Bangladesh Faces Crippling Financial Crisis Under interim Muhammad Yunus with Palki Sharma

Bad news! Few economists have the talent to run a country! Yunus is 85 years old!

America's economic outlook has declined three months into Trump’s term, a WSJ survey finds. Really!

So what! Stay calm and carry on! Ignorance is bliss (sometimes)!

Too many economists are presumed to suffer from Trump Derangement Syndrome and so on. Then there are numerous eternally dismal economists! The forecasts of economists are as as good as mine and yours! They are very often wrong! 😊

Drastic, major reforms to reduce government size, waste, fraud, and abuse usually have an immediate negative effect on the economy. That is to be expected. The chances are very high, the economy will rebound! Like viva Argentina!

"Since President Trump took office, economists have dramatically slashed estimates for growth while raising them for inflation and unemployment. The main reason, according to respondents to The Wall Street Journal’s quarterly survey of economists: tariffs."

"... Since President Trump took office, economists have dramatically slashed estimates for growth while raising them for inflation and unemployment. ..."

The Wall Street Journal What's news

Economic Outlook Dives Just Three Months Into Trump’s Term "Probability of a recession leapt while growth outlook slumped, survey of economists finds"

Black men in the U.S. who ‘passed’ as white lived longer in 20th century | AAAS. Really!

Once more the skin color obsession/racism of the American Association for the Advancement of Science (AAAS)! Like the Klu Klux Clan!

Dismal Economists, i.e. NBER, are also involved!

What are "African American men"? African American is such an abused and wrong expression!

"Passing for white" is another derogatory and disdainful expression! 

"... A new study reveals for the first time that Black men who “passed” as white lived more than 9 months longer, on average, than their siblings who continued to publicly identify as Black. The research, released last month in a working paper published by the National Bureau of Economic Research (NBER), provides a glimpse of how deeply ingrained structural inequalities have shaped health outcomes in the U.S. ..."

From the abstract:

"In the presence of segregation and discrimination during the late 19th and early 20th century, many African American men changed their racial identity and “passed” for white. Previous studies have suggested that this activity was associated with increases in income and socioeconomic status despite the costs associated with cutting ties with their black communities. This study adds to this literature by evaluating the long-run effects of passing on old-age longevity.

We construct longitudinal data of black families in historical censuses (1880-1940) linked to their male children’s Social Security Administration death records (1975-2005). We use family fixed effects to demonstrate that individuals passing as white live approximately 9.4 months longer, on average, than their non-passing siblings. Additional analyses suggest substantial improvements in education and occupational standing scores as well as differential parental investments as potential pathways."

Black men in the U.S. who ‘passed’ as white lived longer in 20th century | Science | AAAS "A better education could explain the improvement in longevity"

Passing as White: Racial Identity and Old-Age Longevity

Nobel-Winning Economist Eugene Fama Says Bitcoin is Doomed with Palki Sharma. Really!

I don't think that the 85 year old economist really grasps what digital currency is all about! It is very plausible and realistic to assume that in the 21st century, we will abandon conventional money (metal coins, paper banknotes)

16 left-wing Nobel prize-winning economists have signed a petition declaring that if Donald Trump is elected there will be Risks to the U.S. Economy

What a joke! Or is it desperation? So pathetic!

Not even all living Nobel Prize winners, irrespective of discipline, can safe the 46th President!

Verbatim:

"Sixteen Nobel Economists Sign Letter About Risks to the U.S. Economy of a Second Trump Presidency

We the undersigned are deeply concerned about the risks of a second Trump administration for the U.S. economy. 

Among the most important determinants of economic success are the rule of law and economic and political certainty. For a country like the U.S., which is embedded in deep relationships with other countries, conforming to international norms and having normal and stable relationships with other countries is also an imperative. Donald Trump and the vagaries of his actions and policies threaten this stability and the U.S.’s standing in the world. 

While each of us has different views on the particulars of various economic policies, we all agree that Joe Biden’s economic agenda is vastly superior to Donald Trump’s. In his first four years as President, Joe Biden signed into law major investments in the U.S. economy, including in infrastructure, domestic manufacturing, and climate. Together, these investments are likely to increase productivity and economic growth while lowering long-term inflationary pressures and facilitating the clean energy transition. 

During Joe Biden’s presidency we have also seen a remarkably strong and equitable labor market recovery—enabled by his pandemic stimulus. An additional four years of Joe Biden’s presidency would allow him to continue supporting an inclusive U.S. economic recovery. 

Many Americans are concerned about inflation, which has come down remarkably fast. There is rightly a worry that Donald Trump will reignite this inflation, with his fiscally irresponsible budgets. Nonpartisan researchers, including at Evercore, Allianz, Oxford Economics, and the Peterson Institute, predict that if Donald Trump successfully enacts his agenda, it will increase inflation. 

The outcome of this election will have economic repercussions for years, and possibly decades, to come. We believe that a second Trump term would have a negative impact on the U.S.’s economic standing in the world and a destabilizing effect on the U.S.’s domestic economy. 

Signed,

George A. Akerlof (2001)

Sir Angus Deaton (2015)

Claudia Goldin (2023)

Sir Oliver Hart (2016)

Eric S. Maskin (2007)

Daniel L. McFadden (2000)

Paul R. Milgrom (2020)

Roger B. Myerson (2007)

Edmund S. Phelps (2006)

Paul M. Romer (2018)

Alvin E. Roth (2012)

William F. Sharpe (1990)

Robert J. Shiller (2013)

Christopher A. Sims (2011)

Joseph E. Stiglitz (2001)

Robert B. Wilson (2020)"

The Very Model of a Modern Major Bidenomics Economist | Mises Institute

https://s3.documentcloud.org/documents/24777566/nobel-letter-final.pdf

Renters less likely to be kicked out where eviction filing fees are higher. Really!

Don't you love very naive and simplistic journalists? This is also another example of racializing everything! The phony disparate impact demagoguery was applied again!

Did you know that Princeton University has an Eviction Lab? Did you know that luminaries like "Bill and Melinda Gates Foundation • .... • Chan Zuckerberg Initiative • Ford Foundation" are funding it?

This pseudoscience was then also accepted and published as a research article in an economic policy journal. Although, it obviously follows the propaganda playbook/narrative that landlords are villains and tenants are severely exploited angels.

 

These pseudo economists are talking about first round effects! This is highly misleading and false!

If e.g. the eviction fees were higher then perhaps these rentals would not even be offered or rental apartments would be converted into something else etc. etc.

"Places with higher fees for filing eviction cases have lower eviction rates — even when other factors are considered, new research from the Eviction Lab at Princeton University shows.

The research, published in the journal Housing Policy Debate in May, showed higher filing fees motivate landlords to work with tenants rather than turning to the legal process. "

From the abstract

"Eviction is a common and consequential event in the lives of tenants and is shaped by the legal environments in which it takes place. In this study, we show that eviction filing fees, or the amounts of money it costs landlords to begin formal evictions, have a large effect on eviction practices. Specifically, fees that are higher by $76 (one standard deviation) lead to lower eviction filing rates by 1.71 percentage points (0.26 standard deviations) and lower eviction judgment rates by 0.49 percentage points (0.19 standard deviation). Filing fees affect not only the rate but also the purpose of filing, as lower fees make landlords more likely to file serially against the same tenants as a form of rent collection. Each of these effects appears to be disproportionately large in majority-Black tracts, suggesting that low filing fees have disparate impacts on Black renters. These findings contribute to our understanding of the legal basis of housing insecurity and the racialization of eviction practices in the United States."

Renters less likely to be kicked out where eviction filing fees are higher – Center for Public Integrity 

When it’s cheap to file an eviction case, tenants pay the price

The Racially Disparate Influence of Filing Fees on Eviction Rates

The Trickling Up of Excess Savings

When politically motivated economists write research papers! Usually, it is the myth of trickle down economy!

In this latest paper, three economists proclaim a phony hypothesis of the trickle up "to the richest savers with the lowest MPCs [marginal propensity to consume], raising wealth inequality".

One obvious and glaring flaw with this study is that perhaps the single-minded focus on MPC [marginal propensity to consume] of rich people is much lower, however, they spend their money on real estate, art, yachts, all kinds of investments etc! These expenditures create jobs, new products, pay taxes etc.

Please note that government failure like massive trillion dollar deficit-financed fiscal transfers started the process!

From the abstract:

"We provide a simple framework connecting the distribution of excess savings across households to the dynamics of aggregate demand. Deficit-financed fiscal transfers generate excess savings. The poorest households with the highest MPCs spend down their excess savings the fastest, increasing other households’ incomes and their excess savings. This leads to a long-lasting increase in aggregate demand until, ultimately, excess savings have “trickled up” to the richest savers with the lowest MPCs, raising wealth inequality."

The Trickling Up of Excess Savings | NBER (open, but restricted access)

Credits: Breitbart Business Digest

High Marginal Tax Rates on the Top 1 Percent Earners? You bet!

The prestigious American Economic Association just published following article in their journal Macroeconomics. What a junk!
Caveat: I do not have access to the full article. Perhaps the AEA should change their policies and open up their articles to the general public!

When economists sell expropriation as science!

From the very brief abstract:

"... We construct a large-scale overlapping generations model with uninsurable labor productivity risk, show that it has a realistic wealth distribution, and numerically characterize the optimal top marginal rate. We find that marginal tax rates for top 1 percent earners of 79 percent are optimal as long as the model earnings and wealth distributions display a degree of concentration as observed in US data."

High Marginal Tax Rates on the Top 1 Percent? Lessons from a Life-Cycle Model with Idiosyncratic Income Risk - American Economic Association (no public access)

Piketty’s new book explores how economic inequality is perpetuated

Ah, a new book by this hard leftist Marxist! He is not an economist, but a lousy propagandist! His previous, best selling book ("Capital in the Twenty-First Century") was soundly debunked as myth telling!

He believes in class struggle and other Marxist fantasies! Anyone who tries to boil down or explain history in such simple terms is a fool!

His story of the Swedish economy is bogus!

"Participatory socialism is the general objective of more “access” to education. Educational justice is very important in terms of access to higher education. Today there’s a lot of hyper criticism, not only in the U.S., but also in France and in Europe, that we don’t set quantifiable and verifiable targets in terms of how children [from] lower [income] groups [gain] access to higher education, what kind of funding [they] have for higher education. The other big dimension is circulation of property, so I talk about “inheritance for all.” The idea is to use a progressive tax on wealth in order to finance [a] capital transfer to every young adult at the age of 25."

Picketty is such a naive intellectual that it hurts! Don't we already have a serious inflation of higher education degrees in Western countries? The Internet has profoundly changed the availability of education for free etc. 

Picketty demands expropriation of the "expropriators"! What a total fool!


Piketty’s new book explores how economic inequality is perpetuated – Harvard Gazette: Economist Thomas Piketty discusses his new research into the historical roots of inequality around the world and what can be done to begin redressing it.

Historian Niall Ferguson on capitalism in crisis

I am sorry to witness that as Niall Ferguson gets older his views become stranger and grumpier! He, in his earlier career, produced great video/TV documentaries like “Civilization: Is the West History? (2011)” or “The Ascent of Money” (2008). 

Latest case in point: Ferguson’s commentary published in the November 2019 McKinsey Quarterly: ‘Don’t be the villain’: Niall Ferguson looks forward and back at capitalism in crisis. In my opinion, a disappointing commentary!

In his opening paragraph of his commentary, Ferguson states (emphasis added):

“Capitalism is in crisis, as usual. There will always be people questioning the legitimacy of the system. As Joseph Schumpeter wrote in Capitalism, Socialism and Democracy, published in 1942, capitalism has at its heart creative destruction, and that creates pain; it creates losers. This is the normal state of affairs, and we shouldn’t be surprised that it’s going on.” 

This is a highly one sided and very pessimistic view of capitalism! Yes, Creative Destruction creates losers, but it creates many more winners and those losers become winners again easily if they “incessantly revolutionizes the economic structure from within, ... incessantly creating a new one” (Source). Thus, Ferguson has only quoted the negative part of Schumpeter's Creative Destruction!

“The obvious lesson from the Gilded Age is don’t be the villain of the piece. John D. Rockefeller became the villain of the original antitrust movement in a way that Andrew Carnegie avoided. Why? I think it’s partly about bad luck, in the sense that Standard Oil was unlucky enough to be the target of some extremely effective muckraking reporting, and that didn’t happen to Carnegie. But it’s also because Carnegie understood the power of philanthropy to offset the unpopularity that you inevitably accumulate as a successful businessman. And Carnegie was extraordinarily revolutionary in his philanthropy. He said that you should give it all away—not half, as in the giving pledge that we have today—all of it. In a wonderful essay on wealth, Carnegie argued that you should spend the first third of your life educating yourself, the second third making money, and the third third giving it all away.”

Nice try by Ferguson to juxtapose Rockefeller and Carnegie in this way! Except it is terribly flawed in several respects: 

1. Carnegie was not the first super rich to give away most of his wealth, there were others before like Stephen Girard (1750 - 1831) of Philadelphia, perhaps one of the first multimillionaires of the U.S. 
2. The Gospel of Wealth essay by Carnegie is everything but wonderful, it is actually terrible. I have blogged about it here!

Historian Niall Ferguson on capitalism in crisis | McKinsey: Capitalism is in crisis, as usual, argues historian Niall Ferguson. By looking back, business leaders can get a clearer view of what’s coming.

Stray Thoughts: Nobel Laureate Robert Solow’s Predictions for the Next Century | The MIT Press Reader

Robert Solow (economics Nobel laureate of 1987), another of the many all too dismal economist. His essay is so banal and trivial! If I had to grade it, it would be an F (failed). Solow, incomprehensibly, omitted so many important aspects that will drive the next hundred years (e.g. enormous medical progress (e.g. cancer is history, gene editing etc.), fast economic development of Africa, shrinking world population, almost unprecedented technological progress and much faster adoption of new technologies etc.). Solow’s discussion is mired in the economic jargon of the 1960 as if senility as clouded his mind! Indeed, not much more than stray thoughts!

Stray Thoughts: Nobel Laureate Robert Solow’s Predictions for the Next Century | The MIT Press Reader: A leading economist considers such topics as the effects of climate change on economic growth, the rise of income inequality, and the shifting work year.

A Brief Primer On Economists

Posted: 9/11/2018

I have tried many times before in my blog here to characterize economics and economists. Here is an attempt to distill some fundamentals of what I have learnt so far over several decades as an economist.

1. Many prominent past and present economists are not much more than sycophants (German term: Steigbügelhalter) to government power and control
2. Economics is not a dismal science, but many economists are indeed dismal
3. Too many past and present economists prefer centralism and statism while they despise the chaotic nature of free markets and federalism; entrepreneurs; or the voluntary and free exchange between humans
4. Since 1776, economists are still very lousy at predicting business cycles or economic depressions
5. Since 1776, economists still advise politicians on how to run an economy into the ground. They deliberately assist in misguided policy measures to induce the next depression, recession or crisis or they make them much worse  
6. Since 1776 economists still have not learnt or to appreciate more the self healing nature of free markets or spontaneous order to come out of an economic depression or recession

Many Economists Are Bankrupt

Posted: 7/4/2018

Introduction

I have previously posted several critical blogs here about economics and several prominent economists here.

Summary

Here is an attempt to summarize:

1. Many are not dispassionate scientists, but active advocates for big government, central planning, and mercantilism. They are the mouthpieces for government programs
2. Rarely do economists criticize government for economic recessions although governments are often heavily responsible for their cause and/or their severity and/or their prolongation
3. Many are socialists in what they do and in what they present in public
4. Humanity does not really benefit from many economists

A Supreme Example

Government mandated minimum wages:

1. How many economists openly protest the introduction of any new minimum wages or any hikes?
2. How many economists have ever advocated to lower minimum wages?
3. Why is it not taught in public (government) schools that minimum wages are a form of government price controls? That it is one of many grave government interventions in economic affairs that severely interfere with the working of free markets and the choices of free individuals

Reckless Monetary Policy Dooms Western Democracies

Posted: 6/17/2016

I have blogged here numerous times about the irresponsible and reckless monetary policies pursued by the likes of Alan Greenspan and the dim witted economic professor and successor Ben Bernanke. The current head of the U.S. Federal Reserve System, another very pale economic professor, Janet Yellen is not much better. Mario Draghi (or Dracula) or his predecessor at the European Central Bank have not been better either. By the way, Ben Bernanke and Mario Draghi were both students of Stanley Fischer.

To destroy western civilization and individual freedom politicians start by debauching the currency. This basic wisdom has been known hundreds of years before Maynard Keynes or Lenin.

If awful monetary policies are pursued in conjunction with irresponsible fiscal policies (more deficits and more government debt and more government regulation instead of lower taxes and more economic freedom) as is the case in the first decade of the 21st century, then our elected politicians have created the perfect storm.

Why the considerable rise of populism in recent times in Europe or the USA?

Why are Western democracies in crisis as I blogged here before?

Robert J. Shiller - A Dismal Economist

Posted: 4/17/2015

Trigger

Just read “Debt and Delusion” on the Project Syndicate website.

I said it before on my blog post, it amazes me how many top economists have written absurd pieces for this Project Syndicate.

I have written a number of blog posts here on contemporary dismal economists. I guess, it could be called a series of posts.

Who Is Shiller?

“Robert J. Shiller, a 2013 Nobel laureate in economics, is Professor of Economics at Yale University and the co-creator of the Case-Shiller Index of US house prices. He is the author of Irrational Exuberance, the third edition of which was published in January 2015, and, most recently, Finance and the Good Society.”

Shiller’s Delusions Or Banalities

The whole article is about what seems an obsession by this top economist to show that a particular economic indicator is “artificial” “and often irrelevant”. His singular focus and by exclusion of a lot of stuff related to government indebtedness and its consequences this economist has done a dismal job.

Following are salient quotes from the above article and my comments (emphasis added):

1. “Could it be that people think that a country becomes insolvent when its debt exceeds 100% of GDP?”
   [What a stupid remark is that by an ivy league professor! Yes, indeed it could happen, e.g. when interest rates are back to normal and if the economy is sputtering.]
2. “There is nothing special about using a year as that unit. A year is the time that it takes for the earth to orbit the sun, which, except for seasonal industries like agriculture, has no particular economic significance.”
   [First, this is a non sequitur argument. What is this banality all about? A year or a quarter or a month is a practical, useful period of time to define an indicator like debt to GDP ratio. This has been common and best practices for a decades if not longer. Indebtedness is usually a process that happens over time.]
3. “We should remember this from high school science: always pay attention to units of measurement. Get the units wrong and you are totally befuddled.”
   [Thank you so much for another banality.]
4. “Speaking from personal experience, I have to say that they can, because even I, a professional economist, have occasionally had to stop myself from making exactly the same error.”
   [The only passage of his article where he expresses something significant. He errs.]
5. “Economists who adhere to rational-expectations models of the world will never admit it, but a lot of what happens in markets is driven by pure stupidity – or, rather, inattention, misinformation about fundamentals, and an exaggerated focus on currently circulating stories.” [Like so many economists do not admit that they are driven by pure stupidity and would not so often misinform the public. Most economists know that rational expectations is an abstraction or simplification, but that over time a majority of individuals act more or less rationally in their economic transactions.]
6. “What is really happening in Greece is the operation of a social-feedback mechanism. Something started to cause investors to fear that Greek debt had a slightly higher risk of eventual default. Lower demand for Greek debt caused its price to fall, meaning that its yield in terms of market interest rates rose. The higher rates made it more costly for Greece to refinance its debt, creating a fiscal crisis that has forced the government to impose severe austerity measures, leading to public unrest and an economic collapse that has fueled even greater investor skepticism about Greece’s ability to service its debt.”
   [Had this Nobel Laureate done his homework, he would have known that Greece heavily overspends on military and public sector. Further, too much of the economy is run by the government etc. Thus, so called “austerity measures” [a red herring anyway] were not necessary, but some serious economic reforms to liberate the economy was asked for, which the Greek politicians refuse.]
7. “A paper written last year by Carmen Reinhart and Kenneth Rogoff, called “Growth in a Time of Debt,” has been widely quoted for its analysis of 44 countries over 200 years, which found that when government debt exceeds 90% of GDP, countries suffer slower growth, losing about one percentage point on the annual rate. One might be misled into thinking that, because 90% sounds awfully close to 100%, awful things start happening to countries that get into such a mess. But if one reads their paper carefully, it is clear that Reinhart and Rogoff picked the 90% figure almost arbitrarily. They chose, without explanation, to divide debt-to-GDP ratios into the following categories: under 30%, 30-60%, 60-90%, and over 90%. And it turns out that growth rates decline in all of these categories as the debt-to-GDP ratio increases, only somewhat more in the last category.”
   [I cannot believe, Prof. Shiller wrote this nonsense! Well, yes, perhaps the classification chosen by Reinhart/Rogoff is somewhat arbitrary, but I would guess, with different brackets the results would have come out similar. Perhaps, something else is flawed with this study and needs correction.]
8. “There is also the issue of reverse causality. Debt-to-GDP ratios tend to increase for countries that are in economic trouble. If this is part of the reason that higher debt-to-GDP ratios correspond to lower economic growth, there is less reason to think that countries should avoid a higher ratio, as Keynesian theory implies that fiscal austerity would undermine, rather than boost, economic performance.”
   [Many economists would know that government failure is often the cause of economic trouble. The public debt to GDP ratio is only one indicator to quickly gauge this situation. Keynesianism has been debunked so many times that one must get the impression that economists like Shiller are incorrigible dogmatic, never learning from their mistakes.]
9. “The fundamental problem that much of the world faces today is that investors are overreacting to debt-to-GDP ratios, fearful of some magic threshold, and demanding fiscal-austerity programs too soon. They are asking governments to cut expenditure while their economies are still vulnerable. Households are running scared, so they cut expenditures as well, and businesses are being dissuaded from borrowing to finance capital expenditures.
   The lesson is simple: We should worry less about debt ratios and thresholds, and more about our inability to see these indicators for the artificial – and often irrelevant – constructs that they are.”
   [How about that certain governments are underreacting to increasing public debt to GDP ratios. Investors do not demand austerity, but meaningful reforms to liberate the economy. Austerity is most of the times only demanded by economists or international, governmental institutions like the IMF]

Werner Sinn - A Dismal Economist

Posted: 1/17/2015

Trigger

Just read “Economics and Its Critics” an opinion piece by Werner Sinn published on the Project Syndicate website. Prof. Sinn is one of the most best known and prominent economists in Germany.

The whole article is filled with dubious statements I would ascribe to a dismal economist. Most prominently, he criticizes a number of market failures when in fact we are dealing with government failures of various kind.

Who is Werner Sinn:

1. Director of one of Germany’s best economic research institutes (Ifo Institut in Munich)
2. A member of the advisory council of the German ministry of economics.
3. An often quoted, interviewed economist in the German media

Economists Are Misunderstood And Met With Ignorance

According to Sinn: “But much current criticism of the [economics] profession is based on misunderstanding and ignorance.”

How To Defend Economists

In Prof Sinn’s words (emphasis added):

“[Economists are] Like sniffer dogs, they search the economy for such defects [of the invisible Hand or perfect competition] and ponder how they can be corrected through intelligent state intervention.”
[Since when are governments intelligent or more intelligent than free markets?]

“In this respect, economists are like doctors, who have to know what a healthy body looks like before they can diagnose disease and prescribe treatment. A good doctor does not intervene arbitrarily in the body’s processes, but only in cases where there is objective proof of a disease and an effective treatment can be prescribed.”
[This flawed analogy or metaphor used here by Prof. Sinn has left me speechless. As an economist myself, I would never get the idea to compare myself to a doctor or diagnose whether the economy is sick or healthy.]

“Environmental regulation addresses a particularly striking example of market failure.”
[This nonsense has been taught to generations of students of economics! Many times it is government failure that lead to very harmful environmental consequences of economic activity.]

“Another malady that economists sometimes diagnose might be called “Keynes disease.” If demand is too weak, it can lead to a sharp drop in employment (because wages and prices are rigid in the short term). The disease can be cured with injections of public, debt-financed stimulus – like giving a cardiac patient doses of nitroglycerin to keep his heart going.”
[No comment necessary anymore. Just awful!]

“Contrary to what many think, there is no fundamental bias against this [Keynesian] medicine in mainstream economics today.”
[Prof. Sinn names exactly the fundamental problem of economics today that mainstream believes in long debunked Keynesian therapies to use his language.]

“Competition among providers of complementary goods or services is harmful, and can be even worse than a monopoly. (That is why train drivers and pilots, for example, should be forced into monopoly unions that represent all of the other employees of their respective companies.)”
[I am not sure what Sinn is trying to say here. However, he wants to force train drivers and pilots into some kind of monopoly unions? Again, a statist, paternalistic economist is coming out here.]

“The market failures that initially give rise to public-sector intervention tend to recur internationally, which means that competition between states is usually not efficient, either. Examples include competition between welfare states to deter economic migrants, the race to the bottom in taxation, and regulatory rivalry in the banking and insurance sectors. Competition, contrary to what many on the right believe, is not always good.”

[There is a lot to be said about this nonsense too, but I am afraid, for the sake of brevity … First, all these cited examples are not related to competition based on market economies, these are distortions brought about by failed government policies, e.g. outlandish welfare states or overtaxation and so on.]

“By ensuring that policies respond to flaws in the rules of the game, not to individuals’ fallibility or irrationality, this “methodological individualism” saves us from dictatorial paternalism.”

[I don’t know in which world Prof. Sinn is living, but governmental paternalism or statism has spread and expanded tremendously in basically all Western democracies.]

“Banks that grant risky loans on too little equity illustrate the analytical value of homo economicus particularly clearly. Their profits are privatized, but any losses exceeding their equity are dumped on their creditors, or, even better for them, on the taxpayers. This asymmetry turns banking into a casino: The house always wins. Banks choose particularly risky investment projects, which may be profitable but are economically damaging.”

[Perhaps, Prof. Sinn is naive or willfully blind or is he a Marxist. Were it not for decades of bank bailouts by governments (in particular in the U.S.); governments pushing affordable housing policies; too cozy relationships between high finance and government; ridiculously low government (via central banks) enforced interest rates; and a government mandated deposit insurance, the markets and bank customers would punish imprudent banks.]

“The problem is not caused by human irrationality; on the contrary, it arises precisely because bankers are acting rationally. As we know from environmental regulation, preaching common sense or ethics to bankers will not help; but changing bankers’ incentives – by, say, requiring higher equity-asset ratios – would work wonders.”

[Prof. Sinn is absolutely right that bankers acted rationally because of decades old implicit bailout guarantee by governments also called too big to fail. Especially, the U.S. government since the 1930s has imposed strict regulations and oversight of the financial sector, but this did not prevent the savings and loans debacle in the 1980s or the financial crisis of 2008. To think that more government control like higher equity-asset rations is baloney and wishful thinking. Has Prof. Sinn forgotten that the Basel III Accords (an agreement between state governments) exempted government bonds and mortgage debt.]