permaculture

[Brent McMillan <brent@gp.org>]

Hi Toby:

I wouldn't group all economists in the same basket the same as I 
wouldn't group all farmers in the same basket.

There are some good economists out there, just as there are some good 
farmers out there, you just don't regularly hear about them in the main 
stream media.

One economist that I do pay attention to is Paul Krugman, who also won 
the Nobel Prize in economics but with a very different message than 
Friedman.

I had the opportunity to present at the Eastern Economic Association 
gathering last year in New York City. At that time Krugman took over as 
president of the Eastern Economic Association. I was on a panel in the 
Basic Income Guarantee track. I was surprised to find several economics 
that understood quite well what was going on, but those aren't the ones 
that the main stream media go to. They go to the ones that support 
corporatism.

Sincerely:

Brent McMillan, Steward of Woodhaven
Avilla, IN USA

Here is a recent Krugman editorial:


***

http://www.nytimes.com/2010/03/01/opinion/01krugman.html?th&emc=th

Financial Reform Endgame

By PAUL KRUGMAN
NY Times Op-Ed: February 28, 2010

So here's the situation. We've been through the second-worst financial
crisis in the history of the world, and we've barely begun to recover: 29
million Americans either can't find jobs or can't find full-time work. Yet
all momentum for serious banking reform has been lost. The question now
seems to be whether we'll get a watered-down bill or no bill at all. And I
hate to say this, but the second option is starting to look preferable.

The problem, not too surprisingly, lies in the Senate, and mainly, though
not entirely, with Republicans. The House has already passed a fairly strong
reform bill, more or less along the lines proposed by the Obama
administration, and the Senate could probably do the same if it operated on
the principle of majority rule. But it doesn't - and when you combine
near-universal Republican opposition to serious reform with the wavering of
some Democrats, prospects look bleak.

How did we get to this point? And should reform advocates accept the
compromises that might yet produce some kind of bill?

Many opponents of the House version of banking reform present their position
as one of principle. House Republicans, offering their alternative proposal,
claimed that they would end banking excesses by introducing "market
discipline" - basically, by promising not to rescue banks in the future.

But that's a fantasy. For one thing, governments always, when push comes to
shove, end up rescuing key financial institutions in a crisis. And more
broadly, relying on the magic of the market to keep banks safe has always
been a path to disaster. Even Adam Smith knew that: he may have been the
father of free-market economics, but he argued that bank regulation was as
necessary as fire codes on urban buildings, and called for a ban on
high-risk, high-interest lending, the 18th-century version of subprime. And
the lesson has been confirmed again and again, from the Panic of 1873 to
Iceland today.

I suspect that even Republicans, in their hearts, understand the need for
real reform. But their strategy of opposing anything the Obama
administration proposes, coupled with the lure of financial-industry
dollars - back in December top Republican leaders huddled with bank
lobbyists to coordinate their campaigns against reform - has trumped all
other considerations.

That said, some Republicans might, just possibly, be persuaded to sign on to
a much-weakened version of reform - in particular, one that eliminates a key
plank of the Obama administration's proposals, the creation of a strong,
independent agency protecting consumers. Should Democrats accept such a
watered-down reform?

I say no.

There are times when even a highly imperfect reform is much better than
nothing; this is very much the case for health care. But financial reform is
different. An imperfect health care bill can be revised in the light of
experience, and if Democrats pass the current plan there will be steady
pressure to make it better. A weak financial reform, by contrast, wouldn't
be tested until the next big crisis. All it would do is create a false sense
of security and a fig leaf for politicians opposed to any serious action -
then fail in the clinch.

Better, then, to take a stand, and put the enemies of reform on the spot.
And by all means let's highlight the dispute over a proposed Consumer
Financial Protection Agency.

There's no question that consumers need much better protection. The late
Edward Gramlich - a Federal Reserve official who tried in vain to get Alan
Greenspan to act against predatory lending - summarized the case perfectly
back in 2007: "Why are the most risky loan products sold to the least
sophisticated borrowers? The question answers itself - the least
sophisticated borrowers are probably duped into taking these products."

Is it important that this protection be provided by an independent agency?
It must be, or lobbyists wouldn't be campaigning so hard to prevent that
agency's creation.

And it's not hard to see why. Some have argued that the job of protecting
consumers can and should be done either by the Fed or - as in one compromise
that at this point seems unlikely - by a unit within the Treasury
Department. But remember, not that long ago Mr. Greenspan was Fed chairman
and John Snow was Treasury secretary. Case closed. The only way consumers
will be protected under future antiregulation administrations - and believe
me, given the power of the financial lobby, there will be such
administrations - is if there's an agency whose whole reason for being is to
police bank abuses.

In summary, then, it's time to draw a line in the sand. No reform, coupled
with a campaign to name and shame the people responsible, is better than a
cosmetic reform that just covers up failure to act.




Toby Hemenway wrote:
> I was just sent this excerpt from an interview with Nobel-prize winning 
> economist Milton Friedman in which he says incredibly stupid things. 
> It's proof that economists think that the laws of their field trump the 
> laws of physics, and gives an indication as to why conventional thinking 
> is not going to solve many problems. Unfortunately, it was sent without 
> a reference, so I don't know where it's from.
>
> Toby
> http://patternliteracy.com
>
> **/Ravaioli/****/:/**/ But there are many other environmental problems .../
>
> **Nobel Laureate Friedman:** Of course. Take oil, for example. Everyone 
> says it's a limited resource: physically it may be, but economically we 
> don't know. Economically there is more oil today than there was a 
> hundred years ago. When it was still under the ground and no one knew it 
> was there, it wasn't economically available. When resources are really 
> limited prices go up, but the price of oil has gone down and down. 
> Suppose oil became scarce: the price would go up, and people would start 
> using other energy sources. In a proper price system the market can take 
> care of the problem.
>
> **/Ravaioli/****/:/**/ But we know that it takes millions of years to 
> create an oil well, and we can't reproduce it. Relying on oil means 
> living on our capital and not on the interest, which would be the 
> sensible course. Don't you agree?/
>
> **Nobel Laureate Friedman:** If we were living on the capital, the 
> market price would go up. The price of truly limited resources will rise 
> over time. The price of oil has not been rising, so we're not living on 
> the capital. When that is no longer true, the price system will give a 
> signal and the price of oil will go up. As always happens with a truly 
> limited resource.
>
> **/Ravaioli/****/:/**/ Of course the discovery of new oil wells has 
> given the illusion of unlimited oil …/
>
> **Nobel Laureate Friedman:** Why an illusion?
>
> **/Ravaioli/****/:/**/ Because we know it’s a limited resource./
>
> **Nobel Laureate Friedman:** Excuse me, it's not limited from an 
> economic point of view. You have to separate the economic from the 
> physical point of view. Many of the mistakes people make come from this. 
> Like the stupid projections of the Club of Rome: they used a purely 
> physical approach, without taking prices into account. There are many 
> different sources of energy, some of which are too expensive to be 
> exploited now. But if oil becomes scarce they will be exploited. But the 
> market, which is fortunately capable of registering and using widely 
> scattered knowledge and information from people all over the world, will 
> take account of those changes.
>
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