More engineered dissention...

...amongst the Eunach Class, with no self-awarenss of the ultimate epistemological questions...

(from Paul Krugman's Imperial sounding board)

Wren-Lewis’s first post concerns the obsession with microfoundations. As he says, this obsession is at this point deeply embedded in the academic incentive structure:

If you think that only ‘modelling what you can microfound’ is so obviously wrong that it cannot possibly be defended, you obviously have never had a referee’s report which rejected your paper because one of your modelling choices had ‘no clear microfoundations’. One of the most depressing conversations I have is with bright young macroeconomists who say they would love to explore some interesting real world phenomenon, but will not do so because its microfoundations are unclear.

So where does this come from? The “Lucas critique” has been a big deal in the profession for more than a generation. This says that even if you observe a particular relationship in the real world — say, a relationship between inflation and unemployment — this relationship may change when policy changes. So you really want to have a deeper understanding of where the relationship comes from — “microfoundations” — so that you won’t be caught off guard if it does change in response to policy.

Ants go marching...

...Fitch follows the "early adaptors" into the misguided notion that the credit rating of the U.S. is somehow dependent on its ability to "get" dollars from foreign "creditors" in order to satisfy its dollar-denominated bonds.

July 19 (Reuters) - Fitch Ratings Service said on Thursday
it affirmed certain municipal ratings directly linked to the
United States 'AAA' sovereign debt rating, outlook negative.
    Short-term ratings that are directly linked to the
creditworthiness of the United States or its related entities
are affirmed at F1-plus, Fitch said in a statement.
    Included are the following categories of debt:
    -Debt obligations whose repayments are guaranteed by the
United States; 
    -Pre-refunded bonds whose repayments are wholly dependent on
'AAA' rated United States government and agency obligations held
in escrow;
    -Municipal bonds that are wholly secured by 'AAA' rated
United States government and agency obligations held in escrow.

Philomath

I have, since the creation of this blog, referred to myself in my profile as a "philomath", which means "lover of knowledge".

Never.  Stop.  Learning.

For this, the below sites have been extremely useful.  Its always beneficial to stretch your understanding of things, and to compare and contrast how similar tools are used to engage extremely disparate problems.  The history of Finance and Economics can accurately be described in the same fashion...a history of the conflict of mechanisms.

Coursera
Khan Academy
MIT (open source)
Stanford (open source)
Code Academy

Galbraith's Bezel...

Making the rounds in large banks, and even sunny San Bernardino...

July 13 (Bloomberg) -- Law enforcement officials are
investigating possible crimes in San Bernardino’s city
government, which almost drained special funds to prop up its
budget.
     The near-bankrupt state of the community of 209,000 east of
Los Angeles came to light when a new finance director discovered
that previous officials shifted money for workers-compensation
and liability insurance to the general fund, said Andrea Travis-
Miller, interim city manager.
     “The city has relied on a whole variety of one-time
measures to balance its budget,” Travis-Miller, who began her
job in May, said yesterday. “There have been transfers to the
general fund with the expectation that they would be repaid.
That became difficult.”

The Divine Right of Technocrats

Bit of a rant today.

The history of ("well known"***) philosophy is basically a history of apologetics.  From Socrates to Augustine, to Jean Bodin, Hegel, Rawls, et al.  Philosophy has always been a warm and inviting home to those who would legitimize the current form of rule, whatever its form.

The Divine Right of Kings ("DROK") was one of the more silly episodes in the history of power.

The DROK's basic premise was (and likely will be once more) that God has given sovereign powers on earth to a certain set of people.  These people then rule unencumbered by accountability, oversight, or limitation.

It guarantees massive excesses and basically commits entire nations to the particular whims of people who do not experience chastening or emotional discipline.

Today, there is this fascination with Technocratic skill.  Jean Bodin would be pleased to note the dominance in his native France of the Grand Ecole's on its political structure...to say nothing of the reverence we in the U.S. hold for the various government agencies, bureaus, boards, and commissions that monotonically wave from rule to decision.

This "Divine Right of Technocrats" ("DROT") derives its legitimacy from competitive education.  The problem, as is often the case with these forms, is one of scale.

An intensely competitive, disciplined environment is excellent for, say, Medicine, where the problems are more tractable and the patient is a singular being.  The problems of society and its formation are of an entirely different character than illness or injury.

And yet, society simply believes that these "well qualified" people can solve problems in the same fashion merely because of credentials.

So we live in the age of the DROT.  It likely won't last long in historical terms.

***I think philosophy, much like art, suffers from "popularity" bias: the random fashions and tastes of the age determine what is "good" and "bad" art/philosophy/literature/music, etc.  To the extent that there are other countervailing examples in the age, they are relegated to the dustbin of history.  Historians of philosophy and economics often find that their "new" ideas are not new...they were only unpopular in previous epochs.

More "downgrades" for the U.S.?

Much talk today of further putative downgrades for U.S. debt.

Hogwash.

At this point, absolute credit levels should be completely disregarded in favor of relative levels of safety.  Something along the line of my own "Sovereign Debt Tier List" would be more useful than simply stating "The credit ratings of Western (and soon Eastern, Southern, etc.) Civilization are officially downgraded".

The bond and equity markets of the U.S. are evidence enough.

Broken record

Today's PPI signals another note in the long and distinguished path of Deflation the world is currently locked into.

Again, all those pundits who forcasted massive inflation due to "money printing" have it all wrong.

My stance on this has been clear for years.