Forum failing

The Wall Street Journal reported today about the proceedings of the American Economic Association from this past weekend. The article was entitled, “Experts’ Rx on How to Get Out of This Mess.” The story quoted 11 eminent economists as to their opinion of what needs to be done to turn the U.S. economy around. I am assuming that each of these 11 gave comprehensive interviews or speeches that served as the base material from which the WSJ story was created. However, the portions that were considered essential by the story’s author and editor barely mention regulatory reform. Regular readers of this little blog know that I think that is the most essential element in being able to truly turn the corner and exit this economic disaster. Regrettably, only one economist is quoted speaking about regulation at all, Markus Brunnermeier of Princeton. Typically reporters and editors try and capture the essence of an event in their article’s cursory overview. Thus, I am guessing that most economists at this prestigious event still don’t get “It.” “It,” of course, refers to the fact that lax regulation, combined with rampant greed, led to a gigantic economic disaster whose seismic aftershocks are still affecting EVERYTHING.

I am usually an upbeat, positive person but consider this story to be proof that most of the hammers out there (i.e. economists) still see all of the problems as nails (i.e. problems that money can be thrown at). Throwing money at the problem will only temporarily change the system. I liken this situation to having almost drowned in the ocean due to a leaky ship. Bailing water will only keep the ship seaworthy for so long. Eventually someone needs to fix the ship’s structure or more water will need to be bailed out. Duh! I repeat: Duh!

I am hopeful that the myopia of this set of economists does not extend to the incoming Obama Administration and that they understand the absolute necessity of increasing and changing financial regulation. I will be paying close attention to the news to see if the incoming Obama-ites are walking the talk of the recent election season. If they are not, then I may revise downward my optimism that the worst portions of the financial market collapse are behind us. At this point I am still optimistic and am trying not to read too much into the distilled ramblings of a gathering of a bunch of wonky, ivory-tower economists this past weekend.

Stay tuned!

Jason