Thursday, February 12, 2009

House Rules

This is an obvious question, but why does no one really know how to put the economy back together?

If an airliner crashes, experts can find the faulty part or parts and correct them. If a bridge collapses, building a new, safer, bridge is not a mystery.  Should a new bacterial or viral pathogen emerge, researchers have some idea how to cope with it. 

But the U.S., economy, is different. Iceland went under. They're no less intelligent than we are. How could they not stop that from happening? People are being cast out of their homes, jettisoned from their jobs, and left living in cars, and fixing the whole mess is an inexplicable mystery.

Incompetent executives are rewarded with truckloads of money. The people who seem to have created this disaster are now collecting billions or trillions of dollars. Those two problems are clear, but somehow impossible to fix. 

Sure, securities, and credit markets and the fed, mortgages and loans are complicated. But are they really so complicated that no one knows how to wrestle them back into order? Is our economy like a nuclear power plant that's so complicated that its operators will be faced with crises they do not recognize?

Everyone knows: write off the useless securities cobbled together with sliced and diced mortgage loans to people who could not afford to pay them. Who pays? The cobblers, slicers and dicers, with money borrowed from the treasury.

How could there be more than one opinion on how to proceed? Is righting the economy like choosing between a suspension bridge and a truss bridge? That does not seem to be the case, because such an issue could be solved relatively easily by comparing cost, durability, capacity and  longevity.

Why should we suppose that economics is rational? Because there is a Nobel prize in economics. People study economics. Is it a branch of mathematics, philosophy, or psychology?
Or is economics a spongy discipline like sociology?

It's hard to tell because economics is both abstract and immaterial.  There seems to be no applied economics. It's all just bits of symbolic data flowing through computers, and apparently, no one really understands it.

Or, some people understand economics but they keep everyone else in the dark so that they can make fortunes, at others' expense. 

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