Thursday, July 12, 2012

I've seen worse

Greetings, EconoSpeakers. As a special bonus for your devoted attention to this blog, you have the privilege of enduring me for the next few days.  Who am I?  Don't ask.  Those who tell don't know, those who know don't tell.  Of course for many it will be perfectly bleeding obvious, just STFU about it, okay?

We've all heard of the Great Recession and more recently, the Little Depression.  These days I'm reading Hyman Minsky, so I'm inclined to think neither phrase is appropriate.  More apt would be "Business as usual."  By Minsky, the sort of collapse we are currently experiencing is not a bug, it's a feature of unregulated capitalism.  If you doubt the ubiquity of such events, you should consult "This Time It's Different," by Reinhart and Rogoff.  In the most basic sense, this is normal.  It sucks, it's worse now than usual, but it's normal.  Deal with it.

R&R do not mention Minsky -- theirs is an exhaustive empirical work with some theoretical b.s. included, and little in the way of policy remedies.  In theoretical terms it is shallow.  Minsky is deep.  He gets into the pores of the financial system, long neglected in macroeconomic theory.  I hope to have more to say about him in due course.

Time for breakfast . . .


Shane Taylor said...

Welcome! This should be fun.

For anyone looking for an introduction to Minsky written for a lay audience, here are two.

Historian Stephen Mihm:

Economist James Galbratih (see "Minsky and Non-linear Financial Dynamics" [PDF]):

What fascinates me no end about Minsky's work is how his theory is one of emergent chaos, of *disorder* that is the result of human action, but not the execution of any human design. It strikes me as a potent reminder that a spontaneous process can bring about either order or disorder. If the left and center-left really want to take on market liberalism, this stuff may be one of the best places to start.

Miracle Max said...

Spontaneous disorder. Yes. I like that.

Peter Dorman said...

Welcome, Max! Does this mean we all get to be a little more unruly?

Jack said...

Hello MnM, You're doing a crappy job of keeping your identity on the QT. Otherwise, always nice to see your smiling photo.

is it just possible that the design that results from chaos can be either predictable or engineered? Would that not make it possible for the professional market traders, the bank trading desks not the actual button pushers, to manipulate the chaos and by slipping in and out of equities at the right times and over the long haul shift a gazillion dollars onto their side of the ledgers?

Barkley Rosser said...

Welcome, MM. Yes, Minsky is the serious man, definitely deeper than R&R, although they are not too bad most of the time.

chrismealy said...

A couple of weeks ago I was looking for a list of emergent bads (as opposed to emergent good things, like what Hayekian freemarket spontaneous organizers are always talking about). I couldn't find anything. This is what I came up with:

Braess's paradox
complexity catastrophe
Prisoner's dilemma

I was looking for some real-world stuff, like traffic jams. Somebody has to have written about malign self-organization, right?

nereus said...

I am so happy to have Max back again. To the barricades!