

Andy Grove Essay Commentary by Tyler Cowen - mhb
http://www.marginalrevolution.com/marginalrevolution/2010/07/the-andy-grove-essay.html

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jacoblyles
The down-swing in a business cycle is the time for everyone to resurrect their
pet anti-trade theories.

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SkyMarshal
Defationary collapse of a massive debt bubble != down-swing of the business
cycle.

Also, a quick look at just about every economic empire in history shows their
decline was always associated with a massive negative trade balance. The
theorists seem to ignore this though. If it's not codified in a dazzling
formula, it's irrelevant.

Not that I'm for protectionism or anti-globalization, but it's certainly not
beyond questioning, reconsidering, and/or re-engineering.

~~~
hugh3
_Defationary collapse of a massive debt bubble != down-swing of the business
cycle_

They look pretty much the same from the perspective of July 2010. What's the
big difference?

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SkyMarshal
Routine business cycle downswings don't require over a trillion dollars to
prevent the economy from tailspinning into another Great Depression.

If you add up the TARP and all the alphabet soup lending support programs, the
stimulus package/s, and Fed's quantitative easing intervention, you're talking
well over a trillion dollars, and we're still not out of it yet.

This was a speculative debt bubble followed by the inevitable financial
crisis. See Rogoff & Reinhardt. Definitely not part of the business cycle.

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bretpiatt
The list of 9 over simplified points is not what I'd expect from somebody with
Dr. Cowen's background. When I first read the blog I thought, "Really, is some
20 something programmer questioning Grove, cute."

I don't agree with everything Grove has to say either but to dismiss things
without analysis is not justified either.

I'll pick on point #3 about "scale, scale, scale". Cowen states that Germany
does not have the scale of the USA and is a big exporting success. Germany
does have scale in the luxury auto market. See:
[http://blog.polk.com/blog/new-vehicle-sales/0/0/audi-
outpace...](http://blog.polk.com/blog/new-vehicle-sales/0/0/audi-outpaces-
luxury-rivals-in-early-2010) Germany also has scale in many other industries
it chooses to compete in.

I'd like to have a more in depth discussion with him on Grove's essay. He
should at least give it the same amount of analysis and thought that Grove
did. This blog post does not do it justice.

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gojomo
A bullet list of reactions/avenues-for-consideration is often Cowen's style. I
appreciate the conciseness.

Grove has given this subject more words, _not_ more analysis and thought. And
Grove's words are the same as from economic debates of decades ago. That's the
real reason that Cowen is parsimonious with his response. Cowen concludes
with:

 _Grove is writing from a time warp in which these debates never happened or
never were settled or never something -- I don't know what._

~~~
SkyMarshal
1\. Decades is not a long enough time period to know anything in Econ with
certainty.

2\. Even if it were, the global economy is a highly complex system, subject to
change. What was right decades ago may not be today.

3\. Economics has a pretty dismal recent record. Most of the theorists _cough_
Krugman _cough_ completely missed the buildup to the biggest economic event in
recent history, the financial crisis.

Rather it was the historians like Rogoff & Reinhardt, crisis-experts like
Roubini, and shrewd business people and money managers (who make their living
putting their money where there mouth is) who foresaw it. Not the theorists.

There are a host of problems with the field of economics, from physics envy to
sociology of science, that critics like Taleb and Wilmott have exposing. The
field's understanding and credibility is highly suspect.

Grove knows what works, and has proven that his way actually does create jobs.
And his point about scale enabling additional innovation beyond the original
concept is exactly right. What has Cowen done but get good grades and write
about it?

~~~
zl12ty9
Krugman did in fact-along with other economists-predict the housing bubble:
[http://query.nytimes.com/gst/fullpage.html?res=9507E4D61039F...](http://query.nytimes.com/gst/fullpage.html?res=9507E4D61039F934A15756C0A9639C8B63)

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lkrubner
Isn't it strange that such a wide gap exists between business people and
economists? Possibly the economists get lost in theory. For a business person,
the reality of China under valuing its currency is the most important fact to
consider when thinking about doing business in Asia. And yet, for an economist
like Cowen, its as if the issue doesn't really exist. I also find it odd that
Cowen, in different posts on his blog, will sometimes claim that America has a
robust economy because its economy is free-market, but then in other posts he
complains about the heaviness of government intrusion into the market. This
strikes me as inconsistent - either the government is heavy-handed, or the
economy is free-market. If he really believes that America is both free market
and yet it has an intrusive government, then it seems to me his theories need
to allow for the possibility that the economy has a robustness due to some of
the intrusions that the government makes. That would be the argument I would
make, regarding some of the investments in R&D that the government has made
over the decades - not free-market, but good for the economy.

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Estragon
The real problem with Grove's suggestions is that he ignores the issues which
led to this economic downturn in the first place: rampant avarice, ignorance
and corruption. There can be no meaningful improvement to US fortunes until
those issues are substantially corrected.

~~~
jacoblyles
You talk as if rampant avarice, ignorance and corruption were invented in 2005
and weren't with us during last 150 years of dazzling increases in prosperity.

~~~
SkyMarshal
Throw in systematic deregulation of all financial safeguards, massive
speculation leading to a debt bubble, and then it's obviously a problem.

