Patterico's Pontifications

9/29/2008

Uncertainty and the Market

Filed under: Economics,Government — DRJ @ 9:12 pm



[Guest post by DRJ]

I’m a big fan of Amity Shlaes (“The Forgotten Man”) and she’s apparently a fan of Robert Higgs and his theory of “regime uncertainty.” Here’s Shlaes talking about Higgs and today’s market:

“The scholar Robert Higgs has a concept called “regime uncertainty.” He is one of those talents that just doesn’t show up at the big universities or on big television. I.e., he’s not a star in the establishment chat salon. But if any mind in America has predicted what is happening it is Higgs.

Regime uncertainty basically says that when government is a) doing wild things and b) evidencing no consistency on that behavior the world freezes up and waits for a more predictable master. The blame here will be laid on Congress but it also goes to the Treasury and White House for presenting a highly discretionary plan light on rules and clarity. Hail Higgs!

Until Washington makes clear what it will NOT do the market will continue to punish the rest.”

We’re waiting, Washington.

— DRJ

4 Responses to “Uncertainty and the Market”

  1. This makes as much sense as anything else I’ve heard.

    thebronze (90b755)

  2. I agree. The US is the “Dad” of the world. I hope Congress rises to the occasion.

    Patricia (ee5c9d)

  3. There’s nothing particularly novel about what Shlaes, or Higgs, asserts: that markets like predictability. But it certainly explains why the New Deal didn’t work. I echo your endorsement of her book.

    sierra (aa4594)

  4. I am actually coming around to the idea of the bailout insofar as it would create a market where one does not currently exist.

    On the flip side, some of the bank owned properties are able to be moved right now, and we closed on one today, and refinanced our home in the process. We were able to get a nice investment property at a great price, a price 6-figures less than the same bank turned down from us 3 months ago.

    Some of the bigger ones, like Countrywide, are holding on dearly to some of their properties, waiting for the market to be created for the securities, and then seeing if they will be able to recoup some of their losses when the market supposedly corrects. As an example, we made a cash offer of $800,000 on a Countrywide bank owned property that we know is mortgaged at $1.2M. Sure it is a low offer, but given the fact that they have carried these costs for almost 4 years on this one property, one might think they would be interested in cutting their losses. As long as they are holding onto assets like this, they should have to move these things before they start getting our money to help out …

    JD (f7900a)


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