A real life Gordon Gekko

"This was a nasty, vindictive man who laid off workers en masse, bragged about stealing ideas from competitors, belittled his employees with screaming tirades laced with oaths and imprecations, overburdened them with heinous work schedules, cheated his best friends and oldest colleagues when it came time to distribute shares, outsourced everything he could to Chinese factories that employ child labor under dangerous conditions, practiced a cruel Darwinian meritocracy that disdained diversity, lied constantly out of pure habit, sicced the government on his chief business rival, possessed a “Nietzschean attitude that ordinary rules didn’t apply to him”, and even denied paternity of his firstborn child. Then he took credit for the work he practically whipped out of people while posing as a benevolent sage."

Who was this real-life Gordon Gekko? For the answer, see here.

Payday loans for rich people?

When I saw this ad for J.D. Wentworth a few days ago, my instantaneous reaction was, "Payday loans for rich people." That certainly is not the reaction that the people who made the ad wanted. An important reason for choosing opera as a way of getting their message out is that opera is considered high-class, and they want to be the association of high-class opera to color people's views of their company.

The service they are offering is the same service as payday loans--to restructure payments. People who use payday loans need money now but do not get paid until later. The same is true of the people whom J.D. Wentworth is targeting, though the payments are over a much longer period of time and are much bigger. Their appeal is to people who have structured payments over time, the sort of payments that lotteries, annuities, and some legal settlements give. If you have a certain income stream of $2000 per month and you want to cash it in, firms like J.G. Wentworth are there to help you out.

Are they socially useful? The argument that they are is the same argument that payday loans are socially useful. If people are rational, we should trust that they know what is best for themselves. J.D. Wentworth has testimonials on its website emphasizing how useful it can be to restructure payments. The argument that they are not socially useful is that many people think only short-term and will do things for immediate gratification even though the long-run consequences are disastrous. This position would argue that J.D. Wentworth is preying on those who have self-control problems or are compulsive spenders.

(They have a somewhat different ad that still has the music but a different setting.)

Another Hazard

Another Merle Hazard song and video, this one about too big to fail.


An annotated version, much longer, is here.

Two entertaining videos about Hayek

A couple more fun economics videos:


The second has better production values.

Nobel Prize

The Nobel Prize in Economics was awarded to Thomas Sargent and Christopher Sims. Here is Sargent last year commenting on the 2009 stimulus package"

In early 2009, President Obama’s economic advisers seem to have understated the substantial professional uncertainty and disagreement about the wisdom of implementing a large fiscal stimulus. In early 2009, I recall President Obama as having said that while there was ample disagreement among economists about the appropriate monetary policy and regulatory responses to the financial crisis, there was widespread agreement in favor of a big fiscal stimulus among the vast majority of informed economists. His advisers surely knew that was not an accurate description of the full range of professional opinion. President Obama should have been told that there are respectable reasons for doubting that fiscal stimulus packages promote prosperity, and that there are serious economic researchers who remain unconvinced.

update: Another quote, from a graduation address:

“Everyone responds to incentives, including people you want to help. That is why social safety nets don’t always end up working as intended.”

Jobless recoveries

From the Bureau of labor Statistics:

(Click on the graph to see the whole thing.)

The recovery after the 2001 recession has been called the "Jobless Recovery," but job growth then was no worse than what we have seen after the 2007-9 recession.

A double dip prediction

The Economic Cycle Research Institute says we are heading for a new recession:

Early last week, ECRI notified clients that the U.S. economy is indeed tipping into a new recession. And there’s nothing that policy makers can do to head it off.
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Why should ECRI’s recession call be heeded? Perhaps because, as The Economist has noted, we’ve correctly called three recessions without any false alarms in-between.
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A new recession isn’t simply a statistical event. It’s a vicious cycle that, once started, must run its course.
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It’s important to understand that recession doesn’t mean a bad economy – we’ve had that for years now. It means an economy that keeps worsening, because it’s locked into a vicious cycle. It means that the jobless rate, already above 9%, will go much higher, and the federal budget deficit, already above a trillion dollars, will soar. 

A GDP song

Found from a link at Division of Labor.

Regime uncertainty

Donald Boudreaux contrasts two theories of depression, the Keynesian and one from Robert Higgs:

Perhaps ironically, one of the most powerful challenges to any Keynesian diagnosis of economic ailments also focuses on inadequate investment spending, but from a wholly different perspective. That challenge is today most closely associated with the economist Robert Higgs.

Higgs' careful look at the data on the Great Depression and World War II convinced him that (1) a U.S. economy producing genuine prosperity wasn't restored until 1946, and (2) investors hunkered down, especially from 1935-40, because New Deal regulations -- along with President Franklin Roosevelt's increasingly vocal hostility to enterprise and successful risk-takers -- created too much uncertainty about how government would treat profits and wealth accumulation.

The "regime uncertainty" -- described by Higgs as "a pervasive uncertainty among investors about the security of their property rights in their capital and its prospective returns" -- unleashed by actual and threatened New Deal interventions made private innovation and entrepreneurial effort simply too unattractive. So private investment spending largely ground to a halt during FDR's reign.

Read more: Regime uncertainty - Pittsburgh Tribune-Review http://www.pittsburghlive.com/x/pittsburghtrib/opinion/columnists/boudreaux/s_757981.html#ixzz1Z4O9XdPA

Higg's view is shared by Amity Shlaes in her The Forgotten Man: A New History of the Great Depression.

Both are essentially arguing that the focus should not be on the demand side, as both Keynesians and monetarists have argued, but on the supply side. To understand the reason that recovery was so slow in the Great Depression, and by extension the reason we see so little recovery now, look not to the theories of macroeconomics, but to some of the literature on economic growth and development that argues that secure property rights and an impartial legal system are keys to economic growth.

The price of sex

From "Cheap Dates" in the New York Post:

“Every sex act is part of a ‘pricing’ of sex for subsequent relationships,” Regnerus said. “If sex has been very easy to get for a particular young man for many years and over the course of multiple relationships, what would eventually prompt him to pay a lot for it in the future -- that is, committing to marry?”
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So, what can women do to return the balance of sexual power in their favor? Stop putting out, experts say. If women collectively decided to cross their legs, the price of sex would soar and women would regain control of the market. Like a whoopie cartel.
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“Let’s be realistic: It’s not going to happen here,” Regnerus says. “Women don’t really need men and marriage -- economically, socially, and culturally -- like they once did. What I hear in interviews with women is plenty of complaining about men or about the dating scene, but their annoyance is seldom directed at other women.”

There is a prisoner's dilemma problem involved--what looks good to the individual may not be good for the group. Plus it is arguable that the end effect of the women's liberation movement of the 1960s and 70s may have been to make many women worse off, not better.