Nate Silver says everything I’d like to say about the bank bailout plan. Go read it.
He also gets at what’s frustrated me so badly about Paul Krugman over the past few weeks:
My anecdotal experience for the past several months has been that the more someone knows about the economy, the more they know (or at least are willing to admit to) what they don’t know. Anyone who is professing with certainty that this or that will work — nationalizing the banks, for instance — is an idiot.
Paul Krugman is a Nobel prize winning economist, and is deservedly recorded lots of respect and deference on these issues. But he doesn’t know what will or work in this situation. He has theories, but there are lots of people with theories, many of which are at odds with what he thinks. I don’t mind his criticism of the Obama administration, but I think his certitude serves him poorly.
February 11, 2009 at 4:56 pm
As a practical matter, I agree. Most of us have nothing to add to the argument that hasn’t already been said a million times. The experts, who in this case are simply defined as those in charge, are certainly making more informed decisions than most of everybody else. They aren’t likely to royally screw everything up, and will probably do a better job than us laypeople.
With that being said, the last thing we want to do is sit back and relax and pretend as though everything is going to be all right because the experts have control. They will not do a perfect job and will make mistakes. Us ordinary citizens need to be critical of their actions and make them aware we are on their case. Be lazy and uninformed, and you are just asking for corruption.
The housing mess was caused by terrible decisions that even laypeople could have understood: we were building too many houses that too many people couldn’t afford. We didn’t win by letting the experts handle that one. With smarter, more informed citizenry, mistakes that set of common sense warning bells can be minimized.
February 11, 2009 at 6:28 pm
(1) Krugman is not the only economist calling for nationalization of some banks.
(2) I wonder if Nate has actually read Krugman’s blog – Krugman is suggesting the path of action that he believes has the most likely chance of succeeding based on his extensive experience. This is what we should expect from subject matter experts. I definitely do not get the impression that he is professing anything with certainty.
(3) Economics is more of an art than science. No one knows what will work. I didn’t really understood this fully until I read the brutally honest opening paragraph of this post by Willem Buiter, another prominent economist.
February 11, 2009 at 6:59 pm
Oops, rereading your post I guess it was you and not Nate that was slamming Krugman. But my comment #2 still stands.
February 11, 2009 at 11:04 pm
You don’t think that Krugman is overly certain? His posts seem almost hysterical with insistence that his path is optimal.
February 12, 2009 at 1:04 am
Overly certain? No.
Strongly believes his path is optimal? Yes.
But perhaps I misread him. Let’s say he is being overly certain and hysterical. Ask yourself: Why would a highly regarded expert act this way on matters in his field? Perhaps he knows better than most what peril we face and is trying to get others who can affect the course of events to understand this.
February 12, 2009 at 5:21 am
I am certain that the Geithner barely-a-plan will fail, but beyond that I am not certain of much.
February 12, 2009 at 12:43 pm
It’s also not clear to me why “nationalization” of banks is a four letter word. The FDIC takes over banks that are failing (9 so far this year) and distributes their assets to more healthly banks, and during the 80s S&L scandal the FSLIC did the same. Why the stigma this time? Perhaps because this time it’s the largest 5-10 banks that are insolvent?