Sunday Blues Verificationism

by John Holbo on October 26, 2008

Yesterday I linked to an archive of free Leroy Carr mp3s. All well and good. Then I noticed that they are part of a much larger collection. Very nice. (Scroll down, down, little farther. There.) Today I listened to dozens of those tracks, while messing about in Photoshop. Dum de dum. Perfect Sunday, really. Turned out the one I liked best was Blind Willie McTell (two great, free mp3s). Interesting. It had never occurred to me that Bob Dylan’s claim that “no one can sing the blues like Blind Willie McTell” was a proposition subject to empirical confirmation. Also, I hadn’t realized that the White Stripes “Your Southern Can Is Mine” was a cover.

What does it all mean

by John Quiggin on October 26, 2008

There’s been a bit of discussion about what Alan Greenspan really conceded in his recent testimony. Although Greenspan was less opaque than usual, I won’t try to second-guess him any further, and will instead ask again what the crisis means for the way we think about economics and the economy. There are two big economic ideas that look substantially less appealing in the light of the current crisis.

The first is the macroeconomic hypothesis, often called the Great Moderation which combines the empirical observation that the frequency and severity of recessions declined greatly from 1990 to the recent past with the explanation that “the deregulation of financial markets over the Anglo-Saxon world in the 1980s had a damping effect on the fluctuations of the business cycle”.

The second is the microeconomic idea, central to much of modern finance theory called the Efficient Markets Hypothesis. In its most relevant form, the EMH states that prices observed in asset markets (for stocks, bonds, foreign exchange and so on), reflect all known information, and provide the best possible estimate of the value of earnings that assets will generate.

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