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Harsh Predictions about the Future

Posted by: Michael Mandel on March 30

I’m at a conference on the Council on Foreign Relations, looking back at the Great Depression and the New Deal.

One speaker is Ed Prescott, 2004 Nobel Prize winner. He said:

I do predict the U.S. will lose a decade of growth. Marginal tax rates will be increased. Productivity-depressing policies will be adopted.

When asked what we should do noww, he said (more or less exact quotes, based on my rapid typing):

Don’t subsidize inefficiency. Cut tax rates to get people to work more
This financial stuff is much ado about nothing. I don’t see any reason for the taxpayers to bail out Goldman Sachs in a roundabout way. Let these businesses go bankrupt. They gambled, they lost. That’s part of life.

I’m not necessarily agreeing with him, but it’s an interesting position.

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Reader Comments


March 30, 2009 10:39 AM

One think the tax-cut crew don't seem to get is that taxes get priced into labor cost. That is, if you cut income taxes, you might get more jobs at the low end, but I don't think it is very effective at raising wages.
But since corporate tax rates are also income taxes instead of sales taxes, shifting the tax burden to corporations is always going to be tremendously difficult in real terms.

I'd love to be able to leave these banks out in the cold, but so far the argument has been the collateral damage would be terrible. Is Prescott arguing that's not the case, or is his position solely principles-based?

Brandon W

March 30, 2009 12:29 PM

Only in La-La Land of Theory will tax cuts get people to work more. Maybe, if this crisis will teach anyone anything, it's that reality and the theories don't align any longer. Tax cuts don't get people to work more. An opportunity to do something they find meaningful and worthwhile will get people to work more. A genuine opportunity to increase one's quality of life might get someone to work more. Tax cuts that result in a few dollars a week to most people - at the cost of a deteriorating infrastructure - won't incentivize anyone to work harder.

One thing I think you'll see out of this downturn is the mass realization that how we were living, the quantity of consumption, the living on ever-growing debt is irrational and unsustainable. There is also a shifting perception that began even before the crisis (but is being expedited by it) that time is NOT equal to money. Time is worth MORE than money. When time and money are not equal, the math on which we have run things breaks down.

Our economic system is in a major upheaval at the highest, most meta- levels. The old ways of understanding it, predicting it, and planning in it are becoming as obsolete as cassette tapes. Mr. Prescott and many others - including our government - better start realizing this soon or risk being irrelevant if not completely nonsensical.


March 30, 2009 03:14 PM

The US is struggling to convince the rest of world that its financial system is credible and able to heal its wounds. The US needs it, the rest of the world needs it. This is no time for such oversimplified proposals (i' m talking about Prescott's phrase "they gambled, they lost"). Caution is required.
Some sort of financial system will always be the heart of our societies. Our current financial system has become too complicated, too opaque, full of useless and distorting elements. In this sense, I agree with Prescott about "financial stuff that is much ado about nothing".
Cutting tax rates? Hmmm, it depends on whether our goverment is enlightened enough to use our taxes for a better collective future.


March 30, 2009 03:55 PM

"Let them fail" didn't help Hoover very much. Neither did ignoring the financial sector.

DeLong's comment,


March 30, 2009 06:10 PM

I am beginning to think that no large country (greater than 10m population) can ever get their per-capita GDP above $60,000 a year in 2009 inflation-adjusted dollars. The US is currently about $45,000.


Because as prosperity rises, more people have the luxury of becoming leftists. They drop out of productive roles and become 'activists' on welfare who work towards increasing taxes, punishing the private sector, opening the borders for unskilled illiterates while driving out highly skilled immigrants, reduce the quality of schools by replacing math/science education with indoctrination, and tie the hands of policemen, thereby ensuring higher crime rates and lower business formation (not to mention the death of 4 white cops in Oakland).

All of the above chokes of economic prosperity.

When society was poorer, the 60-year-old leftist women at Code Pink instead had to work in the fields, in factories, or as nannies and governesses. They had no luxury of being being parasites on the public dole.

Thus, perhaps it is an inherent limitation in human nature that no human society can ever get to a per-capita GDP of $60,000 a year. The ratio of leftists to productive people just rises to an extent of putting a ceiling above prosperity.


March 30, 2009 06:15 PM

In other words, the process is :

1) A successful host (entrepreneurs and American private-sector workers,, defended by the US military) attracts parasites (leftists).

2) Stupid parasites (unrestrained leftists) go too far and kill the host.

3) Eventually, a new host becomes successful (China, India, UAE) and learns to thwart the parasites early.


March 30, 2009 07:55 PM

I do not know about the policies of this blog. But sometimes, the language being used is offensive, promotes hatred and therefore, the free and open expression of ideas regardless of their origin (Upist or Downist) is ultimately obstructed.
But then again, may be the Internet is offering us an excellent opportunity to train ourselves in tolerance and self-restraint by allowing anything to be published.
It is an interesting challenge.


March 30, 2009 08:57 PM

Prescott is most likely right. The reason you couldn't let the banks fail in the '20s is because of fractional reserve banking, where the more banks fail, the more the money supply falls. With our current FDIC and understanding of this money supply mechanism, I don't think that vicious cycle recurs today. Further, money supply destruction has never been an argument in favor of bailing out counterparties of investment banks like Bear Stearns, so it was no reason to step in with Bear. It is possible that new financial instruments like derivatives have made the system much more tightly interlinked, so there was somewhat of a rationale for govt-made 1- or 2-year bridge loans to AIG so that it could be broken off and sold in pieces over time, rather than going bankrupt all at once because its financial products division blew up an otherwise healthy and large company. But Prescott is definitely right that govt responses to the crisis so far will probably cost us far more than they've helped.

Kartik, you're right that parasites have grown in past societies but the coming wave of new technology will destroy the leftists in many ways. For example, rather than newspapers existing as monopolies that negotiate with employee unions, journalists will just blog online on their own and be picked up by various filters or people, once their work can be monetized through micropayments. This change of journalists from isolated employees of large corporations to self-reliant small business owners will greatly change their economic views. Adam Smith wrote about this centuries ago when he lamented the fact that as people got more specialized they tended to lose their generalized ability to be self-reliant and deal with many things, we're due for a reverse in that trend. The same will happen with entertainers, engineers, education, medicine, finance, all the information professions. This new market will be rabidly competitive and allow less scope for leftist parasites to find someone to leech onto. Empedos, I didn't read anything offensive, feel free to make actual arguments rather than complaining about how your delicate sensibilities were damaged.


March 30, 2009 10:36 PM

Ajay wrote :

"but the coming wave of new technology will destroy the leftists in many ways. "

Until 2007, I used to think that. Now, I am not so sure. This is because :

1) Blogs, for all the hoopla, still draw away only 5-10% of the MSM audience.
2) Point 1) is offset by the fact the MSM is becoming more extreme and more bold in their leftist propaganda.
3) More wealth enables more people to earn a living destroying the wealth of others, rather than having to do hard labor in order to survive. Again, the 60-year-old Code Pink women would, in decades past, be in the field, the factory, or working as housekeepers.
4) Leftist propaganda operations will inherently out-perform right-wing ones, as right-wing people have jobs and families that consume their time.
5) Leftists also dominate entertainment, where it is easy to make a corporate executive a villain (as is often the case nowadays). The villains are no longer gangsters or dictators, but rather corporate bosses.
6) Universities have become far more leftist than before.
7) Public schools have become far more leftist than before.

I think that no large country can cross $60,000 in per capita GDP, just like a mountain on Earth cannot be taller than 8 miles before it would collapse under its own weight and Earth's gravitational forces. It is a ceiling that a human society imposes upon itself.


March 30, 2009 10:38 PM


Exactly which words offend you? Terms like 'leftist', 'parasite', etc. are normal words in the English language.

No profanity has been used.


March 30, 2009 11:30 PM

I'm sorry that you've lost hope but it will happen when micropayments are deployed. Micropayments are the key because once information can be monetized, the internet can take off again. Once that happens, blogs will become the dominant publishing platform and all the existing content corporations will be destroyed, newspapers, magazines, TV networks, etc. Why work for these corporations when you can hang out your own shingle online simply by starting a blog and getting paid in micropayments? The MSM will be destroyed so their bias is irrelevant. While it is true that people can always support useless leftist organizations with their time and money, the economically literate make far more money and can easily outspend the illiterate. Entertainers have a very leftist viewpoint because they work in a market where the owners of distribution have too much power, which the entertainers can only counteract with unions. The internet has now made distribution plentiful and micropayments will make it lucrative, so their field will change entirely to something like the blog model, from broadcast to unicast. The same with education, it will be destroyed by online learning. What's to stop some teenager from learning online at much cheaper prices and using his online certification to compete with the kid with the college degree? The fact that males have already been skipping college at much higher rates, while females enter at higher rates, is a great leading indicator of this as males are the first to jump into risky new trends, while females generally follow the old, established paths. I don't think your GDP per capita figure means much as it fails to capture the benefit from how we used to have to pay for vinyl records to be stamped but can now just get mp3s from our friends. Regardless, I claim we are in for an explosion of growth once the internet takes off again, with micropayments as the catalyst, and the problem won't be how to keep growth chugging along but whether we're sure we can handle the rocket ride up.


March 31, 2009 01:48 AM

I am not qualified to become the judge of anybody and you are certainly not obliged to agree with me. I will stick with my initial choice to be generic.
I should make an effort to make actual arguments and stay with the subject of Mike's post regardless of what others do. Given the opportunity, I do think that micropayments is an interesting proposal.


March 31, 2009 02:16 AM


The "Web 2.0" hype and much of what you're looking forward to boil down to the combination of a flattening of the competitive landscape (due to low costs of entry for many kinds of knowledge work) in combination with a restructuring of today's big content providers. This window of opportunity is real and large: but I still think you oversell its fundamental transformational effect because I actually agree with Karthik that you're overestimating the diversity that will result (relative to the diversity in the "old" economy).

Mike Reardon

March 31, 2009 02:28 AM

Banking came close to stopping once, why push it over the edge in one ideological correct move that leaves investors and bondholders only getting pennies to carry on with. I would think if bondholders and insurers are substantially harmed annuities and pensions will not have supporting capital remaining to meet any of their obligations.

And I would think bankruptcies by the major banks, would end with settlements of interwoven financial positions going ultimately into international courts to unwind conflicting national interests. You would have to think those obstructions would be in place until resolved.

Ed Prescott as far as I can find was one of the 100 economists signing on with the McCain campaign against Obama’s tax policies, and latter with the 250 economists signing onto a CATO Institute rejection of Obama’s Stimulus Plan and he has been a hard core tax cutter as base policy. That will not have any real effect for the next four years so what is gained in collapsing any hope for stable banking.

Mike Mandel

March 31, 2009 05:41 AM


I monitor the comments on this blog closely, and I delete anything which is a personal insult. I am very happy to report that I have had to delete very few comments for that reason.

On the other hand, sharp economic discussion is right on point, as long as it doesn't cross over the line.


Brandon W

March 31, 2009 08:12 AM

It appears to me that you believe in a vicious world where everyone is out to destroy one another with the intent to hoard resources. While this may be true among hyenas, humans stand at the top of the Darwinian pyramid because of their ability to collaborate and cooperate in peaceful societies. Humans generally care about other humans. Perhaps you call this being "leftist", but I simply call it being human. There are certainly those who are out to destroy others like hyenas, and there are certainly those that take advantage of society's goodwill; but most of us don't live in the world of such extremes. Attempting to run an economy to satisfy either of those insane extremes is irrational and impractical.

Dave L

March 31, 2009 08:55 AM

Prescott is another member of the "I-don't-know-what-the-question-is-but-tax-cuts-are-the-answer" club.

Does he REALLY think that we're facing a supply-side crisis, and that our problems can be cured by giving people more incentive to work?

His recommendations, if applied, would shove the economy into a debt-deflation death spiral. Much as I would love to have the satisfaction of seeing Citi go down the drain - they've certainly earned that outcome - I'm pretty sure that we would not enjoy the collapse of the financial sector.

"This financial stuff is much ado about nothing." -Hah! Everyone reassured now? I mean, the guys got a Nobel Prize, in Economics!!!


March 31, 2009 02:24 PM

Blame Code Pink, good idea. They have obviously been in power for the last thirty years. Like a so sort of secret society (Illuminati or maybe a funded by a Rothschild or Soros).

They have behind all bad things in this country especially the Gramm-Leach-Bliley Act that deregulated the banking industry. They also decided to not regulate the derivative market (or maybe that was that leftist Alan Greenspan, not sure).

Those leftists are everywhere ask Senator Joe McCarthy. I think we should have a congressional hearing to see if we get those damn commies. Forced labor would do them good.

There is no left in the US. None. Zero. When people can call Obama and the Democrats socialist and are not laughed at, there is no serious left.

But blaming leftist for the market crash and the republican depression is a good try. I am sure many people in the US will agree. Mostly because they do not know any better.


March 31, 2009 03:30 PM

yeah all those leftists down on wall street and in the Bush adminsitration really did a number, and of course those leftist cops in Oakland who executed that handcuffed kid. Funny no one blinked when Bush sent billions out of the country to Iraq.


March 31, 2009 03:37 PM

It's important to keep in mind that many of those Zombie Banks we've been hearing about recently are the actual owners of the privately owned The Federal Reserve Bank. So we have the Zombie Banks who caused all these problems for the people of the United States bailing themselves out through THEIR privately owned Federal Reserve WITH OUR MONEY. I think we should nationalize the Federal Reserve and cancel all that interest debt we owe those private bankers. Why in the world do we need to pay interest to THEM when our government could create its' own money interest free. The United States of America can no longer afford this CRAZY arrangement that was crafted by Bankers.


March 31, 2009 06:43 PM


It would be great if you are right, but I don't rate the probability that high.

1) Some level of micropayments already exist, in terms of blogs using Google Ads.

2) Since the technology is not anything so profound, why hasn't the micropayment paradigm already spread?

Brandon W,

It is correct that normal people seek to create, and seek to innovate. The problem is that leftists seek to tear down their fellow man, and would rather be parasites than producers/builders.

1) A successful host attracts parasites.
2) Unwise parasites go too far and kill the host.

Free markets and personal responsibility are the only paths to prosperity, and that has always been the case.


The market began to crash precisely when Barack Obama began to have a clear lead in the polls. Weak stock market years coincide exactly with Democrat control of congress, and strong years coincide with Republican control.

Plus, leftists dominate the media and education complexes, thereby destroying productive values.


You would not be worthy of a response, except that the fact you think the 4 Oakland policemen are villains and the murderer of them a victim, shows why morally-inverted leftism is the death of any society.


March 31, 2009 08:03 PM

March 30, 2009 06:10 PM
"I am beginning to think..."

It's about time you started. Now please practice some more before you post more of your nonsense.


March 31, 2009 08:21 PM

Kartik, you're right that Google Adwords is essentially a weak form of micropayments. The difference is that by compelling the advertiser to pay for content and not the consumer, you only get .3 cents per article rather than 3 cents. It is hilarious how the idiot web 2.0 crowd will whine about how the tax system isn't "progressive" enough, then use an advertising model where the content for 1000 people is paid for by the one idiot who was dumb enough to click on an ad and buy something at an inflated price. The minimal money from online ads is why newspapers get less than 10% of their revenue from online advertising and are now going out of business. I agree that the technology is easy to implement, I think it only hasn't happened because of deep stupidity on the parts of those involved. Technologists tend to lean leftist and are fairly economically illiterate, look at how they all dismiss a payment system for email to weed out spam with dumb, economically illiterate arguments. The economically knowledgeable who understand the need for this, a group which numbers in the handful of people, assume that it isn't technically feasible because they're usually technically ignorant. Ultimately, micropayments are a new way of paying and looking at the world that has only become possible with widespread technology beginning in the '90s: what stops it is that people cannot break out of their old mindsets and the botched attempts of past technologists who didn't focus on ease of use and making it seamless. I'm trying to build a micropayments frontend right now, working with a startup that's trying to raise series A funding so I think it can be done.

Brandon, if you really believed in cooperation, you would allow private charities to fulfill their role and wouldn't be talking about "running" economies. The fact that you likely want the govt to step in and "fix" income inequality or whatever means that you don't really believe in society's goodwill, which is why you want govt guns held to taxpayers' heads to force them to "give" to others.

Cmac, it is well known among those who aren't economically ignorant that the corporations formed after the Gramm-Leach-Bliley act were more diversified and have thus done better in this financial crisis. If you don't know how dumb regulations that encouraged securitization were a cause of this crisis, you really should read about that before asking for more regulation. Your notion that regulators can somehow anticipate all stupidity and forestall it has no basis in history or reason.


March 31, 2009 10:22 PM

Didn't we just try that?

Cut taxes then as the economy collapsed from the concentration of wealth let Lehman go under? That worked well.

And didn't this crash just completely disprove his quantitative general equilibrium business cycle theory?

Didn’t he say a while back that by following the policies of the last 8 years nothing like this could ever happen?

Good thing the Chinese don’t believe his stuff, maybe that’s why they are getting so rich & powerful.

And we followed his advice for the last 8 years and we are poorer, weaker and given up our dominance of the world.

What do they call it when people refuse to face reality?

Of course our future is going to be rough, we are in decline because we followed his theories and we will NEVER recover.

BTW-did anyone else make $ out of this ordeal besides me?

He certainly didn’t and that also proves the point.

your kids

March 31, 2009 11:01 PM

If the US government really wanted to put the trillion+ dollar bailout tab to good use they should have done many things different.

1) Alot of people have been blaming the free market but for the free market to work it has to correct itself thus we should allow the poor management decisions to have ended these poorly run business. a) I know what you're thinking, if that was done then America's financial industry and reputation would have been globally finished, but ask your self this... Why didn't we fund our financial institutions that made good decisions? PNC Bank for one is a great example of a bank that could have been given financial assistance to buy out other bad banks. Any smaller regional bank that made good decisions could have been propped up to a more national level, but you know what it just doesn't help that treasury/SEC/and other government officials had questionalble ties to these failed institutions that did everything they could to retain their multimillion dollar bonuses. Even Chris Dodd, unbeleivable, Washington DC is thoroughly corrupt!

2)With all of that money they could have nationalized some industries and made them profitable enterprises such as: alternative energy solutions, medical insurance, transportation, basically spend money to make money not spend money so that a corrupt CEO can buy that new house in the Cayman islands.

u s*k babyboomers, trust me my generation is not happy with you guyz

Marc Smith

March 31, 2009 11:40 PM

Ajay - You under estimate AdSense. Radio only worked because of... (wait for it) advertising. Same with TV. The internet is no different.

Micropayments are your dream. Good luck with that...

You insult many people. Some people do click on ads because they're interested in the product. They, according to you, are all 'idiots'. I myself clicked on an advertisement for an external 2TB drive from LaCie with Firewire 800 on sale for US$214 two weeks ago. I bought 3. Heck, it's over US$250 (many are US$300 or more) for a bare 2TB drive. I find many things, well priced, through internet ads. I guess I'm one of those 'idiots' who click ads when there is a product that interests me.

Disclaimer: I put my first web site on the internet in January 1996. I make my living these days with a couple of web sites using both AdSense and ads by companies which contact me wanting to advertise on my sites. Ads I sell to companies are 'presence' advertisements, and I make that *very* clear to advertisers. I do not count clicks or anything like that. There is a set monthly fee and it has nothing to do with 'clicks'. I also have an ad limit on my sites. There are several companies waiting to get an ad in, but the current advertisers keep renewing so they have first choice.

Free - A Business Model - My sites specifically state that there isn't any copyright on the materials. Anyone can download my works and use them as they see fit, *other* than in a resale type of situation.

As to the original topic, I agree that the companies should all be allowed to fail. To go bankrupt. Kaput. Isn't that what capitalism is all about? Survival of the fittest == Capitalism.

Disclaimer 2: I really don't have a horse in this race. When Bush was elected I changed all investments into physical gold coins which I keep at home and have done OK. I never keep more than US$3000 in my checking account and I n]do not have a savings account. Every month I drain my checking account by cashing a check and I keep the cash at home as well, or I buy some more gold coins. I have absolutely no debts and I own my home and property outright. I can handle my own finances. The only thing I have lost is equity in my house and property. But - Since I bought this place to live in, not to resell or to use for collateral to take on debt, it's sale value makes no difference to me.

I mention this because I can not name one friend of mine who hasn't lost quite a bit in this orgy of fraud which has enveloped the US financial system starting in the early 1980's. The chant of 'deregulation' continues to lead to financial disasters. All were stock market and housing people who believed that there was, and would not be (in their life time) a downside to either the stock market or the housing market. Even my own family - Everyone else saw me as the 'liberal nut' of the family. I've watched as they've taken losses exceeding 40% of their net worth (and that's AFTER their Enron losses, which were significant for a couple of my family members).

Call me 'economically ignorant'. "Cmac, it is well known among those who aren't economically ignorant that the corporations formed after the Gramm-Leach-Bliley act were more diversified and have thus done better in this financial crisis." Citation / facts needed. I don't believe your statement can be backed up by quantifiable data.


April 1, 2009 12:28 AM

Marc, the difference between radio/TV and the internet is that the internet is much more advanced technology. How do you setup a pay system for terrestrial radio? When the cable company has a monopoly on the cable system and there's no such thing as a DVR, how do you skip the ads during programs? Well, the internet allows us to implement easy payment systems for everything and people are able to impose their preference not to view ads, with browser adblockers and DVRs. It's possible that some negligible minority will always view ads in order to pay less but I believe that the advertising model will die on the internet. It's well known that the people who click on banner and other ads are not the brightest bunch. By making them pay for everybody else's content by including the lumped cost of everybody else's content in their purchase, you're essentially imposing a stupidity tax. A few people may actually benefit from being advertised to, but Yahoo and AOL subscribers are prized by advertisers because their conversion rates are much higher. Gee, I wonder why that is: could it be because they're the dumbest people on the internet? How exactly do I underestimate AdSense? It is well-known that Google makes almost no money from it, making almost all their money from their Adwords search ads instead. I have no problem with ads working for you, as long as you don't deny that it's generally the idiots who click on them and have no problem with that. As for your investment situation, I'm glad you did well but I find your impetus of the Bush election crazy. The orgy of "fraud" and deregulation that you condemn has also coincided with a great rise in material wealth in this country. Most people see that connection, I'm sorry you do not. I'm also sorry if your family didn't realize that market gains don't appear out of the blue, that there's risk to go with those gains. As for Gramm-Leach-Bliley, my claim is very well-known and widely accepted, I certainly didn't come up with it:

Marc Smith

April 1, 2009 12:36 AM

CORRECTION to my earlier post: "there was, and would not be (in their life time) a downside" should be "there would not be (in their life time) a downside"

Marc Smith

April 1, 2009 01:17 AM


"It's well known that the people who click on banner and other ads are not the brightest bunch."

Citation/data needed.

"I believe that the advertising model will die on the internet"

Good luck with that.

"How exactly do I underestimate AdSense? It is well-known that Google makes almost no money from it, making almost all their money from their Adwords search ads instead."

That is silly. Google sells ads (AdWords) and shares part of it with publishers like me through AdSense, and also makes money on their search url. You can't divide the two.

Look - You have an agenda for micropayments. Apparently it is your business model. Have at it.

Where you continue to 'turn me off' is in your characterization of everyone who clicks an ad as an 'idiot' or 'stupid'. Umm, well, the same can be said of any medium, including TV and radio. Anyone who buys a ShamWow is an impulse buyer. That does not mean every TV and radio and newsprint ad reader is an 'idiot' or 'stupid'.

"As for your investment situation, I'm glad you did well but I find your impetus of the Bush election crazy."

I won. I bet you lost. Call me 'crazy'. Bush ruined the only 2 businesses he ever actually had much say in. It was obvious when he said he'd run this country like a CEO that he would destroy what ever he touched. Imagine what the situation would be for most people had Bush got his way and gotten Social Security into the stock market (aka Casino, aka Gambling).

"As for Gramm-Leach-Bliley, my claim is very well-known and widely accepted..."

It is widely accepted that Gramm-Leach-Bliley allowed many financial institutions to gable, unregulated, in search of short term profits, and look where that got the economy. You try to cite companies formed AFTER GLB Act. What about the companies that existed at the time? It did nothing less than allow them (and they're the biggies) to run wild.

You say stuff like 'most people'. You set up straw men to shoot down just as Reagan used 'Welfare Queens'. Who is 'most people'? Citation, please.

Marc Smith

April 1, 2009 01:24 AM

Ajay: "The orgy of "fraud" and deregulation that you condemn has also coincided with a great rise in material wealth in this country. Most people see that connection, I'm sorry you do not."

Most people are seeing a serious decline in their 'wealth', their standard of living and their future. The "great rise in material wealth" you cite has evaporated for most people. Kaput. Gone.


April 1, 2009 02:26 AM

How would you prove that they're not the brightest bunch with data, you want me to track down all their SAT scores? I remember some study that claimed to find something to this effect, that the poorest or dumbest tended to click on ads. You're on your own if you want that link though. Why can't you divide AdWords and AdSense? Google clearly did and the two don't have any sort of symbiotic relationship, so I don't see any rationale for why you think they should be lumped together. Considering that I've never made a cent off of micropayments, while you make your living off of ads, your agenda is the one more in question. I do think that people who buy stuff just cuz it was on the TV or radio are stupid. However, classified ads represent a real market for information that has now been taken over by craigslist, though unfortunately done very cheaply and badly by them. I didn't lose when Bush was elected as I was just joining grad school then and haven't had savings to invest. I did see that the markets were overvalued in 2004-5 however and warned people to stay out, so I certainly wouldn't have bought in. Over the long run, SS will be much better off being invested in markets, rather than continually being raided and paid for with treasuries, for which we will need to start raising taxes to pay off this coming decade. I'm not sure why you think the GLB act allowed more people to gamble, as you provide no specific reason. I was referring to the fact that GLB removed restrictions against merging certain types of financial institutions, and that those that did were the most stable recently. "Most people" refers to the fact that opinion surveys show that most people attribute the great increase in wealth to deregulation initiated by Reagan and continued by his successors. It is funny that you believe that a 20% drop, most of it paper wealth equities that are now undervalued, after a quarter-century in which household net worth appreciated by 4-5 times (check out the Fed's Z1 releases) means that people are wiped out. Innumeracy and greatly exaggerated claims are the easiest signs of sloppy thinking.


April 1, 2009 02:33 AM


You are clearly Nygrump, who has lost the debate and can't do more than hurl childish barbs in a display of your defeat.

You have shown how leftists are non-thinking, proving my point superbly.

By condoning the murder of 4 white Oakland police officers, you are a sicko.


I fully agree that many technologists are leftists and hence economically illiterate. But a business model should still form around the scenario that you outline for micro-payments.


April 1, 2009 11:27 AM


I hate to waste my time, but I'll rise to the bait because I can't let this nonsense go by without a token defense.

If you disagree with leftists, fine. But leaving aside any basic personal decency, your contemptuous diatribe against non-thinking leftist parasites is not intellectually honest.
Many liberals are intelligent and clear-thinking. If you doubt me, try reading Obama's books for some examples of exceptional perspicacity. Do you really think Obama is a parasite? Maybe you do. But what could be more liberal in the first place than the mere existence of public schools? Is basic public education parasitic?

Surely, money attracts parasites of all kinds. But is leftism the province of the well-to-do? In America, yes. But certainly not in South America or in many other times and places in history.

The conservative philosophy is simple, elegant, and unambitious, and thus easy to defend from a logical standpoint. But the typical liberal wants more than the minimum in human caring and responsibility. The people who just want someone to give them a free lunch tend to get lumped together in the same bucket as the people who just want more personal responsibility, more equal opportunities, and to clean up some of the second-order effects of imprecise ownership of items in society. How much thought have you given to those distinctions?

And while terms like parasite and sicko are not profane, they are not in any sense respectful. Therefore they should not be thrown around lightly in polite conversation. So please, show others some courtesy if you can't summon respect.

Brandon W

April 1, 2009 12:32 PM

Ajay et al,
I just want to defend myself from your accusation that I want the government to run everything or take everyone's money. Not true. As far as taxes go, I believe taxes should be restrained as much as possible, and frankly, the whole system needs a severe overhaul; but I also recognize that taxes pay for infrastructure. That infrastructure includes everything from roads and public education to the legal system. Without that infrastructure we would not be the wealthy nation we are, and those who have succeeded would not have been able to reach where they have. Without that infrastructure business owners don't have customers with enough discretionary income to buy their products, roads on which to get to the store, or employees capable of handling the "knowledge" work of the modern economy. Infrastructure matters, and it has to be paid for somehow. A perfectly fair system would have to tax the users of the infrastructure equitably for their usage. Doing that would be tremendously difficult. The other reasons for the government to spend money are to act as a safety net and provide public services that we have requested of our democratically elected government. It is a democratic republic that we live in, after all. We ought to minimize taxes, but we also need to provide (and maintain!) infrastructure while also providing public services requested of the citizenry. The point where we can best balance all these issues is the "perfect" point. Of course, we don't all agree on how many public services a government should provide, but this is why we have elections and a democracy.

I personally support the elimination of the entire federal tax code, replaced by a single payment made by each state to the federal government (prorated to population) that would support Constitutionally mandated defense and infrastructure by the federal government. Let the states compete with each other for citizens and businesses by working out what combination of services, infrastructure, and taxes (or lack of taxes) will best work for their local population. What that single payment should be could be decided in Congress. Social Security, Medicare/Medicaid, and all other federal services would be divested out to the States.

I hardly think any of my perspectives are extreme, or leftist.


April 1, 2009 04:34 PM

The 11:27 AM comment is impersonating me. That is how low a leftist who loses a debate will sink.


April 1, 2009 06:12 PM

that was me and a typo. I was not deliberately hiding my identity. Your interpretation of events adds to my case.


April 1, 2009 07:26 PM


On the contrary, you have strengthened my points.

Parasite is a word in the English language, that accurately describes many leftist groups.

You excuse those who say the murder of 4 white policemen is OK, but when someone correctly calls that person a 'sicko', you rush to defend the cop-hater. You are morally inverted to the same degree, and I would gladly seek your disapproval.

Mike Mandel

April 1, 2009 07:33 PM

Cool it, folks. You can make your points without negative personal comments. I like that people from a wide range of politics feel welcome here, and I'd like to keep it that way.

Thanks very much.


April 1, 2009 08:43 PM

I knew I was wasting my time. Of course, Mike.

Joe Cushing

April 1, 2009 09:42 PM

I agree with him.

One thing you have to keep in mind is that on a macro level, economic collapse does not destroy much real wealth. It just causes it to change hands. So if the banks go bankrupt, wealth is transferred from equity/debt holders to buyers of the assets that work collateral. In other words, wealth in today's society is being transferred to those who are buying houses at rock bottom prices. The house fills the same function if it is worth $500,000 or $250,000. It has no more value at the higher price than at the lower. The only value that is lost is the value that is lost to depreciation without replacement. This happens when the economy stops making new stuff faster than old stuff wears out. The faster we can clear the market, the faster we can get to making new stuff. So let the whole thing collaps and make sure economic freedom is maintained. As long as we are economicaly free, we will do fine.


April 1, 2009 11:08 PM

Btw, I don't excuse cop-hating. I'm just skeptical that anyone here actually supports it.

Thomas Esmond Knox

April 5, 2009 02:41 AM

Speaking of Goldman Sachs, they are up over 100% from their recent low; same for Wells Fargo. Neither was any chance of failing.

Prescott's opinions on macro-economics are always worth considering- of course Michael Mandel (God bless him) hasn't given us the full text here.

In my opinion, Prescott is more a mid- to long-term guy rather than a short-term guy.

Thank you for your interest. This blog is no longer active.



Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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