Results for “"inside job"”
6 found

*Inside Job*

Nick writes to me:

I'm an undergrad math/Econ double major and aspiring economist. I also read your blog (amongst others) daily. You said today that "Inside Job" was "half very good and half terrible." Critical reviews are widespread, but prominent economists haven't said much. I was wondering if you could expound on your terse critique in an email or blog post.

It's been a while since I've seen the movie, but here goes.  The best parts are on excess leverage, the political economy of the crisis, and the attitudes of the economics profession.  Overall it is remarkable how much economics is in the movie, even though some of it is quite bad.  The visuals and pacing are excellent and many scenes deserve kudos. 

The worst parts are the misunderstandings of deregulation.  Glass-Steagall repeal was not a major factor, much of the sector remained highly regulated, and there is no mention of the failure to oversee the shadow banking system.  The entire discussion has more misses than hits.  The smirky association of major bankers with expensive NYC prostitutes (on one hand based on very little evidence, on the other hand probably true) was inexcusable.  There is talk of "predatory lending," but it is not mentioned that many borrowers committed felonies, or were complicit in felonies ("on the form, put down any income you would like").  Most generally, there is virtually no understanding of the complexity of the dilemmas involving in either public service or in running a major corporation.

Overall, the movie's smug moralizing makes me wonder: is this a condescending posture, spooned out with contempt to an audience regarded, one way or another, as inferior and undeserving of better?  Or are the moviemakers actually so juvenile and/or so ignorant of the Western tradition — from Thucydides to Montaigne to Pascal to Shakespeare to Ibsen to FILL IN THE BLANK — that they themselves accept the very same simplistic moral portrait?  If so, most of all I feel sorry for how much of life's complexities they are missing and how impoverished their reading and moviegoing and theatregoing must be. 

Do you remember the scene in Hamlet, where Hamlet tries to judge the King by enacting a pantomime play in front of him, to see how the King would respond to a work of art?  I think of that often.

Saturday assorted links

1. What does China think of “Crazy Rich Asians”? (NYT)

2. Is tech ruining teenagers’ brains? (NYT)

3. Atif Mian is forced out of his Pakistan advisory role.

4. “Museum Boss Fears Philly Insect Heist Was an Inside Job.

5. “Over 93 heavily footnoted pages, she presented the case that the company should not get a pass on anticompetitive behavior just because it makes customers happy.” (NYT)

What I’ve been reading

1. Mark Zupan, Inside Job: How Government Insiders Subvert the Public Interest.  This is now the very best book on how special interest groups subvert the quality of public policy.

2. Historically Inevitable: Turning Points of the Russian Revolution, edited by Tony Brenton, contributors include Dominic Lieven, Orlando Figes, and Richard Pipes.  I, for one, often find it easier to learn history through counterfactual reasoning.  “What if they hadn’t put Lenin into that train?, and so on, and so this is my favorite from the recent spate of books on 1917 in Russia.

More generally, there are people who very much like counterfactual reasoning (say Derek Parfit), and people who don’t care for it much (say Jim Buchanan).  The two types often don’t communicate well.  The counterfactual deployer seems like a kind of smart aleck, caught up in irrelevancies and neglecting “the real issues.”  In turn, the non-poser of counterfactuals seems stodgy and unable to understand the limitations of principles, how one might handle the tough cases, and what might cause one to change one’s mind.  Being able to bridge this gap, and learn from both kinds of thinkers, is both difficult and yields high returns.

3. Mary Gaitskill, Somebody with a Little Hammer, Essays.  Short pieces, never too long, strong throughout, mostly on literature (Nicholson Baker, Peter Pan, Norman Mailer, Bleak House) with some essays on movies too.  This will make my best of the year list, and she remains an underrated author more generally.

4. Jace Clayton, Uproot: Travels in 21st-Century Music and Digital Culture.  An original and consistently interesting extended essay on how “World Music” is evolving in digital times.  A must-read for me, at least.

5. Johan Chistensen, The Power of Economists Within the State.  I haven’t read this one, but it appears to be a very interesting look at the role of economists within government, for the case studies of New Zealand, Ireland, Norway, Denmark, and other cases (in less detail).  “Economists in government” remains an underappreciated topic, so I expect this book is a real contribution.

6. Julie Schumacher, Doodling for Academics: A Coloring and Activity Book.  It’s funny, for instance one panel has the heading “Find and color the many readers who will enjoy your dissertation.”  The images include a rat and a snake in the grass, but there aren’t even so many of those.

Finance and the Common Good

That is a new paper by E. Glen Weyl, and here is one excerpt:

Using relatively crude methods to translate publicly-available data into income estimates, I estimate that approximately 40% of income of authors in both fi elds comes from consulting activities,  roughly consistent with self-reported income figures for the broader profession in the National Center for Education Statistics’s National Study of Postsecondary Faculty. Second, I show that consulting activity in industrial organization is primarily policy-oriented while consulting work in finance is primarily geared toward private interests. Together these two facts are weakly suggestive that material incentives are at least complementary with research focus.

But this is not Inside Job either:

…the view I put forward is not that financial economists defended the interests of the firms for which they worked in regulatory disputes; this is precisely what I believe industrial organization economists, in contrast to fi nancial economists, often did. Instead it is that financial economists were simply not interested in such disputes instead focusing on aiding private accumulation of wealth in markets rather than pushing public policy in one direction or the other.

Glen predicts that future work in finance will become more like research in industrial organization and move in a more legal and regulatory and policy-oriented direction, as the real world shifts toward greater regulation of finance.

An ethics code for economists

Richard, a loyal MR reader, asks:

What are your thoughts on the recent proposal to implement an ethics code for economists? Do you see this having any effect on the general field/body of work being published in the near future? Will the general public find that these ethical guidelines afford them a more scrutinized body of work (i.e. Will they trust the profession more? Will this help to serve as a bulwark against negative views of the profession?)

Annie Lowrey offers background.

I favor such codes, but I'm not sure they will help much.  First, most economic research doesn't matter in the first place.  Second, the research which does matter very often is distorted anyway.  It is pulled out of context, exaggerated, presented by intermediaries and political entrepreneurs without qualification, and so on.  That's the real problem.  In this context I'm not sure that a conflict of interest statement is going to push people closer toward truth; the process wasn't accurate or finely honed in the first place.  What is published is already so much more scientific than the policy process itself.  Improving the former inputs with an ethics code seems like pushing on the less important lever and to some extent it is a very weak substitute for the almost complete lack of an ethics code in politics itself.  Third, a lot of the problem is economists in government –advising – rather than what is published in economics journals. 

Newspapers already have conflict of interest policies for many (or all) of their writers, but I don't see they are much enforced or have much improved the quality of most Op-Ed pages as policy advice.

Ideally, the employing university should enforce such policies, but of course individual universities do not have much incentive to "move first" on such issues.  Furthermore, universities are notoriously selective in their enforcement of other rules, such as limitations on how much time a professor can spend consulting.

If you take the cases presented in the movie Inside Job (which by the way is half very good and half terrible), a code of ethics would have changed individual behavior but it is very unlikely that it would have improved economic policy in the United States.

The biggest potential gain is simply keeping or extending the public's trust in the economics profession.  In other words, the biggest potential gain is fairly small.

Is there any downside from trying to raise ethical standards and transparency in research?  One problem is that "all-government funded" probably will be seen as high status, when I am not sure it should be.  Explicit political bias is not my main concern, rather this funding source encourages false precision and an excess of technocracy.  Another issue is how disclosure might interact with anonymous donations to universities.  Either anonymous donations become more costly or impossible, which makes universities poorer, or they become a means of circumventing the transparency. 

I don't have easy answers there, but I wouldn't conclude that we should give up trying on matters of professional ethics.  It still seems to me that some individuals are creating a negative externality for the economics profession as a whole.  Simply doing the right thing, even when you can't see what immediate gains it will bring is often…the right thing to do.