December 2010

I get nostalgic for old Rankin/Bass stop-motion holiday specials. I just watched Jack Frost with the kids. Somehow I never noticed this as a kid myself, but there is some interesting monetary policy involved. The evil Kublai Kraus has taxed away all the ‘real money’ – down to the last kaputnik – from the inhabitants of January Junction. But every winter Jack Frost is responsible for a massive helicopter drop of cash, in effect, in the form of icicles, which the townfolk saw into slices and use as ‘ice coins’. The economy then does ok until spring – not great, mind you. They aren’t rich. But there is a lot more buying and selling in the market. So the town loves Jack. He’s sort of a genius loci, not of a place, but of a part of the calendar: the holiday shopping season. (The story isn’t actually about this.)

Zombie economics is all well and good. But maybe we need a volume on the Economics of Elfland. ‘The Magic of Money’ is a standard theme. It’s mysterious stuff, how it grows and breeds and exerts strange power over the mind, charming whole populations. All gold, in an economic sense, is fairy gold. It lasts as long as the spell it casts lasts. So how has the general subject of economics – not just money and gold – been treated in fairy tales? There’s Midas, of course. Bit of a cautionary tale, that one. I can’t think of too many examples, but I expect they would tend to be along Jack Frost lines. The magical creation of money is an invitation to satire. Are there fairy tales about elves crashing the economy with fairy gold-induced hyper-inflation? Or saving the economy with a heroic helicopter drop? Stories about elves themselves fleeing Elfland for the human world, with its relatively stable currencies? Hedge fund managers practicing crude ‘hedge magic’, to get rich quick, only to call up dark forces beyond their control or comprehension?

UPDATE: The whole Jack Frost special is on YouTube. (Oddly enough, it’s in the Public Domain, its Wikipedia entry says. Can’t imagine why.) Economically speaking, it’s also nice for the scene in which everyone gives everyone else an empty package, in which they imagine they find the thing they want the most. Sort of a cross between a potlatch ceremony, Plato’s Form of the Good, and Wittgenstein’s beetle in a box.

Frank Field, the Joe Lieberman of British politics, “has been advising the ConDem government”:http://www.guardian.co.uk/politics/2010/dec/03/frank-field-welfare-sacred-cows on welfare reform. Here’s a sentence to contemplate:

bq. This goal of changing the distribution of income will be achieved by ensuring that poorer children in the future have the range of abilities necessary to secure better paid, higher skilled jobs.

Of course, I can see a way in which that might work. The newly educated poorer children, frustrated at the stultifying low-wage jobs on offer to them, rise up and change the income distribution by expropriating the expropriators. I doubt that’s the mechanism that Field has in mind though.

Some feel we should take a more active approach to managing comments. I think we do pretty well on the whole (although the Lord love you, you are a grumpy lot). Question of the day: is the unremitting, permanent badness of Matthew Yglesias’ comments the result of intentional sabotage, or can it be chalked up to his policy of utterly ignoring them at all times? I favor the former explanation, because he’s influential enough that I can imagine some testy Republican or two taking it on as a volunteer project to wreck it up constantly. There was never a time when they were good, either, even in the early days. He was assigned what I consider to be, in John Emerson’s formulation, an Al-bot; a rotating crew of people commenting as “Al” day and night there and at Kevin Drum’s and Ezra Klein’s with the result that every single thread was derailed. Final note: why has Digby never been promoted to the big leagues, despite her obvious rightness and acerbic wit? Sexism, or a lust for mindless contrarianism that she will never satisfy?
[click to continue…]

“Live at Eurointelligence.”:http://www.eurointelligence.com/index.php?id=581&tx_ttnews[tt_news]=2973&tx_ttnews[backPid]=901&cHash=484db55c3a An extract.

bq. The reaction to the news that Irish taxpayers are to be squeezed while foreign bondholders escape scot-free has been one of outraged disbelief and anger. At the start of last week, it was possible to make the argument that ‘burning the bondholders’ was irresponsible, since it would inevitably lead to contagion, and the spread of the crisis to Iberia. That argument has at this stage lost all validity, since contagion has happened anyway. Besides, the correct response to the possibility of contagion was never to engage in make-believe, but to extend taxpayer protection to other Eurozone members as required. Swapping debt for equity in a coordinated fashion across Europe would show ordinary people that Europe is on their side; but like the PLO of old, the European Union never misses an opportunity to miss an opportunity. It could have provided a means of kick-starting a new post-crisis growth strategy based on investment in the infrastructures we will need in the future; instead it has transformed itself into a mechanism for forcing pro-cyclical adjustment onto countries that are already sinking. It could have led the way in reining in an out-of-control financial sector; instead it now embodies the discredited principle that banks must never, ever, default on their creditors, no matter how insolvent they may be.

Ireland’s recent €85bn bail-out package negotiated with the IMF and the EU is discussed in terms that verge on the apocalyptic. The rescue was supposed to serve as a break against the wildfire of market bondholder panic. And yet the upward trend in Portuguese bond rates has scarcely been slowed. Beyond Portugal  is the much larger Spanish economy. Portugal, like Greece and Ireland, could probably just about be rescued within the terms of the current emergency scheme. It is becoming increasingly possible that the bond markets may make it too difficult for the Spanish government to refinance its loans and to raise new money on government bonds. If this were to happen, the European Financial Stability Fund would come under extreme pressure. And worse, if it is not possible to restore confidence in the stability of the Euro, there seems little reason why other countries may not also be in trouble. Spain is now where the line in the sand must be drawn. But we have heard this before. If Spain is vulnerable, why not Italy; and if Italy, why not Belgium, perhaps even France. Little wonder that the imagery of contagion, of financial plague, is brought into play.

[click to continue…]

As I mentioned a few days ago, the best paper I’ve read on Ireland and the economic crisis was “this one”:http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1642791 by Sebastian Dellepiane Avellaneda and Niamh Hardiman. I’m happy to say that Niamh has agreed to do some guest-blogging for us over the next several days on the Irish crisis as it continues to unfold, and its implications for the EU. Niamh is a “senior lecturer”:http://www.ucd.ie/research/people/politicsintrelations/drniamhhardiman/ at University College Dublin’s School of Politics and International Relations. She has written extensively on political economy and public policy in Ireland and the EU. We’re grateful and lucky to have her. Her first post will be up shortly.

While the humanities are under siege (in the UK; possibly all over Europe; or perhaps even in the entire world if Nussbaum is right in her book Not For Profit: Why Democracy Needs the Humanities), the Dutch Research Council decided last year to fund two large programs which would add to a strenghtening of the humanities. That said, our new right-wing government immediately decided to cancel their future additional investment in the humanities (whereas under the last government there was some talk that the humanities would ‘catch up’ with the other sciences, since it was clearly demonstrated that they suffered from underfunding relative to the social&behavior and the natural sciences).
[click to continue…]