On the global economy and the recent downturn.  The pointer is to www.bookforum.com.

Megan McArdle asks and here is her follow-up post.  I would suggest the following:

1. Given the existence of a lender of last resort, *everyone* favors capital requirements of some kind, at least if you prefer to close down bankrupt institutions rather than to let them continue borrowing from the Fed and gambling with the money.

2. It makes sense for some of these capital requirements to be upfront and clear ex ante, noting that any attempt in this direction will be imperfectly realized.

3. Most observers overestimate how effective capital requirements will be.  Many a crisis has happened right under their nose and that includes Japan and Bear Stearns, among others.

4. As Megan suggests, regulators are not very good at outguessing the market; read Arnold Kling as well.

5. Regulation can discourage leverage at the margin; the social costs of leverage are higher than the private costs, due to contagion effects and the inability of the lender of last resort to precommit to no bailouts.  This need not require selective regulatory intervention or regulatory outguessing of the market.

6. A good deal of regulation requires voluntary compliance on the part of the financial institutions rather than foresight or intelligence on the part of bureaucrats.  Banks of course don’t *have* to follow the rules they are given and sometimes they don’t.  But for a bank to cross the line of systematic legal disobedience, observable by potential whistle-blowers and the like, is a big step and many of them are not willing to do this.  Much of the power of financial regulation derives from this fact rather than from any particular abilities of regulators.

7. We should make capital requirements as symmetric as possible across different kinds of banking activities, at least to the extent systemic risk is present.  That said, this still probably won’t prevent the next bubble and blow-up.  It will limit some of the damage ex post.

8. It would be nice to have greater use of clearinghouses and netting of positions for the unregulated "shadow banking sector." 

Apparently the beasts are back in charge:

Now we’re beginning to find out that eBay’s seemingly revolutionary core – the online auction – may have been a fad all along. As Business Week reports, eBay’s auctions are “a dying breed.” Buyers and sellers are reverting to the traditional retailing model of fixed prices:

Auctions were once a pillar of e-commerce. People didn’t simply shop on eBay. They hunted, they fought, they sweated, they won. These days, consumers are less enamored of the hassle of auctions, preferring to buy stuff quickly at a fixed price … “If I really want something I’m not going to goof around [in auctions] for a small savings,” says Dave Dribin, a 34-year-old Chicago resident who used to bid on eBay items, but now only buys retail …

At the current pace, this may be the first year that eBay generates more revenue from fixed-price sales than from auctions, analysts say. “The bloom is well off the rose with regard to the online-auction thing,” says Tim Boyd, an analyst with American Technology Research. “Auctions are losing a ton of share, and fixed price has been gaining pretty steadily.”

Hat tip to Andrew Sullivan.  Chris Masse sends me more.

The Shouting Vase.  "Stress Relieving Vase Takes Your Verbal Abuse So Others Don’t Have To."

I guess that is why the Metro was so quiet there.

Thanks to Caleb Eboch for the pointer.

Addendum: From Ben Cunningham, this looks pretty neat too.

Rodrik writes:

So the "us" and "them" characterization that Tyler attributes to irrational nativism perhaps has more to do with the absence of a common set of international rules on labor standards, environment, consumer safety, and so on.

Tyler responds ably here, I will add a few more comments.  A testable implication of Rodrik’s hypothesis is that people will be more upset about international trade than immigration since foreigners in foreign countries obey different rules but immigrants obey the same rule as us.  In reality, people are more upset by immigration than by trade and as a result we are much closer to free trade than to free immigration.

Rodrik has a very Ivory-tower view of what people care about.  Rodrik may be upset that people in other countries have poor on-the-job safety but (for the most part) workers who lose their jobs to foreigners really don’t give a damn.  What U.S. workers are upset about is losing their job and if asked to name the problem the U.S. worker will almost certainly say it’s the low wages of foreigners not their poor working conditions.  Moreover, the worker’s diagnosis of the problem (problem to him or her that is) is correct and Rodrik’s diagnosis is wrong.  Why?  Because higher safety standards in foreign countries would cause foreign wages to fall and thus would not much reduce competition from abroad, which is what the worker cares about.  I assume that Rodrik knows this even if the worker does not. 

Rodrik’s deeper argument is also peculiar, especially for a liberal economist.  A liberal economist should understand that for the most part labor, environmental and consumer safety standards are chosen not imposed (not always, of course, but for the most part in the long run).  In the United States we have a lot of job safety because we are wealthy and are willing to pay for job safety with a reduction in our (already high) wages.  In other words, Americans buy a lot of on-the-job safety for the same reasons we buy a lot of smoke alarms and DVD players.  (OSHA has very little effect on job safety.)  Job-safety is thus a choice Americans make about what to consume – we use some of our wealth to buy safety both at home and at work and some of our wealth to buy DVD players.  Thus, to argue that we shouldn’t trade with foreigners because they don’t have the same job safety as Americans makes about as much sense as arguing that we shouldn’t trade with foreigners because foreigners don’t buy as many DVD players as Americans.