Wednesday, October 8, 2008

A propos ...

A propos the previous post, Esther Duflo argues that too many of the best and brightest have gone into finance, that the result has not been socially beneficial, and that the reallocation of human capital in the wake of the collapse will on balance prove positive.

Arindrajit Dube goes farther: he contends that the high remuneration of financiers accounts for much of the increased return to education that has been observed over the past two decades. This would be a significant finding if true, but the proof is not yet available.

We Hear Ya, M'Lord

It seemed to me a good time to reread Keynes' General Theory. I am not one of those who abandoned Lord Keynes during the lean years of monetarism, rational expectations, and all the rest. He has always remained a hero of mine, not least for his dry wit. Yesterday I came upon the following delightful passage:

When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. ... These tendencies are a scarcely avoidable outcome of our having successfully organized "liquid" investment markets. It is usually agreed that casinos should, in the public interest, be inaccessible and expensive. And perhaps the same is true of Stock Exchanges. That the sins of the London Stock Exchange are less than those of Wall Street may be due, not so much to differences in national character, as to the the fact that to the average Englishman Throgmorton street is, compared with Wall Street to the average American, inaccessible and very expensive. ... The introduction of a substantial Government transfer tax on all transactions might prove the most serviceable reform available, with a view to mitigating the predominance of speculation over enterprise in the United States.

Vindicated!

You heard it here first (see my predictions over several weeks):

La Banque centrale européenne a décidé, mercredi 8 octobre, d'abaisser son principal taux directeur à 3,75% contre 4,25%, en raison de la crise financière. Simultanément, la Réserve fédérale américaine et la Banque d'Angleterre ont également annoncé une baisse d'un demi-point de leur taux directeur. Après ces annonces, le CAC 40 est aussitôt repassé dans le vert. (AFP)Plus d'informations sur Le Monde.fr dans quelques minutes. - http://www.lemonde.fr