Brink Lindsey Accuses Progressives of Peddling “Nostalgianomics”
Cato’s Brink Lindsey has an informative, but ultimately pretty strange, new research paper out titled “Paul Krugman’s Nostalgianomics: Economic Policies, Social Norms, and Income Inequality”. You could almost think of it as two papers, in fact. One an informative discussion titled “Economic Policies, Social Norms, and Income Inequality” looking at the transition from the low-inequality equilibrium of postwar America to the high-inequality equilibrium of the present day. And the other a kind of silly attack on Paul Krugman that accuses him of being a proponent of misguided “nostalgianomics.”
The basic shape of things, however, goes like this. For a long time, a lot of people just kind of shrugged off increasing levels of inequality as the inevitable result of broad impersonal forces—the terms “skill-biased technological change” and “superstar effect” came into play a lot here. More recently, a group of social science researchers and a group of progressive media figures have called attention to the substantial evidence that SBTC and superstar effects can’t account for the whole thing. Krugman is both a very prominent social scientist and a very prominent progressive media figure, so he’s played an important role in calling attention to this stuff. In his paper, Lindsey takes the unusual-for-a-libertarian tack of agreeing with Krugman (and others) that public policy changes have played an important role. But he argues that the changes have mostly been changes that, on net, are positive. So it’s wrong of Krugman to espouse nostalgianomics and support a return to the policies of the 1950s. Which is fine, except I read almost every Krugman column and I’ve read Conscience of a Liberal (and, indeed, other works of Krugmanania such as Pop Internationalism and Peddling Prosperity) and it’s not as if the book ends with a call for the return of comprehensive regulation of airline fares or the re-establishment of the AT&T monopoly. To observe that the growth of inequality has policy roots isn’t to say that the right response to it is to methodically reverse every policy change of the past thirty years. It’s simply to deny the previous conventional wisdom—that it would be impossible to reverse the growing inequality of our society.
Indeed, I think that in a lot of ways the most interesting recent research on inequality turns out to be about skill-biased technological change after all. Specifically, Claudia Goldin and Lawrence Katz argue in The Race Between Education and Technology that we shouldn’t look at SBTC as something that just comes along and causes inequality. Rather, it causes inequality when society fails to respond to SBTC by expanding the quantity of educated citizens. Seen in this light, the SBTC component of growing inequality is, indeed, a policy failure.
But more broadly, the generic “progressive” idea is that we should have a more progressive tax code that spends more money on egalitarian social welfare programs. That’s not a return to the 1950s. It’s an effort to ensure that the gains of the past 30 years worth of policy shifts are spread more equitably. More liberal immigration policy, for example, is good for immigrants and on net good for the economy, but it’s bad for low-wage native born workers. But it really is on net good for the economy. In principle, the pie could be redistributed (through tax-and-transfer or tax-and-service) such that everyone winds up with more pie than they had before (and the immigrants end up with much more pie) rather than giving huge additional pie slices to the richest people. And the same goes for most of this over stuff. That’s what I’m for, and I’m pretty sure it’s what Krugman’s for. Conscience ends with a call for universal health care, not with a call for a return of the ban on interstate banking.
52 Responses to “Brink Lindsey Accuses Progressives of Peddling “Nostalgianomics””
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February 10th, 2009 at 3:08 pm
There might be a whole lot more to addressing inequality, even through spending programs based on progressive taxation, than “egalitarian social welfare programs” (at least as conventionally defined), even if a good start. There is also the sensibility of investment and infrastructural and institutional innovations which produce a fundamentally fairer economy, rather than continually running to clean up its messes.
On the other hand, it would actually have been much, much better had we left our financial system unmodernized than allowed it to be Grammitized in the name of modernization.
February 10th, 2009 at 3:28 pm
“More liberal immigration policy, for example, is good for immigrants and on net good for the economy, but it’s bad for low-wage native born workers. But it really is on net good for the economy….”
Marginally.
When the National Research Council of the National Academy of Sciences http://www.nap.edu/catalog.php?record_id=5779 thoroughly examined the economic impact of immigration in 1997, their definitive estimate was that the HIGH end of the range of immigration’s economic impact was “as much as $10 billion”…. in a trillion dollar GNP.
That’s the equivalent of a dime on the sidewalk, when you have three twenties, a ten, four fives, eight singles, six quarters, ten pennies, four nickels and two more dimes in your pocket already: it’s a marginal value.
The NRC also concluded that while the benefits are all national, the costs are generally localized — California households pay $1,000 more in taxes, NJ $200+.
On the other hand, no less than Milton Friedman referred to certain aspects of our “immigration” policy (i.e.,g the NON-immigrant H-1B visa) as a “subsidy”.
So the economic argument for immigration, such as it is, is pretty flawed.
February 10th, 2009 at 3:28 pm
More liberal immigration policy, for example, is good for immigrants and on net good for the economy, but it’s bad for low-wage native born workers. But it really is on net good for the economy.
Another simplistic post from MattY; he should tell the last sentence to California. There are additional costs to that more “liberal” plan that a hack like MattY will never understand nor mention. For instance, that more “liberal” plan would give even more power inside the U.S. to foreign governments and would take away power from U.S. citizens. That has a huge cost, but it’s not factored in to MattY’s argument.
On a sidenote, if any of MattY’s readers want to block the stimulus, help me push this plan.
February 10th, 2009 at 3:38 pm
“More liberal immigration policy, for example, is good for immigrants and on net good for the economy, but it’s bad for low-wage native born workers. But it really is on net good for the economy.”
One of the dumbest things Matt has ever written. I mean, does Matt think immigration quotas were at their lowest during the New Deal era 1932- 1068 because new dealers were tying to screw workers? Oh, but that was the old fascist democratic party. You know, the one that didn’t believe in sacrificing workers, low wage or otherwise, to assauge Matt’s racial/identity politics guilt feelings.
February 10th, 2009 at 3:43 pm
transition from the low-inequality equilibrium of postwar America to the high-inequality equilibrium of the present day
Is it Lindsey who thinks we’re in a “high-inequality equilibrium now? Or you? I mean, who the heck thinks this is an “equilibrium” of any kind? Not me. I think we’re sinking like a rock. No doubt it’s been “positive” for some of Linsey’s friends (rich people like libertarian “ideas”), but it’s no equilibrium, and that’s because it’s not been positive for most people.
February 10th, 2009 at 3:45 pm
And anyway, why should we listen to someone named “Brink,” for heaven’s sake?
February 10th, 2009 at 3:48 pm
David – nice! The window dressing of words like “equilibrium to sound all economically truthy – they are such garbage.
Back to the fifties, I’d say. After all, didn’t Bush take us back to the roaring twenties? And where was Brink when that was going on?
February 10th, 2009 at 3:52 pm
Whoa– are you suggesting that someone from the Cato Institute is a filthy liar?
If not, I’ll step in and say it outright.
February 10th, 2009 at 3:53 pm
That “immigration quotas were at their lowest during the New Deal” had nothing to DO with the New Deal: the laws were enacted in 1917, 1921 and 1922, and didn’t take effect until the end of the 1920s, when Hoover was President.
The biggest immigration innovation during the 1930s was the use of a loophole in the country of origin quotas to allow professors to immigrate, which is how people like Fermi, Teller, Szilard, and so many others were allowed to enter outside the quotas.
February 10th, 2009 at 3:56 pm
A thought experiment for the anti immigration crowd: What is your attitude towards automation taking away low skilled jobs?
February 10th, 2009 at 4:03 pm
“A thought experiment for the anti immigration crowd: What is your attitude towards automation taking away low skilled jobs?”
Right – automation causes job losses. I mean, just look what happened when we started building shit on assembly lines. And the BushCo/Wall Street/corporate push for higher immigration quotas and amnesty was more evidence of their legendary regard for the living standards of working people.
February 10th, 2009 at 4:05 pm
I mean, does Matt think immigration quotas were at their lowest during the New Deal era 1932- 1068 because new dealers were tying to screw workers?
Er, no. The ahistorically low immigration quotas of the period you mention were in place mostly because Republican politicians correctly calculated that pandering to the anti-immigration sentiments of their constituents was likely to be awarded at the ballot box (both because anti-immigration voters appreciated such policies, and because sharply reducing immigration would tend to crimp the creation of new Democratic voters.).
My hunch would be that the sharp reduction in immigration during this period proved modestly helpful in redistributing income downward (it obviously wasn’t the only factor), but proved modestly unhelpful in expanding the amount of pie available on a per capita basis. I doubt there was much of an edge for the period 1930-1970 over 1970-2000 in per capita GDP expansion, for instance.
It’s hard for people — especially rabidly anti-immigration people like 24head — to accept it, but the evidence mostly shows that the modest levels of immigration permitted by Washington has a very small impact indeed on an economy as large as that of the US. Even with illegal immigration, we’re barely managing a net immigration rate of 1/3 of 1% these days. That’s just not that big a deal, especially when compared to, say, trade, globalization, etc., (when you’re dealing with 7 billion economic actors) and technological change. Anyway, here’s the ever-sensible Fred Zakaria’s take:
February 10th, 2009 at 4:07 pm
Note airlines (and interstate trucking) were deregulated by Carter.
The end of the ATT monopoly was not deregulation. It was regulation and, in particular, anti trust regulation. ATT obviously didn’t want to allow competing long distance carriers. They were forced to.
There were regulations — ATT had to provide telephone dial tone service at the same rate to everyone. There are regulations — the baby bells have to provide telephone dial tone service at the same rate to everyone.
Now there is a great advance — standards. The rule is that phone signals have to be standard so different companies can communicate with each other. Whose idea was that ? Sure wasn’t a product of the free market. It was forced on ATT by the Justice department.
I mean there are other great innovations like the internet. There have been great financial innovations like the 30 year mortgage. Oh and nice separate efforts fitting harmoneously together like the Chicago skyline. They all have something in common and it sure isn’t the invisible hand (or the Republican party or the Libertarian party).
February 10th, 2009 at 4:08 pm
Shhhh Matt, we are never supposed to mention Pareto optimal solutions unless it is to argue the benefits of free trade, after which point you forget the part about theoretically being able to implement the policy without making anyone worse off and start over again. Basically you are supposed to use Pareto optimal policies as an argument for free trade or other free market policies, but then you are to oppose any actual efforts to implement Pareto optimal policies after a move towards free trade and freer markets–because that would be socialism!
February 10th, 2009 at 4:12 pm
A fact for Eric K, using a distinction between “immigrant” and the Bush approach toward workers as economic units, rather than people: from 1942-1964, we had agricultural guestworkers in what was called the bracero program. Advocates first argued that we needed it for national security (all the men were in the military, all the women were in factories: who was going to pick the crops if not foreigners?); then braceros were supposed to be a good neighbor thing with Mexico (until we deported a million people a year in street sweeps), and finally the big growers who used the program insisted that Americans didn’t want to pay what it would cost for lettuce and tomatoes if they had to pay competitive wages.
Then the subsidy of guest workers was eliminated in 1964, and guess what? The price of those commodities, lettuce and tomatoes and so on, WENT DOWN.
When growers faced market forces for their labor, they prompted automated.
Progressives need to pull their heads out and make a BETTER, reality-based case for immigration: based on civics rather than bogus economics like we’ve seen in this post and thread.
February 10th, 2009 at 4:12 pm
Right – automation causes job losses. I mean, just look what happened when we started building shit on assembly lines.
Kafka: During the period in question, America was absorbing three to five times as many immigrants, proportionally, as she does now. It’s true that technology destroys a lot of jobs (and at the margin creates downward pressure on the wages of some workers). It’s also true that neither technology nor immigration causes a net destruction of jobs (or reduction in wages).
February 10th, 2009 at 4:12 pm
So far, so good. These are fact-based observations.
Here’s where Matt goes off the rails. Fact is, the principle he speaks of is currently pie-in-the-sky. If I were a low-wage citizen, based on my experience thus far, I might want to throttle back on the influx of folks competing in my labor market first, until such time as policies to actually redistribute the pie were already written into law.
February 10th, 2009 at 4:14 pm
What is your attitude towards automation taking away low skilled jobs?
Or automation taking away the human effort required to be the world’s biggest blogwhore?
February 10th, 2009 at 4:26 pm
Zakaria’s right to the extent that US immigration law is an atrocious mess, implemented by an underfunded bureaucracy, though he glosses over the fact that Canada (or Australia or NZ, with similar coherent immigration systems) have a degree of geographic insulation.
Thing is, the US-Mexico border has long served to offer social and economic arbitrage on both sides, and was set by MassiveImmigrationOMFG!1! of pale motherfuckers, regardless of what demented nativist bedwetters like Wackadoodle say.
(’sfunny, though, how faux-populists like LoudObbs don’t seem that interested in unions or employee protection.)
February 10th, 2009 at 4:33 pm
Krugman’s “nostalgianomics” — his liking for the 1950s America where he grew up — has done a lot to help him break out lately of the sterile boxes that so economists are trapped in intellectually. For example, it was only after his nostalgianomics article that he overcame Krugman’s deepseated emotional biases on the subject of immigration and started to take seriously Harvard’s George Borjas’s empirical work on how massive unskilled immigration is bad for unskilled Americans.
February 10th, 2009 at 4:37 pm
In the long run, economic historians will begin to understand how immigration was intimately tied into the Housing Bubble. Why, for example, was the vast majority of subprime mortgage money lost to defaults — the break that launched the world economic catastrophe — concentrated in four heavily-immigrant states: California, Nevada, Arizona, and Florida?
It now appears that something like 60-67% of subprime dollars defaulted during the Housing Bubble were by minorities.
February 10th, 2009 at 4:39 pm
If you want to know why Jasper is wrong, I’ve got thousands of posts about this issue, or just subscribe to my feed. You’ll learn all the things MattY, Jasper, and the like don’t know or won’t tell you.
However, the key think right now is to block the stimulus. If you don’t want the U.S. to get screwed out of trillions of dollars, help me promote that plan.
February 10th, 2009 at 4:41 pm
The straw that broke the camel’s back was likely George W. Bush’s campaign, arm-in-arm with Angelo Mozila of Countrywide, against requirements demanding downpayments on homes. Both Bush and Mozila repeatedly denounced downpayments as the chief barrier to closing the racial housing gap in America.
Bush, of course, wanted minorities to become homeowners in the hopes that this would make them more conservative and thus make them GOP voters. It might have worked a little in 2004, but the huge foreclosure rates among minorities backfired in 2008.
February 10th, 2009 at 4:50 pm
Matt says:
“Rather, it causes inequality when society fails to respond to SBTC by expanding the quantity of educated citizens.”
Of course, in the real world, government policy has been to expand the quantity of _uneducated_ resident noncitizens by not enforcing the laws against illegal immigration. In turn, this expands the quantity of less-educated American born citizens as the illegal immigrants have children in this country.
Young East Coast commentators like Matt (NYC->Boston->DC) are clueless about the long-run impact of immigration by Latin American peasants. They automatically assume new immigrants are just like their great-great-grandparents who arrived at Ellis Island, and their descendants will follow the same upward path. I’m sorry, but old Southern Californians like me know it doesn’t work that way. The recent book from sociologists at the UCLA Chicano Studies Center, “Generations of Exclusion,” documented that among 4th generation Mexican-Americans (who are the grandchildren of American-born Mexican-Americans!), the college graduation rate is 6% versus 35% for their Anglo counterparts.
The Housing Bubble was caused by the assumption that heavy Hispanic immigration was compatible with high home prices in California, Nevada, Arizona, and Florida. Thus, mortgage dollars lent to Hispanics for home purchases went up 691% from 1999 to 2006. The subsequent mortgage meltdown was largely triggered by proof that the populations of these four heavily Hispanic states can’t earn enough money to pay off these huge mortgages, nor can they find enough Greater Fools who want to pay even more to live in quasi-barrios.
February 10th, 2009 at 4:51 pm
“More liberal immigration policy, for example, is good for immigrants and on net good for the economy, but it’s bad for low-wage native born workers. But it really is on net good for the economy.”
As others have pointed out, that last sentence is correct in the exact same way every other globalist economic policy is correct. Namely, it works perfectly in theory but not so much in the real world.
Mike
February 10th, 2009 at 5:43 pm
This is one strange ideological brew on this page. More so than most comment-pages (is that word?) here.
February 10th, 2009 at 6:06 pm
Oy — then let’s cut through the bullshit: Steve Sailer is full of it.
Do the math — it wasn’t mortgage defaults that caused credit markets to freeze. (Repeat as necessary.) The total lost in mortgage defaults is a cup of coffee in the Atlantic Ocean of speculative losses, which is what sunk Iceland and is putting everybody else in deep kimchee: on the order of magnitude of 30:1 or more.
For the past 8 years, with the enthusiastic help of Bush ‘regulators’, Phil Gramm’s deregulation of derivatives, etc., allowed speculators to do with new technology what was forbidden (for damned good reason) with the old technology.
The collapse in the housing market was simply the pin that pricked the bubble.
But progressives who want to make a case for immigration need to do the math, too: Matt is simply WRONG in his blithe assumption that “More liberal immigration policy is …. on net good for the economy.”
This ain’t so, without understanding the difference between “immigration”, and what we have now (which includes a substantial reliance on “non-immigrant visas” to subsidize employers, as well as illegal immigration, which has even worse economic effects.
That’s why I cited the ACTUAL research on the subject. Folks need to do their homework. The actual economic impact of immigration is marginal, at best, with very localized costs: progressives can’t win a dishonest argument.
But an honest one t leads to a conclusion that CAP ought to embrace — the real case FOR immigration is CIVIC, not economic.
February 10th, 2009 at 7:18 pm
I’ve got thousands of p–
Here’s your problem, 24Wacko. Nobody is going to go near your obsessive-compulsive blog because you’ve spent the past five years spamming it. If you have an actual argument to make, make it here, instead of retreating into an ever-more-solipsistic set of tics laden down with YourOwnPrivateSpacelessJargon, then rushing off to spam the other 47 blogs that pop up on your RSS keyword search.
Prove that you’re interested in more than procuring traffic for cash and keeping the white supremacists in your own comments section frothing away. Because right now, the Turkish spammers who litter the bottom of open threads have more integrity than you.
February 10th, 2009 at 8:05 pm
How many immigrants invested in derivatives with 30-1 margins, eh?
February 10th, 2009 at 8:36 pm
I’m a little wary about becoming an economic crank, but it really seems to me that mainstream economists are missing something important when it comes to taxes and economic growth/vitality. Namely, that entrepreneurs are usually good for economic growth/vitality, but rentiers are usually not, and that low-tax, laissez-faire policies ostensibly designed to encourage enterprise may merely enable rentierism.
There are thousands, if not hundreds of thousands, of economic papers about the deadweight losses of increased taxes on economic growth, presumably due to reduced work effort. There are also tons of papers about the negative effects of public pensions, which presumably reduce economic growth by reducing work effort. But if there are similar papers about the deadweight losses of policies that enable rentiers to live on their investments without working, or the negative effects of private pensions on work-effort, I haven’t heard of them.
And it seems to that there are tons of real world examples of this phenomenon. It seems to me that Britain gradually lost economic vitality over the course of the late 19th-early 20 th century when it changed from a more entrepreneurial society to a more rentier society (it later changed under 1960’s labor into a pretty socialist economy, also I think bad for economic growth/vitality). And why was the transition of the Eastern bloc socialist economies (especially Russia) to capitalism so badly handled? It seems to me that the reformers thought their policies would create an entrepreneurial economy, when in fact they created a rentier economy. Putin has been a real economic improvement over Yeltsin, because for all his faults he has been willing to understand that cracking down on rentiers is not necessarily socialism, and is not bad for economic growth.
Recently left this question for Paul Krugman:
http://krugman.blogs.nytimes.com/2009/01/12/a-remarkable-achievement/
“I’ve been wondering if there is any gini-coefficient/tax code “sweet-spot” modelling of economic growth?
That is, if the Gini coefficient is too low/ tax code is too progressive, you have a socialist economy, with insufficient incentives for work/enterprise. While if gini is too high \ tax code is too favorable for the wealthy, you have a rentier economy, which, when rentiers become too risk-averse, leads to declining employment and enterprise. While if you have a gini coefficient / tax code in the “sweet spot”, you have property rights secure enough to motivate work/enterprise, but not secure enough to enable too much rentierism, or rentier-seeking.”
Am I missing something, or is this a blind spot in mainstream US economics research? How come no US economist seems willing to say the word “rentier”, or even think it?
February 10th, 2009 at 8:45 pm
I’d also point to Susan Feiner’s post on TPM Cafe, which I replied to in part because was so happy to see a real economist say the word “rentier”.
http://tpmcafe.talkingpointsmemo.com/2008/12/18/post_non-depression_economics/index.php#comment-3318146
[my reply]
“I’d like to strongly endorse this question. Why did Keynes think that the “euthanasia of the rentier class” was desirable and likely to happen in the future, when in fact rentiers and rentier-seekers have become a more prominent part of our economy, not a less prominent part? (I define rentiers and rentier-seekers as executives & investors who have a mindset, “make my pile & retire early”, instead of a mindset “build & be a part of a great organization that does great things”)”
February 10th, 2009 at 9:32 pm
duBois asks:
“How many immigrants invested in derivatives with 30-1 margins, eh?”
How many derivatives with 30-1 margins are invested in immigrants’ mortgages, eh?
February 10th, 2009 at 10:47 pm
Wow. I thought the one moral principle left among rightwingers was the tears they cry for the Holocaust. Now we are supposed to believe that blocking Jews from getting into the states in the 30s was a good thing?
That blows it. They are are creeps all the way through.
February 10th, 2009 at 11:17 pm
The amount of good that a more liberal immigration policy would have done for European Jews during the Nazi era is greatly exaggerrated.
“More liberal immigration policy, for example, is good for immigrants and on net good for the economy, but it’s bad for low-wage native born workers. But it really is on net good for the economy.”
Assuming that the immigrants have high IQs, and that they or their children can rise economically and socially, assuming that those children of immigrants who do not rise economically are as willing to work crappy jobs as their parents are, and assuming that the immigrants will not rely on any governmental social services to support them.
February 10th, 2009 at 11:20 pm
Do the math — it wasn’t mortgage defaults that caused credit markets to freeze. (Repeat as necessary.) The total lost in mortgage defaults is a cup of coffee in the Atlantic Ocean of speculative losses, which is what sunk Iceland and is putting everybody else in deep kimchee: on the order of magnitude of 30:1 or more.
I believe that it was the housing bubble caused largely by the efforts to make more minorities homeowners and the too-low interest rates by the Federal REserve that made the huge speculation possible.
February 11th, 2009 at 12:03 am
A VDare link, Glaivester? Really? Really? Your swastika’s showing.
February 11th, 2009 at 7:56 am
How many derivatives with 30-1 margins are invested in immigrants’ mortgages, eh?
That’s the equivalent of Mackenzie Phillips in American Graffiti of trying to taunt a hot rodder by screaming, “That car’s as ugly as I am.”
February 11th, 2009 at 8:04 am
I believe that it was the housing bubble caused largely by the efforts to make more minorities homeowners and the too-low interest rates by the Federal REserve that made the huge speculation possible.
Bubbles aren’t “caused” by credit. They’re caused by delusion and greed.
February 11th, 2009 at 12:21 pm
“the housing bubble … made the huge speculation possible…”
Nonsense on stilts.
Derivatives, credit default swaps, collateralized debt obligations — these are all BETS which had nothing to do with the underlying value of the asserts. They might as well have been betting on the tide — or tulips.
That’s precisely why we’re in the mess we’re in — a house has an inherent value: determined by the market, sure, but it ain’t vapor.
Say it costs 100k to build a house, to buy the land, hook up the utilities, the materials and the labor. Two years ago, the market said that house was worth 500k. Today, the market MIGHT say it was worth 200k, IF even a very good credit risk could get a loan to buy it.
I’d happily invest in, say, a house that cost $100k to build for less than $100k… I might even go to $150k, or $200k, depending, especially if there were sound reasons it was initially priced at $500k, beyond the bubbleiciousness of it all: location, amenities, schools, etc.
So why can’t even good credit risks get mortgage loans? (Or business loans, car loans, etc.)
Because speculators leveraged the original loans 30 or more times, and lost all 3,000% of the value. THAT’s why this is a mess.
Do the math: if this had only been a housing bubble, in which, hell, ALL of the mortgages in the entire Bush administration were bad (which ain’t so), a lot of mortgage companies, like Countrywide, would go down — but ultimately, who would care? For all their well-earned losses, there would be a fair amount of impressive profits made as smarter people bought up houses that had been marked down from 500k to 200k: such a deal.
It’s not like people don’t need a roof over their head anymore, nor has a home of your own ceased to be a solid value in most lives.
What caused credit to freeze as the TED spread (which should be about 50) went up to nearly 300 last fall, and is still hovering near 100, is the leveraged speculation that pervaded every form of financial transaction — ALL of it abstracted from the actual production of stuff… like houses, which have a value in themselves.
A bad CDO has no value at all. That’s what the whole mark to market mess is about: financiers who are unhappy at the actual value of their bad bets are like a guy who wants to win a bit by running a 4 minute mile — he runs 300 yards in four minutes and says, well, that’s a mile.
Nobody wants to buy that crap. That’s the obstacle to credit, not the burst real estate bubble.
Even if a house has to be sold at LESS than the cost to produce it — a 100k house for 50k, even — that’s bad news for the guy who is selling, but GREAT news for the guy who’s buying. At current interest rates, hell, sign me up for three.
That’s where the nativist bigotry that Sailer exhibits illustrates its bone-deep ignorance: there are LOTS of people who want to buy the foreclosed houses, on the usual market calculation that 1) they’re cheap now, and 2) they will be more valuable later.
But there is no credit to be had for love nor money, because the smart guys who were in the business of selling access to money forgot that it has to be based on value, or they might as well be selling tulip bulbs.
Which at least have the virtue of growing in the sorta shit they’ve shoveling.
February 11th, 2009 at 7:39 pm
You mean ‘Krugmaniana’.
February 19th, 2009 at 7:06 pm
Those unwilling to deal with the data problems in my textbook, Income and Wealth,or even look at the Gini coefficient for disposable income (flasince the Census change their survey methods in 1993) might as least take a look at the graphs in this 2008 presentation.
February 19th, 2009 at 7:10 pm
Those unwilling to deal with the data problems in my textbook, Income and Wealth,or even look at the Gini coefficient for disposable income (flat since Census changed their survey methods in 1993) might as least take a look at the graphs in this 2008 presentation.
As always, if anyone has problems with the statistics, I am willing and even eager to discuss them.
The topic is getting ironic, because recessions are very equalizing, this one more than most. If you have been worried about the share of income or wealth going to the top 1%, the 2008 data should make you very happy. But not the federal or state tax collectors.
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