Money in the news

Will McCain Defect?

I don’t mean “defect” in that he will knowingly be working for Al Qaeda or something like that, just that there is a temptation for him to defect from the public interest in the game theory sense. We do have a sort of prisoners’ dilemma setup here.

There is an argument about that McCain has no scruples worth mentioning. On this model he will try to pull a bait-and-switch on Obama regarding the bank bailout, which is widely unpopular and yet deemed necessary by the people who, you know, are all wise and stuff about the economy. Since there is a self-fulfilling aspect to share values and expectations, what is deemed necessary may well be necessary. In any case, the people around McCain surely believe in its necessity.

Would McCain rather be president of a god-awful mess or a citizen of a country and world that still stands some chance of managing to recover from the huge mistakes of the past decade?

My bet is that he can’t and won’t pull this shenanigan specifically because it is the beneficiaries of the bailout that are running his show. It’s pretty telling, though, that we can’t be sure which way he’ll go on something like this.

And then there is the argument that “maverick” means “loose cannon “. Perhaps his “gut” will tell him to defect just as it tells him “naw, I don’t wanna go to Mississippi on Friday and be on TV”, and to nominate Palin, and who knows what all else over the next few years.

Related musings by Sam Stein here.

The Alternatives

There are alternatives to a massive government bailout of the U.S. financial industry, according to Luigi Zingales–they just would be more costly for financiers and cheaper for taxpayers.

See also “How I learned to Stop Worrying and Love the Financial Collapse” by Aaron Edlin. Both in a special edition of The Economists’ Voice.

Note that they still can say “shibboleth”: another article in the issue is “Turn Left for Sustainable Growth” by J. Stieglitz. Sigh.

Bailing Out Galveston

OK, it’s pretty small compared to the trillion dollar bailout, but Galveston is not a big city. When does all this spending become inflationary?

HOUSTON — Officials from Galveston will ask Congress for about $2.2 billion in disaster relief this week to repair the battered island’s port, save a major research hospital from going under and rebuild the city’s infrastructure.

The estimate of the damage done when Hurricane Ike raked the island on Sept. 13 was breathtaking. With 57,000 residents, the amount officials are asking for works out to about $36,800 a resident.

Alas, that is our research hospital. I think we should just move it to Austin, which peculiarly has no medical school at all. (Probably the largest American city in that position…) Anyway, I think keeping it, or anything substantial, in Galveston makes little sense.