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Animal house

By Owen Paine on Monday April 27, 2009 07:13 PM

Here's a WSJ op-ed by ecomedy team Ackerloff and Schiller:

"Americans have long understood that for the economy to work well, government must play an important supporting role. They've also long understood the important role that self-regulatory organizations (SROs), such as trade associations and exchanges, play in cooperation with government regulation -- The debate about the proper role of government in the economy goes far back in American history...

There have been several major shifts in American history on this large issue -- we hope and expect we are seeing a shift that will be remembered in association with Barack Obama. If the president (with the help of Congress and our SROs) brings about this shift, it will be something far more important than the soon-to-be-forgotten stimulus and the bailouts he has overseen to date.

...Contrary to a widespread impression the current situation is not really a crisis of capitalism. Rather we must recognize that capitalism must live within certain rules. And our whole view of the economy, with all of its animal spirits, indicates why the government must set those rules."

Question: why does capitalism always outgrow its rules? "Animal spirits", sez these two notables. Really?

It's in our natures? Faustian beings, we moderns.

Comments (5)

Isn't the present circumstance more a case of the rules being dismantled than outgrown?

And "animal sprits" is a Keynsian thing. Thus economist.com:

The colourful name that Keynes gave to one of the essential ingredients of economic prosperity: confidence. According to Keynes, animal spirits are a particular sort of confidence, "naive optimism". He meant this in the sense that, for entrepreneurs in particular, "the thought of ultimate loss which often overtakes pioneers, as experience undoubtedly tells us and them, is put aside as a healthy man puts aside the expectation of death". Where these animal spirits come from is something of a mystery. Certainly, attempts by politicians and others to talk up confidence by making optimistic noises about economic prospects have rarely done much good.

indeed it is keynes

but he used it as a diminutive
to put the whole corporate "investment" system
under burlesque lights

at some point i suspect
folks will see more clearly
our fate is not in ourselves
but in our systems


"Isn't the present circumstance more a case of the rules being dismantled than outgrown?"
yes !!!!

in fact both processes
creation of outside vehicles
like private equity out fits and special investment vehicles
the removal of restraints on existing institutions

it's a tango of move counter move
bending twisting
and even this would not count
the ways
these kongs of finance
burst their chains and change their means
and pick their locks too

they play all at once
hercules and houdini
and the jailer who claps
on the brake away cuffs


The better NYT article today is the one on Geithner's prolific contacts -- both social and formal -- with Wall Street leaders like Rubin, much of the information gleaned from his 2007 NY Fed chairman calendar. The unprecedented detail of the article suggests Geithner may be being set up as fall guy (not un-deservedly) for administration blunders and complicity so far. For more, see Naked Capitalism today.

Son of Uncle Sam:

Rather we must recognize that capitalism must live within certain rules...and the government should make those rules.

.. and you gotta be yey tall to ride on the Mixer... or you can get on by buying my buddy Morty some more Dr.McGillicuddy's.... c'mon it's either that or more mustach rides from the bearded lady!

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