Marginal Utility

1. Caroline Spector tries Starbuck's coffee:
   

   I met a friend at Starbucks the other day. I haven’t been in Starbucks since I quit drinking coffee. Not unlike the alcoholic who should stay away from bars, I found just being in a place so redolent of brewing Sweet Nectar of the Gods was more of a temptation than I could stand for the first year or so.
   
   My friend arrives and gets an iced coffee. Being the shameless mooch I am, I ask if I can have a sip of her enticing cold beverage. (Mmmmm, caffeine.) She graciously obliged.
   
   I take a sip. And then I have that moment we’ve all had, (girls more so than guys I suspect) the, “Do I spit or swallow?” dilemma. Because what I have in my mouth is not Sweet Nectar of the Gods, but rather Satan’s Piss.
   
   You know: The Devil’s Urine. Beelzebub’s tee tee. Lucifer’s pee. Mephistopheles’s piddle. This stuff is so foul I’m pretty sure they must have an EPA permit to sell it.
   
   And I realize why Starbucks sells all those Vente, Grande, Mocha Swirl with a Half-gainer concoctions. Because if anyone actually tasted the coffee in them, they would be convinced, as I am now, that Starbucks is actually in league with The Dark Lord (no, not Voldemort) to corrupt the taste buds of an entire generation.

   
   and then she discusses Harry Potter and the Deathly Hallows in a manner that (though I disagree with her conclusion) at least makes it clear she has a basis in reality.
   
   
2. Trying to find reality, Gavin Kennedy reviews Milton Friedman's "contribution" to Adam Smith's Legacy, finds he's the primary reason it is "lost":
   

   In the meantime, I am savvy enough to know from long experience of this misattribution to Smith of a metamorphosis of a metaphor into a ‘concept’, which he never meant it to be read that way, as my regular reader will know, that I could assume what follows, but scholastic training, and the many occasions when in discourse I have seen people caught for doing just that before falling on their faces, I shall refrain from the temptation, and await some kindly person to send me the paragraph..
   
   That Milton Friedman, of Chicago University fame, was behind the metamorphosis does not surprise me. ‘Chicago’ Adam Smith was created in Milton’s department and replaced the authentic ‘Kirkcaldy’ Adam Smith who wrote the Wealth Of Nations.
   
   One of the many atrocities committed by Chicago and its graduates who spread the word across US campuses, was the myth of the ‘invisible hand’, which some variants transmuted into ‘as if led by an invisible hand’, and most of examples of the myth in currency assert it was, first a ‘concept’, then a ‘theory’ and finally Smith’s most ‘important idea’.
   
   Should my reader wish to have an electronic copy of my recent paper, “Adam Smith’s Invisible Hand: from metaphor to myth”, he or she should let me know by arranging the following words into an address: ‘gavin’, ‘negweb’ and ‘com’ in the usual manner.

   
   UPDATE: Kennedy gets the full quote, and goes full out.
   
   
3. And—only somewhat related to either of the above but as a result of visiting a world more unreal than that of thestrals and Xenophilus Lovegood—Felix Salmon discovers that Punditry is for Professionals Only. Do not try this at home, especially if you are Sane:
   

   Just some of the Cramer gems there:
   

   "I'm looking for 100% default on the 2-and-28s. One hundred per cent. The bears are looking for 50%. I'm saying that they're foolish and that they're way too optimistic."
   
   "I'm not distinguishing any more between subprime and prime. That's a meaningless distinction. When your house drops 20% in value, then it doesn't matter whether you're subprime or prime. It's better to walk away, even if you're wealthy, because you don't want to lose your credit card, and you don't want to lose your car. Your house is the one thing that's fungible. It's smart to walk away... If your home declines 20% in value, it's really important to walk away from it."
   
   "I'm calling for a dramatic decline in home values... If the Federal Reserve were to cut rates by one full point, things would just reverse dramatically, and everything would go up in value... Until then, we're going to be in what I believe now is a total crisis."

   
   Is it worth responding to this as though it's rational? Is this what passes for informed commentary on TV these days? I can see how it gets ratings, in a train-wreck kind of way – hell, I'm blogging it. But the idea that wealthy people will stop paying their mortgages because their houses are "fungible" (unless we get a 100bp cut in the Fed funds rate, of course) – it's like some kind of incredibly unfunny parody. Nouriel Roubini et al might be shrill, but at least there's coherent logic to their position.

   
   Is it worth responding to Consummate Irrationality? Probably only at the margins, and there are days when the marginal return doesn't seem to be enough.
   
   
4. Bryan Caplan says something sensible on this anniversary of Friedman's death. (Of course, he discovered it at Comic-Con):
   

   My Comic-Con epiphany: Economics doesn't really have superstars. Even if Adam Smith himself showed up at the American Economic Association meetings, he wouldn't have thousands of economists fall on their knees in awe. But that's basically what happened at Comic-Con when Neil Gaiman held some public Q&A.

   
   Just wait until after Stardust comes out at the end of next week.
   
   
5. And, finally, from earlier this year, I honor The "Uncle Miltie" of Economics by referring you to Max's "discuss[ion of] Milton Friedman's leading contributions to economic thought" and its attendant links. So that his legacy may not be forgotten.

Labels: Eat Our Brains, Economics, mortgage, sf, subprime

// posted by Ken Houghton @ 7:55 AM