Quote of the Day - Matthey

'The Old English Common Law doctrine of caveat emptor - "let the buyer beware" - was accepted in our colonies and established in the main body of American law. Up to 1933 the buyer was supposed to be able to look out for himself. The seller was permitted to tout his wares as long as he didn't blatantly misrepresent. Our heritage was one of rugged individualists who could take it as well as give it. However, not only Mr. Roosevelt but the people of this great country, shocked by the excesses of the roaring twenties, for which many groups were to blame, said "This cannot happen again." So we changed from the concept of caveat emptor to the doctrine of caveat vendor - "let the seller beware." This fundamental change in our basic thinking, in our mores, took place in but a few years.'


-Dean Matthey, Fifty Years on Wall Street, 1966.


via Michael Lewis, The Money Culture

Quote of the Day - Malkiel

'Information is disseminated too rapidly today, and it gets reflected almost immediately in market prices. By reacting so quickly, the analysts make it extremely difficult to realize a significant profit in the stock market on the basis of fundamental analysis.'


-Burton Malkiel, A Random Walk Down Wall Street, 1973.

Shame on the Atlantic

I think that Elspeth Reeve should stick to covering weddings. This tripe over at the Atlantic (?!) claims that the fact that a primary challenger to Barack Obama in Arkansas is to the left of Mr Obama is illogical. This, she sputters, is because one John Wolfe supporter claims he represents Southern Democratic values. Ms Reeve thinks this means that they think Mr Obama is 'too liberal.' Ms Reeve seems to think that everything means that Mr Obama is 'too liberal.' She'll even try to raise some segregationist Democrats from the dead if that'll do the trick.

While it's nice to see that young Ms Reeve apparently took a class in mid-20th-century American politics, it's a shame that she never got to the part where all of the Dixiecrats became Republicans. Where exactly is that space on the D-R spectrum that is to the right of Mr Obama and still marked 'D?' Any Democrat with ideological differences with Mr Obama is by definition to his political left.

I had to read this screed twice, just to make sure that I wasn't missing a weird joke. Could this be the plague that Ross Douthat hath wrought? A generation of bright, young, energetic, reactionary dunderheads?

What We Talk About When We Talk About Austerity

Tyler Cowen's Alfred-E-Newman-esque protestations notwithstanding, this is, indeed, what austerity looks like. It might be easier for the likes of Cowen to recognize this plain fact if the reality borne by ordinary people in this crisis were similarly borne by those bankrolling his sort of quasi-intellectual reactionary witchcraft. So long as the citizenry must cash the checks written by the bankers over the last thirty years, there will be unrest. So-called libertarianism's goal of maintaining the status quo at all costs will likely, in the long run, cost more than anyone can imagine.


Brad Delong:

Austerity, American Style:

Paul Krugman:
Austerity, American Style: Via Mark Thoma, Antonio Fatas has a good piece on the exceptional weakness of government spending in this recovery. I thought I might add to that observation. Let’s look at real government… purchases of goods and services — from all levels of government during three recoveries: the current expansion, the Bush Boom (such as it was), and Morning in America…. Which one is different? Now, this doesn’t include safety-net spending…. But actual government purchases have been uniquely weak, largely because of budget distress at the state and local level…

EDIT: Ezra Klein lays on more data.

Quote of the Day - Shameless Age

"The Shameless Age is over only when people on Wall Street begin to care what people off Wall Street think."

"The Street is not about to give back the emancipation it has won in the last ten years from the conventional rules of social behavior. The show goes on, muted only slightly by recent events."

-Michael Lewis, Franky's Longest Mile, 1990. 

Mankiw-Reality-Disconnect of the Day

What Greg Mankiw leaves unsaid, but seems to want his readers to believe, is that executives are not really paid as much as we think they are, and that, maybe, their pay is not actually that outsized. I think he'd rather his readers not glance casually at the y-axis of the graph. That's the axis that shows the ratio of average executive pay to that of workers. If you look closely, you'll see that it is 'only' 231. It's no wonder Mitt Romney likes this guy so much.

On a related note, Dr Mankiw has got to exercise a lot more care in choosing his sources. If he keeps looking at the EPI, he may learn some uncomfortable truths.

Fact of the Day: CEO Pay:

Source. 

The relative pay of CEOs skyrocketed during the 1990s and has since fallen by about half.

Quote of the Day - Woodhouselee*

"A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury."

*Though attributed to Alexander Fraser Tytler, Lord Woodhouselee, by one Mr Elmer T Peterson in an op-ed that appeared in the 9th December 1951 edition of the Daily Oklahoman, this quotation is likely apocryphal, as no reference to the quote appeared prior to 1951, and Lord Woodhouselee had at that point been dead for nearly 140 years. It is, of course, possible that Mr Peterson was mistaken in his attribution, but, given the obscurity of the supposed author of the quote and the fact that no one has yet stepped forward to claim it on behalf of another, it can be safely asserted that the true author is Mr Peterson, whose efforts to lend gravity to his postulation led him to associate it with an obscure scholar, confident that Lord Woodhouselee's obscurity was sufficient to mask his own subterfuge.

The sentiment of the quote itself is indeed curious. Two unspoken assumptions seem to be required by the audience. First, that the society described is more capitalistic than not. Clearly some attributes of social democracy must exist, however, for, in a laissez-faire dystopia, there is of course no largess to be voted to oneself. The other assumption is that, in Mr Peterson's example, social and economic conditions are so poor so as to incentivize the teeming masses to stage what amounts to an economic revolution by way of the ballot box. I'd offer that there is a very narrow range on the utopia-dystopia spectrum within which this particular scenario could occur. If prosperity is truly shared, this fear is absurd.

Perhaps Mr Peterson, in his haste to find a dead Scots noble to claim as his intellectual forebear, didn't think his theory all the way through. What is unsustainable is the condition of subsistence serfdom that many of the economically powerful seek to impose upon their lessers. Fortunately, in this situation, we have only to look to Stein's Law for solace.

Quote of the Day - Russell on Keynes

"Keynes's intellect was the sharpest and clearest that I have ever known. When I argued with him, I felt that I took my life in my hands, and I seldom emerged without feeling something of a fool. I was sometimes inclined to feel that so much cleverness must be incompatible with depth, but I do not think that this feeling was justified."


Bertrand Russell, in Autobiography Ch. 3 : Cambridge, p. 69

Quote of the Day - Kalecki

"We shall deal first with the reluctance of the “captains of industry” to accept government intervention in the matter of employment. Every widening of state activity is looked upon by business with suspicion, but the creation of employment by government spending has a special aspect which makes the opposition particularly intense. Under a laissez-faire system the level of employment depends to a great extent on the so-called state of confidence. If this deteriorates, private investment declines, which results in a fall of output and employment (both directly and through the secondary effect of the fall in incomes upon consumption and investment). This gives the capitalists a powerful indirect control over government policy: everything which may shake the state of confidence must be carefully avoided because it would cause an economic crisis. But once the government learns the trick of increasing employment by its own purchases, this powerful controlling device loses its effectiveness. Hence budget deficits necessary to carry out government intervention must be regarded as perilous. The social function of the doctrine of “sound finance” is to make the level of employment dependent on the state of confidence."

-Michał Kalecki, 1943

The more things change...


via Paul Krugman and Robin Wells.

Quote of the Day - Anatole France

"The law, in its majestic equality, forbids the rich as well as the poor to sleep under bridges, to beg in the streets, and to steal bread…"

--Anatole France, The Red Lily

Ma Ferguson and Know-Nothingism

Miriam Amanda 'Ma' Ferguson became the first female governor of the state of Texas, and the second in the nation, when she assumed office in January 1925. Her husband, 'Pa,' had been banned from public office after his own term as governor was interrupted by impeachment and conviction. She was the most efficient chief executive in state history, if efficiency is best reflected in the pardon rate. Ma Ferguson averaged over five pardons per day for her entire four years as governor.

During her first term, she vehemently opposed her state's single progressive innovation, Spanish-language kindergarten. Though the quote is widely attributed to her, there is no evidence that she asserted, 'If English was good enough for Jesus Christ, it's good enough for the children of Texas!' A variation on this know-nothingness dates to the late 19th century. The New York Times, on 23 May 1881, referred to a Rev. Dr. Pentecost, who was raising money for a new Bible translation. A farmer told the curiously-named parson, 'What's the matter with the good old King James version? That was good enough for St. Paul, and it's good enough for me.'

Quote of the Day - JF re: Ron Paul

Ron Paul advocates a position that represents the curious rebellion against a particular institution by those to whom that institution has returned the greatest benefit. And he's really uncomfortable with black people.