Knowing and Making

Sometimes I think you should stop reading my blog and just read Steve Randy Waldman's Interfluidity instead. His last two articles, like nearly everything else he writes, are full of brilliant insights. In " Information is stimulus ", he answers Paul Krugman's (and my) question about asymmetry clearly and convincingly, making a thoroughly true case for certainty as a source of economic strength. In " Vanilla afterthoughts ", he neatly clarifies the argument for vanilla financial products while providing an entirely new insight into its public choice consequences. I have noticed several times that he seems to be thinking more or less what I want to think, but is about three steps further ahead. Maybe that's because he used to be a Java programmer before taking up economics. Whereas I...used to be a Java programmer before taking up economics. Hoping to see Steve writing a bit more in future, as he's been quiet this summer.

Thanks to Lucas Engelhardt for a thoughtful answer to my questions about Austrian economics. He points out a few ambiguities and flaws in my posting and explores the "something happens" phrase which I neglected. I would like to continue the debate on three main points: Why those sectors? Lucas says: When money is cheap, interest rates drop. When interest rates drop, assets that provide payoffs further in the future gain value relative to assets that provide payoffs closer to the present. Therefore, sectors that are expected to offer high returns in the far future will see resources diverted toward them. So on this argument, all investment assets rise in value compared with goods for immediate consumption. But is this what we saw in 2001-07? Lucas and I agree that there were too many resources in residential construction, but on his argument we should have seen a general excess of investment as a whole, and a reduction (relatively) in consumption. Contrary to that, most peo...