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[stas]

Интернет помнит все. Колонка Пола Кругмана (того самого, нобелевского) в Нью-Йорк Таймс, 2002:

The basic point is that the recession of 2001 wasn't a typical postwar
slump, brought on when an inflation-fighting Fed raises interest rates
and easily ended by a snapback in housing and consumer spending when
the Fed brings rates back down again. This was a prewar-style
recession, a morning after brought on by irrational exuberance. To
fight this recession the Fed needs more than a snapback; it needs
soaring household spending to offset moribund business investment. And
to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to
create a housing bubble to replace the Nasdaq bubble.

Отличный оказался совет, не правда ли?

Comments

[piter239.livejournal.com]

о да, совет что надо!

Последствия могут оценить очень и очень многие

[shkrobius.livejournal.com]

That's his usual refrain: that worldwide production overcapacity exists objectively, and nonrecessive economics needs bubbles to keep afloat, as otherwise there is no way of matching the demand to the existing capacity: the global economy is overextended. You get out of the recessions only by blowing new bubbles; as soon as you stop doing it, it becomes recessive. The stimulus is envisioned as another means of inflating a bubble through the demand side economics (as opposed to the supply side) that works to match the demand to this overextended production capacity. He is being true to his central economics idea, and he got the prize for working out this explanation to account for a series of financial crises in Asia. Some of it rings true: it is, indeed, a possibility, regardless of his leftist views on economics policy. The collective expectations of rapid market growth may indeed result in large spare capacity and then the market will do its best to create inflated demand to match this capacity, as it is the only path to profitability on the overinvestment. His view is that the stimulus inflates the demand restoring the balance without abandoning this investment. I think he is simply not concentrating on the state of the economy in which this balance is restored by such artificial means. I guess his logic is that it does not matter through which side the demand is created: stimulus (the deamnd side) or speculative bubbles (the supply side). Why is that, I do not know; either way is troublesome and leads to large, distributed losses.

[stas]

I think he has the basic fallacy that Arbat is calling "Communist tunnel" - he starts with some way to artificially improve some economics measure, and then when the improvement has undesired consequences he advocates more and more "improvements" - each of which, of course, has it's own set of consequences - so that the necessary interventions become bigger and more frequent with each iteration.
The only logical conclusions of this can be either permanent crisis, once the size of the necessary interventions exceeds government's political and administrative capacity, or fully planned and fully governmentally operated economics. The latter is impossible to advocate, though I'm not sure if he realizes it's also impossible to create while maintaining current level of life. The former is also impossible to advocate but politically very convenient to folks like him since it means the demand for his services will be perpetual.
As for bubbles, I find it hard to believe it is possible to create large-scale synchronized market distortion without government(s) being either complicit or directly orchestrating it. In our present case, it is the hard fact that the government was doing exactly that, as Krugman prescribed.

[shkrobius.livejournal.com]

I do not know. What you say (the government complicit in inflating bubbles) is as unfalcifiable as that the stimulus fostering the exit from the recession. Any state government is tied to the economy in a myriad ways and it is always possible to say that the government was complicit (orchestrating, not doing enough, over- or under-regulating, etc.) in inflating a bubble. These bubbles emerge on such a regular schedule in so many states with different models of interaction, I find it hard to believe that it is in the pover of the government to do anything about it.

[stas]

All economic claims are unfalsifiable on this level, since you can't make clean experiment and historic evidence is so complex you can always claim something else was the reason.
However, there are bubbles and bubbles. There are speculative trends on some markets, but they come and go and nobody care too much except for some folks that lose or make some money on it. However what we have now is kind of different scale. It is definitely in the power of government to create easy credit, to encourage spending beyond sustainable boundaries, to enforce controls and regulations leading to inefficiencies and inflexibilities, to create moral hazards leading to excessive risk-taking, etc.
Government can't make people stupid, but it can make acting stupid easier and acting smart harder, so more people act stupid and less people act smart.

[shkrobius.livejournal.com]

It does not work this way: the left hand never knows what the right hand is doing. You think of the government as a monolith with some set policy. It is an amoeba. Even if at the top level they have some delusions that they have definitive policies, when it comes to the base and practical decisions, it is all a swamp.
The amoeba goes in several directions and pursues contradicting policies, always. You grossly overestimate its powers. Its typical operation is building a humangous dam, then building a humangous bridge across this humangous dam, years later noticing that everyone walks around this dam. It bungles every delicate job so thoroughly that it cannot have much effect, good or bad, on anything. You fall for its own claims that it does something; these are their occupational delusions. Smart people will be acting smart, stupid people will do stupid things -- and no government can do anything about it. If people want to live beyond their means and money can be made out of it, it will happen one way or the other.

[stas]

Smart people will be acting smart, stupid people will do stupid things -- and no government can do anything about it.

The problem here is that if you have a situation where, for example, you can earn millions on risky operations and the failures will be paid by the government, then the smart things to do is to take the risks, to reap the rewards and to fail and have the government pay the bill. This behavior would be much less smart without the last part, and there is where the government plays its role. Its only one example, of course.

[shkrobius.livejournal.com]

Smart people realize that you cannot do this repeatedly; the government is as likely to back up on its own policies as to follow these through. "Failures being paid by the government" sounds great in theory until you are one of these failures charged with the herculean task of extracting money from the US government. Then you discover that getting anything out of it is something few can afford and fewer can succeed at unmolested. The problem you recognize is not the government per se but the belief that the government will "help" someone. It seldom does and when it does nobody likes it. The government does superb job of convincing everyone of its impotence to be the savior of the last resort; it always did. If THAT does not convince people, what else can be done about it? Even when the government does not tell it guarantees the assets there are countless people believing it does. You do not tell them, they get bolder. You tell them, they run on the bank. The government, being a human institution, does plenty of stupid things, but it is the reflection of stupidity existing in the nation. It is unrealistic to expect it to be any other way.

[stas]

But you do not need to do this _repeatedly_ - you take whatever money comes your way, and when it blows up you move on to the next thing. And yes, you can do the "next thing" repeatedly - exactly because there's always some things that govt wants to "fix". It's as natural as light getting curved by gravity - it's just a natural consequence of the distortion.

Then you discover that getting anything out of it is something few can afford and fewer can succeed at unmolested.

I do not see it being a herculean task. If it is, then US must be nation full of Heracles - all I can hear is that more government money need to be given to more people, with some trillions already out and now prominent economists discussing how many more trillions need to be distributed.

Since this help is provided by a vastly complex mechanism with very little transparency and accountability, it is not obvious for many where this help comes from and how much does it cost.

The government, being a human institution, does plenty of stupid things, but it is the reflection of stupidity existing in the nation

My point is it's not the reflection, it's amplification. By enabling, supporting and encouraging stupid things to be done it keeps stupid people stupid (by not providing them strong incentives to stop being stupid) and encourages smart people to be stupid (by distributing consequences of stupid actions to people that had nothing to do with these actions). That's like if somebody could smoke and the some guy in the next state would get cancer - would that increase amount of smokers? I think it would.
There always are people that more or less stupid, but govt actions shift the spectrum massively in the "stupid" direction. Relying on the govt is stupid too, but many people have no choice, and for those that do have the choice it's harder not to go with the flow.
Example: if I want to provide my own pension, it is much harder for me to do so because the govt takes certain amount of money from me, forcing me to rely on govt pension system, which has high chances of being bankrupt by the time I might need it. Can I do something about it? No, expect for just take the hit and hope for the best.

[shkrobius.livejournal.com]

The government does not force you to rely on governmental retirement plans. Contributing to these plans is not mandated in any sense, although the emloyer may require it as a condition for employment. I've lost you there. If someone invests money in a pension plan that this someone considers as good as gone - how can the government "amplify" such self-destructive tendencies? This is already topping the scale of economic irrationality... Something is not right there.

[stas]

You know a way not to pay payroll taxes? Please enlighten me.

[shkrobius.livejournal.com]

That's social security; you were talking about 457s or 401(k)'s.

[stas]

I wasn't. 401k is not a state pension plan. However social security is (along with being other types of insurance).
One more example - FNMA/FHLMC and their policies of underwriting bad loans. Both moral hazard and promoting bad decisions.

[shkrobius.livejournal.com]

This is like saying that building prisons promotes crime because it presumes that these prisons will be filled up by the criminals, encouraging these criminals to do crime to match the expectations. Bad decisions are people's.

I do not dig you. How can a democratically elected government avoid reflecting its own constituency, its irrational and contradicting demands, its differing political philosophies (including that of governing)? You say it spromotes bad decisions. But these are enthusiastically insisted upon and applauded by a sizeable chunk of the electorate, which finds nothing wrong with these decisions. Krugman may believe that the government may be better informed, more far-sighted, and wiser than the people it governs. I have no such delusions. It is exactly on the same level, +- omega small, and it cannot be helped. Most of the blame the government gets seems to me misdirected. It cannot nor should it be what this or that voting group wants it to be, because there are other voters, and it is their government too. It cannot be a rock of wisdom in the sea of folly. If you do not like what the government does, convince these other people to change their views, then you would get the government you like. It is not distorting or promoting anything: it shines upon you the ideas of your own neighbors. If you convince them to become libertarians, you'd get the libertarian government of your dreams. Instead you wish the government would become libertarian by... revelation? its own willful decision? a new social contract? physical disappearance of all Krugmans? People cannot sway the others and then fault government for their own failure to be persuasive, accusing this government of representing and acting on the views they do not like. Like the people like their government.

[stas]

This is like saying that building prisons promotes crime because it presumes that these prisons will be filled up by the criminals, encouraging these criminals to do crime to match the expectations. Bad decisions are people's.

It's nothing like that, because getting into prison is usually a bad thing for the prisoner. Getting government backing on the loan is not a bad thing. So motivations are exactly the opposite.

How can a democratically elected government avoid reflecting its own constituency, its irrational and contradicting demands, its differing political philosophies (including that of governing)?

It can, to a measure, if it does not try to pander to the lowest instincts and if everybody recognizes that government handouts aren't the way to prosper. Sadly, it is not the case now neither for electors nor for ones they elect.

You say it promotes bad decisions. But these are enthusiastically insisted upon and applauded by a sizeable chunk of the electorate, which finds nothing wrong with these decisions

By using coercion to force or support these decisions, or to make people that didn't make these decisions to bear costs caused by them, the government makes consequences of bad decisions worse. Of course, since the people are ultimate source of power, if the people want hope-and-change they are getting it. I am just saying that if the people wanted to have the system where they aren't up to very unpleasant surprises each time the next brilliant idea blows up, they should start with removing the government coercion factor.

If you do not like what the government does, convince these other people to change their views, then you would get the government you like.

I kind of try to, but I do not expect to succeed a lot, since people much better than me in every regard tried and failed.

People cannot sway the others and then fault government

I think our disagreement comes from different understanding of the term "government". When I say government in this context, I don't necessarily mean particular people that occupy particular posts with intent that if different people occupied the same posts it would be different. I mean the system where there is a coercive entity that can distort economics by forcing some behaviors on people that otherwise would not do it. Of course, each person that supports this system shares the blame, so when I say "government is at fault", I do not mean to single out specific functionaries of the government - I mean the coercive actions and, by extension, the people who enabled and supported these actions - are at fault.

[shkrobius.livejournal.com]

>>Sadly, it is not the case for electors and the ones they elect.
>>the government makes consequences of bad decisions worse.
>>I mean the coercive actions and, by extension, the people who enabled and supported these actions - are at fault.

The electorate is cheering for just such coercive actions, so you fault the democracy for representing its people. It is moderated by people opposing such actions, just like you. It is frustrating, inefficient, contradictory, and making no one happy. But it is better than the government that decides by itself what is right ignoring "those idiots". It is not government's job to convince people that the government should be non-coercive. It is yours.

[stas]

I don't fault the democracy. Democracy is a procedure, there's nothing to fault. What I fault is the system that by allowing coercive actions of government to distort economics makes everybody worse off. Everybody who supports this system shares the fault, though of course more fault goes to somebody that actually could do better and is supposed to know better.
Also, democracy as a procedure doesn't mean every democratic decision should be fulfilled. There are certain safeguards built into American system to prevent mob rule abuses. Even these safeguards, unfortunately, can work only if enough conscious citizens work to support it. That seems to fail nowdays more and more.

It is not government's job to convince people that the government should be non-coercive. It is yours.

It's governments job to _be_ non-coercive, at least in the areas where it doesn't fix the results of rights violations. The job of explaining that to fellow citizens is one of everybody who cares.

[shkrobius.livejournal.com]

>>It's governments job to be non-coercive, at least in the areas where it doesn't fix the results of rights violations.

That would be implementing a political philosophy on people not necessarily sharing it. The Constitution does not tell that the US government has to be non-coercive. If the government tells 50% of the electorate "you guys are the mob, we can ignore you" it is not going to last very long, is it? Truly democratic decisions will be implemented one way or the other; even the Constitution offers limited protection because it can be democratically changed. I do not think that the safeguards reside in the Constitution or the government that knows better. These safeguards are very real, but these reside in the people. I think you are persistently return to the idea that the government, by magic, should know better than the people it governs and for that reason is culpable for the policies that the people peddle for through their representatives. It does not.

[stas]

By the way, I look at these numbers -
http://www.rasmussenreports.com/scoreboards/by_the_numbers2/by_the_numbers
and wonder - are the people really supporting what the govt is doing? Yes, they elected them, but it looks like they got screwed on this deal and they starting to feel it.

[shkrobius.livejournal.com]

Good for them, that's how it works. But I have to tell you that no matter what government does there are many millions opposing its actions. Furthermore, people retrospectively change their views and there is never enough information. This government business is a bum job. It is a total mystery to me how anything gets done at all.

[e2pii1.livejournal.com]

Видели это эссе о Кругмане: http://xaxam.livejournal.com/214073.html

экономист Гомберг комментирует это эссе: http://ninazino.livejournal.com/460422.html?thread=7104134#t7104134

[stas]

Эссе видел, хотя ввиду слабости матемаической подготовки оценить по достоинству не могу.

Kругман, кстати говоря, отметился в своей богатой карьере еще как советник в такой интересной компании, как Энрон. Небось тоже что-нибудь такое им присоветовал.

[e2pii1.livejournal.com]

сyть бeз математики:

"
Короче, выпуклость оказывается предельно естественным предположением при анализе экономического поведения.

При этом очевидным "недостатком" выпуклой теории было именно её "стабильность", поскольку наблюдаемое поведение совершенно не столь устойчиво.

И тут-то появляется на сцене проф. Кругман, со своим неисчерпаемым запасом (полу)математических игрушек. Его главный научный метод - "поиск под фонарём": если отбросить основное условие выпуклости, то требуемой неустойчивости, кажущейся иррациональности, желанной непредсказуемости и вожделенной парадоксальности поведения можно добиться ... Сделав произвольное число предположений о ... вспомогательных функций (о самом существовании которых среди экономистов нет согласия), можно изготовить пищалки, кричалки, ваньки-встаньки и прочую забаву для детей. За двадцать лет проф. Кругман настрогал их столько, что под любое наблюдаемое событие можно вытащить из ящика модельку с данным поведением (парадокс стада обезьян по-нобелевски).

критиковал Кругмана за математические игрушки, не ставящие себе целью преодолеть реальные проблемы экономики. Экономист спрашивает, почему то-то и то-то происходит, а Кругман отвечает: а вот почему, например, это может происходить. Экономист таращит глаза и говорит: да с такими манерами карту из рукава доставать, всё, что угодно можно объяснить! А Кругман доволен: да, и впрямь что угодно.
"

[stas]

Это вообще феномен известный, не только в экономике. Поэтому от теорий принято требовать предсказательной силы. Однако с экономическими теориями, особенно в области макроэкономики, возникают очевидные проблемы как с постановкой экспериментов, так и с интерпретацией результатов.