The Politics of Economics
The Laurel and Hardy of left wing economic thought were at it again today. Actually, make that Hardy and Hardy.
Paul Krugman, in response to an interview where Obama tacitly approved of the bonuses granted to Jamie Dimon of JPMorgan and Lloyd Blankfein of Goldman Sachs, said, "How is it possible, at this late date, for Obama to be this clueless."
Not to be out done, Joseph Stiglitz, in a piece for Politico, called for another stimulus—ex post facto, and told us not to get caught up in all that angst over ever mounting deficits—you know, the deficits that were "out-of-control" when they were 80% smaller under George Bush.
If you follow politics and/or economics, you know that Krugman and Stiglitz are the go to guys when the left leaning media and liberal politicians are looking to validate progressive policy prescriptions with some academic heft. Seems reasonable on the surface. Both are Nobel laureates, after all. But, do you ever wonder how they earned the honor?
Let's examine Dr. Stiglitz a bit. Krugman has been in my cross hairs in a number of past blogs, so he gets a pass this time.
It's hard to find a progressive principle that doesn't have Stiglitz's stamp on it. He is often referred to as the most cited economist in the world. When one reviews his body of work, it's easy to see why those who favor an activist government look for his endorsement.
Stiglitz made his mark by "proving" that markets are not normally efficient. Standard economic theory held that markets are almost always efficient, except in some limited and well documented instances. In essence, Stiglitz made the case that the invisible hand is just that, invisible (i.e. doesn't exist). Furthermore, he "showed" that whenever markets are imperfect (which is regularly the case), then there is nearly always some government intervention which can induce superior outcomes.
Are you beginning to see why this research caught the eye of the folks in Norway?
Finally, someone and something to justify the Big Government utopian desires of the Nobel committee and their elitist brethren around the globe. Imagine, research that says it's not just okay for the government to intervene, but actually necessary if we want better outcomes. Social justice here we come.
Wow, what a breakthrough.
Apparently, no one considered that when Adam Smith and the other founding fathers of capitalism orthodoxy discussed efficient markets, they probably meant relatively, not perfectly efficient, nor did they mean efficient all the time? Guess that's why they explained how imbalances were typically corrected?
And, I imagine no one bothered to calculate the odds of ideologically aligned politicians coming up with flawless economic solutions to squeeze out incremental efficiency from all these imperfect markets? Come to think of it, I bet they also didn't figure the probability of the government actually making things much worse?
As pointed out numerous times in past blog entries, markets can and do break. There are occasions when intelligent intervention can produce better outcomes. However, one has to recognize that the likelihood of highly imperfect politicians coming up with perfect or near perfect solutions is quite remote. As such, the first instinct should be to let markets heal themselves. The near- or mid-term results may be painful, but not nearly as damaging as ill-advised intervention.
If we listen to the Hardy twins, Krugman and Stiglitz, it will be just another fine mess that they've gotten us into.
Paul Krugman, in response to an interview where Obama tacitly approved of the bonuses granted to Jamie Dimon of JPMorgan and Lloyd Blankfein of Goldman Sachs, said, "How is it possible, at this late date, for Obama to be this clueless."
Not to be out done, Joseph Stiglitz, in a piece for Politico, called for another stimulus—ex post facto, and told us not to get caught up in all that angst over ever mounting deficits—you know, the deficits that were "out-of-control" when they were 80% smaller under George Bush.
If you follow politics and/or economics, you know that Krugman and Stiglitz are the go to guys when the left leaning media and liberal politicians are looking to validate progressive policy prescriptions with some academic heft. Seems reasonable on the surface. Both are Nobel laureates, after all. But, do you ever wonder how they earned the honor?
Let's examine Dr. Stiglitz a bit. Krugman has been in my cross hairs in a number of past blogs, so he gets a pass this time.
It's hard to find a progressive principle that doesn't have Stiglitz's stamp on it. He is often referred to as the most cited economist in the world. When one reviews his body of work, it's easy to see why those who favor an activist government look for his endorsement.
Stiglitz made his mark by "proving" that markets are not normally efficient. Standard economic theory held that markets are almost always efficient, except in some limited and well documented instances. In essence, Stiglitz made the case that the invisible hand is just that, invisible (i.e. doesn't exist). Furthermore, he "showed" that whenever markets are imperfect (which is regularly the case), then there is nearly always some government intervention which can induce superior outcomes.
Are you beginning to see why this research caught the eye of the folks in Norway?
Finally, someone and something to justify the Big Government utopian desires of the Nobel committee and their elitist brethren around the globe. Imagine, research that says it's not just okay for the government to intervene, but actually necessary if we want better outcomes. Social justice here we come.
Wow, what a breakthrough.
Apparently, no one considered that when Adam Smith and the other founding fathers of capitalism orthodoxy discussed efficient markets, they probably meant relatively, not perfectly efficient, nor did they mean efficient all the time? Guess that's why they explained how imbalances were typically corrected?
And, I imagine no one bothered to calculate the odds of ideologically aligned politicians coming up with flawless economic solutions to squeeze out incremental efficiency from all these imperfect markets? Come to think of it, I bet they also didn't figure the probability of the government actually making things much worse?
As pointed out numerous times in past blog entries, markets can and do break. There are occasions when intelligent intervention can produce better outcomes. However, one has to recognize that the likelihood of highly imperfect politicians coming up with perfect or near perfect solutions is quite remote. As such, the first instinct should be to let markets heal themselves. The near- or mid-term results may be painful, but not nearly as damaging as ill-advised intervention.
If we listen to the Hardy twins, Krugman and Stiglitz, it will be just another fine mess that they've gotten us into.
Well said Chuck. The looters are never satisfied with the imperfect capitalist system, mostly because it doesn't provide "social justice" which is actually code for Marxist redistribution of wealth. The system that has provided more opportunity to more of its citizens, than any socialist utopia, is being not so slowly eroded by these progressive nitwits who believe that they always have a better answer for how to run everything. The largest most prosperous middle class in history is who will suffer, as these goofs enslave more and more of them with entitlements and government dependence. They want the power, plain and simple.
"the problem with socialism is you eventually run out of other peoples money"
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As you have stated (and proved) in the past, no one has been wrong more than Krugman. He is a master of WRONG. It's OK, the public is not as crazy as these two, or the bunch in the White House. November is only a baseball season away. No one tell the Dems the way out is to cut spending by 10% and then cut taxes. We'll save that solution for the Republicans.
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Hey, if you're talkin' about a Pittsburgh Pirates season, it could be an eternity!
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Chuck,loved the Laurel and Hardy reference. It takes us back to an era where history can validate your point. Consider the depression of 1920.Unemployment at 12% and GNP in double digit decline. Harding's actions to cut the federal budget by nearly half, slash taxes for all income groups, reduce national debt by one third while keeping the federal reserve on the sidelines,is in my opinion the intelligent intervention. Free markets were able to correct, by 1923 unemployment was at 2.4% and the economy was in full robust recovery. Compare this to the depression of 1929.In which the government employed Public works spending, massive deficit spending and inflationary monetary policy as the tools to recovery. All that only propelled the U.S. into the great depression lasting an entire decade.
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If only you were Treasury Secretary or Chairman of the Fed!
You know how they say history repeats itself? Well, not with the Dems in charge and when the history has to do with failsafe methods for fixing the economy.
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