A Note From Krugman
Paul Krugman has just posted a quick note on his New York Time “The Conscience of a Liberal” blog site about Elizabeth Warren’s decision to explore the waters of a US Senate race in Massachusetts:
Finally, Someone to Run Against Wall Street
One of the truly amazing things about American politics in the Lesser Depression is that nobody in political life has been willing to run as the champion of ordinary Americans against the financial wheeler-dealers who brought this disaster on us….
So I’m glad to hear that Elizabeth Warren will apparently run for Senate. She’s no Huey Long — her manner is more schoolteacher than rabble-rouser — but that makes her more credible. And she’s got the best credentials on the financial crisis of any prominent figure in American life.
This should be edifying
Read the full item here at the NYTimes.com
4 Responses to A Note From Krugman
Is that to suggest that it is time to reject our American form of Capitalism and go with a Clement Attlee period?
Regards — Cliff
The Republican professor I had for introductory economics didn’t lecture very often; the class was mainly taught by grad students and guest professors. But he did take one lecture to point out to us that, in a capitalistic system, the incentives are such that, to paraphrase the title of a recent book, capitalism needs to be saved from the capitalists.
Case study. You’re the CEO of a company that produces engine blocks. There are ten other companies in the economy that produce the same product. This means that the ten companies are competing against each other for customers, which ensures a relatively low price (aka, the market efficient price). Now, the CEO of each of those companies would be better off if they could collectively raise their prices at once, but that’s illegal. So how do you raise your price? Well, you could buy out your competition, which could potentially violate anti-trust laws. You could preemptively lower your price, forcing your competitors to lower their prices and hopefully driving them out of business. Or you could do any number of things to reduce the number of competitors. Why do you do this? Because when there are two companies instead of ten, you get a much larger paycheck. However, this is obviously bad for consumers; we are now in an oligopoly, not a capitalist market.
The point here is not to endorse anti-trust legislation. It’s to illustrate that the incentives for those participating in the market are to subvert a true capitalist system; it’s how you make more money.
I think it is painfully obvious that Warren, and Krugman, are far more capitalists than your standard supply-side, voodoo-economics conservative. The first two care about creating fair and efficient markets; the latter seems only to care about maximizing profits by shifting the Untied States away from a capitalist system.
Maybe. Or maybe they think they are smarter than anyone else and know how to make the system run. Is Wall Street better off today, and American, as a result, with all the regulation and all the Quants, Accountants and Lawyers trying to figure out how to beat the system or back in the old days before we started down this spiral of trying to outsmart each other?
I agree that we don’t benefit from monopolies, most of the time, and when we have them they need to be regulated.
It is just that the optics of “run against Wall Street” are bad from where I am sitting. And apparently they were also bad if you were sitting on Capitol Hill.
Regards &mash; Cliff
Oh, I agree fully. We were better off in the old days when we actually had regulations. Glass-Steagall would have been a nice one to keep.