Economics

Now Playing at Reason.tv: Obama's New New Deal—as bad as the old New Deal?

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Nobel laureate economist and New York Times columnist Paul Krugman says he wants President-elect Barack Obama to enact "something like a new New Deal." Historian Douglas Brinkley has said that Obama could come to office with a "sweeping legislative agenda which will be Johnson-like or New Deal-like." An aide close to Obama told New York magazine that "A lot of people around Barack are reading books about FDR's first hundred days."

On the cusp of a deep economic recession, and with a staggering amount of bailout money being offered to struggling industries, pundits and political advisers are advocating that the incoming Obama administration construct a new New Deal. 

But is the popular narrative about the old New Deal—that Keynesian economics and top-down planning rescued America from the Great Depression—accurate? Reason.tv's Michael C. Moynihan talks to UCLA economist Lee Ohanian, who argues in work written with colleague Harold Cole, that the New Deal's massive intervention into the economy actually prolonged the economic crisis by seven years. 

"Obama's New New Deal" is written and produced by Michael C. Moynihan. Director of Photography is Dan Hayes.

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  1. Who here is a fan of alphabet soup?

  2. I can see the support for the New Deal, even if I think its pretty stupid, but people still support the Great Society? Really? Will we have to wait until Medicare completely destroys the federal government until they stop supporting it?

  3. Paul Krugman says he wants President-elect Barack Obama to enact “something like a new New Deal.”

    How about Deal or No Deal instead? Frankly, I trust Howie Mandel’s advice more than I do Krugman’s.

  4. Most people can’t just stand there. They have to DO something.
    Now throw in the people willing to stand there, but the politicians say to them, hey, you can continue going about your normal business because I’LL DO SOMETHING. Next thing you know, you’ve got an hysterical mob.
    (Always off in the wrong direction. But you knew that.)

    Our biggest problem is that Milton Friedman can no longer patiently explain to us what’s happening.

  5. “Our biggest problem is that Milton Friedman can no longer patiently explain to us what’s happening.”

    And Naomi Klein is feasting on his freshly-lain corpse.

  6. And Krugman is winning a nobel prize.

    Sadly, our only asset is getting Ron Paul on Fox News whenever Bernanke/Paulson do something stupid.

  7. Is the current economic crisis really affecting enough people that we need something on the scale of the New Deal?
    While I don’t wish it to happen, it would seriuosly serve my curiosity to find out what would happen if GM and Chrysler went under in a month.
    We’re in a terrible situation with a lot of no-win terrible decisions to make. Just be wary of anyone too eager to settle on and make one of those terrible decisions.

  8. Krugman’s Nobel comes from a time when he was doing some pretty neat work – my copy of Dispatches from the Dismal Science is still a favorite.

    And I’m with you, Reinmoose – I’m not at all excited about failure of the Big Two And A Half but am definitely going to do my best to enjoy watching what happens. Living in Michigan, that may be easier said than done.

  9. Worst case scenario for the Big 2.5 – the UAW Bailout never quite clears the political minefield, and they have to declare bankruptcy.

    Which would, of course, be a Chapter 11 reorg, not a Chapter 7 liquidation. They keep operating, so Detroit does not become a radioactive wasteland (as the UAQ Bailout proponents like to pretend), the supplier networks stay at least somewhat viable, etc.

    Sure, there’ll be some pain amongst their many creditors, but that pain is coming anyway without the kind of reorganization that has to occur sooner or later to keep them viable. After all, they can’t suck on the public teat forever; even the Dems will get tired of pumping tens of billions a year into the rathole of the Big 2.5 as they currently exist.

  10. You fucking right wingers can twist any fact like a pretzel to fit your moronic ideology. But the country is moving left, fucksticks. Contribute now!

  11. I remain blissfully content-free! [insult] [irrelevant “joke”]

  12. What’s that annoying scrambling on my screen under R C Dean’s post? *wipes monitor* It just won’t go away!

    Oh it’s just Lefiti posting again.

  13. I remain skeptical of claims regarding the prolonging effects of the New Deal…particularly when they involve specific dates (7 years, yeah right).

    Predictions in economics are never better than common sense guesses. This is true whether you are projecting into the future or into an alternate past.

    In addition, conditions now are significantly different than they were when FDR was mucking around. This makes any analogies to the Great Depression pretty sketchy.

    IOW, a pretty useless post.

    Yes we should discuss what, if any, government interventions into the economy are wise. And yes, we should discuss which interventions are clearly unwise. But couching this as some parallel to the New Deal complete with silly ornaments about the “true” effects of FDR’s programs is a waste of words.

  14. Make sure to post the free-market prayer now, Lefiti. It gets funnier every time OLOLOLOLOLOLOLOLOLOL

  15. What’s distressing is that, once again, the likely market (such as it were) outcome is being drowned out by stories of the worst possible case scenario. If the car companies go into Chapter 11–a not uncommon experience for companies over many years of doing business–they’ll have the ability to restructure themselves and their relationships with other parties, all while still remaining in operation. They won’t simply vanish, taking out thousands of jobs and all of the suppliers dependent on their continued existence. As the unions, politicians, and the media keep suggesting–egad.

    That’s not to say that there won’t be ill effects felt across the economy by such bankruptcy filings, but those effects are hardly likely to be anything remotely cataclysmic. There’s reason to believe that only GM and Chrysler are definitely bankruptcy candidates, anyway.

    Failure is an option.

  16. http://blogcritics.org/archives/2008/09/04/1628412.php

    Book Review: The Conscience Of A Liberal by Paul Krugman
    Written by Dan Schneider
    Published September 04, 2008

    In short, Krugman discourses on how the aftermath of the Stock Market Crash of 1929- which ended what he calls the Long Gilded Age, of the 1870s thru 1920s, impacted Americans via the Great Depression, which saw the rise of Liberalism, through what he calls the Great Compression, after the Second World War, when higher tax rates and governmental policies squeezed incomes from top and bottom, creating a more egalitarian and stronger economy- and one that has yet to be equaled. Krugman posits that the post-war economic boom, and the rise of the suburban middle class (using the example of Levittown), was not a result of the free market, which he rightly acknowledges ended, for all intents and purposes, with the Great Depression, but with direct government intervention.
    He then charts the rise of Movement Conservatism’s early and naked biases, how it learnt its lessons, and emerged to wage a stealth politics of class division (which they often accuse their counterparts on the Left of doing) to seize power, and begin a decades long assault on social gains instituted by the New Deal of President Franklin Delano Roosevelt. Krugman also details how they overplayed their hand, and why he feels the 2006 election was a turning point back to more Liberal control of national politics, or, at the very least, a return to 1950s and 1960s moderation of the two major political parties, when, Krugman quotes President Eisenhower, on the radical Right Wing, who wanted to dismantle the New Deal, abolish social security, unemployment insurance, and eliminate labor laws and farm subsidies, as their ‘number is negligible and they are stupid.’ The President was wrong on their size, and he shows how and why they let the accordion expand again, economically, undoing the Great Compression, and bringing on the income stagnation of recent decades. Krugman cleverly shows that in no other period of American history was there even an argument over whether a younger generation would do better than an older one. The very fact that there is debate is proof of the poor policies of Right Wing agenda-driven governance.

  17. Is the current economic crisis really affecting enough people that we need something on the scale of the New Deal?

    Just this morning on my way to work I observed three grown men pushing apple carts outside my building, and at least half a dozen more selling pencils.

    As for getting our economy jump-started, when the new New Deal fails, Obama should deliberately engineer World War III.

  18. Is there even a real Lefiti anymore (or was there to begin with)? All of his posts just seem like parodies recently.

  19. Bull hockey. Without 9/11 (a primarily non-economic event), the GOP wouldn’t have overreached so much and would likely still be in power. Evidence that we’ve suddenly veered left is scant, at best. See how things go in 2010 before you get cocky.

  20. Another annoyance regarding New Deal comparisons…even in their work, these economist primarily blame the NIRA for the damage.

    Obama would not be able to implement a new NIRA as it was declared unconstitutional.

    So…the approaches used in the New Deal that are blamed for prolonging the depression are not even on the table for any New New Deal.

  21. if any, government interventions into the economy are wise. And yes, we should discuss which interventions are clearly unwise.

    The problem is that if there are wise interventions by government (whatever that means) you will also get unwise interventions by government. It’s a package deal, neither you nor I get to choose what it will do. Government actions are a product of political forces, influences. They are not a product of wisdom.

  22. http://www.fpif.org/papers/2004keynesianism_body.html
    FPIF Special Report
    May 2004
    From Keynesianism to Neoliberalism: Shifting Paradigms in Economics
    By Thomas I. Palley

    Excerpt:

    The concept of market failure has proved extremely powerful, but it has in turn generated a neoliberal counterargument framed in terms of government failure. The claim is that, though markets may fail, having government remedy market failures may be even worse, owing to bureaucratic inefficiencies and lack of market-styled incentives.
    The government failure argument has had great resonance in the United States, given the culture of radical individualism. However, the role of government in a market economy runs far deeper, and its contribution is inadequately understood. Government not only plays a critical role in remedying market failure, it also provides essential services related to education and health. In addition, government is pivotal in stabilizing the business cycle through fiscal and monetary policy. Deeper yet, government is integral to the workings of private markets through its provision of a legal system that supports the use of contracts. Absent the ability to contract, the benefits of a market economy would be enormously diminished.
    Particularly poorly understood is the role of government in preventing destructive competition, in which market incentives lure agents to engage in actions that generate a socially suboptimal equilibrium. This type of situation is illustrated by the bribery problem. Bribery is economically destructive, because it allocates business on the basis of bribe-paying rather than economic efficiency. For this reason, societies should aim to avoid bribery. However, unregulated markets tend to produce bribery. If one agent bribes while others do not, that agent thrives while others suffer. As a result, all agents have an incentive to bribe. Left to itself, the market therefore generates a “bad” equilibrium in which all agents pay bribes. The “good” equilibrium in which none pay bribes can only be induced and maintained by laws imposing penalties that deter bribery. This illustrates how government action may be needed to support optimally efficient outcomes. The real world is afflicted by situations generating destructive competition-examples include bribery, excessive advertising expenditures, tax competition between jurisdictions to attract business investment, and the global race to the bottom, in which countries ratchet down labor standards to attract business. Remedies for all of these situations require government intervention.

  23. Sam Grove,

    We the people…government of, for and by the people…yadda yadda.

    Get involved.

    You are part of those political forces.
    Political forces is shorthand for the opinions of citizens. If the wiser citizens check out of the process…then the process is less likely to result in good outcomes.

  24. LOL NEOLIBERALISM? you mean CLASSICAL liberalism.

  25. I wonder if anyone will address the substance of the excerpts lefti just posted with substance.

    I wonder if lefti will add any substantive thoughts on how they are relevant to the current posting.

  26. I’m sorry Lefiti, but when the TITLE of an article is grossly incompetently wrong (lol! NEOliberalism!), I can’t read the rest of it and take it seriously.

  27. If the wiser citizens comprise a small minority of the whole, then the process will likely steamroll over their wise positions.

    There were and are completely valid reasons for not structuring our system as overly democratic. But we decided to break those shackles. And now we’re about to pay the piper. . .again.

  28. “If the wiser citizens check out of the process…then the process is less likely to result in good outcomes.”

    And if the stupider citizens check out of the process, is the process more likely to result in good outcomes? Anarcho-capitalists surely don’t vote, do they?

  29. The concept of market failure has proved extremely powerful

    FIRST SENTENCE EPIC FAIL

    Markets don’t fail, they just don’t provide the outcomes some people expect. It’s like saying that weather has failure when rain falls instead of feathers.

    Please, keep quoting idiots. (And yes, you may therefore begin to quote yourself.)

  30. Pro Lib,

    The wiser citizens can often influence the less wise with better arguments.

    It only takes a handful of articulate and dedicated individuals to change the direction of a society.

    It could be argued that is the only way societies ever actually change.

  31. That’s okay, Egosumabbas. I wouldn’t want your lips to get all chapped and sore.

  32. “From Keynesianism to Neoliberalism”

    LULZ. This really made my day. It’s like saying FROM STALINISM TO COMMUNISM.

  33. Sugarfree,

    You are one fucking firm True Believer. Keep the faith!

  34. “From Keynesianism to Neoliberalism”

    LULZ. This really made my day. It’s like saying FROM STALINISM TO COMMUNISM.

    Yeah, people who have never had catechism class are soooo fucked!

  35. There are a number of people who claimed that FDR purposely got America in WWII including the bombing of Pearl Harbor in order to get America out of the great depression.

    I don’t know about that but was is definitely clear from history is that without WWII and the significant increase in private production needed to support the war effort the depression would have lasted a lot longer than it did.

  36. Keynes only published his General Theory in 1936, so you do have to be careful not labelling the whole New Deal as Keynesian, I rather call it proto-Keynesian.

  37. Yes, I Truly Believe you are a retard. Quick! Spout off the same tired shit you do every day!

  38. Neoliberal means market fundamentalist because I say so! Nevermind that it really means “American Liberal”! I’m an anarchist who wants you to vote in big daddy government! wooooooo!

  39. Stating a precise number that the depression was prolonged by is silly. But it is still clear that FDR did prolong it. (And it wasn’t just FDR who is to blame, as Hoover’s interventions did some prolonging of their own).

    Actual economic recovery didn’t happen until after WWII. Many economic historians declare that the depression ended at WWII, but that’s only because they measure unemployment. But all the unemployed got drafted, so it’s a false measure. There’s no way you can call the wartime austerity a good economy. In some ways it was worse than much of the formal depression itself. Hell, nearly every staple good was rationed!

  40. Sugarfree,

    Markets don’t fail, they just don’t provide the outcomes some people expect. It’s like saying that weather has failure when rain falls instead of feathers.

    Just as it is logical to say the rain failed to provide our farm with needed moisture this year it is logical to say the markets failed to provide outcome x.

    So, on the level you criticize the term your critique seems pretty weak.

    On a deeper level, you are assuming that markets always operate at optimal efficiency when only bottom up forces are allowed. But no complex adaptive system operates at optimal efficiency without BOTH top-down and bottom-up forces.

    “Market failure” is a term to describe cases whereby the market is not operating at optimal efficiency. This may be due to too much top-down, or too-little.

  41. I think the market is evil but I make millions on my book tours!

  42. The only way to have a market fail is when one party violates its contract (fraud), or a third party holds guns to the heads of the contract signers (government intervention).

  43. @Brandybuck:

    When you have rationing, price fixing, and massive disruptions of whole segments of the economy, it would be challenging to construe that as a recovery.

  44. Sugarfree,

    Also, the first sentence talks about the
    “concept of market failure” proving to be powerful.

    I am not sure how you can refute that given the proliferation of the meme. It seems to serve a useful purpose in discussions of policy and shows up in literally 10’s or thousands of serious papers on economics.

  45. 10’s of thousands, that is.

  46. First, I vote.

    Second, the ability of The Wise? to influence the masses on complex concepts, particularly when they appear counterintuitive, is quite low. This doesn’t mean that I think we need to give the wise more power; rather, I think we need to weaken the power of government to impose the foolish whims of the majority–or even the not-so-foolish whims–willy nilly.

    Talk of a new New Deal is so out of whack with the current situation as to make any debate about it quite difficult. We’re not even remotely in the economic pit we were in during the Great Depression. Nor are there any real signs that we will move there. We may face a deep recession, but that’s just life in the business cycle. This time around will hurt more than usual, but I have yet to see any indication that this recession will be even as bad as the late 70s, let alone the 30s.

  47. Face it wingnuts, the New Deal was the best thing to ever happen to this country, Cuba has the best healthcare in the world, and North Korea is a worker’s paradise.

    Fucking free market fundamentalist fucks.

  48. Keynes only published his General Theory in 1936, so you do have to be careful not labelling the whole New Deal as Keynesian, I rather call it proto-Keynesian.

    or, perhaps, New Deal Apologetics.

    We may face a deep recession, but that’s just life in the business cycle.

    The business cycle has become one of those risks that Americans must be protected against, PL. By government fiat, the business cycle has been revoked.

  49. Neu,

    Just as it is logical to say the rain failed to provide our farm with needed moisture this year

    Yes, but only crazy people use this an argument to implement a massive and expensive scheme to control the weather.

    “Market failure” is a term to describe cases whereby the market is not operating at optimal efficiency. This may be due to too much top-down, or too-little.

    I’m willing to grant this point, but “market failure” also seems to be a term thrown around by people fundamentally ignorant of the fact that a market (or any system created by millions of interactions of humans) cannot be optimally efficient without something approaching perfect knowledge. Something that the “market failure” crowd thinks the government somehow magically possesses.

    Compound this with the fact that a lack of government “free” healthcare is also a “market failure” and it seems to become a term of abuse by the economically ignorant.

    Despite the protestations of the village idiot, I’m not a free market fundamentalist and concede that a certain amount of oversight is necessary for an optimally efficient economy. But the hard-left “market failure” crowd is usually complaining that the free market doesn’t produce a socialist paradise for them without a whit of understanding that it won’t and never could.

  50. Pro Lib,

    I don’t disagree with anything you say.

    Although I think the wise have often been able to influence the masses quite effectively. It requires, however, talking to the masses as if they were indeed also wise and could understand the complex topic as it exists.

    The current habit of assuming the masses are idiots that wouldn’t understand does more to proliferate the ideas of pandering idiots than anything else.

    Pairing leadership with wisdom is a rare gift…I don’t know if we’ve got anyone that can take up the challenge, but I hope Obama stumbles upon some wise individuals, cuz he certainly has the “influence the masses” thing down.

  51. I demand my right to an economic downturn, where my continued employment allows me to buy stuff at a sharp discount! Where’s my top hat, boy?

  52. Neu Mejican | December 16, 2008, 2:23pm | #
    Sugarfree,

    Also, the first sentence talks about the
    “concept of market failure” proving to be powerful.

    I am not sure how you can refute that given the proliferation of the meme. It seems to serve a useful purpose in discussions of policy and shows up in literally 10’s or thousands of serious papers on economics.

    It is conceptually flawed because it relies on the idea that markets are extrinsically malleable where in reality they are intrinsic systems, not designed. Efficiency is not a real argument against markets because every day produces a set of information that is more efficiently allocated than the day before, through the price mechanism mistakes are realized, and successes rewarded, and eventual , visible progress is eventually seen in the outcome down the road, but never in the actual process.

    http://www.fpif.org/papers/2004keynesianism_body.html
    FPIF Special Report
    May 2004
    From Keynesianism to Neoliberalism: Shifting Paradigms in Economics
    By Thomas I. Palley

    Excerpt:

    The concept of market failure has proved extremely powerful, but it has in turn generated a neoliberal counterargument framed in terms of government failure. The claim is that, though markets may fail, having government remedy market failures may be even worse, owing to bureaucratic inefficiencies and lack of market-styled incentives.
    The government failure argument has had great resonance in the United States, given the culture of radical individualism. However, the role of government in a market economy runs far deeper, and its contribution is inadequately understood. Government not only plays a critical role in remedying market failure, it also provides essential services related to education and health. In addition, government is pivotal in stabilizing the business cycle through fiscal and monetary policy. Deeper yet, government is integral to the workings of private markets through its provision of a legal system that supports the use of contracts. Absent the ability to contract, the benefits of a market economy would be enormously diminished.
    Particularly poorly understood is the role of government in preventing destructive competition, in which market incentives lure agents to engage in actions that generate a socially suboptimal equilibrium. This type of situation is illustrated by the bribery problem. Bribery is economically destructive, because it allocates business on the basis of bribe-paying rather than economic efficiency. For this reason, societies should aim to avoid bribery. However, unregulated markets tend to produce bribery. If one agent bribes while others do not, that agent thrives while others suffer. As a result, all agents have an incentive to bribe. Left to itself, the market therefore generates a “bad” equilibrium in which all agents pay bribes. The “good” equilibrium in which none pay bribes can only be induced and maintained by laws imposing penalties that deter bribery. This illustrates how government action may be needed to support optimally efficient outcomes. The real world is afflicted by situations generating destructive competition-examples include bribery, excessive advertising expenditures, tax competition between jurisdictions to attract business investment, and the global race to the bottom, in which countries ratchet down labor standards to attract business. Remedies for all of these situations require government intervention.

    Fallacy of the Only Viable Actor. In the examples listed is a coercive body the best choice in the possibilities that are applicable to the situation, even in the example of fruad, the damage is

  53. I am not sure how you can refute that given the proliferation of the meme. It seems to serve a useful purpose in discussions of policy and shows up in literally 10’s or thousands of serious papers on economics.

    Granted. It is only certain interpretations of the concept that I object to, not the notion is is a powerful meme. (Dumb ideas are often wildly popular.) I was hasty.

  54. Get involved.

    You are part of those political forces.
    Political forces is shorthand for the opinions of citizens. If the wiser citizens check out of the process…then the process is less likely to result in good outcomes.

    Neu–A perfect example of the political failure at work is the insistent and incessant support of the bailout by the politician class, while it is obvious that a sizable majority of their constituents are opposed to it.

    I sent emails to all 3 of my congresscritters prior to the first vote stating my opposition and why I opposed the bailout and all 3 voted in favor of it. I did, however, eventually get back messages from the 2 senators with their half-baked reasons for voting yea.

    Needless to say, my political opinion weighs in at about the same value as a flaming bag of shit in Maryland. It’s one-party rule here and I wasn’t invited to the party (well, I was invited, but I didn’t like the Tax Here! Stomp now! theme they picked for it).

    I don’t have a great deal of faith in your proposed solution.

  55. Fallacy of the Only Viable Actor. In the examples listed is a coercive body the best choice in the possibilities that are applicable to the situation, even in the example of fruad, the damage is

  56. spit it out man

  57. Fallacy of the Only Viable Actor. In the examples listed it is assumed a coercive body is the best choice in the possibilities that are applicable to the situation, even in the example of fraud, the damage is

  58. It only takes a handful of articulate and dedicated individuals to change the direction of a society.

    And it only takes a few vocal individuals with good PR and sweet sounding rhetoric to turn it right back around. No offense Neu, but you’re incredibly naive to believe that committee style dialog will ever produce something that is remotely wise or efficient for anyone but those who stand to benefit by gaming the system.

    Most of society is directed by memes, paradigms, and the occasional urban legend. Like the idea that WWII brought us out of the depression and that war is good for an economy. How long has that nonsense idea been around? The fact that people continue to believe in it, among other silly memes, is proof enough that the “wise” have little direct influence on the movement of society.

  59. Each time I’ve copied and pasted that entire section but it wont print out more than a shuffled version of the first few sentences.

  60. . . .is. . . .

  61. Sugarfree,

    Yes, but only crazy people use this an argument to implement a massive and expensive scheme to control the weather.

    But wise individuals might implement a reservoir system or use drought resistent farming techniques.

    “market failure” also seems to be a term thrown around by people fundamentally ignorant of the fact that a market (or any system created by millions of interactions of humans) cannot be optimally efficient without something approaching perfect knowledge.

    Not really true. This assumes a tighter relationship between knowledge of the system and efficiency of the system than exists in these kinds of systems. The top-down forces don’t need perfect knowledge, or anything close. They just need to be able to recognize trends that will derail efficient operation and have the ability to adjust in ways that correct those trends.

    No magic needed.

    Something that the “market failure” crowd thinks the government somehow magically possesses.

    I think you are attributing beliefs that people don’t hold, or are talking about a very very small minority of people that use the term.

    Compound this with the fact that a lack of government “free” healthcare is also a “market failure” and it seems to become a term of abuse by the economically ignorant.

    No one uses this argument. The failure is the lack of health care. A proposed solution is to have the government provide access to health care. No one claims that the market should produce government health care. They claim that the market fails to produce access to health care for all who need it.

    But the hard-left “market failure” crowd is usually complaining that the free market doesn’t produce a socialist paradise for them without a whit of understanding that it won’t and never could.

    I actually think they understand perfectly well that it never could. That is why they are “hard-left.” They don’t believe in the power of the free market to provide for society’s needs.

  62. Fallacy of the Only Viable Actor. In the examples listed it is assumed a coercive body the best choice in the possibilities that are applicable to the situation. Even in the example of fraud, the damage is

  63. Your selected text may include special characters that are defeating your attempts to paste. Any greater-than or less-than symbols? Try copying or pasting as plain text, if you have that option.

  64. New topic:

    How is the concept of “political failure” different or similar to the concept of a “market failure.”

    Is politics a separate market, or part of the free market?

  65. That is bizarre.

  66. Neu Mejican

    You show an unsettling tendency to think for yourself.

  67. Fallacy of the Only Viable Actor. In the examples listed it is assumed a coercive body the best choice in the possibilities that are applicable to the situation. Even in the example of fraud, the damage is still done whether or not parties are punished and ‘justice’ is served. Will it prevent other actors down the road? History says no, not when the size and scope and degree of punishment in our Nation compared to the level of criminal activity is compared, who is to say a less law prone society would be more lawless as a result?

  68. I’m not sure, but I suspect that GM’s best hope is to close some divisions and spin off others.

    Corvette, for example, might thrive as a standalone niche marketer of pricey sports car while it also continues to make engines for Cadillac which might also survive as the maker of a couple of luxury lines. How many other divisions are viable I wouldn’t venture to say.

    I’m not sure there’s any hope for Chrysler, except maybe the Jeep part.

    As PL suggests Ford may survive with little or no tweaking. I think they’ll stll need to renegotiate labor contracts, though. And probably downsize some more.

    I keep hearing talking heads say stuff to the effect that they can’t go into Chap 11 because noone will buy from a conpany they think is bankrupt.

    Doesn’t everyone know that they’re already bankrupt?

  69. No offense Neu, but you’re incredibly naive to believe that committee style dialog will ever produce something that is remotely wise or efficient for anyone but those who stand to benefit by gaming the system.

    You missed my point, clearly.

  70. Pro Libertate | December 16, 2008, 2:44pm | #
    Your selected text may include special characters that are defeating your attempts to paste. Any greater-than or less-than symbols? Try copying or pasting as plain text, if you have that option.

    Thanks, I found the problem and rewrote that section.

  71. You missed my point, clearly.

    You’ll have to do better than that.

  72. they are intrinsic systems, not designed

    Indeed. But they are also not homogeneous and include large and small players, players whose role is regulatory, players whose role is disruptive, players whose role is “creative destruction,” etc….

    Think of a brain. You have individual synapses firing in the context of a hormonal background and a soup of neurotransmitters that inhibit and excite and prevent cascading failures (epilepsy, say).

  73. Pain,

    Actually, I was thinking you should be the one who puts in more effort.

    I am doing fine.

  74. players whose role is regulatory,

    These players are extrinsic to the process whether or not you accept their validity is a different story.

  75. Neu,

    I actually think they understand perfectly well that it never could. That is why they are “hard-left.” They don’t believe in the power of the free market to provide for society’s needs.

    Then let them propose the folly of socialism and stop trying to torture the market into providing them something it cannot. Especially with the continuing blood libel that our already heavily-distorted market is somehow “free.”

    But wise individuals might implement a reservoir system or use drought resistant farming techniques.

    Those are both bottom up solutions, analogous to investing conservatively or saving to avoid financial disaster during downturns and panics. Even if they are done by the government on the macro-scale, they still aren’t an effort to distort the weather, but just to ameliorate is effects. Top down would be controlling the weather. Ask the Chinese how well that worked.

    (On a side-note, I have no objection to a social safety-net (reservoirs). But it should be a net, not a hammock. To further torture this analogy, I don’t give a flip about the guy who tries to farm the desert and complains the reservoir doesn’t provide him enough water.)

    No one uses this argument.

    O’Rly?

    http://www.nakedcapitalism.com/2007/04/market-failure-i-money-driven-medicine.html

    http://rationalreasons.blogspot.com/2006/01/private-healthcare-and-market-failure.html

    http://jontaplin.com/2008/04/05/market-failure-in-health-care/

    These are three hits from the first page of googling “health care market failure.” Destroying the private health industry based on the fact that is doesn’t produce “free” healthcare is exactly what they are proposing. Complaining that a private market cannot produce something for nothing is economic ignorance.

    (By the way, the last one is particularly stupid. He argues that Mass. not producing enough doctors for it’s Universal Health Care program is somehow a market failure. He seems incapable of grasping that if you heavily distort an employment market by controlling wages, less people will want to do the job.)

  76. Isaac,

    Don’t people fly on bankrupt airlines? I mean, where does this idea come from? I’m sure people are a little more wary doing business with a company in Chapter 11, but I’m not sure consumers care that much. Certainly not enough to completely avoid the manufacturer. If nothing else, the Buy-American mentality will set a definite floor to the number of people who’ll shop elsewhere. And, of course, if Ford were to avoid Chapter 11, then it could be an alternative if one is needed.

  77. Think of a brain. You have individual synapses firing in the context of a hormonal background and a soup of neurotransmitters that inhibit and excite and prevent cascading failures (epilepsy, say).

    Synapses are not individual sentient beings thus the analogy fails. Synapses do what they are told. Humans cannot be accurately modeled to any certainty, especially in an economic environment where they are aware of it. Because they will try to game or break the system to their own gain. So unless you allow for a system that compensates when others try to game it it will fall apart.

  78. Ah, Neu.

    I realized that I wrote “government ‘free’ healthcare.” Sorry, you are entirely correct with that mistake sentence. I wrote gov, changed my mind and inserted free and forgot to delete gov. My bad.

  79. “FDR prolonged the Great Depression.” As far as I understand it the argument goes something like this: It is a priori true that governments don’t act as efficiently as the private sector, and that high tax rates on the rich damage the economy, and that greater wealth equality is bad, ergo FDR’s progressive policies prolonged the Great Depression, which would have ended 7 years sooner had we simply put our faith in the private sector and the free market.

    Since nobody possesses a time machine capable of visiting alternate universes, the evidence for this argument, of course, is scant.

  80. If all we want is free healthcare, why not simply enslave all doctors and supporting medical personnel and make them give us healthcare without charge? Sure, that’s unfair to those enslaved, but the greatest good for the greatest number, right?

  81. You are probably looking for a more elaborated explanation — forces that are extrinsic to a market system are those that are not necessary to its function. These are cultural considerations instead of operative ones. Say, the vast majority of people in a given trading zone have a set of things that they believe to be bad, the trade of humans, child labor, mixing of carrots and corn in canned goods, for one set of people in a given trade zone, and a different set, no trade for the revered cow, forced early retirement, and no trade in sharp utensils exist for their neighbors to the North.

    Each group with its set of taboos sets of a board to decide how matters that incur infractions against the reigning taboos will be punished. In either case the ‘efficiency’ of the market is not increased. You may say that the locals are relieved that their chain store down the block does not carry steak knives so they have more ‘confidence’ purchasing there, but that reduces things to the whims of psychology, and we are no longer talking about market factors since it is recognized that where demand is applicable the black market creates more efficient means of allocation when objects are banned and taboos are crossed (ie. booze, drugs, porn) than exist when these things are culturally normative.

    Regulators are a matter of culture and not intrinsic to the market.

  82. Don’t people fly on bankrupt airlines?

    Of course they do. But to listen to the pitchmen for the big 3 you’d think no company has successfully gone through Chap 11. God almighty, it seems to me that just about every company except the automakers have done it at least once by now.

    I think the biggest problem for them is that chap 11 will make it so that contracts with unions and dealers will be renegotiated. The UAW will be weakened and a lot of dealers will go out of business.

    Mind you the dealers do know that there are too many of them and their numbers need to be reduced. It’s just none of them wants to be one of the ones that has to take a bullet.

    As to the New New Deal thing, hasn’t it occured to anyone that we maybe should have thought about paying for the old one before we started a new one?

  83. TonyQ | December 16, 2008, 3:16pm | #
    “FDR prolonged the Great Depression.” As far as I understand it the argument goes something like this: It is a priori true that governments don’t act as efficiently as the private sector, and that high tax rates on the rich damage the economy, and that greater wealth equality is bad, ergo FDR’s progressive policies prolonged the Great Depression, which would have ended 7 years sooner had we simply put our faith in the private sector and the free market.

    Since nobody possesses a time machine capable of visiting alternate universes, the evidence for this argument, of course, is scant.

    The essense of the argument against the New Deal boils down to techocrats cannot replace entrepreneurs. Except for the energy sector (and I guess, finance, but that is long way gone before even yesteryear), Neu Mejican rightly points out that Obama hasn’t advocated this nowhere near the extent the New Dealers did.

  84. I really think our best course of action is to wait for Obama to fuck something up and then complain. All this anticipatory complaining is just making us look like whiners. “I told you so” is much more satisfying than Chicken Littling.

    By the way Firefox, Barack Obama is now the President of the United States. I’m not misspelling anything.

  85. The gist of our objection to the use of term, ‘market failure’ is this, Mississippi is a cultural failure not a market failure. The extent they have free markets in Mississippi has no bearing on this, any more than to say in New York every one doesn’t have his own hovercraft is a market failure. In all instances when the market is pointed to as the problem, you are not giving the matter careful enough scrutiny.

  86. “A lot of people around Barack are reading books about FDR’s first hundred days.”

    If this is the case, Obama won’t be giving us a New Deal, he’ll be giving us the Old Deal.

  87. “Market failure” is a term to describe cases whereby the market is not operating at optimal efficiency.

    Define ‘optimal efficiency’. Exactly.

    When people with an inordinate amount of power describe inefficiencies as any case were prices go down, or money is lost, well, do I need to even finish the sentence?

  88. Obama will have learned from the mistakes of FDR, one of which was to attempt to reduce spending and balance the budget, which did, in fact, make matters worse in ’37. The good thing is Republicans no longer believe in fiscal responsibility.

  89. Regulators are a matter of culture and not intrinsic to the market.

    This is pure opinion on your part.

    It all depends on how you construe the boundaries of “the market.”

    You are drawing a line and saying X is part of the market and Y is not.

    I am putting the line in a different place.

    The disagreement has to do with the term necessary in this statement.

    forces that are extrinsic to a market system are those that are not necessary to its function.

    Regulations and the agents that carry them out, I contend, ARE necessary to the functioning of the market. They are a feature of the market, not extrinsic to it.

  90. Define ‘optimal efficiency’. Exactly.

    http://pages.stern.nyu.edu/~adamodar/New_Home_Page/invemgmt/effdefn.htm

    Gives a decent discussion.

    In an optimally efficient market, knowing the price would tell you everything you need to know about the product making it very difficulty to trick buyers or sellers. Optimal efficiency will, of course, never be achieved.

  91. “If all we want is free healthcare, why not simply enslave all doctors and supporting medical personnel and make them give us healthcare without charge? Sure, that’s unfair to those enslaved, but the greatest good for the greatest number, right?”

    You are really fucking stupid, aren’t you, Libertate. I mean we’re talking moronic.

  92. Paul,

    To expand a bit.

    An inefficient market will not only provide highly flawed information via prices, it will fail to fulfill both sides of a supply/demand equation with some items that are in demand being unavailable despite there being the means and the resources available to make the items and provide them.

    An inefficient market will not provide suppliers with the information that there is a demand for X at price Y (a sustainable and profitable price), and it will not provide buyers information that item X could be made available at price Y. As a result, no one provides item X at price Y.

  93. By the way Firefox, Barack Obama is now the President of the United States. I’m not misspelling anything.

    Absolutely a joe worthy misstatement of fact. He is the President Elect, he wont’ be sworn in until Jan 20, at which time he will be the President, barring some kind of very odd series of events in the interim.

  94. Other Matt,

    So Firefox shouldn’t recognize the spelling of his name until 1/20/2009?

    Sounds like a market failure to me.

    The market should have figured out the need for a spellchecker that recognizes Barack Obama’s name at least 18 months ago.

    ;^)

  95. Synapses are not individual sentient beings thus the analogy fails. Synapses do what they are told. Humans cannot be accurately modeled to any certainty, especially in an economic environment where they are aware of it. Because they will try to game or break the system to their own gain. So unless you allow for a system that compensates when others try to game it it will fall apart.

    Of course, or, maybe, kinda.

    Synapse don’t do what they are told, they react to an environment. As do people. People, of course, have a much wider set of options, are themselves complex adaptive systems, etc…

    This does not break the analogy, however.

    All complex adaptive systems off-load excess complexity either onto their environment (the source of top-down forces) or distribute it across their primary elements (the source of bottom-up forces). The process never reaches equilibrium as bottom-up forces try to reduce complexity by recruiting top-down forces and top-down forces attempt to off-load their work on the primary elements.

  96. Why do you hate patients, Lefiti?

    I also endorse enslaving all rude, vacuous trolls, because the public needs them more than the trolls need to be free.

  97. *neurology pedant alert*

    You mean neurons, not synapses. Synapses are the connections between neurons.

  98. If we enslave Lefiti, can we dress him up in a rubber suit and keep him chained in my basement?

  99. Clearly we need a Spellchecker Czar.

  100. Warty,

    Whatever floats your boat. He’ll be your property, after all.

  101. Warty,

    I meant synapses in the original post…but, you are correct. Pain used synapse for neuron and I just went along.

    Synapse = transaction (between two individuals in the market).

    Although looking back, the wording on my part was a bit sloppy.

    You have individual synapses firing in

    Should be, “you have synaptic firing in…” or something along that line.

  102. I masturbate to teletubies

  103. I’d much rather pay taxes than buy things with my money. Everyone knows that governments provide useful cost-effective services, while private businessmen only sell me useless junk that I’ve been brainwashed into wanting. besides, the state creates a cozy feeling of communal unity. Now excuse me, I have to go polish my Obama action figures.

  104. “I’d much rather pay taxes than buy things with my money. Everyone knows that governments provide useful cost-effective services, while private businessmen only sell me useless junk that I’ve been brainwashed into wanting. besides, the state creates a cozy feeling of communal unity. Now excuse me, I have to go polish my Obama action figures.”

    You do this as well as Colbert does Republican. Good job.

  105. Synapse don’t do what they are told, they react to an environment. As do people. People, of course, have a much wider set of options, are themselves complex adaptive systems, etc…

    This does not break the analogy, however.

    All complex adaptive systems off-load excess complexity either onto their environment (the source of top-down forces) or distribute it across their primary elements (the source of bottom-up forces). The process never reaches equilibrium as bottom-up forces try to reduce complexity by recruiting top-down forces and top-down forces attempt to off-load their work on the primary elements.

    Assuming that disparity of scale would play no significant role (i.e. the system we’re comparing to the brain contains only 300 million primary elements, rather than 100,000 million primary elements), how would the following additional assumptions affect the analogy?
    1. The top-down forces in one system are comprised of approximately 5% of the same type of elements as the primary elements. The top-down force or forces in the other system is very poorly understood*, and involves a single consciousness which is arguably on a transcendent magnitude from its elements.
    2. If we assume that the primary elements are endowed by their creator with unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, top-down forces are instituted among the primary elements, deriving their just Powers from the consent of the primary elements.

    * I’ll grant that the Federal Government is often pretty poorly understood as well.

  106. and involves a single consciousness which is arguably on a transcendent magnitude from its elements.

    That is not an assumption I can live with…assuming I understand what you are saying with your very obtuse language here.

    I have not problem with your second assumption, but I am not really sure it is relevant to the discussion.

  107. Many of the top-down forces in the brain operate well below the radar of consciousness.

    The assumption that the self is an undifferentiated whole is, at best, unlikely based on our current incomplete understanding.

    A good book on the topic:
    http://www.amazon.com/exec/obidos/ASIN/0140230122/reasonfoundation-20/

    Norretranders does a lot of speculation, but makes some subtle and important points along the way.

  108. contains only 300 million primary elements

    Closer to 7 Billion, but whatever.

    You don’t really believe the market stops at our border do you?

  109. You don’t really believe the market stops at our border do you?

    No. And sadly, attempts to establish and increase top-down forces on the larger total are becoming more frequent.

    That is not an assumption I can live with…assuming I understand what you are saying with your very obtuse language here.

    Apologies if I wasn’t clear.

    My meaning is that the top-down element of a human culture (its government) is populated by ordinary members of the culture itself.

    In the brain, can we find a complete explanation for consciousness in the workings of governing neurons alone?

    I have not problem with your second assumption, but I am not really sure it is relevant to the discussion.

    I’d simply add that while American culture is a complex adaptive system, it is more complex and simultaneously more constrained than a single brain.

    It’s more complex because the primary elements are self-aware, independent, and are asserted to be endowed with individual rights. It’s more constrained because not all off-loading of complexity is permitted. While some bottom-up forces may try to reduce complexity by recruiting top-down forces, the written structure of the American system is designed to limit which top-down forces are authorized (constitutional). Not all visions of attempted equilibrium are supposed to be on the table.

    When I consider a brain, I see it as being composed of wholly “owned” neurons. When I consider America, I see it as being an aggregation of free people.

    Regardless, thank you for referencing the term ‘Complex Adaptive Systems’. It’s been quite a while since I was in school and this discipline is new for me. It’ll be fun to research.

  110. Richard Stands,

    This is probably a dead thread, but if you want to look more into economies as complex adaptive systems go over to edge.org.

    http://www.edge.org/3rd_culture/brown08/brown08_index.html

    1) The economy is a physical system, involving flows of goods, information and energy, hence it might be useful to model an economy as a system in physics. However, while there is a concept of equilibrium in neoclassical economic theory, the concept of equilibrium in physics is not applicable to economies because it applies only to particular kinds of systems called closed systems.

    These are closed off from the outside world and have fixed unchanging amounts of the goods that compose them. They have fixed amounts of energy, which cannot be added to or subtracted from the outside. Markets are not describable as closed systems, so the notion of their being in physical equilibrium cannot be applied.

    2) Instead, markets are examples of systems physicists call open systems. They do not have fixed amounts of goods or currencies. They are situated inside larger open systems including the biosphere and energy and materials flows through them from the larger system that contains it.

    3) Flows of energy and goods through an open system can drive its selforganization to meta-stable states. These states are not like equilibrium in that fluctuations around them are neither small, nor random, nor uncorrelated.

  111. To your points:

    My meaning is that the top-down element of a human culture (its government) is populated by ordinary members of the culture itself.

    As are the top down forces in the brain. Ordinary members of the brain acting in the same fashion as other portions of the brain further downstream. They are just utilizing different types of information based on their place in the hierarchical structure of the CNS.

    It’s more constrained because not all off-loading of complexity is permitted. While some bottom-up forces may try to reduce complexity by recruiting top-down forces, the written structure of the American system is designed to limit which top-down forces are authorized (constitutional). Not all visions of attempted equilibrium are supposed to be on the table.

    Again, this is how brains work also. While the individual neurons are not self-aware agents, the relationship of the primary elements to the whole are very similar.

    Regarding “wholly owned” neurons.

    Try and make a particular neuron fire.
    You can’t do it, so they are no more owned by the conscious parts of the brain than individuals in a society are owned by the government.

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