It is my guiding confession that I believe the greatest error in economics is in seeing the economy as a stable, immutable structure.
I would now, however, more strongly emphasize, and especially as to the United States, the inequality in income and that it is getting worse – that the poor remain poor and the command of income by those in the top income brackets is increasing egregiously. So is the political eloquence and power by which that income is defended. This I did not foresee.
In economics, it is often professionally better to be associated with highly respectable error than uncertainly established truth.
Fools, as it has long been said, are indeed separated, soon or eventually, from their money. So, alas, are those who, responding to a general mood of optimism, are captured by a sense of their own financial acumen. Thus it has been for centuries; thus in the long future it will also be.
The world of finance hails the invention of the wheel over and over again, often in a slightly more unstable version. All financial innovation involves in one form or another, the creation of debt secured in greater or lesser adequacy by real assets.
Speculation buys up, in a very practical way, the intelligence of those involved.
Speculation, it has been noted, comes when popular imagination settles on something seemingly new in the field of commerce or finance.
I have sufficiently urged that all suggestions as to financial innovation be regarded with extreme skepticism. Such seeming innovation is merely some variant on an old design, new only in the brief and defective memory of the financial world.
Recurrent descent into insanity is not a wholly attractive feature of capitalism.
Tenure was originally invented to protect radical professors, those who challenged the accepted order. But we don’t have such people anymore at the universities, and the reason is tenure. When the time comes to grant it nowadays, the radicals get screened out. That’s its principal function. It’s a very good system, really – keeps academic life at a decent level of tranquility.
The process by which money is created is so simply that the mind is repelled. Where something so important is involved, a deeper mystery seems only decent.
Here in briefest form is the modern political dialectic. It is an unequal contest: the rich and the comfortable have influence and money. And they vote. The concerned and the poor have numbers, but many of the poor, alas, do not vote. There is democracy, but in no slight measure it is a democracy of the fortunate.
Anyone taken as an individual is tolerably sensible and reasonable – as a member of a crowd, he at once becomes a blockhead. – Friedrich Von Schiller, as quoted by Bernard Baruch.
There would also be, we may be certain, the traditional reassuring words from Washington. Always when markets are in trouble, the phrases are the same: “The economic situation is fundamentally sound” or simply “The fundamentals are good.” All who hear these words should know that something is wrong.
The recurrent and sadly erroneous belief that effortless enrichment is an entitlement associated with what is thought to be exceptional financial perspicacity and wisdom is not something that yields to legislative remedy.
The second factor contributing to speculative euphoria and programmed collapse is the specious association of money and intelligence.
This was because of a special American commitment to the seeming magic of money creation and its presumptively wondrous economic effects. T.
To proclaim the need for new ideas has served, in some measure, as a substitute for them.
Scholars gather in scholarly assemblages to hear in elegant statement what all have heard before. Again, it is not a negligible rite, for its purpose is not to convey knowledge but to beatify learning and the learned.
There is the possibility, even the likelihood, of self-approving and extravagantly error-prone behavior on the part of those closely associated with money.
There is nothing reliable to be learned about making money. If there were, study would be intense and everyone with a positive IQ would be rich.