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Assorted links
1. Uh-oh. I once appeared on New Zealand TV in a penguin suit, but I would never do that.
2. The reality of jetpack use, including photos and a discussion of injuries.
3. Sectoral shifts, sectoral shifts, sectoral shifts.
4. The economics of the Kindle; best piece on the topic so far.
5. Brilliant post by Simon Johnson; too good to excerpt.
Posted by Tyler Cowen on March 9, 2009 at 11:43 AM in Web/Tech | Permalink
Comments
It looks like people at the highest levels of finance have been creating bank deposits to invest in leveraged funds, with everybody involved taking a fee. So the money supply has been expanding with no real goods or services created, while these people have been living at the top of the world, and making political contributions to defend "free-market" principles and keep the whole system going. Why shouldn't they all be destroyed?
Posted by: Lee A. Arnold at Mar 9, 2009 12:02:01 PM
Can't get the Simon Johnson link to work.
Posted by: MW at Mar 9, 2009 12:21:03 PM
You once appeared on New Zealand TV in a penguin suit??!
Posted by: nick at Mar 9, 2009 12:48:44 PM
Sorry, but the Kindle piece is lame, with a capital L. The first half of the piece is a sob story about how badly bookstores are doing, without ANY mention of online sales of books.
"Meanwhile, back at the Barnes & Noble, the low-margin books—those worthy backlist titles for which the store must pay a lot to store on the shelves for weeks or years just so they'll be waiting for you when you finally come looking for them—are clogging up the system."
It's not the Kindle that is destroying this model and yet, by sleight of hand, the article tries to imply it is.
Posted by: Tom at Mar 9, 2009 1:02:46 PM
S. Johnson concludes
"Derivatives have the potential to create a rent-seeking structure that is unparalleled in human history. No society can afford to allow that kind of financial system to operate. Either we figure out how to make it much more transparent - and amenable to outside review - or the re-regulation process currently in the hands of Senator Dodd and Congressman Frank needs to consider more radical alternatives."
Although I agree with everything he said before his conclusion, I prefer to rewrite it as follows:
"Large financial entities have shown to have the potential to create a rent-seeking structure that parallels that of government in human history. No society can afford to allow that kind of financial entities to operate. Since the history of government has shown the impossibility of making big government transparent and amenable to a good system of checks and balances, we know that we should prevent the development of large financial entities (BTW, they are usually too close to big government as the hands of Senator Dodd and Congressman Frank have recently shown). The challenge is how to keep the incentives for financial innovation while preventing that development."
Posted by: E. Barandiaran at Mar 9, 2009 1:09:38 PM
This is an odd way to describe contributions to Chris Dodd and Barney Frank and Barack Obama:
"and making political contributions to defend "free-market" principles and keep the whole system going."
Posted by: Greg Ransom at Mar 9, 2009 1:18:11 PM
I caught that piece on the Kindle, and I would ask one other question about the backlist decline: to what extent is it due to the increasing efficiency of the used book market? I ask because it's now very easy to comparison shop for used books online, and Amazon offers used books next to new ones; I wrote about this issue in "I’m not the first or only one to have noticed Amazon.com’s utility." If a used hardcover copy is available for a few dollars less than a new paperback copy of a book, for example, I will almost always go for the hardcover.
I haven't seen any good numbers about the issue but would love to hear if you know of any.
Posted by: Jake at Mar 9, 2009 1:37:22 PM
The sign of the accuracy of Simon Johnson's remarks is the
refusal of Fed Vice Chair, Don Kohn, to reply when asked about
the other parties involved in the AIG deals, just as AIG is
asking for more money. This is clearly the ultimate sinkhole
of the leftover derivatives mess, with AIG's near meltdown on
Sept. 18 was the Minsky Moment, and we are not over it. Yes,
this looks like a real rent-seeking nightmare.
Posted by: Barkley Rosser at Mar 9, 2009 1:46:15 PM
Jake -- I've wondered the same thing about the increased efficiency of the used-book market. Back in the dark ages, you either had to use a book-finder service that would take several weeks, at least, to get you the book you wanted or hope that you'd just happen upon it during your used-book-store rounds.
Of course, now that I have a Kindle, I don't buy used books any more! Which brings up a point the linked article missed: you can't pass around (beyond a very small circle) or resell a Kindle version of a book once you're done with it. So in a sense, Kindles may increase book sales.
Posted by: JP at Mar 9, 2009 1:51:50 PM
Regulatory arbitrage seems a lot like spam. You have algorithmically-informed attempts to game a system of incentives, and an arms race against "gatekeepers" who attempt to define via rules what counts as spam behavior.
In the case of email any human can quickly decide whether a piece of email is spam or not. But unfortunately, with financial innovation the ultimate unequivocal "proof of spamminess" might only come 5 or 10 years later. So the financial problem is both much more destructive and much harder to solve.
Imagine if it was the government's job to solve the easier problem (email spam). Would they do a better job than google? Doubtful. So how could they solve the much harder financial problem?
This problem seems too hard-- regulatory arbitrage seems capable of becoming arbitrarily opaque, with the advent of computers.
It seems like we would want something like (1) long-term bubble prediction markets, and/or (2) "glass house" strict transparency and disclosure regulations that make a bank's risk exposure completely computable by an outside party.
Posted by: mk at Mar 9, 2009 1:58:12 PM
Publishers and bookstores are intermediaries.
Any intermediary runs the risk of disintermediation. The risk of disintermediation (and the opportunities for new intermediaries to start) is significantly increased during a time of technological innovation.
It's the future: live it or live with it.
Posted by: ZBicyclist at Mar 9, 2009 4:11:03 PM
Publishers and bookstores are intermediaries.
Any intermediary runs the risk of disintermediation. The risk of disintermediation (and the opportunities for new intermediaries to start) is significantly increased during a time of technological innovation.
It's the future: live it or live with it.
Posted by: ZBicyclist at Mar 9, 2009 4:11:29 PM
@Barkley Rosser: Indeed!
Maybe I've lived too long in Chicago, but when they won't tell you something, there's usually something to hide.
Posted by: ZBicyclist at Mar 9, 2009 4:14:53 PM
@Barkley Rosser: Indeed!
Maybe I've lived too long in Chicago, but when they won't tell you something, there's usually something to hide.
Posted by: ZBicyclist at Mar 9, 2009 4:15:14 PM
Just be thankful of all the disasters they are preventing that you can never know about!
Oh, wait, that was the TWAT (The War Against Terror) slogan, not the TWERP (The War for Economic Recovery Programs). Oh well, let's recycle it.
Posted by: Andrew at Mar 9, 2009 6:45:46 PM
Raivo Pommer
raimo1@hot.ee
Schwarze Banken
Schwarze Liste der G20?
Bewegung in die Frage war gekommen, nachdem EU-Kommissionspräsident José Barroso die EU-Länder Luxemburg und Österreich in der Vorwoche erneut zur Kooperation nach den Standards der Organisation für wirtschaftliche Entwicklung und Zusammenarbeit (OECD) gedrängt hatte. Diese sehen mehr Informationsaustausch vor. Die OECD und die 20 wichtigsten Industrie- und Schwellenländer (G20) arbeiten derzeit an einer „schwarzen Liste“ von sogenannten Steueroasen. Österreich, Luxemburg und die Schweiz könnten dem Vernehmen nach auf dieser Liste landen. Mit ihrer neuen „Gesprächsbereitschaft“ im Kampf gegen Steuerbetrug wollen sie dies verhindern.
Für Pröll wäre es nicht nachvollziehbar, käme Österreich auf die Liste: Die Kriterien dafür müssten erst klar dargelegt werden. Die G20 werden am 2.April in London tagen. Eines ihrer Hauptthemen wird die Trockenlegung von Steueroasen weltweit sein.
Bei dem für heute, Dienstag, angesetzten Treffen der EU-Finanzminister in Brüssel wird Pröll versuchen, gegen eine Aufnahme in die Liste Stimmung zu machen. Beim G20-Treffen ist Österreich selbst nicht vertreten.
Posted by: jose barraso story at Mar 9, 2009 7:33:35 PM
Greg Ransom, whoever is useful will be subsumed. What is odder is that anyone over the age of 18 buys into the "free-market" theology to begin with. Certainly no one making the political contributions -- they just wanted deregulation, and easily sold it to a country full of clowns.
Posted by: Lee A. Arnold at Mar 9, 2009 8:44:40 PM
can we some footage of you in the penguin suit? what show was it?
Posted by: webber at Mar 9, 2009 9:48:24 PM
#3: I don't know about all the theory, but it certainly looks/feels like a debt-fueled bubble peaking at the time of a sectoral shift. I don't really think everyone has suddenly turned to frugality and eschewed wants. It feels like everyone got a plasma TV in every room, then realized they had too many rooms. Inertia would dictate that the plasma TV maker would keep making TVs until the consumer shift slaps them in the face. Why does the music stop all at once for all producers? Aside from a shift in ease of credit, the music has to stop some time, so, why wouldn't it stop all at once? Because entrepreneurs want to avoid losses, right? But they aren't booking losses right up until they are. I mean, the banks still aren't really booking their losses.
Posted by: Andrew at Mar 10, 2009 5:15:13 AM
It's not rocket packs, but it's pretty close to human flight.
http://vimeo.com/moogaloop.swf?clip_id=1778399
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