Open Letter to Nobel Economists

Dear Nobel Labor Economists:

Thank you for taking a moment to read my post.  It’s not nearly as incredibly erudite as the stuff you say, but that’s not surprising, because I got a C in Econ 101 while traveling through the collegiate experience toward my incredibly marketable degree in Classics with an emphasis on Roman History.  I did have three minors, though, and one of them was in uber-fashionable English, so, you know.  I probably have really good stuff to say, or at least the ability to say it in an intelligible manner.

I had to write you because there’s a super-awesome-castic article today about a speech by a newly-minted Nobel Prize-winning Labor Economist, in which he chides American banks for being “dysfunctional”, because they’re not lending money to small businesses so they can make payroll, which means, apparently, not as much payroll as there could be.  Payroll, I believe (and remember the English minor, so I’m probably right), is a euphemism for “workers”, so translating this into English (ibid) we get “it’s the banks that are keeping people unemployed.”

First off, there’s the whole “dysfunctional” thing.  I live in Lehi, UT, USA, so probably someone delegated to the faculty of Northwestern University the task of regulating English definitions without my hearing about it (Heaven knows regular Americans abdicated that role eons ago) (or is it aeons?) (no, WordPress gives me a red squiggly under that, so it has to be the first one) (but then, WordPress gives me a red squiggly under “WordPress”, too, so…) (but not, fascinatingly, under “squiggly”), but I thought that the word “dysfunctional” meant “broken”, or some synonym thereof.  I can assure you that bank shareholders think that banks are anything but dysfunctional.  In fact, they’re recording record profits.  They’re functioning at a level of perfect efficiency unseen since the days of JP Morgan.  So Mr. Esteemed Nobel Labor Economist, I do not think that word means what you think it means.  But I’m not Norwegian, neither am I Inigo Montoya, so I probably ought to defer.

Second, I think you might be confusing desirability of output with functionality.  See, being just a “payroll” myself, I don’t get to see the economy from the lofty position occupied by those that have won prizes named for dead Norwegians, but from down here in the muck, here’s the view:

We’re making an apple pie.

We have an apple cutter, and sugar and cinnamon, and a pie tin, and some apples.

The apple cutter is sharp, and in the peak of condition.

The sugar is the finest cane, and the cinnamon is from Malabar, shipped in this week and ground on the premises.

The apples are from off the ground several weeks ago.

The pie tastes like cow dung.

This, I see from your comments, means that the apple cutter is dysfunctional.  Without wishing to draw the ire of so esteemed a notable as yourself, might I suggest that perhaps the output of the cutter has more to do with the quality of the apples than with the functionality of the implement itself?  No?  Oh.  Well, sorry, then.  Can I just finish the post, because I really have worked hard to come up with enough to say that this post will not be embarrassing to English minors everywhere?  Thanks.

To make plain the analogy, then, the banks are the cutter and the apples are the government policies that make the economy taste like cow dung.  Oh.  You got that?  Great.  I didn’t know how much of that sort of English-department poetic-device explication they taught there in the Econ wing, but okay.  To incorporate yet another department, here’s the math, in a nutshell, for the banks: lending money is risky.  Lending money to small businesses is, statistically speaking, a lot more like lighting it on fire than it is like preserving it.  The money itself was originally borrowed from the Fed at something south of 1%.  Practically everything in the world generates a better return than that.  Practically everything in the world is less risky than investing in a small business.  Therefore banks, needing only minuscule returns to exceed their costs of borrowing, are doing practically everything in the world other than lending to small businesses.

Now, I know that this isn’t your job.  You do say, point blank, that “Economics is not a predictive science.”  This was also confusing to me, because I thought that Economics was ENTIRELY a predictive science, and that it has no function whatever other than to make predictions about things.  The fact that most people that work for a living, and those that think for a living, and those that are just living, and the majority of people no longer living, think that economists like your esteemed self are worthless steaming piles of cow dung, figuratively speaking, is that you are always WRONG about what the effect of your economic policies is going to be.  Like, laughably, ridiculously, insanely and hilariously wrong.

I want to suggest, in light of this, that you could revise and extend your remarks of yesterday.  You could put in stuff about how the banks are performing in a manner simple to predict by all the rest of us, and that this should have been anticipated by Ben Bernanke, and Tim Geithner, although not by the thousands of policy wonks on Capitol Hill, who are, after all, economists, and therefore engaged in non-predictive thinking.  You could amend your comment about government regulators not having sparked lending by keeping interest rates low to read “government regulators have not sparked borrowing by keeping interest rates low”, because, as you would have been able to tell if you had been in the classics department (apparently ancient history and archaeology IS a predictive science) instead of the economics college, LENDING is sparked by HIGH interest rates.  BORROWING is sparked – or it should be – by LOW interest rates.  And indeed, demand for borrowing has been sparked.  Being on the front lines of that, as it were, as both a small businessman and a representative of a lender, I can tell you that there’s huge demand for capital out here.  But there is no incentive to lend it, because the Fed has money so cheap banks can get it faster than a K-Street prostitute.

Banks will start lending again, Mr. Nobel Labor Economist, when the cost to them of their capital is high enough that they need to get a serious return on their money to be able to repay it.  This is a prediction, since you pointedly refused to make one, and implied that you don’t even know how.  It might even be useful to make such predictions, so as to give the Congress and the Fed some idea of what to do, because as you may have noticed (or would this come under the purview of the Journalism Department?), they’re flailing about in the dark like a blindfolded three-year-old with a pinata.

I realize now, however, that that would eliminate the chance of winning a Nobel Prize in Economics.  So you’d have to settle for Literature.  But that’s still pretty good.


Chris Jones, Payroll

3 Responses to “Open Letter to Nobel Economists”

  • Rich Wiltbank says:

    Payroll: “The battle of wits has begun. It ends when you decide and we both eat and we find out who is right and who is eating cow dung.”

    Mr. Nobel Prize (Mr. NP): “Now, a clever man would give the cow dung to the borrowers because he would know that only a great fool would keep the cow dung close to himself, thus I can clearly not choose the pie in front of you. But you must have known that I was not a great fool, so I can clearly not choose the pie in front of me.”

    Payroll: “You’ve made your decision then?”

    Mr. NP: “Not remotely. Because cow dung comes from ranches, as everyone knows, and ranches are entirely run by backward hicks who know nothing about economics, just as you clearly know nothing about economics, so I can clearly not choose the pie in front of you.”

    Payroll: “Truly, you have a dizzying intellect.”

    Mr. NP: “Wait ’til I get going! You must have suspected that I would have known that cow dung comes from cows and you probably heard that I was a vegetarian, so I can clearly not choose the pie in front of me.”

    Payroll: “You’re just stalling now.”

    Mr. NP: “You’d like to think that, wouldn’t you? Lowering interest rates to 0% has not spurred banks to lend which means that they are dysfunctional, so I can clearly not choose the pie in front of you. But, giving stimulus money to the Payroll has only caused your savings to increase which means that you must believe that money is the root of all evil, so you would want to keep the dung as far from you as possible, so I can clearly not choose the pie in front of me.”

    Payroll: “You’re trying to trick me into giving away something; it won’t work…”

    Mr. NP: “It HAS worked. You’ve given everything away! I know where the cow dung is.”

    Payroll: “Then make your choice.”

    Mr. NP: “I will. And I choose…LOOK! There’s a small business actually making a profit and hiring!!”

    Payroll: “What? Where? I don’t see anything.”

    Mr. NP: “Oh, well, I could have sworn I saw an up-turn in the economy. No matter. Let’s eat – you from your pie and me from mine.”

    Both take a bite.

    Payroll: “You guessed wrong.”

    Mr. NP: “You only think I guessed wrong, that’s what’s so funny! I switched my predictions when your back was turned. You fool! You fell victim to one of the classic blunders. The most famous is ‘Never get caught up in get-rich-quick investment hype.’ But only slightly less well known is ‘Never try to use logic around an over-schooled Washington bureaucrat!’ Ha ha ha ha ha ha ha ha ha!!”

    Mr. NP unceremoniously falls off the front pages of the world news. And Payroll walks over to assist American Public to her feet.

    American Public: “To think, all that time it was your pie that had the cow dung in it.”

    Payroll: “They both had cow dung in them. I’ve spent the last few years getting used to the idea that everything that comes from the intelli-reaucracy is made out of cow dung.”


  • Paul Valenzuela says:

    LOVE IT – Of course the Austrian economists did, in fact, predict this exact result. See and for a plethora of finely worded, prescient, essays on the stupidity of quantitative easing (i.e. counterfeiting.) Of course “mainstream” economists of the Nobel Laureate class look down their noses at the Austrians – mostly because the Austrians are right about things like; the dotcom implosion, the housing bubble, and the disaterous effects of quantitative easing (i.e. counterfeiting) on the value of the dollar and the ability of all the “payrolls” in the economy to recover (excepting, of course, banksters) from the depression caused by the dotcom and housing bubble implosions and quantitative easing (i.e. counterfeiting.) I love the piñata metaphor. Unfortunately, the piñata is in the form of a “payroll” and the hits just keep on coming.

Leave a Reply for Paul Valenzuela