Arnold Kling  

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Tyler Cowen is everywhere. Here he gives what I call (borrowing the term from Steve Roach) the tallest pygmy theory of America in the world economy.


The major Austrian banks, for instance, have loans to eastern Europe equal to as much as 70 percent of their country's gross domestic product. The two largest Swiss banks, taken together, have assets four times larger than Switzerland's GDP. Even in the relatively large economy of Germany, the liabilities of Deutsche Bank have been measured at 80 percent of German GDP. These banks have grown too large to be handled or bailed out by their national governments. In the United States we talk about institutions that are "too big to fail," but in many parts of Europe it might be more apt to speak of those "too big to be saved."

Here he takes on Brad DeLong in a rather unilluminating debate on fiscal stimulus. Brad would rather debate a straw man than engage an opponent.

Finally, here he talks about blogging and his thought process. You can see that, unlike Brad, he is not focused on win-lose in economic arguments. Instead, he wants people to see the strengths and weaknesses of various positions.

Nick Szabo criticizes but takes seriously my imperialist/militarist theory of the originas of money.


We both seem to agree that the traditional economists' explanation of money emerging from a barter market that otherwise obeyed the principles of efficient modern markets is not historically sound (although I do believe it is theoretically and empirically sound as a theory of the way things can happen -- money-like intermediate commodities can and have been observed to emerge from barter markets). Where we may differ, and perhaps not by much, is on the role of coercion. I believe that both coercive and voluntary transactions (and transactions that partook of both components) were important, and that the voluntary transactions were not efficient market exchanges

Lawrence Kotlikoff and Jeff Sachs on the bailouts.

The Geithner-And-Summers Plan (GASP) to buy toxic assets from the banks is rightly scorned as an unnecessary give-away by virtually every independent economist who has looked at it. Its only friends are the Wall Street firms it is designed to bail out.

From Razib comes a link to this study, in which postmenopausal women were randomly given either estrogen, testosterone, or a placebo to see how it affected their behavior in economic experiments.

There was no significant effect of estrogen or testosterone on any of the studied behaviors.

I still believe that gender affects decision-making, particularly at the executive level. As I said in an earlier post, if I were the systemic risk regulator and could control one variable at financial firms, it would be the gender of the CEO.

Perhaps the next experiment could be to take CEO's of failed financial firms, not necessarily as volunteers, and randomly castrate half of them. I suspect that this experiment would find significant effects on risk taking, particularly if it were announced in advance as applying to firms that currently are healthy.


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COMMENTS (5 to date)
cm writes:
Perhaps the next experiment could be to take CEO's of failed financial firms, not necessarily as volunteers, and randomly castrate half of them. I suspect that this experiment would find significant effects on risk taking, particularly if it were announced in advance as applying to firms that currently are healthy.
Don't give the administration new regulatory ideas.
El Presidente writes:

Arnold,

Perhaps the next experiment could be to take CEO's of failed financial firms, not necessarily as volunteers, and randomly castrate half of them.

All that would do is increase the number of risk-taking female CEOs. They may be rarer, but they certainly exist, and this would give them a comparative advantage in taking risk. Perverse incentives, right? Go directly to Jail. Do not pass Go. Do not collect bonus points for practical regulatory solutions. :-)

What do you base your gender preference on?

With respect to the Cowen v. DeLong royal rumble, I think Brad's point about taking the punch bowl away sooner is the best solution. I don't think it's a straw man, I think it's insightful and instructive. It speaks to the burden of being an effective regulator; you often have to do what virtually nobody wants you to do in order to prevent a great many people from experiencing great harm down the road. Why didn't we choose to let some air out of the bubble sooner? As I recall, temporary tax cuts were all the rage.

Tyler remarks:

I don’t doubt that the current stimulus plan will raise GDP figures for the year to follow and also raise employment by some amount. But then we’ll face a choice: either continue spending $800 billion each period to keep these jobs in place, or pull back the $800 billion and have those jobs go away.

Would he have made this argument about temporary CG tax cuts in the face of growing government expenditures (for war and stuff) and pursuit of a weak dollar policy? Deficits were bound to grow. Did anybody really think the administration and congress that instituted them were going to allow them to expire on their watch?

Tyler pays no attention to the ability of redistribution to change the comparative leverage at opposite ends of the income spectrum. The CG tax cuts enhanced the disparity. Redistribution through government programs has the potential to narrow it. This changes the way in which people will interact with one another going forward. It deemphasizes leverage and reemphasizes value.

Brad DeLong writes:

You really don't want me to take you at all seriously, do you?

fundamentalist writes:

"We both seem to agree that the traditional economists' explanation of money emerging from a barter market that otherwise obeyed the principles of efficient modern markets is not historically sound..."

That's an odd statement. What historical records does anyone have to show this? The oldest historical records I know of are in the Bible's Old Testament. Other than that, there is some stuff from ancient Sumeria, but money was already used at that time. I'm not aware of any ancient history that existed before money. In 2000 BC, Abraham bought and sold things with silver weighed in scales.

jb writes:

In all honesty, Prof. DeLong, I would hope he would care absolutely not a whit whether you took him seriously or not.

But given that he doesn't delete well-written comments that are critical of him from his blog like you do, the question, to me, is why we should take you seriously, since you obviously can't handle any form of dissent from the peons.


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