"If money isn't loosened up, this sucker could go down" - George W. Bush warned in September 2008

Monday, September 13, 2010

Really good links - Krugman on global savings glut - New Keynesian macro - Seeing like a state

Paul Krugman, Robin Wells - Global savings glut - "In China, whose trade surplus accounts for most of the US trade deficit, the desire to protect against a possible financial crisis has morphed into a policy in which the currency is kept undervalued, which benefits politically connected export industries, often at the expense of the general working population. <..>
        Europe managed to inflate giant housing bubbles without turning to American-style complex financial schemes. Spanish banks, in particular, hugely expanded credit; they did so by selling claims on their loans to foreign investors, but these claims were straightforward, “plain vanilla” contracts that left ultimate liability with the original lenders, the Spanish banks themselves. The relative simplicity of their financial techniques didn’t prevent a huge bubble and bust. <..>
       Our guess is that the bubble got started largely thanks to the global savings glut, but that it developed a momentum of its own—which is what bubbles do. "

Nick Rowe - Currently planned future desired expenditure is not equal to currently expected future income - "Now, if every individual knew what every other individual were planning to spend next year, and knew what every other individual were expecting to earn in income next year, and understood National Income Accounting, and could add up all the numbers, they would learn that Et[AE(t+1] and Et[Y(t+1)] weren't equal. So they would know that someone is being overly optimistic, or pessimistic, but they wouldn't know if it was them. Maybe all the other people are wrong; I'm not going to change my plans or expectations. The amount of knowledge an individual would need to figure out that he was wrong would be enough to make that individual smart enough to be appointed central planner, so we wouldn't need New Keynesian macroeconomics anyway.
        There's sensible rational expectations, then there's silly rational expectations, and then there's the rational expectations that would be needed to make New Keynesian macroeconomics work."

James Scott - The trouble with the view from above - "The example of scientific forestry is meant here as a signal and cautionary example of the dangers of the forms of simplification typical of states and large bureaucratic organizations. In Seeing Like a State, I developed several examples in considerable detail: the imposition of uniform land tenure and cadastral surveys on vernacular forms of land tenure; the imposition of uniform legal codes on vernacular customs, the replacement of dialects with a national language, the design (or redesign) of abstractly planned cities (e.g. Brasilia) compared to “vernacular” unplanned towns, the forced resettlement of peasants and pastoralists in poor countries compared to “vernacular” movement and settlement, agricultural collectivization compared with small-holder mixed farming, and, finally, the difference between praxis or vernacular knowledge on the one hand and epistemic knowledge on the other. The emphasis, throughout, is on the processes whereby hierarchical organizations, of which the most striking example is the state, create legible social and natural landscapes in the interest of revenue, control, and management."

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