And you’re stretching waaay too far on the opposite side too. You know perfectly well that the statement “inequality is bad” is, in fact, controversial, very much so. So, instead you talk about hunger. ‘Hunger’ and ‘inequality’ are not the same. If I am a principled libertarian, my response is: sure, let’s organize soup kitchens. Preferably financed by charities.

On CT hermeneutics, I am not sure at what level of irony to step off Henry’s post, whether I am adding anything to the above or contradicting it.

But suppose I have reason to believe I in particular am better than others at predicting consequences?

• First, an obvious point, but one difficult to get right: what counts as “sacrificing” is going to depend on your view on acts and omissions. The standard deontological view looks pretty crazy in toy examples like the trolley problem, much less so when applied, say, to decisions on war and peace where the bellicose (I’m thinking Hitchens here) help themselves to all kinds of assumptions about the lives they save (“If Uday and Qusay had ben left in power …” – you know the drill.

• Second, following what “my fellow consequentialists” believe about likely consquences seems overly restrictive. Why limit yourself to the estimates of party members?

• Third, copying what others think, even a majority, is a recipe for bubbles and crashes, isn’t it?

• Fourth, OK so you abandon that in favour of rules (meaning rules of thumb). But where are these rules coming from? Past experience perhaps? That sounds like a sensible answer but I already hear the seducer’s voice telling you that the world has changed, that old rules are no longer relevant (now that China is rich, or Iran has the bomb, or Al Qaeda has anthrax, or whatever) … no time for longer deliberation, emergency, etc etc.

Luckily on football I won’t comment, since in the world of football I do not exist. Or was it the other way around?

Uh, no. I was asking my coworkers in Los Angles by 2002 who exactly was going to buy all those 1200 sq ft townhouses being built on desert scrub and former vineyards in the Inland Empire and marketed “from the low 400s”, and pointing out to them that even with the Los Angles area’s traditional growth rates there was no source of population or income growth large enough to support the number of houses being built. Same thing was evident in the far Chicago exurbs where developments “from the low 250s” were creeping past Joliet and headed toward Peoria – even in an area as rich as the Chicago SMSA there just wasn’t enough income for everyone to have a 6-bedroom 1/3 acre McMansion. As indeed it turned out.

And if I was noticing that by 2002 that meant it was going on well before that.

Cranky

http://nobelprize.org/nobel_prizes/economics/laureates/1981/tobin-lecture.html

. . .Were there a full set of simultaneously cleared markets for all commodities, including commodities for future and contingent delivery, there would be no macro-economic problems, no need for money, and no room for fiscal and monetary policies of stabilization. . .

. . .the departure that sets the stage for macro-economic theory and policy, is one emphasized by Keynes. It is the virtual absence of futures markets and of course contingent markets in any commodities other than money itself. As Keynes said (1936, pp. 210-212),

“An act of individual saving means – so to speak – a decision not to have dinner today. But it does not necessitate a decision to have dinner or to buy a pair of boots a week hence or a year hence or to consume any specified thing at any specified date. Thus it depresses the business of preparing today’s dinner without stimulating the business of making ready for some future act of consumption. It is not a substitution of future consumption-demand for present consumption-demand, – it is a net diminution of such demand … If saving consisted not merely in abstaining from present consumption but in placing simultaneously a specific order for future consumption, the effect might indeed be different. For in that case the expectation of some future yield from investment would be improved, and the resources released from preparing for present consumption would be turned over to preparing for the future consumption. The trouble arises, therefore, because the act of saving implies, not a substitution for present consumption of some specific additional consumption which requires for its preparation just as much immediate economic activity as would have been required by present consumption equal in value to the sum saved, but a desire for “wealth” as such, that is for a potentiality of consuming an unspecified article at an unspecified time.”

In short, the financial and capital markets, are at their best highly imperfect coordinators of saving and investment, an inadequacy which I suspect cannot be remedied by rational expectations. This failure of coordination is a fundamental source of macro-economic instability and of the opportunity for macroeconomic policies of stabilization.

My understanding is that a recession occurs when 1) people really want to accumulate wealth, and 2) the contractionary methods of accumulating wealth (cutting spending, laying off workers, etc.) are dominating over the expansionary methods of accumulating wealth (making and selling something for profit, etc.)

So to have an economic system less vulnerable to severe recession, ideally you’d want:

1) some way of avoiding sudden and volatile swings in people’s desire to accumulate wealth. One way might be a strong safety net, so people don’t have to fear poverty if they lose their private wealth. Another way might be to discourage borrowing against rapidly appreciating assets. Yet another way might be government programs to ensure full employment, reducing fear of losing a job and not being able to find another.

2) When in a recession, you want to encourage expansionary methods of accumulating wealth, and ,perhaps, discourage contractionary methods. In Ancient Egypt, a government would/should stimulate expansion by doling out cash for pyramids. In Ancient Gaul, cash for mehnirs. In 19th century America, cash for railway tracks. In our day, what should a recession-fighting government announce they’d be willing to dole out cash for?

But Henri, suppose I fire back that we shouldn’t try to moderate the business cycle because no doubt there’s some oddball out there who is doing well enough in the down trough, who sort of likes the rollercoaster thrill of it all.

Do you really want to say that, say, people going hungry is so controversial as a ‘bad thing’ that we shouldn’t just agree that, in general, it’s a bad thing? I tried not to wander into territory that would actually be controversial in the post. That’s actually an important feature of what I’m proposing.

Alex,
Having a monster housing bubble is better correlated with having the most populus best-educated generation (the one that invented the 2-income household) hitting the age where the number of existing houses for top 10% households (think McMansions) was wildly insufficent. The housing boom wasn’t a bubble until ‘06 and turned into a bubble due to too much capital being created (hedge funds and the yen carry trade, chinese currency peg, baby boom income peak, tax code changes, investment banking rule changes; mix and match as you see fit.)

Game theory shouldn’t really be necassary here. This is an exercise in properly bucketizing your data into relavant behavioraly different subsets while changing the values attributed to an age described bucket due to variation in educational attainment, ethnicity, and household structure of the segment of the population entering that bucket. New households consume capital (college educated 2-income new households even more so,) mature households create capital (except when they are buying that move up McMansion or paying for Jr.’s college etc.) You should find more clues in the marketing department than in the math department.