On scapegoats and short memories.

Mark Thoma links to Brad DeLong's post about why Freddie and Fannie aren't to blame for the current crisis. Free Exchange points to sources saying that laymen and others may be at least partially to blame for this mess--so let them suffer. David Henderson at EconLog says that there are people who have been saving money in order to buy homes at crisis-depressed prices--and trying the government's trying to fix the housing crisis hurts these people.

It seems to me that this sort of conversation has mostly left the public discourse. When the housing crisis was just starting to unfold, there was a lot of talk about who was to blame. The term "house of cards" was used quite a bit. Low interest rates from the Fed, financial institutions giving away subprime loans to anyone with a pulse, rating agencies giving high ratings to subprime mortgage-backed securities, and everyday people taking on huge mortgages without considering their abilities to pay them off. In short, lots of people were to blame, from the top to the bottom. Why aren't people still talking about this?

When this was unfolding, there was theme of "pass some kind of recovery bill--anything to help us. If we act now, we can stave off the worst of the recession." And that's what happened. Congress passed a $700 billion bill to try to save our economy. A number of economists were against this--particularly how the bill was designed--but the idea was that a bad bill was better than no bill. The bill, at the time, was intended to save large banks. The ones "too big to fail." The idea was that if those banks fell, then basically the flow of money would stop. There would be no money market at which to finance business ventures. If those big banks fell, then would the vast majority of businesses. Quick action was necessary.

But, that isn't the case any more. The bulk of the recently passed bill won't take effect until well past when the recession is forecast to end. Now, if the bill has any effect, it's to help along the recovery or expansion portions of the business cycle. However, people aren't talking about accountability anymore. That is, the bill is to "save the economy"--save big business, save small business, save homeowners--we've just assumed that we have a right to the money. And if the money doesn't help our specific subgroup of people, we feel gyped. The professionals are talking about where the money is going, not whether there should be any money to save the economy at all.

We were previously talking about how we got ourselves into this mess, and we have to learn that there are consequences to bad choices, rather than knowing the government will bail us out. We put that aside because we were convinced quick action would save us. Now that's no longer the case, we're ignoring this basic economic question?

I'm not trying to make a statement about the quality of the bill. If you think the bill is going to help us, good for you. If you think the bill is a terrible idea, wonderful. All I'm saying is this: what happened to the public discourse? Why aren't we talking about this anymore?

... What's with the optimism?

I was surprised to hear good optimism from some economists:

Mark Perry reports that global economic activity might be on the rebound. It's too early to report a definite trend, but let's hope that these raw materials purchase keep up.

And, a post at CalculatedRisk points out that retail sales increased from December to January. Though it's still off from its 2008 mark, the rise is a welcome change from previous news.

I'm honestly not sure these are indicators of anything, but the news is refreshing. Maybe the recession is nearing the bottom?

On another note, here's a piece from the Economist defending the field of economics. It's a well written piece, I think, particularly in light of the many other blogs talking about the divisions between economists (a good one on EconLog mentions the different types of divisions--it's not necessarily political, as many seem to think).

Our future

Here's an interesting article about Larry Summers and Tim Geithner, two possible choices for New York Federal Reserve president. It's a pretty interesting look at the two gentlemen. A WSJ blog gives more information.

Greg Mankiw writes a memo to President-elect Barak Obama. Hopefully Obama listens to Kling (and many others) on the auto industry.

Some advice for those seeking jobs in academia.

Prof Glaeser says that we need better teachers to improve our education system. I think there's much more to the issue. Also, Prof Glaeser doesn't say how we should attract better teachers--some data, for example, shows that better teachers often work at private schools, where they get lower pay. So, if pay isn't a good enough incentive, how do we attract teachers? Either much larger pay, or we should take a look at the incentives of teachers. My bet is that teachers are concerned with their work environment, their freedom in the classroom, and job security. The government has done a number of things to dissuade teachers from staying in their field. (h/t Thoma)

Still on education, Charles Murray argues that we should get rid of four-year BAs.

For those that follow oil prices and the industry, Mike Shedlock provides a wealth of information. Personally, I thought it was hilarious that Venezuelan president Hugo Chavez "predicted" $100/barrel oil, with no qualifiers. Firstly, price tends to increase in all goods--we call this inflation, and it's especially true in prices tied to the dollar--so with no time qualifier, Chavez's "prediction" is basically self-evident. Secondly, not even Chavez could "predict" how oil would skyrocket (proving him right, by technicality), then plummet again (making him still sound ridiculous).

Lastly, in a paper about the ancient history of economics, Gavin Kennedy talks about the origins or bargaining. Now that's economic history!

Just a few more things on my mind.

This mention of growth of the Chinese hat industry sticks out at me, only because I happen to know a guy who heavily invested in hat factories in China, buying up a few factories back in May or June. He must be doing very well, now!

Here's an interesting article pointing out that helping developing countries (in particular, countries to the south of us) is beneficial to the United States, due to positive impacts on trade. It's a point that most people outside of Economics haven't understood, it seems.

While I don't agree with everything the Economic Policy Institute believes, I think their post-election letter, Wall Street rescue plan, and their agenda for "Shared Prosperty" are interesting reads.

For students of Economics

The Economics Help blog poses a question--is Economics irrelevant if there is no scarcity? The answer seems to be yes. It's an interesting thought question, certainly.

And, some links about how a degree in Economics can help you.

2.79 Quintillion.

That's Zimbabwe's inflation rate. Yowza! That's 2,790,000,000,000,000,000%. I didn't even know what came after quadrillion! That's just a ludicrous number. I half expect the Cato Institute to update the page with, "Just kidding!" Oh, and the link goes to a new blog in the econoblogsphere, Crisis Talk. When they linked their source on the 29th, it was 10 quadrillion percent.

The WSJ shows that states in which housing prices have fallen are voting for Obama, and states in which housing prices have risen are voting for McCain. I wonder if the economy as a major issue drove states to vote for Obama, or if states predisposed to voting for McCain have more responsible lenders.

Robert Shiller at the NYT talks about Greenspan's self-admitted mistake. Though Greenspan says that their models did not predict the housing bubble, Shiller points out that people hinted at it, but the warnings were ignored. Contrary views are unpopular, and when you're a policy maker, you are less likely to want to risk your job with contrary views.

Mark Perry at Carpe Diem quotes an energy economist who claims that oil will go down to $20-25. It's around $66 now, and it was $140 not too long ago. I find it difficult to believe it will go down to $20.

Congratulations, Paul Krugman, and Thank You

If you've been paying any attention to the econoblogosphere, or to a number of other news sources, you've heard that Paul Krugman won the Nobel prize. I didn't feel inclined to go out of my way to help break the news on Monday, because it was really everywhere. Though many disagree with his politics--and, he's an easier target than most economists, due to his visibility--it's hard to argue that he's not deserving.

Congratulations, Paul. You've done great work, and you definitely deserve the prize.

A couple links to Marginal Revolution, who give an overview of the decision and work of Paul Krugman, and who explain so-called 'New Trade Theory,' for which Krugman apparently won his prize (though, Krugman has explained that the idea certainly isn't new, he just put it into a workable model--it's also worth noting that he doesn't agree with all of the implications of the model... but there are problems with every model).

Mark Thoma has spent some time showing off some of Paul Krugman's work, recently, including Krugman's defense of macroeconomics (a great read for an economist, I think), and a quote from The Accidental Theorist on how to think about economics (the relevant section is even available as part of the limited preview on Google Books, page 17 of the book, or so).

The Accidental Theorist is actually the first economics book I ever read, and probably contributed heavily to my decision to pursue economics as a profession. I apparently owe much to Paul Krugman. He has written that he never had truly great students like some other professors have had, but he has certainly had an impact on me.