Economic Schadenfreude

One aspect of the current economic crisis has been the comeuppance for certain firms, industries, and segments of the labor market that are overdue for correction, all made possible by their special relationships with the state. The result is a case study in how political favors can result in short-term gain, while in the long run economic laws still have the final say.

Is it wrong to enjoy this comeuppance, even if just a little bit?

Bernanke and the pension crisis

While the real world has switched from defined benefit pension plans to defined contribution plans (e.g. IRAs, 401k), much of government still uses defined benefit plans where retirees receive regular pension checks based on a formula. The problem today is that many public systems are underfunded and are having difficulties remaining viable. The economic crisis is a culprit in that there are fewer people working and contributing, but more importantly the assets of the plans, such as bonds, are earning less. This is the money that is used to pay retirees.

I, Toaster

Leonard Read’s classic “I, Pencil” is a staple of introductory economics classes the world over. I expect that the same will happen with the TED talk below, in which Thomas Thwaites details how he tried to make a toaster completely from scratch. He makes a valiant effort. At the end, he is able to get something he can plug in that ran for about five seconds before the heating element melted. I’m pretty sure he didn’t actually get any toast.

Yes, It’s Baaack--But It’s Not What You Think, Paul

In 1998 Paul Krugman declared “It’s Baaack” in a silly article heralding the return of the Keynesian liquidity trap, a chimera that even Keynes himself never believed in. But recently something very real and truly dreadful has climbed out of the witch’s brew of fiscal and monetary stimulus policies concocted by Ben Bernanke and other mainstream economists and policymakers who have drunk the same Kool-Aid as Krugman.

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