nanfeng oranges

Joe Stiglitz’s new book ‘Freefall’ has a pretty simple message: the next challenge policy makers face is not to decide whether an economy should be market driven or centrally planned; the challenge is to find distinguish what should be left up to markets what what should be regulated. Since of any potential adversaries is easy to guess, the book usually is trying to persuade the reader that markets don’t always deliver the optimal results in a reasonable amount of time.

 

The empirical evidence that points to market failures is easy to find and fresh in everyone’s memory. How did this happen? Step 1: inflate an asset bubble by keeping interest rates too low (Greenspan). Step 2: Allow financial wizards to come up with new crazy new financial products.

 

What happens next? Major institutions fail or almost fail (Lehman Brothers, Fannie Mai/Freddie Mac, AIG). The government doesn’t help and people get upset (Lehman Brothers). The government does help and people get upset (AIG, TARP). The economy goes into recession. GM and Chrysler get into trouble, too.

 

Obama to the rescue. If you think Obama is going to get through this telling unscathed, think again. The stimulus plan, although the right idea, was too small, according to Stiglitz.

 

Now that we’ve had an overview of just what happened, Stiglitz digs in a little deeper. First he examines the real estate failures. Then he details how financial titans committed something tantamount to robbery when their too-big-to-fail institutions were rescued.

 

In chapter six Stiglitz examines what he sees as the root causes of the crisis and how they can be addressed. Banks can’t address systemic risks. Regulate them. Incentives in corporate governance and banking are out of whack. Social and private incentives should be realigned.

 

A few interesting themes emerge throughout this discourse. First, how critical “agency” and externalities are in understanding why markets fail. (21st century capitalism does not equal 19th century capitalism.) Second, understanding when profit seeking ultimately helps society and when it doesn’t. (Fees for electronic payments such as those levied by Visa and Mastercard are presented as emblematic of when profit seeking hinders innovation.)

 

In the chapter ‘A New Capitalist Order’ Stiglitz tackles some bigger questions. What is the role of government? How do we strike a balance between markets and the state?

 

Next, he examines the international response to the crisis. One of the most interesting parts of this chapter is the idea of a global currency. Stiglitz doesn’t go into too great depth about the merits and demerits of an international reserve currency. Perhaps that’d be out of the scope of this book.

 

Towards the end he confronts the entire discipline of economics, running quickly through the highlights of economic thinking over the past couple hundred years, from Smith to Milton Friedman. This is probably the single most interesting chapter of the book.

 

Finally he addresses what all this means for society. Stiglitz reflected on an observation Keynes made. The observation that in Keynes’ time, people were coming to the point where they didn’t really have to struggle to fulfill their basic requirements of food, shelter, and water. What would that mean for the future? Would people work less?

 

Perhaps, but not necessarily. Just compare France and the U.S. Moreover, even though they’ve taken markedly different paths, neither Americans or French would trade places with each other.

It doesn’t take long to plough through Nick Heil’s ‘Dark Summit’, a short overview of the 2006 climbing season at Mount Everest. It’s not a bad read even if at times it’s less than Shakespearean.

 

The first thing book lets the reader know is the mechanics of getting to the top of Everest. Although the jargon sometimes requires the reader to put down the book and look up what ‘glissade’ means, it does give you step by step instructions for getting to the top. First, if you’re coming from Tibet, you take the Friendship Highway from Lhasa to base camp through the border town of Zhangmu. Next you trek from base camp to advanced base camp on the edge of the Rongbuk Glacier. Then, the real fun starts. You cross the climb the north face and make it on to the northeast ridge through the exit cracks. At point, only the daunting three steps are between you and the summit. And in the 70’s some Chinese guys were nice enough to leave a ladder behind to help you out.

 

What I didn’t like too much about the book but did understand why it was there, was the intro. It takes a good eighty pages before the adventure begins. In that time, Heil covers some basic history. Not just climbing history. He also covers political history and history of how man discovered altitudes where so dangerous to begin with.

 

Near the end, a pattern starts to take root. Inexperienced climbers wind up in trouble and fellow climbers have to calculate just how far they can go to help without risking their own lives or their own summit chances.

 

In the end, three interesting if tragic stories emerge. The book ultimately concludes that whatever happens at the top, it’s ultimately a climber’s own responsibility to take care of him or herself.

 

Oh, and Russ, the Himex expedition operator, comes across as Clark Kent, if not Superman.

About a week ago I finished Thomas Ricks’ ‘The Gamble’. A couple days ago I watched Oliver Stone’s ‘W.’. Both are about George Bush. But one is way better than the other one.

 

 

 

Thomas Ricks’ book is almost impenetrable for someone not well versed in the United States military establishment. He does manage to squeeze a coherent narrative out of a complex, evolving situation with lots of players and lots of perspectives. The story, as he tells it goes something like this:

 

A few years after the invasion of Iraq some retired generals are sitting around watching CSPAN and are absolutely horrified at how horrible the Rumsfeld crew is handling the situation. Against all odds, they get the ear of the President and convince him to adopt a new strategy in Iraq. The new strategy isn’t only about more troops. It’s about getting the troops closer to the people and making Iraqis stop hating Americans.

 

David Petraeus and Raymond Odierno get the job done, along with their outsider advisors (David Kilkullen, Emma Sky, Sadi Othman). It’s tough going at first and, whilst political battles burn in Washington, Iraq isn’t a bed of roses. With more resources and less lofty goals, the strategy ultimately prevails.

 

But, in the end what’s been accomplished? Sure Iraq is more stable, but a stable, effective government has failed to emerge. I guess we’ll have to wait for Ricks’ third book for the cliffhanger conclusion.

 

Now, Oliver Stone’s ‘W.’ Bush is an idiot with a lot of idiots around him.

 

I was really surprised that Roger Ebert gave ‘W.’ a very positive review. But, he’s in the minority. Most people agree with me. The movie was a let down.

 

At the very least, W. wasn’t a conventional movie. In that respect, it’s worth watching. But I really wished it was more worth watching.

I’ve been meaning to write up something about a book I just finished, ‘Fiasco’ by Thomas Ricks. Finally, I’m getting around to writing something now, but it’s going to be quick.

 

‘Fiasco’ gives a quick background of the events leading up to the second Iraq War and goes on to chronicle the pre-surge events. For someone who casually observed the new during this time, it provided a much appreciated narrative of the course of the war in Iraq.

 

One of the most confusing aspects of the situation in Iraq is the relationship between Sunni, Shia, and Kurd in Iraq. ‘Fiasco’ removes some of the mystery around the complicated relationship among these peoples.

 

There is a lot of information flying by in this book, and you have to stay on your toes to catch it all. Ricks does provide most of the information you need to follow the book, the relationship between the Pentagon, State Department, White House, military and so on. But, it’d certainly help to come into the book with at least a vague idea of how these institutions work.

 

I just ordered the next book, ‘The Gamble’.

Finally getting around to writing about a book I read a few weeks ago, ‘Seeds of Terror’ by Gretchen Peters.

 

I heard about the book when Gretchen Peters showed up promoting the book on ‘The Daily Show’. Gretchen Peters was in Pakistan after the Taliban took over Afghanistan and before 9/11. This book’s raison d’être is basically an atonement for missing the really important story in Afghanistan/Pakistan at that time — the terrorist/taliban/heroin connection — and instead, along with all the other media focusing on the human rights transgressions of the Taliban.

 

It’s a quick read that tries to add some dimensions to a story that’s usually told one-dimensionally. The Taliban has different motivations from al Qaeda. The Americans have different objectives than the Pakistanis. The Pakistani military has different objectives than the Pakistani government. And the money comes from all directions.

 

She also covers the mechanics of the business which are just about as interesting. She fills the reader in some of the paths heroin takes from a farmer’s field in Helmat to a junkie in Paris and more importantly, how the money moves back, some of it winding up with terrorists.

 

In the end, she outlines what needs to be done. I didn’t mind this being included, but it seemed a little off key. If the problems are as deep and entrenched as they’ve been described in the preceding couple hundred pages, how is it that the solutions can be outlined so succinctly in the last ten?