Casey Mulligan has designated this “WMD week” on his blog. His point is that the Bush Administration’s expensive (and liberty-sapping) efforts to avert financial disaster were as poorly justified as the invasion of Iraq to eliminate WMD.
Although I love the spirit of his task, my problem for some of his earlier posts was that Paulson et al. were claiming that their plan would avoid disaster–not that we would get disaster anyway. So since the plan passed, and disaster didn’t happen… You see the problem?
However, in today’s post, Mulligan looks at payroll data and argues that the scare-mongering clearly was bogus. He deals with my problem by pointing out the exact timing of when the TARP, er, CPP money actually reached the troubled banks. Further, he points out that you can’t even say, “Well, once the plan passed, the businesses knew help was in sight, so they went ahead and paid their employees.” Because remember, the whole point was that even sound businesses wouldn’t be able to use short-term credit markets to make payroll without giving the banks an injection of quick cash.
Sam Bostaph passed along this article with this shocking sentence:
Only one outside economist contacted by Obama aides, Harvard’s Greg Mankiw, who served on President Bush’s Council of Economic Advisers, voiced skepticism about the need for an economic stimulus, transition officials said.
I’m sorry everyone. I left my contact information with Governor Blagojevich’s office, but apparently he hasn’t been in communication with the President-Elect.
What a fantastic line from the CNN guy interviewing Ron Paul! Incidentally, Ron Paul lights it up in this interview. How many other people mention Mises, Hayek, and Rothbard, as if all the cool kids know these names? And check out his reaction to the Krugman reference. (HT2LRC)
Over the summer I helped Lawrence McQuillan at PRI with its new report, “The Sizzle of Economic Freedom,” that summarizes the empirical literature on the benefits of economic freedom. (Press release here, actual report pdf here.) The way it works is that there are a few fairly objective rankings of countries (or smaller regions such as US states) in terms of economic liberty. Then, economists have run regressions etc. to test whether economic liberty is a significant explanatory variable when it comes to things as diverse as GDP growth, unemployment, literacy rates, and childhood vaccination. I was surprised by how much empirical work has already been done in this area. It’s not just “blind faith” in markets anymore.
In an effort to boost ratings, we occasionally pass along titillating links. Reader Phil Maymin sent me his article comparing central banking to a government sperm bank (though he did not specify the analog of fiduciary media–OH!). And CNBC reports that the porn industry is looking for a bailout too. (Some bad double entendres are already in the article so I will spare you.)
Over at The Austrian Economists, Greg Ransom and I (plus some others) are arguing with Pete Boettke about the best way for Austrian economists to advance the school. I wisely said last night that I would be making my last post, so now honor forbids me from correcting the latest posts from Boettke (and now Roger Koppl) demanding an answer. Ah well, it’s probably all for the best. For sure the way NOT to advance Austrian economics is to devote more than one hour to a single thread on TAE.
Over at MasterResource I make another guest blog post, this time tackling Robert Bryce’s possibly premature concession on whether speculators were driving oil prices. I don’t really take a stand but just try to clarify the debate:
In the broadest sense, any price is caused by “supply and demand.” The prices for Las Vegas real estate in 2006, as well as for Dutch tulip bulbs in 1637, balanced the quantity demanded with the quantity supplied. Even at the height of a speculative bubble, sellers can only receive what buyers are willing to pay.
In the present context, however, it is common for people to contrast “the fundamentals” from mere “speculative demand.” In the case of oil, if demand has increased because factories need to run their machines harder or because refiners expect motorists to buy more gasoline, then that is deemed a legitimate, fundamental driver of higher oil prices. On the other hand, if hedge fund managers invest in oil futures contracts not because they forecast higher fundamental demand, but rather because they are simply betting that the market value of the contracts will appreciate, allowing the hedge fund to unload the contract before physical delivery, then that is considered pure speculation.
Incidentally, I knew when I wrote it that that last sentence was a bit long. But man, that last sentence is a bit long.
I’m not making this up. The actual headline is, “Hard-Hit Families Finally Start Saving, Aggravating Nation’s Economic Woes.” (HT2LRC) Here’s some great analysis from the nation’s “economically savvy” newspaper:
As layoffs and store closures grip Boise, these two local families hope their newfound frugality will see them through the economic downturn. But this same thriftiness, embraced by families across the U.S., is also a major reason the downturn may not soon end. Americans, fresh off a decadeslong buying spree, are finally saving more and spending less — just as the economy needs their dollars the most.
Usually, frugality is good for individuals and for the economy. Savings serve as a reservoir of capital that can be used to finance investment, which helps raise a nation’s standard of living. But in a recession, increased saving — or its flip side, decreased spending — can exacerbate the economy’s woes. It’s what economists call the “paradox of thrift.”
Good for you, American consumers! Too bad the government increased its debt by more than one trillion in 2008 on your behalf. (HT2 Tim Swanson)
If you would like a careful unpacking of the “paradox of thrift,” see my earlier article. It’s bad enough when the Nobel laureate brings it up, but now the Journal? Oh man.