Asymptosis

I mean cap-C Conservative. Do Conservatives and Republicans value honesty?

I ask in the context of Jonathan Haidt’s research into moral spheres, and which spheres are important to different political groups. (Blogged here and here.)

In response to Haidt’s $1,000 challenge for people to come up with additions to his five spheres, Tim Dean proposes the one that also came immediately to my mind when I first saw the challenge: truth/honesty.

“You should tell the truth” is obviously a widespread or perhaps universal moral intuition. (Though of course it’s not categorical–none of these intuitions is.) And it’s easy to understand how that predilection would have evolved.

I don’t know if truth/honesty merits a place in Haidt’s pantheon — there are complicated issues of interacting and overlapping moral spheres, touched on below. But I am curious about the same thing Tim Dean is:

Another interesting test would be to see how self declared liberals and conservatives respond to issues of truth/honesty. My guess would be that conservatives would rate truth/honesty as being more important than liberals.

My intuition: Conservatives would be shown to rank honesty differently depending on the context of the situation.

• In private, direct, and especially face-to-face situations, I think there’s a 50% probability that Tim is right, that conservatives would care more about honesty than liberals. Significantly more? Very low odds, I think.

• In the public realm — especially the realm of public debate — I think they would be shown to rank honesty very low relative to other spheres, especially group loyalty.

I would suggest that this is a result of conservatives’ greater concern for group loyalty. When the context is groups — promoting them, defending them — both the truth and the fairness realms are downgraded to the benefit of the loyalty realm. In a further (meta) downgrading of honesty, they would be expected to give lip service to honesty while failing to practice it. Think: “fair and balanced.”

This highlights the problematic nature of Haidt’s realms — the interactions between those realms — and the need for research that teases out those interactions. It also highlights the need to distinguish different groups’ moral weightings in different contexts.

Unfortunately, those necessities would/will turn Haidt’s fairly easy-to-understand model into a far more complex field of study — much as genetic interactions and epigenetics have done to genetics.

Asymptosis Uncategorized

People are obviously unemployed because they want to be.

The Big Picture » Blog Archive » An Epidemic of Laziness?.

Asymptosis Uncategorized

If an increasing number of people in America are not capable of doing economically viable work (because they don’t have the “knowledge skills” or the wherewithal to acquire them)–and as a result can’t contribute to the log-rolling exercise that is our economy by spending and providing demand for producers–is it a problem?

Can rich people do all the necessary spending to keep the log rolling? Will they?

It’s a complicated question, but I wanted to get at least a simplistic look at the numbers. So I took a look at the BLS’s Consumer Expenditures in 2007 (PDF), the latest year available (published April 2009), and threw the numbers into a spreadsheet, which you can dowload here (XLS).

Here’s one result. To maintain demand:

If spending by the bottom 69% of households (<$70K income) drops by:	10%	20%	30%
The top 7% of households (>$150K income) must increase spending by:	27%	54%	81%

In this particular example (<$70K vs. >$150K, year 2007), every 1% drop in low-end spending requires a 2.7% increase by high-end households to maintain the same level of demand from producers. (This is a function of the smaller number of households at the high end, ameliorated by the lower spending per household at the low end.)

Now obviously, if income is redistributed similarly, to the high end (as it has been so profoundly since 2001), it will also be concentrated similarly. So maybe that would suffice to effectuate those spending increases by the well off. But saying so with any certainty requires a model that it is beyond my means to produce.

That model would need to consider the following (related) questions:

• What is the relationship between income and spending at different income levels? How do each group’s utility curves (actually algorithms) respond to shifts in income?

• What about wealth, which is also a driver of spending? Higher incomes only slowly expand household wealth.

• What kind of lag times are we talking about? Will the well-off immediately ramp up their spending, or will they wait to build wealth, and make sure the income is a reliable stream?

• What about the investments that the well-off make with what they don’t spend? If producers receive those investments (which have to be paid back), is that as stimulative as sales revenues, which they get to keep?

Pondering these, all four seem to suggest that widely distributed spending (and income) are much more likely to maintain demand than spending by the well off.

I haven’t been able to find empirical research that addresses this question in a satisfying manner. (Yes, lots of theory…) Anyone else?

Asymptosis Uncategorized

I can’t believe I’ve never posted about Judith Rich Harris, who undoubtedly ranks as at least a significant demigod in my personal pantheon.

Judy–a largely uncredentialed indy in her house in suburban New Jersey–pretty much single-handedly obliterated the notion that parenting is what causes us to be fxxxed up, and that parents in fact have much direct impact at all on how their kids “turn out.” (This side of abuse or gross negligence.)

She completely altered the way psychologists look at human development, by pointing out that developmental studies that don’t control for the effects of genes (i.e. almost all of them, until recently) are simply…worthless. They tell us nothing.

Yeah: children whose parents are alcoholics are more likely to be alcoholics. Nature or nurture? If you don’t ask that question, you can’t say anything useful on the subject.

I won’t detail it all here. Read this Malcom Gladwell piece from the New Yorker (published just before her first book came out), then run don’t walk to read her second book, No Two Alike. It’s one of the half dozen books you absolutely have to read to understand how human beings work. Her arguments and explanations are crystalline in their lucidity–issue after issue, she lines ‘em up and knocks ‘em down. (No, she’s not perfect; but she’s stunningly good.)

I have two things to say about Judy’s work.

First, I want to echo and add to Steven Pinker’s wonderfully humane (and funny) comments* in the parenting chapter in The Blank Slate (which chapter is based largely on Judy’s work).

I’ll do it via my recent response to a friend’s email, asking what I thought about screen time (watching DVDs) for her delightful, precocious ten-year-old daughter. (Mine are 17 and 18.)

My rule of thumb when making this kind of decision was always, “What effect will this have on my child on the day she graduates from college, or gets married?” (i.e., affect how she “turns out.”)

The answer, in almost every case, was “utterly imponderable” or “none.”

In that huge majority of cases, the next important questions are:

Will this thing contribute or detract from her having a joyous childhood? (The greatest gift a parent can give.)
and
Will this thing contribute or detract from us having a joyous family life?

Or perhaps even more important: will my trying to control this thing contribute or detract from the above?

Her response over lunch: “Why didn’t you tell me this ten years ago?!”

Some parents do not feel so liberated. They feel depressed and defensive. I think it’s because they want to matter. My advice, FWIW: find joy in your children; find your “matter” elsewhere.

* When many people hear these results, their first reaction is to
say, “Oh, so you mean it doesn’t matter how I treat my kids?” Of
course it matters! It matters for many reasons. One is that it’s
never all right to abuse or neglect or belittle a child, because
those are horrible things for a big strong person to do to a small
helpless one that is their responsibility. Parenting is, above all, a
moral obligation.

Also, let’s say I were to tell you that you don’t have the power
to shape the personality of your spouse. Now, only a newlywed
believes that you can change the personality of your spouse.
Nonetheless, on hearing this truism, you’re unlikely to say, “Oh,
so you’re saying it doesn’t matter how I treat my spouse?” It matters
how you treat your spouse to the quality of your marriage,
and so it matters how you treat your child to the quality of your
relationship to your child.

On consideration, I’m going to save my second comment for a later post. It’s a somewhat technical evolutionary discussion, and this post is already getting long.

Asymptosis Uncategorized

Update: I am an idiot. (You could have found that out by asking my daughters.) Curt Gardner is nice enough to point out in the comments that “the book you link to is not Robin Hansen’s, but that of his GMU colleague Tyler Cowen.” I do get the two confused at times, this being a fine example. Having framed this post by characterizing myself, I’ll leave it at that.

Robin Hanson was nice enough to drop off a drive-by comment in response to a recent post of mine (responding to a presentation of his), a post that espoused my Luddite Fantasy. His comment:

No we haven’t reached a flat plateau yet.  Only a small fraction of world income now goes to machines, and a flat part could easily trigger a faster growth mode.  No, redistribution is not required to maintain demand, and utility functions do not “flat-line.”

My initial response to this (rather curt and dismissive) reply was fairly natural–irritation. But I tried to think about it in the best light, assuming we were hearing from a busy person who didn’t have time to respond in detail to an admitted amateur–much less provide an education in basic economics to one who clearly (at least to Robin) had not acquired that education on his own.

But still, being from Missouri I was less than convinced by the unsupported denialism. So I went looking through Robin’s work to see if he anywhere provides empirical support for his assertions. (Including–without success–in his book, which is a paean to [his own self-described] “autistic cognitive style.” Yes, I bought it in hardcover, read it, and re-read sections.)

His second comment on the post (replying to my queries) pointed toward some evidence, though without actually providing it:

“Less than 10%” [of world income now goes to {owners of} machines].

I didn’t find any support in his work, but this is not an implausible number. In the U.S., only 15% of personal income is “receipts on assets,” and over the last 80 years it’s varied between 5 and 20%. (There was a long, steady rise from ‘44 to the mid ’80s, after which it declined some then stayed relatively flat.) I do really wonder how his number is, or can be, calculated, however. For instance, workers presumably reap some of the benefits of machines in the workers’ wages. How can this all be split out? (cf. multifactor productivity.) Where does his number come from?

In any case, while Robin seems to think this is a silver-bullet argument, it’s really something of an aside. His charts that we were talking about weren’t describing machines’ share of income, but the growth in machines’ abilities and the utility (to humans) of their output relative to humans’ abilities. They may be tightly related, but the relationship–especially as it interacts with aggregate demand and the macroeconomy–is far from clear.

Perhaps Robin thinks that standard economic theory explains all that, and it need not be discussed.

Robin did touch on this area in a post that I read quite carefully when it came out a while back, responding to a fellow Luddite’s self-published book and accompanying blog. One key paragraph from Robin’s post:

Ford’s mass-market theory of production is nothing like standard economic theory.  Sure high income inequality might be ethically bad, and threaten political instability, but it does not at all threaten economic collapse – producers can focus on giving the rich what they want, and innovation and growth is just as feasible for elite products as for mass products.

Okay, here he explicitly invokes “standard economic theory,” and he (perhaps understandably) does not feel the need to explain it–or question it. But the whole point of my assertions was that these beliefs merit serious questioning, in particular the assertion that “producers can focus on giving the rich what they want, and innovation and growth is just as feasible for elite products as for mass products.”

Because–and this is the central point that Robin rather mysteriously does not reply to–the cognitive ratcheting of knowledge societies seems to be putting an increasing number of people below the cognitive waterline where they can be productive contributors to, consumers of, and participants in, the economy. He seems remarkably (almost autistically) blind to the situation that so many find themselves in–those who (unlike Robin) are not blessed with an “autistic cognitive style.”

To address two more of Robin’s assertions:

No, redistribution is not required to maintain demand

My gentle readers will forgive me, I hope, if I repeat a question I’ve asked before: Why is it that every large, thriving, prosperous country–with no exceptions–engages in massive doses of redistribution? If libertarian principles are so efficient, why hasn’t a single country emerged that operates according to those principles, and surged ahead of all the rest? Could libertarianism be a utopian fantasy? We know how those have turned out over the centuries…

utility functions do not “flat-line.”

This seems to be asserting that a second or third Lamborghini has the same utility-per-dollar ratio as providing a comfortable home for one’s family. Is he just quibbling over the “flat-line” wording, when he knows that “flatter” is what’s being discussed? Is he tossing aside any insights at all from happiness research, and in fact from “standard economic theory”? His six words, while giving some impression of heat, shed little light.

Finally, I would ask Robin if he has a better explanation for this rather profound and accelerating trend. Based on everything I’ve been able to find, standard economic theory is at a loss to explain it.

After lengthy consideration, the impression I receive from Robin’s hands-over-ears, eyes-closed, humming-loudly reply is perhaps best encapsulated in two words: Undergoing Bias.

Asymptosis Economics, Politics, Uncategorized

My gentle readers will undoubtedly remember a question I’ve asked repeatedly: as technology steadily increases productivity, will we (have we) come to a point where a large portion of workers can’t do “valuable” enough work to earn a decent living? Where only the technologically adept, and owners of technology, “merit” liveable earnings?

My thinking is not particularly original. As Robin Hanson points out in the presentation I’m about to discuss, it goes back at least to David Ricardo. who went after this subject quite rigorously in 1821 (The Principles of Political Economy and Taxation, 3rd Edition).

Many will say (not without grounds) that my thinking is simplistic, amateurish, and silly. The most powerful argument that my concerns are groundless or stupid: invoking history in the form of The Luddite Fallacy:

If the Luddite fallacy were true we would all be out of work because productivity has been increasing for two centuries.^*

If technology is making human labor less valuable, how do you explain the steady, seemingly inexorable rise in wages/earnings/GDP per capita (choose your measure) over the last century or two? (Yes–if you look globally–even over the last few decades.)

That, by my lights, is a bloody strong argument. How does one respond to it?

It’s a question I’ve struggled with mightily, not only to protect my pet theories but because of a feeling that something was missing. And I think I’ve found an answer in Robin Hanson’s “Economics of Nanotech and AI” presentation at the Foresight 2010 conference. (Liberal-bashers take note: Robin is a quite devoted if decidedly idiosyncratic libertarian–and one of the best thinkers thinking today, IMHO.) If you’re a reader like me you’ll find much of the matter, more quickly, in Robin’s IEEE Spectrum article, “Economics Of The Singularity“–though if you’re feeble-minded like me you’ll also need to view the presentation and the slides (PowerPoint) to understand his insights.

This is probably old-hat to many who are better-versed than I. But it’s something of an aha! for me, and may be likewise for some of my readers.

Here’s the heart of his matter, a debate  economists have been having for centuries: do machines, does technology, complement (I would prefer “augment”) or substitute for (I would prefer “replace”) human labor? If all technology does is augment human labor–making each person more productive–that increased productivity is purely good and all boats rise (at least over the long term, though obviously with local disruptions, both temporal and geographic, that societies might want to address and ameliorate.) If technology replaces human labor, then some portion of the population, over time, will get squeezed out, with no opportunity to “earn” a share of the increased production. (And/or, wages for labor will decline.)

So which is it–does technology complement or substitute for human labor? Augment or replace? My immediate, uninformed answer is “Yes. Both.” But I’ve had no idea how to quantify those effects, or characterize their interactions.

The economic consensus (as I’ve discerned it and as Robin reports it) is that it’s all complement/augment–substitution is only local and temporary. And two centuries of rising wages certainly give a great deal of weight to that position. But it still seems more likely to me, even obvious, that both occur.

Which leads me to wonder: How do the two effects interact? What’s the ratio of the two? Does that ratio change? Most interestingly to me, has that ratio changed in any steady way over the decades and centuries?

Happily, it turns out that Robin is a Yes man like me:

I want to help you understand how they can both be right. (22:32)

He explains it with the following waterline model.

Machines do (obviously) take over human tasks, replacing human labor in those tasks, as machines gain a “better relative ability” to do those tasks than humans. No doubt about it. That’s the point where the waterline meets the shore, where a task can be equally well/efficiently done by a machine or a human. And the waterline is obviously rising.

But (not shown) those machine tasks complement the (more cognitive/creative) tasks that humans still do–and give humans time to do those tasks–increasing the humans’ productivity. (Robin explains: “The tasks themselves are all complements–and this is a very robust, standard thing [in economics]–the better the world economy does any one thing, the more valuable doing all the other things becomes.”) This makes the human effort steadily more “valuable,” so the humans can produce more with machines’ help, and–because the humans’ work is valuable–those humans can claim their share of the increased production. Sounds great.

Another way to think about it: humans can only migrate so far above the waterline. They need that vast body of technology–that body of water at their back–to expand into new territories.

It’s worth pointing out that there’s an unstated presumption here: that the graph continues up and to the right, that humans can climb to ever-higher levels–leaving lesser tasks to machines while we tackle tasks that deliver ever-greater value per hour–ever-greater productivity. (Designing more efficient cars instead of building cars.) Assuming that everyone shares in that greater prosperity (as everyone has, in the long historical picture though certainly not in detail), this truly is an all-boats-rise scenario.

But here’s where things get interesting–when Robin changes the shape of the shoreline:

The land contour is actually a graph of the change in the complement/substitute ratio. Sometimes one effect dominates, sometimes the other. On the left, machines’ takeover of human tasks does more to complement human effort than it does to substitute for that effort–resulting in economic growth and human prosperity. (To repeat: this rosy view reflects a big-picture, long-term orientation. Some individuals can’t make the steep climb, and they drown. But humanity moves ever higher.)

But then that ratio changes–the shoreline flattens out, and the scenario shifts radically. For every increase in machine abilities, there’s more substitute, and less complement. But the water keeps rising.

It looks to me like a lot of people just drowned, while a lucky few remain perched on the precipice.

Here’s Robin’s explanation:

There’s both a substitution and a complementary effect. And which dominates depends on the shape of this curve. Down here where it’s very steep you have very little substitution and a lot of growth. The machines getting better basically means people get richer, wages rise. But we could also reach a point [slide change] where there’s a large flat region in principle, and we could have the wave of water coming in, to a point where most income in the world is going to the machines, and a relatively small fraction is going to the people, and depending on the shape of this shoreline it might simply flood the entire region.

Unlike the future that Robin’s envisioning, though, in our world machines have no claims on earnings–they aren’t “people,” so they don’t get income. Their owners do. So he’s describing a situation “where most income in the world is going to the [owners], and a relatively small fraction is going to the [workers].”

Robin says this quite explicitly in his Spectrum article:

Wages could fall so far that most humans could not live on them.

This is, to my understanding, exactly the situation that the Luddites (and many others since) were so concerned about.

Robin is rather blithe in his statement that “in principle” there could be a large flat region. His talk has heretofore argued that periods of rapid growth (the steep parts of the curve) occur, highlighting the agricultural and industrial revolutions. And he asserts that those periods are getting closer together. He also asserts that another one is imminent–he thinks in the next hundred years.

Which would suggest that we are currently in one of those flat periods, where you see a lot more substitution relative to complementing–where a lot of people are being squeezed out of the economic system (drowned), without commensurate gains via complementarity (machines’ increased ability to produce things–and help humans produce things–that humans value).

Let’s hope the hill keeps going up to the right, and that humans have the capacity to keep climbing.

But here, perhaps, is the issue: many don’t. While measured IQ has been increasing over the decades since it was first measured (they keep having to recalibrate the test to achieve the 100 median), it’s not increasing anywhere near as fast as machines’ abilities. It’s possible that a large group of humans–at least in advanced, knowledge-driven societies like the U.S.–are being left below the waterline.

There’s much more I’d like to say on this topic, but I find myself out of time. (And I’m thinking you might be as well.) So I’ll just leave you with the questions I posed for Robin on his blog (slightly modified and expanded here).

Robin:

Asymptosis Uncategorized

While poking around for info on the previous post, I came across this graphic:

Which comes from this especially great WikiPedia page.

Which just re-emphasizes what we’ve seen since WWII, and especially since 1980:

Asymptosis Economics, Politics, Uncategorized

Not surprisingly, somebody went out and asked them. Here are the results:

Source. I think this pretty much speaks for itself, though it’s worth noting the commonly misunderstood fact that foreign aid accounts for less than 1% of Federal spending.

Asymptosis Economics, Politics, Uncategorized

We’ve been hearing more about “jobless recoveries” over the years, but it’s pretty profound how rapidly the trend is increasing. Calculated Risk:

Months to Return to Full Employment
1981:  28
1990:  31
2001:  47
2007:  ??

This multi-decade trend suggests to me that there’s something secular and structural at play. I suggest this.

Asymptosis Economics, Politics, Uncategorized

All hands on deck! Run for the exits! The Economist has just reported that lending to businesses in the euro area contracted by 1.2% from October of last year to October of this year. With that kind of catastrophic free-fall in lending, it’s not hard to understand why unemployment has gone up by 28% in the Euro area and 33% in the U.S.

Sorry. Excuse me if I can’t resist being facetious. On multiple occasions I’ve questioned the accepted orthodoxy that a shortage of lending is central to our current difficulties, or to our economy as a whole. This seems like a good time to reiterate those questions and re-examine the answers.

First, understand this:

1. Small businesses consistently put financing and interest rates at the very bottom or near-bottom of their lists of business constraints. That has been true for many years, it was true throughout the recent crisis, and it remains true at this very moment.

What are they short on? It’s no surprise: sales, a.k.a. demand. See here and here, and for the very latest data from November 2009 (including the chart above), the PDF here.

It’s true that there are exceptions around the world. Says The Economist:

According to a Gallup poll published in September, small businesses in Greece and Croatia say that access to finance is their biggest problem. Credit concerns are high on the list for small firms in France, Hungary and Italy as well.

Okay then. Greece and Croatia. But in most of the world it just ain’t so.

2. U.S. public companies disgorged every last penny they earned 2004-2008 ($2.4 trillion) in dividends and stock buybacks, plus another $200 billion–seven percent more than they earned. (Where’d they get the money? Cheap lending.) Does it sound like they were strapped for cash? With the big banks paying back tens or hundreds of billions in government loans only months after they were bailed out, are they strapped for cash now?

There are (still) truly oceanic quantities of cash flowing around this world, desperate to find solid, productive investments with decent promise of decent returns. A shortage of money and lending for business certainly wasn’t what got us into this mess, and there’s no sign that increasing lending to businesses will do anything to get us out of it.

But that belief system continues to bounce around the world echo-chamber–from the White House to Wall Street to The City to the MSM, even to the deepest corners of the econoblogosphere. BWWilds’ comment on the Economist story pretty much sums it up:

the money is not making its way to the small business owner and till it does no new jobs will be created.

That orthodoxy seems to go completely unchallenged, unquestioned, even unconsidered.

That’s certainly true in The Economist. Their December 12 article on “Europe’s corporate credit crunch” engages in extraordinary contortions to demonstrate the dire credit situation, using data that demonstrates…pretty much the opposite.

In their leader on the topic (bombastically titled “Small business, big problem: The sharp end of the credit crisis”), they share this graphic with us, demonstrating the precipitous decline in private-sector lending:

But of course this doesn’t show a steep decline in lending and borrowing. It shows a decline in the year-over-year growth in borrowing. Between 2004 and 2008 the amount of credit was growing by 7 to 12 percent a year–and it continued to grow (though more slowly) through most of 2009. Was that a good thing? Now it’s declining a little (by an amount that probably is not much greater than the survey’s measurement error). Is that a bad thing?

Then there’s the metaphorical title of the article–”Muck in the fuel pipe”–which displays a profound misunderstanding of the role of finance and lending in the business economy. Finance is not “fuel” for the “machine” of businesss–if anything, sales are, or maybe raw materials or labor. Finance is more like lubrication–it’s crucial to avoid things seizing up, but you don’t really need very much of it relative to the quantity of inputs and outputs.

Next, take a look at their front-and-center graphic:

…which re-creates this graphic from their source (Ifo):

Short story, for small and medium German manufacturers, credit is easier to get today today than it was in 2003, 2004, or 2005. (You didn’t hear of anybody complaining about credit crunches in those years.) Only large German businesses are experiencing more difficulties getting bank loans. In aggregate, things look pretty good:

And none of this says anything at all about how much constraint the lack of borrowing puts on businesses. In fact, it seems that the decline in lending is not because of a shortage of money or lenders, but because businesses aren’t asking for loans:

A German survey showed that in November the number of firms saying they faced tighter credit conditions ticked up again, having fallen for the previous three months (see chart). Yet a German government fund that is intended to help healthy companies borrow has had relatively low take-up to date. KfW, the state-owned bank that administers the fund, says it has received fewer than 4,000 loan applications for a total of about €15.6 billion ($23 billion), of which it has approved about half (granting loans worth €4.3 billion), mostly to small firms making car parts or industrial machinery.

Like small businesses in American, German companies aren’t clamoring for credit, even when the government’s trying to encourage them to borrow.

Ah, but it could be a problem!

The worry remains that when demand for credit picks up properly, disquieting clunks rather than the purring of a well-tuned engine will be heard from the banking system…

But even where the chances of a full-blown crunch appear remote, policymakers fret that if one set in, it would be difficult to reverse.

So most businesses around the world don’t report suffering from (as opposed to experiencing) a credit crunch, and there doesn’t seem to be any likelihood of a credit crunch emerging, and if one did emerge it might not hurt businesses all that much because they’re not really seeking loans in case, but…we really should really worry about it.

And it seems that policymakers are in fact worrying, especially about small businesses–the ones that are actually having less trouble getting loans:

The plight of small businesses, which are more dependent on bank credit than their larger peers, preoccupies policymakers. The ECB’s loan-officers survey showed that demand for bank credit weakened much more in the third quarter among big firms, which have access to capital markets, than among smaller ones.

So demand for loans is declining among both small and large firms, but more so among large firms, because they have other ways to tap into the oceans of global cash. But still:

Adam Posen, a member of the BoE’s monetary-policy committee, frets that Britain’s recovery may be stillborn because banks are not able to finance growth by small and medium-sized companies. The German government this month appointed a “credit mediator” to help smaller firms that are healthy but cannot get funding.

We’ve already heard about German companies’ response to those government efforts. Maybe policymakers should be “preoccupied” and “fretting” about something other than the health of lending institutions.

Likewise, I am agog when I hear reports like this about CIT–the big lender to small businesses that got itself in trouble recently:

“Small and medium-sized businesses are wild with concern that the bankruptcy filing of CIT Group will cut off the financing they use to pay employees and creditors…”

“They have to make payroll this week — they don’t know whether they will be able to meet obligations for payroll or for suppliers.”

These companies are taking loans to make payroll? Should they even be in business? (Think: creative destruction?) Is the ability to shift payments a month or two back in time truly crucial to the well-being of our business economy? We’re not talking about investment in expansion here, or anything like it.

I’ve been a equity partner and/or principal in a string of successful companies with a combined worth well into the tens of millions of dollars. And I’m here to tell you: successful business owners invest to expand their businesses when there is 1) demand, or 2) expectation of demand. Absent that, all the credit in the world won’t make smart businesspeople invest in expansion. You don’t buy new machines or hire new staff to run them because you have lots of lubricant available.

Again, you don’t need very much lubricant (read: finance and credit) to make the machine of business run smoothly. By all appearances, we seem to have several times more than we need or than is good for us.

But still, we have this on the front page of the New York Times:

Obama Presses Biggest Banks to Lend More

President Obama pressured the heads of the nation’s biggest banks on Monday to take “extraordinary” steps to revive lending for small businesses and homeowners, prompting assurances from some financial institutions that they would do more even as they continued to shed their supplicant status in Washington, The New York Times’s Helene Cooper and Eric Dash reported.

Meeting with top executives from 12 financial institutions, Mr. Obama sent a clear message that the industry had a responsibility to help nurse the economy back to health and do more to create jobs in return for the huge federal bailout last year that kept Wall Street and the banking system afloat.

But Mr. Obama also confronted the limits of his power to jawbone the industry as banking companies continued to repay government money received in the bailout.

My question: instead of spending time jawboning and kowtowing to the bankers, should President Obama be waging a FDR-level jihad to rein them in and break them up? Or has he been convinced by his financial-industry advisors that the old orthodoxy–”Credit crisis! Need more lending!”–is true, and that he needs the banks as much as they need him?

Do we, in fact, need them? We got out of the Great Depression without much help from their ilk:

And you have to wonder how much help they’re going to be this time.

Obama does mention regulation and reform in the NYT piece:

“I made very clear that I have no intention of letting their lobbyists thwart reforms necessary to protect the American people,” Mr. Obama said in remarks after the meeting. “If they wish to fight common sense consumer protections, that’s a fight I’m more than willing to have.”

Okay babe, good words. Show us your stuff. To start with, you might consider some words like those that Roosevelt delivered:

The economic royalists hate me, and I welcome their hatred. The economic royalists have met their master.

Or to quote George W. Bush, “Bring ‘em on.”

Asymptosis Uncategorized