the rational post » history & society

one island, two worlds

The Editor — Tue, 02 Feb 2010 22:02:16 +0000

It isn’t surprising that so-called “ambulance economics” has gained mass policy appeal as the global economy descends into madness. The battlefield, after all, is no place for quiet research and careful study. But even the most pressing humanitarian disasters could use a little “clinical economics” to help decision-makers better chart out the way forward. Recent poverty relief efforts in Haiti, for instance, should certainly focus first on the bare essentials of sustenance, sanitation, and security. Once politicians and development professionals are able to stop the bleeding, however, the really critical work actually begins in terms of supporting the long-term prosperity of the country. In that spirit, any path forward should take into consideration the unique historical, geographic, cultural, and economic…

volcker rules

The Editor — Tue, 02 Feb 2010 12:20:15 +0000

A perennial hot ticket on the lecture circuit at economic clubs and grad schools around the planet, Paul Volcker’s influence is finally starting to resonate where it counts: at both ends of Pennsylvania Avenue. As his testimony in front of the Senate Banking Committee looms, the broader premise of a more responsible financial services sector pursuing sustainable, profitable growth needs to get out in clear journalistic prose from a messenger untarnished by the last 18 months of political and economic triage. This Sunday NYTimes op-ed attempts to do just that, despite the complexity of the topic. Unfortunately, it falls a little short for those either too stubborn or greedy to listen or too impatient to digest his astute commentary on the benefits and challenges…

christianity and the crash

The Editor — Fri, 25 Dec 2009 16:25:54 +0000

“America’s mainstream religious denominations used to teach the faithful that they would be rewarded in the afterlife. But over the past generation, a different strain of Christian faith has proliferated—one that promises to make believers rich in the here and now. Known as the prosperity gospel, and claiming tens of millions of adherents, it fosters risk-taking and intense material optimism. It pumped air into the housing bubble. And one year into the worst downturn since the Depression, it’s still going strong.”

Did Christianity Cause the Crash?
by Hanna Rosin in The Atlantic Monthly

IMAGE CREDIT: MARK PETERSON/REDUX

LIKE THE AMBITIONS of many immigrants who attend services there, Casa del Padre’s success can be measured by upgrades in real estate. The mostly Latino church, in Charlottesville, Virginia, has…

war games

The Editor — Thu, 17 Dec 2009 03:35:35 +0000

Scores of advanced military technologies – from radio to the Internet to GPS – have successfully made the leap from combat central to electronics expo since the dawn of the industrial military complex. As game consoles grow ever more powerful and programmers continue to push the envelope of simulated reality, consumer electronics are returning the favor. At a fraction of the cost of custom hardware designed by established global defense contractors, networked PS3s and the benefit of retail economies of scale are being used for everything from high-tech imaging systems to simulating the behavior of nuclear weapons, blurring the line yet again between war and peace…

War games
Dec 10th 2009 From The Economist print edition

Consumer products and video-gaming technology are boosting the performance and reducing the…

volcker vs. greenspan

The Editor — Fri, 11 Dec 2009 03:58:37 +0000

Much like the shifting partisan politics which rules Washington in 2- to 4-year cycles, stewardship of the Federal Reserve has ebbed and flowed between neo-Keynsians and Austrians since the birth of American central banking nearly 90 years ago. Two of the Fed’s greatest leaders and keenest minds have crafted American monetary policy for most of the last three decades, and yet they couldn’t be more different.

This is their story.

Power Brokers
How Paul Volcker and Alan Greenspan Reinvented the Fed

Economics has been called the “dismal science” for almost 200 years, remaining on the fringes of modern policymaking until a string of recessions and panics in the late 19^th century. These tremors reminded political leaders that a basic understanding of market mechanics can often prevent…

why capitalism fails

The Editor — Thu, 01 Oct 2009 05:02:57 +0000

Humanity is rarely more receptive to change than during the depths of a crisis. At various times, war, famine, and financial paralysis have offered societies around the world an opportunity to revisit their fundamental character. But just as political, economic, and social systems are descending toward chaos, a current of optimism emerges – if only for a moment. The second derivative inflects, like the speed of a car just before a crash. Avoiding Armageddon — or at least pushing it back — releases a shockwave of positive sentiment. Green shoots emerge and reformists are branded as meddling fools who almost ruined a good thing. Stability returns, trust is restored, and the economy springs back to life — with a few important exceptions.

As investors, policymakers, academics, and…

after the crisis

The Editor — Wed, 30 Sep 2009 00:53:02 +0000

Exploring the recent economic “upheaval” through the lens of history helps in at least two ways: 1) it assures us that humanity has faced similar dangers in the past and somehow lived to tell the tale, and 2) it suggests that the same entrepreneurial instincts that led us into trouble (yet again) also hold the key to restoring stability and growth. This speech by the President of the World Bank highlights a series of events that presaged the crisis — like the “emergence” of emerging economies, the popularity of leveraged finance, and growing imbalances of trade — focusing less on the outcome and more on the decades of unbridled expansion that inspired it…

Robert B. Zoellick
President, The World Bank Group

September 28, 2009 in a speech at…

reflections on a year of crisis

The Editor — Sun, 23 Aug 2009 02:56:01 +0000

A comprehensive if somewhat subjective view of the two years since the credit crisis first broke, direct from the horse’s mouth. Perhaps more interesting than any insider account of the Fed’s frantic response to the meltdown of the banking system is the degree to which the Chairman was concerned with the human impact of his macroeconomic policy-making…

Reflections on a Year of Crisis
Chairman Ben S. Bernanke

Speech at the Federal Reserve Bank of Kansas City’s Annual Economic Symposium, Jackson Hole, Wyoming, August 21, 2009

By the standards of recent decades, the economic environment at the time of this symposium one year ago was quite challenging. A year after the onset of the current crisis in August 2007, financial markets remained stressed, the economy was…

the man who crashed the world

The Editor — Thu, 16 Jul 2009 03:01:29 +0000

Another entertaining piece of journalism by Michael Lewis, this time reporting from the nucleus of the financial crisis. The premise? Buried deep within the world’s largest insurance company lay the other side of the global bet on real estate and perpetual growth. Lewis interviewed the FP traders accused of underwriting the risky default swaps that nearly destroyed the world economy while siphoning-off juicy bonuses from the comfort of their gated Connecticut suburbs. What he turned up was a far bigger fish and an interesting chorus: “while they disagreed on this and that, they all were fairly certain that if it hadn’t been for A.I.G. F.P. the subprime-mortgage machine might never have been built, and the financial crisis might never have…

ten market rules to remember

The Editor — Sat, 13 Jun 2009 20:19:03 +0000

“Bob Farrell was a legend at Merrill Lynch & Co. for several decades. Farrell had a front-row seat to the go-go markets of the late 1960s, mid-1980s and late 1990s, the brutal bear market of 1973-74, and October 1987’s crash. He retired as chief stock market analyst at the end of 1992, but continued to occasionally publish. Rumor has it for a humongous donation to Farrell’s favorite charity, you can get on his very exclusive email list. Marketwatch gathered some of Farrell’s more famous observations, and republished them as 10 Market Rules to Remember.” – via The Big Picture

1. Markets tend to return to the mean over time When stocks go too far in one direction, they come back. Euphoria and pessimism can cloud people’s heads.…

politico economicus

The Editor — Fri, 27 Mar 2009 16:06:40 +0000

In the midst of a global financial pandemic, private enterprise finds itself under the public microscope yet again — as it did during the 1930s after a century of unbridled growth and later in the 1970s after decades of stifling regulatory oversight. With this 21st century changing of the guard, the theoretical bases for free market capitalism are now under academic and legislative review. At the heart of the debate is the accuracy of the economic models taught to college students around the planet as though they were immutable physical laws. Having some basis for estimating the future is clearly a useful if not interesting intellectual exercise, but modeling the stability of the entire financial system around half-baked calculus and thermodynamics…

axis of upheaval

The Editor — Mon, 23 Mar 2009 18:38:29 +0000

While many observers are still consumed by the economic complexities of the financial crisis, historians have been busy making predictions about the ominous geopolitical implications of a destabilized global economy, rising unemployment, falling incomes, and swelling ethnic tensions. Much like its individual citizens, countries in the aggregate tend to retrench in the face of uncertainty about the future, and that could lead to some dangerously myopic decision-making in the months and years ahead…

The Axis of Upheaval
By Niall Ferguson in Foreign Policy, March/April 2009

Forget Iran, Iraq, and North Korea—Bush’s “Axis of Evil.” As economic calamity meets political and social turmoil, the world’s worst problems may come from countries like Somalia, Russia, and Mexico. And they’re just the beginning.

Seven years ago, in…

multiplicity and complexity

The Editor — Fri, 20 Mar 2009 02:04:34 +0000

“The human mind cannot grasp the causes of phenomena in the aggregate. But the need to find these causes is inherent in man’s soul. And the human intellect, without investigating the multiplicity and complexity of the conditions of phenomena, any one of which taken separately may seem to be the cause, snatches at the first, the most intelligible approximation to a cause, and says: ‘This is the cause!’ ”
— Leo Tolstoy, War and Peace, Book IV, Part 2, Chapter 1, first paragraph

i met the walrus

The Editor — Tue, 17 Mar 2009 01:28:41 +0000

“In 1969, a 14-year-old Beatle fanatic named Jerry Levitan, armed with a reel-to-reel tape deck, snuck into John Lennon’s hotel room in Toronto and convinced John to do an interview about peace. 38 years later, Jerry has produced a film about it. Using the original interview recording as the soundtrack, director Josh Raskin has woven a visual narrative which tenderly romances Lennon’s every word in a cascading flood of multipronged animation. Raskin marries the terrifyingly genius pen work of James Braithwaite with masterful digital illustration by Alex Kurina, resulting in a spell-binding vessel for Lennon’s boundless wit, and timeless message...”

underground economies

The Editor — Thu, 15 Jan 2009 22:07:48 +0000

The existence of black markets in virtually every economy on the planet is a testament to human resourcefulness and natural entrepreneurship. For those that are building tunnels under Gaza’s border with Egypt, $100,000 and a few months work can generate up to $10,000 a day in fees, and help to provide critical supplies and less critical desires into the struggling Gaza strip. One economist has estimated that roughly 90% of the annexed economy is driven by these covert smuggling operations. Unfortunately, along with tea, cows, washing machines, and gas flow AK-47s, drugs, and anti-aircraft missiles as soaring Gazan demand meets profitable Egyptian supply…

Photo Essay: Gaza’s (Literal) Underground Economy
By Preeti Aroon in November 2008

Since Hamas gained control of Gaza in June 2007, Israel…