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September 22, 2008

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Bob B

"Whether you think the crisis is the result of . ."

Try Donald Campbell: Incentives - Motivation and the Economics of Information (Cambridge UP, 2nd ed 2006) for an account of principal-agent issues, moral hazards and how the Federal Deposit Insurance scheme, introduced by the Roosevelt administration, motivated the Savings and Load Association debacle of the 1980s and 1990s:
http://www.amazon.co.uk/Incentives-Motivation-Information-Donald-Campbell/dp/0521539749

The 1st edition came out in 1995, which is where I first learnt of the scale of losses from the S&L Associations:

"The savings and loan crisis of the 1980s and 1990s (commonly referred to as the S&L crisis) was the failure of 747 savings and loan associations (S&Ls) in the United States. The ultimate cost of the crisis is estimated to have totaled around USD$160.1 billion, about $124.6 billion of which was directly paid for by the U.S. government—that is, the U.S. taxpayer, either directly or through charges on their savings and loan accounts — which contributed to the large budget deficits of the early 1990s."
http://en.wikipedia.org/wiki/Savings_and_Loan_crisis

I don't usually have much time for Hegel but he was absolutely right when he wrote: "What experience and history teach is this – that people and governments never have learned anything from history, or acted on principles deduced from it." [Philosophy of History]

Nicholas Im hurting inside

personally im not to worried about financial changes happening. Its just going to motivate me to make even more money than ever before you know?

ad

"The idea I have in mind is Nudge. This presumes that people are irrational - chapter one of Nudge is “biases and blunders” - and so their behaviour can be influenced by the right design of choice architecture."

I don't believe any politician ever reached No 10 without realising that. Voting involves a choice.

"In other words, rulers and experts know more than ordinary people."

Why? The experts are people too.

I thought that the idea of nudge was to nudge people in a certain direction, rather than ordering them in that direction? Put like that, it sound slightly less daft, as it will be easier to evade idiotic instructions from the powers that be.

jameshigham

Because they're not just experts - they're demi-gods.

passer by

Without getting my "math is not a science and therefore economics cannot be a science" out of the bag, in physics it is pretty well accepted that different things work on different levels, theory of the big being at odds with theory of the small, seemingly incompatible.

I think the answer to your final question is time, Ordinary Joe maybe smart as the future Prof Dillow, but he has not got the time to wade through the arguments, I think they call it the division of labour. The better question is why is Joe not getting good value for money.

dearieme

"David Cameron’s big idea?" To not be Gordon Brown.

reason

The crisis just proved that limited liability is a great thing for those with access to other peoples money. The experts ripped off the ordinary people and get off relatively unscathed.

chris strange

Will nudge work as a way for our political elites to engineer society? Probably no, you cannot engineer something that complex and hard to predict.

Will it work better than the current attempts to engineer society through micromanagement by a tsunami of regulation and legislation? Probably yes, because it requires fewer judgements by the so-called experts in fewer areas.

Andrew Duffin

If ordinary people are at least as smart as "experts" - and I would expect they would be, when dealing with their own affairs - then this is not just a problem for Cameron; it's a problem for statists and authoritarians of every stripe.

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