Market Process Blog

Plan Seeks to Expel Private Lenders From Program

In the latest in a string of government bailouts and takeovers the federal government is proposing to cut the private lenders out of the student loan business and become the direct supplier.

The WSJ reports:
Under a plan unveiled in the administration’s budget, subsidies to private lenders would be eliminated, and the government would use the savings estimated at $47.5 billion over the next decade to help bolster the Pell grant program for low-income students.

If approved by Congress, the plan would effectively end government-guaranteed loans to students by banks and other private lenders—lending that has totaled $56.7 billion in the current school year, and has been the primary source of college financial aid since the program was launched in the 1960s.
Read more …

New study by the Mercatus Center at George Mason University

On February 13, 2009, President Obama signed into law the American Recovery and Reinvestment Act (ARRA), with the promise that this $787 billion stimulus would “create or save” 3.5 million jobs over the next two years, mostly in the private sector. The basis for the law was a study by Christina Romer, the Chairman of the Council of Economic Advisors, and Vice-President Biden’s chief economist Jared Bernstein, who warned that without an economic stimulus, unemployment would reach 9 percent by the end of 2010.
Read More …

A little humor for your Friday. How many of you know that Matt Stone the co-creator of South Park is the son of economist Gerald Stone? I am told Gerald Stone actually consulted on this episode on the economic downturn. The Treasury Department Scene is the best part.

No need for a Bail-Out here. The South Park television series won its fourth Emmy last night in the Outstanding Animated Program (for programming less than one hour) category for last spring’s episode Margaritaville.

Watch the full episode here.

“Markets are pro-social. Markets are about serving the needs of another—that is innately virtuous,” says Paul J. Zak, professor of Economics at Claremont Graduate University.

See the video here neuroeconomist-paul-zak

Paul Krugman recently wrote a piece for NY Times Magazine asking How Did Economists Get it So Wrong? In a response to the article John H. Cochrane replies asking How Did Paul Krugman Get is So Wrong? Both pieces are definitely worth the read. Just a small excerpt from Cochrane’s piece

“In fact, I propose that Krugman himself doesn’t really believe the Keynesian logic for that stimulus. I doubt he would follow that logic to its inevitable conclusions. Stimulus must have some other attraction to him.”

With the FDA’s new authority to regulate tobacco one of the first acts is to ban flavored cigarettes, primarily clove cigarettes starting at the end of this month. The WSJ explains the goals of the program and the details. As is always the case when markets are suppressed they emerge in a new form. One of the major producers of clove cigarettes has already developed a clove cigar, which does not fall under the ban. Just as interesting is the question what about the cigarettes already in the stores. “So, what do we do with the stuff that’s on the shelves? Who eats that? Is it legal to sell until it’s gone or what?” asked Jim Carlson, owner of two CVille Smoke Shop stores in Charlottesville, Va., about 70 miles northwest of Richmond.” An astute student of mine read the article in the WSJ and suggested that this was a real entrepreneurial opportunity to buy what was left before the end of the month and start an underground market. This is the normal course of events when products are banned.