The Economist
EVERY January more than 10,000 economists meet for the annual conference of the American Economic Association (AEA). This year, the shindig was in balmy Chicago, a stone’s throw from its second-tallest building, the name TRUMP stamped in extra-large letters across its base. Most papers had been written months in advance; few sessions tackled the electoral earthquake in November. Yet there was no mistaking the renewed sense, following its failure to foresee the 2007-08 financial crisis, of an academic field in a crisis of its own. The election was seen as a defeat for liberalisation and globalisation, and hence for an economics profession that had championed them. If economists wish to remain relevant and useful, the modest hand-wringing at this year’s meetings will need to yield to much deeper self-reflection.
Their theories had always shown that globalisation would produce losers as well as winners. But too many economists worried that emphasising these costs might undermine support for liberal policies. A “circle the wagons” approach to criticism of globalisation weakened the case for mitigating policies that might have protected it from a Trumpian backlash. Perhaps the greatest omissions were the questions not asked at all. Most dismal scientists exclude politics from their models altogether. As Joseph Stiglitz, a Nobel laureate, put it on one star-studded AEA panel, economists need to pay attention not just to what is theoretically feasible but also to “what is likely to happen given how the political system works”......

It’s the politics, stupid
Many economists shy away from such questions, happy to treat politics, like physics, as something that is economically important but fundamentally the business of other fields. But when ignoring those fields makes economic-policy recommendations irrelevant, broadening the scope of inquiry within the profession becomes essential. Some justifiably worry that taking more account of politics could destroy what credibility economists have left as impartial, apolitical experts. Yet politics-free models are no insulation from political pressures—just ask a climate scientist—and nothing would boost economists’ reputations more than results which match, and even predict, critical outcomes.
Political and social institutions are much harder to model and quantify than commodity or labour markets. But a qualitative approach might actually be far more scientific than equations offering little guide to how the future will unfold. Donald Trump campaigned (and may well govern) by castigating the uselessness of experts. To prepare for a time when expertise comes back into fashion, economists should renew their commitment to generating knowledge that matters.

I often show this video at the start of my classes. BTW, Political Economy is at the root of the classical economics-  Smith (wrote The Theory of Moral Sentiments) and Ricardo and Malthus (whose adopted policies against the poor are a black mark on our science).

Noah Smith
Lots of economic policy debates end up going like this: First, one economist or policy wonk will propose a government intervention -- a minimum wage increase, a tax on sugar or subsidies for solar electricity. Another person, usually someone of a more free-market bent, will demand to know exactly which market failure justifies the intervention. A market failure, in the parlance of economics, means a situation in which free markets produce wasteful outcomes. If the advocate can’t produce a theory justifying the policy, the critic claims triumph. If the advocate can find a theory that seems to support the intervention, the critic will typically then criticize the assumptions of the theory. Since most econ theories are highly stylized and have questionable ability to fit the facts, this means that free marketers claim victory quite a lot.
The demand to demonstrate a market failure isn’t fair, because it puts too much burden of proof on advocates of intervention. But it’s often rhetorically effective, because of two sociological quirks. First, many people assumes that free markets are the natural state of things. The flow and bustle of the business world seems much like a jungle, while government action feels forced and artificial. Government interventions can seem a lot like medical procedures. And of course it makes sense for doctors to diagnose an ailment before they start prescribing treatments. The medical rule of first, do no harm is a good one because nature has had millions of years to turn human bodies into self-correcting systems. That principle also makes sense for human societies tampering with natural environments.
But economies are a little bit different from natural ecosystems or the human body. Where the latter is the result of evolution, economies are defined by systems of rules, made by human beings. In some cases, those systems appear to lead to a lot of wealth and prosperity -- the U.S., Japan and much of Europe, for instance. In other cases, as in many poor countries, markets are dysfunctional, inefficient and fail to produce growth. We can’t always know why.
Because the economy is to a large extent a human construct, there’s no reason not to believe that we should always be tinkering and trying to improve it. Think of the economy as somewhere between a jungle and a factory -- the latter is something that can almost always benefit from intentional improvement.
The second sociological quirk behind the show-me-the-market-failure argument is the econ profession’s lingering fetish for theory. There’s a shift underway from what labor economist David Card calls mathematical philosophy to a more data-focused discipline, but theory is still far more privileged and prized in economics than in many natural sciences. The insistence on citing a theory can be a sort of measuring contest.
In fact, economic theory suggests that real-world markets are probably a dense thicket of market failures -- asymmetric information, limited enforceability of contracts, incomplete markets, externalities, public goods and human irrationality. Often, one policy is needed to correct for the failings of another -- a phenomenon economists call the theory of the second-best. It can be politically easier to patch the system up than to overhaul it entirely.

But these theories are usually highly abstract. In order to make the math work, economists simplify their models so much that it can be hard to apply the theories to specific cases -- they end up being more like parables. That’s why when free-marketers demand to see a theory supporting a particular intervention in the real world, they’re making what usually amounts to an impossible demand.
So I propose we minimize our use of the show-me-the-market-failure argument. Sometimes there are policies that people have tried in the past, which seem to work even though it’s hard to tell exactly why. Public education is a great example. It seems to make economies more prosperous, and most economists support it, but no one can point to just why the free market doesn’t educate enough people on its own. Road-building is another -- there are essentially no countries with mostly private high-quality road systems, and economists struggle to explain why.
We know these government interventions work; figuring out why they work is a task for the future. Like the people who chewed tree bark to relieve pain long before the discovery of aspirin, or the engineers who used lithium-ion batteries without quite understanding the physics, sometimes it pays to go with evidence even before you have a theory in hand.

​On March 7, 2007, the late Steve Jobs sent an email to Eric Schmidt, who was at the time Google’s CEO and still a member of Apple’s board of directors: “Eric, I would be very pleased if your recruiting department would stop doing this. Thanks, Steve.”1)
 
“This” was a cold call from a Google recruiter to an Apple engineer trying to convince the engineer to move to Google. The next day, Schmidt sent the following email to Google’s HR department: “I believe we have a policy of no recruiting from Apple and this is a direct inbound request. Can you get this stopped and let me know why this is happening? I will need to send a response back to Apple quickly so please let me know as soon as you can. Thanks, Eric.” Shortly thereafter the recruiter was fired.
 
This exchange between two of the most powerful people in the tech world—and definitely in Silicon Valley—was one of the pieces of evidence in a 2010 antitrust lawsuit by the DOJ against Adobe, Apple, Google, Intel, Intuit, Lucasfilm, and Pixar (US v. Adobe Systems Inc., et al.). The DOJ claimed that the defendants entered into an illegal “no cold call” agreement, thus limiting their respective employees’ career options.
 
The DOJ used harsh words in its complaint: “Defendants’ concerted behavior both reduced their ability to compete for employees and disrupted the normal price-setting mechanisms that apply in the labor setting. These no cold call agreements are facially anticompetitive because they eliminated a significant form of competition to attract high tech employees, and, overall, substantially diminished competition to the detriment of the affected employees who were likely deprived of competitively important information and access to better job opportunities.”2)
 
The DOJ and the defendant companies proposed a settlement on the same day that the suit was filed. Although the DOJ was not timid in the way it described the defendants’ conduct—and although it was definitely a high-profile case that was not just well-covered by the press but also followed closely by corporate executives—the outcome was only moderately impactful: in the settlement that was approved by the court, the companies agreed to broader limitations on the recruitment practices for a period of five years. The settlement included no compensation for the employees. However, a class action resulted in Adobe, Apple, Google, and Intel paying $415 million, Pixar and Lucasfilm paying $9 million, and Intuit paying $11 million.

Matt Taibbi @ Rolling Stone 
Back in 2006, as a deal manager at the gigantic bank, Fleischmann first witnessed, then tried to stop, what she describes as "massive criminal securities fraud" in the bank's mortgage operations.

Thanks to a confidentiality agreement, she's kept her mouth shut since then. "My closest family and friends don't know what I've been living with," she says. "Even my brother will only find out for the first time when he sees this interview." 

Six years after the crisis that cratered the global economy, it's not exactly news that the country's biggest banks stole on a grand scale. That's why the more important part of Fleischmann's story is in the pains Chase and the Justice Department took to silence her.

She was blocked at every turn: by asleep-on-the-job regulators like the Securities and Exchange Commission, by a court system that allowed Chase to use its billions to bury her evidence, and, finally, by officials like outgoing Attorney General Eric Holder, the chief architect of the crazily elaborate government policy of surrender, secrecy and cover-up. "Every time I had a chance to talk, something always got in the way," Fleischmann says.

Business Insider. 
"Swedish sex toy company LELO is marketing a new product "exclusively for bankers."

That's right, it's for bankers only.

Here's why, from the company:

"Many bankers want more from their profession and their investments; they also want more from their intimate investments. The new PINO™ will be the first sex toy in history that can satisfy the hedonistic sexual cravings and excesses exhibited by members of the financial world." "


Well, as regular readers of this blog will note:
I would definitely like to bend the banking community over.  Does it come with leverage ratios, elimination of OTC derivatives trading, vested bonus pools subject to government confiscation, non compete clauses for regulatory workers (along with higher pay),criminal prosecution, and life time bans for executives caught flaunting the law?


Book deal to follow with the working title "50 Shades of Money"

From 2012 Nobel Prize Winner Al Roth (Market Design).
We used to see universities in the US as one of the great engines of social mobility. Think in ourselves as an immigrant nation. My grandparents came from Russia and were tailors. My parents went to college and were high school teachers. I got a phd and I’m now profesor. That was the kind of story we like to tell. Now we worry than that’s less and less true. Rather than be an engines of social mobility, colleges maybe becoming the way that well often educated transmit their inheritance to their children. It’s more complicated than money. Once admitted to Harvard or Stanford, finances are not the problem. The problem is that too few families whose income is 50.000 dollars a year are able to provide the education before college to their kids that’s needed to be admitted to Harvard or Stanford. We have a problem that we haven’t figure out yet, which is how to get talented children from all parts of society to come to universities and get the right kind of education. I think it’s harder for children whose parents have not been to college to want to go to college and to get themselves read to do it. If you live in a community where everyone goes to college, then you know a high school, what colleges, what kind of courses youshould take... It’s a whole path. 

Praising Jean Tirole’s attempts to “tame powerful firms”, the committee awarding the 8m kronor (£750,000) prize said the University of Toulouse professor was “one of the most influential economists of our time”. The committee chose an area of economics that has become increasingly important as governments have privatised former public monopolies such as water, electricity and telecoms and Tirole’s work has been adopted by competition regulators around the world.

Tirole, 61, has covered a wide range of areas including pay, the banking industry and credit card fees. In a paper last year he scrutinised, with Roland Bénabou, a “bonus culture that takes over the workplace, generating distorted decisions and significant efficiency losses, particularly in the long run”.

"Alex Tabarrok, “The market doesn’t lie doesn’t mean the market is always correct. A lie is an intentional falsehood. Market manipulation would be analogous to an intentional lie so it’s not impossible for markets to lie only difficult much of the time.”  (Marginal Revolution)"

What about LIBOR, what about commodity warehousing, what about insurance companies, what about the fact the western government's felt it was necessary to constrain Microsoft, what about high frequency trading, what about price fixing in the options market, There are large sectors of the economy that are constantly being manipulated. Has Cargill or Archer Daniels Midland ever paid a fine for price fixing corn or soy? Fuck me, these guys are such corporate prostitutes that is makes me want to tear up my Econ degrees.

Wow

Summers has been at the heart of much of what has gone wrong in America the last 20+ years (improper deregulation-deference to multinational agendas, austerity, etc.). I have chronicled these issues many times on these pages. 
Please do not make him Fed chair. Please.

Onion Headline: "Economists Advise Nation’s Poor To Invent The Next Facebook"
Romney Economic plan: "Romney's Plan for Dealing with Unemployment: Have the Unemployed Borrow Money
From Their Fathers and Start Businesses"

I wish I could laugh, but I can't.
I can't because much of the economics profession still denies trade causes inequality, claims we live in a meritocracy and the real problem is that the poor need to be provided the correct incentives to work. Government just has to get out of the way.

Of course "incentives" are something that economics always recommends to the working class, providing the proper incentives to business (think tax reform, regulation) is something economics gives only a minor mention, and usually with bromides and caveats about how under the proper conditions "the markets will be self regulating" or the Coase theorem will lead us to an efficient solution of market externalities (message: there is no need for nasty government). What Europe needs is labour market reforms not corporate tax reform.

I have an idea, why don't we deregulate the labour markets in North America so  the poor can send their children into the labour market, sell their children  into slavery or prostitution - EM countries have been using that type of  innovative, free market thinking  -well forever. 

But economists are against exploitation you say -because economists  frequently come out against exploitive organizations and TV shows likes Duck Dynasty & Honey Boo Boo, and NCAA and NFL football. Sorry- my bad.

Perhaps the young poor are just missing a proper role model.

For those about to recommend to the poor to  innovate, we salute you.