1. John Tierney reviews "The Rational Optimist" by Matt Ridley.
Key quote: "Rulers like to take credit for the advances during their reigns, and scientists like to see their theories as the source of technological progress. But Dr. Ridley argues that they’ve both got it backward: traders’ wealth builds empires, and entrepreneurial tinkerers are more likely to inspire scientists than vice versa."
Another point the article highlights is that the doomsayers predicting minimal progress or even regression have existed in the past and they were wrong even though they had what sounded like good reasons. Unfortunately for humanity, this is a relatively weak argument. Just because humans have solved problems in the past doesn't mean that the problems the large world faces now are going to be equally amenable to scientific or entrepreneurial solutions.
2. Scott Sumner analyzes
recent market movements.
Key quote: "It’s a strong dollar crisis that has been misdiagnosed as a weak euro crisis. If this sounds familiar, recall in July – November 2008 the dollar also rose sharply against the euro, and once again 99% of pundits failed to recognize that the excessively strong dollar (reflected in falling asset prices and falling NGDP growth expectations) was the real problem, and the worsening of the banking crisis was a symptom."
Scott Sumner has had some very interesting commentary, but I am starting to wonder whether or not he is seeing the world through his model of optimal central bank policy and labeling anything that he believes the central bank could possibly fix as a mistake of the central bank if nothing is done to counteract its effects. It would be a weird monetary policy that almost always sought to cancel out a flight to quality in the dollar or tone down a bull market dollar sell off. When the dollar sells off during rallies or strengthens during sell offs, part of it is due to the change in the price of crude oil which is reacting to changes in projected world aggregate demand and is not necessarily US specific. I would also need to see the evidence for why the market reaction on the day or two after plans are announced is seemingly seen as more significant than long term trends.
Side note: I wonder if he realizes that his proposed policy of having the central bank target nominal GDP with the help of GDP futures has the potential to drastically reduce the volatility of the stock market. Even without being very inflationary, this policy would be very positive for the stock market's actual valuation. However, the suppression of volatility would lead to greater problems the next time the central bank was unwilling or unable to prevent real volatility.
3. Will Wilkenson looks into
the Robert Frank vs. David Friedman debate on income distribtion, specifically the part where Frank wants libertarians to think that his redistributive ideas are coherant with libertarianism.
Robert Frank: "I know what the market would do if they were free, so people who like markets like libertarians should agree to this redistribution if they are smart."
Libertarians: "I don't think he quite understands why libertarians like the market process."