Re: The Repo Market Time Bomb <37123862.C3CB1FC5@interport.net> <37125436.870F5B91@mindspring.com> <v0401171bb3381110ba23@[166.84.250.86]> <v04011721b3381726287e@[166.84.250.86]> <37126ACE.43E12460@interport.net>

[Peter Dorman <dormanp@xxxxxxxxxxxxxxxxxxx>]

1. Popper does not equal "serious commitment to empirical evidence".
Philosophy of science has come quite a way since then.  (If I were mean
and nasty I would make a crack about amateurs and professionals, but I
won't.)

2. More to the point, the general normative question of whether a
society is better off with or without a particular market structure is
usually not capable of being addressed empirically.  But this doesn't
mean that we must retreat to dogma -- oops, I mean theory.  The usual
practice is to break the big claim up into many smaller pieces that have
testable aspects and see what they show.  So we might think of
particular ways society or some part of it might be better off due to
certain specific mechanisms, and then we can investigate.  For instance,
Doug has thrown down an empirical gauntlet: Perhaps the thicker
secondary markets have engendered higher levels of debt in real estate.
We could explore (1) whether it is reasonable to think that changes in
market structure have contributed to this rise in indebtedness, and (2)
whether this greater indebtedness has led to greater systemic fragility,
etc.

Sorry to be so pedantic, but how else to respond, other than just
sniping back?  Does Stan Jonas want to have a real discussion, or was he
just trying to lob a few put-downs?

Peter

stan jonas wrote:
>
> im sure there are other reasons as well
> i didn't see an empirical question.. usually those entail
> a means for determining their veracity or not.. oops.. but that
> would mean referring to a 20th century theory.. a la Popper
>
> Doug Henwood wrote:
>
> > stan jonas wrote:
> >
> > >silly question..
> >
> > Sillier answer.
> >
> > >you should go back to your Marshall..
> >
> > Oh, best place to go to answer an empirical question about the late 20th
> > century is to return to a theoretical text from the late 19th. Gosh, why
> > didn't I think of that? That must be why you're on CNBC regularly and I'm
> > not.
> >
> > >even if one accepts your initial premise..
> > >imagine how much worse it could be if there was not efficient fixed income
> > >market
> > >place..
> >
> > That's a neat counterfactual! So much faith in theory that you just *know*
> > things would be worse if it weren't for the repo market.
> >
> > >for a starter look at whats happened to mortgage rates and the number of
> > >people
> > >that have even if they can't afford private housing.
> >
> > I'm not sure what this is supposed to mean - not that I'm some
> > old-fashioned believer in the stability of meaning, of course - but if
> > you're touting the virtues of deeper mortgage markets, then I know one
> > advantage: more mortgage debt. According to the Fed's balance sheets, home
> > mortgages outstanding were around 30% of the value of underlying real
> > estate, and now they're 45%. A measurable increase in human welfare, I'm
> > sure you & Marshall would agree.
> >
> > Doug