Galbraith Must be Right–Jim Cramer Says So!

Don’t we all, as historians, love to engage in but-for analysis? The causes of X event are certainly Y. I work a lot on Cold War history, and the debate never ceases over what caused the Cold War (obviously, the causes were all economic, as William Appleman Williams would argue, were he around to do so). This week’s readings focus on why did it happen with regard to bank runs and the 1929 Crash.

The O’Grada (sorry, could not figure out how to properly punctuate his name) and White paper engages in micro-economic analysis of the 1854/57 bank runs, utlizing a robust set of data from the EISB. Robust, in the sense that it is extant, but troubling, in that it is such a limited sample set, particularly for the nation-wide 1857 panic. There seems to me to be an overconfidence in the economics. I am a big fan of this methodology, but I don’t think this is the best execution. One could easily question whether the variables are sufficient/correct. Interesting as a methodological piece, but I am not sure that it provides real answers. More interesting than the econometrics is the chart of deposits/withdrawals, and the growth charts presented early in the paper.

Mark Carlson is to be commended for supplying a thorough review of the literature. He articulately lays out the two competing strands of thought–illiquidity v. asymmetrical information, adds a “hybrid” category, and then does some base level analyses. Carlson’s paper is well-written, lucid, and informative, but his conclusions are (justifiably?) tentative.

Galbraith is a masterful writer. He tells a good tale and argues coherently. But, I take issue on two points. First, I think he may overstate the role of income disparity as a driving force behind the bubble and crash. That is simply a fact of the contemporary market, and has not changed in 80 years. It may be a symptom, but I think Galbraith goes too far it painting it as causal. Second, Galbraith disparages the role of “economic intelligence” during the bubble, and castigates economists as making things worse. Maybe so. But is it realistic to expect economists to be able to accurately model–if they model too pessimisticly, we deride them as harbingers of doom, and if too optimistically, Pollyannas. Perhaps the level of sophistication among those listening to the pundits at the time made them too susceptible to influence, a phenomena not unfamiliar to us today.

But, speaking of pundits (smooth segue, eh?), Galbraith is unquestionably the greatest pundit of them all! Not just because he acknowledged that another bubble might come along some day (his prognostications were a bit wishy-washy in my view), but because that Great Financial Wizard, MR. JIM CRAMER (typing in ALLCAPS to simulate his inimitable style SAYS SO!!

Is There A Dissertation Lurking Here?

I was catching up on a number of blogs that I follow last night (after watching the masterful reworking of the classic 1980s hit “V”), and stumbled across this new book “The Rise of the Uncorporation.” The book traces the history and significance of alternative forms of legal organization to the corporation. Partnerships, LLPs and other non-traditional organizations have been quite important at various points in history, and form the focus of at least half a semester of the law school class known as “Business Associations.” (Important mainly because bar examiners love these more arcane forms). We’ve focused largely on corporate forms in this class (although some of the corporations may have started out otherwise, and some of Scranton’s exemplars may have been alternative organizations). Seems to me like this book is only scratching the surface, based on my scan of a few reviews, and that there may be a lot of good work to be done here. Legal history, social history, labor history (that might be particularly interesting, thinking about how relations worked on this level–how do these unincorporated forms of larger businesses deal with unions?), responsibility to the public (is there the same level of hatred that forms towards corporations?). Philosophically, there is no legal personality to the uncorporation–what does that mean legally? Historically? I am looking forward to reading this book over the break. The abstract is below, and if you can’t wait for Amazon to deliver your copy, here is the first chapter.

1. What I’d really like to talk about today is the lawsuit filed by the State of New York against Intel. But, I am proscribed from doing so in any great detail by certain ethical obligations to my client (Intel). So, I will just state this very generally. There are two federal agencies charged with enforcing the antitrust law, the FTC and DOJ (depending on the type of business and the conduct at issue). There are numerous private actors capable of doing the same (for example only, there is a major lawsuit against Intel by AMD, its largest competitor, pending in the D. Del. filed in 2005, and going to trial next year). It is no secret, by the way, that the FTC is investigating Intel as we speak . Without getting into the dubious merits of their investigations, one wonders why the State of NY feels compelled to poke their heads into a matter that is already being investigated by federal enforcers, and is the subject of one of the largest litigations in history. What is the benefit to the taxpayers of the State of New York? Moreover, how does it benefit the economy? Only a few states engage in vigorous enforcement of the antitrust laws as to global companies and for good reason–its not efficient for them to do so. One might look at various examples where states bring high-publicity complaints against large companies and think about what their motives are. I only pose the question, and leave it to you to discuss. Should state agencies get involved at this level generally?