Quotes of the day

I rather think that the division of labor created philosophy. That is, when you choose a profession or some important avocation it supposedly is a better means to an end, but what end? Is it merely to be rich? I doubt that is really so prevalent because to have such a nakedly self-interested goal is not necessarily in the best interest of neighbors, and they would not trust or like such people.
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we have a lot of existential angst as we try to figure out 'why' we want to build a bridge or have five kids, and it's usually some greater good, not merely one's power and pleasure.  Real satisfaction in life often comes from advancing such higher purposes, imagined though they may be.
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So, Adam Smith was correct to note the division of labor as a crucial step in human development, but he actually underclubbed it: it didn't just give rise to the industrial revolution, but also to the strange fact that humans think about thinking, meaning, and a sense of self.  The division of labor didn't create consciousness, but it did make us ask why we do what we do, and so lead to a higher level of consciousness.--Eric Falkenstein

American universities have been criticized because many of them engage in high-level competitive sports that involve heavy recruitment of student athletes. Since students and alumni like rooting for their school’s teams, these are perfectly appropriate activities for universities, aside from a couple of major problems. One is the exemption that the Supreme Court has granted to the obvious cartel-like behavior of the NCAA that uses its power to severely restrict compensation to student athletes, especially those in football and basketball. Universities should be forced to pay competitive prices for these athletes, not the much lower cartelized prices that the NCAA enforces.
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Having taught for almost all my adult life at American universities I am well aware of their many limitations. These include faculty who cater to students by easy grading and telling jokes, faculty who engage in vicious battles over trivial issues, faculty and administrators who are afraid to take stands against political correctness and the latest education fads, alumni and other donors who are cultivated for large gifts that really do not help a university’s mission, and so forth. Nevertheless, on the whole, American universities do an excellent job of providing up to date and diversified education for students of varying abilities and interests. Many of their “failures” are the result of bad incentives provided by federal and state support and regulation of university programs.--Gary Becker

There is no doubt that Ben Bernanke’s views on zero-bound policy have changed over time.
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Once, he called targets for long-term interest rates a “policy I personally prefer”; later, he “agreed 100%” with opposition to that policy. Bernanke once advocated a 3-4% inflation target for Japan; as Fed chair, he says “that’s not a direction that we’re interested in pursuing.” Bernanke has also abandoned his early proposals for currency depreciation and for money-financed tax cuts. More generally, he no longer argues that a central bank can easily overcome the zero-bound problem “if the will to do so exists.”
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At one level, the primary reason for these changes is also clear: Bernanke was influenced by the work of the Fed staff, as summarized in Vincent Reinhart’s June 2003 briefing to the FOMC. By 2004, Bernanke was coauthoring papers with Reinhart that advocated the same zero-bound policies as the briefing. These policies were communication about the federal funds rate, quantitative easing, and shifts in the Fed’s holdings of short-and long-term securities--exactly the policies that the Bernanke Fed has followed since 2009. In sum, Bernanke’s views about the zero bound changed greatly between 2000 and 2004, but they have been consistent since then.
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The puzzle about this history is why Bernanke so quickly and completely dropped his previous views and adopted those of the Fed staff. We cannot be sure, but social psychology suggests two possible factors: groupthink and Bernanke’s shy personality. These two factors are complementary. An atmosphere of groupthink pervaded the FOMC in 2003, discouraging anyone from questioning the views of the Fed staff. As a shy person, Bernanke may have been especially reluctant to suggest unpopular policies.
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If this interpretation of history is correct, it has implications for the design of monetary-policy committees. A committee is likely to explore a greater range of options if the causes of groupthink are avoided, as Sibert suggests. Ironically, as Fed Chair, Ben Bernanke has moved the FOMC in that direction. Bernanke does not dominate policy discussions as Alan Greenspan did. He has reduced the emphasis on consensus, tolerating three dissents from FOMC votes. He has also reduced the Committee’s insularity, for example, with news conferences in which he explains policy decisions.
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The history described here also has implications for the choice of people to serve on policy committees. It suggests that decisions are influenced not only by policymakers’ expertise and opinions, but also by their personalities. Outspoken “bulldogs” may be more likely than shy people to contribute new ideas to policy debates.--Laurence Ball

Speaking of ludicrous

... here are the players the Patriots picked before Brady in 2000, when they had to forfeit their first-round pick to the Jets for having signed Bill Belichick:

OL Adrian Klemm (round two), RB J.R. Redmond (round three), OT Greg Robinson-Randall (round four), TE Dave Stachelski and DL Jeff Marriott (round five), and CB Antwan Harris (round six.)

It wasn't until after 198 players had been drafted that the Patriots finally decided to take Brady.

Feel free to return now to reading all those articles about which players are the top prospects and which teams should take them.

That's Jim Donaldson.

Quote of the day

He not busy being born is busy dying.--Bob Dylan

James Hamilton canes Joseph Kennedy

If Representative Kennedy knows a way to go out and produce another barrel of oil somewhere in the world for $11 a barrel, he would do a world of good if he would actually go out and do it himself, as opposed to simply asserting confidently in the pages of the New York Times that it can be done. People with far more modest fortunes than Kennedy inherited are out there using their resources to try to bring more of the physical product out of the ground.

And many, many more would be attempting the feat if it were remotely possible to produce a new barrel of oil for anywhere close to $11.

If you want to prove me wrong, Mr. Kennedy, then don't talk about how easy it is to produce more oil-- just go do it.

Read the whole thing here.  Here's a nice photo of Rep. Kennedy with the CEO of Citgo:

Karl Smith takes a switch to Mohamed El-Erian

and a two-by-four to the Fed:

Central Banks don't have direct control of wars but they do control recessions. Thus its natural to think that the goal of central banking is to produce growth, prosperity and financial health.

However, on a basic level its not. If the economy is running at maximum employment and the prices are moving in a steady and predictable fashion then the central bank has done its job. What happens to growth is ultimately not the Fed's concern.

Consequently, when folks like myself point out the ongoing abject policy failure of the Federal Reserve and the absolute nightmare that is the ECB, our complaint is not about growth, it is about employment.

Read the whole thing here.

I'm wondering if Smith feels that a flattening of the curve towards short term rates is what the Fed should be shooting for. It's not all in their control.

Quote of the day

... if faith teaches us anything, it should be that our nostalgia is for an ideal we can only find after accepting, and passing through, the brokenness of a fallen world. Any other approach, in art or in life, is a form of denial.--Gregory Wolfe

Quote and video of the day

You're a grimy little pimp. As soon as I raise my hands, I warn you, it shall be too late to run.--Lane Pryce, to Pete Campbell

Eric Falkenstein is so right and so funny

[Jonathan] Haidt ends this book where he notes he read a book by Jerry Muller titled Conservatism, and the author noted that conservatism was not based on mere orthodoxy, but rather, the idea that encouraging respect, self-reliance, and loyalty were actually a reasoned method to help communities prosper, and their individuals to obtain more satisfactory lives. This reasoned defense of conservative values floored him, because he saw it was, at the least, intellectually defensible and could be argued in good faith. That he came to this conclusion in 2008 highlights the bubble the poor guy was in.--Eric Falkenstein

Talk show transcript excerpt of the day

Larry King: What, Professor, puzzles you the most? What do you think about the most?
Stephen Hawking: Women
Larry King: Welcome aboard.

Source here.

Take out your sociological goggles and look around

In our society, smart, hard-working, conformist kids go to old-fashioned brick-and-mortar colleges. Their elders expect them to do so. Their peers expect them to do so. They feel like losers in their own eyes if they don't go.

The normativity of conventional education isn't a passing phase. College attendance is a central tenet of our society's secular religion. A student who scoffs at all these expectations probably has a serious problem with authority. Would-be employers treat him accordingly.

That's Bryan Caplan. And this is a doozy:

Middle class jobs will no longer require college only after middle class kids can no longer afford college.

What fails more than markets? How about regulations ...

John Carney reports:

Friedman and Kraus argue that regulation—especially regulation of bank capital under Basel II and similar rules in the U.S.—led to a homogenization of balance sheet assets across the banking system. Risk weighting loaded the dice in favor of buying the assets regulators viewed as safe—especially mortgage backed securities—and as a result the banking system as a whole was over-exposed to mortgages and lacked diversity.
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This last point is especially crucial and not well understood. One of the advantages of a free market system is that different businesses can adopt different business strategies. In fact, competition encourages diversity as executives attempt to gain advantage over rivals in the face of an uncertain future. Disagreement among capitalists strengthens the system because it reduces the cost of errors. Some firms win, others lose, and the damage of bad bets is contained and balanced by the benefits of good bets. Regulations that impose one view on business create systemic risk, Friedman and Kraus argue.

Gary Becker, on controlling campaign finance ... as well as other manifestations of special interests, such as lobbying and volunteering

Sharp restrictions on campaign contributions would make more sense if monetary contributions were the only major force that shapes who wins elections and the policies goverment officials support.Yet that is very far from the situation that prevails in American politics, and in the politics of most other democratic nations. One reason for this is that interest groups can often avoid the intent of restrictions on campaign contributions through other ways to influence political outcomes. For example, many industries hire lobbyists and spend other monies to try to persuade legislators, regulators, and others in important political positions to subsidize their industries, or to reduce the taxes on their industries, or to gain other advantages.

It is not only business that is active in these ways since, for example, unions of government employees use political clout to obtain generous pensions and health plans for their members. The tight budgets that are currently being imposed on many national and regional governments-such as the Greek government and state and local governments of the United States- have induced government unions to fight hard to keep their pension and health benefits, and to limit any reductions in these benefits. Similarly, unions of public school teachers have spent considerable money and time to defeat efforts to introduce school vouchers and many other changes in public school systems.

Candidates who galvanize enthusiasm with their oratory and political positions induce many supporters to spend considerable time working to elect these candidates and to promote policies the candidates favor. Time spent by supporters is often as effective and “corrupting” as money spent influencing political outcomes and policies. This is probably especially true in the age of the Internet and other methods of mass communication. Supporters of a particular candidate may spend a lot of time on political issues through blogs, Facebook and other social networks, and through other forms of mass communication. Radio, television, and Internet stars, such as Rush Limbaugh, Bill Moyers, and Matt Drudge, not only affect the views of followers, but also how active they are in supporting conservative or liberal policies.

These reflections lead me to question whether it is wise to control one form of interest group politics; namely, direct and indirect monetary contributions to political campaigns, in an environment where other types of interest group politics are important and are only weakly controlled.

Read the whole thing here.