Understanding the Great Recession

A special session at the annual meeting of the AAG was devoted to Paul Krugman's Nobel, and what that meant for economic geography. There one of the panelists recalled his encounter with Krugman years ago. The panelist finished his talk at a seminar when he was a visiting professor somewhere in Europe (I forget the name exact location.) It turned out that Krugman was also there at the same time. When it opened up for Q/A, apparently Krugman mocked that the research that the panelist presented was nothing but simple anecdotes for the edification of undergraduates.
That reminded me of the time when I was in graduate school--I came across an essay where the economist Robert Solow had written a damning critique of my adviser's essay. True to my nature, I brought this up with my adviser, who said something like, "oh, where he knocked me on my head?"

I suppose it is rare for a super-genious to be gracious to others. Many others, like Larry Summers, are also notorious for such behaviors. But then, hey, it takes all types of people to make up this planet :-)

In the NYRB, Solow has a critique of Richard Posner's latest book, A Failure of Capitalism: The Crisis of '08 and the Descent into Depression. An interesting review for many reasons. In wrapping up the essay, Solow writes:

The problem is rather that Panglossian ideas about "free markets" encouraged, on one hand, lax regulation, or no regulation, of a potentially unstable financial apparatus and, on the other, the elaboration of compensation mechanisms that positively encouraged risk-taking and short-term opportunism. When the environment was right, as it eventually would be, the disaster hit.

Like I am going to disagree with Solow and get knocked on my head! :-) Seriously, there is nothing to disagree here. In reaching this ending, Solow has lots of wonderful explanations for the crisis, and dissects Posner for sloppiness. It was interesting to note how Solow threaded in Posner's book on Public Intellectuals: A Study of Decline.

In his book on public intellectuals, Posner blames the decline of the species on the universities and their encouragement of specialization. I may be acting out that conflict. Remember that even hairsplitting is not so bad if what is inside the hair turns out to be important.

Ouch! That is the Solow knock on Posner's bald head! Oh, the sentence just before that quote? "his grasp of economic ideas is precarious" . Hilllaaarious .... :-)