Blog War

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• We Need Less Regulation, Not More

  By Eric Falkenstein | Aug 10, 2009 | 0 comments

  Justin, the problem with saying that ’some’ regulation is good is that it is very ambiguous, because in today’s regulated environment, it could mean doubling, or halving, the number of regulations and bureaucrats meddling in finance. I’m more on the halving side. I agree with Kling, in that when you say something [...]

• Back to the Myth of the Rational Market

  By Justin Fox | Aug 7, 2009 | 1 comment

  So Eric, you’re saying that some financial regulations are pointless, some are counterproductive, and some actually do good. Sounds about right to me. But it’s not what the die-hard rational marketeers of the 1970s and 1980s were saying. They didn’t think any regulation (including the ones banning insider trading) made any sense. That’s one of [...]

• Why Most Market Regulation is Useless And/Or Harmful

  By Eric Falkenstein | Aug 6, 2009 | 1 comment

  Justin, I think your half-way position represents conventional wisdom on financial regulation: we should do more, but no specific solution is obvious. You are setting yourself up to serve evil!  As George Will writes, most regulation is championed by a confluence of Baptists and bootleggers, the first group with high motives, usually naïve, and the [...]

• Markets Can Do Many Things Well, But Not Everything

  By Justin Fox | Aug 5, 2009 | 0 comments

  Eric, I’d agree with you that a command-and-control economic system run entirely by bureaucrats would be a really bad thing. But that’s really beside the point. The reality is, our system is a mix of government edicts and freely functioning financial markets, and it broke down. The system we’ll end up with in its place will [...]

• In Defense of Efficient Markets

  By Eric Falkenstein | Aug 4, 2009 | 0 comments

  Justin, let me first note that in your book, which I very much enjoyed, you make many gracious acknowledgements to the efficient markets hypothesis (EMH), such as the basic implication that it is very, very difficult to outperform the market. To outperform the market is incredibly hard, as evidenced by data not merely on retail [...]

• The Price Isn’t Always Right

  By Justin Fox | Aug 3, 2009 | 2 comments

  The efficient market hypothesis dreamed up by Eugene Fama at Chicago in the late 1960s envisioned a market in which “security prices at any time ‘fully reflect’ all available information.” This theory gained tremendous power over scholars and regulators. For decades, most academic research into financial markets began with the assumption that security prices did [...]

• Your Guide to Blog War

  By David Hamilton | Jul 6, 2009 | 1 comment

  Blog War offers sharp, lively, expert debate on big issues related to the economy, the stock market and personal finance. If you’ve missed previous exchanges, here’s a handy index for you: Scott Sumner vs. Lee Ohanian, 6/26/09: Inflation or Deflation: Which Poses the Greatest Economic Threat? Bruce McCain vs. Michael Markowski, 06/01/09: Does The Stock-Market Rally Have [...]

• No, Inflation Is Not the Key to This Recovery

  By Lee Ohanian | Jul 2, 2009 | 0 comments

  Scott Sumner is a leading advocate of having the Fed increase inflation from its current rate of about zero to two percent. He forcefully argues that if this could be achieved, then our economy would improve substantially. But in my view, a small increase in inflation wouldn’t improve economic performance very much at all. Inflation’s impact Sumner [...]

• We Need Inflation to Spur a Recovery

  By Scott Sumner | Jul 2, 2009 | 0 comments

  Lee Ohanian makes a very persuasive argument that zero percent inflation does not harm an economy. Sometimes that’s true, but I don’t think it’s the case this time. Because we are all consumers, we naturally think lower prices are good. Yet the U.S. just experienced the lowest inflation in 58 years, with the CPI falling 1.3 [...]

• Fed Policy On Inflation: As Good as It Gets

  By Lee Ohanian | Jul 1, 2009 | 0 comments

  Scott Sumner argues that the Federal Reserve erred in not expanding the money supply even more than it did last fall, and that monetary policy caused the financial crisis to worsen and our economic crisis to deepen. He suggests that a two percent inflation rate would be superior to the current rate, which is about zero. [...]

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