Mark Thoma:

Does the total cost of our financial system exceed the total benefits?

Overmighty finance levies a tithe on growth, by Benjamin Friedman: …The crucial role of the financial system in a mostly free-enterprise economy is to allocate capital investment towards the most productive applications.

…it is important to ask what this once-admired mechanism costs to run.

If a new fertilizer offers … a higher crop yield but its price and the cost of transporting and spreading it exceeds what the additional produce will bring at market, it is a bad deal for the farmer. A financial system, which allocates scarce investment capital, is no different.

The discussion of the costs associated with our financial system has mostly focused on the paper value of its recent mistakes and what taxpayers have had to put up to supply first aid.

What has somehow escaped attention is the cost of running the system.

A fast reply in the comment thread, “I did not think it was possible for economists to ask the right questions.”

Snippets from Ted Kennedy, 1980:

I am asking you to renew our commitment to a fair and lasting prosperity that can put America back to work.

We have learned that it is important to take issues seriously, but never to take ourselves too seriously.

Our cause has been, since the days of Thomas Jefferson, the cause of the common man and the common woman.

The commitment I seek is not to outworn views but to old values that will never wear out. Programs may sometimes become obsolete, but the ideal of fairness always endures.

We must insist that our children and our grandchildren shall inherit a land which they can truly call America the beautiful.

Among you, my golden friends across this land, I have listened and learned.

Brian McDermott at FastCompany:

“What we are experiencing is a colossal failure of leadership in the business community.

“CEOs are greedy, shortsighted, unethical, arrogant, and lacking in vision and commitment.

“It’s truly pathetic.”

Don’t make yourself silly over a drip from a faucet.

U.S. cities lose 25 to 30 percent of the fresh water in their pipes. [link]

There are many barrels leaked before we use our average of a barrel per day.

Be wary of the drip from your pocket, because nobody has been maintaining America during our frenzy of wealth.

Journal of Agricultural and Food Chemistry: [link]

1. The substance hydroxymethylfurfural forms mainly from heating fructose, the sweetener in beverages and processed foods. Levels jump dramatically at about 120 degrees.

2. Some commercial beekeepers also feed corn syrup to bees to increase reproduction and honey production. When exposed to warm temperatures, corn syrup derivative compounds can kill honeybees.
3. Studies have linked hydroxymethylfurfural to DNA damage in humans. In addition, corn syrup derivative compounds break down in the body to other substances potentially more harmful.

Another slap on the hand. Corn is important and corn syrup has its place, but it seems we need to look carefully at our policies.

Paul Livingstone at R&D Magazine:

This summer marks the centenary of a demonstration by Fritz Haber which showed, for the first time in public, the exothermic equilibrium reaction that would break the strong triple bonds of nitrogen and pair it with hydrogen to create ammonia. When oxidized, ammonia can be used to make fertilizer, explosives, and other products.

It was the touchstone process, that, when industrialized with the help of methane by Carl Bosch, led to the Green Revolution. It was the beginning of a transformation of agriculture that today easily supports the lives of more than a third of the world’s population.

In fact, industrial nitrogen is the primary reason why some say the Earth can support up to 10 billion people. But even after decades of improvements in efficiency and chemical process, industrial nitrogen still has unsolved problems. Not least of which is the propensity for farmers to use too much.

Now we must contend with the consequence of poor nitrogen use.

1. Farms in northern China use six times more nitrogen fertilizer per acre than farms in the midwestern U.S.

2. Runoff ‘dead zones’ of algal blooms
3. Nitrous oxide emissions, which are about 298 times more effective at trapping atmospheric heat than carbon dioxide
4. Easy bombs.

“Our aim is to ensure Germany can continue to fight for as long as possible, in order to exhaust and ruin England and France,” Joseph Stalin ordered in 1939 because “under these circumstances, we, finding ourselves in a beneficial situation, can simply await our turn.”

“What we can do is maneuver around the two sides, push one of the sides to attack the other.”

George Bush and the preordained Obama bump in federal debt .

“It is becoming clear that the main ‘work’ of the future will be education. that people will not so much earn a living as learn a living.” – Marshall Mcluhan: The future of education

Only one crime was solved for each 1,000 CCTV cameras in London last year. [BBC]

All systems are flawed:

John Stuart Mill cautioned: “Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works”.

John Maynard Keynes was aware of this: “Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.”

When Ronald Reagan stepped in to save a big Chicago bank, his administration “made it clear that a permanent shift in policy had taken place, telling Congress that none of the nation’s top 11 banks would be allowed to fail.”

Some wingnut says we’re accustomed to torture and that’s a good thing:

Without getting into the substance of the controversy, I’m doubting that there will be a lot of popular outrage over any of the allegations of abuse.

Right or wrong, I think the average American assumes that some rough stuff goes on behind the scenes and that’s okay.

Hollywood tells us so…

I’ve long been fascinated with the disconnect between what pundits, politicians and various activist groups complain about and the status of interrogation techniques in the popular culture.

In countless films and TV shows the good guys — not the bad guys — do things to get important information that makes all of the harsh methods and allegedly criminal techniques in the IG report seem like an extra scoop of ice cream and a Swedish massage.

“We’ve discovered that owning things and consuming things does not satisfy our longing for meaning. We’ve learned that piling up material goods cannot fill the emptiness of lives which have no confidence or purpose.” — Jimmy Carter 1979

Income distribution really starts to change after Ronald Reagan’s Free Market Trickle-Down propaganda. The policy crashes under George W. Bush, the first administration since 1933 President Herbert Hoover to flatten income gains of the typical family.

[more analysis at economicPopulist]