Bryan Caplan  

Two Quick Points on Kling v. Surowiecki

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1. Financial markets' support for the Paulson plan is hardly evidence that the plan was good for the overall economy.  After all, its essence was a massive transfer from taxpayers to financial markets.  This is just a bigger-scale version of the confused view that if a Detroit bail-outs raise the stock prices of GM, Ford, and Chrysler, it must be sound economic policy.

2. Am I the only one who finds it bizarre for Surowiecki to appeal to the "wisdom of crowds" after the debacle of 2008?  The main flaw with The Wisdom of Crowds is its inadequate search for evidence against its main thesis.  But in 2008, a massive counter-example bonked the world straight in the nose.


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COMMENTS (6 to date)
Tom A. writes:

You are not the only one.

Jacob Oost writes:

The "stimulus" plan is popular with the stock markets because it favors certain special interests.
Simple as that. The stock market is just a single indicator of economic performance, and it is far more reliable in periods of steady growth than during volatile times like now. Why are so many economists losing their heads lately?

megapolisomancy writes:

"After all, its essence was a massive transfer from taxpayers to financial markets."

There is an urgent need to analyze the bailout / stimulus mania from a public choice perspective, that's for sure.

If it will be agreed that the Paulson plan was just another wealth redistribution scheme, the support of progressive politicians and some "libertarians" would be very ironic.

rpl writes:

Bryan,

Have you or Arnold tried writing to Surowiecki to get his response to your criticisms. I think that a big part of what is wrong with our public discourse is that public intellectuals toss out these little gems and then take no further responsibility for them. If a writer/thinker has any intellectual integrity at all, then he should either defend or retract his ideas in the face of criticism.

caveat bettor writes:

Bryan, I think the wisdom of crowds works better with less government distortion. Do ya think the goverment chartered ratings agencies may have had a hand in the 2008 counterexample, by assigning triple-A's to junk? Once the crowd sees contracts trading on ratings, essentially the game is over, and the crowd is the last to know.

Melancholy Aeon writes:

Bryan, while James' argument 'tain't that great - the market isn't making a political point - yours against crowd wisdom isn't working for me either. What about the debacle invalidates crowd wisdom?

Please note the CDSs were concentrated in a relatively few hands, as it turns out, and the financial teams playing with those were relatively small in proportion to the overall size of the institutions - this wasn't a hula-hoop craze, in the end.

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