncertainty is the precise timing of a severe experience. Risk management can be used to mitigate the impact of such events but only if the proper incentives are in place to do so.
Pretty much all future-regarding economic activity - whether characterized as investment or speculation - involves consideration and analysis of "unknown unknowns" - which is a big reason why the RE framework and DSGE models don't work except under conditions of relative stablity. Ie even something really basic like figuring out cash flows from Project X in year 4 involves considering potentially infinite variety of factors many of which there is just zero tangible information to support; the mainstream framework however in effect treats this as a simple pre-determined probability model akin to predicting the relative probabilities and outcomes of roulette wheel spins. Keynes pointed all this out decades ago, but that aspect of his work was mostly ignored until recently. For a more contemporary take try: http://www.amazon.com/Beyond-Mechanical-Markets-Asset-Swings/dp/0691145776
Thanks for that, Joan. That's something to chew on.
Speaking of which (and as a good illustration how things changed, which kinda supports Tamas's original point), I wanted to go to The Economist's website and typed in http://theeconomist.com/
Irony does not begin to describe it. :lol:
Quote from: Viking on October 18, 2011, 08:33:52 AM
Quote from: Valmy on October 18, 2011, 08:21:24 AM
Quote from: Viking on October 18, 2011, 08:12:22 AM
No. Coddled western societies have allowed themselves to indulge in idiotic philosophizing and politicizing when real economics keep paying for their societies.
We, the grown ups, are paying for the idiots who keep increasing in number. We are not getting differing economic views. We are rather coming to a point where the effects of the abdication of responsibility for the economy by the masses is being noticed by the masses.
I think the big question is if the masses will acquire economic literacy by learning from others or if they will acquire it by learning from experience.
Wait wait...what is this historical epic when the masses were savvy with economics and ran the economy?
The epoque with the economics savvyness of the people is the one immediately following an economic catastrophy or an economic miracle. Edwardian Englishmen were dogmatic free traders, post-WWII Germans were dogmatic sound moneyists.
It's not really an golden age of economic literacy, but I suggest that economic literacy is a function of recent economic change.
We are not entering an age where an alternative to liberal free market economics is being proposed, rather that were are in a situation where there is anger at the inability of the market to provide the value that people have assumed would be provided.
Uhm, you do realize that recessions and depressions did happen before WW2, and they were much more painful/destructive than what we have now, right?
Quote from: fahdiz on October 19, 2011, 12:58:00 AM
Quote from: DGuller on October 18, 2011, 08:17:05 AM
I don't think that there actually are real and/or meaningful differences. There is a school of thought that represents the best of what we currently know about macroeconomics, and there is a brand of charlatanism being pushed by people who profit from that charlatanism being thought of as a legitimate economic theory.
Would you mind expanding on this?
It seems to me in a very general way that two things can be stated about economies:
1) no amount of risk management can properly account for black swans. That's why they're black swans; they're unknown unknowns, to steal Rummy's poetry. You can mitigate some things - maybe even most things - but some things are unforseeable and potentially worse than could be forseen.
2) economic strategies that work well in bullish markets may not be the same strategies that work well in bearish ones...and the strategies that seem to work acceptably in either may not work at all in a complete unforseen catastrophe. See #1. If anything, the turbulent nature of the global economy is at least itself a partial endorsement of *both* laissez-faire notions and at least somewhat Keynesian interventionism, depending on the market conditions at the time - and also depending on the muscularity of the regulations in place.
I think the recent years simply show that ultimately we have no idea. The global economy is a confidence game with a nearly countless number of actors. I think advanced physics would describe it better than any actual economic theory. This confidence has now largely evaporated and hence we are seeing a downturn even though most likely people today are not less productive than they were 5 years ago.
People in the streets and elsewhere panicking because politicians seem to have no way to stop this, and I don't think they will have. We just need to wait until the turbulences stop. For now it's a free fall.
Quote from: Jacob on October 19, 2011, 02:12:00 PM
Quote from: fahdiz on October 19, 2011, 11:03:07 AM
Quote from: Neil on October 19, 2011, 08:33:05 AM
You don't really see black swans in the economy though. Maybe the only one I can think of in recent years is the fallout from the 9-11 attacks.
O_O 9/11. The tsunami. Deepwater Horizon. How deeply the Euro crisis would affect the global economy. That's just off the top of my head.
If a major corporation - much less a government - doesn't have risk management programs in place for those sort of eventualities then they're not doing significant risk management at all IMO.
I mean my wife is doing her actuarial exams, and one of the assignments is advising a grocery chain on how to manage risks in the eventuality of a major pandemic.
You can't necessarily predict if and when a pandemic will hit (or other natural catastrophes), but you certainly can assess the risk and plan to mitigate them.
And yeah, if you don't prepare for systemic failures like the Euro crisis then you're not managing risk at all.
Yeah, that's the cause of the current pain. Not that the crisis happened, but because so many institutions were completely careless during the fat years and just thought it will continue indefinitely (I read recently that apparently a lot of major corporations slashed pension funds of their employees during the era, because they were "too big" as stock prices rose exponentially - this, not the crisis, is a reason why many people are now left with no pension.)
Quote from: Martinus on October 20, 2011, 03:04:50 AM
I think the recent years simply show that ultimately we have no idea. The global economy is a confidence game with a nearly countless number of actors. I think advanced physics would describe it better than any actual economic theory. This confidence has now largely evaporated and hence we are seeing a downturn even though most likely people today are not less productive than they were 5 years ago.
People in the streets and elsewhere panicking because politicians seem to have no way to stop this, and I don't think they will have. We just need to wait until the turbulences stop. For now it's a free fall.
Yes. I think it is ridicoulous to think that local national tinkering with economic policies can have a guaranteed effect in today's world. They just make things worse, as they pump up false confidence and in turn reckless risk-taking which is bound to fail.
Regulations are powerful tools for politicans and their allies in the financial world to get unfair advantage over the rest. They should be minimized, not extended.
Quote from: Martinus on October 20, 2011, 02:56:10 AM
Quote from: Viking on October 18, 2011, 08:33:52 AM
The epoque with the economics savvyness of the people is the one immediately following an economic catastrophy or an economic miracle. Edwardian Englishmen were dogmatic free traders, post-WWII Germans were dogmatic sound moneyists.
It's not really an golden age of economic literacy, but I suggest that economic literacy is a function of recent economic change.
We are not entering an age where an alternative to liberal free market economics is being proposed, rather that were are in a situation where there is anger at the inability of the market to provide the value that people have assumed would be provided.
Uhm, you do realize that recessions and depressions did happen before WW2, and they were much more painful/destructive than what we have now, right?
I don't know what you learned in school, but in west germany they learned that the weimar inflation was the first step in getting hitler. That's why the germans were paranoid about losing the mark.
Quote from: Tamas on October 20, 2011, 03:17:36 AM
Quote from: Martinus on October 20, 2011, 03:04:50 AM
I think the recent years simply show that ultimately we have no idea. The global economy is a confidence game with a nearly countless number of actors. I think advanced physics would describe it better than any actual economic theory. This confidence has now largely evaporated and hence we are seeing a downturn even though most likely people today are not less productive than they were 5 years ago.
People in the streets and elsewhere panicking because politicians seem to have no way to stop this, and I don't think they will have. We just need to wait until the turbulences stop. For now it's a free fall.
Yes. I think it is ridicoulous to think that local national tinkering with economic policies can have a guaranteed effect in today's world. They just make things worse, as they pump up false confidence and in turn reckless risk-taking which is bound to fail.
Regulations are powerful tools for politicans and their allies in the financial world to get unfair advantage over the rest. They should be minimized, not extended.
I don't know about "false confidence". There is no such thing as false vs. non-false confidence when it comes to the market. We need people to start buying stuff again - this will prop up the economy. If it needs "false confidence" to convince them to do so, so be it.
And I disagree we need more deregulation. The global market is an amorphous, almost "natural" force that is produced by our collective greed, and it certainly is not one that produces desireable results when unchecked.
I agree that national regulations are largely useless but that's because a national government is simply no match for the global market. We need international/global regulations however. Unchecked globalization is neither ethical nor pretty.
You are like someone arguing that since regulating rivers/protecting against floods at a township level is unfair (because, if one city builds a levee, the water will flood another town down the river) we should abandon any attempts to regulate them altogether. I am saying that no, we should regulate but take into account a bigger picture and not just particular interests of individual townships.
Quote from: Martinus on October 20, 2011, 03:23:47 AM
I don't know about "false confidence". There is no such thing as false vs. non-false confidence when it comes to the market. We need people to start buying stuff again - this will prop up the economy. If it needs "false confidence" to convince them to do so, so be it.
This is the EXACT sentiment which got us here in the first place.
Quote from: Tamas on October 20, 2011, 04:03:08 AM
Quote from: Martinus on October 20, 2011, 03:23:47 AM
I don't know about "false confidence". There is no such thing as false vs. non-false confidence when it comes to the market. We need people to start buying stuff again - this will prop up the economy. If it needs "false confidence" to convince them to do so, so be it.
This is the EXACT sentiment which got us here in the first place.
Yeah, but it's true. Mind you, it won't happen anymore because the 'consumer confidence' model has reduced the largest, most affluent group of consumers, Americans, to poverty.
Quote from: Martinus on October 20, 2011, 02:56:10 AM
Uhm, you do realize that recessions and depressions did happen before WW2, and they were much more painful/destructive than what we have now, right?
And this last one would have been like that had it not been for the post-WW2 welfare states and their automatic fiscal stabilizers, and Paulson and Bernanke firing their trillion dollar bazooka.
Quote from: Tamas on October 20, 2011, 04:03:08 AM
Quote from: Martinus on October 20, 2011, 03:23:47 AM
I don't know about "false confidence". There is no such thing as false vs. non-false confidence when it comes to the market. We need people to start buying stuff again - this will prop up the economy. If it needs "false confidence" to convince them to do so, so be it.
This is the EXACT sentiment which got us here in the first place.
The problem is that although mass consumer spending is the ultimate driver of a capitalist economy, where wages and median incomes are stagnant (as has been the case in the US for some time now), that engine can be fueled only by consumer debt or asset bubbles. And since ultimately the former can only be financed or collateralized by the latter, US economic growth has become dependent on figuring out ways to inflate asset values.
Back in 1976, Hyman Minsky warned of the dangers of adopting economic policies aimed at directly encouraging investment instead of protecting worker income levels. He admitted the investment promotion strategy could and would increase growth but at the cost of greater instability as absent growth in labor incomes, such growth can be sustained only by turning up the treadmill faster and faster. What was happened since then is an extreme version of the scenario he warned against.
Ultimately, the income "inequality" problem however denoted is inextricably connected with America's economic problems generally.
Quote from: The Minsky Moment on October 19, 2011, 05:39:55 PM
Black swans are not the issue - capitalist economies don't experience financial crises because of unexpected, extreme low probability events; rather capitalist economies are inherently prone to cycically recurring financial crises. It is a certainty that it will happen; the only uncertainty is the precise timing of a severe experience. Risk management can be used to mitigate the impact of such events but only if the proper incentives are in place to do so.
Pretty much all future-regarding economic activity - whether characterized as investment or speculation - involves consideration and analysis of "unknown unknowns" - which is a big reason why the RE framework and DSGE models don't work except under conditions of relative stablity. Ie even something really basic like figuring out cash flows from Project X in year 4 involves considering potentially infinite variety of factors many of which there is just zero tangible information to support; the mainstream framework however in effect treats this as a simple pre-determined probability model akin to predicting the relative probabilities and outcomes of roulette wheel spins. Keynes pointed all this out decades ago, but that aspect of his work was mostly ignored until recently. For a more contemporary take try: http://www.amazon.com/Beyond-Mechanical-Markets-Asset-Swings/dp/0691145776
Your second paragraph pretty well describes what black swans are, so I think black swans are the issue. Extreme events of this sort aren't quantifiable using a standard statistical model, primarily because the large number of variables and the relatively small amount of data available make it wholly inadequate to the task.
Quote from: frunk on October 20, 2011, 09:08:24 AM
Your second paragraph pretty well describes what black swans are
Except that black swans are supposed to be about extreme events.
The reality is that non-extreme or even relative commonplace events can be destabilizing. The last crisis was not triggered by any extreme event - just a garden variety slow-down in the housing market.
Could we please stop the ensuing nerdrage and Languish-"debate" over what the fuck a black swan is? Who cares?
Interesting stuff Minsky, I'll have to read up on that, well, Minsky fellow.
Quote from: Tamas on October 20, 2011, 09:29:53 AM
Could we please stop the ensuing nerdrage and Languish-"debate" over what the fuck a black swan is? Who cares?
Get off your fucking high beet wagon and let the debate flow.
JR,
What did Minsky propose for protecting worker incomes rather than inflating assets?
Quote from: Tamas on October 20, 2011, 09:29:53 AM
Could we please stop the ensuing nerdrage and Languish-"debate" over what the fuck a black swan is? Who cares?
Interesting stuff Minsky, I'll have to read up on that, well, Minsky fellow.
http://www.amazon.com/Black-Swan-Impact-Highly-Improbable/dp/1400063515
Luckily I just picked up this book last week, so I'm with the class on this one. :D
Quote from: Tamas on October 20, 2011, 09:29:53 AM
Could we please stop the ensuing nerdrage and Languish-"debate" over what the fuck a black swan is? Who cares?
:huh:
It's a movie about a ballerina.
Quote from: Peter Wiggin on October 20, 2011, 10:01:06 AM
Quote from: Tamas on October 20, 2011, 09:29:53 AM
Could we please stop the ensuing nerdrage and Languish-"debate" over what the fuck a black swan is? Who cares?
:huh:
It's a movie about a ballerina.
And its on netflix if you missed it.
Quote from: crazy canuck on October 20, 2011, 09:39:07 AM
JR,
What did Minsky propose for protecting worker incomes rather than inflating assets?
Progressive direct taxation of income and heavy taxation of estates.
Negative income tax
"ELR" - Government to act as employer of last resort via souped-up New Deal-type programs
Expanded government role in financing investment in infrastructure and housing
"Peace among nations" - Minsky believed that although armaments production could have a stimulative impact, that in the long-run such expenditures were de-stabilizing because of their built-in rapid obsolescence and capital-intensivity
It's worth pointing out that like Keynes, H. Minsky frowned upon the pursuit of GDP growth for its own stake. One can query whether his program may be naive in the context of a competitive state system where economic muscle translates into military and diplomatic potential.
Quote from: The Minsky Moment link as heard by Crazy Canuck
Wah wah wah wah wah
Wah wah wah
Wah wah wah wah wah
Wah wah wah wah wah wah wah
"Peace among nations" - Minsky believed that although armaments production could have a stimulative impact, that in the long-run such expenditures were de-stabilizing because of their built-in rapid obsolescence and capital-intensivity
You are better then that Ide.
Quote from: Razgovory on October 20, 2011, 10:35:03 AM
You are better then that Ide.
:rolleyes:
It's just a little joke. CC's a good guy and a grownup. I didn't hurt his feelings.
ETA: and to be clear, I wasn't saying he wouldn't understand it, just that he doesn't particularly like those things. There, I explained the joke, are you happy?
Quote from: Peter Wiggin on October 20, 2011, 10:01:06 AM
Quote from: Tamas on October 20, 2011, 09:29:53 AM
Could we please stop the ensuing nerdrage and Languish-"debate" over what the fuck a black swan is? Who cares?
:huh:
It's a movie about a ballerina.
Ok Martinus
Quote from: The Minsky Moment on October 20, 2011, 09:17:08 AM
Except that black swans are supposed to be about extreme events.
The reality is that non-extreme or even relative commonplace events can be destabilizing. The last crisis was not triggered by any extreme event - just a garden variety slow-down in the housing market.
It's about extreme consequences from otherwise commonplace events. A housing slowdown wasn't unexpected. The impact that had on a large number of banks and the economy at large was.
Quote from: Tamas on October 20, 2011, 10:47:58 AM
Quote from: Peter Wiggin on October 20, 2011, 10:01:06 AM
Quote from: Tamas on October 20, 2011, 09:29:53 AM
Could we please stop the ensuing nerdrage and Languish-"debate" over what the fuck a black swan is? Who cares?
:huh:
It's a movie about a ballerina.
Ok Martinus
Dude. Mila Kunis and Natalie Portman dyking it up. That movie would bore Mart.
Mart: WHERE ARE THE FEET? WORST MOVIE EVER!!!
Quote from: Ed Anger on October 20, 2011, 11:36:21 AM
Quote from: Tamas on October 20, 2011, 10:47:58 AM
Quote from: Peter Wiggin on October 20, 2011, 10:01:06 AM
Quote from: Tamas on October 20, 2011, 09:29:53 AM
Could we please stop the ensuing nerdrage and Languish-"debate" over what the fuck a black swan is? Who cares?
:huh:
It's a movie about a ballerina.
Ok Martinus
Dude. Mila Kunis and Natalie Portman dyking it up. That movie would bore Mart.
Mart: WHERE ARE THE FEET? WORST MOVIE EVER!!!
I think you misstepped with that one. There is a lot of focus on feet, as after all, it is a movie about ballerinas. :P
Quote from: garbon on October 20, 2011, 11:42:48 AM
Quote from: Ed Anger on October 20, 2011, 11:36:21 AM
Quote from: Tamas on October 20, 2011, 10:47:58 AM
Quote from: Peter Wiggin on October 20, 2011, 10:01:06 AM
Quote from: Tamas on October 20, 2011, 09:29:53 AM
Could we please stop the ensuing nerdrage and Languish-"debate" over what the fuck a black swan is? Who cares?
:huh:
It's a movie about a ballerina.
Ok Martinus
Dude. Mila Kunis and Natalie Portman dyking it up. That movie would bore Mart.
Mart: WHERE ARE THE FEET? WORST MOVIE EVER!!!
I think you misstepped with that one. There is a lot of focus on feet, as after all, it is a movie about ballerinas. :P
:blush: :lol:
Quote from: Ed Anger on October 20, 2011, 11:36:21 AM
Quote from: Tamas on October 20, 2011, 10:47:58 AM
Quote from: Peter Wiggin on October 20, 2011, 10:01:06 AM
Quote from: Tamas on October 20, 2011, 09:29:53 AM
Could we please stop the ensuing nerdrage and Languish-"debate" over what the fuck a black swan is? Who cares?
:huh:
It's a movie about a ballerina.
Ok Martinus
Dude. Mila Kunis and Natalie Portman dyking it up.
:hmm:
Quote from: frunk on October 20, 2011, 11:31:25 AM
Quote from: The Minsky Moment on October 20, 2011, 09:17:08 AM
Except that black swans are supposed to be about extreme events.
The reality is that non-extreme or even relative commonplace events can be destabilizing. The last crisis was not triggered by any extreme event - just a garden variety slow-down in the housing market.
It's about extreme consequences from otherwise commonplace events. A housing slowdown wasn't unexpected. The impact that had on a large number of banks and the economy at large was.
:yeahright: I think it was quite expected. It's not like it wasn't a common knowledge that a lot of derivatives were based on the housing market, or that derivatives can blow up in a spectacular way.
Quote from: frunk on October 20, 2011, 11:31:25 AM
It's about extreme consequences from otherwise commonplace events.
Historically its not that extreme.
Quote from: The Minsky Moment on October 20, 2011, 08:49:09 AM
Quote from: Martinus on October 20, 2011, 02:56:10 AM
Uhm, you do realize that recessions and depressions did happen before WW2, and they were much more painful/destructive than what we have now, right?
And this last one would have been like that had it not been for the post-WW2 welfare states and their automatic fiscal stabilizers, and Paulson and Bernanke firing their trillion dollar bazooka.
It isn't too late for it to turn that way, and the long-term effects are similar. The 2000s were a lost decade for most people, and the 10s and perhaps the 20s will probably be the same.
Quote from: Martinus on October 20, 2011, 03:04:50 AM
I think the recent years simply show that ultimately we have no idea. The global economy is a confidence game with a nearly countless number of actors. I think advanced physics would describe it better than any actual economic theory.
There are actually a number of people trying to do just that.
Quote from: DGuller on October 20, 2011, 12:19:16 PM
:yeahright: I think it was quite expected. It's not like it wasn't a common knowledge that a lot of derivatives were based on the housing market, or that derivatives can blow up in a spectacular way.
A good reason we should update and reinstate Glass-Steagall.