A couple of weeks back the Planet Money podcast hosted Nassim Taleb, author of the Black Swan. Click here for the interview. I have not read Taleb’s book, although I am likely to now, but I am baffled by how the real estate crisis and the crash of the market could be considered a hard-to-predict or rare event. In that, Taleb seems like an apologist for the neoliberal school of thought which is in love with totalizing arguments: "There is no alternative" or "Nobody could have predicted it." So sorry, but there are alternatives and plenty of us predicted it long in advance. Look, I only have a basic training in economics, but it was a good one, and it was obvious to me that the market was out of whack. Unless somehow more training in economics leads to diminishing returns, the idea that the crash was a black swan seems bizarre, even delusional.
But again, I have not read Taleb’s book and much of what he said in the Planet Money interview made a great deal of sense. Although I enjoyed the show, it seems like the interviewers, who tend to be free-market apologists, did not want to hear what Taleb had to say, which is that the Obama administration is completely out of touch with the will of the people. Nobody wants to prop up the financial system anymore. If I were Obama, I’d begin by firing Larry Summers, Rahm Emmanuel, Timothy Geitner, and the whole rotten crew. But I would’ve never hired them in the first place. It’s going to be tough to do a 180 but it’s either that or—barring a real black swan (or perhaps a candidate so Right wing that he or she is unelectable by a majority)—the Republicans take the midterms and have the next presidency locked up.
I know that some of my readers have expressed the wish that I would come out and say that everything will be ok soon and that the boom of the last decade will be back. But with the neoliberal bag of tricks exhausted, I just don’t see how that can happen. If the Great Depression is too upsetting a model (and inaccurate, after all, we have YouTube to entertain us, they didn’t), then take Japan since the asset bubble popped in 1991 or, heck, take the United States from 1966 to 1996, my formative years. It’s not my fault that the economy is the way it is (if it were, I’d be a lot richer, like Obama, Summers, Emmanuel and Geitner) and I don’t take great pleasure in predicting the Great Recession will not end soon. But I was very much alarmed by all of the people going around talking about the boom as if it were the greatest thing since slight bread. Now they wonder why their real estate investments went awry. I guess black swans are the answer…
Still, I hope that these same individuals listen to Taleb and understand that extrapolating short-term trends is nonsense. I am not sure how we will dig or if we will dig ourselves out of this hole. It could be that this is a terminal crisis for capitalism, which will be replaced by some new economic system. I am not sanguine about that prospect either for instead of socialism we could well have a (happy faced) neo-fascism (after all, we have YouTube).
In sum, do give the interview with Taleb’s a listen, but be skeptical about the black swan. Instead of black swans, maybe it’s better to hunt for the Owl of Minerva, who as Hegel reminds us comes out at twilight to paint her grey on grey when a form of life has grown old… Ask yourself where the owl is flying now.