By Arnold Kling
Bill Easterly is not of fan of military nation-building in Afghanistan. He writes,
critics of top-down state plans for economic development are also not fans of top-down state plans for military development. If the Left likes the first, and the Right likes the second, that just shows you how incoherent Left and Right are.
to keep responsible lending, we put private capital in front of public capital and ask that private capital take the first loss on loans it makes which turn out to be bad. Ultimately, taxpayer money is there as backup, but it should not be directing investment. We call this institutional arrangement a “bank”.
This simple sensible construct is utterly lost on policy makers and the commentariat alike. For banking to do the job it is meant to do (ie. make loans that will be paid back), a bank should be required to keep all loans it makes on its books until maturity.
Robert Pozen gave a talk where he offered ideas to make securitization work better. I asked why we should want securitization. He said that when a bank securitizes a loan, it can turn around and lend the money again, increasing lending. I asked why this is a feature, rather than a bug. Pozen did not answer. He is against excess leverage and in favor of securitization, yet seems to be unaware of the tension between those two positions.
Scientific American writes,
If there were a massive conspiracy to defraud the world on climate (and to what end?), surely the thousands of e-mails and other files stolen from the University of East Anglia’s Climatic Research Unit and distributed by hackers on November 20 would bear proof of it. So far, however, none has emerged. Most of the few statements that critics claim as evidence of malfeasance seem to have more innocent explanations that make sense in the context of scientists conversing privately and informally. It is deplorable if any of the scientists involved did prove to manipulate data dishonestly or thwart Freedom of Information requests; however, it is currently unclear whether that ultimately happened. What is missing is any clear indication of a widespread attempt to falsify and coordinate findings on a scale that could hold together a global cabal or significantly distort the record on climate change.
Pointer from Mark Thoma. The headline for the article is “Seven Answers to Climate Contrarian Nonsense.” As the tone of the headline suggests, the article preaches to the converted and attacks the weakest arguments of the skeptics. [UPDATE: As Julian Sanchez once wrote, there is such a thing as the “weak man” argument.] For example, in the paragraph above it says that skeptics see a climate-change conspiracy, and such a conspiracy is not possible. In fact, what skeptics see is a scientific discipline that is self-defined by the position it takes on global warming. This self-defined science requires no conspiracy. I have seen it happen in economics. Macroeconomic modeling as of 1970 was self-defined as Keynesian orthodoxy, with no conspiracy taking place. The fact that the CRU leaks uncover some conspiratorial emails and computer code is what leads me to say that climate science is at least one standard deviation worse than what would be normal in economics.
On the other hand, if your goal is to persuade people with whom you disagree, you have to focus on your own weakest arguments and show why, in spite of the problems in your position, you still think that it is reasonable. My problem with the climate believers is that I continue to see a reliance on models that are “tuned” to fit data. I want to see those models make interesting predictions that pass empirical tests.
money and credit began a long postwar recovery, trending up rapidly and eventually surpassing their pre-1940 levels compared to GDP by the 1970s. Credit itself then started to decouple from broad money and grew rapidly, via a combination of increased leverage and augmented funding via nonmonetary liabilities of banks. In recent decades we have been living in a different world, where financial innovation and regulatory ease has permitted the credit system to increasingly delink from monetary aggregates. By 2007, the typical level of broad money had risen to about 70 per cent of GDP, but bank loans now exceeded 100 per cent, and bank assets over 200 per cent.
Again, thanks to Mark Thoma for the pointer. A longstanding debate in economics is whether money matters or credit matters. The MV=PYers tend to focus on money, and the rest of us are willing to look at credit. Read the whole Schularick-Taylor article.