What I’ve been reading and browsing

1. Gaël Faye, Small Country.  Short, readable, and emotionally complex, one of my favorite novels so far this year.  Think Burundi, spillover from genocide, descent into madness, and “the eyes of a child caught in the maelstrom of history.”  Toss in a bit of romance as well.

2. David Edgerton, The Rise and Fall of the British Nation: A Twentieth Century History.  I’m only on p.34, but this one is spectacular and I expect to read it closely all the way through.  You’ll probably hear about it more in future blog posts.  He takes on many myths about British postwar decline, for instance, arguing that British business actually did pretty well in the 1950s and 60s.  Right now it is out only in the UK, but the above link still will get you a copy.  Here is a good Colin Kidd review in New Statesman: “Every so often a book comes along that the entire political class needs to read.”

3. Karl Ove Knausgaard, Inadvertent (Why I Write).  92 short pp. on how he thinks about writing, consistently high in quality, the contrast between Kundera and Hamsun was my favorite part.

Laurence M. Ball, The Fed and Lehman Brothers: Setting the Record Straight on a Financial Disaster is a very serious and useful book.  The Fed could have saved Lehman Brothers and didn’t, partly because of political pressures, and partly because they underestimated the damage it would cause to the economy.  Ball documents what I have supposed from the time of the event.

Cass R. Sunstein, The Cost-Benefit Revolution.  Not since the 1970s has cost-benefit analysis been as underrated as it is right now.

Joy Lisi Rankin, A People’s History of Computing in the United States appears to be interesting.  It tries to liberate the history of American computing from the usual emphasis on Silicon Valley, and offers greater focus on Dartmouth, Minnesota, and other less studied locales.


Which eras of American politics had less signaling and more cost-benefit analysis? Even if we concede to the cynic that "politics is not about policy", some periods must still be more "rational" than others?

'It tries to liberate the history of American computing from the usual emphasis on Silicon Valley'

Yep, MIT is really an obscure institution that almost no one has ever heard of, and thus requires, what is the term of the art here?, a bit of status raising.

Why does the numbering stop after 3? Straussian?

If so, don't expect any +1s. Way too overt.

I met Cass Sunstein when I worked in London about 13 or so years ago. This was just before “Nudge” came out. I asked him what we needed to do for assessing the merits of policy proposals and he shot back “cost benefit analysis”, so at least he’s consistent.

Too bad he didn't bother with it when he had the chance.

Sunstein was known for cost-benefit back in the late 1980s as I recall, and certainly by the early 1990s, so he's been consistent for a while.

Cowen: "Not since the 1970s has cost-benefit analysis been as underrated as it is right now." Au contraire. Liberal democracy pays the cost and Trump and Putin reap the benefits. There, cost-benefit analysis.

Counselor, I, as a law-school dropout, recall the lecture where the professor said that 'cost-benefit' and other such fancy rules are essentially make work for lawyers and their staff. The theory is: a 'bright line' test, like the driver that rear ends the other driver is always at fault, is simple to administer, even though it's not entirely 'fair'. However, a 'cost benefit' test is very fair, but requires lots of expert opinion (i.e., expensive). For a multi-billion dollar project it's OK, but for a simple tort? Just more money for expert testimony (read: economists) and expensive discovery...

Ray, flunked-out, dropped-out, whatever, but you missed the essential point of law school: it trains advocates. There are no bright lines. Indeed, accounting majors and such are completely baffled the first year, expecting to "learn" the law only to find that the law is elusive. Of course, the advocacy approach isn't limited to law, as it has leaked over to economics.

2. I ordered the book (for delivery late July or early August). GB is a microcosm of the US: the liberal world order (trade) greatly benefited one relatively small segment of society (and sector of the economy) while leaving much of society (and other sectors) behind. One cannot visit London in the past 30 years without coming away with the impression of unprecedented success. Look at photos of London at the end of WWII and look at London today. Trump seems to prefer the London of 1945.

I greatly prefer the London from way back in 1995 (when it was still English).

How much is there positive about London today relative to 30 years ago?

Once you isolate out what modern tech does (your Netflix subscription, your phone; things that happen everywhere), the city specific trends are a mixed bag; basically more expensive housing, nicer restaurants and more ethnic diversity.

But very few young British people who live there would, I think take the nicer restaurants over cheaper housing and far lower mortgage:salary, and, ethnically British people would more likely than not choose not to select the ethnic diversity.

Young Brits in the capital fall into the patterns of being hipster tourists from the provinces (having their little adventure and prepared to return to their little town when they want to buy), city natives stuck in a perpetual adolescence without being able to buy and anxious for the future, and a self assured class that earns high salaries and can afford property; not so in the 1970s or 1980s. Doesn't exactly breed a healthy, adult social life.

It's a Geneva-ized version of what it was. Polished, hipsterized, gentrified, duller. If that's your idea of the good life, and you can afford it, you might prefer that. For most, The Rent Is Too Damn High.

Not really. It’s true that house prices were lower in the early to mid 90’s but not many people could afford to buy because of high interest rates and high unemployment. In terms of immigration I don’t see much difference even then London was pretty diverse. In fact on some measures it is less diverse now than in the nineties due to all the Eastern Europe immigration, I happen to be in Hounslow today and my take is there are more white faces now than I remembered.

And yet home ownership rates continued to rise and rise during the 1990s - https://www.citymetric.com/politics/uk-home-ownership-rates-are-their-lowest-30-years-and-crisis-goes-way-beyond-london-2312. And this has almost certainly changed more sharply in London than in the rUK.

As well I think by any measure, the idea that Eastern European migration has been significant enough to make London more ethnically European than in the 1990s is absolutely in the realm of fantasy.

If you look from 2001-2011, (http://www.dailymail.co.uk/news/article-2320002/How-rise-white-flight-areas-dominated-ethnic-minorities-creating-segregated-UK.html) increase in White non-British (Europeans, Americans, etc.) is only about 4%, while decrease in share by White British is about 16%.

This has almost certainly changed again by almost the same fraction, albeit very slightly less under Tory watch, who are slightly more rigorous on migration. Going from something like 65-70% British in the 90s to probably about 38% today, is a really major change.

Even if you were to accept that a substantial migration of Poles speaking Polish isn't an ethnic or cultural change, for some reason.

London is rubbish compared to what it was 25 years ago.

I know this because I almost never go there now. I used to go there for unusual food, bookshops, music, movies, specialist retailers, but that's all available online now. Even with restaurants, you can find somewhere that's Michelin starred close to where you live.

Everything about it is, in my experiences, dysfunctional. The tube is disgusting, conference facilities are bad, you find cafes without toilets. Its arthouse cinemas are in a bad state.

Nobody goes there, it's too crowded. With apologies to Wessex Man (but I couldn't resist).

Lehman Brothers: Tim Geithner's memoir captures the exigency of the crisis, as he, Paulson, and Bernanke struggled to put out flash fires while attempting to put the economy back on a path of a slow but eventual recovery all the while maintaining their instincts to trust markets and to intervene at a minimum. Second guessing the government and the Fed during the financial crisis of 1929 is like shooting fish in a barrel, the officials were so inept, but second guessing the government and the Fed during the financial crisis of 2008 is like questioning the skills of LeBron James because Cleveland lost the championship.

The difference is Bernanke (and others) claim they did not have the legal authority to save Lehman. This would be akin to the Cavs being down 88-91 and with :02 remaining in the game clock, LeBron drives for a layup. During the postgame press conference Stephen A Smith asks “LEBRON JAMES... THE KING... THE CHOSEN ONE... THE GREATEST PLAYER NOT NAMED MICHAEL JEFFREY JORDAN OR KOBE BEAN BRYANT OR KAREEM ABDUL-JABBAR OR WILT CHAMBERLAIN OR MAGIC JOHNSON OR WILLIAM FELTON RUSSELL... WHY ON THIS EVER-REVOLVING EARTH - THE SAME EARTH WHERE YOUR BASKETBALL PLAYING SKILLS ARE IMPECCIBLE... UNDENIABLE... AND SCRUMDIDDLYUMPTIOUS - WOULD YOU EVER CONCEIVE... EVER CONSIDER... EVER CONCLUDE... EVER DEVISE A PLAN WHERE YOU WOULD TAKE A TWO POINT BUCKET DURING THAT SEQUENCE? IT’S UNEXPLAINABLE... IT’S UNFATHOMABLE... IT’S AN ABOMINATION TO THE SPORT AS CREATED AND FORMULATED BY THE LATE GREAT DR JAMES A NAISMITH.” LeBron then responds by claiming he didn’t shoot a three pointer because Ty Lue told him during the timeout that he isn’t allowed to take a three.

While I haven’t read the book, I have listened to an interview with Ball and he seems to have the evidence to support his claim. If anything, it’s troubling for the Fed & Bernanke if Ball’s claims are true.

Toi be fair, no one saw it coming. But, ". . .put out flash fires . . ." that Geithner (NY Fed Pres.), Greenspan, and intellectuals for years had missed and failed to preclude.

". . . trust markets and intervene at a minimum." I guess. If near-zero interest rates, $10 trillion in deficits, and $4+ trillion in QE define "minimal intervention." Thank God I wasn't drinking coffee. It would be all over the keyboard.

The Fed bailed out earlier insolvent firms, but not Lehman. Of course, the Fed's/Treasury's Goldman Sachs alumni had nothing to do with it.

The comparison of King Lebron to the Fed would be almost valid if Lebron James' teams never had won a game.

3 April 2017 Barron's: "Dr. Doom's Diagnosis" by Randall W. Forsyth: Henry Kaufman new book, Tectoniuc Shifts in Financial Markets: People, Policies, and Institutions. Anybody younger than 35 years-old has experienced only disinflation and falling interest rates.

The foolishness of policy-makers and market participants led to the recent financial crisis and its long-running aftermath. ". . . the Fed has attained an unprecedented prominence - precisely because of its past policy failures." Greenspan and Bernanke failed to note deep changes in financial markets - securitizations; repeal of Glass-Steagall; increased concentration of markets - handful of megabanks dominate. Then, according to Dr. Kaufman, Dodd-Frank worsened the concentration of financial risks causing a far more fragile financial system and more dependent on the Fed.

". . . trust markets and intervene at a minimum." I guess. If near-zero interest rates, $10 trillion in deficits, and $4+ trillion in QE define "minimal intervention." Thank God I wasn't drinking coffee. It would be all over the keyboard.

I suspect you are the kind of person who needs a food resistant keyboard nonetheless.

Your statement is actually true, that is not market intervention. Market intervention is deciding to save one company here but let another fail there.

Stimulus, however, is the opposite. Stimulus says add more money to the economy (0% interest rates, QE, running up deficits with mostly tax cuts and generalized spending). Maybe that will save any particular company or maybe not. On a whole I would have rather the system let the specific banks and GM fail but double down on the stimulus to the entire economy.

The irony is stimulus appears to involve bigger sums then intervention. To save, say, GM the gov't needed to spend $50B upfront and got back about $40B after the dust settled for a net of just $10B. If the gov't instead said let GM fail but have three or four years of extra generous unemployment benefits (for anyone who loses their job since the actual GM jobs lost would be just the tip of the iceberg), special assistance for education and retraining, maybe even individual 'relocation loans' offered by the gov't to individuals in the most distressed communities, and you'd get at a min. a few hundred billion dollars.

But the problem with comparing the impact on the gov't Treasury statement of the two ideas is that in the more expensive one the market actually makes the decisions about what happens. Maybe GM comes back as people buy cars or maybe it's replaced by hundreds of diverse small businesses in totally different industries.

You did not call me a "fascist."

The 2008 financial catastrophe would have, should have, could have been avoided. It was not. They didn't learn from the 1989-1992 S&L Crisis; or the dot.com bubble; or . . .

Is it that there is no "settled science" on these crises?

I have little confidence that the Fed will save America from the next "event." Neither does Dr. Kaufman.


Lehman went down because Paulson hated Fuld.

This seems to imply that The Federal Reserve acted on the behalf or under the suggestion of Paulson who was not an official of the Federal Reserve System.

They did and it was dirty. Paulson's team leaked, apparently, the pending bailout in (I recall) the third week of September 2008, since about that time the credit markets froze up on bad paper. The reason they froze--and I've seen John Taylor of Stanford argue this--is that everybody was expected a bailout, so it became a self-filling prophecy. Had Paulson's team not leaked the pending bailout, arguably markets would have corrected. Instead, the froze up (as Paulson kept saying to Congress at the time they would) precisely because they were anticipating Paulson's 100% bailout with no haircut. Another example of how Wall Street profits from Main Street. A golden opportunity was wasted to show that markets don't need bailouts (nor do they need deposit insurance, but I digress).

Paulson hated Fulf because Fuld torpedoed the deal with the Korean Development Bank that would have saved the firm.

The Korean Devekolment Bank has an inkling of what was coming so they demanded very generous terms. Fuld thought it was just another crisis like LTCM or the Russian default so he balked at the terms. That’s why Lehman failed.

More BS. The talks with the KOR Development Bank never got down to 'brass tacks''

Paulson hated Fuld because of what happened after RUS defaulted on its sovereign debt. LTCM was levered 100: 1 on this. Greenspan called all the IB CEO's together and told them each to cough up US$1B. They all did, save for Lehman Brothers.

Led by Dick Fuld.

Paulson at the time was CEO of Goldman.

I am not defending the system that lead to the crisis; quite the contrary, as I have made clear in my comments at this blog, that relying on rising asset prices for prosperity is a recipe for disaster. Indeed, once the urgency had passed and Congress rejected fiscal policy to address the crisis and promote the recovery, monetary policy (i.e., stimulus) and rising asset prices became the sole remedy, putting us on the path for another crisis ahead. What I liked about Geithner's memoir is that he makes no claims to be an economist: he self-identifies as a crisis manager. His memoir was an account of the many mini-crises they faced and the choices they made. Attributing evil motives to Paulson or any of them serves no useful purpose and, with respect to Paulson, belies Paulson's very important contribution: he realized just how dire the situation and acted accordingly. Was it a mistake not to save Lehman? I don't know, and nobody knows, since it's an AH: we only know the consequences of the path taken.

1. How do you have a recovery without asset prices going up? By definition recovery means GDP goes up. If the same set of assets is making more GDP in year 2 than year 1 then why wouldn't you expect owners of those assets to set a higher price for selling them? Ergo higher asset prices.

2. I think you're making gliding over a bubbles here. It is easy to see how bubbles can exist for specific things, harder for general things. Enron, not 'all stocks'. Tulips, not 'all plants'. We tell each other stories and it is easy to get hooked on a story with a specific character, hence lock in a delusion about the value of a specific thing based on a false story that keeps getting reinforced.

But a 'macro bubble' seems to be a totally different type of creature. A macro bubble has to get translated into specific behavior. Say we all get convinced that stocks will go up forever. At the end of the day you can't buy 'stocks' but must buy specific shares. One guy buys Walmart, you buy Apple, another buys Shell. Even if you buy an index fund you are just pushing these specific decisions to someone else.

You can fool some people all the time or all people some of the time but not all people all of the time. A macro bubble seems to be built upon the latter. In other words, you are saying a mass Matrix style delusion is sustainable and I think that is a very hard argument to be plausible.

It's a strange feeling, coming on here to observe that rayward has the better of an argument.

This could be a funny book (right leaning, not yet out): Art from the Swamp: How Washington Bureaucrats Squander Millions on Awful Art by Bruce Cole.

Very good book (a bit anti Russia and Trump): Facts and Fears, Hard Truths from a Life in Intelligence, by James R. Clapper and Trey Brown

Also good (mix of art and fact, left leaning): New Dark Age, Technology and the End of the Future, by James Bridle

Good analysis of populist politics: The Rise of the Outsiders: How Mainstream Politics Lost its Way, Steve Richards

Ha! The name of the last book is nice. It reminds me of this great title (and a great book too): In Advance of the Landing: Folk Concepts of Outer Space by Douglas Curran and Tom Wolfe :-)

"I’m only on p.34, but this one is spectacular and I expect to read it closely all the way through." I hope you'll give us a considered review when you've finished it. Or finished every third page or whatever.

I wonder if TC has read "The Empire Project: The Rise and Fall of the British World-System, 1830–1970" by John Darwin (2009), which argues the British empire was overrated? I've only finished the first 34 pages or so myself, slow reading it.

"the British empire was overrated": by whom? The Admiralty, for instance, thought it was absurdly inflated and impossible to defend. Political and popular opinion was split. You can't have Imperialists vs Little Englanders unless a lot of people are highly sceptical of the whole shebang.

I guess that a larger proportion of late 19th century Britons was sceptical of the Empire than current Americans are of the American Empire.

In terms of importance in the world, though, it was big deal if you like the abolition of slavery and the defence of Freedom of the Seas. Plus spreading the English language, English law and whatnot.

Knausgaard's "Inadvertant" is the most recent book in the "Why I Write" series, which is based on the Windham-Campbell Lectures at Yale. The book is only 92 pages, but costs $18, and isn't yet available through interlibrary loan. So, I used a famous search engine to find a video of Knausgaard giving the lecture. It lasts about one hour and is free. His manner is hypnotic, with cadences that remind me of a Lutheran pastor's sermons that I heard as a boy.

A better link for the Kidd review of the Edgerton book: https://www.newstatesman.com/2018/07/Rise-Fall-British-Nation-David-Edgerton-Review

"Life is short and then you die", I remember Bluton saying, and Whimpeigh's quick reply --- "Nevertheless, would you be so kind as to lend me a quarter for just one hamburger, for which I will gladly repay you on Tuesday" ? (from "Cost Benefit Analysis and Me", by J. Ott, Princeton University Press, 2005 or so, page 91 or so).

Who does not enjoy remembering the little dog in Popeye, Geep, or Ignatz from UTAH, or even what Mickey and Minnie were like before they got so famous, more than 13 years ago of course???

UTAH equals Monument Valley. Good times!

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