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April 8, 2012

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Posted: 08 Apr 2012 12:06 AM PDT
Posted: 07 Apr 2012 04:02 PM PDT
Robert Shiller is bullish on Wall Street:
Democratize Wall Street, for Social Good, byRobert Shiller, Commentary, NY Times: Many finance students and members of the Occupy Wall Street movement have a great deal in common: a deep interest in democratizing Wall Street.
At Yale, where I have been teaching for 25 years, I've been hearing a great deal lately from my students about financial innovations linked to social media. One such innovation, called crowdfunding, is embedded in the jobs bill signed into law by President Obama... The idea involves Web sites that help many investors contribute small amounts of capital to projects that they read about online, and that might otherwise be starved for money. ... There may well be disappointments at first, but the concept can be tinkered with, like other democratizing financial innovations that have eventually delivered much good to society. ...
Financial innovation, of course, takes unanticipated forms, but wherever it turns next, we can expect some breathtaking transformations during the careers of today's students. And despite the damage to its reputation from the subprime mortgage crisis and its aftermath, financial innovation could help solve many vexing problems...
Contrary to popular opinion these days, the history of finance marks ... "ever-widening circles of activity" with products ranging from venture capital to home mortgages to various forms of insurance, savings and pensions. The faults in institutions that contributed to the recent financial crisis can be corrected... The challenge ahead — both for my students bound for the world of finance and for those who would occupy it — is to truly democratize Wall Street.
This financial innovation stuff is apparently pretty magical. It can "help reduce social inequality ..., deal with the problem of rigid entitlements ..., make our responses to catastrophes more intelligent, ... channel our gambling impulses into something more constructive, ... better direct creative energies," and "focus specifically on problems specific to the very poor." And to top it off, "It can make speculative bubbles less of a problem, and help make prices in financial markets better reflect fundamental information."
Is there anything that financial innovation can't do to make the world a better place?
More seriously, sure, financial innovation has had its successes, but some of it just redistributes income -- in both intentional and unintentional ways -- without much to show in terms of efficiency, and there have been catastrophic breakdowns as well with costs that spread far and wide. No news there given what we've just been through. So I suppose I'm not so positive about Wall Street -- too many China shops are still under repair from the last time bullish financial  innovation got loose -- and would prefer to see more emphasis on how to keep the system stable in the future.
Posted: 07 Apr 2012 11:07 AM PDT
Wanted: Reasonable Republicans:
On Ryan Apologists, by Paul Krugman: ...the continuing defense of Paul Ryan is a remarkable phenomenon. He's still being treated by many pundits as a man deeply concerned about deficits, when the fact is that his policy proposals are all about redistributing income upward, and make no serious effort to curb debt. He's even given credit for advocating higher taxes on the rich when he has more or less specifically rejected the things for which he's given credit.
What's going on here? The defenders of Ryan come, I'd argue, in two types.
One type is the pseudo-reasonable apparatchik. There are a fair number of pundits who make a big show of debating the issues, stroking their chins, and then — invariably — find a way to support whatever the GOP line may be. There's no mystery in their support for Ryan.
The other type is more interesting: the professional centrist. These are people whose whole pose is one of standing between the extremes of both parties, and calling for a bipartisan solution. The problem they face is how to maintain this pose when the reality is that a quite moderate Democratic party — one that is content to leave tax rates on the rich far below those that prevailed for most of the past 70 years, that has embraced a Republican health care plan — faces a radical-reactionary GOP.
What these people need is reasonable Republicans. And if such creatures don't exist, they have to invent them. Hence the elevation of Ryan — who is, in fact, a garden-variety GOP extremist, but with a mild-mannered style — to icon of fiscal responsibility and honest argument, despite the reality that his proposals are both fiscally irresponsible and quite dishonest.
How much longer can this last? I guess we'll eventually find out.
Paul Krugman may be hesitant to mention David Brooks as one of the biggest chin-stroking offenders here, but I'm not. Brooks writes an entire column wondering if there is room in the Republican party for moderates -- how they are fleeing a party of extremists -- only to follow it up with a column treating Ryan as someone with ideas that deserve serious attention. Ryan is portrayed by Brooks and others as a moderate rather than an extremist who is helping to push the party far, far to the right. As Krugman says there is a need to invent moderates that don't exist as foil for Obama, including portraying the Ryan budget as a reasonable alternative. However, Krugman was right to when he said the Ryan budget is "nonsense" shortly after it came out (and the updated version  of his budget is little better):
it's really time to stop pretending that the Ryan plan is an intellectually sound expression of a philosophical viewpoint. Even from its own ideological perspective, it's a piece of incompetent junk; all you had to do was spend a little while poking through the assumptions, and it became clear that it was nonsense. I know this is a hard thing for people who gushed about the plan to accept, but it's the simple truth.
The "people who gushed about the plan" include Brooks, and it's a lot easier for Brooks to dig in his heels and defend the Ryan plan rather than admitting his initial take on the Ryan budget gave it far more credibility than it deserved, i.e. that he was wrong:
When the gaping holes in the Ryan plan were revealed, I expected the Very Serious People to move on and find a new GOP daddy to idolize. Instead, however, they've mostly dug in, condemning anyone who points out that the plan is a piece of junk as being somehow out of bounds.
Finally, this is not what social Darwinism means in the modern context, and Brooks should know better (see here), but nevertheless Brooks makes a claim that allows him to  justify the bile that Republicans routinely spew by creating a false equivalency that Obama does it too (one of his specialties):
Obama ... unleashed every 1980s liberal cliché..., calling the Republicans a bunch of trickle-down, Trojan horse-bearing social Darwinists. Social Darwinism, by the way, was a 19th-century philosophy that held, in part, that Aryans and Northern Europeans are racially superior to brown and Mediterranean peoples.
Obama was not saying this, but with the recent comments from the NRO's John Derbyshire, perhaps he should have.

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