Great Throughts Treasury

"Good questions outrank easy answers."

"What we know about the global financial crisis is that we don't know very much."

"Companies are not charitable enterprises: They hire workers to make profits. In the United States, this logic still works. In Europe, it hardly does."

"By keeping labor supply down, immigration policy tends to keep wages high. Let us underline this basic principle: Limitation of the supply of any grade of labor relative to all other productive factors can be expected to raise its wage rate; and increase in supply will, other things being equal, tend to depress wage rates."

"Wall Street indices predicted nine out of the last five recessions!"

"Economics has never been a science - and it is even less now than a few years ago."

"Asia's governments come in two broad varieties: young, fragile democracies - and older, fragile authoritarian regimes."

"An intriguing paradox of the 1990s is that it isn't called a decade of greed."

"Every good cause is worth some inefficiency."

"Economists are said to disagree too much but in ways that are too much alike: If eight sleep in the same bed, you can be sure that, like Eskimos, when they turn over, they'll all turn over together."

"Funeral by funeral, theory advances."

"The problem is no longer that with every pair of hands that comes into the world there comes a hungry stomach. Rather it is that, attached to those hands are sharp elbows."

"Politicians like to tell people what they want to hear, and what they want to hear is what won't happen."

"Sooner or later the Internet will become profitable. It's an old story played before by canals, railroads and automobiles. "

"The consumer, so it is said, is the king... each is a voter who uses his money as votes to get the things done that he wants done."

"Globalization presumes sustained economic growth. Otherwise, the process loses its economic benefits and political support."

"Self-deception ultimately explains Japan's plight. The Japanese have never accepted that change is in their interest and not merely a response to U.S. criticism."

"If we made an income pyramid out of a child's blocks, with each layer portraying $1,000 of income, the peak would be far higher than the Eiffel Tower, but almost all of us would be within a yard of the ground."

"In this age of specialization, I sometimes think of myself as the last 'generalist' in economics, with interests that range from mathematical economics down to current financial journalism. My real interests are research and teaching."

"I'm not sure most of the people that get caught up in the middle of a bubble can be described as irrational. It seems pretty rational to buy a house and flip it in the next few weeks at a profit when that's been happening for a long time."

"It isn't that greed's increased. What's increased is the realization that you've got a free field to reach out for what you'd like to do."

"Profits are the lifeblood of the economic system, the magic elixir upon which progress and all good things depend ultimately. But one man's lifeblood is another man's cancer."

"Reasonable men are not reasonable when you're in the bubbles which have characterized capitalism since the beginning of time."

"Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas."

"Macroeconomics, even with all of our computers and with all of our information, is not an exact science and is incapable of being an exact science."

"A new system, that is what requires emphasis. Classical economics could withstand isolated criticism. Theorists can always resist facts: for facts are hard to establish and are always changing anyway, and ceteris paribus can be made to absorb a good deal of punishment. Inevitably, at the earliest opportunity, the mind slips back into the old grooves of thought, since analysis Is utterly impossible without a frame of reference, a way of thinking about things, or, in short, a theory."

"A force that operates year-in and year-out, whenever we are at high employment, to push up prices. It's a price creep, not a price gallop; but the bad thing about it is that, instead of setting in only after you have reached over full employment, the suspicion is dawning that it may be a problem that plagues us even when we haven't arrived at a satisfactory level of employment."

"A thousand to ten thousand money managers all look about equally good or bad. Each expects to do 3% better than the mob. Each has put together a convincing story. After the fact, hardly ten out of ten thousand perform in a way that convinces an experienced student of inductive evidence that a long-term edge over indexing is likely. ..., it may be the better part of wisdom to forsake search for needles that are so very small in haystacks that are so very large."

"A respect for evidence compels me to incline toward the hypothesis that most portfolio decision makers should go out of business -- take up plumbing, teach Greek, or help produce the annual GNP by serving as corporate executives. Even if this advice to drop dead is good advice, it obviously is not counsel that will be eagerly followed. Few people will commit suicide without a push."

"An American economist of two generations ago, H. J. Davenport, who was the best friend Thorstein Veblen ever had (Veblen actually lived for a time in Davenport?s coal cellar) once said: ?There is no reason why theoretical economics should be a monopoly of the reactionaries.? All my life I have tried to take this warning to heart, and I dare call it to your favorable attention."

"As funds accumulate in active life, purchases can be made in the indicated proportions (or, more accurately, can be made so as to keep the totals rebalanced to those proportions). Sales (in retirement, for educational expenses, for extraordinary consumption purposes) can be guided by the same balancing considerations."

"Canny investing suggestions: 1. Decide what proportions of wealth in common stocks, money market funds, and longer-term bonds your own risk tolerance leaves you comfortable with (e.g., 60% in stocks, 25% in money market funds, 15% in bonds). There is no scientific way to determine what is optimal for these fractions. 2. Put 80% to 100% of your targeted equity portfolio in a no-load version of an index fund (e.g., Vanguard's Index Trust for the S&P 500 and possibly its smaller-stock tier; or Wells Fargo's similar vehicles; 10% to 25% in similar foreign market vehicles also makes sense.). The full management and other inclusive fees ought to be as low as three-tenths of 1% of principal per year - in contrast to the usual 1% to 2% in the mutual fund, pension, and trust worlds. 3. Lean-cost bond and money funds are similarly indicated."

"Bliss was it in that dawn to be alive, but to be young was very heaven!"

"Econometrics may be defined as the quantitative analysis of actual economic phenomena based on the concurrent development of theory and observation, related by appropriate methods of inference."

"Economics never was a dismal science. I should be a realistic science."

"Fashion always plays an important role in economic science: new concepts become the 'mode and then are pass‚. A cynic might even be tempted to speculate as to whether academic discussion is itself equilibrating: whether assertion, reply, and rejoinder do not represent an oscillating divergent series, in which?to quote Frank Knight's characterization of sociology?"bad talk drives out good.""

"Economists are not yet agreed how serious this new malady of inflation really is. Many feel that new institutional programs, other than conventional fiscal and monetary policies, must be devised to meet this new challenge. But whatever the merits of the varying views on this subject, it should be made manifest that the goal of high employment and effective real growth cannot be abandoned because of the problematical fear that re-attaining prosperity in America may bring with it some difficulties; if recovery means a reopening of the cost-push problem, then we have no choice but to move closer to the day when that problem has to be successfully grappled with."

"Economists have much to be humble about."

"For better or worse, US Keynesianism was so far ahead of where it started. I am a cafeteria Keynesian. You know what a cafeteria catholic is?"

"Herein lies the secret of the General Theory. It is a badly written book, poorly organized; any layman who, beguiled by the author's previous reputation. Bought the book was cheated of his five shillings. It is not well suited for classroom use. It is arrogant, bad-tempered. Polemical, and not overly generous in its acknowledgments. It abounds in mares' nests or confusions. In it the Keynesian system stands out indistinctly, as if the author were hardly aware of its existence or cognizant of its properties; and certainly he is at his worst when expounding its relations to its predecessors. Flashes of insight and intuition intersperse tedious algebra. An awkward definition suddenly gives way to an unforgettable cadenza. When finally mastered, its analysis is found to be obvious and at the same time new. In short, it is a work of genius."

"I don't believe we're converging on ever-improving forecasting accuracy."

"I couldn't reconcile what I was being taught at the university of Chicago, the lectures and the books I was being assigned, with what I knew to be true out in the streets."

"I cannot agree. According to recent trends of thought, the interest rate is less important than Keynes himself believed? As for expectations, the General Theory is brilliant in calling attention to their importance and in suggesting many of the central features of uncertainty and speculation. It paves the way for a theory of expectations, but it hardly provides one. I myself believe the broad significance of the General Theory to be in the fact that it provides a relatively realistic, complete system for analyzing the level of effective demand and its fluctuations. More narrowly, I conceive the heart of its contribution to be in that subset of its equations which relate to the propensity to consume and to saving in relation to offsets-to-saving. In addition to linking saving explicitly to income, there is an equally important denial of the implicit "classical" axiom that motivated investment is indefinitely expansible or contractible, so that whatever people try to save will always be fully invested. It is not important whether we deny this by reason of expectations, interest rate rigidity, investment inelasticity with respect to overall price changes and the interest rate, capital or investment satiation, secular factors of a technological and political nature of what have you. But it is vital for business-cycle analysis that we do assume definite amounts of investment which are highly variable over time in response to a myriad of exogenous and endogenous factors, and which are not automatically equilibrated to full discussion employment saving levels by any internal efficacious economic process."

"I don't care very much for the People Magazine approach to applied economics."

"I don't care who writes a nation's laws. or crafts its advanced treatises, if I can write its economics textbooks."

"I have always considered it a priceless advantage to have been born as an economist prior to1936 and to have received a thorough grounding in classical economics. It is quite impossible for modern students to realize the full effect of what has been advisably called "The Keynesian Revolution" upon those of us brought up in the orthodox tradition. What beginners today often regard as trite and obvious was to us puzzling, novel, and heretical. To have been born as an economist before 1936 was a boon?yes. But not to have been born too long before!"

"I made a deal of money in the late 1940s on the bull side, ignoring Satchel Paige?s advice to Lot?s wife, ?Never look back.? Rather I would advocate Samuelson?s Law: ?Always look back. You may learn something from your residuals. Usually one?s forecasts are not so good as one remembers them; the difference may be instructive.? The dictum ?If you must forecast, forecast often,? is neither a joke nor a confession of impotence. It is a recognition of the primacy of brute fact over pretty theory. That part of the future that cannot be related to the present?s past is precisely what science cannot hope to capture."

"I must confess that my own first reaction to the General Theory was not at all like that of Keats on first looking into Chapman's Homer. No silent watcher, I, upon a peak in Darien. My rebellion against its pretensions would have been complete. Except for an uneasy realization that I did not at all understand what it was about. And I think I am giving away no secrets when I solemnly aver? upon the basis of vivid personal recollection?that no one else in Cambridge, Massachusetts, really knew what it was about for some twelve to eighteen months after its publication. Indeed. until the appearance of the mathematical models of Meade, Lange. Hicks, and Harrod, there is reason to believe that Keynes himself did not truly understand his own analysis."

"I think there is an element of truth in the view that the superstition that the budget must be balanced at all times [is necessary]. Once it is debunked [that] takes away one of the bulwarks that every society must have against expenditure out of control. There must be discipline in the allocation of resources or you will have anarchistic chaos and inefficiency. And one of the functions of old fashioned religion was to scare people by sometimes what might be regarded as myths into behaving in a way that the long-run civilized life requires. We have taken away a belief in the intrinsic necessity of balancing the budget if not in every year, [then] in every short period of time. If Prime Minister Gladstone came back to life he would say ?uh, oh what you have done? and James Buchanan argues in those terms. I have to say that I see merit in that view."

"I spent the four years I was an undergraduate working on the beach. And it wasn't because I was lazy; it was because my freshman class would go to a hundred different employers and wouldn't get a nibble."