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Saturday, January 24, 2015

Standard & Poors: Internal Controls Enabling a Conflict of Interest

After the financial crisis of 2008, rating agencies reassured the public that additional “internal safeguards” would prevent the sort of over-stated ratings that had contributed to the crisis. Congress did not deconstruct the structural conflict of interest wherein a rating agency is tempted to overstate the rating on financial security such as a corporate bond because the agency’s revenue would be higher if more of the bonds are sold. I contend that reliance on a company’s internal “fire walls” is naïve, given the strong, sustained temptation that exists as long as an institutional or structural conflict of interest is in place. To obviate the problem, the conflict itself must be deconstructed.




The full essay is in “Essays on the Financial Crisis and
Institutional Conflicts of Interest, both available in print and as an ebook at Amazon.

Friday, January 23, 2015

Deficiencies in the E.U. Capital Markets: A Silver Lining

Even six years after the financial crisis of 2008, the limited scale of the E.U.’s capital markets relative to their American counterparts exacerbated the E.U.’s problems with state debt. Most directly, the lack of diversification on the types of capital markets meant that the focus on the bonds issued by state governments would continue.[1] Having had years to develop alternative markets since the financial crisis, E.U. policy makers had no one to blame but themselves—it would seem. However, a bright spot in European culture may be responsible for the lack of development.

The full essay is at “Deficiencies in the E.U. Capital Markets.”


1. Simon Nixon, “A Continent in Need of Greater Capital Markets,” The Wall Street Journal, January 20, 2015.

Wednesday, January 21, 2015

Police Snatching Property: A Conflict of Interest While American Federalism Sleeps

The U.S. Justice Department halted its adopted-forfeitures program in early 2015 out of a sense that state and local law-enforcement agencies had been using the federal program to retain a greater portion of seized property, including cash, than state laws permit. Asset forfeiture had grown since the 1980s largely as a strategy in combatting drug traffickers, yet the agencies themselves benefited in being able to spend the cash. Besides this conflict of interest, the federal-state dynamic here demonstrates federalism in action, though perhaps not as strongly as the system of government allows.


The full essay is at “Police Snatching Property.”

Monday, January 19, 2015

The Imitation Game: Machines Imitating Man?

What does it mean to understand something? Put another way, what counts as understanding? The film, The Imitation Game (2014), touches on the question of whether machines (i.e., computers) can think, but the film falls needlessly short in pursuing the question. My aim here is to show how film can be more substantive along philosophical lines without sacrificing on entertainment value.



The full essay is at “The Imitation Game.”

Sunday, January 18, 2015

Behind the Lower 2014 U.S. Federal Budget Deficit: A New Default

The U.S. Government’s fiscal deficit of $483 billion for fiscal-year 2014 is the lowest since 2007.[1] At a preliminary 3% of GDP, that deficit is much better than the 2010 deficit, which came in at 10% of the GDP. To be sure, the American economy was larger in 2014. Also, the federal government’s overall fiscal improvement masks changes “behind the curtain” that may not be so palatable.

The full essay is at “U.S. Federal Budget Deficit.”


[1] Josh Zumbrun, “Budget Deficit Reaches a Seven-Year Low,” The Wall Street Journal, January 14, 2015. The budget deficit for the calendar year came in at $488 billion.

Relaxing State Deficit Restrictions: Power-Grab by the European Commission

As the World Bank came out with its revised prediction of 1.1 percent economic growth for the E.U. (“eurozone”) in 2015, down from the earlier estimate of 1.8%,[1] the European Commission announced that it would allow states more leeway in meeting the federal requirement that state budget deficits be no more than 3 percent of their respective economic outputs. Lest this appear as a sign of political impotence, the “strings” demonstrate the opposite.



The full essay is at "Essays on the E.U. Political Economy," available at Amazon.




[1] Ian Talley, “World Bank Lowers Global Outlook,” The Wall Street Journal, January 14, 2015.

Oil Supply: Problem or Panacea?

Between June 2014 and January 14, 2015, crude oil prices fell by 57 percent. Between November 1985 and March 1986, the prices had fallen by 67 percent.[1] That time, it took nearly two decades for oil prices to rebound. Would it take that long again? The answer has implications for how efficient the market mechanism itself is, and in turn for public policy on energy and global warming.

The full essay is at “Oil Supply.”





[1] Russell Gold, “Back to the Future? Oil Replays 1980s,” The Wall Street Journal, January 14, 2015.