Rent Seeking – A Note

This week I’m reading a book by Mariana Mazzucato, The Value of Everything: Making And Taking in the Global Economy (2018)

Finally! A book about economics that everyone can understand. I’ll review this book fully when I’m finished with it.

For now, I want to clarify the Word of the Day post I wrote in 2013, “What the Heck is Rent-Seeking?”

“Rent seeking” is a word that libertarian scholars, such as Gordon Tullock, appropriated during the last century, along with words such as “liberty,” “freedom” and heritage” from the ‘founding fathers’ of the United States.

Rent-seeking was a concept put forth by Adam Smith, a Scottish philosopher interested in economics, who wrote his famous book, The Wealth of Nations, a few months before the United States of America even existed. Smith published his book March 9th 1776. Continue reading →

Fault Lines – Part Three – They’re At It Again!

Fault Lines: How Hidden Fractures Still Threaten the World Economy by Raghuram G. Rajan (Princeton University Press, 2010)

 
Authors’ Note: Recently several people have told me this series is depressing. That certainly wasn’t my intention. We are in a time of rising hopes in this country. That is great. But rising hopes don’t always come to fruition.

Raj’s chapters point out specific dangers that may impede our progress in this century.

We prepare for natural disasters, especially out here in California. So why not for man-made disasters? It’s just common sense.

Chapter Six “When Money is the Measure of All Worth”

Those of us who worry about derivatives will find this chapter useful.

We live in turbulent times, and the upcoming U.S. Presidential election is overshadowing financial changes that are going on here and abroad.

We’re in a time of high financial volatility that keeps dropping and then creeping upward. Our economy is good—for now. But we know that danger could lurk ahead in our future. Past history teaches us that.

Raj notes that Securitization goes back centuries – in the 1800s to the French monarchy sold annuities to wealthy men. Swiss bankers purchased these French government annuities and took out life insurance on “suitable girls” in Geneva.

Those annuities were then bundled and and resold at a higher price to investors. What happenened next ? The bubble burst. Sound familiar? Continue reading →

Fault Lines – Part Two – Who Should Read This Book?

Fault Lines: How Hidden Fractures Still Threaten the World Economy by Raghuram G. Rajan (Princeton University Press, 2010)

 
Who should read this book? Short answer: Anyone, who like me, wishes to see economists build a model for explaining economics on a world-wide basis.

“Raj” Raghuram is not just examining how the Financial Crisis happened in the first decade of this century. He is also helping to build a global view of economics in his books. Raj is particularly interested in the differences between what economists call “developing” and “developed” countries.

That’s because, as we will see in Part Three of this book review, the previous Financial Crisis was not just limited to the U.S.: it affected the rest of the world as well.

The dominant schools of economic thought in the U.S., Keyesian and Chicago Schools of economics are limited to being national rather than global in scope. But it is much more likely that the next Financial Crisis will be global in scope.

Here’s are short synopsis of Fault Line‘s first five Chapters Continue reading →