What Credit Crunch?

I was pleased to find an excellent analysis of the current debt situation. However, as flawless as the logic is, it overlooks the elephant in the room: globalization. The entire US mortgage market is big in absolute terms, but only a small fraction of the global liquidity. Since most capital flows have been eliminated worldwide, what we have today is a giant interconnected financial market. Disruptions which once would have been calamities are now dampened through global risk spreading. Everybody gets hurt a little, nobody gets hurt a lot. So while the logic of credit crunches is correct, the magnitudes involved must be considered. Size matters.

Expert Opinion

When I first heard someone say that you should never listen to experts, I was taken aback. It made no sense. But, the argument is that experts are so focused on their area of expertise that they fail to see the bigger picture. Consider sunshine. Experts have, for years, warned of overexposure to sunlight because it can cause cancer. Now another group of experts are warning of underexposure to sunlight because it can cause a harmful vitamin deficiency and several nasty diseases. I’m sure both sets of experts are right. What to do? Ignore the experts! I believe the best advice (usually attributed to Aristotle) ever given is moderation in all things.

Cross-cutting Cleavages

No matter how much you learn, there’s always more to learn. I thought I had a pretty good grasp of political economics until I read this post on libertarian class theory and, more importantly, cross-cutting cleavages. Of course, everyone comments on libertarian class theory, but the gold that adds nuance to economic thinking is cross-cutting cleavages. The term comes from political science, but it may have an important place in economic thinking…. However, the best economic lessons are not very nuanced and the masters, like Bastiat, over-simplified to get their point across. But the key lessons of economics, even old and simplified, have great relevance to today’s problems.

Federalism Fred

Fred Thompson is running a different campaign (if that’s what it is), but what’s really different is the kind of issues he’s talking about. His federalism essay is amazing. I’m sure very few voters have this in their lists of top issues, so it’s hard to see this as much of a vote getter. On the other hand, it’s an issue of great importance, directly involving the fundamental philosophy of the American system. I happen to agree with Fred, but whether you do or not, it’s clear that he’s operating at a deeper level than any of the announced candidates.

Strange Behavior Explained

I’ve commented before that the Congressional Democrat’s behavior struck me as strange. Regardless of how you feel about Iraq, the approach being followed seems bizarre. But now I’ve seen a rational explanation that makes sense to me. Without the issue of Iraq, the Democrats aren’t assured of 2008 elections. But an improving Iraq would make things tough for them. That would validate Republican foreign policy for a lot of voters and cast doubt upon the Democrat’s judgment. The best case for the Democrats would be a “failed policy” in Iraq. Unless, of course, Joe Lieberman emerges as their dark horse candidate!

The Rewards of Education

David Brooks has a good article in syndication today. He discusses income inequality and lists nine facts that don’t support the “two Americas” theme so popular with populists. There’s not much new in his column, but he points out, as he has often done before, that the rewards for education and hard work are growing much faster than the rewards for “plain” work. But why should this be true? Someone at the Economist has proposed a theory. In short, the greater rewards come from globalization. With larger markets, everything of value, including educated labor, is in greater demand. This drives the price up. Seems like elementary economics to me.

Career Paths

I’ve wondered about stuff like this. What exactly does someone who majors in “gender studies” expect to do for a living? Some of my professor friends don’t like this question - they claim that higher education shouldn’t be about career preparation. It should be about creating well-rounded adults with critical thinking skills. Maybe. But it seems to me that one of the more critical things to think about is how you’re going to put food on the table.

Man Bites Dog

People seem to have strong feelings about global warming, but I believe their opinions are largely shaped by media. How many of us have read climatology studies? However, there is reason to believe that the media is misreporting the situation. Now, I’m not a big fan of conspiracy theories (can you believe we’re still writing about JFK ?), so I have to ask - why would “mainstream media” do this? Could it be that “man bites dog” sells more than “dog bites man”?

The “W” Years

Everyone knows that Bush is suffering in the polls. What’s not so well known is that Congress is suffering more. Congress now has the lowest approval rating ever. Maybe that’s because they are trying to “get” the much more popular president. Arnold Kling has done a nice analysis of the Bush (W) presidency. I am struck by the parallels between W and Lincoln - unpopular presidents engaged in unpopular wars. Like W, Lincoln was considered to be an ignorant hick and dealt with a recalcitrant Congress. Regardless of what he says or does, Bush continues to be reviled, as was Lincoln….Of course, Bush isn’t the only one subject to scathing resentment - check out this analysis of Tony Blair….almost makes you want to be a politician, no?

Changes

My “Selected Readings” pages are about to disappear. Sorry, but it’s too much work and they don’t seem to get much use anyway.