Monday, November 24, 2008

Are We All Keynesians Now?

Amid the unfolding global financial crisis, countries across the world are fast in deciding pump-priming is the way to go in engineering a recovery of their economies.

If my memory serves me right, about a decade ago, economists, especially those from the IMF and the US Treasury were asking all those troubled economies afflicted by the Asian financial crisis to keep their fiscal house in order before they could gain access to any emergency aid from the IMF or the US(?).

Now, the same economists, (I am assuming here that the economists at US Treasury or IMF who are advising the US government say were either the same ones or have recieved very similar training to those who doled out the advice to leaders of Asian economies ten years ago) are now advocating their governments to spend their way out of the problem.

What has caused this shift in mentality?

Hypocrisy anyone?

Sunday, November 23, 2008

Hong Kong = Rent-seeking Paradise

"Social welfare expenditure [in Hong Kong] had increased by 80% from $20 billion in 1997-98 to $36 billion in 2007-08, representing the second largest share of government recurrent resource allocation"

And No, I do not make this up, it is from the Secretary for Labour and Welfare, Mr Matthew Cheung Kin-chung. More here.

So please repeat after me: Good bye Capitalism, Welcome Welfare State.

My sense is that this is going to get worse as the global financial crisis unfolds. Stay tuned.

Friday, November 14, 2008

Bush on Capitalism

President Bush was talking a lot of sense in the following speech:

-- History has shown that the greater threat to economic prosperity is not too little government involvement in the market, it is too much government involvement in the market.

-- Like any other system designed by man, capitalism is not perfect. It can be subject to excesses and abuse. But it is by far the most efficient and just way of structuring an economy.

-- Ultimately, the best evidence for free market capitalism is its performance compared to other economic systems.

-- The record is unmistakable: If you seek economic growth, if you seek opportunity, if you seek social justice and human dignity, the free market system is the way to go. (Applause.) And it would be a terrible mistake to allow a few months of crisis to undermine 60 years of success.

In other words, our trust on free market is not based on faith or belief, it is based on development experiences throughout the course of history. And we trust the free market not because it is inherently perfect or good in an absolute sense, it is simply better than all the EXISTING alternatives. Unless humans are lucky enough to stumble on another system better free market, if we want to prosper, there is simply NO other way.

For the full speech, read here.

All the recent BS about free market fundamentalism is simply that, BS. No sophisticated free market supporter subscribes to that strawman anyway.

BTW, for those on the left who want to criticize Milton Friedman and other intellectual leaders of the free market, please, please at least read through their stuff before attacking them, not by imaging something they had said or believed and then criticized them on stuff that they did not write or say.

Read the damn books/papers or shut the (insert a four letter word here) up!

Thursday, November 06, 2008

Learn Property Rights Economics from its Guru

Here is the opportunity. More importantly, it is FREE, for now anyway. The chapters are from professor Yoram Barzel's property rights economics text. The first edition came out 1989 and the second one came out in 1997, I read both and the text is an excellent introduction to the subject though professor Barzel's writing can be dry at times. My guess is the online chapters indicate that professor Barzel is preparing the third edition of the book.

Needless to say, I am a true fan of professor Barzel's work. Not only because he was a former colleague of professor Steven Cheung, also as a result of his extension and elaboration of the Washingtonian Approach to Transaction Cost Economics pioneered by Steve (where the measurement problem occupies the center stage of the paradigm). The other alternative of course is that advocated by UC Berkeley's emeritus professor O E Williamson where asset specificity, incomplete contracts, bounded rationality, and opportunism are its major focus.

(An aside: I once believed that the measurement approach to TCE was at least inspired by the characteristic approach of consumer theory pioneered by Kevin Lancaster. So I asked the professor sometime ago in 2005 if that was the case. Guess how the professor responded? The attributes embodied in the goods in Lancaster's are exogenously given, whereas the attributes were endogenously determined in the measurement approach. Brilliant.)

I quite enjoy his Theory of the State book a bit, unfortunately the book fails to grasp the attention of most economists. In Steve's three volume works Economic Explanation (in Chinese) the theory of the state has received little and limited coverage. I once pointed that out to the professor. The professor agreed and promised to write more on this when it is time to revise the works. Recently, the professor reminded me that he would start working on revising the three volume works very soon. So stay tuned.

Wednesday, November 05, 2008

Can Keynes Save Us All?

A short answer is no, and that's the conclusion of this interesting piece by Nobel Prize winner in economics (2006) Edmund Phelps in FT.

This bit is my favourite, at the very end of the piece:

Capitalism theory stresses diversity in sources of new commercial ideas, in the pool of entrepreneurs available for their development, in sources of finance – angel investors, venture capitalists and the rest – and in the array of end users.

It also stresses how important it is that owners of financial and business enterprises be accountable to no one (except their own consciences) – thus free to use their intuition – in contrast to the strict accountability rightly required of state employees. Thus a greatly increased presence of the central government in a country’s investment sector could constrict innovation and lower the quality of the innovations that are made. We would be left still in a slump.

At the end of his life Keynes wrote of “modernist stuff, gone wrong and turned sour and silly”. He told his friend Friedrich Hayek he intended to re-examine his theory in his next book. He would have moved on. The admiration we all have for Keynes’s fabulous contributions should not sway us from moving on.

Tuesday, November 04, 2008

Butch Cassidy and the Sundance Kid

Thanks to W H Yeung at Next Magazine for allowing me to post this latest column of his before it officially appears in tomorrow's addition of the magazine. Enjoy!

「致命的自負」 觸發金融海嘯

格林斯班退休近三年,再出席國會聆訊,為任內的金融政策問責。卸任後尚要問 責,情況堪稱罕見,然而誰又可以否認這不是個非常時期?無論中外報章,都大字 標題說他為過去疏忽監管金融衍生工具認錯。真的嗎?細閱他的演詞及他對議員質 詢的回應,說他「認錯」無疑是太沉重了。

中外報章說他「認錯」了,看來是本此番對答而言吧: 眾議院政制改革委員會主席華士文(Henry Waxman)問:「以今視昔,你是否囿於 意識形態(ideology),做出了不該做的事?」 答:「是的,我發現了一個瑕疵(flaw)。我不知道這個瑕疵有多嚴重或會否持 續。但我為此深受困擾(distressed)。」 華士文眾議員口中的「意識形態」不用說是指資本主義自由市場經濟引伸出來的放 任政策了。不管大家怎麼樣想,然而橫看側望,我都見不到格林斯班有哪個地方是 「認錯」了。資本主義自由市場經濟不是個玫瑰園,即使這個「意識形態」像有格 林斯班說的有瑕疵,只消證明放任政策勝過人類歷史上嘗試過的任何體制,那不便 夠了嗎? 要驗證自由經濟這個優越性倒又沒有半點難度。就算在風雨飄搖的今天,若然有選 擇,你會願意回到三十年前中國尚未開放的日子嗎?就算不是走這樣的回頭路,今 天你會考慮移民到北韓、古巴或委內瑞拉等堅持社會主義優越性的國家去嗎?

格林斯班亦凡人而已 格林斯班在聯儲局待上了十八年,他對經濟運作的認識肯定比世界上99.99%的人為 多。然而不辯的事實是,他亦凡人而已。哪怕市場真的發生了一些他過去沒有察覺 到的事情,以致判斷出錯,那也沒有什麼好值得大驚小怪的吧? 說到底,他已屆八十三歲的耄耋之年。即使認錯,那又有啥大不了,更何況他只是 說察覺到自由市場有一些令他困擾的瑕疵,他不是對這個體制信心崩潰啊!況且誰 說資本主義自由市場經濟是不許有瑕疵的? 海耶克不早便告訴我們了嗎?市場錯綜複雜,根本上沒有人可以隨時隨地完全掌握 全局;過去沒有,現在也沒有,甚至將來也不大可能有。即使格林斯班坐鎮的聯儲 局有全世界最鼎盛的經濟研究隊伍,有最完備的經濟數據,再輔以最了不起的超級 電腦,他亦不見得便全知全能掌控一切吧!要不然他不便能列寧、毛主席、卡斯特 羅所不能,搞起計劃經濟來了嗎?

何方神聖猛火密襲 格林斯班出席國會聆訊的當天,《紐約時報》刊登了跟美國財長保爾森作的專訪, 講述從九月十二日雷曼倒閉到國會通過七千億元救市方案,那個多月間他的日日夜 夜。當中他有這一句發人深省的自白: 我恍惚是神槍手與智多星。到底是何方神聖向我連珠砲發猛火密襲?(I feel like Butch Cassidy and the Sundance Kid. Who are these guys who just keep coming?) 保爾森口中的情境,是羅拔烈福及保羅紐曼的名片《神槍手與智多星》(Butch Cassidy and the Sundance Kid)最後的一個鏡頭。

這兩個專門打劫銀行及解款車 的美國大盜逃到南美洲的波利維亞,給大軍重重圍困,彈盡糧缺更受了傷,試圖突 圍,哪有希望?正當他們冒槍林彈雨死命衝出屋外的一剎那,電影定鏡,只聞一 把聲音:「開火!」隨諸而來的是一陣彈雨槍聲。 保爾森何等樣人也?美國財政部什麼經濟數據沒有?其通訊、電腦硬件又怎不完備 、先進過人?那麼他又豈不對經濟情況有個第一時間的通盤掌握?再者,保爾森又 不只是財長而已;出仕之先,他是高盛這間華爾街第一大行的主席。身經百戰,什 麼大場面他沒有見過?他對實際金融運作的認識又怎不勝過9999%的人?然而以他 的條件、閱歷,他亦不得不從實招來,承認不知道金融市場發生了什麼事情。這般 複雜的體制有個格林斯班口中的瑕疵,正常呀!

資本主義撞正大板? 《神槍手與智多星》裡有這最後的對白: 羅拔烈福:且慢,那不是我們的天敵Lefors嗎? 保羅紐曼:Lefors?不是,你問來做什麼? 羅拔烈福:嚇得我,我尚以為這一趟撞正大板了。(For a moment there I thought we were in trouble.) 我不知道當他想起《神槍手與智多星》時,保爾森有否記起電影落幕前這最後的一 句對白。這一趟資本主義自由市場是撞正大板了嗎?麻煩是有的,但經此一役,世 界便從此回到社會主義大鑊飯的洪荒年代嗎?當然不會。如今甚至鎖國超過半個世 紀的北韓不也開賭場、搞加工特區、讓南韓人前去「觀光」了嗎?(餓殍遍野,何 光之可觀有哉?)像戴卓爾夫人說的:TINA —— There is no alternative —— 捨自由經濟,人類別無選擇!


依我看,金融海嘯最是棘手之處,是在超級電腦的催谷下,金融衍生工具發展得太 快,但完成買賣這些衍生產品所需的配套環節,譬如怎樣管理好買賣雙方萬一不能 完成交易的風險(銀行投保CDS,AIG賠不起那怎麼辦?);票據交收機制如何才可 以追上交易步伐(以次按為基礎CDO給降低評級,了無成交,無從定值,那又怎麼 辦?);按市值入賬(mark-to-market)的會計準則形同迫使金融機構自動破產, 以致整個金融體系僵硬冰封,這個準則在這非常時期應否堅持下去?……等等。 不過,凡此種種,都是技術層面的枝節,跟市場能、官僚不能,這個自由經濟的大 前提無涉。技術枝節又焉能動搖根基,令建基於私有財產的市場體制崩潰?這一兩 個星期來儘管衝擊不絕,技術問題已在逐一解決。譬如面值超過六十兆美元的CDS 票據市場終於發展出了個有效的交收系統,冰封的市場有望解凍。 銀行家朋友又告之,以次按為基礎的CDO債券無疑大跌價,面值一元的票據只賣得 兩角錢,但有成交。換言之,海嘯過後,整個金融系統是在一步步地恢復運作了。 只要市場繼續復元,那麼不管多大的問題也有望解決了。


格林斯班沒有和盤托出,說他看到資本主義自由經濟有個什麼的瑕疵。要是讓我在 堆填區觀天,問題的癥結,是海耶克說的「致命的自負」(The Fatal Conceit)—— 有了超級電腦,好些華爾街上的才俊便長了個僥倖之心,以為自己 真的懂得了投資必賺的竅門,義無反顧、搏到盡,在次按的基礎上滋長出五重、六 重以至更多的衍生產品。頭重腳輕,終致出事,也是常理之中了。問題是這些才俊 哪裡來這個必賺之心? 先前BBC訪問了一個這樣的才俊,他是唸「理論物理學」(Theoretical Physics) 的,數學了得但對市場供求運作一無所知。他知道的是如何炮製模式,設計形形色 色的金融衍生工具。他說這些模式涉及複雜的方程式 —— 不是一條、兩條以至一 百條方程式,而是八十萬條!一個有八十萬條方程式的模式有多複雜,我想也不敢 想。

與天公比高 然而在華爾街上的金融機構來說,有科學家設計出了這般複雜的模式,而超級電腦 又運算出精準不過的數據,那麼天下萬物 —— 包括必賺的投資 —— 又怎不盡在 掌控之中?掌控一切,那又跟全知全能的上主何異?自負得像毛主席那樣「欲與天 公試比高」,那麼不費吹灰之力不便可以作必賺的投資了嗎?人人都以為懂得必賺 之術,釀出一場金融海嘯也是理所當然的吧。

如何收拾局面?這位華爾街科學家說今後搞金融的該先學點經濟學,認識市場供求 為何物。是的,吃了這麼大的苦頭,怎到你不學得謙卑點?甚至格林斯班、保爾森 不也承認世界複雜,大有他們不認識、不明白的地方。最是不好對付的是,好了瘡 疤忘了痛,雨過天晴、境況好轉,運算能力更強的超級電腦出台,人們便不難再興 「與天公試比高」的歪念了。怎麼辦?怎麼辦?