Megan again? What, has it been four days already?

So...it takes a small group of elite, smart, hard-working people with a very specific skill set to create a calamitous situation that no one is responsible for? Plus, that old black Congresswoman is crazy! And ignorant!

BJ and Ray's comments - laughing!! Good ones. Here's my vote: same topic, Megan and Glenn Greenwald. PLEASE!!!!

In addition to academics, there are people who work in multilateral institutions like the World Bank, IMF and IFC, not to mention overseas organizations, who have financial market experience. Many of them are American citizens. I'm sure Wall Street and universities are not the only places you can draw from.

Megan, your comparison of wall street bankers to heroin junkie, alcohol abusing, homeless people was beautiful! both sets of people are so hopeless, clueless, and insensitive to incentives that we just need to clean-up their problems and not worry about the moral hazards involved. now, if we could just get police departments treat bankers like they do the panhandlers...

At some point it becomes obvious that narrow vocational expertise becomes not just myopic in scope and judgment but willfully impotent and irresponsible. It applies especially to economists and public policy wonks who are blinded by their so-called "pragmatic" obsessions which not only exclude a wider perspective but actually conceal their own politics. "Rules" are operating procedures are endemic to political power....it cannot be denied. It must however be smashed.

Megan knows the Econ 101 Lexicon better than I, but I feel the need to pick a nit here. The way she glossed "Moral Hazard" seems to me misleading. Starting it off with "if you buy insurance..." obscures the elemental part of Moral Hazard, which is that you do riskier things because someone else is paying the downside risk cost. Yes, buying fire insurance can lead to Moral Hazard, but insurance just transfers some of the downside risk, you still pay for some of it (premiums, etc). You can have Moral Hazard without any of this buy-in. Indeed, that seems to me the purer form (see: the risk-happy way teenagers drive because their parents bought insurance)

Quoting ginger baker: At some point it becomes obvious that narrow vocational expertise becomes not just myopic in scope and judgment but willfully impotent and irresponsible. It applies especially to economists and public policy wonks who are blinded by their so-called "pragmatic" obsessions which not only exclude a wider perspective but actually conceal their own politics. "Rules" are operating procedures are endemic to political power....it cannot be denied. It must however be smashed.

I don't think any of that is true. Do you have examples or evidence you could give?

"Moral hazard," along with "meme," is one of those formerly elucidating terms that has been used (and abused) far too often by English speaking, um, "intellectuals," so much so, that I nearly wretch every time I hear it.

These two make a good pair: both fence-straddlers when paired with more partisan interlocutors. Together, they seem to bring out their differences. On the downside, they are a bit too dull for me to pay close attention to them today.

Yeah, I tried and just couldn't get into this one. I love Noam, and sometimes like MM, but I think I'm just burnt out on financial discussions right now.

"I don't think any of that is true. Do you have examples or evidence you could give?" CEO's who pursue the narrow economic interests of stockholders at the expense of the public good? Scientists doing lab research under controlled environments? Want examples, just look around. More perversely, just think of network news and typical beltway pundits giving us the petty "objective" analysis which is forgotten a week later. Ever read Thomas Kuhn? Max Weber? John Dewey? The bottom line is that professional requirements tend to constrain the scope of inquiry & discussion. That's what "disciplines" do. So in times of systematic problems, systematic thinking is required.

Quoting ginger baker: At some point it becomes obvious that narrow vocational expertise becomes not just myopic in scope and judgment but willfully impotent and irresponsible. It applies especially to economists and public policy wonks who are blinded by their so-called "pragmatic" obsessions which not only exclude a wider perspective but actually conceal their own politics. "Rules" are operating procedures are endemic to political power....it cannot be denied. It must however be smashed.

And here I thought division of labor gave us the 20th century.

Quoting uncle ebeneezer: Yeah, I tried and just couldn't get into this one. I love Noam, and sometimes like MM, but I think I'm just burnt out on financial discussions right now.

I know what you mean. I'm burnt out too. I've come to the conclusion that the problem is too big for any one person to understand. I've been reading a blog called Economics of Contempt which is written by a securities lawyer, and he's always pointing out howlers by A lister. Same with rortybomb, who's a risk-management guy. Simon Johnson from the IMF too. The best that the smartest and least ideologically pre-committed writers (Felix Salmon, eg) can do is to just link to them. But no obvious solution has emerged so far.

How about this one Chinese financier Le Fang Wei indicted in plot to send nuclear materials to Iran I know it is not really on topic but it does show their cluelessness.

Why not have institutions that are too big to fail and therefore implicitly require government backing pay a fee for this service same way you pay for your car insurance?

Quoting nikkibong: "Moral hazard," along with "meme," is one of those formerly elucidating terms that has been used (and abused) far too often by English speaking, um, "intellectuals," so much so, that I nearly wretch every time I hear it.

Indeed. And to add to my list of verbal pet peeves, how about: "meta-narrative" (or meta-anything, for that matter)? These are fluff words that people toss out in order to sound intellectual and they end up doing the opposite. Grrr!

I like Megan's drive to explain financial crashes as a stochastic process, however, her implication that we should just throw our hands up in the air (hey it's all random anyway) and forget about regulations is wrong. More or less regulation should, in part, determine the frequency of these events. I for one am for less frequent.

Quoting bjkeefe: Megan again? What, has it been four days already?

make it every 3 days, she is one of my favorites

I think the expression about generals fighting the last war applies here. Going forward, the fear for the economy is the fed is inflating the money supply and the democrat's government is running $trillion+ annual deficits. I am more interested in a discussion of the crises to come instead of crises past. ( if financial institutions become too big to fail, simply force them to break up when they reach that threshold. done. move on. ) Government deficit spending is immoral. it is an imposition of a debt obligation by the majority democrats on the minority republicans. Republicans from New England have no representation in the house of representatives. What right does the government have to impose a debt obligation on a people who have no say in that government?

Quoting DenvilleSteve: Republicans from New England have no representation in the house of representatives.

For which they have no one to blame except the Republican Party. You can hardly expect people to vote for an unappealing message, not to mention a track record of incompetence. As much as you might like to blame everything on the "Democrat Party," it's been the GOP since Reagan that has been the party of fiscal irresponsibility, and the current Congressional Republicans continue to show no sign of maturity. Their obsession over trivialities in the stimulus bill and their "alternative budget" proposal were beyond jokes.

Very interesting, very good discussion, even for the economically non-initiated.

Quoting DenvilleSteve: ...the fear for the economy is the fed is inflating the money supply and the democrat's government is running $trillion+ annual deficits. I am more interested in a discussion of the crises to come instead of crises past.

If you think you can predict the future, you should act on it. Not only will you come out ahead, but you will have a stabilizing effect on the entire system. I'm not being sarcastic; I share your fear. Huge deficits imply future inflation, so take out a big 30-year loan on a big house. Looking toward the future is very important. This whole crisis would have been attenuated if only more of the bankers had better instincts about the future.

Quoting DenvilleSteve: If financial institutions become too big to fail, simply force them to break up when they reach that threshold. done. move on.

I agree. In fact, break up any big company.

Quoting DenvilleSteve: Government deficit spending is immoral. it is an imposition of a debt obligation by the majority democrats on the minority republicans. Republicans from New England have no representation in the house of representatives. What right does the government have to impose a debt obligation on a

Quoting x9#z6: I like Megan's drive to explain financial crashes as a stochastic process, however, her implication that we should just throw our hands up in the air (hey it's all random anyway) and forget about regulations is wrong. More or less regulation should, in part, determine the frequency of these events. I for one am for less frequent.

I'm not sure that's quite the right attitude. I want more frequent crashes, but smaller crashes. I want daily crashes! Daily booms and busts. That's what keeps things in equilibrium, and fairly priced. Regulation can help do this when it promotes transparency.

Quoting JonIrenicus: make it every 3 days, she is one of my favorites

I direct your attention to a fine post by graz that I wish he had placed in this thread.

Quoting rfrobison: Indeed. And to add to my list of verbal pet peeves, how about: "meta-narrative" (or meta-anything, for that matter)? These are fluff words that people toss out in order to sound intellectual and they end up doing the opposite.

Grrr!

I have to "grrr" back at ya. "Meta" has a specific meaning (it makes a level distinction, and points out degrees of self-reference) and just generally serves an extremely useful purpose. Misuse of the term, on the other hand, is just as irritating as you say. Conflating perfectly well-formed usages with pretense and damning all of it clouds the issue at least as much as the annoying misuse does.

Noam, you're a married man!!!!! http://bloggingheads.tv/diavlogs/188...2:43&out=22:48

Quoting DenvilleSteve: I think the expression about generals fighting the last war applies here.

Going forward, the fear for the economy is the fed is inflating the money supply and the democrat's government is running $trillion+ annual deficits. I am more interested in a discussion of the crises to come instead of crises past. ( if financial institutions become too big to fail, simply force them to break up when they reach that threshold. done. move on. )

Government deficit spending is immoral. it is an imposition of a debt obligation by the majority democrats on the minority republicans. Republicans from New England have no representation in the house of representatives. What right does the government have to impose a debt obligation on a people who have no say in that government?

I would agree that the massive print spree that we are undertaking is likely laying the foundation for the next financial slow down. It will take some artful managing to avoid what has historically been the response to a too active printing press; and being inflation. From what I have seen so far I don't believe that this particular crew is capable of

Quoting piscivorous: I would agree that the massive print spree that we are undertaking is likely laying the foundation for the next financial slow down. It will take some artful managing to avoid what has historically been the response to a too active printing press; and being inflation. From what I have seen so far I don't believe that this particular crew is capable of it so I would agree we are headed into a long term inflationary spiral.

I would have to disagree that knee jerk reaction that all deficit spending is immoral. Was it immoral for President Eisenhower to use deficit spending to build the interstate highway system. Was it immoral for President Roosevelt to use deficit spending to bring electricity to all rural America? Infrastructure structure spending, that will benefit multiple generations, by it's very nature should be financed by all of the generations that are likely to benefit from that infrastructure. Deficit spending to rescue a bunch of companies, individuals and institutions on the other hand seems to me to be boarding on immoral if not evil.

Wow, Pisc. You almost made a good point in that

pisc was making a distinction between infrastructure and bailing out companies. It seems like a valid distinction to me. You could make the argument that we are spending on our financial infrastructure - but that is a bit of a stretch.

Quoting popcorn_karate: pisc was making a distinction between infrastructure and bailing out companies. It seems like a valid distinction to me.

You could make the argument that we are spending on our financial infrastructure - but that is a bit of a stretch.

He was, I agree. His implicit assumption that it's a binary choice is false. The mostly implicit indication that one of those choices is better, prima facie, is, at best, arguable. Pisc likes arguments in the form of broadsides. I like to point out the flimsiness of that approach.

Quoting AemJeff: I have to "grrr" back at ya. "Meta" has a specific meaning (it makes a level distinction, and points out degrees of self-reference) and just generally serves an extremely useful purpose. Misuse of the term, on the other hand, is just as irritating as you say. Conflating perfectly well-formed usages with pretense and damning all of it clouds the issue at least as much as the annoying misuse does.

That's a perfectly legitimate point, Jeff. I used "moral hazard" the other day in a context (and hopefully) manner that was appropriate. I guess the heart of my complaint is when people use high-fallutin' terms, either because it's part of their professional jargon, or because it sounds impressive, when a simple layman's term will do--though long-winded explanations are a pain in the neck as well. That strikes me as a simple courtesy to the uninitiated.

Quoting piscivorous: I would have to disagree that knee jerk reaction that all deficit spending is immoral. Was it immoral for President Eisenhower to use deficit spending to build the interstate highway system. Was it immoral for President Roosevelt to use deficit spending to bring electricity to all rural America? Infrastructure structure spending, that will benefit multiple generations, by it's very nature should be financed by all of the generations that are likely to benefit from that infrastructure. Deficit spending to rescue a bunch of companies, individuals and institutions on the other hand seems to me to be boarding on immoral if not evil.

I would not be surprised to learn that the interstate highway and electrical grid projects paid for themselves within 10 years. The current day equivalent is the wiring and routers for the internet. Likely already paid for. There is no reason to borrow to pay for infrastructure repair and upgrade, however. And I dont see how borrowing to spur the economy works at any amount. But if they are going to do it they have to pay it back by the end of obama's first term. I am

Quoting DenvilleSteve: There is no reason to borrow to pay for infrastructure repair and upgrade, however. And I dont see how borrowing to spur the economy works at any amount. But if they are going to do it they have to pay it back by the end of obama's first term.

Nitpick: this is completely false.

Can we have a four day gap in between your posts? thx man

Quoting mikeo: Can we have a four day gap in between your posts? thx man

Heh. Sure. If each of my comments are read out loud, and they each get to be 75 minutes long. [Added] Also, you have to agree that on the day that I post, no one else gets to post for the next 24 hours.

Quoting rfrobison: That's a perfectly legitimate point, Jeff. I used "moral hazard" the other day in a context (and hopefully) manner that was appropriate. I guess the heart of my complaint is when people use high-fallutin' terms, either because it's part of their professional jargon, or because it sounds impressive, when a simple layman's term will do--though long-winded explanations are a pain in the neck as well. That strikes me as a simple courtesy to the uninitiated.

Fair enough. The single biggest influence on how I think (to the extent that that's an issue for anybody... pausing to allow the sound of crickets to assert itself in the silence) was almost certainly Douglas Hofstadter's Gödel, Escher, Bach, which, among other things, is a pretty detailed study of the idea of self-reference. I've been using and abusing "meta-" for decades, so I may be a little touchy...

Quoting DenvilleSteve: I would not be surprised to learn that the interstate highway and electrical grid projects paid for themselves within 10 years. The current day equivalent is the wiring and routers for the internet. Likely already paid for.

Yes they have paid for themselves many times over. But I don't think the analogy is incorrect. Both the interstate and rural electrification were government (politically) directed and driven. The wiring of the US has been and still is essentially private sector driven. Yes the government through law and dictate set some some requirements, but are so far behind the technological curve that they are generally functionally obsolete. A proper analogy would be for the government to drive forward with bringing high speed internet to all of America. There are satellite services now that if expanded could accomplish that in 5-10 years instead of running glass; a decades long adventure that will be supplanted anyways.

Quoting DenvilleSteve: There is no reason to borrow to pay for infrastructure repair and upgrade, however. And I dont see how borrowing to spur the economy works at any amount. But if they are going to do it they have to pay it

Quoting rfrobison: That's a perfectly legitimate point, Jeff. I used "moral hazard" the other day in a context (and hopefully) manner that was appropriate. I guess the heart of my complaint is when people use high-fallutin' terms, either because it's part of their professional jargon, or because it sounds impressive, when a simple layman's term will do--though long-winded explanations are a pain in the neck as well. That strikes me as a simple courtesy to the uninitiated.

I think it has more to do with people subconsciously emulating the vocabulary of their peers then with anyone really trying to sound impressive. Take me for instance, when I am talking to a crowd that probably is not into math/physics as much as I am, I routinely use words like exponential, quantum, discreet, impact, etc. incorrectly all the time,even though I know those words correct definitions. P.S.
I do not think I ever used meme once until I was exposed to bloggingheads...damn you bloggingheads!

Take me for instance, when I am talking to a crowd that probably is not into math/physics as much as I am, I routinely use words like exponential, quantum, discreet, impact, etc. incorrectly all the time,even though I know those words correct definitions.

Discrete.

Quoting bjkeefe: I direct your attention to a fine post by graz that I wish he had placed in this thread.

Sometimes I wonder how to beat the idea of zero sum games out of so many people. bhtv can have as many people at a time as whoever puts something up, it could be 4 people in a day if there was another set of people who made a log. Oh, and I have a question for you. Which more conservative person do you enjoy listening to on bhtv? Other than Salaam and Ross (they are admittedly more squishy than most).

Washington is infamous for these little things, including Arab street (unfortunately not limited to DC and yes, it's old), "it is what it is," (ugh) "going forward." So many others. It's like saying them unlocks something for the listener and you are in. To hear what is in, just watch This Week with George S. Someone almost always rings every single bell.

Quoting JonIrenicus: Sometimes I wonder how to beat the idea of zero sum games out of so many people.

bhtv can have as many people at a time as whoever puts something up, it could be 4 people in a day if there was another set of people who made a log.

Does your belief in learning through corporal punishment extend to getting people to stop thinking jargon is a trump card and an imaginary perfect world is the same as the real one? ;^) Sure, there could be four diavlogs posted daily, but there aren't. For whatever reasons, this site posts one diavlog per day, Monday through Friday, and three, total, on Saturday and Sunday. So, effectively, a given pairing doing a diavlog on a given day means no one else can appear on that day.

Oh, and I have a question for you. Which more conservative person do you enjoy listening to on bhtv? Other than Salaam and Ross (they are admittedly more squishy than most).

I suppose if you call Ross and Reihan "squishy" you'll dispute a lot of others who I'd name, but from skimming the list of 'heads, here are some more conservative (than me) people

Quoting willmybasilgrow: Washington is infamous for these little things, including Arab street (unfortunately not limited to DC and yes, it's old), "it is what it is," (ugh) "going forward." So many others. It's like saying them unlocks something for the listener and you are in.

To hear what is in, just watch This Week with George S. Someone almost always rings every single bell.

Yeah, "going forward" is a particularly noxious weed that sprang up in business journalism, the more so since any two-bit "analyst" or stock picker who uses it almost always means the opposite of what he's saying: "Looking backward at today's market gyrations, I predict thus and such.." Financial marketese also has produced these gems: "visibility" (and the lack thereof), and my all-time favorite (drum roll, please): "negative growth." Armed with these three meaningless verbal tics, you too can become a highly paid financial analyst on TV. Observe. "Well, Biff, I'd say that going forward we're likely in for another spell of negative growth due to lack of visibility at the Fed!" "Thanks for that awesome analysis, JT!" Yada, yada, yada....

Strike Felix off your list. I have photographic evidence: http://www.felixsalmon.com/000894.html

Quoting claymisher: Strike Felix off your list. I have photographic evidence:

That doesn't mean anything. Haven't you heard the new party line? All Real Conservatives hate Bush. ;^)

Quoting rfrobison: Yeah, "going forward" is a particularly noxious weed ...

You bastards. I had just started becoming annoyed by that one, too, but since you and willmybasilgrow griped explicitly, I can't stop seeing/hearing it everywhere. All right. To be fair in a case like this, we have to remind the verbally lazy of serviceable alternatives. Please add to this starter list: from here on out, in the near term, in the immediate future, and starting now.

Quoting bjkeefe: You bastards. I had just started becoming annoyed by that one, too, but since you and willmybasilgrow griped explicitly, I can't stop seeing/hearing it everywhere.

All right. To be fair in a case like this, we have to remind the verbally lazy of serviceable alternatives. Please add to this starter list: from here on out, in the near term, in the immediate future, and starting now.

Thanks for that view from the Bloggingheads street, BJ! It is what it is, of course, and who knows how things will develop going forward given the total lack of jargon visibility? I'd like to try to avoid negative growth in our lexical toolbox by suggesting a few more alternatives: "Blah, blah 'street'"= the three government agents--or antigovernment agitators--I spoke to for this interview "(lack of) visibility"=I can't predict the future; we don't know what will happen next, etc., etc. "negative growth"=shrinkage, contraction, decline, etc. Then please beat senseless the person who said it until they swear never to say or otherwise use those words in combination EVER AGAIN.