"Orphan Ideas" by Luigi Zingales. Exit from comment view mode. Click to hide this space CHICAGO – Since the United States Supreme Court’s “Citizens United” decision, which prohibited the government from restricting independent political expenditures by corporations and unions, concern about business interests’ influence over US elections has been growing. But political contributions are only one reason why business interests have so much power. When it comes to lobbying, money is not everything: ideas play a big role, too. Unfortunately, rather than leveling the playing field, the battle of ideas may skew US politics even further in favor of big business. The importance of ideas can be seen from the simplest things. Congressional bills aimed at benefiting powerful constituencies are generally given appealing (and misleading) names.
More importantly, the lobbying of the quasi-governmental mortgage lenders Fannie Mae and Freddie Mac would not have been so successful without the idea of the “ownership society.”
The US Deleveraging Has Resumed. Last quarter, upon the release of the Q4 2011 Z.1 (Flow of Funds) report, we penned "The US Deleveraging Is Now Over", because, well, it was: all the categories tracked by the Fed's Credit Market Debt Outstanding series posted a sequential increase over Q3. Most importantly, there was an increase in the net debt held by the US Household Sector: this was only the first time after 14 quarters of declines, that US consumers had levered up. Sure enough, many took this as an indication that the economy was now fixed, and that with everyone levering up, inflation was sure to follow, and the virtuous cycle was back (also leading to the scare when the yield on the 10 year spiked, however briefly, to the mid 2% range). As it turns out, the entire "releveraging" was merely a one time artifact of consumers relying more than ever on credit to purchase items in the holiday season.
Because as the just released update from the Fed indicates, deleveraging is back with a vengeance. Source: Z.1, table L.1.
Game theory? Occupy Economics?: A Report Back from the Nerdiest Protest I’ve ever been to. « Ph.D. Octopus. By Peter I just got back from Chicago, where, along with attending the American Historical Association, I participated in a series of protests held by Occupy Chicago, along with CACHE (Coalition Against Corporatization of Higher Education) that targeted the American Economics Association (AEA). Its not everyday that the worlds of street protests and academic conferences blend so well. But then again, part of the point was to “puncture the bubble,” that academic economists live in. The protesters gave out “alternative” awards for Most Conflict of Interests (Columbia’s Glenn Hubbard), Intellectual Narrowness (Harvard’s Greg Mankiw), and top prize, the “Toxic Waste of Space Award” (Harvard/Obama administration’s Larry Summers). Other than a brief yelling match that one protester got in with a professor, the tone was light and fun. It just so happens the protests came at a time of particularly hot debate about the ideology of the economics profession.
Like this: Like Loading... MF’s Missing Money Makes You Wonder About Goldman: Jonathan Weil. Six months ago the accounting firm PricewaterhouseCoopers LLP said MF Global Holdings Ltd. and its units “maintained, in all material respects, effective internal control over financial reporting as of March 31, 2011.” A lot of people who relied on that opinion lost a ton of money. MF Global filed for bankruptcy on Oct. 31. This week the trustee for the liquidation of its U.S. brokerage unit said as much as $1.2 billion of customer money is missing, maybe more. Those deposits should have been kept segregated from the company’s funds. What’s the point of having auditors do reports like this? When an auditor certifies that a client’s internal controls are effective, that’s supposed to mean the company can do basic functions like maintain accurate financial records, detect unauthorized transactions and keep track of its receipts and expenditures.
Getting It Right Although we shouldn’t rule out anything, this scenario seems implausible. Audit Backlash Then a backlash hit. Do Investors Stifle Innovation? (Part II) : Planet Money. Istvan Bara/Getty Images Note: This is the second of two related posts. In his latest New York Times Magazine column, Adam Davidson writes, "from a C.E.O.'s perspective, long-term R. and D. is a lousy investment...the C.E.O. of DuPont who retired three years ago, told me that it's tough to get investors to think more than two years ahead — at most.'" To continue the discussion, we asked two economists on different sides of the debate - Baruch Lev of New York University and Shivaram Rajgopal of Emory University - to answer the following question: Are investors pressuring CEO's to cancel long-term R&D projects?
Shivaram Rajgopal's response is below. To read Baruch Lev's response, click here. I think Adam Davidson is unfortunately correct in suggesting that CEOs of public companies feel pressure from short-term shareholders to cut R&D budgets. How can we get around this problem? A counter example is 3M. Debates: Inflation: Statements. Is Any CEO Worth $189,000 Per Hour? The Destruction of Economic Facts. During the second half of the 19th century, the world's biggest economies endured a series of brutal recessions. At the time, most forms of reliable economic knowledge were organized within feudal, patrimonial, and tribal relationships. If you wanted to know who owned land or owed a debt, it was a fact recorded locally—and most likely shielded from outsiders. At the same time, the world was expanding. Travel between cities and countries became more common and global trade increased.
The result was a huge rift between the old, fragmented social order and the needs of a rising, globalizing market economy. To prevent the breakdown of industrial and commercial progress, hundreds of creative reformers concluded that the world needed a shared set of facts. Over the past 20 years, Americans and Europeans have quietly gone about destroying these facts. The results are hardly surprising. The importance of economic facts may not be obvious to Americans. 1) Mortgage Bundling. 2) Default Swaps. Rational Irrationality: Inside George Soros’s “Monstrous Monkey House” Snow-capped peaks; nightcaps with Larry Summers; discussions of complexity theory over breakfast; Tennyson quotations from Gordon Brown at lunch. No it’s not Davos—it’s Bretton Woods, New Hampshire, where over the weekend the Institute for New Economic Thinking (INET), which George Soros set up in the wake of the financial crisis, held its second annual conference.
Last year’s inaugural get-together was held at King’s College, Cambridge, the home of Keynes. This year’s location also had a strong link to J.M.K. It was the grand old Mount Washington Hotel, which in the summer of 1944 played host to a famous international conference about the post-war monetary system. Soros launched INET in 2009 with the intention of fostering fresh ways of thinking to replace an economic orthodoxy that manifestly had failed. While the conference lacked some thematic unity, the speakers delivered a range of interesting insights. The conference ran throughout Sunday. Photograph: robdebsgreen, Flickr CC. Amar Bhidé: In Defense of Human Judgment.
In a recent highly publicized game of Jeopardy, two of the game’s greatest past champions were beat by Watson, an IBM computer whose intelligence was based on algorithms. It was hailed as the latest example of how software could outperform human beings. In the latest INET interview, Amar Bhidé, the author of the new book A Call for Judgment, counters that argument with a strong defense of the primacy of human judgment – at least when it comes to overseeing the economy and navigating the world of finance. The Professor of International Business at the Fletcher School of Law and Diplomacy criticizes the tendency in many quarters to rely on mathematical models to inform investment decisions.
It’s that overreliance on models that tend to generalize and simplify that helped drive the world into the global financial crash of 2008 and the ensuing Great Recession. You can watch a full version of the interview on video or watch individual segments on different ideas. How Our Economy Was Overrun by Monsters and What to Do About It - Umair Haque. How Inferior American Education Caused The Credit/Real Estate/Sovereign Debt Bubbles and Why It's Preventing True Recovery. Cgasmediatvdrama.blogspot.comThis is a lengthy, highly provovative article illustrating in explicit detail my thoughts on how America's inferior education system made the Great Recession not only a foregone conclusion of indoctrinated GroupThink, but prevents a true recovery from recovery due to the abject fear of price clearing.
You may need to put your thinking caps on and exercise some patience and restraint with this one. I am going to follow it up with an explcit example of said groupthink by going against the conventional grain (yet again) and pointing out what many in the mainstream consider to be the most likely threat to economic prosperity in 2012 (and no, Iran is not even in the running on this one). I blame indoctrinated GroupThink for the inability of Wall Street to see the excessive coniferous expanse due to treebark blindness! Until the next post, though... Dubois Speaks Through Me The problem is plain before you. W.E.B. The Hole The Talented Tenth and Class, 101 1. 2. 3.