Arnold Kling  


The IS-LM Model Attacked and D... Business Reality vs. Wonk Theo...

Russ Roberts writes,

Who really writes the latest financial regulations, where the devil is in the details? Who has a bigger incentive to pay attention to their content -- financial insiders such as the executives of large financial institutions or you and me, the outsiders? Why would you ever think that the regulations that emerge would be designed to promote international stability and growth rather than the naked self-interest of the financial community?

He says he is channeling me, but I am only channeling Murray Edelman.

Incidentally, a reader forwards me a question:

what do you think it would it take for the Federal Reserve to break up the largest financial institutions?

I think that the insider-outsider distinction gives you that answer. The only thing that would surprise me more than the Fed breaking up the big banks would be the Fed abolishing itself. Only an act of Congress could force the breakup of the big banks.

The WSJ blog has a nice chart showing that housing is still way below par in terms of its contribution to GDP. I predict that the housing depression will end as soon as the government ceases its clumsy efforts to prevent foreclosures. If we had not had these misguided programs, I believe that the market would be functioning by now.

Also from the WSJ blog, a claim that web searches are improving the job-matching process. If this is true, then it implies that the DMP model is not really of much help in explaining today's high unemployment.

Steven Pinker on the decline in violence over history. Self-recommending, as Tyler would say (although he has not used that phrase recently.)[ UPDATE: link fixed. sorry]

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CATEGORIES: Political Economy

COMMENTS (5 to date)
Sonic Charmer writes:

I disagree.

Obviously there's no question but that financial insiders attempt to influence things like Basel as much as they can. And, perhaps they can a lot. Certainly more so than the lay person. (How much should a lay person influence some esoteric regulation anyway?)

However, from what I have seen firsthand, the end resulting regulations do not resemble regulations written by insiders so much as they resemble regulations written by academics with little/no experience in the product they're regulating - which are then corrected/patched over only through the lobbying of financial institutions you speak of, to bring them back in the direction of something semi-sensible (but still not quite).

Such regulations seem to incorporate the worst effects both of top-down, central planning/the knowledge problem, as well as insider favoritism and crony capitalism. It's fine and good to complain about the latter but do not underestimate the former in shaping the monstrosity that results.

Gian writes:

Steven Pinker stays silent about the role of religion in reducing violence.
He rather links the decline in violence to the need of State and rulers that their subjects do not kill each other to the detriment of revenue.

But it can be argued that the rise of centralized states was only possible because of the decline in violence and that the religious precepts and the example of saints were leading factors.

Artturi B writes:

How do I access the Pinker talk? When I click it I get a movable type sign in page, but I don't have a account.

Silas Barta writes:
Also from the WSJ blog, a claim that web searches are improving the job-matching process.

Hahahahaha! Good one! Try getting a job through web searches and job sites (rather than through networking) using only your CV, and report back on your "tremendous" success. Sorry, but this is one thing the web hasn't helped much with, though admittedly some find jobs this way.

Norman Pfyster writes:

Financial institutions don't have an interest in stability and growth?

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