Quotes of the day

By not allowing [Elizabeth] Warren’s nomination to be considered through the regular order of the full Senate confirmation process, the [Obama] administration has circumvented one of the very few checks on a big new agency that already has been given an unprecedented concentration of regulatory powers. This maneuver is an affront to the pledge of transparency and consumer protection that’s purported to be the focus of this new agency.--David Hirschmann

Perhaps [Paul] Krugman believes that by labeling other economists as politically extreme, he can undercut their credibility. In criticizing my argument that politicians pushed easy housing credit in the years leading up to the crisis, he writes, “Although Rajan is careful not to name names and attributes the blame to generic “politicians,” it is clear that Democrats are largely to blame in his worldview.” Yet if he read the book carefully, he would have seen that I do name names, arguing both President Clinton with his “Affordable Housing Mandate” (see Fault Lines, page 35) as well as President Bush with his attempt to foster an “Ownership Society” (see Fault Lines, page 37) pushed very hard to expand housing credit to the less-well-off. Indeed, I do not fault the intent of that policy, only the unintended consequences of its execution. My criticism is bipartisan throughout the book, including on the fiscal policies followed by successive administrations. Errors of this kind by an economist of Krugman’s stature are disappointing.--Raghuram Rajan

Facts are very important in economics and finance, because so many important issues like the equity premium and default rates have such large uncertainty. Most people think facts are easy, and theory is hard, but actually I think it is the reverse. Theory, once you understand it, is trivial, yet important facts are very elusive, often at the bottom of most major disagreements. It appears that default rates were much higher in the 19th century, and this could be very relevant to the 21st, because so many countries, and government entities within countries, have been on an unsustainable Greek-like binge. A subsequent wave of sovereign defaults could seem 'unprecedented', but only if you counted your lifetime as the sample of inference. As Faulbert noted about human folly, 'Our ignorance of history makes us libel our own times. People have always been like this.'--Eric Falkenstein

According to a new survey from Phoenix Marketing International’s Affluent Market Practice, the number of American households with investible assets of $1 million or more rose 8% in the 12 months ended in June. The survey says there now are 5.55 million U.S. households with investible assets of $1 million or more. That follows two years of declines and brings the millionaire count back to 2006 levels. Of course, that is still below the peak of 5.97 million in 2007 and the current growth rate is well below pre-financial crisis levels, when the millionaire population increased as much as 35% a year. Still, the numbers offer further evidence that the wealthy may have decoupled from the rest of the economy. The study’s authors say high salary growth, rather than investments, are the main drivers of the millionaire expansion.--Robert Frank

The ultimate problem with the Human Development Index, though, is lack of ambition. It effectively proclaims an "end of history" where Scandinavia is the pinnacle of human achievement. Admittedly, I've never visited Scandinavia. But when I see it for the first time this August, I'm pretty sure I won't say to myself, "Wow, it can't get any better than this!" At this point, you might ask, "Yes, but will you take the HDI bet, Bryan?" Nope. Scandinavia comes out on top according to the HDI because the HDI is basically a measure of how Scandinavian your country is. While Obama is moving us in that direction, I don't think he's going to be able to take us all the way there.--Bryan Caplan

[John] Hempton found an obscure Chinese travel company which somehow managed to get itself a listing on the NYSE: Universal Travel Group. He tried to book travel through Universal Travel’s website, and failed. And after 5,500 words of explaining exactly why he was doing it, he shorted Universal Travel’s stock. Which turned out to be a great trade: the stock plunged by 20% today, entirely because of Hempton’s blog post.--Felix Salmon

Last week, I was the only one to have Seattle over San Francisco, I was the only one to have Washington over Dallas, I was the only one to have Kansas City over San Diego.--Adam Schefter

If the Feds are the last line of defense in your home against commercialism, sex, and violence, then you really ought to reconsider what constitutes parenting, because it really doesn’t end with conception.--Tony Woodlief