Economists Come Around to What I’ve Said All Along

Me, May 2010:

If you’re going to have one central bank, you need a vehicle other than monetary policy to relieve regional disparities.

Paul Krugman, January 2011:

[Making] the euro work is more feasible than I used to think. True American-style labor market integration isn’t…going to happen. But more fiscal integration could.

Now let’s see how long it takes them to admit my other conclusion:

You need to design the system so it has time to adapt to isolated changes without a negative ripple effect.

Economists Oliver Hart and Luigi Zingales have proposed a regulatory system that anticipates banks’ distress based on their credit default swap prices and restructures their debt before bondholders are in panic mode. In 2001, U.S. Treasury Secretary Paul O’Neill proposed an international bankruptcy court that could serve the same purpose for sovereign debt.

The global economy is wound pretty tightly these days. Maybe it’s time to make it a little safer for the occasional error.

Making the World Safe for Finance

I promised you my take on Greece, and my take you shall have. Here’s my latest post on the Sun-Sentinel blog. It continues my work building up to a coherent framework (and hopefully a book) on international law. If you’re interested in learning more about tight coupling in financial markets, check out Richard Bookstaber’s A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation. If you’ve been following our “Best of the Week” series, you should be very familiar with the Hart/Zingales proposal; I’ve linked to it several times. Here’s the most recent reference. As always, before you do any of that, don’t forget to check out my post.

Best of the Week: March 14-20, 2010

10. Why Fritz Hollings Is Wrong About Economists — David K. Levine
9. Washout for the Anbar Awakening — Marc Lynch and Followers of Sadr Emerge Stronger After Iraq Elections — Anthony Shadid
8. Unhappy Yemen — Tariq Ali
7. People Vote for Competence Not Policy — Adrian Hamilton, What Failure Would Cost the Democrats — Norman Ornstein & Thomas MannMcConnell Strategy Shuns Bipartisanship — Carl Hulse & Adam Nagourney, and What Happened in Massachusetts — Stephen Asolabehere & Charles Stewart III
6. Global Cooling Bites the Dust: Hottest January Followed by Second Hottest February. Now March Is Busting Out. — Joseph RommGlobal Boiling: Freak Storms on Every Continent — Joseph Romm, and NASA: “It Is Nearly Certain That a New Record 12-Month Global Temperature Will Be Set in 2010” — Joseph Romm
5. Lehman’s Demise, Dissected — William D. CohanCurbing Risk on Wall Street — Oliver Hart & Luigi Zingales, How Bank Credit-Market Funding Helped Spread the Global Crisis — Claudio Raddatz, and How Chris Dodd’s FinReg Proposal Solves the Problem of Information, but Not of Regulators — Ezra Klein
4. Is the U.S. “Offer” to Iran on Medical Isotopes a Pretext for More Coercive Action? — Flynt Leverett & Hillary Mann Leverett and Rafsanjani Makes His Move — Geneive Abdo
3. Is the Bible More Violent Than the Quran? — Barbara Bradley Hagerty and Lenten Thoughts — Gary Wills
2. Health Reform: What Happens When? — Austin Frakt and A Viewer’s Guide to This Weekend — Sarah Binder
1. As Things Get Worse in Pakistan, the Optimism Continues to Soar — Robert FiskPakistan to America: What Have You Done for Us Lately? — Arif Rafiq, Into the Terrifying World of Pakistan’s “Disappeared” — Robert Fisk, and Don’t Forget India — Nikolas K. Gvosdev
BONUS: Square Dancing — Steven Strogatz and Financial Imagineering — Steven E. Landsburg

Best of the Month: February 2010

10. Massive Moisture-Driven Extreme Precipitation During Warmest Winter in the Satellite Record–and the Deniers Say It Disproves (!) Climate Science — Joseph Romm
9. The Fetishism of Morality — Jonathan Rée and Doing What Comes Supernaturally: Stanley Fish on Fact and Value — Russell Blackford
8. The Making of a Euromess — Paul Krugman and California Death Spiral — Paul Krugman
7. Child Slavery in Uzbekistan — Craig Murray
6. Questions and Answers about the Financial Crisis — Gary Gorton, Due North: Canada’s Marvelous Mortgage and Banking System — Mark J. Perry, and The Troubling Resolution Revolution — Peter J. Wallison
5. “Too Big to Fail” Is No Redemption Song — Avinash Persaud and How to Make a Bank Raise Equity — Oliver Hart & Luigi Zingales
4. Blair: Gaza’s Great Betrayer — Avi Shlaim
3. Eric Holder and the Khalid Sheikh Mohammed Trial — Jane Mayer and Susan Collins Spreads Central Myth about the Constitution — Glenn Greenwald
2. The World Needs All Kinds of Minds — Temple Gradin and How Brains Learn to See — Pawan Sinha
1. State of Denial: Searching for Peace in Israel — Robert Fisk, Arieli Is a Man with a Plan. The Trouble Is, It’s a Map of Israel — Robert Fisk, and Gaza’s Defiant Tunnellers Head Deeper Underground — Robert Fisk
BONUS: Let’s Not Create More Debris in Haiti — Anthony W. Orlando

Best of the Week: February 7-13, 2010

10. Cyber Warriors — James Fallows
9. The Wonder Drug Myth — Thomas Goetz and Why Adult Cells Won’t End the Stem-Cell Wars — Sharon Begley
8. The Eurozone Debt Crisis: Facts and Myths — Charles Wyplosz
7. Republicans–Not Obama–More Often on Wrong Side of Public Opinion — Nate Silver
6. Blair, Bush, Israel and Iraq — Stephen M. Walt
5. Listen to the Iranian People — Robert Wright and Salehi: Iran Would Back Down If West Supplies LEU; Khamenei Vows Self-Defense Against “US-Backed Saboteurs” — Juan Cole
4. Yanukovych Is Back — Owen Matthews
3. Massive Moisture-Driven Extreme Precipitation During Warmest Winter in the Satellite Record–and the Deniers Say It Disproves (!) Climate Science — Joseph Romm & Jeff Masters
2. “Too Big to Fail” Is No Redemption Song — Avinash Persaud and How to Make a Bank Raise Equity — Oliver Hart & Luigi Zingales
1. State of Denial: Searching for Peace in Israel — Robert Fisk, Arieli Is a Man with a Plan. The Trouble Is, It’s a Map of Israel — Robert Fisk, and Gaza’s Defiant Tunnellers Head Deeper Underground — Robert Fisk
BONUS: Rock Groups — Steven Strogatz