A libertarian socialist engineer solves the financial crisis
sepwww.stanford.edu
sepwww.stanford.edu
The only difference between this and a crackpot is that the domain is stanford.edu and not geocities.com.
There's so much wrong here that I can't even figure out where to begin. Most points are based on distorted facts, contains fallacies, ignores realities, and so on.
There are some reasonable ideas (standardized mortgages) that I've heard elsewhere, but a lot of it is crap.
#1 fixes what, exactly?
#2 is reasonable.
#3 is just ranting about credit cards. the fees may be egregious but someone does need to get paid to run the machinery. of course, it should be a fixed cost per transaction and the machinery should be less complicated. but it's not related to the actual crisis.
#4 just moves the problem.
#5 is just painful.
#7 are you kidding?
#8 is just silly. and I work there.
#9 is more pain.
#10 is not the problem either. It's that there's multiple processes. It was leverage and VAR that hurt, not the raw gaussian mis-approximation (although it didn't help.) The markets are gaussian (well, GARCH) short-term, but the regime shifts and changes are the output of another process.
A more reasonable solution going forward is going to be a) transparency in financial instruments for consumers, b) strict guidelines about new kinds of financial instruments, and c) leverage restrictions on financial organizations.
I think that simultaneous failures of other industries due to lack or loss of flexibility will have to be dealt with in different ways.
Of course, I've been exposed to some of the primary sources for some of the more syndicalist ideas he espouses.
And the idea of having standardized forms for major asset purchases is not without merit.
//edit: wow, I didn't realize you had totally expanded and revised the original comment (top of thread). It's kind of rude not to flag such a major change.
Engineers and Scientists value the truth, whereas Lawyers value a convincing argument whether it is true or not. Think about their jobs: you can't convince reality you're right, but you can convince a jury.
I think you'd find it much harder to create feedback models of the economy which just happen to predict the best thing to do is to "Give Goldman Sachs a bonus to fix the economy", than it is to come up with some unprovable scare-mongering which terrifies the politicians into doing just that.
So yes, engineers or scientists would probably be more trustworthy running the economy as long as they stay true to the discipline.
People who think they know best for everyone else need to be kept far away from real power, whatever their political flavour.
The scientific approach to government should not be the USSR over-centralization. It should be intelligent design. Create the incentives, set the rules, and step back when the games begin.
Do you live in NYC or a similarly large city? I think you'd see that engineers (specifically, in the building & construction trades) can be just as corrupt as the next guy (and we're talking people's safety here, not the kind of corruption that doesn't harm others so much, like fake parking permits).
The only thing the "everyone else's ideas are crap, let me start from my gut" approach has going for it is that it appeals to ... other people's guts.
A lot of economics is junk but a lot of it also involves some subtle thinking about problems where common sense often fails.
Indeed, one might even argue that the crisis came because there was already too much "technological" thinking and not enough thinking about the history of ... bubbles. LTCM was pretty close to the "engineering mindset" (at least the bad part) even if it was physicists running it and many actors (Alan Greenspan esp) viewed the market as a technology that would take care of everything.
-- Also, #7, right or wrong, "retroactive" law enforcement involves ... abandoning the rule of law. Again, if you study the history of places where that happens, you know that's a bad thing. So, no let's not let engineers or software engineers or mathematicians run the country, even though I'm in the last two groups...
Bad idea. Besides being in very poor form (changing the rules after the fact), retroactive taxes will snare people who made perfectly reasonable financial decisions given the rules at the time, but would now find that they don't even have the money to pay their (retroactive) taxes.
As for 90% taxes on high income, I'd prefer that they simplified the tax code and got rid of loopholes.
I wish he had written this naked insanity at the top of the page so I didn't waste my time reading everything up to it.
So landlords raise rents 10% (or more) and the effect is simply forced savings. Why not just make the SS tax rate 10 percentage points higher? Ridiculous.
That said, I would wholeheartedly support such a revolution.
However, if you take a look at actual banking, like commercial banking and corporate finance, the sector remains rather low-tech. And there's a reason for it: there are no new ideas in banking. It's all about packaging and selling old ideas. That will never be replaced by computers, unfortunately.