Friday, October 17, 2008

State size follow-up

I speculated last week that the way the financial crisis swamped Iceland and seems to show the need for deep pockets and deep capital reserves within a financial system ("seems"-- I have no view about whether that's an economically true lesson to draw) probably did some damage to small-nation secessionists such as Quebec or Scottish nationalists.

From yesterday's Washington Post:
The massive bailout of banks has been widely received as welcome and necessary across the United Kingdom. But it has not been lost on Scots that the largest shareholder in Scotland's two largest banks is now the British government.


Prime Minister Gordon Brown, a native Scot but an outspoken advocate of keeping Scotland in the U.K. fold, seemed to go out of his way Tuesday to tweak advocates of independence, especially the SNP.

Brown said the $65 billion bailout of the Royal Bank of Scotland and the bank formed by the merger of Lloyds TSB and the Halifax Bank of Scotland (HBOS) proved that the United Kingdom was "stronger together."

"We were able to act decisively with 37 billion pounds; that would not have been possible for a Scottish administration," said Brown, whose own political fortunes have been boosted by his handling of the crisis.

Others have pointed out that the bailout for eight major British banks -- including capital for banks and government loan guarantees -- is worth a total of almost $700 billion, which is about five times Scotland's annual gross domestic product.

Brown particularly seemed to taunt Alex Salmond, the SNP chief and head of the Scottish government, who has said he wants an independent Scotland to be part of an "arc of prosperity" stretching from Iceland to Ireland to Norway.

The SNP Web site speaks admiringly of Iceland as "the sixth most prosperous country in the world," words that were written before last week's massive banking and economic crash, which nearly bankrupted the country.

"We've seen the problems in Iceland; we've seen the problems in Ireland. We were able to put the whole strength of the United Kingdom's resources behind these two banks" in Scotland, Brown said, provoking an irritated response from Salmond. [...]

Thursday, October 16, 2008

Things not to say...

when you're debating a law professor who's much, much better than you are at packing a lot of information into a 90-second answer:

"All of the details need to be known."

Obama clearly had his Ayers and ACORN monologues memorized, but McCain set them up with a helluva softball straight line. "We need to hear the full extent." "All of the details need to be known."

However many minutes later, Obama looked like the opposite of someone engaged in a cover-up. Rattling off the resumes of the Annenberg Board was a nice touch.

More generally, as Matt Yglesias notes here,
McCain had some okay jabs at Obama that I think impressed some of the CNN panelists and, especially, got the conservative ones jazzed up. But he used a lot of right-wing echo-chamber jargon, never explaining what he meant about trial lawyers and scare-quote “health” and so forth.

As a result, we sometimes had the very weird dynamic of McCain sputtering out an attack that the average voter didn't understand at all, because it was all phrased in conservative-political-insider shorthand, and then Obama giving one of his dense information-packed answers in which he first had to explain to the audience what the hell McCain was talking about before rebutting it. The CNN pundits, in their down-on-Obama period before the poll results came in and told them to be up-on-Obama, kept using "professorial" as an insult. (Compare also: McCain's use during the debate of "eloquent" as an insult.) Now, I recognize all the ways in which "professorial" isn't the ideal mode for political discourse. You wouldn't want a lecture as an inaugural address. But Obama's ability to pack every sixty- or ninety-second unit full of information and explanation, compared with McCain's almost Palin-like or Bush-like repetition of the two or three keywords he had for any answer ("spread the wealth!") was professorial, and, I thought, devastatingly effective.

Wednesday, October 15, 2008

Canadian Conservatives and Quebec secession

I don't think I say anything that's not pretty obvious, but for what it's wort, I take part in a colloquy with Ilya Somin and others chez Volokh about why the Tories don't support the secession of a province thatseems so determined to keep them out of a governing majority.
Libertarians for Obama, continued

Dan Drezner.
If markets are supposed to let failures fail — not the trendiest idea right now, I know — then the Republicans have no right to be rewarded for their performance over the past eight years. Let the GOP have its comeuppance and come back under new management.

Tuesday, October 14, 2008

Blog-quotes of the day

Brad DeLong:

So what to do? We don't want to let the banking sector collapse into bankruptcy--Lehman Brothers was bad enough, and we don't want to replicate the Great Depression. But we also don't want to repeat Japan's mistakes of the 1990s, with zombie banks neither alive nor dead failing to do their job for the economy as they focused on getting back above water to create some value for shareholders and executives.

And here is my worry about the current plan to buy preferred rather than common stock of the banks. Preferred stock runs a risk of creating zombies--if shareholders and executives conclude that the preferred has all the equity value if they continue business as usual, then they will not continue business as usual but will instead start behaving like the Japanese banks of the 1990s. And we don't want that.

By mighty spells the Head Voodoo Priest Henry Paulson has raised the corpses of America's biggest banks from the graves to which the financial crisis was consigning them, but has he restored them to life, or just to zombiehood? Will they do their job for the economy, or will they begin wreaking destruction, all the while crying out: "BBRRAAIINNS! BBRRAAIINNSS!"

[NB: That's a funnier way of expressing my point below about changing forward-looking behavior. I'd rather hear that my worries are the uninformed results of undereducation in economics, but I still like hearing from Brad DeLong that I've kind of understood something relevant to the current mess correctly..]

Julian Sanchez:
And certainly it’s got to be much easier, much more comfortable, to give your self-selecting audience precisely what they want to hear and bask in their accolades. I don’t know if I’ve named it here before, but I’ve long observed a phenomenon in the blogosphere I call “audience capture,” where a once-interesting writer becomes rather dull and predictable, each post another jab at the lever, predictably rewarded with a tasty pellet.

For what it's worth, that phenomenon is one reason why I've never turned comments on. I do think that comments sections sometimes provide all the wrong kinds of feedback to a blogger.
Sentences that scare me

“The needs of our economy require that our financial institutions not take this new capital to hoard it, but to deploy it,” Mr. Paulson said, who offered some details of the plan along with the Federal Reserve chairman, Ben S. Bernanke, and the chairman of the Federal Deposit Insurance Corporation, Sheila C. Bair. [sic-- should be "said Mr. Paulson, who..."]

If the bailout were working properly, no exhortation or bully pulpit would be required-- right? The banks would think that it was again in their interest to make short-term commercial loans. This has been one of my worries for a while now-- that we were deploying backward-looking tools to solve a problem of forward-looking incentives. If the banks say, "thanks for the new funds; they'll look lovely on our balance sheet!" then nothing productive has happened; the taxpayers have just propped up the stock price of financial firms.

Monday, October 13, 2008

I'm enjoying...

the tributes to new Nobel Laureate Paul Krugman from libertarian and libertarianish economists. Some sharply distinguish the pre-NYT real economics Krugman did from the post-NYT public commentary. Others count Krugman's ability to explain things to a lay audience as one of his virtues-- which is of course appropriate given that they remember it as one of Milton Friedman's virtues, too.

See: Arnold Kling, Bryan Caplan, Alex Tabarrok, and of course Tyler Cowen. Note that the plaudits for Krugman's new trade theory/ economic geography contributions themselves have to be based on a genuine admiration for their intellectual importance, since those contributions were traditionally taken as being unfriendly to free trade, insofar as they showed at least the theoretical possibility of productivity-enhancing protectionism. (Krugman understands the difference between that possibility result and any likelihood that actually-adopted protectionism would be of the right sort.)

Sunday, October 12, 2008

Autumn in Montreal

Being my very first experiment in multimedia on this here blog; but I hear that the interwebs are now capable of handling things that aren't even text. (In my day, we browsed the interwebs on lynx in UNIX and read e-mail on Pine and we liked it!)

Anyway: two previous autumns in Montreal and 21 in New England and I've still never seen anything like this year's color.

Brettschneider reading group at Public Reason

Following up on last year's very successful Estlund reading group, Public Reason is hosting a reading group on Corey Brettschneider's Democratic Rights.
On the other hand...

I've linked (approvingly) to several posts elsewhere about why libertarians and classical liberals ought to be supporting Obama, however reluctantly, this election. And I've by and large failed to link to stuff (including by my friend Todd Seavey on the other side. But I do feel compelled to point to this Ilya Somin post.

My core reasons for preferring any Democrat to any Republican this election are backward-looking. After the catastrophic (in policy terms and in moral terms) Bush Administration, the Republican Party needs to go to the penalty box, for its health and for the health of American democracy. A party must not be able to run eight years of policy-failing, power-grabbing, deficit-ballooning, separation-of-powers-shredding, torturing, detaining-without-charge government without consequence or punishment-- and, since presidents are term-limited out, the punishment must be partisan.

But I am deeply worried, in a forward-looking way, about the new historical moment the financial crisis brings about, and Ilya hits some important forward-looking worries. I've never been persuaded by the scare-tactic view that says Obama is, deep in his heart, some kind of nutty socialist. But that's not what Ilya stresses-- it's that a Democratic President, an expanded majority Democratic Congreess, and an economic crisis coinciding could lead to much longer-term damage to economic liberalism than libertarians-for-Obama like me are comfortable admitting.

I'm not changing my mind-- but I'm also not denying that I share some of his worries.