Richard A. Posner

...is the name of my new book on the economic crisis, just published by Harvard University Press. Of course the book covers some of the same ground as my previous book on the crisis, A Failure of Capitalism: The Crisis of '08 and the Descent into Depression (Harvard University Press 2009), but it is longer, more detailed, more scholarly, but above all more focused in the events of 2009 rather than of 2008. The first book was completed (beyond possibility of…… More »

I apologize to readers for technical problems that have made it difficult to find my blog. I am told the problems have been solved. I want to refer readers to two recent entries on the Becker-Posner blog, dealing with the stimulus program and the president's proposal to double exports in two years, respectively, both relating to the economic crisis. The entries can be found at http://uchicagolaw.typepad.com/beckerposner/ The title of the present entry was suggested…… More »

My post of February 8, which argued that the only way out of our fiscal dilemma is more rapid economic growth, and proposed some possibly politically feasible public measures for accelerating growth, elicited a number of interesting comments. One comment noted that repeal of the drug laws, which was one of my suggestions, is not realistic, and that is true. What I should have said is that, as a start toward decriminalization, state and federal law enforcement…… More »

My last post elicited a number of very interesting comments. Some very intelligent-seeming commenters insist that the $787 billion stimulus program enacted last February has had no effect on unemployment. I think this is wrong, but I understand the underlying concern, which is with the impact of the program on the federal deficit. The stimulus program was months late in being enacted, was poorly designed, and has been lackadaisically executed. And critics are right…… More »

Economists refuse to call the economic downturn that began in the last month of 2007 a "depression" because it is not as serious as the 1930s depression as measured by decline in GDP, unemployment rate, and deflation. That is absurd. It would be like refusing to call the Korean War a war because there were fewer casualties than in World War II. But, the root error of the economists is failing to consider the emotional consequences of an economic downturn and how…… More »

Paul Krugman advocates an additional stimulus program, along the lines of the $787 billion stimulus program enacted last February. He has not, to my knowledge, indicated how large a program he wants, but presumably it would be very large, perhaps equal in size to last year's program. He realizes that the nation cannot continue running up its debt without serious long-run consequences, but believes that now is not the time to reduce deficits by higher taxes or lower…… More »

The unemployment rate is weighing very heavily on the economy, and on our politics as well. People are getting impatient: the unemployed, of course, but also the people who worry about losing their job, the people who do not count as unemployed because they have given up, the people who are employed and expect to remain employed but have seen their wages, their hours, or their benefits--or all three--slashed. The government has almost given up trying to do anything…… More »

Ryan Grim, in a posting January 21 on Huffington Post, states that "a recent poll [a Research 2000 National Poll] found that 47 percent of Americans think Bernanke cares more about Wall Street than Main Street, while only 20 percent think he works for Main Street. Independents, who swung heavily for Brown in Massachusetts, are even more opposed to Bernanke than Democrats or Republicans. Fifty percent of independents think he cares first about Wall Street; 15…… More »

There is a disturbing report in The New York Times this evening: Senator Reid, the Senate Majority Leader, is reported to have said publicly that "he had decided to support Mr. Bernanke [for a new term as chairman of the Federal Reserve] with trepidation and only after he received a commitment that the Fed chairman would take additional steps to increase the flow of credit to middle-class Americans." (Emphasis mine.) I take no position on whether Bernanke should be…… More »

The recent announcement of what I'll call the "Volcker Plan" for regulating banks was sandwiched between two major political events: the election of a Republican Senator from Massachusetts and the Supreme Court's decision "deregulating" corporate campaign contributions. The timing of the announcement in relation to the election of the Republican (Scott Bowen) is suspicious: it suggests a desire to change the subject and recapture the populist mandate by attacking…… More »

The big news of the day is the president's apparent embrace of Paul Volcker's proposal to "restore Glass-Steagall," which is short-hand for confining commercial banks to traditional commercial banking activities, and specifically bar them from trading on their own account. I do not know how serious the proposal is or what support it will garner in Congress; maybe it's just an attempt to change the subject from health care in light of the result of the Massachusetts…… More »

On January 3, Fed chairman Ben Bernanke gave a long speech entitled "Monetary Policy and the Housing Bubble," in which he argued that the Fed's low interest rate policy in the early 2000s, which he supported, was not a significant factor in the housing bubble and resultant financial collapse. His arguments are unsound, self-serving, and harmful to economic recovery and financial regulatory reform. John Taylor, in an op-ed in The Wall Street Journal on January 11,…… More »

I interrupted my blogging at this site on October 23. There were two reasons, closely related. The first is that I needed the time to finish my new book on the economic situation. It is entitled "The Crisis of Capitalist Democracy" and will be published by the Harvard University Press in March. The second is that there would be too much overlap between blog and book. Now that the book is completed, I can resume blogging, and will post my first new entry…… More »

Paul Volcker has suggested, as has Mervyn King, the Governor of the Bank of England (the U.K.'s version of the Federal Reserve), along the lines of the Public Utilities Holding Company Act or the Glass-Steagall Act, both passed in the 1930s and since repealed, that commercial banking (including lending by thrifts, and probably by money-market mutual funds as well) be separated from proprietary trading and other high-risk financial activities.The reasons are several…… More »

Here are two questions about the bonuses that I did not discuss in my blog yesterday: 1. Could the bonuses be compensating for the risks of a career in finance? 2. Shouldn't Goldman want to limit the bonuses paid its employees? 1. Consider actors' careers. A handful of actors have huge incomes. Most actors have such meager incomes that they abandon acting as a career. The lucky handful are like lottery winners. The only way you can motivate people to buy a lottery…… More »

I have been terribly neglectful of my blogging duties! I haven't blogged for almost a month. Judicial work, some travel, and work on a new book -- a follow-up to A Failure of Capitalism -- has distracted me. I will try to make amends. Goldman Sachs, we learned earlier this month, may end up paying more than $20 billion in bonuses to its employees in 2009. The controversial bonuses that American Insurance Group (AIG) had wanted to pay had been intended to reward…… More »

Anyone who still thinks that stimulus expenditures in the second quarter of this year increased GDP or employment would do well to read John F. Cogan, John B. Taylor, and Volker Wieland, "The Stimulus Didn't Work," in the September 17 issue of the Wall Street Journal. They note that, consistent with theory, the transfer payments (the major component of the stimulus that was actually executed in the second quarter) appear not to have resulted in any measurable…… More »

Two bad recent signs concerning the movement to reform financial regulation: The first is the first public meeting of the Financial Crisis Inquiry Commission, created by Congress four months ago to investigate the causes of the financial crisis and report back at the end of next year. The commission has gotten off to a slow start, and even though only one member of the commission could (I believe, though I am not certain, and welcome correction) be described as a…… More »

One can imagine, though with difficulty, an Administration spokesman explaining the nation's recent economic history as follows: "Because of serious errors of monetary policy, excessive deregulation of the banking industry, a belief there would never be another depression, a failure to understand the full significance of the bursting of the housing bubble, and mistakes in responding to the financial collapse of last September (such as allowing Lehman Brothers to…… More »

My lefty critics don't believe me when I say I support the stimulus. But I do, and I advocated it in my book A Failure of Capitalism, completed before the stimulus was enacted. I am a Keynesian, and I have sharply criticized conservative economists who oppose Keynesian deficit spending. I simply do not believe that it is possible to attribute the improvement in the economy to the actual spending of stimulus money through the end of the second quarter, because I…… More »