Wednesday, August 12, 2009

Ode to Skeptics

. Wednesday, August 12, 2009

Nassim "Black Swan" Taleb and Nouriel "Dr. Doom" Roubini are characteristically upbeat in this 11 minute CNBC segment [/sarcasm]:














One thing that jumped out at me is Taleb's discussion of the moral hazard that has pervaded basically every economic policy made by the Obama administration, from PPIP to "cash for clunkers". Health care reform is on everyone's lips, but few discussions of the merits and demerits of the public option even mention adverse selection. Everyone was talking about moral hazard last October, but that talk died down as we all assumed that plunging the world economy back into the 1930s was more distressing than worrying about long-run moral hazard. But now that we seem to have averted Armageddon it seems like we should be asking those kinds of questions: How can we reduce asymmetrical information in financial markets? Should we really be punishing the prudent to reward so many consumers, investors, and homeowners who made very poor decisions? Should we continue to give large amounts of power to those -- Bernanke, Summers, Geithner -- who failed to prevent the current crisis (even if few would have done better)?

Those questions are not rhetorical; they are complicated and difficult, and the answers are not obvious to me. But I am a little bit shocked that they are so rarely asked these days.

Where have the skeptics gone?

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Ode to Skeptics
 
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