Tab bar getting crowded.
Suitcase With $134 Billion Puts Dollar on Edge (Bloomberg). For the record, I think the bonds are fake. But even so, it sure would be nice to hear the whole story.
BofE’s Mervyn King : No Bank should be too big to fail (Calculated Risk). Go Mervyn! Can we make this guy Treasury Secretary?
Chief Asset Allocator (Across the Curve)
Bulldozing America’s Shrinking Cities. An editorial honestly suggesting that the best way to increase prosperity in America is to start destroying physical structures that took substantial resources and skilled labor to create. (I am not making this up.) This would be merely humorous if the author were not a Harvard Economics Professor.
Don’t tase granny, bro. 72-year-old woman gets zapped.
In re: Bulldozing, I think his argument is a little better than you give it credit. Just like the bank that bulldozed brand new houses in California a few weeks ago, if the cost of maintaining existing property is higher than the cost of dismantling it plus its economic value, than it makes sense to dismantle it. It might be even better to just stop maintaining uneconomical areas, and let nature take its course, but it is understandable that most cities will not want to do that.
Economists do not think sunk costs are relevant in making a rational decision.
Economists do not think sunk costs are relevant in making a rational decision.
Well, neither do I. But physical structures are not “costs”; they are investments. I am skeptical that the real value of most of these structures is zero.
In my world, there is real wealth, like physical goods, services, and knowledge… And then there is money, which is little pieces of paper. The notion that house prices are falling and therefore we need to destroy a bunch of them is sheer lunacy, but also a logical consequence of getting the concepts a little backwards.
I realize this is not exactly what Glaeser is arguing, but it is not very far off, either. Something about destroying real things just rubs me the wrong way.
I agree, the structure is not a “cost” in itself. But your point was that the structures should not be destroyed on account of the resources and skilled labor they required in their construction. So they were an investment – a bad investment, because they are of little utility. If the land can be transformed into something of greater utility, then the rational thing would be to do that.
I mentioned the resources and skilled labor to reinforce the notion of the structures as real things with real value.
During the 30s, the U.S. plowed over crops in an effort to support prices. This article reminds me of that, although I concede Glaeser’s argument is different.
Ah, utility maximization. Who could possibly argue against that?