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I'm not necessarily going to argue with that. The point is that the system as a whole needs to find a way to remain resilient in spite of that. You must remember that the term "malinvestment" comes from "Austrians" who believe that a perfect but fragile is destabilized by policy errors. I say, bunk, the system has no fixed point to which it returns at rest, it can always have wobbles all on its own, there is no knowable correct investment path.
Toggle Commented 2 hours ago on Links for 02-23-17 at Economist's View
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Paying the wrong price for land (and borrowing to do that) is something quite different from "malinvestment". But that doesn't mean I can be happy to see progressives using a made up word coming from people with what I regard as an incoherent view of the world.
Toggle Commented 2 hours ago on Links for 02-23-17 at Economist's View
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When is that quote not true? You see I'm a believer the economy is an evolving system and that the future is in principle unknowable. And if those conditions are generally true at the time, and that was knowable, why are there so many fools in the world? And in particular, why are banks lending to them - banks are supposed to be specialists in assessing risk? (And this last point is the real key issue - agency problems in finance - perhaps the greatest error in history was when investment banks become limited companies instead of partnerships.)
Toggle Commented 2 hours ago on Links for 02-23-17 at Economist's View
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I will add a few points of personal opinion here to make the issues perhaps clearer. 1. I don't think investing in housing at the time was unwise (if there were unused resources going to waste, more and better houses might have been a sensible way to use those resources). 2. I do think that the land price inflation was very damaging (and land price inflation very often is very damaging - although it does help a subset of the population). 3. Investment in more infrastructure, planned to ensure that more well connected and serviced places to live and work could be produced would have been wise.
Toggle Commented 2 hours ago on Links for 02-23-17 at Economist's View
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The bubble was 90% a BUBBLE - i.e. inflated asset prices (in this case LAND prices) associated with crazy lending policies (and yes regulation could have stopped that). Towards the end there was also a period of excessive (in the short term) investment in house building, but the overhang in total house quantity has since turned to a deficit. The resulting problem is almost all FINANCIAL (i.e. wealth inequality and insolvency), there is no remaining problem from excessive real investment, but there is still a financial problem. Of course part of the problem here is a language problem - when I say in investment - I mean real investment (production of productive assets).
Toggle Commented 2 hours ago on Links for 02-23-17 at Economist's View
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"One point that critics and supporters of markets are both apt to forget is that, when viewed from the perspective of Arrow-Debreu theory, the astonishing thing about markets is how under-developed they are." Well not really, they cost.
Toggle Commented 4 hours ago on Missing markets at Stumbling and Mumbling
http://equitablegrowth.org/equitablog/major-malinvestments-do-not-have-to-produce-large-depressions/ The term "malinvestments" (which is a bit of "Austrian" jargon) should be banned from civilized discourse. There are mistaken investments, there are unproductive investments (which may not be mistaken at all) and there are untimely investments but "malinvestments" (which seems to mean investments make by people being misled by incorrect prices or something). Prices are only a small part of the input to investment decisions and investment error is and should be a normal part of the world. A world that is not resilient enough to handle investment errors is a maladaptive world.
Toggle Commented 5 hours ago on Links for 02-23-17 at Economist's View
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https://afinetheorem.wordpress.com/2017/02/22/the-greatest-living-economist-has-passed-away-notes-on-kenneth-arrow-part-i/ From the comments - by Luis Enrique who I normally have a high regard for - quoting Kenneth Arrow: "general equilibrium as an ideal to be achieved by a mixture of private enterprise and public planning and regulation” (taken from his econjournal watch interview) with the author of the foundational analysis of GE." I'm not sure exactly what Kenneth Arrow really thought about general equilibrium, but I know that I think it is the greatest wrong turn in the history of economics. (I don't think Kenneth Arrow is to blame for that). But why is it seen as an "ideal". I really don't understand that at all. What is ideal about it apart from there being no further gains from exchange (but exchange is only possible way to make gains among many). (Relatedly, there is also nothing optimal - in a more general sense - about the Pareto optimum.) This all sounds like a good undergraduate essay topic, I know. Sorry about that.
Toggle Commented 6 hours ago on Links for 02-23-17 at Economist's View
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Thanks for the link to Kaletsky.
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There are three possible ways for Japan to solve the debt issue. 1. Just print money to retire the debt (see point two) 2. Inflate (seems difficult) so the real value eventually gets small 3. Inheritance taxes (which would be the smart solution for Japan - since Japanese government debt is mostly owned by old Japanese, and the Japanese have very few children).
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"One is that in hiring someone what matters is putting round pegs into round holes. Productivity often results not from the intrinsic quality of a worker, but from the match between his skills and the job." On the other hand you could adjust the shape the hole to fit the shape of the peg. Some managers seem to do this with players for instance (adjusting the system according to the players available), others not (they play the transfer market to find players to suit their system). It seems a skill more essential to managers of national football teams - especially those not quite at the very top in terms of available talent. Clubs with lots of money available can do it either way. But I would have thought if a club really wanted a long term solution, then molding the club to the vision of the manager was the way to go.
Toggle Commented yesterday on Replacing Wenger at Stumbling and Mumbling
Training, training, training - athletes all train massively but only one of them wins a gold medal. That explains why cheating in athletics is so widespread, and why the most powerful man in the world is a chronic cheat. We need a world that has a place for everyone. It is time to rebel against the boundless philosophical hegemony of meritocracy. We cannot all win all the time. But we need to live all the time.
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hmm.. A very US centric approach (which I don't like, because in many ways the real problem is the surplus countries not the deficit countries - look at what Germany is doing to Europe in general and Greece in particular - and I don't like unilateral solutions to multi-lateral problems). I think in GENERAL having a national currency as the world reserve currency is a bad idea. See https://www.theguardian.com/commentisfree/2008/nov/18/lord-keynes-international-monetary-fund On the other hand, if we end up with no alternative to a unilateral action, it is not a bad idea at all. (As I mentioned above, I regard the real problem as lying in dysfunctional financial markets). Here is your missing link: http://abcdnow.blogspot.de/2015/08/why-using-market-access-charge-mac-to.html My original thought was that this might be a crank, but the author is well credentialed and serious.
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I think one thing that is forgotten almost always in such discussions is that the arguments for or against trade start with barter not so much with monetary exchange. That IN THEORY, the exchange rate and other prices should adjust to any change in tax or regulatory regime to at least partly offset it. A lot of the practical problems arise, because price adjustments do not actually seem to happen to the extent predicted, and large financial imbalances are seen to become secular features of the economic landscape. This is why I'm inclined to say that trade barriers are a bit of red herring, the really big issues are financial (including the need for finding ways to repair damaged middle class balance sheets). We need to stop seeing redistribution as a dirty word. It is what democratic governments worth the name should be doing.
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I think it is more complicated than that. 1. Both the CDU and SPD also became more concerned with environmental issues (the CSU in Bayern less so). 2. As Greens increased thir vote, there actually has been some movement the other way, with the greens attracting people on the environment movement fringes of the other parties, so that the greens as less extreme than they used to be (e.g. the current Premier of Baden-Württenberg). 3. There is partly as a consequence a split in the Greens between the realos and the idealos. In some ways can be traced back to the Greens having more government experience and the necessity of compromise associated with that. The greens are definitely suffering at the moment from the Syrian refugee crisis, because they tend traditionally to be extremely pro asylum.
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Ron, Japan is not as bad as you paint it. You forget that the Japanese population is falling. It never really had a "great depression", unemployment in Japan was at most 5.5%. Some of what you say I agree with. But perhaps you need to occasionally cross check your facts.
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" In the US, the top 20% own 80% of all investments." This doesn't sound skewed enough to me. When you say "investments" are you including owner occupied housing?
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BUT there are ENORMOUS gains in the quality of life of many, many people just by redistributing what we have better and using the resources we currently use more efficiently.
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Sandwichman - what the hell are you trying to say here? Say's law - production creates the financial ability to consume that production (- i.e. the income from selling production can be used to consume other things - money in = money out). This has to do with the circulation of money. Yes, of course, it is possible that things are produced that nobody wants, but on the other hand, it is NOT possible to consume things that are not produced. Now this circular flow of money has leakages (taxes, savings and imports) and injections (government spending, investment and exports). All these leakages and injections can be influenced by policy. All these points are just straight forward factual information. What is ARROGANT about it? Yes, there are other possible elements of economic policy (labor laws, environmental and safety regulation, information policy, redistribution and social insurance) etc, but they are surely orthogonal to the issue at hand.
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It would be interesting for someone to study what parameters (endowments, basic income - pass go, house prices, rents and taxes - from chance and jail and community chest) would keep the game going for ever. Is there a mathematics major out there looking for a PhD thesis topic?
Toggle Commented 7 days ago on Links for 02-16-17 at Economist's View
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Re monopoly. Pass go and collect $200. And don't forget the inheritance taxes.
Toggle Commented 7 days ago on Links for 02-16-17 at Economist's View
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I'm now officially launching a campaign - drive out misleading terms. When you buy a house in a big city, most of what you are buying is land. A house is just a big long lasting consumer durable.
I'm running a campaign, please stop using the term "creative destruction" - use "destructive creation" instead. Cars didn't need to get rid of all the horses before they could take over the road - the cars drove the horses out.
Toggle Commented 7 days ago on Low job mobility at Stumbling and Mumbling
I remember receiving a lot of pushback here when I worried about the consequences of a war between the intelligence community and the Trump regime. Are people still so sanguine? http://www.rawstory.com/2017/02/he-will-die-in-jail-intelligence-community-ready-to-go-nuclear-on-trump-senior-source-says/ pointed to from comments on http://www.motherjones.com/kevin-drum/2017/02/newsweek-our-allies-dont-trust-us-anymore#disqus_thread
Toggle Commented 7 days ago on Links for 02-16-17 at Economist's View
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"high house prices are bad for growth." Fume!! High LAND prices!