Complexity risk

After the financial meltdown starting in 2008, calls for financial reform began. Dodd-Frank is the most obvious response to the need for better financial regulation. But does Dodd-Frank adequately fix things? Or might it also add additional layers of regulation making conducting business unnecessarily difficult and adding risk. (Related post from Sept 12)

A recent paper by Federal Financial Analytics develops the idea of "Complexity Risk". As the name suggests Dodd -Frank seems to add additional, confusing and sometimes contradictory rules.
Here's the paper: Complexity risk
And if you don't want to read the whole paper here is a column from Joe Nocera of the New York Times who comments Keep it simple

Worth reading.

An ode to economists

Prof. Dani Rodrik of Harvard writes a short insightful dressing down of economics and economists. In the piece Rodrik quotes Greg Mankiw quoting John Maynard Keynes about  economists' search for truth and lack of ideological bias. Really? I've not found that to be true.
Occupy the Classroom

Some thoughts on 2012

If you didn't see the piece in the Dec. 31 NY Times, here is a link to a compendium story of six leading economists' views of what we might see in 2012.  The varying perspectives taken by the contributors is quite interesting.
Six economists's views

Ron Paul's portfolio adventure

Normally there is little reason to follow Ron Paul except to see how his particular brand of wackiness fits among the Republican candidates. Last week the Wall Street Journal published a piece on Paul's investment portfolio.  To say the portfolio is an outlier is an understatement. An investment adviser is quoted as characterizing the portfolio this way:   ”This portfolio is a half-step away from a cellar-full of canned goods and nine-millimeter rounds” If Mr. Paul submitted this portfolio to my Investment Finance class he would have "a lot of  'splaining to do"
Ron Paul's portfolio

More interesting info about Groupon

Here is another skeptical post about the recent high profile IPO of Groupon. According to DealBook, it seems even the normally unaggressive SEC had to demonstrate a firm hand to this otherwise flighty company.
I still maintain that Groupon will be an interesting company to watch, for all the wrong reasons.

DealBook on Groupon

What ails the U.S. economy?

Nobel laureate Joseph Stiglitz writes succinctly about factors that brought on the economic  problems in the U.S. and some sobering prescriptions for the way forward. The careful reader will see similarities with another Nobel winner, Paul Krugman.
To Cure the Economy

Rational beings systematically maximizing their utility

Yes, that has been the fundamental economic assumption for the past 50 years or so. But over 300 years of bubbles, manias and irrational exuberance argues against the basic assumption. Prof. Robert Schiller of Yale, who famously warned against the U.S. real estate bubble well before it burst,writes about the new field of neuroeconomics. Worth reading.
The neuroeconomic revolution