The moral condemnation directed towards the Greeks is the saddest aspect of this financial crisis, and it says a lot more about the givers than the receivers. Just like the smell of burning books, the demonisation of entire populations and a 'we good, they bad' mentality is an unmistakeable manifestation of pathology. Lacking the intelligence or the interest to understand what the hell is going on, the morally outraged resort to silly stories and juvenile good/evil dichotomies to make sense of the world.
Richard Parker, the Harvard economist, has an interesting article in the FT:
Greece desperately needs reforms. Mr Papandreou knew this well before the crisis, as did most Greeks. But the larger problem was the panic that swept over Europe and the easy moralising that financial crises evoke. Greeks were cast as tax-evaders, lazy and anti-business, their government as over-indebted, bloated and corrupt – a situation that required castor oil and humiliation.
But almost none of the moralising clichés were true. Greek taxes were more than a third of gross domestic product, near the European average. And if Greeks were anti-business, why then were there more small entrepreneurs per capita than anywhere else in Europe? Government was not bloated in terms of employees – at a fifth of the labour force, it was about the European average. Corruption was clearly a problem, but our data showed it was concentrated – incomprehensibly to non-Greeks – in the health sector, where minor “gifts” to doctors secured early scheduling of surgeries.
Two more facts to add here. One, Greeks work amongst the highest number of hours of all OECD countries. Two, while there is a lot of tax evasion in Greece (together with high tax rates so that overall tax take is comparable to elsewhere), this has to do with the fact Greece has a relatively large number of small, family businesses. The Germans have as much inherent propensity to tax evade as the Greeks.
How to bid on eBay. No, you don't just enter your valuation and relax.
Why men are better at mathematics and engineering.
Eugene Fama: My life in finance.
Open Yale courses.
Interviews of great econometricians.
Mad, mad men.
Beautiful Kokeshi dolls.
Gary Becker, 2008: We're not headed for a depression. 'World economic growth will recover once we are over the present severe financial difficulties.'
Don't blow your nose when you have a cold.
Very interesting research on dating.
Why are modern scientists so dull?
Did people who knew about secret CIA coups game the market?
Think of it this way: two years ago we lived in a world in which the wealth of global owners of capital was some $80 trillion — that was the market value of all of their property rights to dividends and contract rights to interest, rent, royalties, options, and bonuses.**
In the past two years the wealth that is the global capital stock has fallen in value from $80 trillion to $60 trillion. Savings has not fallen through the floor. We have had little or no bad news about resource constraints, technological opportunities, or political arrangements.
$17 trillion of [the fall] comes by [my] arithmetic from a rise in the risk discount. There has been a massive crash in the risk tolerance of the globe’s investors.
Thus we have an impulse — a $2 trillion increase in the default discount from the problems in the mortgage market — but the thing deserving attention is the extraordinary financial accelerator that amplified $2 trillion in actual on-the-ground losses in terms of mortgage payments that will not be made into an extra $17 trillion of lost value because global investors now want to hold less risky portfolios than they wanted two years ago.
Our models predict that in normal times, with the ability to diversify portfolios that exists today, the risk discount on assets like corporate equities should be around 1% per year. It is more like 5% per year in normal times — and more like 10% per year today. And our models for why the risk discount has taken such a huge upward leap in the past year and a half are little better than simple handwaving and just-so stories. Our current financial crisis remains largely a mystery: a $2 trillion impulse in lost value of securitized mortgages has set in motion a financial accelerator that we do not understand at any deep level but that has led to ten times the total losses in financial wealth of the impulse.
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The recession does not exist: individuals’ lived experience tells us little about macroeconomic phenomena such as booms and slumps. These are aggregate economic data, not direct sense data to any individuals.
An excellent piece by Chris Dillow on the inability of individuals to directly perceive macroeconomic phenomena. Yes - it's still clearing out my closet season, but hey - the recession's still here so I'll count this one as timely.
In more recent blogging, I like how Chris has something interesting to say, even when commenting on the most boring story in the world:
“Management“ functions rather like witchcraft. It’s a set of rituals which are wrongly supposed to have effects on the outside world.