What happened to the global economy and what we can do about it
Day: July 8, 2009
Richard Thaler has a simple argument for plain-vanilla financial products. Mike at Rortybomb deals with some of the predictable objections. This is also similar to Adam Levitin’s position on credit cards, which I wrote about a while back.
I’m in favor, although I don’t think it will be enough to simply make the vanilla offering available; in that case nothing would stop lenders from paying higher commissions to brokers in order to steer customers toward exploding mortgages.
By James Kwak
Felix Salmon has been helping popularize Paul Collier’s idea of bankslaughter. (No, it’s not what you wish it were.) The idea is that there would be a crime called bankslaughter, or “managing a bank irresponsibly.” If a bank blows up, there could be a criminal investigation to determine if the bank managers behaved recklessly (more on that term later); if so, they would be convicted. The analogy is to manslaughter, which is actually a family of crimes; Collier probably means criminally negligent homicide, or causing death through negligent or reckless (more on those terms later) behavior.
Not surprisingly, the conservatives are not happy about this, even though it seems to conform to the conservative principle that people should bear responsibility for the consequences of their actions. (Or maybe that only applies if you are a pregnant teenager.) Salmon cites John Carney, who calls bankslaughter “the worst idea of the week.”
Continue reading “Bankslaughter, Tort Law, and Optimal Deterrence”
The G7 was originally conceived as a form of steering committee for the world economy (antecedents). Existing formal governance mechanisms, around the IMF and the UN, seemed too cumbersome (and too inclusive) during the 1970s, with the breakdown of fixed exchange rates, assorted oil shocks, and the broader shift of economic initiative towards Western Europe and Japan.
And the G7 had some significant moments, particularly with regard to moving exchange rates in the 1980s. More broadly, behind the scenes, it served as a communication mechanism between the world’s largest economies (“coordination” is a dirty word in G7 policymaking circles). And it was probably a good thing in the 1990s that Russia wanted to join the G7 – hence the G8 once a year, although many of the most important technical meetings are just the G7.
But today, honestly, what’s the point? Continue reading “The G7/G8: Why Bother? (A Viewer’s Guide)”
The Baseline Scenario 