Monday, January 28, 2008


Well, I’m not sure if David Gray really is the stupidest man alive, especially since Douglas Feith is still around (p. 281 in Woodward's book) and writing this kind of nonsense. Then we have the clowns at the NY Times who hired analytic buffoon, and Chicken Hawk extraordinaire, Bill Kristol to write op-eds. Paul "I've Been Wrong in Three Different Decades" Wolfowitz can throw his hat in the ring too.

While our cup may 'runneth over' with these stellar examples of incompetence and bumbling, if someone like Brad De Long says Mr. Gray is the stupidest man alive we have to look into it.

For those of you to busy to keep up on your Econ 101, what Brad De Long is referring to is the question, What creates the conditions for economic growth and wealth formation? Old style economists often talked about gold, infrastructures, or knowledge (among others) as the key to growth. Then, during the Depression, John Maynard Keynes came along and said "none of the above" - its confidence. Psychology is critical here.
In estimating the prospects of investment, we must have regard, therefore, to the nerves and hysteria and even the digestions and reactions to the weather of those upon whose spontaneous activity it largely depends ...
If people aren’t confident about the future they will withhold money and stop investing. Simply put, fear of what’s around the corner can put the best of plans to waste (this helps explain the Feds recent rate reduction). Apparently, David Gray didn’t read Keynes. And if he did read him, he didn’t understand what he read. Too bad … we may have recreated the conditions necessary for the return of depression economics. Stay tuned.

- Mark

No comments: