Sun, 14 Dec 2008

Skidelsky? Not so much...

Robert Skidelsky praises John Maynard Keynes. There are many missing facts, facts that don't line up, and logic that isn't.

The chairman of the Federal Reserve is a regulator. Skidelsky should not be "astonish"ed to find a regulator who decries the failure of deregulation.

The story says "the regime of deregulation he oversaw" and links to an article. The article, however, doesn't speak to a single deregulation which could be laid at Greenspan's feet.

It doesn't logically follow that legislation is the regulation necessary to make inefficient markets efficient. Perhaps there are other solutions?

Soros is right -- the problem was intrinsic to the financial system -- which cannot in any sense be described as unregulated, deregulated, or less regulated. The best description of it is "highly regulated". I've read the financial filings that go with an IPO, cover to cover. Would anyone describe an IPO as having been a part of "extensive financial deregulation"?

Skidelsky could name a deregulation, and then compare it in magnitude to the effects of Sarbanes-Oxley, which is a new regulation. Then we could decide whether the amount of regulation has increased or decreased. If you only count deregulations and never reregulations, then you must eventually conclude that there are no regulations left. That doesn't describe financial markets.

I grant that it's possible that there really are fewer regulations, but Skidelsky hasn't made that case and doesn't deserve to be granted it "for argument's sake".

Talking about "deregulation" without naming the deregulations makes it impossible to refute.

Similarly, laying blame at the feet of any one or more deregulations, and then claiming that all deregulation is bad, is like finding a bug in one line of code, and then claiming that all lines of code are equally bad. It just doesn't follow.

Similarly, if you deregulate the predators, while keeping the victims regulated, you have created, not solved a problem. When the wolves are freed, and the sheep left penned, you know mutton is on the menu.

Skidelsky doesn't name any of the "economists who believes that all uncertainty could be reduced to measurable risk." I can't name any either.

"Most economists", again, not named. There are multiple schools of thought about the nature of money. To which ones does Skidelsky refer? Without knowing to whom he refers, it's impossible to judge whether his summary of their ideas is accurate.

"It is this flight into cash that makes interest-rate policy such an uncertain agent of recovery." Let's assume this is a true statement. The fact that Keynes held to one thing that was true lends no credence to any other things he may have said.

"Spend on pyramids, spend on hospitals, but spend it must. (sic)" Keynes felt that non-productive spending was as useful as productive spending. The problem is that this is exactly the Broken Window Fallacy.

Greenspan being wrong doesn't make Keynes right. It's possible that a third theory is more correct.

Someone who has written a biography on Keynes is emotionally and financially invested in the ascendancy of Keynes' ideas. This article is just one stop on a book tour. True, it's not evidence that Keynes is wrong, but I never expect anyone to speak for the truth against the interests of their wallet. They might do it, but I'm surprised when it happens. Here, it hasn't.

Posted [23:02] [Filed in: ] [permalink] [Google for the title] economics,robertskidelsky,skidelsky [digg this]

The Failures of Libertarianism

Tubby writes to say that I'm just as politicized as Krugman and Stiglitz. Maybe. I assume that nothing works perfectly, that everything fails in its own way, that all we can seek are improvements, not perfection.

I think that the opponents of libertarianism see that libertarianism is: not perfect, doesn't try to be perfect, and acknowledges that people are corrupt, institutions fail, and hopes are dashed. These opponents look to coercive planned collective action as the solution to those problems: planning can be perfect, is an attempt to be perfect, can eliminate corruption, make institutions work, and create hope.

They're wrong, of course. But that's their own form of imperfection, their own failing institution. Since they plan on perfection, since they require perfection, they cannot acknowledge that they might be in error.

Which is why they're so scary to me.

Posted [12:21] [Filed in: ] [permalink] [Google for the title] fail,economics,libertarianism [digg this]

Epistemological Problem

So, I have this epistemological problem. I have a great deal of respect for Tim O'Reilly. He's created a successful publishing and conferencing company. That's an accomplishment not to be made light of. One of the things he does from his bully pulpit is look for insight into problems. Of course, he uses that insight to further target his conferences and books, but there's nothing (NOTHING) wrong with that.

The problem is that Tim O'Reilly advocates bad economics. You know, the Krugman and Stiglitz brand of economics. Economics needs to be free of a political slant, less it cease to be description and wander off into the weeds of prescription. Unfortunately, both Krugman and Stiglitz espouse political ideas in the guise of economic analysis, and Tim has bought into those ideas.

Okay, so anybody can be wrong, right? Yesbut, Tim is respected for his insight, and uses that respect to promote ideas. When you're in that kind of position, you need to be careful to only promote ideas that you are confident of. Of Economics, Tim knows little, but he thinks that because he has created a successful business, he knows something about economics. Thus the epistemological problem.

John Maynard Keynes was a successful investor. Because he became wealthy, he thought he knew something about economics. Because he became wealthy, other people thought he knew something about economics. Unfortunately, business and investment insight does not lead directly to an understanding of economics. Only a study of economics leads to an understanding of economics.

Like Keynes, O'Reilly knows very little good economics. I do understand economics (an assertion you can check for yourself by reading the archives of this blog). Yet O'Reilly natters on about economics. He also has much to say about other things, of which I know little. How am I to trust O'Reilly, now that I know he is willing to promulgate bad information? How do I know when Tim is speaking from his experience and his insight, instead of pulling stuff from his butt? If I can't trust him to be right in areas where I have expertise, how can I trust him to be right in areas where I have little knowledge?

Answer: I can't. The solution for him is to listen to his friends. When they tell him he is wrong, in areas where they have expertise, he should be more circumspect in his pronouncements. The trouble is that, like so many people, O'Reilly (and Keynes) thinks that because he is good at finance, he's good at economics. How to cure people of this idea?

I still have a lot of respect for Tim as a person. But as a seer? Much less. It hurts to say so, but I guess every hero has clay feet.

Posted [00:58] [Filed in: ] [permalink] [Google for the title] oreilly,oreillyradar,timooreilly,economics [digg this]