A Critique of Gambling with Borrowed Chips

In The Federal Lawyer, the monthly FBA publication, Jane Gravelle of the Congressional Research Service has written a critique of my recent book on the financial crisis of 2007-08, Gambling with Borrowed Chips.

Here is a link to the book.

Here is a link to the review section of The Federal Lawyer for June. Gravelle’s review begins at p. 3 of that pdf.  If you are reading this after that link has lapsed, try here instead.

As you will see at either site, Gravelle had some kind words about my book as “readable and entertaining.” She enjoyed the historical material, and appreciated my explanations of “a lot of concepts and practices.” So if my book is ever re-issued with a dust jacket, we may be able with judicious editing to mine this review for blurbs.

She spends most of her review arguing with my book though: arguing in particular that my analysis of the cause of the crisis, and my prescriptions for avoiding its like in the future, are thoroughly misguided. Thus, she has my gratitude for giving me a wonderful excuse for discussing that analysis and those prescriptions further, and I will take advantage of the same in a series of posts you’ll be able to read right here next week.

For now, though, I’ll limit myself to an observation about the kind of book this is. Gravelle writes, “Gambling with Borrowed Chips is not a scholarly work, in that it has no references or footnotes.”  

   

 

Yes, it is true that I did not use the usual scholarly apparatus of footnotes and bibliography. This isn’t because I am unfamiliar or disrespectful of that apparatus. I have employed it in earlier books, and may well employ it again if I give this particular argument the fuller work-up I believe it deserves. Still … this book was but a précis for some later complete scholarly study, and a précis that might indeed attract readers who are put off my small-print notes and lengthy lists of references.

The text itself does contain references to the works on which I depend, more-or-less explicit or allusive, it is true. Barney Frank’s great whistling-past-the-graveyard quotation, "There’s no immediate crisis,” may be found in The Washington Post for September 7, 2008, for example, as my book clearly indicates.

As to scholarly works, in my chapter “Sound Money” I allude to the work of economic-historian Robert Higgs on the unusual length of the Great Depression and the economic consequences of the Second World War. I also cite no less of an authority than Ludwig von Mises on the aftermath of the Bretton Woods monetary conference.

My own credentials are not those of an academic economist (or economic historian).  They are those of a reporter whose beat it has been for many years now to cover the world of finance, first at HedgeWorld (2000 to 2008) and more recently at The Hedge Fund Law Report and as the proprietor of Enfield Editorial Service. I believe this has been as valuable a perch whence to observe and learn as any other I could have occupied through the key period.  

That will do for the kind of book, and the kind of author, involved. Next week, we shall get to the substantive issues between Gravelle and your humble servant.

That Kyocera Ad

A distinguished-looking man with cropped hair and professorial glasses walks across a screen and starts talking about costs and ownership periods. We feel at first that we've stumbled into a lecture hall, but this turns out to be a pitch for Kyocera, a Kyoto-based company that makes printers and other office equipment.

The professorial man in the ad is in fact a professor: Peter Morici of the R.H.Smith School of Business at the University of Maryland, College Park, MD. But he is hardly a household name, and when I first saw the ad I had the feeling he was supposed to remind me of someone else.  But who?

I've decided that Morici was chosen less for his economist credentials than for his resemblance to the Ur-expert in economics, the late Paul Samuelson.



The above is a photo of Samuelson. Do the comparison yourself to Morici as he appears in the above YouTube video. Same glasses, same hair, same suit, quite similar face.

I'm reasonably certain that the  ad agency recognized the resemblance, and chose their spokesman on this basis. After all, generations learned the basics of economics from the many editions of Samuelson's textbook, so a visage like that is natural for this role.

None of which would be worth mentioning except that Ben Stein has made it a cause of controversy and even litigation. Here is the complaint. Stein was apparently considered for this role in Kyocera's ads, and then rejected, apparently on the ground that his expressed views about the unreality of global warming were at odds with Kyocera's own eco-friendly branding.

Stein has filed a lawsuit, claiming that Kyocera breached a contract with him. That claim seems certain to go nowhere. If you read the complaint, above, you will see no allegation of specific facts to the effect that there was what lawyers call a "meeting of the minds." There doesn't seem to have been any contract to breach before Kyocera backed out of the arrangement they had been considering. Considering something doesn't bind you to it.

Ben Stein is the son of a fanous economist, Nixon advisor Herb Stein. Ben Stein also played a teacher of economics (at the high school level) in a movie. The point of the movie, as it happens, was that the protagonist wasn't in that day when Ben Stein's character was droning on about the Hawley-Smoot tariff. This movie role is cited without irony in the complaint, apparently in hopes of persuading the court that there must have been a contract to hire such an obvious choice for their commercial as he. 

But the more risible aspect of the litigation is Stein's contention that he is the victim of religious discrimination. "A host of federal laws protects Americans from being discriminated against on the basis of religious beliefs." This could be intended to render the unwinnable issue of whether Stein was ever actually a party to a contract irrelevant. It is just as illegal to refrain from hiring Stein because he is a Jew as it would be to fire him for that.

Ben Stein isn't really saying, though, that he was fired for a religious adherence to Judaism. He is saying that he was fired for a religious adherence to Global-Warming-Isn't-ManMadeism.

The complaint says: "BEN STEIN said [he] was by no means certain that global warming was man-made ... [he] also told Hurwitz to inform defendants that as a matter of religious belief, he believed that God, and not man, controlled the weather."

Felix Salmon has some fun with this in his Reuters blog.

Kant and the Austrian Economists II

Yesterday, I discussed the "Austrian" school of economics, and how it distinguishes itself from the "Chicago" school, although in the minds of the general public they are all alike free marketeers.

I ended with the observation that there is a Kantian edge to Austrian method, it treats the significance of incentives and other premises in much the way that Kant treated his synthetic a priori principles.  I am not learned enough to know whether this is a matter of direct influence, coincidence, or something else.

But the Austrian arguments I quoted yesterday do make another bell go off in my mind: Ayn Rand.

Rand, as my readers may know, was the Russian-born screenwriter-turned-novelist who became the center of an "Objectivist" movement of pop philosophy in the 1960s, an influence upon such young minds as Nathaniel Branden and Alan Greenspan, etc.  Her aphorisms are still quoted today by many free market advocates, including apparently tea partiers.

I have never been one of her admirers.  Certainly my goal in this blog, the goal of refreshing pragmatism, is not one that appeals to Objectivists.

But one fact that stands out in my own mind from the reading I've done in O-ist literature is how vituperative they are toward the memory of Immanuel Kant, and anything that they think smacks of his influence.  It is enough to say, "X sounds like Kant" to thoroughly and foundationally condemn X amongst them.

Why this vituperation?  I'm not clear.  It isn't justified by the reasons they give.  Indeed, if you read Kant's essay, "What is Enlightenment?," you'll find that much of it has an O-ist feel to it, beginning with the Latin motto, Sapare Aude, "Dare to Know," that Kant there takes as his own.  Dare to think for yourself! he was saying, which is exactly the daring that Objectivists generally believe their own central virtue.

Perhaps the reason for the vituperation, though, is precisely that Rand had to carve out her own space in the world of ideas in order to be seen -- in order even to see herself -- as an original thinker.  She couldn't do that by being yet another popularizer of the free-market ideas of the Austrian school.  But perhaps (a) I'm right that the Austrians were Kantians, and (b) she knew or sensed the same thing.  She might well have decided to carve out some space for herself by being the anti-Kantian Austrian!

Puzzle solved.