Tuesday, December 02, 2008

WSJ, NYT, & Institutionalized Stupidity

Wall Street Journal, writing about Robert Rubin:
Under fire for his role in the near-collapse of Citigroup Inc., Robert Rubin said its problems were due to the buckling financial system, not its own mistakes, and that his role was peripheral to the bank's main operations even though he was one of its highest-paid officials.

"Nobody was prepared for this," Mr. Rubin said in an interview. He cited former Federal Reserve Chairman Alan Greenspan as another example of someone whose reputation has been unfairly damaged by the crisis.

New York Times interview with Jamie Galbraith (son of John K Galbraith):
Do you find it odd that so few economists foresaw the current credit disaster?
Some did. The person with the most serious claim for seeing it coming is Dean Baker, the Washington economist. I saw it coming in general terms.

But there are at least 15,000 professional economists in this country, and you’re saying only two or three of them foresaw the mortgage crisis?
Ten or 12 would be closer than two or three.

What does that say about the field of economics, which claims to be a science?
It’s an enormous blot on the reputation of the profession. There are thousands of economists. Most of them teach. And most of them teach a theoretical framework that has been shown to be fundamentally useless.

Mark Twain:
Sometimes I wonder whether the world is being run by smart people who are putting us on or by imbeciles who really mean it.
(Note: This post, artlessly cadged from A Tiny Revolution, further indulges my loathing for the financial priesthood, imbeciles who really mean it. Brooklynese trader maxim: nobody knows nuttin.')


Still Life Living said...

Damn you markLord! I am a professional economist, not just someone who reads the Wall Street Journal. Are you trying to tell me that me and my coworkers are no better than the cia was at predicting the fall of berlin, the existence of wmds, or the bay of pigs? We'll if that is true, I think you are actually criticizing our entire dewey decimal education system.

I am not going to stand for this slander of my nobel profession. I hereby resign as economic advisor to this blog. This resignation will be official once I can find that forever stamp I know I put in the hallroom drawer -- but when I do, you will be getting that letter making the break official.

Jesus Reyes said...

There is the old joke about the world looking for a one-handed economist. Seeing something coming in general terms is probably the best that can be done, but thats good enough. The world is full of economist that knew and know that Milton Friedman is full of shit. I'm also thinking of Joseph Stiglitz. I know there are others. What about that guy from the Phillipines, cant think of his name. Walden Bello it is, maybe not from the Phillipines.

I'm just a simple fucking peasant and I saw this shit storm coming years ago

A. Peasant said...

These money guys all go hand in hand. They're the smartest, craftiest people around when good times roll, and they don't mind you knowing it, sucka, as evidenced by their obnoxious behavior in all public places. But they're suddenly innocent little lambies when things turn to shit. pfft.

MarcLord said...


"nobel profession?" Freudian misspelling, but otherwise, um, Thomas E. Dewey can go categorize himself.


Stiglitz is un-American as an economist. Literally. He and Dean Baker, and Galbraith to some extent, are the only prominent US economists who ascribe to the Austrian School of econ philosophy.


the Lambie Routine is the smart people putting us on part. And oh how they're falling for it.

Jesus Reyes said...

I'm no economist, but I think Joseph Stiglitz is generally considered a neo-keynesian. He has a critical view of the mgt of globalization and free mkt economists. He had a position at the World Bank during the Seattle WTO meeting in 1999. He was fired from the World Bank for ripping on its policies. I think his claim to fame is some research demonstrating that markets are seldom ever efficient which, seems to me, is pretty much opposite of the Australian school.

I'm sure I could find much to disagree with Stiglitz, but Lawrence Summers had him thrown out of the World Bank for pointing out the failures of IMFm, etc. That looks like a start in the right direction for Stiglitz

At any rate, I would like to see a list somewhere of economists who do not agree with the banksters that ran both the Clinton and Bush administrations and now Obama and who have alternatives.


Here is Naomi Klein, Joseph Stiglitz and Hernando de Soto in a conversation moderated by David Harvey,

MarcLord said...

Jesus, hey thanks for the pushback and the Naomi-Stig vid. And no I meant Austrian school, because American neo-Keynesians literally believe what Hayek did, who anyway had a tremendous influence at the LSE over what was branded as Keynesianism. He was far more concerned with social justice, and less concerned with personal wealth, than John Maynard Keynes.

Like Smith, Hayek has been twisted by eager Pharisees beyond recognition, but in context of recent free-marketeerism, he was an out-and-out socialist. He did believe, as our neo-Ks very much do, that too-high taxation would stifle creativity and add friction to transactions. He did not believe in the lack of monetary or government regulation, as has been promulgated.

Had his 'Road to Serfdom' been titled 'A Case for Regulatory Moderation and Reduction of Poverty Through Work Programs,' it wouldn't have gone anywhere. But it would've been more accurate. And if the world knew more about the philosophical underpinnings of Keynsianism, they wouldn't call it that, because its practised models of psychology, taxation, and regulation were heavily influenced by, and directly imported from, the Austrian School.

Anonymous said...

IRL, I work in commercial real estate banking, servicing homebuilder lines of credit. Before that, I worked for 10 years closing loans for attorneys/title companies. Trust me, lots and lots of people saw this all coming, with the Hindenburg of housing bubbles. The banks didn't miss it either - that's why the ones that failed, failed all at the same time. You can only cook the books for so long before it becomes clear that you are broke, busted and sapped of cash. It was a grab - the higher-ups got themselves nice a rich, and now claim "we never saw it coming." Don't believe that one for a second.

Jesus Reyes said...

Well, you got me there. I always considered von Hayek and Milton Friedman as essentially the same phenomenon.

MarcLord said...


The people at the middle and bottom of the pyramid (like us) knew the fix was in, but I know the people at the top generally believed their own bullshit. Much like Mormons, communists, or Seventh-Day Adventists, believing was in their interests--but Bernanke, Greenspan, Paulson, and many others were ardent free-marketeers. They got to where they were because they sincerely believed the system and its philosophy were the best for everybody. That is why they don't know what to do now.

MarcLord said...


Hayek detested Friedman, and left the University of Chicago.

He hated high taxes, and thought putting large classes of people on the dole was corrosive. Some data show that high taxes seem to be ok, that anti-poverty programs have a positive effect on overall per-capita income, but that data comes from Scandinavia.

Given the spending choices of English-speaking governments which have fracturing Yugoslavia-like demographics, and Hayek doesn't look bad.

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