Did Tom Wolfe have it right when he claimed that much that is strange and crazy and wonderful in American culture has a way of starting out on the West Coast and eventually filtering East?

For those of us far more fascinated with the inception and dissemination of fashion trends than the consumption of them, the neighborhoods of San Francisco have always been a buffet of people watching for the street style destined to seed the runways and department stores. And Guy Trebay of the New York Times nails it in his opening line of Fashion Diary: The Tribes of San Francisco:

IF a decade spent following the fashion flock will teach you anything, it’s that fashion people seldom have much to do with generating style. This little-appreciated truth naturally comes to mind as the Fashion Week juggernaut lumbers toward Manhattan, a rolling, continuous loop of live-streamed, Tweeted product-placement set to ambient glamour-buzz cranked out by the Industrial Hype Machine.

…What she likes about San Francisco style, said Ms. Grim, who is in her early 40s, is that the town is remarkably free of fashion hierarchies and in-crowd tyrannies. There is no shoe of the season here. There is no It bag. Except perhaps for the pulp-novel heiresses Vanessa and Victoria Traina (who anyway are almost New Yorkers), there are no Vogue-anointed darlings-du-jour.

Photo: Heidi Schumann for NY Times

One thing notably absent, however, in Trebay’s analysis is the influence of Burning Man culture on the San Francisco fashion scene. Given the thousands of key Burner players whose default world residence is the bay area yet keep their culture alive and well year round, I find it hard to believe that their DIY radical self expression anti-corporate style wouldn’t permeate out onto the streets.

Interestingly enough, even though the quirky, innovative aesthetic is pervasive, my handful of trips to San Francisco hunting for the corresponding retailer sources - especially local designers - have left me standing mostly in resale shops or malls in tourist destinations. Ever so often there will be a brave entrepreneur opening a collective of local designers, a curated vintage store in a high rent district that mixes in refashioned pieces, or a boutique carrying avant-garde designers from NY… but those are the exception, not the rule.

Even locals tend to concede, unasked, that San Francisco has historically been an also-ran in fashion terms. “Every time a designer from here has a little bit of success, they disappear to New York,” said Gladys Perint Palmer, executive director of fashion at the Academy of Art University, whose fashion department has an enrollment of 2,500.

Allow me to digress for a moment… 2500 fashion students? That’s about 1000 graduating a year, and that’s just one school in one city. A private, for-profit school with 5 digit tuition. Are there enough jobs in the industry for all of them? Um, no. Back to San Francisco…

Ms. Perint Palmer was referring specifically to Nice Collective, a San Francisco-based label founded in 1997 by Joe Haller and Ian Hannula in part to capitalize on distinctive elements of a local style that, like so much else in the Bay Area, seems to be generated by some loopy organic collective impulse rather than an editorial cabal.

It’s so good I have to restate it: “generated by some loopy organic collective impulse rather than an editorial cabal.” But really, especially since the ‘youth revolution’ of the 60s, has that editorial cabal really dictated much? I’d argue that the best they can do is distill and co-opt the shapes, colors and styling that settles out of the collective choices of the loopy ones. And where do those loopy young ones go for the raw materials of their sartorial expression, especially when their piled into shared bedrooms in sky high rent apartments? You guessed it - thrift stores. Which has over the past couple of decades seeped into the mainstream to the point of becoming a standard style option, perhaps even one with far more cred for the find than the spoon fed trends of the big stores. Trebay quotes a former department store buyer:

“The stigma attached to used-clothing is gone,” she added. “You can either spend $300 on a top at Neiman Marcus or go to the thrift store and buy a bag of clothes for a tenth as much.”

Exactly. And this leaves one with far more time and disposable income for living, not just posing like a well dressed doll.

…Or you can do both and then mash up the results, as the women of the Mission tribe do.

“Those girls are the local Holly Golightlys,” Mr. Ospital of M.A.C. said of women like Rachel Corrie, a waitress at Tartine, who as she left work last week hopped onto her bike wearing what looked like a gingham onesie, feet shod in gladiator sandals and a velvet equestrian hunt cap passing as safety gear perched atop her head.

Girls like her are all over the Mission. You see them flying down Valencia Street on Vespas, their wildly improvised get-ups composed of, say, rags scavenged from the Bay Area’s fabled thrift shops (Out of the Closet in the Castro, Eco-Thrift in Vallejo, the Goodwill outpost just off the 101 Freeway in San Rafael), Marni skirts, vintage SM leathers culled from an eclectic assortment of goods at Marc Josef’s locally legendary antiques shop, Tradesmen, and wingtip shoes.

…“People will wear vintage with some D.I.Y. thing they made themselves with some piece that they couldn’t resist in a boutique,” Ms. Grim said. “They’re not afraid to mash things up.”

Because it might be that one innovative, interesting piece from the boutique, something that might have been inspired by vintage, might even have been made from vintage, but definitely didn’t happen prior to this decade… that’s the piece that communicates that subtle status that signals to other members of the targeted tribe that you’re doing well enough, and care enough, for bits of investment dressing.

“It’s a very difficult city to read,” Mr. Lopez said, owing largely to the local distaste for ostentation and hype, a suspicion of anything that requires a high-degree of difficulty to pull off and that people spend a lot of their lives in cars.

“San Francisco is definitely about quiet style,” he said. “People care. They have the clothes, but they wear them in private. They bring in the most amazing stuff for consignment and I’m always thinking, ‘Where did you wear this thing?’ ”

Stealth Wealth indeed.

I’ve venture to guess that the large majority of investors - particularly the professional ones - might admit to following their gut to some degree, but would still insist their decisions are informed and rational ones. But how different are their purchases and discards than a teen at the mall?

David Doubilet for National Geographic

Jason Zweig explores the latest attention getting scientific theory that everyone is talking about in his article for the Wall Street Journal, So That’s Why Investors Can’t Think for Themselves:

Why do investors so often seem to resemble a school of fish, all changing direction together?

…A study published last week in the journal Current Biology found that the value you place on something is likely to go up when other people tell you it is worth more than you thought, and down when others say it is worth less. More strikingly, if your evaluation agrees with what others tell you, then a part of your brain that specializes in processing rewards kicks into high gear.

In other words, investors often go along with the crowd because—at the most basic biological level—conformity feels good. Moving in herds doesn’t just give investors a sense of “safety in numbers.” It also gives them pleasure.

That may help explain why market sentiment can change so swiftly, why true contrarians are so hard to find and why investors care so much about the “consensus view” on Wall Street.

Most of our brains are programmed to reward us when we swim with the school.

The brain scans showed that as soon as people learned they had chosen the same song as the experts, cells in the ventral striatum—a reward center wired with dopamine neurons that respond to pleasures like sugar and sex—fired intensely.

“If someone agrees with your choice, it’s intrinsically rewarding in the same way food or money is rewarding,” says one of the experimenters, Chris Frith of University College London.

Why might other people’s estimates of what something is worth lead you to change your own? Their appraisal could make you unsure that yours is correct. You might become more popular once you agree with others, or joining the experts may make you feel like one yourself. “We are very social creatures,” says Prof. Frith, “and we are desperately keen to be part of the group.”

In 1969 sociologist Herbert Blumer was the first to publish a theory that the fashion mechanism operated in all fields of human endeavor, not just clothing. I’ve included these quotes from his theory of collective selection (this blog’s namesake) in a previous post on how most economists were fashion victims of their own thinking and completely failed to predict the crash of 08, but they’re so good they bear repeating (emphasis my own):

It is necessary, first of all, to insist that fashion is not confined to those areas, such as women’s apparel, in which fashion is institutionalized and professionally exploited under conditions of intense competition. As mentioned earlier, it is found in operation in a wide variety and increasing number of fields which shun deliberate or intentional concern with fashion. In such fields, fashion occurs almost always without awareness on the part of those who are caught in its operation. What may be primarily response to fashion is seen and interpreted in other ways – chiefly as doing what is believed to be superior practice.

Not only are most investors (and artists and psychiatrists and economists) blind to their immersion in the fashion mechanism, they get downright offended when you propose that their decisions are informed by anything short of ’superior practice.’

…The absence or inadequacy of compelling tests of the merit of proposals opens the door to prestige-endorsement and taste as determinants of collective choice. The compelling role of these two factors as they interact easily escapes notice by those who participate in the process of collective choice; the model which emerges with a high sanction and approval is almost always believed by them as being intrinsically and demonstrably correct. This belief is fortified by the impressive arguments and arrays of specious facts that may be frequently be marshaled on behalf of the model. Consequently, it is not surprising that participants may fail to completely to recognize a fashion process in which they are sharing. The identification of the process as fashion occurs usually only after it is gone – when it can be viewed from the detached vantage point of a later time. The fashions which we can now detect in the past history of philosophy, medicine, science, technological use and industrial practice did not appear as fashions to shoes who shared in them. The fashion merely appeared to them as up-to-date achievements!

Zweig sums up more on the brain chemistry behind this:

The experiment also showed that learning that the experts agree with one another—regardless of whether you agree with them—triggers activity in the insula, a brain region associated with pain and heightened body awareness. This suggests that the agreement of others may have a special ability to grab our mental attention. No wonder a consensus opinion is almost impossible for many investors to ignore.

He also calls out the myth of the market as a rational and impersonal mechanism:

Benjamin Graham, the founder of value investing, wrote that “the market is not a weighing machine, on which the value of each issue is recorded by an exact and impersonal mechanism, in accordance with its specific qualities.” Rather, he added, “the market is a voting machine, whereon countless individuals register choices which are the product partly of reason and partly of emotion.” Herding, Graham understood, is part of the human condition.

Zweig’s prescription? Do everything you can to go against the herd and establish tracking mechanisms for your decisions to go back and evaluate more objectively:

Thus, if you buy individual stocks, you should note which way the herd is moving—and go the other way. You should get interested in a stock when its price gets trampled flat by investors stampeding out of it. The list of new 52-week lows is a rough guide to what the voting machine has been trashing lately. Then run your own weighing machine, studying the company’s financial statements, products and competitors to determine the value of its business—while ignoring the current price of its stock. And make a permanent record that thoroughly details your rationale for making the investment. That way, you set in stone exactly where you stood before the herd began trying to sweep you away.

I happened upon on a succinct and thought provoking post on attention, consciousness and how the internet is affecting the two. The host site, Edge.org, introduced me to the term ‘The Third Culture:’

The third culture consists of those scientists and other thinkers in the empirical world who, through their work and expository writing, are taking the place of the traditional intellectual in rendering visible the deeper meanings of our lives, redefining who and what we are.

Thomas Metzinger, a self described ‘neuro-philosopher,’ is the author of The Ego Tunnel: The Science of the Mind and the Myth of the Self:

The core of the problem is not cognitive style, but something else: attention management. The ability to attend to our environment, to our own feelings, and to those of others is a naturally evolved feature of the human brain. Attention is a finite commodity, and it is absolutely essential to living a good life. We need attention in order to truly listen to others — and even to ourselves. We need attention to truly enjoy sensory pleasures, as well as for efficient learning. We need it in order to be truly present during sex, or to be in love, or when we are just contemplating nature. Our brains can generate only a limited amount of this precious resource every day. Today, the advertisement and entertainment industries are attacking the very foundations of our capacity for experience, drawing us into the vast and confusing media jungle. They are trying to rob us of as much of our scarce resource as possible, and they are doing so in ever more persistent and intelligent ways. We know all that. But here is something we are just beginning to understand — that the Internet affects our sense of selfhood, and on a deep functional level.

Consciousness is the space of attentional agency: Conscious information is exactly that information in your brain to which you can deliberately direct your attention. As an attentional agent, you can initiate a shift in attention and, as it were, direct your inner flashlight at certain targets: a perceptual object, say, or a specific feeling. In many situations, people lose the property of attentional agency, and consequently their sense of self is weakened. Infants cannot control their visual attention; their gaze seems to wander aimlessly from one object to another, because this part of their Ego is not yet consolidated. Another example of consciousness without attentional control is the non-lucid dream state. In other cases, too, such as severe drunkenness or senile dementia, you may lose the ability to direct your attention — and, correspondingly, feel that your “self” is falling apart.

If it is true that the experience of controlling and sustaining your focus of attention is one of the deeper layers of phenomenal selfhood, then what we are currently witnessing is not only an organized attack on the space of consciousness per se but a mild form of depersonalization. New medial environments may therefore create a new form of waking consciousness that resembles weakly subjective states — a mixture of dreaming, dementia, intoxication, and infantilization. Now we all do this together, every day. I call it Public Dreaming.

Photo found at Trendhunter.com, believed to be from a Michael Kors campaign

For several months I’ve been collecting articles about the luxury industry’s contraction and resulting mandate for a new strategy if they’re to survive. Sameer Reddy writes for Newsweek, Luxury’s Image Problem: Having Lots of Fancy Toys is Suddenly Not So Chic:

Until now, the luxury world has represented an ideal lifestyle that the masses aspired to achieve. The models in advertising campaigns for companies like Michael Kors and Jimmy Choo are perpetually stepping off private jets or lounging poolside in five-inch stilettos.

The luxury industry will still represent an ideal lifestyle that the masses will aspire to achieve, it will just have to adjust to the new ideal.

But the economic meltdown has left luxury with an image problem. Signifiers of social status are suddenly out of fashion…

The old signifiers are out of fashion. What will be the new ones? (more…)

I’ve also been seeing the phrase ‘tone deaf’ used a lot, too. From ABC News, JPMorgan Chase To Spend Millions on New Jets and Luxury Airport Hangar

After pressure from his administration, Citigroup abandoned plans for a new $50 million corporate jet from France. And in February, Obama said the days of bank executives flying corporate jets “were over.”

But on March 11, the chairman of JPMorgan Chase, Jamie Dimon, said he could not understand why corporate America has such a bad image.

“When I hear the constant vilification of corporate America I personally don’t understand it,” Dimon said.

Dimon, whose 2008 compensation package, according to SEC documents, was worth more than $19 million in salary, stock and options, declined to speak with ABC News about the proposed plans.

Can we say deeply engrained sense of entitlement totally divorced from performance or contribution not just to the greater good, but even to their own benefit? Because as I understand it, the whole Ayn Rand kick is all about leaving these superior, brilliant beings to pursue their own self interest because since it wouldn’t be in their self interest to, let’s say…have their companies blow up in a super nova that becomes a black hole sucking away global capital… that they wouldn’t - couldn’t - let that happen. And how’s that theory working out for us right about now?

Tony Schwartz writes How Self-Interest Destroyed the Economy and explains the ‘tragedy of the commons.’ Expect that phrase to be popping up more and more:

Do you find yourself asking this question: How is it that so many ostensibly smart people in the financial world made such terrible choices for so long?

Thirty years ago, an ecologist and professor named Garrett Hardin wrote a classic article in the journal titled “The Tragedy of the Commons.” His thesis was that individuals, acting in their rational self-interest, may ultimately destroy a limited resource over the long term.

To illustrate, Hardin used the metaphor of an open pasture - “the commons” - to which herdsmen bring their cattle to feed. The herdsmen understandably want to feed as many of their cattle as possible - or as Hardin put it: “As a rational being, each herdsman seeks to maximize his gain.” This works fine for everyone so long as there’s enough grass to feed all the cattle. As demand rises, however, the effects of overgrazing take a progressive toll on the commons, until ultimately they’re destroyed for everyone.

“Therein is the tragedy,” Hardin writes. “Each man is locked into a system that compels him to increase his herd without limit - in a world that is limited. Ruin is the destination toward which all men rush, each pursuing his interest in a society that believes in the freedom of the commons.”

But we’re not herdsman (well, at least not literally. Although the case could be made for anyone in marketing…) How does this relate to our financial system?

Far too many of us conspired to get as much as we could while the getting was good, never stopping to consider that if everyone keeps trying to get more - leveraging their bets and running up debt to do so — there will eventually be a day of reckoning.

And the antidote?

We live now in a world of palpably limited resources. Every choice we make has an increasingly visible impact on the commons. The leader who suggests that his company’s only obligation is to maximize profit for his shareholders is dangerously delusional.

We’re all in this together, and we literally can’t afford to act any longer as if we’re each free to pursue our self-interest with blinders on. The antidote is a higher level of awareness - the capacity to see the consequences of our actions over the long term and to make choices from that perspective rather than succumbing to our most primitive impulses.

A perspective which, of course, is the opposite of current advertising methods which are all about stimulating those primitive impulses in order that they may be sated by the product on offer. What we’ll have to see then, is a layer of sophistication integrated in - since thinking about others or the common good might now have perceived rewards (feeling good about oneself and the like) then the brand will need to associate itself with those actions. This will become a feedback loop of sorts - as consumers get more activist and whistleblowing becomes accessible to everyone with a cell phone camera, corporations will have to watch their p’s and q’s. How many investment bankers can become PR people? Hype alone isn’t going to cut it.

This was circulated back in mid-October, but I just now stumbled across it on Portfolio.com. It also sprung up on blogs and articles everywhere, including the LA Times. It’s a farewell letter written by a young, brilliant hedge fund manager, Andrew Lahde, who saw through the housing hype, knew that it was going to crash and made literally 866% returns betting that it would. And then he had the sense to take his millions and split, getting out while the getting was good.

I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.

Sounds like Lahde shares the same opinion of the elite university system as Chris Hedges. He continues:

I truly do not have a strong opinion about any market right now, other than to say that things will continue to get worse for some time, probably years. I am content sitting on the sidelines and waiting. After all, sitting and waiting is how we made money from the subprime debacle.

Lahde was one of the very few who not only suspected the crash was on the way, but was so sure that he made countless billions investing accordingly. So if this guy says its going to get worse for years, I’m inclined to believe him over the wishful thinkers who just lost a whole lot of money and are crossing their fingers that it will ‘return to normal.’

I now have time to repair my health, which was destroyed by the stress I layered onto myself over the past two years, as well as my entire life — where I had to compete for spaces in universities and graduate schools, jobs and assets under management — with those who had all the advantages (rich parents) that I did not. May meritocracy be part of a new form of government, which needs to be established.

(more…)

Globalization creates interlocking fragility, while reducing volatility and giving the appearance of stability. In other words it creates devastating Black Swans. We have never lived before under the threat of a global collapse. Financial institutions have been merging into a smaller number of very large banks. Almost all banks are interrelated. So the financial ecology is swelling into gigantic, incestuous, bureaucratic banks - when one fails, they all fall. The increased concentration among banks seems to have the effect of making financial crisis less likely, but when they happen they are more global in scale and hit us very hard. We have moved from a diversified ecology of small banks, with varied lending policies, to a more homogeneous framework of firms that all resemble one another. True, we now have fewer failures, but when they occur - I shiver at the thought.

The world view of finance and economic changed within weeks as previous economic models were rendered useless. Now that we’re in the post-financial-meltdown world, the airways are filled with pundits and experts everywhere exploring and analyzing in hindsight how ended up in this mess. (The best, by far, is This American Life’s The Giant Pool of Money - which, btw, aired pre-collapse back in May - and the follow up piece, Another Frightening Show about the Economy) As I’ve watched this unfold and learned more about the behind the scenes dynamics, I’m blown away wondering how in the world did they not see this coming?

from www.mathworks.co.kr - Risk-assessment model developed in MATLAB

From a NY Times interview with James K. Galbraith:

Do you find it odd that so few economists foresaw the current credit disaster? Some did. The person with the most serious claim for seeing it coming is Dean Baker, the Washington economist. I saw it coming in general terms.

But there are at least 15,000 professional economists in this country, and you’re saying only two or three of them foresaw the mortgage crisis? Ten or 12 would be closer than two or three.

What does that say about the field of economics, which claims to be a science? It’s an enormous blot on the reputation of the profession. There are thousands of economists. Most of them teach. And most of them teach a theoretical framework that has been shown to be fundamentally useless.

Contemporary writers are weighing in with similar questions and explanations, all lending credence to sociologist Herbert Blumer’s theory of Collective Selection. Here are a few quotes from his still influential paper published by the Sociological Quarterly in 1969 explaining that ‘fashion’ is not a ‘thing’ limited to clothing, but a mechanism pervasive in all areas of contemporary life, including those whose leading voices would deny this most vehemently:

It is necessary, first of all, to insist that fashion is not confined to those areas, such as women’s apparel, in which fashion is institutionalized and professionally exploited under conditions of intense competition. As mentioned earlier, it is found in operation in a wide variety and increasing number of fields which shun deliberate or intentional concern with fashion. In such fields, fashion occurs almost always without awareness on the part of those who are caught in its operation. What may be primarily response to fashion is seen and interpreted in other ways – chiefly as doing what is believed to be superior practice.

Robert J. Shiller explains this phenomenon of economists confident in their ’superior practices’ in terms of social psychology and Groupthink. From the NY Times, Challenging the Crowd in Whispers, Not Shouts

And why didn’t a consensus of economists at universities and other institutions warn that a crisis was on the way?

The field of social psychology provides a possible answer. In his classic 1972 book, “Groupthink,” Irving L. Janis, the Yale psychologist, explained how panels of experts could make colossal mistakes. People on these panels, he said, are forever worrying about their personal relevance and effectiveness, and feel that if they deviate too far from the consensus, they will not be given a serious role. They self-censor personal doubts about the emerging group consensus if they cannot express these doubts in a formal way that conforms with apparent assumptions held by the group.

… Deviating too far from consensus leaves one feeling potentially ostracized from the group, with the risk that one may be terminated.

(more…)

I watch the Daily Show with Jon Stewart for comic relief, but isn’t it funny how satire can be dead on? This was from a segment with Wyatt Cenac:

Volatility frequently occurs when everyone suddenly realizes that the stock market is just a consensual mass delusion based on fictitious valuing of abstract assets.

I’ve been expecting consumer crunch for a while - after all, Americans were spending more than they were making and sooner or later that easy credit was going to run out. I expected a slump, but had no idea I’d be witnessing such a spectacular implosion that spread like wildfire across the globe. Kurt Andersen writes eloquently about the collective experience of this meltdown in his piece for New York Magazine, Whiplash City:

So seldom do we motley millions all think and talk about the same thing at the same time—let alone two great big things, let alone intensely and continually for weeks at a time.

(more…)

I was really moved by a piece an article I read over my morning tea (in my nice comfortable apartment before I drove off in my reliable, paid for car to my steady job). So when I heard this afternoon on the drive home that it was Blog Action Day and the topic was poverty, I knew I had to share some excerpts.

John Dolan illustrates the mindset that Dickensonian poverty brings one to and shares the deep humiliation and fear that comes with it. He’s not a drop out, junkie or careless subprime victime, but a graduate educated person who slipped from the middle class into the underclass by a stroke of bad luck. Given the all too eminent prospect of millions of other Americans soon to be in a similar situation, he outlines 5 Pieces of Advice for the New Paupers and let me assure you that it goes beyond the pat social services brochure style advice of most columnists.

All the things we learned are going to seem pretty obvious, but remember that it’s very hard to think clearly when your life has collapsed.

…Antidepressants. Get on them right away, if you’re not already. If you are, up your dose. Because it’s going to hurt. It doesn’t matter how much Marxist theory you’ve absorbed; it doesn’t matter that you can put your fall into global context; it’s happening to you now, and it’s going to hurt like you wouldn’t believe. You’re an American, and you share that culture’s values whether you like it or not. So you define yourself by your job, car and house. When they go, you’re going to hate yourself. Don’t even bother arguing about it. It’s going to happen. Just take the damn Prozac….How do you tell your story? That’s going to matter, because you’ll be brooding about what went wrong 24/7, whether you want to or not. And you’ll find that explaining one’s great fall is a vital skill among the fallen, as well as a deeply satisfying pastime. This raises the issue of denial, a vital and deeply misunderstood mechanism. Denial, like Kurtz said about Terror, is your friend or an enemy to be feared. You need some denial to keep your ego from being crushed completely. Your ego is going to get very sick, now that you’re nobody. It’s easy to be polite and self-deprecating when you’re winning. I used to be like that. You can’t afford that when you’re being crushed. You have to demand respect if you expect to get it. The alternative is to dwindle away and disappear. Those antidepressants will help you deny the facts, but don’t be shy about doing ego-exercises, boasting practice, to reawaken that playground ego that so many of us polite middle-class types allowed to atrophy. You’re going to need it.

(more…)

here’s nothing like a massive, history making global economic crisis to bring on the 20/20 hindsight vision. Since I am anything but an expert on economics or political science I won’t attempt to resolve any age old debates, but in keeping with my discourse analysis, I do find it interesting how the tension between the individual versus the collective interest has come more sharply to the forefront of mainstream conversation. Here are a few of the more notable references I’ve seen in the past week or so:

Princeton professor and NY Times op-ed columnist Paul Krugman - who won the Nobel prize in economics this morning - was interviewed on NPR this afternoon and asked who should have seen this coming. He first answers ‘myself’ and then goes on to say that while he’s been warning of problems for years and been a long time critic of former Federal Reserve chairman Alan Greenspan, that he really didn’t expect such a sudden, dramatic crash. Krugman wrote last weekend in his pre-Nobel op-ed on the current financial situation, Moment of Truth:

Why do we need international cooperation? Because we have a globalized financial system in which a crisis that began with a bubble in Florida condos and California McMansions has caused monetary catastrophe in Iceland. We’re all in this together, and need a shared solution.

A lot of people have been setting their hindsight vision on Greenspan. A few days ago the NY Times ran a story titledThe Reckoning: Taking a Hard New Look at the Greenspan Legacy:

As the long-serving chairman of the Fed, the nation’s most powerful economic policy maker, Mr. Greenspan preached the transcendent, wealth-creating powers of the market.

A professed libertarian, he counted among his formative influences the novelist Ayn Rand, who portrayed collective power as an evil force set against the enlightened self-interest of individuals. In turn, he showed a resolute faith that those participating in financial markets would act responsibly.

Really? He was counting on the people competing to make billions of dollars to be responsible and honest and that’s why we didn’t need regulation? I haven’t studied Rand since high school, so maybe a libertarian follower of hers will chime in to clarify and defend this position.

Noam Chomsky was interviewed for Alternet this week and he makes a different perspective on regulation:

…So, if you allow unregulated capital, of course you will have corruption and disaster.

Read Adam Smith. He points out if you see two business men talking in the corner, they are probably arranging a conspiracy against the public. That’s their job. It is not that they are bad people. That is just what they are supposed to do. Just like a corporation is not evil to try to maximize profit. If managers are not trying to maximize profit, they are breaking the law. They are not supposed to be ethical institutions; they are supposed to be operating in the interests of their shareholders.

(more…)