What to Read on July 8, 2009

• Let's Treat Borrowers Like Adults -- Todd J. Zywicki - Consenting adults should be allowed significant liberty to conduct their own affairs; that is Zywicki's main point, and I agree. But when their actions harm others -- in financial terms, when their actions threaten to bring down the entire system -- then we all have reason to be concerned, and the government has a right to intervene. As Oliver Wendell Holmes put it, "The right to swing my fist ends where the other man's nose begins." This counterargument is supported by economic theory and history, which I cover in my forthcoming book. Additionally, he should check out Richard Thaler's recent column in the New York Times because his assumption, upon which the rest of his argument rests, that "many consumers rationally respond to incentives" is only half-true. Consumers can be very irrational, and it doesn't help when markets have incomplete information that gives lenders a leg up on borrowers. Zywicki makes a good legal defense, but it fails on economic theory.
• U.S. Missile Shield Plan Threatens Arms Cuts: Moscow -- Agence France Presse (via Common Dreams) - We better not throw out a significant reduction in nuclear weapons for that cockamamie "missile defense" idea. Just when I was turning optimistic...
• The Obama Justice System -- Glenn Greenwald - I'm speechless. What have we become?
• Drone On -- Interview with S. Azmat Hassan (Newsweek) - Why do we never listen to the experts who are on the ground and understand the native populations? Hassan says everything that needs to be said, and Bravo! to Newsweek for publishing it. Was General McChrystal serious about minimizing civilian casualties, or did he just hope to placate and fool the public? Goodness, I hope it's the former. Most Americans may not notice, but he certainly hasn't fooled the Pakistanis. Also note the alternate strategy Hassan suggests: "How do you weaken the insurgents? Through the lure of socioeconomic development. After all, in Iraq's so-called insurgent awakening, they were made to lay down their arms because they were given a monthly stipend by the U.S." Funny how we never talk about this point when we praise the "success" of the surge...
• Economic Witch Hunting -- Richard Caballero - Caballero is an incredibly good economist who is falling into a very common trap: Trying to find one all-encompassing answer for the failure, the correction of which must therefore be a panacea. Our minds gravitate toward the simplicity and closure of such an approach, but to do so we have to ignore all the other causes...or explain them away with theories that are full of holes. I explain all this and more in my forthcoming book, but to give you a hint, I will say that Caballero's strategy would probably have stopped this crisis, but it won't stop the next one. The next crisis will come from a different financial innovation carved out of a new regulatory loophole, but correcting global imbalances and excess leverage will prevent the next bubble-and-crash from taking down the entire system, unlike Caballero's proposed solution.
• Regulation & Finance Sector Pay -- Barry Ritholtz - Great charts. Oh so true. Check it out.
• Google Plans a PC Operating System -- New York Times - On the heels of the Bing-vs.-Google article below...competition-squared!
• Bing, the Imitator, Often Goes Google One Better -- David Pogue (New York Times) - Gotta love competition.