What a difference a few months make

Posted By Daniel W. Drezner Sunday, September 21, 2008 - 9:44 PM Share

Back in May I attended a conference about American foreign policy from 2009 onwards. Here's a link to what I said,* but basically what I said is that global markets for capital, energy, food, and carbon emissions were badly dysfunctional. I remember being struck by the fact that I was the most optimistic of the panelists, and I was pretty damn gloomy. I bring this up because this Tyler Cowen quote perfectly captures how I'm feeling as of late:

[A]t the end of the day it is hard to escape the conclusion that markets simply have performed horribly in a number of important regards.

More on what this portends in a bit. Given that Tyler's one of the more optimistic economists I've met, however, this is a damning quote. * As is typical at these kinds of conferences, the economics-themed panel is always scheduled last. This can be pretty annoying, since, typically, it's only after the political economy panel that the rest of the attendees realized that they aren't going to be able to implement many of their more grandiose grand strategies.

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JOHN JENKINS

11:14 PM ET

September 21, 2008

That quote is simply not true

That quote is simply not true (and your cutting off the first half of it is misleading about what Tyler said). We don't know how the market did, because no market had a chance to do anything. The federal government was deeply involved in the Mortgage crisis that precipitated the current problems. Without all of the ill-advised mortgage lending that was propped up by the government, we wouldn't be where we are. In fact, the market behaved quite rationally with respect to what were de facto government backed loans, it's just that no one ever expected that guarantee to get called.

ELI RABETT

2:16 AM ET

September 22, 2008

markets are not people. It

markets are not people. It is the people who have redefined stupid and risky behavior.

ERIC

5:03 AM ET

September 22, 2008

Well, "perfect" market

Well, "perfect" market systems probably aren't that likely, even if we had the "perfect" set of regulation (or deregulation) policies.

People don't really behave that rationally. We've got a very long and disturbing list of cognitive biases which make us vulnerable to all sorts of bubbles, scams, stupid gambling, and bad assessment of risks.

Here's a fun list: http://www.healthbolt.net/2007/02/14/26-reasons-what-you-think-is-right-is-wrong/

Too bad this particular Black Swan seems to be ushering in a new Glorious Era of Socialism (that's one really odd Black Swan, this is at least nominally a "limited government" Republican Administration!) I can't wait to see the 5-year Plan that will follow.

Sigh.

SJC

3:42 PM ET

September 22, 2008

The markets are sounding a

The markets are sounding a lot like my ex-boyfriend.

For the record it was a good panel. I think I was more disappointed that there wasn't going to be any more food.