Capital Markets

Rash, Insular, and Proud

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Last week, more than 200 economists signed a letter expressing concern about the White House's proposed bailout plan.  While not completely opposed to government action, the letter urged caution, thoughtfulness, and careful assessment before rushing to action.  It concluded this way:

…we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come. 

When asked about the letter at a meeting last week with leaders of Congress, President Bush reportedly replied:

"I don't care what somebody on some college campus says."

This administration's contempt for intellect and worldliness is bizarre.  It's not as if the letter came from the heads of 200 women's studies or sociology departments.  These are people who've studied economics for much of their lives.  And most of them share Bush's alleged (if not practiced) fondness for free markets.

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  1. It’s just another god-damned piece of paper for Bush to ignore.

  2. In his race to the bottom, Bush is passing James Buchanan.

    This from someone who once voted for him.

  3. And banks are still lending…

  4. “I don’t care what somebody on some college campus says.”

    I’ve seen the report written by the bureaucracy.

  5. “Enough of your borax, Poindexter. A man’s The economy’s life is at stake. We need action! Take that you lousy dimension Congress!”

  6. What would an economist know about the way the economy works… I mean… everything can’t recover on its own… that would mean we don’t need to have our hands, wallets, and testicles held onto by congress.

    And just as a current note:

    +335 at present… 43% recovery in less then a day.

    Nephilium

  7. You think too much!

  8. This administration’s contempt for intellect and worldliness is bizarre.

    Not if you’ve been paying attention the last 8 years.

  9. Sadly, I think most Americans think the same way that Bush does. Someone feel free to cheer me up and convince me otherwise.

  10. We fear what we don’t understand. His biggest fear is knowledge?

  11. These are people who’ve studied economics for much of their lives.

    Isn’t that Bush’s point? They have studied economics, not been in the real world practicing it and failing or succeeding. After all, those who can, do.

  12. Congress: 500+ laywers that haven’t held a real job in decades, if ever.

    Who really wants these people in control of the economy?

  13. Isn’t that Bush’s point? They have studied economics, not been in the real world practicing it and failing or succeeding. After all, those who can, do.

    I always forget which part of that saying applies to those who go into government, where they can tell everyone else what to do.

  14. Shows what Bush knows. A lot of economics professors were once in the private sector (and some of them still are, if it’s a private school). One of my professors, for example, once was a high up in the World Bank. But who cares what those assholes think, right Bush?

  15. I always forget which part of that saying applies to those who go into government, where they can tell everyone else what to do.

    Those who can’t do or teach, administrate.

  16. “Isn’t that Bush’s point? They have studied economics, not been in the real world practicing it and failing or succeeding. After all, those who can, do.”

    That probably is his point, but it is an intellectually bankrupt point. Sure, if you want advice on running a business, you probably are better served talking to a high school graduate tire store owner than a business professor.

    But, when talking about the U.S. economy and policy decisions, few people can speak intelligently to that. I’d listen to Greenspan, and then look to economic consensus among academics.

  17. Oh, and some have their real jobs in addition to being professors, like the guy who taught an econometrics class I was in. He’s leads an office that participates in crafing the state budget.

  18. George W Bush thinks he’s the protestant pope and therefore infallible. He doesn’t care what somebody on some college campus says, he doesn’t care what somebody at the pentagon says, he doesn’t care what anybody says. He only cares about what he says. If he said it, it must be so, and it’s only a coincidence that what he says makes his friends more money.

  19. Sadly, I think most Americans think the same way that Bush does. Someone feel free to cheer me up and convince me otherwise.

    Most americans don’t want a bailout. That’s one glaring place they think differently than Bush.

    The Democratic congress, on the other hand…

  20. Hey Derrick – I’m all for calling the general population absolutely stupid when it comes to just about anything. However, you should remember that the reason congress didn’t buy this massive bag of shit from wallstreet was due to tremendous popular disapproval for the bailout.

    It seems that the bastards closest up for re-election in tight races were most likely to vote against the bailout.

    http://www.fivethirtyeight.com/2008/09/swing-district-congressmen-doomed.html

  21. This administration’s contempt for intellect and worldliness is bizarre. It’s not as if the letter came from the heads of 200 women’s studies or sociology departments. These are people who’ve studied economics for much of their lives. And most of them share Bush’s alleged (if not practiced) fondness for free markets.

    To be fair Fannie Mae did came from the economics department at Harvard…that and the policies that ended up prolonging great depression for 10 years.

    I wonder where the research used by CRA and Fannie and HUD came from that buying up Sub-prime loans would be a good idea?

    Bush’s instinct to mistrust academic economists historically is a good move….just misplaced on this particular issue.

  22. Bush is a fool. A more savvy speaker, one who knows to bury this sort of thing in a homey anecdote or joke (e.g., Reagan) would’ve told the following joke:

    Three men went off on a sailboat together, a physicist, a chemist, and an economist. Unfortunately, they ran into a storm and the boat was wrecked on an uninhabited island. The only food they were able to rescue from the wreckage was a case of baked beans. As they got hungry, they began to wrestle with the problem of how to open the bean cans. The physicist said “I’ll climb a tree and throw a can onto a rock, and it’ll split open.” The others didn’t much like this idea because they thought the beans would just splatter everywhere. The chemist said “We can soak the cans in salt water and they’ll rust through.” The others didn’t much like this idea because it would take too long. Then the economist said, “Hey–no problem, we’ll just assume a can opener.”

  23. Good point, z. Those ecomomists may have studied the economy, but George W. Bush has been out there economonizing.

    I’ll bet not a single one of those economists know how to drive a company into the ground, or got the Texas lesislature to give them a couple hundred million dollars for a ballpark.

  24. Also, ignoring the point that some of those that can, might choose to do something they enjoy more.

    I mean, if we want to talk economics (101), an economist who teaches at a random University might also be able to found a company and become very rich. They might also dislike a lot of the work related to that and enjoy hanging around on campus being a professor. Think opportunity cost, or whatever. If they are happier doing one than the other, they might well choose to do what makes them happy.

    But of course, “those that can, do; those that cannot, teach” is much more snappy. It must be accurate.

  25. Most americans don’t want a bailout.

    Um, not quite.

    http://www.washingtonpost.com/wp-dyn/content/article/2008/09/30/AR2008093000450.html?hpid=topnews

    Most Americans don’t want this particular bailout.

  26. It’s time to start imposing income tax on all those weakling foreigners who depend upon the good old U S of A for their protection.

  27. All Americans want a bailout. We just want it for ourselves.

  28. Well, I’m on record favoring a symbolic bailout, involving the transfer of US$700 billion to, well, me.

  29. This administration’s country’s contempt for intellect and worldliness is bizarre.

    Fixed. “He’s one of us!”

  30. As a sociologist, I’d just like to point out that we are (mostly) nothing like women’s studies.

  31. George W. Bush has been out there economonizing.

    Hah!

    I’ll be using the word “economonizing” liberally from now on.

    Well played, joe.

    Maybe, just maybe, anti-elitism and anti-booklearnin’ have gone too far.

  32. I always thought Mr. Pickman was more of a ghoul-ologist.

  33. “He’s one of us!”

    Gooboo gabba gooboo gabba, one of us, one of us!

    Reminds me ofthis, a good song for GWB.

  34. This administration’s contempt for intellect and worldliness is bizarre.

    Yeah, it’s not like we got the whole Cold War wrong.

    Reagan ignored us too, and look where… um, never mind.

  35. Ghoul-ology when I can, the other just to pay the bills.

    I also paint.

  36. joe,
    “Most Americans don’t want this particular bailout.”

    Spot on. It almost seems like joe sixpack doesn’t trust the government not to screw things up…unless the deal is really sweet for joe.

  37. Most americans don’t want a bailout.

    Um, not quite.

    http://www.washingtonpost.com/wp-dyn/content/article/2008/09/30/AR2008093000450.html?hpid=topnews

    Most Americans don’t want this particular bailout.

    I get the feeling that any bailout will fail with the public. Left and right oppose it for far different reasons. As you move the proposal either way you may lose more supporters than you gain.

    They hate this one because they know (in a general way) what it is. They’ll know the next one as well. And a different majority will hate it.

    The above may just be a symptom of incurable optimism.

  38. Even if the above is true, it doesn’t follow that one won’t get passed.

  39. J sub D,

    As you move the proposal either way you may lose more supporters than you gain.

    I think that would be the case if they take the Paulson-cum-Pelosi/Boener plan and try to modify it.

    I’m not so sure about a plan that comes at the issue from a whole different direction.

  40. Sadly, I think most Americans think the same way that Bush does. Someone feel free to cheer me up and convince me otherwise.

    I wish I could help. Last night I spent a wildly frustrating evening attempting to explain to an otherwise intelligent friend that “doing something” is not only no guarantee that things will get better, but is also a good way to make thing worse. But he had heard lots of ‘experts’ on the news saying really scary stuff, so rational discussion was out.

  41. Email update just received from the W$J (emphasis mine):

    Pregnant Pause

    So maybe it wasn’t the end of the world, but U.S. lawmakers’ rejection of a huge bailout plan continued to induce anxiety and calls for action.

    On Monday, the legislative defeat fueled a 778-point drop in the Dow Jones Industrial Average, the biggest one-day decline in the blue-chip measure in its 102-year history. By Tuesday afternoon, the blue-chip gauge had recovered more than a third of that eye-popping loss. In recent action, the Dow industrials were ahead 344.24 points, or 3.3%, at 10709.68. Gains were registered by 27 of its 30 components, including rallies in all its financial names. The Nasdaq Composite Index was up 3.9% at 2060.89, while the S&P 500 rose 4.1% to 1151.05. But the pressure for Congress to act remains. …

  42. But he had heard lots of ‘experts’ on the news saying really scary stuff, so rational discussion was out.

    I have nightmare visions of a hybrid future where politicians are sponsored by networks and elected by ratings (a la Max Headroom), and the general population has the intelligence displayed in Idiocracy. Throw in a little Survior and you get Fox vs CNBC for the title match.

  43. Last night I spent a wildly frustrating evening attempting to explain to an otherwise intelligent friend that “doing something” is not only no guarantee that things will get better, but is also a good way to make thing worse

    I don’t even bother trying any more. Getting wildly frustrated is very, very annoying.

  44. Sadly, I think most Americans think the same way that Bush does.

    Academia’s generations-long obsession/flirtation with Marxism and its many descendants has not won it many friends off-campus.

    Sure, this is almost entirely a liberal arts/campus administration thing, but it dominates the headlines.

  45. I’m starting to move way beyond merely despising Bush — and I actually voted held my nose and voted for the fucker a while back (I think I’d be severely hating on Al Gore too if he’d won in 2000 and 2004, BTW).

    I’m thinking about getting one of those “1-20-09” bumper stickers to plaster next to my Ron Paul sticker, confusing the hell out of partisan Team Red and Team Blue folks.

  46. Academics | September 30, 2008, 2:23pm | #
    This administration’s contempt for intellect and worldliness is bizarre.

    Yeah, it’s not like we got the whole Cold War wrong.

    Reagan ignored [academics] too, and look where… um, never mind.

    Your failure to distinguish between liberal, centrist and conservative intellectuals is what makes both this quote and your assessment of Bush’s anti-brain stance wrong.

  47. Hey Pickman,

    I’ve never found another person that noticed this, but did you realize there might be a reference to you in Stephen King’s It too?

    The market for your originals is cut-throat.

  48. Economic predictions:
    http://www.jstor.org/stable/2397778?seq=1

    The role of prediction in economics involves a fundamental tension. On the one hand, much of economics is concerned with prediction. On the other, economic predictions are notoriously unreliable. It is, in fact, tempting to see the economist as the trapeze-performer who tends to miss the cross-bar, or as the jockey who keeps falling off his horse. Whether or not such characterization is fair, there can be no doubt that the nature and genesis of this fundamental tension, and its implications, do call for systematic analysis and assessment. The aim of this paper is to attempt a brief examination of these issues. There is a sequence of questions to be faced. How central is prediction to economics? Why are economic predictions so difficult? What techniques does economic theory use to cope with these difficulties? Are these techniques sound? How does economic theory relate to practice? I shall take up these questions in turn.

  49. Is it possible that the one thing GWB learned in pursuit of his MBA is that economic predictions are a bunch of hogwash. Is it possible that this is his first intellectually deep statement?

    Inquiring minds want to know.

  50. Last night I spent a wildly frustrating evening attempting to explain to an otherwise intelligent friend that “doing something” is not only no guarantee that things will get better, but is also a good way to make thing worse. But he had heard lots of ‘experts’ on the news saying really scary stuff, so rational discussion was out.

    I have been spending a lot more time at home, alone, for this very reason. How do you have a rational discussion with somebody who learned everything he knows about this “crisis” from watching Glenn Fucking Beck?

  51. Don’t listen to those “expert” economists with all their “facts” and “studies”! I’ve been a failure at everything I’ve ever done in my life! Listen to me!

  52. Good point, z. Those ecomomists may have studied the economy, but George W. Bush has been out there economonizing.

    I was going to post something snide about Bush’s track record for running businesses, but frankly, joe, your comment was a lot funnier.

  53. Dagny –
    Something I’ve learned is that I like my friends more the more we don’t talk about politics. That’s never to say that I don’t get caught in conversations where I’m clearly the one who’s going to be hated on for my position, but people just aren’t ready for someone who thinks of the effects of policies that everyone wants instead of just using the word “should” 150 times per hour.
    examples:
    “The Oil companies SHOULD be made to pay for everyone to go to college for free”
    “Corporations SHOULD not be allowed to pay CEOs so much”

  54. Lets see when it comes to the politicians educations they boast about being Ivy League graduates. As though simply by paying way to much for an education somehow makes them more intelligent than the common man with a degree from some much lesser University.

    Yet with all their wisdom and knowledge they have run our country into the shitter anyway. Now when scholars from the very same institutions send them something like this they act as though what the hell could these University pinheads know that we don’t. To me it not only discredits the scholars but also they themselves.

    Perhaps we need 1) a LOT less lawyers in government and 2) a lot more people from the everyday American schools where we live in reality. Obviously they have lost all sense of reality in DC with such socialist programs as bailouts for failed companies.

  55. I’ll bet not a single one of those economists know how to drive a company into the ground, or got the Texas lesislature to give them a couple hundred million dollars for a ballpark.

    “First of all you’re going to have to grease the local politicians for the sudden zoning problems that always come up. Then there’s the kickbacks to the carpenters, and if you plan on using any cement in this building I’m sure the teamsters would like to have a little chat with ya, and that’ll cost ya. Oh and don’t forget a little something for the building inspectors. Then there’s long term costs such as waste disposal. I don’t know if you’re familiar with who runs that business but I assure you it’s not the boyscouts.”

  56. I don’t even bother trying any more.

    It was a mistake I don’t plan on repeating.

    “No. I believe in letting children learn from their mistakes, Michael. They make a mistake once, they shan’t make it twice.”

  57. Last night I spent a wildly frustrating evening attempting to explain to an otherwise intelligent friend that “doing something” is not only no guarantee that things will get better, but is also a good way to make thing worse. But he had heard lots of ‘experts’ on the news saying really scary stuff, so rational discussion was out.

    Like Epi, I don’t bother any longer either for the aforementioned reasons. But sometimes, I just find myself blurting out my opinion because I just can’t stands the idiocy any longer.

    Then, 2 wasted hours later, I regret saying anything to begin with.

  58. http://leiterreports.typepad.com/blog/2004/10/is_economics_a_.html

    The crux of this argument has not been that economics generates no successful predictions, but only that (a) the quality of its predictions (their precision and reliability), and (b) the growth of its predictive power over time, are not of scientific quality. They do not live up to the standards that economists themselves claim for them. Generating true generic predictions is not the hallmark of science. All of us, drawing on common-sense psychological assumptions, do that all the time. Genuinely scientific theories must anticipate the future with a degree of precision and consistency greater than that realized by common-sense.

    I predict, for example, that a movie which receives a rave review in Friday’s New York Times will produce queues at the New York City movie theaters on Friday and Saturday nights–ceteris paribus, of course (e.g., as long as there is no strike that Friday by the newspaper delivery drivers). I predict that ignoring the curve and giving A’s to all my students will increase enrollment in my courses. I predict that covering a class for an absent colleague will make it more likely that that colleague will give me detailed comments on a manuscript I’ve given him to read. All of this is the stuff of common-sense, but no one would think of characterizing the common-sense psychology that undergirds such predictions as the core of a scientific research program. The question is: does economics really do any better, in predictive precision and reliability?

  59. Thinking about that economist joke I posted above, it also can apply in modified form to the current situation. The punchline is President Bush’s: “Hey, no problem–we’ll just assume an economic crisis.”

  60. NM –
    Predictions are difficult things to make, yes. The economy is a large, complicated system of things that have impacts throughout the whole system.
    However, I always like to liken it to the environment (since many liberals are big on that). Why do American liberals seem to think that it’s ok to mess with a giant complicated beyond-our-understanding system like the economy and claim that there are no unintended consequences (or at least, immoral ones), yet they are fully aware of what could happen to an entire species if we build grocery stores on their stopping places, and what that means for their predators, and so-on and so-forth.
    Why is that?
    I think it’s willful ignorance, but that’s just me.

  61. people just aren’t ready for someone who thinks of the effects of policies that everyone wants instead of just using the word “should” 150 times per hour.

    Good point. At one juncture in the conversation, I was foolish enough to question the impulse of looking to gov’t for the solution to most (any) of life’s difficulties. I was met with a blank stare.

  62. Ha, nice quote, JW.

    “Maybe you can help me straighten out my Longfellow.”

    It was a mistake I don’t plan on repeating.

    You have to guard yourself constantly to pull this off. The temptation that “this time, they’ll get it”, is very strong.

    “And I’m not afraid to make mistakes. Or have you forgotten to read this little…Damn it! My legs are so powerful.”

  63. Common sense, NM, says that we’re punishing industry by regulating them, and they hate that. Common sense also says that it frequently creates barriers to entry, decreasing competition, and allowing prices to rise, along with having many other consequences.

  64. Reinmoose,

    I am just throwing some grist in the discussion mill. For what it is worth, the science behind environmental studies is much more successful in making the kind of detailed predictions that economics finds impossible. This probably because environmental sciences stand upon a firm foundation of harder sciences while economics rests upon the jello of psychology and sociology.

    Of course, in terms of policy decisions, the common-sense approach to both environmental issues and economics issues is at about the correct level of detail to move forward. Both, however, require that your common sense is working with an understanding of the relevant facts. I seriously doubt that GWB has a handle on those facts. And I doubt that the congress does either. The suggestion to do something prudent after careful study (the point dismissed by Bush) is not one that you need a college degree to make.

  65. Reinmoose,

    Common sense says that the optimal solution will result in removing some regulations, re-instating some others, creating some new ones to codify long-standing practices that have gone by the wayside to create this crisis, and, possibly, providing some active measures to stabilize institutions.

    It ain’t an all or nothing kind of issue.

    It never is.

  66. The suggestion to do something prudent after careful study (the point dismissed by Bush) is not one that you need a college degree to make.

    NM –
    It seems that a lot of people with college degrees have no interest in carefully studying the matter and only then “doing something.” Them having a degree in something else (law, environmental studies, physics) should not reduce your seemingly high estimate of a person’s native ability to make economic judgements on a large scale, so what do you suppose the cause of so much rash decision is?

  67. That is to say, if it’s not economic ignorance, what is it?

  68. Common sense says that the optimal solution will result in removing some regulations, re-instating some others, creating some new ones to codify long-standing practices that have gone by the wayside to create this crisis, and, possibly, providing some active measures to stabilize institutions.

    Perhaps you’re confusing “economics” with “economists.” There are combatting theories in economics, so the chances that you can get an accurate prediction by walking up to any random economist and asking them to make a prediction for you is lower than if you select economists with a history of “correct” predictions.

    Although, again, the proper thing to point out is that economics is also a study of measurement, and how to find sufficient information in order to assess the effect of something outside of the immediate effect.

    Those who would rather run around micromanaging every time another leak springs can do so, and they tend to be the ones who select to think that there is no effect of a policy outside its immediate effect.

  69. Reinmoose,

    It is not unusual for people to act irrationally when they perceive a “crisis.” No ignorance requried.

    “We knew better, we just panicked” is a sentence that in one form or another everyone has uttered.

  70. Perhaps you’re confusing “economics” with “economists.” There are combatting theories in economics, so the chances that you can get an accurate prediction by walking up to any random economist and asking them to make a prediction for you is lower than if you select economists with a history of “correct” predictions.

    See the above discussion regarding the quality of correct predictions in economics.

    So, no, I am not confusing “economics” with “economists.” If there are economists making scientifically powerful predictions, they will have moved “economics” forward and their results would be subsumed under the term.

    Although, again, the proper thing to point out is that economics is also a study of measurement, and how to find sufficient information in order to assess the effect of something outside of the immediate effect.

    The study of measurement plays a big part in economics and I think the intractable problems economics presents to those who want to measure effects with scientifically meaningful precision has moved the science of measurement forward. The tools economist have put together have, imho, moved other field forward more than they have economics. Again, I think this is due to the fact that economics sits on a foundation of psychology and sociology rather than biology or physics.

  71. It’s time to start imposing income tax on all those weakling foreigners who depend upon the good old U S of A for their protection.

    Here here. If those barbarians are going to enjoy the fruits of Pax Americana and the protection of our legions, they should be grateful to ship their gold and spices to Caesar.

    Even if the above is true, it doesn’t follow that one won’t get passed.

    I guarantee it will get passed in some form or another. They’re already starting to re-brand it from “bailout” to “Rescue package”.

    Split it up into smaller segments of 100 billion every couple of months, slap some pretty tough sounding requirements on it with big enough loopholes to let Wall St. get out of them, and then spin it all as such an improvement over the Paulson plan crafted in a spirit of bipartisanship.

    Just lather rinse, and repeat until the American public has forgotten about it or is thoroughly deceived about the bill.

  72. Maybe the theocrats are on to something. If the government is our God, then we can just place blind faith on its correctness. When it appears to be in error, well, the ways of the God Emperor are mysterious and unknowable to mere mortals.

    Gosh, I feel better already.

  73. Reinmoose,

    I seem to recall that the Royal Society recently allowed an economist in not because they felt economics had moved from soft-social science to hard empirical science, but because the economist in question (I forget the name) had made advances in measurement techniques which were applicable in other fields, and were interesting mathematically divorced from their utility.

  74. Tribute! What a brilliant idea! I heard that someone in Europe was bitching about the U.S. abrogating its “special responsibility” to the world in not passing some symbolic legislation yesterday. Well, that special responsibility came at a low introductory price, but we’re jacking it up to 2.5% of each country’s GDP. Effective immediately.

  75. I wish I could help. Last night I spent a wildly frustrating evening attempting to explain to an otherwise intelligent friend that “doing something” is not only no guarantee that things will get better, but is also a good way to make thing worse. But he had heard lots of ‘experts’ on the news saying really scary stuff, so rational discussion was out.

    Do we have the same friend?

  76. I’m not gonna spout a bunch of words like some jerk from New York who thinks he’s great.

    I’m gonna rise up, gonna kick a little ass, gonna kick some ass in the USA. Gonna climb a mountain, gonna sew a flag, gonna fly on an eagle. I’m gonna kick some butt, I’m gonna drive a big truck, I’m gonna rule this world, I’m gonna kick some ass, I’m gonna rise up, I’m gonna kick a little ass. ROCK, FLAG, AND EAGLE.

  77. As a sociologist, I’d just like to point out that we are (mostly) nothing like women’s studies.

    And as a economist, I’d like to point out that we are nothing like women’s studies, either!

  78. libertarian democrat | September 30, 2008, 2:03pm | #

    Also, ignoring the point that some of those that can, might choose to do something they enjoy more.

    I mean, if we want to talk economics (101), an economist who teaches at a random University might also be able to found a company and become very rich. They might also dislike a lot of the work related to that and enjoy hanging around on campus being a professor. Think opportunity cost, or whatever. If they are happier doing one than the other, they might well choose to do what makes them happy.

    Let’s not be so quick to discount the freedom to grow a snappy salt-pepper ponytail, wear Birkies and steel-rim glasses, and be a condescending mentor to hundreds of YDAFUC (young, dumb, and full of cum) minds.

    And, of course, the powerful draw of undergrad pussy.

  79. Karl Marx,
    If you’re an economist, I’m a cab driver.

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