In thinking about how to resolve the financial market crisis, I've said that we should do two things, pursue some version of a mortgage repurchase plan, and pursue some means of removing risky assets from financial markets:
[T]he Fed [can] remove risk from the market by purchasing risky mortgage backed securities... I think purchasing mortgages would [also] help to stabilize the mortgage market, so I ... favor ... the mortgage purchase plan, particularly since it helps homeowners directly. I am just not sure that it will be enough by itself to get credit flowing again. ... Because of the uncertainty about whether purchasing mortgages will be enough to stabilize markets, I would advocate doing a combination of both policies, purchase troubled mortgages and purchase troubled financial assets at the same time... (and other measures, e.g. regulatory change, could also be put into place so his is not all that can be done).
In a follow-up, I added that:
I believe a combination of both plans - the Treasury intervening to purchase mortgages and reissue them on more attractive terms, and the Fed intervening to purchase mortgage backed securities (MBS) - is the safest bet. Even if one of the measures isn't enough on its own, hopefully the combination will prove sufficient.
The analytics of proposals such as this are starting to come together. Brad DeLong has done us a favor and provided the latest step in the analytical process. Here's a fragment of a much longer post he has provided. Notice that he has also added recapitalization to the list of policies, an important innovation since this is one of the keys helping financial markets to move forward:
What do we do now? That is the subject of Larry Summers's column. We do two things. First, we have the Federal government reduce the supply of risky financial assets by having the government buy or guarantee (thus making the assets no longer risky, you see) or support the purchase of mortgages (and other things) and so push the private financial-sector supply of financial assets to the left. Second, we have the Federal government "encourage" the financial sector to recapitalize itself, thus pushing the supply up and to the right, like so:
And so pushing up the prices and reducing the interest rates charged on financial assets, making the good equilibrium reappear, and keeping us out of depression, like so:
That, in a nutshell with simple graphs, is what Larry is saying, with the addition that he thinks that we now have in motion enough policy moves to resolve the crisis and save the world economy from depression. But there are four additional points that don't fit easily on the graphs. We need to make sure that we also:
- do smart things to try to keep this from happening again
- assign blame and try as hard as we can--without causing a depression--to make sure that those who bear responsibility don't make out like bandits by looting the Treasury as this is accomplished.
- make sure that others--even if they are still largely innocent bystanders at the moment--do not earn unjustified windfall fortunes in the process.
- make sure that the upward-and-to-the-right orange-arrow movement of the supply curve does in fact take place: make sure that financial intermediaries that survive and profit because of government intervention become not just part of the problem but part of the solution: that because "much is being given to financial institution shareholders and management, [it is only fair that much] action to help the economy and protect the taxpayer... be expected in return."
Now there are three objections to this analysis and this plan of action, roughly: (1) it's immoral, (2) it's unfair, and (3) it can't work in the long run. To expand a bit ... [...Brad's post...]
What is the source of foreclosures, interest rate resets or falling prices? In this post, I said:
It's easy to explain how interest rate resets could increase foreclosure rates since the monthly housing payment will change as a result of the reset, but why do falling prices cause increased foreclosures? Falling prices don't change monthly payments, so why do more people default?
The post then explains how falling prices can increase defaults and Richard Green provides academic work supporting the mechanism.
But falling prices and interest rate resets are not mutually exclusive explanations for rising foreclosure rates, both could be at work, and Brad DeLong presents a model that explains how, through adverse selection, rising interest rates can cause increases in defaults.
The purpose of this post is to further illuminate Brad's discussion and to explain how the adverse selection mechanism operates.
To do so, rather than try to impress all of you by building my own model, I'll avoid reinventing the wheel and will instead base this discussion on a version of the Stiglitz and Weiss (1981) model presented in Carl Walsh's Monetary Theory and Policy text (so full credit should be given to those authors). The presentation is mathematical, but along the way I will try to provide the intuitive underpinnings, so hopefully the points will be clear even if the mathematics is not.
The basic point of the model is to illustrate two things. First, how an increase in the interest rate can increase defaults. This is the main point. Second, how equilibrium credit rationing can occur, i.e. how financial markets can settle on an equilibrium where there are buyers willing to take out loans at the going interest rate, but nobody willing to lend them money at that rate, and the excess demand for loans is not resolved through rising interest rates.
I should add that there are other mechanisms that can be used to explain these results, moral hazard and monitoring cost models for example (e.g., as interest rates increase, borrowers are induced to take on more risk in moral hazard models, and the increased risk taken on by borrowers increases defaults) so this should not be considered exhaustive.
1. The model contains a single type of lender, and different types of borrowers. The lender's expected return on loans is a function of the interest rate and the probability of repayment. The probability of repayment will vary across individuals.
2. Borrowers come in two types:
Type g: this type repays loans with probability qg Type b: this type repays loans with probability qb
It is assumed that qg > qb, so that the good borrowers (g types) are more likely to repay than the bad borrowers (b types).
3. If lenders can observe the type of borrower they are lending to, they will charge each a different interest rate to reflect differences in risk, and the market will clear without credit rationing. It will be fully efficient.
4. For example, we'll assume the supply of credit is perfectly elastic (the supply curve for credit is horizontal):
Assuming risk neutral lenders, and that they lend to a large number of borrowers (so the law of large numbers applies), the lender will charge r/qg to the good borrowers, and r/qb to the bad borrowers and will realize an expected return of r for each group (i.e., the lender receives r/q with probability q so the expected return is q(r/q)=r). There is no credit rationing, the lender simply charges risky borrowers more than good borrowers to compensate for the extra risk.
5. Now assume the lender cannot observe the different types of borrowers. What we will now show is that as the interest rate, r, increases, the fraction of bad borrowers in the loan applicant pool also increases, so the probability of default goes up.
That is the main point - when interest rates rises, the good borrowers drop out (this is the adverse selection mechanism, the good borrowers self-select out of the pool leaving a greater fraction of risky borrowers in the market).
But we can also get equilibrium credit rationing with this as well. Here's how. As r increases, the return to the lender goes up, so an increase in r increases profit. But, as we will show, the increase in r also causes the fraction of bad borrowers to go up and this increases the default rate and lowers profit. So, the net effect of an increase in r on profit depends upon which of these two effects is stronger, the increase in profit from charging a higher interest rate, or the decrease in profit from higher defaults.
To get rationing, what we have to show is that as r increases, initially profits go up since the higher price effect dominates the increase in defaults. But there comes a point in the lender's profit function where any further increase in r is not profitable, the loss from defaults increasing is larger than the profit increase from the higher interest rate, so the lender won't raise the interest rate even if there is an excess demand for loans at the current r being charged in the marketplace.
This is the credit rationing. Even if there is excess demand for loans, the lender will not raise r above the critical value of r, call it r*, where profit begins falling.
Let's show this mathematically.
6. Let g be the fraction of good borrowers among all borrowers. In order to earn an expected return of r, the lender charges borrowers (which cannot be distinguished and hence face the identical loan rate) r1 such that:
gqgr1 + (1-g)qbr1 = r = expected return if lender charges r1 to all types.
The lender should charge:
r1 = r/[gqg + (1-g)qb]
7. Using this strategy, the lender will thus earn r if borrowers are chosen (walk through the doors of the bank) randomly. But they don't show up randomly, so this is not the end of the story.
Notice that r/qg <>1<>b. Good borrowers are paying too much, and bad borrowers are paying too little. Thus, good borrowers are more likely to drop out of the market, and the fraction of good borrowers will diminish over time increasing average default rates (perhaps because they are good borrowers they can find other, cheaper ways to finance investment) .
This is a classic lemons problem - good borrowers leave the market increasing the average risk and default rates of borrowers still in the market, interest rates go up to compensate for the higher risk, more borrowers leave the market, average risk goes up, more borrowers leave, etc. - and it will lead to market failure.
8. Now let's change the model slightly to illustrate equilibrium credit rationing. Loans are characterized by more than just the interest rate, and here we will characterize loans by three parameters, the interest rate lenders charge on loans, r1, the size of the loan L, and the required collateral on the loan, C.
9. The probability that a loan is repaid depends upon the return yielded by the borrower's risky project. Let a particular project yield a return of R. Then the lender will be repaid if
L(1 + r1) <>
That is, the lender is repaid if the value of the loan is less that what the borrower has to give up in default (the lender gets to claim any return, R, that the borrower made on the project plus the value of the collateral). This just says that the borrower repays when losses are smaller from doing so.
10. Now suppose that the return, R, is risky:
Return R = R1+x with probability 1/2 Return R = R1-x with probability 1/2
Then the expected return is R1, and the variance of returns is x2. As x increases, there is a mean-preserving spread in the distribution, i.e. risk goes up, but the expected return is not changed.
11. Next, to limit the outcomes to the ones we are interested in, assume that
R1-x < (1+r1)L - C
This means that the borrower will always choose to default when a bad outcome is drawn (-x), and will always repay when there is a good outcome (+x).
12. Thus, under a good outcome the borrower earns
R1+x - (1+r1)L
(this is the return on project minus the cost of the loan) and under a bad outcome, the borrower loses -C, i.e. loses the collateral on the loan.
13. Then the borrower's expected profit is
EπB = (1/2)[R1+x - (1+r1)L] + (1/2)[-C]
[The superscript means borrower]. That is, the borrower gets the good outcome shown in the first set of brackets 1/2 the time, and the bad outcome of -C shown in the second set of brackets the other half of the time.
14. Define x*(r,L,C) ≡ (1+r1)L - C - R1. That is, x* is the value of x such that EπB > 0 whenever x > x*, and EπB < 0 whenever x < x*. It's the point where profit turns negative.
Another way to say the same thing is that, with x* defined in this way, EπB = (1/2)(x-x*). x* gives the level of risk (how big the bad outcome must be, i.e. the size of x) where it becomes worthwhile for the borrower to walk away from the loan and default.
15. Notice that x* is increasing in r1. This means that as r1 increases, those with smaller x values drop out (i.e. those facing less risk), but the riskier borrowers (those with larger x values) remain in the pool. The mix of borrowers changes toward riskier borrowers and defaults will increase.
16. What about the lender? The lender's expected profit is
EπL = (1/2)[(1+r1)L] + (1/2)[C+R1-x] - (1+r)L
The first term is the return in the good state, the second is the return in the bad state (both happen with probability 1/2), and the third term is the opportunity cost of the funds it lends out (so the return is r, not r1, since the opportunity cost is the market return, r).
That is, the lender receives a fixed amount in the good state, (1+r1)L, but as x increases, the lender does increasingly worse in the bad state where it receives C+R1-x (i.e. as x increases, profit falls). This means that EπL is decreasing is the level of risk, x.
17. Now, let there be two groups of borrowers . Good borrowers are low risk (have small x values), bad borrowers are high risk (have large x values). Designate the x-values for each group as xg and xb, where xg <>b.
From the condition that EπB = (1/2)(x-x*), if r1 is low enough,
xg <>b <>
In this case, all loans are repaid, and all loans are profitable. If each type of lender is equally likely to be in the market, then expected profit for the lender is
EπL = (1/2)[(1+r1)L+C+R1] - (1/4)[xg + xb] - (1+r)L
This is increasing in r1.
18. But, as r1 increases, we will eventually reach the point where xg = x*(r, L, C) and the good types drop out of the market and stop borrowing (this is adverse selection at work). In this case, expected profit falls to
EπL = (1/2)[(1+r1)L+C+R1] - (1/2)[xb] - (1+r)L
Thus, EπL falls discretely when xg = x*, i.e. profit falls discretely when r1 increases and reaches
r1 = (1/L)[xg - C + R1] - 1
since this is the point where low risk types exit the market (the discrete jump comes from having two groups - with a continuum of risky borrowers, the discrete jump would be replaced by a maximum profit point, i.e. a single-peaked profit function).
19. We can show this graphically:
For loan rates between 0 and r1, no loans are profitable and none will be made. For loan rates between r1 and r*, both types of borrowers are in the market, and all loans are profitable (and profit is increasing in r).
For loan rates between r* and r2, loans are unprofitable, so no loans would be made. For loan rates above r2, loans are profitable, but only the risky group will be in the market.
Thus, credit rationing is possible at equilibrium. If loan demand is robust, lenders will increase r until it hits r*. At r*, there can be excess demand, but lenders will not raise the loan rate unless demand is so strong that rates can be profitably increased all the way to r2. Thus, if demand is strong enough to produce excess demand at r1, but not strong enough to push rates all the way to r2 or above, there will be credit rationing at equilibrium.
We have shown two things. First, when the interest rate increases, adverse selection mechanisms can cause good borrowers to drop out of the loan pool increasing the riskiness of the average borrower. This increases default. Thus, this shows how an increase in the interest rate can increase default rates.
[Note: I wouldn't apply this model directly to mortgage markets as is, interest rate resets would be modeled a little bit differently, but the basic mechanism would be the same and is well illustrated by this and Brad DeLong's example.]
Second, the adverse selection mechanism can explain the presence of equilibrium credit rationing. There are other explanations too, e.g. moral hazard and monitoring cost models can explain equilibrium credit rationing, so there are other ways to get this result.
Larry Summers, who is becoming a bit more optimistic about economic conditions, says monetary and fiscal policy measures enacted or likely to be enacted have helped to reduce the chances of severe problems, but there are still dangers to worry about and the next step for policymakers is to increase the amount of capital held by financial firms:
Steps that can safeguard America's economy, by Lawrence Summers, Commentary, Financial Times: Neither US financial institutions nor the economy are likely to suffer from a lack of central bank liquidity provision. New lending facilities are coming along almost weekly, the safety net has been expanded to include non-bank primary dealers...
At the same time, processes are in motion that may lead to new demands for more than $1,000bn in mortgages, directly or indirectly. Recent regulatory actions will enable Federal Home Loan Banks along with Fannie Mae and Freddie Mac ... to purchase more than an additional $300bn in mortgage-backed securities. ...
Moreover, legislation to reduce foreclosures being pushed by Senator Christopher Dodd and Representative Barney Frank could result in the federal government purchasing or providing guarantees that enable the purchase of several hundred billion dollars worth of mortgages.
The confidence engendered by all of this has led to some normalisation in credit markets. ... It is sometimes darkest before the dawn. For the first time since last August, I believe it is not unreasonable to hope that in the US, at least, the financial crisis will remain in remission. ...
While spreads have come in somewhat, markets continue to price in significant probabilities of default for even the most apparently strong financial institution, reflecting in part concerns about their solvency. At the same time it needs to be recognised that the federal government is bearing credit risk in extraordinary ways through its implicit guarantee to the GSEs, the lending activities of the Fed and the general backstop it is providing to the financial system.
All of this implies that a priority for financial policy has to be increases in the level of capital held by financial institutions. Capital infusions to date fall far short of prospective losses. Without new capital, the financial sector will operate with too much risk and leverage or will put the economy at risk by restricting the flow of credit. ...
The policy approach should start with the GSEs. These institutions' viability ... depends on the implicit federal guarantee of their several trillion dollars of liabilities. ...
It is not appropriate that their shareholders' "heads I win, tails you lose" bet with the taxpayer be expanded for this purpose. Given their past and prospective losses, their regulator – supported by the Treasury, the Fed and, if necessary, Congress – should insist that they stop paying dividends and raise capital promptly and substantially as they expand their lending. ...
Because they do not have a similar public mission and are operated with more financial rigour and closer regulation, the situation is somewhat different with respect to other financial institutions.
As part of its dialogue with financial institutions, the Fed should push for further efforts to raise capital. Consideration should be given to collective actions designed to destigmatise cutting dividends or raising equity. The idea of linking access to Fed credit and measures to attract capital should also be explored. At a time when much is being given to financial institution shareholders and management, action to help the economy and protect the taxpayer should be expected in return.
Is the poverty trap caused by a fundamental change in behavior once the number of problems an individual faces crosses some critical threshold?:
The sting of poverty, by Drake Bennett, Boston Globe: ...In the community of people dedicated to analyzing poverty, one of the sharpest debates is over why some poor people act in ways that ensure their continued indigence. Compared with the middle class or the wealthy, the poor are disproportionately likely to drop out of school, to have children while in their teens, to abuse drugs, to commit crimes, to not save when extra money comes their way, to not work.
To an economist, this is irrational behavior. It might make sense for a wealthy person to quit his job, or to eschew education or develop a costly drug habit. But a poor person ... would seem to have the strongest incentive to subscribe to the Puritan work ethic, since each dollar earned would be worth more ... than to someone higher on the income scale. Social conservatives have tended to argue that poor people lack the smarts or willpower to make the right choices. Social liberals have countered by blaming racial prejudice and the crippling conditions of the ghetto... Neoconservatives have argued that antipoverty programs themselves are to blame for essentially bribing people to stay poor.
[Charles] Karelis, a professor at George Washington University, has a simpler but far more radical argument to make: traditional economics just doesn't apply to the poor.
When we're poor, Karelis argues, our economic worldview is shaped by deprivation, and we see the world around us not in terms of goods to be consumed but as problems to be alleviated. This is where ... bee stings come in: A person with one bee sting is highly motivated to get it treated. But a person with multiple bee stings does not have much incentive to get one sting treated, because the others will still throb. The ... poorer one is ... the less likely one is to do anything about any one problem. Poverty is less a matter of having few goods than having lots of problems.
Poverty and wealth, by this logic, don't just fall along a continuum... They are instead fundamentally different experiences... At some point between the two, people stop thinking in terms of goods and start thinking in terms of problems, and that shift has enormous consequences. ...
If Karelis is right, antipoverty initiatives championed all along the ideological spectrum are unlikely to work - from work requirements, time-limited benefits, and marriage and drug counseling to overhauling inner-city education and replacing ghettos with commercially vibrant mixed-income neighborhoods. ... "It's Econ 101 that's to blame," Karelis says. "It's created this tired, phony debate about what causes poverty." ...
Karelis ... remains relatively unknown... A few, though, have taken notice... "There's not much evidence in the book, and there are a lot of bold claims, but it's great that he's making them," says Tyler Cowen, an economics professor at George Mason University. It "was a really great book, and it was totally neglected."
The economist's term for the idea Karelis takes issue with is the law of diminishing marginal utility. In brief, it means the more we have of something, the less any additional unit of that thing means to us. ... In many cases, Karelis says, diminishing marginal utility certainly does apply: Our seventh ice cream cone will no doubt be less pleasurable than our first. But the logic flips when we are dealing with privation rather than plenty.
To understand why, he argues, we need only think about how we all deal with certain familiar situations. If, for example, our car has several dents on it, and then we get one more, we're far less likely to get that one fixed than if the car was pristine before. ...
Karelis argues that being poor is defined by having to deal with a multitude of problems: One doesn't have enough money to pay rent or car insurance or credit card bills or day care or sometimes even food. Even if one works hard enough to pay off half of those costs, some fairly imposing ones still remain, which creates a large disincentive to bestir oneself to work at all.
"The core of the problem has not been self-discipline or a lack of opportunity," Karelis says. ... The upshot ... for policy makers, Karelis believes, is that they don't need to fret so much about the fragility of the work ethic among the poor. In recent decades, experts and policy makers all along the ideological spectrum have worried that the more aid the government gives the poor, the less likely they are to work to provide for themselves. ... It was this concern that drove the Clinton administration's welfare reform efforts.
But, according to Karelis, that argument is exactly backward. Reducing the number of economic hardships that the poor have to deal with actually make them more, not less, likely to work, just as repairing most of the dents on a car makes the owner more likely to fix the last couple on his own. ... (One federal measure Karelis particularly likes is the Earned Income Tax Credit, which, by subsidizing work, helps strengthen the "reliever" effect he identifies.) ...
Karelis ... believes ... the strength of his arguments is less in how they fit with the economic work that's been done to date on poverty - much of which he is suspicious of anyway - but in how familiar they feel to all of us, rich or poor. "The bee sting argument, or the car dent one," he says, "I've never had anybody say that that isn't true." [See also On Poverty, Maybe We're All Wrong]
Richard Florida takes a look at how support for Democratic presidential candidates varies across the creative and working classes, and the how the variation "raises an interesting dilemma for campaign strategists":
Obama and the class question, by Richard Florida: ...Pundits on all sides have framed this election - and especially the Democratic primary - as turning on the traditional fault lines of race, gender and generation.
The talk shows go on and on about how Mr. Obama is attracting black and young voters and how Ms. Clinton finds her voice among women and baby boomers.
But what is seldom discussed and yet most interesting... At bottom, both the Democratic primary and the upcoming general election turn on an even deeper economic and social force: class.
In 2002, I defined a new creative class of inventors, entrepreneurs, engineers, artists, musicians, designers and professionals in idea-driven industries.
Today, nearly 40 million American workers fit into that group, 35 per cent of the total working population and a good deal more than the 23 per cent who make up the working class. ...
Up to this point, creative-class people have predominantly cast themselves as politically independent or "post-partisan," and their political sympathies have been up for grabs.
The traditional Republican platform of individualism, economic opportunity and fiscal responsibility appeals to them; but so, too, do the Democratic values of social liberalism, environmentalism and a progressive track record on gay and women's rights.
Democratic candidates such as Bill Bradley and Howard Dean attracted the creative class in the 2000 and 2004 elections. But no one has caught fire with this class like Barack Obama. ...
To get a better sense of how this deep this support runs, I asked opinion pollster John Zogby to look into how creative-class people were voting in this primary season.
The result: On issue after issue, they preferred Mr. Obama to either Ms. Clinton or Republican John McCain by wide margins. ... Mr. Obama even bests Ms. Clinton and Mr. McCain substantially on the issue where he is allegedly weakest - "combating terrorism" - registering 50 per cent of creative-class support compared with 24 per cent for Ms. Clinton and 18 per cent for Mr. McCain. ...
Mr. Obama consistently polls strongest in cities and regions with significant creative-class concentrations. Ms. Clinton, on the other hand, has scored better in industrial states with dominant blue-collar towns, where voters are anxious about the economy and job prospects.
Ms. Clinton is more popular among voters without college degrees. Meanwhile, ... Brendan Nyhan has crunched numbers that show a college education to be a big predictor for Obama support.
This divergence in the electorate raises an interesting dilemma for campaign strategists.
Is a coalition between the creative class and working class even viable? Appealing to them both will prove difficult. The creative class anticipates the future while the working class is, in many senses, seeking protection from it. ...
It will be difficult for Ms. Clinton to win wholehearted endorsement of the creative class, as committed as she is to specific programs.
It will also be hard for Mr. Obama's rhetoric of hope and change to resonate with those who are falling farther and farther behind economically. In coming years, it will be vitally important for progressive political leaders to reach out to the working and service classes, and in ways that enable them to connect to the new creative economy.
But in the short months remaining until the general election, deep-seated working-class anxiety about economic and social change is not likely to be overcome.
Clearly, neither race, gender, nor age can provide the core support necessary for a sustainable political majority. Just as Franklin Delano Roosevelt forged a new majority on the swelling ranks of blue-collar workers, so must the candidate and party that hope to win this election, and shape the political landscape for years to come, gain the support of today's ascending economic and political force - the creative class.
Everyone seems to be posting their comment policies lately. Here's mine:
I don't have an explicit policy.
I do delete obvious spam, no surprise there.
And sometimes, maybe it's the last straw after a string of irritating comments, maybe I've had a bad day, maybe a comment crosses some line, e.g. racism, maybe I misinterpret, but there comes a point where I go from passive to aggressive at which point one of three things happens:
I respond with my own comment, and the tone isn't always pleasant. I usually regret this right away, pleasant tone or not, and, fortunately, I have the power to fix it. So I do - I delete my own comment.
So, it's my own comments that get deleted the most. By a huge margin. It's not even close. The only complication here is if someone has already responded to my comment. Then I'm usually stuck leaving it.
At this point I promise myself I will never, ever again respond to anyone in comments, at least not negatively - it doesn't do much good anyway and I don't always think the response through as much as I should - and that lasts until a comment sends me over the line again, I respond and regret it, make the promise anew, but really mean it this time.
The second response is to delete the comment. I usually regret this too, but not always. But mostly I do regret it and, after a bit, if I was smart enough to "unpublish" rather than "delete" the comment, I repost it. However, if I'm sufficiently irritated to take action, I tend to choose delete since, at the time, I have no intention of reposting the comment, ever, and it saves me the trouble of deleting it later.
The third response is to ban the person from commenting at all. Right now, there is one person in that category, but the number changes over time. I've lifted it three times for that person (more or less, can't remember for sure), but it hasn't worked out very well and a more extended break is now in place. I might lift it on some particularly forgiving day, but for now, it stays.
I don't do this unless there have been repeated instances where I've had to ban someone's comments. There's no list of things I can point to that says this is what will cause you to get banned, this won't, it happens when I've had enough. But it's always after repeated troubles and interaction, so while it's often a surprise to the person when they get banned, it shouldn't be.
But even in these cases, even when someone deserves to be banned, I start to feel I should give them another chance and, after awhile, I almost always lift it. How long before the ban is lifted varies, sometimes it's an hour later, sometimes it's the next day, one time it was many months later, there just comes a day when I feel like lifting it and do. And it's mostly worked, when people comment again their behavior changes or they quit commenting altogether. But not always and there's no doubt someone will get banned again before too long. Hopefully, they'll even deserve it.
One last thing. As the election approaches and the trolls begin coming out in force I plan to get more aggressive, particularly in removing arguments I find wrong or misleading, etc. I won't try to list what will or won't get comments removed, but I will know it when I see it - if it pollutes the discourse I will remove it, and I will be the judge of what does and does not cross the line. I'll probably make mistakes, but that's how it goes - it's a pretty big job just keeping up with comments and I'll do the best I can, but it comes down to my judgment about what I do and don't want appearing here. Some of you won't like it - but some of you don't like it when I don't do anything to moderate comments - so anything I do (or don't do) will cause objection from some people. So, I'll just do what I think is best. Once the election is over I'll probably relax things once again.
So, that's it, that's how it works. It pretty much comes down to me removing the things I think ought to be removed, and if something is a persistent problem, keeping it away for a more extended period. If there's no adaption after a few iterations, the ban becomes permanent.
Ultimately, I want to encourage, not discourage comments, and to maintain a healthy and informative discourse (so, please join in, the more of you who comment the better). I wish I had the time to moderate comments more effectively and to interact more, but that's not possible - e.g., I may not actually have the time to do as much moderation as I'd like as the election approaches, and I certainly don't do as much as I'd like now. So I depend upon those of you who do participate to help me to make comments a place where people can respond intelligently to information in the main post, interact with others doing the same thing, and help all of us to learn more about the topic in the process. It's always disappointing when the comments deteriorate into one of the many degenerate forms comment threads can take.