Pursuit of Truthiness

my gut tells me I know economics

Archive for the ‘cash’ Category

Has the Fed bought the Economics profession?

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There’s an intriguing and well written, though overly long, article over at HuffPo called “How the Federal Reserve Bought the Economics Profession“.

The basic idea is that so many economists work for the Fed, have worked for the Fed, or want to work for the Fed that their desire to please their employer has stifled debate over the Fed’s role throughout the profession.

Certainly such a thing is possible; Hayek, in his 1944 Road to Serfdom, noted that he was advocating for small government against his own self-interest since more active governments engaging in central planning hire lots of economists.

But is the problem that the Fed serves no purpose except to employ economists?  Far from it.  The importance of monetary policy has been noted by most economists for a very long time; as far as I know only the Austrians say it is necessarily a bad thing.  Rational expectations folks say it does neither harm nor good (it really does just provide jobs to economists), but this almost undermines the monetary-economic complex conspiracy theory, since Ratex emerged in the 70’s just as this article said the Fed was becoming more powerful, and rational expectations continued to grow in popularity and power at the same time the Fed did.  Interestingly, this crisis has not been good to the credibility of either the Fed or the Ratex people despite their opposition to each other.

So monetary policy is necessary, but the Fed still stifles criticism of its own current brand of monetary policy?  This seems unlikely to me, because it would mean the Fed is working against its own long-term interest.  The Fed gains power and credibility as its monetary policy gets better, and policy will get better only through criticism and refinement.  Fed employees should be pretty forward-looking since their appointments last several years.

I wonder if advocates of unconventional monetary policy like Scott Sumner feel “stifled”.  I suspect it is only people like Galbraith who question the Fed’s motives who run in to trouble, rather than people who simply think they could run things better.

As far as Galbraith’s accusation about the Fed’s political bias: his numbers actually did seem to bear this out when I looked at this last.  However, of all major Presidential candidates it was George H.W. Bush who felt most strongly that the Fed cost him the election; and this in 1992 when the Fed was run by longtime Republican and former Objectivist Alan Greenspan.

The most convincing criticism in the article is the quote from the Father of Monetarism himself, Milton Friedman, criticizing the Fed’s large influence on the profession.  I guess we could say that the Fed has some “market power” in the intellectual marketplace, making the market for ideas less than perfectly competitive.

On the whole though, I don’t worry that the Fed has bought the profession.  But then, that’s probably just because I’m holding out for a job there.  Or because of the check Bernanke is sending me to write this post.

Written by James Bailey

September 10, 2009 at 6:18 pm

A small step toward a much better world

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The website Wikileaks is currently down.  They recently broke the story of the list of websites banned by the Australian government, and their bandwidth has been overloaded by peoples’ interest.

Wikileaks allows little people to get information indicting powerful organizations in to the view of the larger world.  They protect the anonymity of their sources, and by locating servers in many countries and having extensive legal defense help they can keep stories up despite the opposition of governments.  Almost no case is too big or too small for them to handle.

But they have run out of money.

I can’t think of any other way a small donation could go further toward promoting freedom for individuals and transparency and accountability for institutions.  Freedom isn’t free, but this is your chance to buy it cheap!

Written by James Bailey

March 22, 2009 at 2:33 am

Professional World Savers

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The Washington Post details their travails in trying to be normal middle class adults.

I think we got the point after watching the Incredibles, the Spiderman movies… really the whole World-Saving genre is one long way of saying, as Five for Fighting’s Superman did, “It’s not easy to be me.”

Get rich first, save the world later seems to be the most effective may to make a difference- if you don’t forget what you’re about.  Although some economists would say that getting rich indicates you are doing something good/useful for the world, and it is a tragedy that Bill Gates has quit making Microsoft better (something he’s good at) to building a charity (not so much).

If I do choose the save-the-world-first strategy, please, give me a good slap on the nose if I complain about it.

Written by James Bailey

November 7, 2007 at 2:17 pm

Posted in cash, idealism

What to do with $

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Now that I have a real job, and may or may not have some other significant revenue streams/assets, this is now a question with more than theoretical importance to me.

Being back home, I’ve been confronted by the examples of my family members.

Some can only measure their net worth with significantly negative numbers; another measures wealth by how big the numbers in the bank account are, constantly worrying about spending money. Some measure wealth by how sweet their cars are and how many toys they have. (If said family members ever read this, you know who you are; but nobody else will).

I fear I’ve gotten rather out of practice at being self-righteous (let me know if you think otherwise), but I believe this is a proper occasion for some good, old-fashioned accusatory moralism.

I hope I never follow the examples my family has set for me in how they spend; I hope they will find a new path as well.

Some trade-offs to consider:

Will having this thing I’m buying make me happy enough to forget about interest payments, debt collectors, and never being able to retire? Is this purchase worth the financial insecurity bundled with it?

A: maybe. The point is, think about it.

If I spend most of my disposable income on personal entertainment (sweet cars, movies, expensive dinners, electronics, drugs, hookers, et c), will I really be any happier?

A: well yes, if you’re entertained by seeing how your life looks as it crumples and folds in on itself as the meaning drains out of it…. this doesn’t sound fun, but I’m sure its better when you’re watching it on a plasma TV, while high and accompanied by said hookers.

If I make saving money one of the primary goals of my life, seeking to accomplish it in everything I do and making it the cornerstone of how I relate to people, will I end up with lots of money in the bank?

A: You sure will!

And then I’ll be happy?!?

A: Hell no! Saving money is a never-ending struggle, bound to end in death; a struggle which will rob you and those around you of the ability to enjoy anything you spent money on. Unless you have a fetish for green paper, money is only valuable for what you can spend it on! Save when you have something to save for, or nothing to spend on. Don’t spend your life worrying!

So know that you’ve shared your priceless wisdom about what not to do with $, what do we do with it?

Great question!

Answers anybody?

Written by James Bailey

June 28, 2007 at 1:27 am