Tag: debt

Credit Cards and the Corridor

I don’t know if most people realize how much credit card debt fell during and after the Great Recession. It fell by a lot! Credit card debt outstanding today is about $180 billion, or 21 percent, lower than it was at the end of 2007. This is a 50 percent larger fall than in mortgage debt in percentage terms — though the fall in mortgages is of course much bigger in absolute dollars.
This fall in credit card debt is entirely explained by the drop in the number of credit card accounts, from about 500 million to 380 million. The average balance on open credit card accounts is about the same today as it was when the recession began.

The obvious question is, is this fall in consumer credit due to supply, or demand? Are banks less willing to lend, or are households less eager to borrow?

Here’s some interesting data that helps shed light on this question, from the Fed’s most recent Quarterly Report on Household Credit and Finance.

The red line shows the number of credit card accounts closed over the preceding 12 months, while the blue line shows the number opened. So the gap between the blue and red lines equals the change in the number of accounts. The spike in the red line is mostly write-offs, or defaults. I’ll return to those in a subsequent post; for now let’s look at the blue and green lines. The green line shows the number of inquiries, that is, applications for new cards by consumers. The blue line, again, shows the number issued. As we can see, the number of new accounts tracks the number of inquiries almost exactly. [1] What do we conclude from this? That the fall in the rate at which new credit cards are issued is entirely a matter of reduced demand, not supply. And given that balances on outstanding credit cards have not fallen, it’s hard to avoid the conclusion that banks’ reduced willingness to lend played little or no role in the fall in consumer credit.

Of course one figure isn’t dispositive, and mortgage debt is much more important quantitatively than credit card debt. But Dean Baker has been making a similar argument about mortgages for several years now:

the ratio of applications to [home] sales has not risen notably in this slump, indicating that the inability of potential homebuyers to get mortgages has not been a big factor in the housing downturn.

As a matter of fact, after reading that post (or one of Dean’s many others making the same point), I tried to construct a similar ratio for credit cards, but I wasn’t able to find the data. I didn’t realize then that the Fed publishes it regularly in the household credit report.

Needless to say, the ratio of applications to contracts is hardly the last word on this question, and needless to say there are plenty of more sophisticated attempts out there to disentangle the roles of supply and demand in the fall in borrowing. Rather than get into the data issues in more detail right now, I want to talk about what is at stake. Does it matter whether a fall in borrowing is more driven by the supply of credit or the demand for it? I think it does, both for theory and for policy.

One important question, of course, is the historical one: Did the financial crisis straightforwardly cause the recession by cutting off the supply of credit for nonfinancial borrowers, or were other factors more important? I admit to being agnostic on this question — I do think that credit constraints were dragging down fixed investment in the year or so before the recession officially began, but I’m not sure how important this was quantitatively. But setting aside the historical question, we also need to ask, is the availability of credit the binding constraint on real activity today?

For monetarists and New Keynesians, the answer has to be Yes almost by definition. Here’s DeLong:

There is indeed a “fundamental” configuration of asset prices–one that produces full employment, the optimal level of investment given the time preference of economic agents and the expected future growth of the economy, and the optimal division of investment between safe, moderately risky, and blue-sky projects. 

However, right now the private market cannot deliver this “fundamental” configuration of asset prices. The aftermath of the financial crisis has left us without sufficient trusted financial intermediaries … no private-sector agent can create the safe securities that patient and prudent investors wish to hold. The overleverage left in the aftermath of the financial crisis has left a good many investors and financial intermediaries petrified of losing all their money and being forced to exit the game–hence the risk tolerance of the private sector is depressed far below levels that are appropriate given the fundamentals… Until this overleverage is worked off, the private marketplace left to its own will deliver a price of safe assets far above fundamentals  … and a level of investment and thus of employment far below the economy’s sustainable and optimal equilibrium.

In such a situation, by issuing safe assets–and thus raising their supply–the government pushes the price of safe assets down and thus closer to its proper fundamental equilibrium value.

In other words, there is a unique, stable, optimal equilibrium for the macroeconomy. All agents know their expected lifetime income and preferred expenditures in that equilibrium. The only reason we are not there, is if some market fails to clear. If there is a shortfall of demand for currently produced output, then there must be excess demand for some asset the private sector cannot produce. In the monetarist version of the story, that asset is money. [2] In DeLong’s version, it’s “safe assets” more generally. But the logic is the same.

This is why DeLong is so confident that continued zero interest rates and QE must work — that it is literally impossible for output to remain below potential if the Fed follows its stated policy for the next three years. If the only reason for the economy to be off its unique, optimal growth path is excess demand for safe assets, then a sufficient increase in the supply of safe assets has to be able to get us back onto it.

But is this right?

Note that in the passage above, DeLong refers to a depressed “level of investment and thus of employment.” That’s how we’re accustomed to think about demand shortfalls, and most of the time it’s a reasonable shorthand — investment (business and residential) generally does drive fluctuations in demand. But it’s not so clear that this is true of the current situation. Here, check this out:

We’re looking at output relative to potential for GDP and its components; I’ve defined potential as 2.5 percent real annual growth from the 2007Q4 peak. [3] What we see here is investment and consumption both fell during the recession proper, but since 2010, investment has recovered strongly and is almost back to trend. The continued output gap is mainly accounted for by the failure of consumption to show any signs of returning to trend — if anything, consumption growth has decelerated further in the recovery.

You can’t explain low household consumption demand in terms of a shortage of safe assets. The safest, most liquid asset available to households is bank deposits, and the supply of these is perfectly elastic. I should note that it is possible (though not necessarily correct) to explain falling consumption this way for the early 1930s, when people were trying to withdraw their savings from banks and convert them into cash. The private sector cannot print bills or mint coins. But classical bank runs are no longer a thing; people are not trying to literally hoard cash; it is impossible that a lack of safe savings vehicles for households is what’s holding down consumption today.

So if we are going to explain the continued consumption shortfall in DeLong’s preferred terms, households must be credit-constrained. It is not plausible that households are restricting consumption in order to bid up the price of some money-like asset in fixed supply. But it is plausible that the lack of trusted financial intermediaries makes investors less willing to hold households’ debt, and that this is limiting some households’ ability to borrow and thus their consumption. In that case, it could be that increasing the supply of safe assets will provide enough of a cushion that investors are again willing to hold risky assets like household debt, and this will allow households to return to their optimal consumption path. That’s the only way DeLong’s story works.

It’s plausible, yes; but is it true? The credit card data is evidence that, no, it is not. If you believe the evidence of that first figure, the fall in consumer borrowing is driven by demand, not supply; continued weakness in consumption is not the result of unwillingness of investors to hold household debt due to excess demand for safe assets. If you believe the figure, investors are no less willing to hold consumer debt than they were before the recession; it’s households that are less willing to borrow.

Again, one figure isn’t dispositive. But what I really want to establish is the logical point: The shortage-of-safe-assets explanation of the continued output gap, and the corollary belief in the efficacy of monetary policy, only makes sense if the weakness in nonfinancial units’ expenditure is due to continued tightness of credit constraints. So every additional piece of evidence that low consumption (and investment, though again investment is not especially low) is not due to credit constraints, is another nail in the coffin of the shortage-of-safe-assets story.

So what’s the alternative? Well, that’s beyond the scope of this post. But basically, it’s this. Rather than assume there is a unique, stable, optimal equilibrium, we say that the macroeconomy has multiple equilibria and/or divergent adjustment dynamics. More specifically, we emphasize the positive feedback between current income and expenditure. For small deviations in income, people and businesses don’t adjust their expenditure, but use credit and and/or liquid assets to maintain it at its normal level. But for large deviations, this buffering no longer takes place, both because of financing constraints and because true lifetime income is uncertain, so people’s beliefs about it change in response to changes in current income.

In other word’s Axel Leijonhufvud’s “corridor of stability”. Within certain bounds (the corridor), the economy experiences stabilizing feedback, based on relative prices; beyond them, it experiences destabilizing feedback based on the income-expenditure link. Within these bounds, the multiplier is weak; outside them, it is “strong enough for effects of shocks to be endogenously amplified. Within the corridor, the prescription is in favor of ‘monetarist,’ outside in favor of ‘fiscalist’, policy prescriptions.”
I’m going to break that thought off here. The important point for now is that if you think that the continued depressed level of real economic activity is due to excess demand for safe assets, you really need evidence that the expenditure of households and businesses is limited by the unwillingness of investors to hold their liabilities, i.e. that they face credit constraints. And this credit card data is one more piece of evidence that they don’t. Which, among other things, makes it less likely that central bank interventions to remove risk from the balance sheets of the financial system will meaningfully boost  output and employment.

[1] For some reason, inquiries are given over the past six months while the other two series are given over the past year. This implies that about half of all inquiries result in a new account being opened. The important point for our purposes is that this fraction did not change at all during the financial crisis and recession.

[2] To be fair, you can also find this story in the General Theory — “unemployment develops because people want the moon,” etc. But it’s not the only story you can find there. And, I would argue, Keynes really intends this as a story of how downturns begin, and not why they persist.

[3] Yes, it would be more “correct” to use the BEA’s measure of potential output. But the results would be qualitatively very similar, and I don’t think there’s nearly enough precision in measures of potential output to make the few tenths of a point difference meaningful.

LATE UPDATE: Here is a similar graph for the previous recession & recovery.

The Case of Keen

(Warning: To anyone reading this who’s not immersed in the debates of the econo blogosphere, this post will fully live up the blog’s subtitle.)

One of the big things this past week was Krugman’s criticism of Steve Keen. This was a Big Deal, since it is, sadly, rare for someone of Krugman’s stature to engage with anyone in the heterodox world. Unfortunately it wasn’t a productive exchange; no real information was exchanged, and neither side, IMveryHO, covered themselves in glory. For anyone interested in what’s wrong with Krugman’s side, there’s a good discussion in the comments to this Nick Rowe post. Here I am going to focus on Keen.

Keen’s most recent paper is here; it gives the clearest statement of his view that I’ve seen. As I see it, there are two parts to it. First, he argues that a tradition running from Minsky back to Keynes and Schumpeter (and, I would add, Wicksell and on back to the “caps” in 17th century Sweden) sees money as endogenously created by the banking system, rather than exogenously set by central banks (or, earlier, by the supply of gold). This means that banks can lend to borrowers without a prior decision by anyone to save, which in turn means that changes in the terms on which banks extend credit are an important source of fluctuations in aggregate demand that drive movements in output and prices. With all this, I am in perfect agreement.

But then he tries to formalize these ideas. And about the best thing you can say about his formalization is that it uses terms in such an idiosyncratic way that communication is all but impossible. I know I’m not the only one who’s found Keen’s stuff a bit like the novel Untitled in Martin Amis’ The Information, which literally cannot be read. But let’s make an attempt. Here are what seem to be the two key elements.

Keen repeatedly says that “aggregate demand is income plus change in debt.” There are many variations on this through his writing, he evidently regards it as a central contribution. But what does it mean? To a non-economist, it appears to be a challenge to another, presumably orthodox, view that aggregate demand is equal to income. But if you are an economist you know that there is no such view, whether neoclassical, Keynesian or radical.

What economist do believe, across the spectrum, is that total expenditure = total output = total income, or Y = Z = C + I + G + X – M. Given the way our national accounts are set up, this is an identity. The question, as always, is which way causality runs. The term “aggregate demand” is shorthand for the argument that causality runs from aggregate expenditure to aggregate income, whereas pre-Keynesian orthodoxy held that causality ran strictly from income to expenditure. (It’s worth noting that in this debate Krugman is solidly with Keen — and me — on the Keynesian side.) But there isn’t any separate variable called “aggregate demand”; AD is just another name for aggregate expenditure insofar as it determines output. Nobody ever says that AD is equal to income; what they typically say is that AD is a function of income, along with other variables such as interest rates, wealth, and changes in sentiment. (People do say that income is equal to AD, but that is a very different claim, and it’s true by definition.)

I can imagine various more or less sensible things Keen might have meant by the statement, but it feels kind of silly to speculate. As written it makes no sense at all.

The second formalism is Keen’s equation, which he gives the jawbreaker of a name “the Walras-Schumpeter-Minsky’s Law”:

Y(t) + dD/dt = GDP(t) + NAT(t).

Y is income, D is debt, and NAT is net asset turnover. This last is defined as “the price index for assets P, times their quantity Q, times the annual turnover T expressed as a fraction of the number of assets, T<1: NAT = P*Q*T.”

And now we really run into problems.

First of all, is this an accounting identity, or a behavioral equation? Does it hold exactly by definition, or does it describe an empirical regularity that holds only approximately? This is the most basic thing you need to know about any equation in economics, but Keen, as far as I can tell, doesn’t say.

Second, in the national accounts and every economic tradition that I’m aware of, aggregate income Y is identically equal to GDP. They’re just two ways of representing the same quantity. So it seems that Keen is using “income” in some idiosyncratic way that he never specifies. Alternatively, and more in the spirit of Minsky and Schumpeter, perhaps he is thinking of Y as anticipated or current-period income, and GDP as realized or next-period income. But again, it’s not much use to speculate about what Keen might have meant.

The next problem is units. GDP and presumably Y are flows over a specified period (a year or a quarter); they are in units of dollars. dD/dt is an instantaneous rate of flow; it is in units of dollars per unit time. And NAT, as defined, is the product of two indexes times a fraction, so it is a dimensionless number. Well, you can’t add variables with different units. That is just algebra. So again, whatever Keen has in mind, it is something other than what he wrote. And while it’s easy enough to replace dD/dt with delta-D over the period that GDP is being measured, I really have no idea what to do with the NAT term.[1]

It doesn’t help that at no point in the paper — or in any of his other stuff that I’ve seen — does he give any values for Y or NAT. He has lots of graphs of debt, output, employment, etc., showing — to the surprise of no one — that these cyclical variables are correlated. But since Y and NAT don’t figure in any of them, it’s not clear what work the Walras-Schumpeter-Minsky’s Law is supposed to be doing. Again, if his point is that endogenous changes in credit supply are important to business cycles, I’m with him 100%. (Though so are, it’s worth noting, some perfectly orthodox New Keynesians.) But if your idea is just that there is some important connection between A and B and C, the equation A = B + C is not a good way of saying it.

Honestly, it sometimes feels as though Steve Keen read a bunch of Minsky and Schumpeter and realized that the pace of credit creation plays a big part in the evolution of GDP. So he decided to theorize that relationship by writing, credit squiggly GDP. And when you try to find out what exactly is meant by squiggly, what you get are speeches about how orthodox economics ignores the role of the banking system.

Keen is taken seriously by serious people. He’s presenting this paper at the big INET conference in Berlin next week. It’s not OK that he writes in a way that makes it impossible to understand or evaluate his ideas. For better or worse, we in the world of unconventional economics cannot rely on the usual professional gatekeepers. So we have a special duty to police each other’s work, not of course for ideology, but for meeting basic standards of logic and evidence. There are very important arguments in Schumpeter, Minsky, etc. about the role of the financial system in capitalism, which mainstream economics has downplayed, just as Keen says. And he may well have something important to add to those arguments. But until he writes in a language spoken by people other than himself, there’s no way to know.

[1] Not to mention the odd stipulation that T < 0. Why is it impossible for the average turnover time of assets to be less than a year? Or does he really mean the fraction of assets that change hands at least once? What possible economic meaning could that have?

EDIT: I’m a bit unhappy about this post. It’s too harsh on Keen. As Steve Randy Waldman suggests in comments, there probably is a valid insight in there, if one can just get past his opaque terminology. (Altho that’s all the more reason for him to stop speaking in idiolect…) More importantly, posting this critique of Keen makes it seem like I am on Krugman’s side, when his contributions to the debate have been every bit as bad in their own way — as lucid as Keen is impenetrable, but also just embarassingly wrong, at least form where I’m sitting. This post by Michael Stephens Randy Wray at the Levy Institute blog does a good job laying out the issues. I agree with everything he says, I think.

EDIT 2:… and now here’s Keen saying that

Krugman’s part of the economic establishment, which for thirty or forty years has got away with arguing that you can model a capitalist economy as if it had no banks in it, no money, and no debt… You just don’t have a model of capitalism if you don’t include those components. 

I’m also unhappy with that. Krugman (and New Keynesians/monetarists in general) are very specifically modeling an economy with money, but without banks. I agree with Keen that you do need to think about the financial system to understand macro dynamics, but you can’t make the case for that if you can’t correctly describe the position you are arguing against. I don’t think we will make intellectual progress without being more careful about this stuff.

At Rortybomb: The Real Causes of Rising Debt

Last week I promised a discussion of my new paper with Arjun Jayadev on “Fisher dynamics” and the evolution of household debt. That discussion is now here, not here, but at Rortybomb, where Mike Konczal has graciously invited me to post a summary of the paper.

The summary of the summary is that the increase in household debt-to-income ratios over the past 30 years can be fully explained, in an accounting sense, y changes in growth, inflation, and interest rate. Except during the housing bubble period of 2000-2006, household spending relative to income has actually been lower in the post 1980 period than in preceding decades. If interest rates, inflation and growth had remained at their 1950-1980 average level, then the exact same household decisions about spending out of income would have left them with lower debt in 2010 than in 1980. And just as it wasn’t more borrowing that got us higher debt, less borrowing almost certainly won’t get us to lower debt. If household leverage is a problem, then the solution will have to be some mix of large-scale writedowns, higher inflation, and lower interest rates via financial repression.

But I encourage you to read the whole summary over at Rortybomb or, if you’re really interested, the paper itself. Comments very welcome, there or here.

UPDATE: Now also at New Deal 2.0.

UPDATE 2: Responses by Kevin Drum, Karl Smith, Merijn Knibbe, Reihan Salam, and The New Arthurian. There’s some good discussion in comments at Mark Thoma’s place. And a very interesting long comment by Steve Randy Waldman in comments right here.

The Dynamics of Household Debt

Regular readers of this blog will remember some interesting discussions here a few months ago of the dynamics of public debt. The point — which is taught in any graduate macro course, but seldom emphasized in public debates — is that the change in debt-GDP ratios over time depends not just on government deficits or surpluses, but also on growth, inflation and interest rates. In particular, for the US, the UK and many other countries [1], the decline in debt/GDP in the postwar decades is entirely due to growth rates in excess of interest rates, with primary surpluses contributing nothing or less than nothing.
An obvious extension of that discussion is the question, What about private debt? After all, the rise in private leverage over the past few  decades is even more dramatic than the rise in public leverage:
Sectoral Debt as Share of GDP, 1929-2010. Click to embiggen.
So what if you apply the same kind of decomposition to private debt that is done for public debt, and ask how much of the change in sector’s debt in a given period is due to changes in borrowing behavior, and how much is due to changes in interest rates, growth rates, and or inflation? Surprisingly, no one seems to have done this. So Arjun Jayadev and I decided to try it, for household debt specifically, with (IMO) some very interesting results. A preliminary draft of our paper is here.
I’ll have more on the content shortly, but if you’re interested please take a look at the paper. We’re in the process of revising it now, and any comments/questions/thoughts on making it better would be most welcome.

The Bergeron Solution

Does anybody else remember  that Kurt Vonnegut story “Harrison Bergeron”? (It’s an early one; he reused the conceit, I think, in one of his novels — The Sirens of Titan maybe?) The idea is that in a future egalitarian dystopia, perfect fairness is achieved by subjecting everyone to penalties corresponding to their talents — the physically fit have to wear burdensome weights, smart people like you and me and Kurt have earphones subjecting us to distracting noises, and so on. 
As a story, it’s not much — sort of a Simple English version of The Fountainhead. But I thought of it when I read this post from Nick Rowe last month. Microeconomics isn’t normally my bag, but this was fun.

Suppose we have a group of similar people. One of them has to do some unpleasant or dangerous job, defending the border against the Blefuscudians, say. Has to be one person, they can’t rotate. So what is the welfare-maximizing way to allocate this bad job? Have a draft where someone is picked by lot and compelled to do it, or offer enough extra pay for it that someone volunteers? You’d think that standard micro would say the market solution is best. But — well, here’s Nick:

The volunteer army is fair ex post. The one who volunteers gets the same level of utility as the other nine. … The lottery is unfair ex post, because they all get the same consumption but one has a nastier job. That’s obvious. What is not obvious, until you think about it, is that … the lottery gives higher expected utility. That’s the result of Theodore Bergstrom’s minor classic “Soldiers of Fortune” paper.

The intuition is straightforward. Think about the problem from the Utilitarian perspective, of maximising the sum of the ten utilities. This requires equalising the marginal utility of consumption for all ten men. … The volunteer army gives the soldier higher consumption, and so lower marginal utility of consumption, so does not maximise total utility. ….

If we assume, as may be reasonable, that taking the job reduces the marginal utility of consumption, that strengthens the advantages of the lottery over the volunteer army. It also means they would actually prefer a lottery where the soldier has lower consumption than those who stays home. The loser pays the winners, as well as risking his life, in the most efficient lottery.

It’s a clever argument. You need to pay someone extra to do a crap job. (Never mind that those sorts of compensating differentials are a lot more common in theory than in the real world, where the crappiest jobs are also usually the worst paid. We’re thinking like economists here.) But each dollar of consumption contributes less to our happiness than the last one. So implementing the fair outcome leaves everyone with lower expected utility than just telling the draftee to suck it up.

Of course, this point has broader applications. I’d be shocked if some version of it hasn’t been deployed as part of an anti-Rawlsian case against social insurance. Nick uses it to talk about CEO pay. That’s the direction I want to go in, too.

We all know why Bill Gates and Warren Buffett and Carlos Slim Helu are so rich, right? It’s because they sit on top of a vast machine for transforming human lives into commodities market income is equal to marginal product, and Buffet and Gates and Slim and everybody named Walton are just so damn productive. We have to pay them what they’re worth or they won’t produce all this valuable stuff that no one else can. Right?

The problem is, even if the monstrously rich really were just as monstrously productive, that wouldn’t make them utility monsters. Even if you think that the distribution of income is determined by the distribution of ability, there’s no reason to think that people’s ability to produce and their ability to derive enjoyment from consumption coincide. Indeed, to the extent that being super productive means having less leisure, and means developing your capacity for engineering or order-giving rather than for plucking the hour and the day virtuously and well, they might well be distributed inversely. But even if Paul Allen really does get an ecstasy from taking one of his jets to his helicopter to his boat off the coast of Southern France that we plebes, with our puny so-called vacations [1], can’t even imagine, the declining marginal utility of consumption is still going to catch up with him eventually. Two private jets may be better than one, but surely they’re not twice as good.

And that, if you believe the marginal product story, is a problem. The most successful wealth-creators will eventually reach a point where they may be as productive as ever, but it’s no longer worth their while to keep working. Look at Bill Gates. Can you blame him for retiring? He couldn’t spend the money he’s got in ten lifetimes, he can’t even give it away. But if you believe his salary up til now has reflected his contribution to the social product, his retirement is a catastrophe for the rest of us. Atlas may not shrug, but he yawns.

Wealth blunts the effects of incentives. So we want the very productive to have lots of income, but very little wealth. They should want to work 12 hour days to earn more, but they shouldn’t be tempted to cut their hours back to spend what they already earned. It seems like an insoluble problem, closely related to Suresh’s superstar doctor problem, which liberalism has no good answer to. [2]

But that’s where we come to Harry Bergeron. It’s perfectly possible for superstar doctors to have both a very high income and very low wealth. All that’s required is that they start in a very deep hole.

If we really believed that the justification for income disparities is to maintain incentives for the productive, we’d adopt a version of the Bergeron plan. We’d have tests early in life to assess people’s innate abilities, and the better they scored, the bigger the bill we’d stick them with. If it’s important that “he who does not work, neither shall he eat,” [3] it’s most important for those who have the greatest capacity to work. Keep Bill Gates hungry, and he might have spent another 20 years extracting rents from network externalities creating value for Microsoft’s shareholders and customers.

There’s no shortage of people to tell you that it might seem unfair that Paul Allen has two private jets in a world where kids in Kinshasa eat only every two days, but that in the long run the tough love of proper incentives will make more pie for everyone. Many of those people would go on to say that the reason Paul Allen needs to be encouraged so strenuously is because of his innate cognitive abilities. But very few of those people, I think, would feel anything but moral outrage at the idea that if people with Allen’s cognitive capacities could be identified at an early age, they should be stuck with a very big bill and promised a visit from very big bailiffs if they ever missed a payment. And yet the logic is exactly the same.

Of course I’m not endorsing this idea; I don’t think the rich, by and large, have any special cognitive capacities so I’m happy just to expropriate them; we don’t have to work them until they drop. (People who do believe that income inequality is driven by marginal productivity don’t have such an easy out.)

But it’s funny, isn’t it: As a society we seem to be adopting something a bit like the Bergeron Solution. People who are very productive, at least as measured by their expected salaries, do begin their lives, or at least their careers, with a very big bill. Which ensures that they’ll be reliable creators of value for society, where value is measured, as always, in dollars. God forbid that someone who could be doctor or lawyer should decide to write novels or raise children or spend their days surfing. Of course one doesn’t want to buy into some naive functionalism, not to say conspiracy theory. I’m not saying that the increase in student debt happened in order that people who might otherwise have been tempted into projects of self-valorization would continue to devote their lives to the valorization of capital instead. But, well, I’m not not saying that.

[1] What, you think that “family” you’re always going on about could provide a hundredth the utility Paul Allen gets from his yacht?

[2] That post from Suresh is where I learned about utility monsters.

[3] I couldn’t be bothered to google it, but wasn’t it Newt’s line back in the day, before Michele Bachman picked it up?