Morning roundup: mostly Friedmans edition

• Jeff Friedman on the causes of the crisis. Friedman argues that the Recourse Rule, an amendment in the US to Basel rules on bank capitalisation, provided banks with strong incentive to securitize their mortgage assets so as to be subject to lower capital requirements. An explanation I hadn't heard before, and plausible.


• Patri Friedman on public choice reasons for fiscal rather than monetary stimulus


• Patri Friedman: does decentralization lead to social regression?

And now some non-Friedman links

• David Levine beats up on Krugman (HT Mankiw) Krugman responds to freshwater critics.


• Crowdsourcing on the Mechanical Turk


• John Tierney on drug prohibition. He links to a nice New York Magazine review.

Quote of the day: Krugman edition

Over the last few months I have had a chance to closely examine many of Krugman’s recent and past writings on fiscal and monetary policy. One thing that I notice is that Krugman is very skilled at making an argument. He can use the same basic model to make either monetary or fiscal policy seem like the only reasonable option. All that is required is that one tweak the assumptions in such a way that the less favored policy seems either undesirable or infeasible. So my message is this—don’t let anyone (including me) bully you into thinking that your policy instincts are wrong, until you have closely examined the assumptions that underlie each side of the debate. All this drivel in the blogoshere about velocity, multipliers, liquidity traps, Ricardian equivilence, budget constraints, etc, etc, are merely verbal tools that can be wielded to achieve any desired outcome. It’s an insiders game. The real battle is elsewhere.

Scott Sumner on Krugman