LOONY TUNES no 171
Larry Berman, co-founder of ETF Capital Management, posts (11 September) on the Globe and Mail HERE
“Central bankers seem to be more swayed by recent events than longer-term trends. This tends to make policy making an exercise in looking in the rear-view mirror. It’s much easier to defend a position in front of Congress and investors if all can see the “reason” why. This has, over the years, led to a myopic focus for governing monetary policy: Central banks are trying to micromanage the natural ebb and flow of the global cyclical economy – they are at the mercy of Mr. Market more than ever in history. We likely need more of Adam Smith’s invisible hand and less do-whatever-needs-to-be-done monetary policy. European Central Bank president Mario Draghi’s statement this week that the ECB did not even consider more accommodation might be an eye-opener and a message to Brussels that abundant fiscal policy (even more debt) is the next step because he is running out of qualifying bonds to fill his quantitative-easing program.”
What is the difference in Larry Berman’s fantasy world of leaving it to Adam Smith’s ‘invisible hand’, i.e. do nothing, and don’t “do-whatever-needs-to-be-done monetary policy”, i.e. do nothing?
Kent James, an East Washington resident, posts (10 September) on Observer-Reporter HERE
“Central banks suffer from recency bias … do you?“
“Adam Smith’s “The Wealth of Nations” was written in the 1770s in an effort to overthrow the mercantilist policies of the British government, which Smith saw as stifling economic growth by limiting trade.
Smith’s ideas led to the growth of capitalist economies that have created unprecedented material wealth. The political economist and philosopher Henry George argued that if free trade were truly free, with neither party forcing the other to trade, of course it would be beneficial for both parties; if it were not, then one party would back out.
But lately, free trade has come under fire from the leading presidential candidates, because of its impact on American workers
“Adam Smith’s “The Wealth of Nations” was written in the 1770s”. No. it was written over a long period between 1760 to 1776, when it was finally published, followed by 5 editions from 1778, 1784, 1786, 1789, 1791.
“Smith’s ideas led to the growth of capitalist economies that have created unprecedented material wealth.” No. It coincided with the growth of what became “capitalist`’ economies (a word first used in 1854 in English).
Smith’s strong advice was to abandon the prevailing “mercantile” economies, which was ignored and broadly remains so because they fostered colonies, wars between the mercantile powers thoughout the 17th thru to the 20th century.
Dartmouth College posts (11 September) on Science Daily
"Study finds STEM workers more likely to find jobs in denser STEM labor markets”
“This is an important question as many of these STEM job agglomerations are associated with progressive, meritocratic cultures. The study asks if these places play by a different set of rules when it comes to race and gender. When it comes to STEM job matching, they do not. Women and racialized minority STEM graduates are indeed better matched in STEM clusters, but many others are too. That STEM agglomeration hardly improves the matching prospects for women, blacks, and Latinos relative to white men, signaling that no invisible hand can mediate the solution to these labor-market inequalities.”
David Taber, author of the Prentice Hall book, "Salesforce.com Secrets of Success,", and the CEO of SalesLogistix, focused on business process improvement through use of CRM systems, posts (12 September) HERE
Has your cloud consultant gone crazy?”
“If you didn’t know better, you’d think this was all great: lots of competitors lowering the price bar and fighting to improve themselves while the invisible hand of the market does its thing. The problem is, economists know that invisible hands cannot protect against stupidity if everyone is acting stupid. That’s what causes a “race to the bottom,” where nobody wins.”
Martin Sandbu posts (12 September) in the Financial Times HERE
Free Lunch: Algorithm Alert
“Recall Ronald Coase’s insight into the reason why companies exist. It is a human organisation that reduces the costs of many of the myriad transactions economic activity involves. The boundaries of the firm are likely to be drawn between those transactions that can be done at less cost by a centralised decision structure and those more cheaply organised by the invisible hand of markets (LL emphasis). That relative cost difference depends a lot on the relative ease and importance of instructing and monitoring those involved in the activity as employees versus contractors. The computer revolution is altering this balance significantly — hence the change in the type of work available that O'Connor and others chronicle.”
Peter Rosenstreick posts (12 September) on FX Street HERE
“So instead of aiming for an “invisible hand” strategy, Fed policy regrettably has become the pure determinate of asset pricing.”