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December 12, 2012, 1:01 pm
Filed under: Uncategorized

Aretae knows a lot about teaching.

Hyperinflation…of regulation.

This NBER abstract came out suggesting that the CRA had an effect of some kind on the housing/mortgage market, and the usual suspects freaked out. Bar charts were made, or at least alluded to. After all, how dare someone suggest that the government telling banks (out of Good, Wholesome Motives) to overpay for some mortgages could possibly have an inflationary effect on…the mortgage market! Preposterous.

Noah Smith has a more measured response but still comes out saying flat-out “Either way, we shouldn’t blame the CRA.” Can I just ask something? Why does this have to be a thing with a Yes or No answer? Most economic forces and effects of which I have experience fall along some continuum: if I overpay for something and buy a little, that pushes the price up a little; if I overpay for a lot, that probably pushes the price up more. So, how much did I influence the price? The answer, whatever it is, is just not something that is binary. Similar for the CRA: “Yes it Caused The Crisis” and “No it Didn’t Cause the crisis” both seem like automatically-wrong answers to me. If it did anything at all, it had some influence. How much influence? is the fair question to ask and the answer to that simply isn’t ‘Yes’ nor is it ‘No’ so I wish people would stop giving either of these two answers.

David Henderson grapples with when a tax cut is considered ‘regressive’. Commenter egd has the best answer there: “when the tax cuts are passed by a Republican.” The real problem here is the lefty ‘more progressive = always better, more regressive = always worse’ framework; if you take that principle to heart then the only fair, acceptable, stable, and unimprovable taxation scheme is Communism. (To prove this is a simple mathematical exercise which I’ll leave for the reader.)

Half Sigma wonders about the rise of vampire romance. I had an explanation for that here; basically it is the Sleeping Beauty/monarchy fantasy in perverted disguise.

Steven Landsburg on the use and misuse of Pigou.

Yglesias has an interesting approach to arguing against right-to-work which is to cast it as a freedom-of-contract issue. If a Business ‘wants’ (after some pressure, about which the less said the better) to sign a contract with a Gang promising that they won’t hire anyone who doesn’t belong to or at least pay kickbacks to the Gang (this isn’t how Yglesias phrases it, but it is what is happening), then who is the government to stop them? That’s just freedom-of-contract! I look forward to future Yglesias posts explaining why the RICO Act is bad (what’s wrong with a little so-called ‘racketeering’? Shouldn’t people have the ‘right’ to pay protection money?) and similarly why Businesses should also be able to hire only Whites, Christians, Heterosexuals, etc. etc. if they want to. Presumably we’ll need to repeal the Civil Rights Act too. I sure like this new ultra-libertarian Matthew Yglesias!

Finally, for a little lighter and more enjoyable reading, check out TF Market Advisors’s chronicle of the evolution of levered-super-senior CDOs. I laughed, I cried.

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CRA: Ah, get out of my head! Over at Marginal Revolution, I posted the following in response to the long comment thread there:

“Well, if the CRA didn’t increase the number of risky loans, then what in the world was the point of it? The entire idea was to expand loans to people who couldn’t obtain them–tends to correlate with race but isn’t necessarily 1 to 1–and presumably the banks had reasons not to offer these loans before…because they were higher risk. Bankers weren’t refusing these loans because of race, the only color they care about being green.

So the CRA was a typical government program. An activity that could not be justified in economic terms was deemed good in moral terms and mandated through law.”

To add: of course the CRA affected the crisis. To say otherwise is to say that it had no effect at all on anything and was a complete waste of time and money. Well that’s partly right.

TAXES: I had the same thought Henderson has like 15 years ago back in high school. Under a progressive scheme, there is always some way to spin an across-the-board tax cut as “tax cuts for the rich” while spinning an across-the-board tax increase as an increase on the rich. It’s almost as though it is all deliberately designed this way. The thing is, this insight of mine is blindingly obvious to anyone who thinks about it for more than 5 seconds, meaning the mass of the public who are hoodwinked by these associations haven’t even thought about it for 5 seconds. Maybe democracy is a bad idea…

Comment by Matt

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