Mr Fernandez, your post makes my head spin. I’ll choose three items out of many.
You write: “Perception is often the proxy for value in a service economy. Indeed it often comprises the value itself, at least in the entertainment industry and possibly in news.”
In fact, perception is only in special cases the service being provided. For example, in entertainment, or in opinionated writing.
It may be ironic if a depressed comedian can act happy and make us laugh, but that is his job, and he is producing his product. As a parallel, I am not directly concerned if a shoemaker drinks too much, as long as the shoes are done well.
A “proxy for value” is something that indicates value, and it is always perceived in some way. I can’t taste the raw meat at the supermarket, so I use it’s red color as a proxy for freshness. This isn’t perfect, because color can be artificially retained. But, how does that falsify a service economy. Information is always imperfect.
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You write [edited]: “If we aren’t interested in the real David Letterman or Bill Clinton, but only in some fantasy character they play, then logically nobody should care about blackmail or stained blue dresses.”
–> Combining Letterman and Clinton confuses from the start. Letterman’s end product is his performance. Clinton’s end product was supposed to be great management. It doesn’t matter what Letterman does in his private life; He wasn’t offering advice on living and I wasn’t looking to him as a role model.
Clinton was in a position of great trust, so of course I am interested in things that could indicate his morals, character, and ability. He lost my trust, not because he had sex, but because he was willing to destroy Monica Lewinsky rather than admit his actions. Only his fluids on a red dress saved her from his power.
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You write [edited]: “Whereas the “truth” of a ton of steel is the steel itself, what is the truth of a bundled subprime mortgage? What is the truth content of a credit default swap? Perhaps we don’t know, and this has led to the economic crisis.”
“The financial meltdown is a crisis of information. What we don’t know or falsely believe is hurting us. The market has either temporarily lost its ability to properly value assets; or more disturbingly we are simply unwilling, like the ATP vis a vis Andre Agassi, to value the assets because to recognize the truth would be catastrophic for business in our servitized world.”
The question “What is truth?” is overly philosophical. Steel and Swaps are both useful to those who know about them and use them. It is overwrought to think that no one knows. The only problem with swaps is that some people who lost money used their political power to get public money from the government, claiming that their mistakes were going to end the world. The swaps didn’t rob us, it was some men in business (not business in general) and a bunch of corrupt and ignorant politicians.
The market values assets quite well. The government manipulated the housing market and the bonds based on property values. This manipulation ended in collapse, as always. As a result, the average bond became worth about one-half.
We don’t live in a cartoon world where you don’t fall until you look down. The banks who owned these fallen bonds should have gone bankrupt. But, politicians did not want their own participation to be visible. So, the government has acted to buy the bonds or prop up the banks, again at public expense. This will fail again, but in a more diffuse way that will confuse the perception that those politicians were mostly at fault.
Renowned economist Henry Haslitt wrote in Economics in One Lesson” [edited]:
“Economics is haunted by more fallacies than any other study known to man. This is no accident. The inherent difficulties of the subject would be great enough, but they are multiplied a thousandfold by the special pleadings of selfish interests.”
“Certain public policies would in the long run benefit everybody. Other policies benefit one group only at the expense of all other groups. A group that especially benefits will argue plausibly and persistently for its own special policies. It will hire the best buyable minds to devote their whole time to presenting its case. And it will finally either convince the general public that its case is sound, or so befuddle it that clear thinking on the subject becomes next to impossible.”
Our world is not as complicated and unknowable as it seems. Our government is the center of most policy. Our politicians work tirelessly to set the policies that favor themselves at public expense. They then work tirelessly to confuse the public with outrageous false statements and further manipulations to hide their reponsibility for the horrible consequences.
