Puzzled By These Positions -- State of the Union Address and Davos

|Peter Boettke|

If public debt is destructive, then how can increased government spending be good for the economy?

If government has difficulty conducting monetary policy, then how can expanded government regulation be good for the financial sector?

At the World Economic Forum in Davos, Nouriel Roubini seemed to be having a good time while providing his typical pessimistic message (though he seems to be more optimistic about government regulation than his cynicism should permit).

Comments

[Charles N. Steele]

The careless use of the term "regulation" (and "free market" as well) has rendered debates on what to do about banking incoherent. It doesn't make sense to call a system in which big banks are subsidized and have an implicit promise of a credit line if they get in trouble "under regulated" nor "free market," especially when Treasury and Fed are staffed by their former employees. Mercantilist rent-seeking is a better description than "free market."

On a panel at the recent AEA meetings, John Taylor, John Cochrane, Gary Stern, Carmen Reinhart, all called for some sort of breaking up of the "Too Big to Fail" banks. There might be some political will for this, and it would make sense, *compared to the real alternatives we face.*

"More regulation" defined as breaking the power of TBTF banks to elicit bailouts, as well as enforcing honest and accounting and independent auditing makes sense.

[Roger Koppl]

Right on, Charles!

Does anyone know who's who in that picture? I recognize Taleb, but not the others. The guy on the left looks more like Soros than Roubini to me.

[Peter Boettke]

Roger,

According to Private Sector Development Blog, "Dr. Doom" is between Taleb and the young woman (who is unidentified, do you know her?). Do you know who the gentleman on the other side of Taleb? It very well could be Soros, I haven't seen him recently.

[Roger Koppl]

Ah! I thought that figure was too young to be Roubini.
http://clarification.files.wordpress.com/2008/10/nouriel-roubini.jpg
My mistake. Well, perhaps he's been going to the gym. Sure. Let's go with that explanation. :-)

[Nick Czop]

It is indeed good old Mr. Soros.

[Barkley Rosser]

Dr. Doom is grinning more than one usually sees him, but then that may be due to the, um, accompaniment...