Health Care and the Experts: Financial Analogy?

Some co-author or other saw the Myers (fragment-of-a-) Health Care Plan which I put up last Easter, which started with

1. Allow unlicensed health care, wherever it's clearly labeled as such; it won't get public support but people can choose to spend their money on it. The argument against this is apparently that people will make bad choices. Yeah, some will, probably including me and you. So? I've never understood the way some people believe that they (or those they select) can make good choices for others; in fact I'm moderately cynical about licensure requirements as they are now structured, whether for medics or morticians or cosmetologists.

His comment says

I came to look at Chelyuskin but chanced upon healthcare. Your item 1 is the only time I can remember when I totally disagree with you. You say: Some people will make bad choices including you and me. This equates mistakes by poor slobs who lost their houses and livelihoods in 2008 with "mistakes by TJM," that same TJM who, I suspect, belongs to that tiny minority who made money in 2008, because he has both sharp analytical mind and enough money to hire a top-notch money manager. Besides, this just won't work politically: as soon as a poor slob somewhere takes her child to an unlicensed healer, and the child ends up with an amputated limb, the outcry for regulation will be irresistible and, IMHO, justified.

I wasn't sure how to respond to this money-management analogy, and I let it go; I'll give it a try now...

I'm astonished -- and encouraged, because I would not have expected item 1 to be the only total disagreement even in this post, much less in general. And of course it's possible that I'm totally wrong...but I haven't changed my mind yet. Let's take it one step at a time.

The first point of disagreement, a very big one: No, I didn't make money in 2008. In fact in September 2009 I said

I haven't posted for a long time, but it's not that I haven't made any mistakes. Indeed, I've participated to some extent in one of the biggest mistakes of my lifetime -- the market crash of 2008.

Personally, I did see the bubble as such, earlier than some...

In fact I lost much less than I might have because (like my "top-notch money manager" -- I must remember to tell him about that description) I was expecting a downturn at some unpredictable point Real Soon, a small-to-middling wealth-effect recession whenever the bubble popped, and also of course because I avoided real estate. But I did lose, because we weren't expecting what happened. Was this an issue of expertise, in any useful sense of that term? People with far greater expertise than mine, including both the then-current and currently current heads of the Federal Reserve, were denying the problem -- even denying the limited problem that I saw then. (Indeed, since a big part of the problem was excessive risk-taking -- i.e. excessive confidence -- I think those public statements contributed to our still-continuing doldrums in addition to the policy errors I believe they made.) There were indeed a very few people who actually made money by understanding a part of what was going on: a short-seller named Eisman was quoted in late 2008 in The End Of Wall Streets Boom

“We always asked the same question,” says Eisman. “Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says.

S&P denies that; I haven't heard any coherent excuses for the way they performed as the Supreme Appointed Financial Experts of the American economy (co-equal with Fitch and Moody's, of course). I dunno. Still it's my understanding that Eisman made money whereas on the average, people with more to lose (them with money managers) lost more, disproportionately more, than those with less. That's a Good Thing, as far as it goes -- it didn't go as far as it should because of Too-Big-To-Fail, i.e. some high-income people had their losses made good at the average guy's expense -- but it doesn't fit well with a belief that experts protect us from making disastrous mistakes. As I said in that Sept 2009 post, "To a disturbing extent, I think expertise in (macro)economics has been discredited. I don't believe this is adequately answered by Greg Mankiw's [remarks about economics being non-predictive]". I agree with parts of Brad DeLong's remarks a few days ago in What To Do About Jobs? that

given that most of what we macroeconomists were saying in 2007 was wrong, what, if anything, do we have to say today? Bear in mind that what turns out to have been wrong was pretty much everything that had been done since 1950....

Well, with part of it. As the the Economist (Ryan Avent) said last week,

The narrow point to focus on, however, is that the story in which the housing bust gave us the recession, because America suddenly had lots of houses and workers it couldn't use doesn't appear to fit the data. The economy muddled on despite the housing bust for two years, at which point, for some reason, all sectors suddenly decided that the outlook for growth was much worse than they'd previously believed.

As he says, that fits the Scott Sumner story I've blogged about before, which can be read as very conventional textbook macro and which blames most of the recession on the experts of the Federal Reserve, who simply did the wrong thing in a big way. (There's still room for other blames, of course.) On a more micro-economic level, I'd say that expert stock-picking advice is also of dubious value: I'm a moderate believer in a very weak form of the efficient-market hypothesis, and if this country were to adopt a deduction-free progressive consumption tax system (which it should do on grounds of efficiency/fairness/sanity) I would almost certainly stop using a money manager -- the money-manager's value is rather strongly dependent on his understanding of a complex system that really shouldn't exist. (Also dependent on the fact that his services are mostly deductible, i.e. you're helping to pay. Thanks!) What would I do then? I would switch to a passive management pattern, which in pure investment terms is at least as good and likely better:

In the United States, indexed funds have outperformed the majority of active managers, especially as the fees they charge are very much lower than active managers. They are also able to have significantly greater after-tax returns.

Most of my decisions would then have to do with asset allocation:

The conclusion of the study was that replacing active choices with simple asset classes worked just as well as, if not even better than, professional pension managers. Also, a small number of asset classes was sufficient for financial planning.

Hooray for Malkiel! And for Samuelson and Bogle!. This doesn't prove that financial expertise is worthless, but I don't think it has the kind of value you're suggesting.

Let me put it this way:

• Failure to consult such an expert now and then is really stupid. There are a lot of things a financial specialist knows that are not intuitive; important things.
• Many of these are routine things, how to file this-and-that.
• Many of these are simple things you really ought to learn yourself (why it probably makes sense to own more bonds and fewer stocks as you get older, etc. etc. etc.)
• Some of the others are simply not true, and we don't know which until it's too late (why the top tranche of a pile of mortgage-backed securities deserves its AAA rating, etc. etc.)
• Unlimited trust for your expert is not wise.
• Compulsory obedience to your expert is a really really bad idea, which fortunately is not employed except for the way that S&P and the other experts are embedded in the laws about risk ratings, which effectively required banks to invest in disastrous mortgage-backed securities...
• Perhaps the most important financial skill you can have is that by which you evaluate an expert; nobody else can do this for you, but certification and track-record-checking and recommendations are all important.

Your analogy between medical and financial services is not one that would have occurred to me, but it may have merit. Failure to consult an actual medical expert now and then is really stupid. Medical specialists do indeed know a lot of unintuitive things. Many of these are routine. Many are things you should learn for yourself. Many are false. Trust is a good thing, unlimited trust is a bad thing, compulsory obedience is a really bad thing. Certification and track-record and recommendations...yup. Okay, I'll take the analogy. :-)

Seriously, I think you're saying, effectively, that

If there's one seriously bad (but non-fatal) outcome from an unlicensed healer, public outcry will correctly push us back to requiring licensure

It seems to me you're forgetting something: the licensed doctors we have now are responsible for some 100,000 fatal errors per year (perhaps a little less, perhaps a lot more; see Wikipedia.) Those deaths are on top of a death-toll which I believe to be very much larger: deaths caused by the FDA's prevention of innovation. I'd suggest reading one article, Theory, Evidence and Examples of FDA Harm by Tabarrok and Klein:

Three bodies of evidence indicate that the costs of FDA requirements exceed the benefits. In other words, three bodies of evidence suggest that the FDA kills and harms, on net...

Or you might prefer The FDA: Neither Safe nor Effective ending with a Friedman quote:

“‘The FDA has already done enormous harm to the health of the American public by greatly increasing the costs of pharmaceutical research, thereby reducing the supply of new and effective drugs, and by delaying the approval of such drugs as survive the tortuous FDA process.’ When asked, if you could do anything to improve health in America, what would you do? Friedman replied: ‘No more licensing of doctors. No more regulation of drugs. Not of any kind. Period.’”

Actually, I don't quite agree, but my position is a whole lot closer to Friedman's than to anything that's likely to happen, and I'd accept his as being substantially better than what we have now. (And if we magically went to his, I like you and most others would go right on consulting a conventional MD -- but the MD I consulted might not be in the US. It might depend on what happened to the insurance industry, which would now be free to sell the sort of insurance policy that I'd want to buy.)

Or then again, maybe not.

Update:Stiglitz, Nobel Prize-Winning Economist, Says Federal Reserve System 'Corrupt' according to the Puffington Host:

To Stiglitz, the core issue is that regional Fed banks, such as the New York Fed, have clear conflicts of interest -- a result of the banks being partly governed by a board of directors that includes officers of the very banks they're supposed to be overseeing.

The New York Fed, which was led by current Treasury Secretary Timothy Geithner during the time leading Wall Street firms like Citigroup, JPMorgan Chase, AIG, and Goldman Sachs were given hundreds of billions of dollars in taxpayer bailouts, presently has on its board of directors Jamie Dimon, the head of JPMorgan Chase. He's been there for three years. He replaced former Citigroup chairman Sanford "Sandy" Weill.

"So, these are the guys who appointed the guy who bailed them out," Stiglitz said. "Is that a conflict of interest?" he asked rhetorically.

That really might explain the Fed's behavior... in finance as in medicine, the incentives of regulatory capture and crony capitalism apply. People who exert government's influence are always going to be pushed towards exerting it in favor of those who can exert influence on their behalf, and regulation -- especially licensure, as the power to say who can't compete with you -- is always going to be a Very Good Thing from the point of view of those who have a seat at the table. They may even sincerely believe that they are the only true experts, and that those who do things differently are simply not good for the public. (Or then again, maybe not.)

Update, June 13: In the end, the wealthiest did lose proportionately less from the recession: CONVERSABLE ECONOMIST: Wealth by Distribution, Region, and Age says:

Those in the 90-100th percentiles of the wealth distribution have median wealth of $1,864,000, and mean wealth of $3,716,000 in 2010. That's also the part of the wealth distribution that had the smallest percentage decline in the median and the mean from 2007 to 2010.

I believe that, and I suppose it might have something to do with financial advice, but my current reaction is simply that housing was the most overvalued part of the economy, and those below the top 90% had more of their wealth in housing--and were more likely to have to use up their savings due to job losses in the family. I don't think it has any implications for the health-care analogy.

Thoughts on Greece, and us

A large part of what holds Greece back, and us as well, is fairly described as rent-seeking--manipulation of public power for private profit, one way or another. In Greece, as in the Latin America of my childhood, it's much more likely to take the form of simple corruption: imagine (as I was told in Greece last week) an underpaid government official who approves environmental permits, and who provides faster service for those who provide extra money. And then he slows down the uncompensated permits sharply, to encourage the trade. It's not that he is lazy or works few hours, it's not even that there are too many such officials -- all that is often said but seems to be wrong. It's simply that his work product tends to detract from actual GDP, even as it's added at "cost" to official GDP. If he weren't doing that, Greece would be richer.

Other kinds of rent-seekers include those who profit from government-imposed monopolies, like the Athens taxi-drivers now striking, unpredictably blocking port and airport. Rent-seeking is a pretty broad category in my mind. I suppose that all countries end up with issues of regulatory capture and indeed of crony capitalism; government makes rules, and these rules will tend to promote the interests of those who have something to offer to the rule-makers, or some credible threat they can make. That interest-promotion is "rent," paid to the people who've managed to make some government power into their own property, legally or not.

I spent last week on Spetses, with various extended-family events relating to my granddaughter's baptism. It's interesting and educational to listen to Greeks and Greek-Americans talking about their fiscal crisis; I'd hoped to get some time specifically listening to Yannis Ioannides and Anna Hardman, and did, but not enough for real understanding. Yannis' basic Greece-is-not-bankrupt statement surprised me considerably (see Ioannides Says Greece Not Bankrupt, Must Change Economy: Video - Bloomberg). He thinks Greece really can pay its debts -- and he thought that even before the ’Restricted Default’ deal of this week, so I presume he thinks his case has been strengthened. He's an advocate for the austerity measures, which I suppose makes him one of the Serious People of whom Paul Krugman said this week in 1937! 1937! 1937! - NYTimes.com that

OK, so we’re going to demand harsh austerity in the debt-crisis countries; and meanwhile, we’re also going to have austerity in the non-debt-crisis countries. Plus, the ECB is raising rates. So demand will be depressed in both crisis and non-crisis economies; this will lead to a vigorous recovery through … what? The Serious People are determined to destroy all the advanced economies in the name of prudence.

I'm mostly on Krugman's side there; we're combining monetary policy from the ECB which may be reasonable for Germany but not for Greece, along with drastic contractions of an uncomfortably the-beatings-will-continue-until-morale-improves flavor. Or so it seems to me. But Yannis isn't supporting austerity to reassure bond markets as Krugman says; Yannis thinks that the "austerity" (including the deregulation of taxi medallions being protested) is part of breaking or at least limiting the rent-seeking system. Well, I'm not sure he or Anna ever said "rent-seeking" but that's my understanding of what they did say, and when I look for related material online I find things like BusinessInsider's querying a member of the `professional "elite" class' of Greece, who said

We want the Greek economy reformed. An end to the of unimaginable waste of taxpayers money,...cronyism and corruption. A much smaller and reformed public sector... A pursuit and prosecution of presently wide spread tax evasion practices. The above would immediately provide us with a considerable primary surplus, enabling us to keep repaying our debt, an obligation we wish to honour. ... Unfortunately it appears that the average Greek, does not view things the same way.

That certainly sounds like the viewpoint of the Greeks with whom I spoke. And how big is the corruption problem? Well, Transparency International said

The Greeks paid an average of €1,355 ($1,830) in bribes [in 2009] for public services such as speeding up the issue of driver's licenses and construction permits, getting admitted to public hospitals or manipulating tax returns, ... Bribes paid for private sector services such as lawyers, doctors or banks were even higher...

So really, Yannis and those he supports (to the extent that I understand what's going on here) are not so much engaged in economics as in political action aimed at restructuring Greek culture. Otherwise, the bailouts fail. In The Painful Arithmetic of Greek Debt Default | e21 - Economic Policies for the 21st Century I see

How does corruption limit the capacity for tax and spending reform? Tax avoidance, which relies on bribery to avoid prosecution, is a national pastime in Greece – the envelope used in the bribe even has its own name, the “fakelaki,” confirming the age-old adage that the Greeks “have a word for it.” Bribery is so rampant in Greece that real estate developers’ method of obtaining cheap land is to burn down public land, squat on the burned parcels, and pay off public officials to permit this. Greece’s forest fires, particularly in the Peloponnese in 2007, have been a source of public outrage for years, and yet the developers continue to squat on the land with impunity. Is a society that permits that sort of lawlessness capable of tax reform?

Maybe. Maybe not. I respect Yannis, but if the average Greek doesn't believe in it to begin with, I don't see a happy ending to this story.

Corruption is by no means the only problem, and an end to rent-seeking would not necessarily make Greece fit comfortably into the Eurozone. Clearly, little Greece will never be the target of the ECB's monetary policy. Krugman, in Anatomy of a Euromess, said that

Spain’s troubles are not, despite what you may have read, the result of fiscal irresponsibility. Instead, they reflect “asymmetric shocks” within the eurozone, which were always known to be a problem, but have turned out to be an even worse problem than the euroskeptics feared.

David Beckworth took Krugman's analysis and extended it in "Optimal Currency Area" terms within Eurozone Periphery and the Euro, saying

If a region’s economy is not in sync with the currency union’s business cycle and the above listed shock absorbers ("flexible wages and prices, factor mobility, fiscal transfers, and diversified economies") are absent then it does not makes sense for a country to be a part of the currency union. Instead, the country should keep its own currency which itself will act as a shock absorber.

It's no great surprise to see that in his graphs, Greece ends up as the most ill-placed. But I believe that part of the "austerity" program is intended to increase the flexibility of the job market (by pruning job protection programs, as has been tried before) and maybe, if the austerity programs are accepted, maybe things will work out. For a while. Public Pensions and Labor Force Participation: The Case of Greece

The pension system of Greece is a representative case of the “Mediterranean welfare state”, which is characterized by extensive segmentation, very high payroll tax rates, and yet inadequate pension benefits. In order to explain this paradox we construct an economic–demographic model. We show that in the period 1980–2000, the segmentation of the system and the very low labor force participation rates of the Greek economy have resulted in very high payroll tax rates in relation to the current level of benefits. On top of these problems, the expected adverse demographic developments in the period 2005–2050 will render the pension system completely unsustainable.

Still, the near-term need is to cut the rent-seeking (including corruption) and collect the taxes and shrink the regulatory/welfare state. Maybe. And can it be done? Well, my own approach in Greece, even more than in the US would be:

automate, eliminate, simplify, outsource.

Almost all of a government's functionality should be virtual... Well, maybe I will make a separate post about that, sometime.

Meanwhile, a little more time has been bought. The Economist remarks that

the biggest risk to the euro zone is that its leaders will begin thinking that they've solved the problem. As growth figures worsen in coming months, markets will once again become antsy. Euro-zone officials had better be preparing for a way to convince them anew that they want this thing to work.

And I go back to the pattern I established last winter, of exercise and education

This morning I spent 45 minutes trying to pound a few modern Greek words and phrases into an aging memory; until a month ago, this would have required a major effort of willpower, but lately I've been doing it every day with no problem...

As I commented to my son's mother-in-law, see-gah-see-gah mah-THAY-no, which I think means "little by little I'm learning;" since her response was "bravo, Tom, ah-krih-VOS!" (precisely), maybe it does. And maybe I will eventually learn some economics too. Or then again, maybe not.

The Greenspun Recovery Plan: November 2008

My co-author, rather than updating his Project Afghanistan page for 2010, sends me a link to Philip Greenspun's Economic Recovery Plan -- minimum steps for averting a Depression in the U.S. , with a note that I "will probably find this congenial", probably meaning that it's closer to my views than his, but interesting. So I look at the minimum steps as of two years ago for averting a Depression in the US, and the first thing I notice is that we didn't do those things and we didn't get a Depression, so they weren't minimal steps for avoiding a Depression. QED. (I think we avoided a Depression because the Fed wasn't quite as stupid as it was in the 30s, but I've probably talked about that enough and Greenspun never mentions it.) Greenspun says the minimal steps are

Reducing Government Spending In 2006 we were spending roughly 36 percent of GDP on government at local, state, and federal levels ... We need to [reduce] government spending to 30 percent of GDP within two years and ...

Well, actually I often think about this measure of the size of government; I don't like it much, especially when transfer payments are most of government spending, and ultra-especially when the big transfers like SocSec and Medicare are going to older people, who have other income, sometimes more income than the younger ones, and are also taxpayers. Government salaries are hardly more than a rounding error here. Let's say my income this year is $100 and yours is $10; the government takes $40 from me, carefully evaluates your needs, gives you $10 and spends the rest on other stuff. I now have $60 and you have $20. Now let's suppose that we replace this with a linear tax which is simpler, but nominally even higher: the government takes (50%-$20) from everybody, so it takes $50 from me and $5 from you over the year, and gives each of us $20 in weekly payments. I end up with $70, you with $25. Okay, has the government expanded or shrunk? It collected $55 where before it collected only $40, and borrowed nothing in either case, so obviously it's "bigger" -- or is it? Or is this the wrong question? I'd choose a linear tax at the Federal level (no deductions at all, except that your 401(K) can hold any investment paper you like including your bank account, so money is taxed only as you spend it), and I'd watch state/local experiments with more complicated schemes, but I don't believe "spending/GDP" would measure the result in an interesting way. No, this is not congenial.

Greenspun goes on:

What about Keynes? Japan is a good example of the failure of Keynesian economics in the globalized era. The country spent hugely on public works projects in the 1990s,...

Well, yeah. As Sumner has written over and over again (and as Bernanke wrote years ago), Japan's central bankers have repeatedly chosen a monetary policy calculated to prevent growth no matter what fiscal policy was adopted. Very odd, but Greenspun isn't making a suggestion so much as countering a fiscal-policy suggestion -- yet he never brings monetary policy into it, which I find even odder.

Now we get into strange territory:

Investor Representation on Public Company Boards Right now the shareholders of a public company are at the mercy of management. ...

I don't get this one at all. If management salaries and bonuses are "looting" companies, then investors should do better by choosing the least-looted companies; we are perfectly free to vote with our feet. I think that my simplified no-deductions tax scheme would reduce the value of superstar friends-of-Bill-or-George-or-Barack managers, I see crony capitalism and regulatory revolving doors as significant problems for democracy as well as startup businesses, but I don't see where Greenspun is coming from here.

Depreciation of Capital Expenses...

Oh, please. I believe this to be another non-problem: if a cash-flow-negative company has good earnings prospects it can borrow the money for its first few years. This is routine. If it doesn't, then flexible depreciation won't help.

Education... Our country's best performing schools (all of them private) have non-unionized teaching staffs. We can't afford to experiment with unionized teachers anymore...

Ummmm, well, absotively posilutely maybe. Or not. I could see a federal role for educational infrastructure, mostly in the form of teaching/testing material (especially educational computer games) to be freely used by anyone who likes it. I would like to introduce competition for every school...I would like lots of stuff. My impression of the overall generational impact of the teachers' unions is extremely negative, but I would put this way down on any list of stuff I'd like.

Transportation System Reform... Public transit unions should be eliminated because ...

I think I see a theme here. Greenspun doesn't like unions. Well, I dunno as how I like what they've gradually grown into all that much myself, but if Greenspun thinks that businesses don't invest in NYC because they're afraid that public transit stoppages will keep workers from getting to work, I think he's going just a teensy bit over the top. The main transportation reform we need is for transportation of bits so telecommuting works better than it does. (This will greatly relieve NYC traffic congestion, but congestion charges should be applied also: my E-ZPass should be charged a few cents, about once a block, whenever I drive in NYC -- rather than just once on the GW Bridge as I head to the city and Icon Parking. And E-ZPass should be required for driving in the city. Period. But the Feds should have nothing to do with it, and it has little to do with averting a recession, so it doesn't belong here.)

Predictable Product Liability System We need a fixed range of prices for people killed or injured by products...

Wow. Well, I guess we're working on Exodus 21 KJV

28 If an ox gore a man or a woman, that they die: then the ox shall be surely stoned, and his flesh shall not be eaten; but the owner of the ox shall be quit. 29 But if the ox were wont to push with his horn in time past, and it hath been testified to his owner, and he hath not kept him in, but that he hath killed a man or a woman; the ox shall be stoned, and his owner also shall be put to death. 30 If there be laid on him a sum of money, then he shall give for the ransom of his life whatsoever is laid upon him. 31 Whether he have gored a son, or have gored a daughter, according to this judgment shall it be done unto him. 32 If the ox shall push a manservant or a maidservant; he shall give unto their master thirty shekels of silver, and the ox shall be stoned.

Wow. I guess I sympathize with Greenspun, and with those who disagree with him. Hmm... It doesn't belong here. What else?

Labor Market Deregulation We may soon have deflation. Workers who are young or with poor skills need entry-level jobs in order to build skills and experience. They won't be able to get them if the minimum wage is set higher than the market-clearing wage. ...

Well, here again I think I'm seeing a tendency to look at the current (2008) emergency and see one's prior preferences as solutions to whatever's wrong. Yeah, I think that some entry-level unemployment, along with the increasing use of gadgetry in your neighborhood McDonald's and Burger King, are driven by the minimum wage. And I'd like to get rid of it, as one of the items that gets replaced by the weekly payments of my linear tax scheme above. But I'm averse to pushing it into a "minimum steps" for Depression-aversion.

Substitute Web-based Education and Trade for Foreign Aid We don't spend a large percentage of GDP on foreign aid, but the perception is that the absolute amount is large and nearly all of it is wasted or siphoned off by Third World officials. ...Let's start with a simple message that business investors can embrace: "We've eliminated all U.S. foreign aid spending."

That's interesting, and again I can mostly support his substitution (especially the end to farm subsidies) as better support for developing-country economies. But I simply wouldn't put it in this list at all.

Immigration Policy ...With our crushing overhang of government debt, entitlement programs, and public-employee pensions, the only question we can afford to ask about an immigrant is "How much in taxes will this person pay and for how long?" Countries such as New Zealand apply a point system.

Well, that's interesting. And I do think that our excess housing inventory could have been fixed, reducing the minor recession that we would have gotten even if the Fed had chosen NGDP level targeting from (at least) early 2008 onwards, by admitting a whole bunch of people on a points system. And our current immigration system is so awful that any rational basis would be better than what we've got. But It Doesn't Belong On This List.

Now, my short-range recovery plan, for whatever it may be worth, would be Sumnerian -- it would have to do with my acceptance of Sumner's view of the immediate causes of the recession. Note again that Greenspun was writing in November 2008. As Sumner says,

1. The NGDP and RGDP collapse ... occurred almost entirely between June and December 2008. I argue that NGDP targeting could have prevented that collapse..... the financial crisis of September 2008 did not cause a stock market crash, as the markets expected the Fed to continue its multi-decade policy of keeping NGDP growing at about 5% a year. If the markets had given up on the Fed in September 2008, they wouldn’t have waited until October to crash. 6. I argue that stocks crashed 23% in early October on little financial news. Instead, there were ominous reports of rapidly falling orders all over the industrial world. Markets then sniffed out Fed passivity, a failure of the Fed to do what it takes to maintain the Great Moderation. They became demoralized. 7. I argue that the only significant Fed policy during the October crash was the [contractionary] IOR program,

The recession's unemployment has gradually become more structural, but I believe more monetary response would still help a lot. Indeed, I believe QE2 did help a bunch.

Whatever. Yeah, I'm Greenspunish in some ways. Okay, I'd really like "Market Deregulation" on a really large scale -- in fact I'd like to move away from regulatory government to required-insurance government. Hm... that's not a Greenspun concept. Overall, I don't find Greenspun all that congenial. Interesting, and he's dissatisfied with many of the same things I am, but not congenial. There's an overlap between his thinking then and my thinking now, but then I overlap quite a bit with almost everybody.

Except, of course, for me. I hardly overlap with me at all, and since whichever of us is right I'm certainly wrong, these thoughts belong on this blog.