Let’s Ask the Economists…

Steven D. Levitt, the University of Chicago economist who wrote the best-selling book Freakonomics and runs a blog over at the New York Times, asked two friends and colleagues of his, Doug Diamond and Anil Kashyap, to explain the financial crisis to those of us who aren’t so good at deciphering all the jargon and convoluted details.

Diamond and Kashyap explain here, in clear layman’s terms, why the stock market has been so erratic in the last weeks, what steps the government is and isn’t taking (and why), why the private market cannot take care of this problem on its own (ostensibly), why bank assets are so hard to value right now, what the Treasury is doing about bad assets, whether the government’s plan will work and how soon, and how long the crisis is likely to continue.

If you’re still scratching your heads about what happened with the financial markets in the first place to spark this crisis, this episode of NPR’s This American Life is still the best thing out there that’s made for normal people like us. They talk to the people who were undermining the mortgage market in the first place, with a lot of refreshing honesty about why they did it and how… and it’s just a little bit reminiscent of the historically problematic attitude that, Hey, I was just doing my job. Following instructions. You know.

At What Time and On What Channel is the Oct 15 presidential debate?

In case you were wondering about when the next presidential debate is taking place and on what television channels it is showing:

The October 15th presidential debate between Democratic candidate Barack Obama and Republican candidate John McCain on the Hofstra University campus in Long Island, New York, is scheduled to take place at 8 pm Central Time (9 pm Eastern Time, 7 pm Mountain Time, 6 pm Pacific Time).

The presidential debate will be held in a standard debate format and will last 90 minutes. The debate will be broken into nine, nine-minute segments. The moderator will introduce a topic and allow each candidate two minutes to comment. After these initial answers, the moderator will facilitate an open discussion of the topic for the remaining five minutes, ensuring that both candidates receive an equal amount of time to comment.

The debate moderator will be Bob Schieffer of CBS, and the topic will be domestic and economic policy. The debate will be aired on television channels ABC, CBS, NBC, FOX, PBS, CNN, Fox News, MSNBC, and BBC America.

This is the final debate and may be John McCain’s last big chance to change the momentum of the election in his favor. Voters so far have perceived Barack Obama as the more informed candidate when it comes to economic policy. Watch for lots of numbers being thrown around and some aggressive debating.

So Whose Economic Policy Will Save America?

Let’s ask the economists.

Scott Adams, the creator of the Dilbert cartoon, did. His thorough report is here. It basically says that economists who are Republicans favor John McCain’s policies, that economists who are Democrats favor Barack Obama’s policies, and that economists who call themselves independent favor Barack Obama’s policies, generally speaking. So no surprises there.

The Economist, a free market-leaning British magazine of the highest international repute, has a thorough and no-nonsense analysis of the two candidates’ economic plans in its latest edition. Now, The Economist has also interviewed all the members of the National Bureau of Economic Research (N.B.E.R.), which includes all the top economists in the U.S.

142 of them responded, with somewhat shocking results (at least for those of us who think in the University of Chicago/free market vein). The full data is available here.

First off, 46% of the top economists identified themselves as Democrats, 44% identified themselves as independent, and only 10% identified themselves as Republican. This does not mean that economists are mostly liberal: The Republican party has not been fiscally conservative for a while now, and so hardcore free marketeers would identify themselves as independent. Nevertheless, the high identification with the Democratic Party certainly is surprising.

Asked to grade the two candidates’ economic plans on a scale of 1 through 5, the economists gave John McCain’s plan a 2.1 (i.e., a D) and Barack Obama’s plan a 3.3 (i.e. a C). This isn’t sufficient from either, given the gravity of the current economic situation.

The economists further thought that addressing the housing and financial crisis was the most important thing a future president must do, and rated Obama’s plan at 3.1 and McCain’s plan at 2.0. The next important step the economists agreed on was to promote fiscal discipline, with Obama’s plan at 3.0 and McCain’s plan at 2.0. The scores were virtually the same for priorities three and four: boosting long-term economic growth (Obama 3.2, McCain 2.5) and reforming financial regulation (Obama 3.3, McCain 2.0).

The economists were then asked to rate the candidates’ tax plans according to efficiency, equity, simplicity, and to give the tax plans an overall rating. John McCain’s tax plan received a 2.8 rating over Obama’s 2.7 on the efficiency count, but Obama’s plan topped McCain’s 3.8 to 1.7 on equity, 2.6 to 2.3 on simplicity, and 3.2 to 2.2 overall.

Perhaps most strikingly, 80.7% of the economists thought Obama would pick a better economic team (to McCain’s 13.6%) and 80.1% of the economists thought Obama had a better grasp of economic policy (to McCain’s 7.8%). Moreover, the economists rated the importance of this election for future economic policy at 4.15 out of 5 — i.e. crucial.

Let’s hope some more surveys come out so we can put this one in context, but it’s certainly an occasion for conservatives with independent minds to stop and think.

The John McCain campaign explains his economic platform here.

The Barack Obama campaign explains his economic platform here.