Streams

Old World Economic Ills

Thursday, June 07, 2012

German Chancellor Angela Merkel, European Comission President Jose Manuel Barroso, and IWF Chief Christine Lagarde after a meeting with Greek Prime Minister George Papandreou over a euro zone bailout. German Chancellor Angela Merkel, European Comission President Jose Manuel Barroso, and IWF Chief Christine Lagarde after a meeting with Greek Prime Minister George Papandreou over a euro zone bailout. (Guido Bergmann/Bundesregierung-Pool via Getty Images/Getty)

Luigi Zingales, University of Chicago economist and the author of A Capitalism for the People: Recapturing the Lost Genius of American Prosperity, argues the U.S. economy is in danger of falling prey to the problems he hoped to leave behind in Europe.

Guests:

Luigi Zingales

The Morning Brief

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Comments [11]

Jack Jackson from Central New Jersey

I LOVED THIS GUEST! Unlike yesterday's call-in with Greg David - who just uses data to buttress a point of view, rather than building his point of view based on the data - Zingales insights and conclusions are revelatory.

It sparked knew thinking to explain why the distribution of income here in the U.S. has gotten to be so rotten such that over 23% of GDP goes to the top 10% of households. I have a theory now that's not based on greed or meanness or campaigne donations, though each of these are certainly factors.

Since the staglfation of the 70'S, average incomes have been falling relative to total GDP such that the average individual income no longer covers the necessities and households need MORE THAN ONE earner in order to survive.

My theory? The Feds have done a good job of fighting inflation. (If you consider 2-2.5% per annum as a good job.) However, they have done a GREAT job of fending off DEFLATION. Deflations cause a general re-ordering of costs and, therefore, prioriies. Even Alan Greenspan, the former God of Market Uber Alles, would use any tool in his considerable arsenal in order to prevent a deflation. By eliminating deflations, the government policy has frozen those priorities in place. Poor income distribution, lower tax revenues, a general march to poverty for 'the rest of us' is a sequela of freezing the 1968 priorities into place.

Maybe your next interview could help me think through a controlled deflation...Can we do it? Does it help?

Jun. 08 2012 11:50 AM

Would the "take-a-way":

'Big Money'/'Big Business' benefits most by government requirements masked as/by "Progressive" goals/programs"

be appropriate for this segment?

It seems that the manufactured antipathy between the main stream "Tea Parties" and the non-wastrel Occupiers works until now to keep the pressure off of government established economic and social monopolies.

It would be a pleasant phantasy to imagine that WNYC might be a source for more programing investigating these themes, but there are ample materials. Frederic Bastiat, the French political economist:

"Between a good and a bad economist this constitutes the whole difference - the one takes account of the visible effect; the other takes account both of the effects which are seen, and also of those which it is necessary to foresee. Now this difference is enormous, for it almost always happens that when the immediate consequence is favorable, the ultimate consequences are fatal, and the converse. Hence it follows that the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, - at the risk of a small present evil." http://bastiat.org/en/twisatwins.html ;
[ http://en.wikipedia.org/wiki/Fr%C3%A9d%C3%A9ric_Bastiat ]

He might not be available, but I'm sure there are people able to skillfully present his insights.

Jun. 07 2012 02:29 PM
connie from Waccabuc

Excellent insight from this man. Let's hear more of the likes of his perspective.

Jun. 07 2012 11:34 AM
Leslie Freudenheim from manhattan

He's right: Greece and foreign banks that lent all that money to Greece should pay the cost, not just Greece.

Jun. 07 2012 11:28 AM
sanych

The financial elite is the current ruling class. New York is the US center of the financial activity, and is rightfully the focus of scorn from the rest of the country. We ALL serve this elite and benefit financially from our geographical location - from a delivery boy to Brian Lehrer himself.

Jun. 07 2012 11:27 AM
John from NYC

With regard to "Too Big to Fail" topic, can your guest comment about the Anti-Trust Laws? Has any merger of any industry for that matter been rejected lately due to anti-competitive environment? Maybe a topic for another day?

Jun. 07 2012 11:26 AM
Jenna from hamilton heights

Brian, can you ask your guest why he thinks there is widespread denial of what seem like clear cut facts?
For example, facts and statistics prove there is limited upward mobility, as your guest mentioned, yet politicials seem to always tote this. Statistics and facts prove we are very bad at educating our children, yet people claim we are the best in the world. Why such denial all around? I am sure people will deny your authors book is even factual, even though it is!

Jun. 07 2012 11:22 AM
leslie from nyc

Your guest is right: we need to re-instate Glass-Steagall. The Volcker rule is insufficient as he says. Is he working with Elizabeth Warren to launch a campaign to reinstate Glass-Steagall, separating commercial banks from investment banks?

Jun. 07 2012 11:16 AM
John A.

Chicago-school economics (how many Nobels?) has been celebrated many times in the past thirty years. Couldn't this coincidence with the rise of inequality suggest some complicity?

Jun. 07 2012 11:13 AM
Tina from Queens

I am not an economist, and I always said they should have let ALL the troubled banks fail. I think the country would have benefited in the long run. Instead, the goverment looked at the immediate effect, to the detriment of the long term effect.

Jun. 07 2012 11:13 AM

Great person for interview! Zingales is a very different kind of conservative from, say, his Chicago colleague Casey Mulligan, who concedes nothing at all, ever, in the direction of liberal or Keynesian thinking even in the face of glaring evidence undermining the neo-classical view. (And yes, there are liberal thinkers who do likewise, but I think it's fair to say that there is an imbalance.)

Jun. 07 2012 11:11 AM

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