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Friday, November 19, 2010


Bernanke needs to read Rise and Decline

Read this article and you will see lots of the same ideas drawn up by Olsen in R+D. In the second paragraph Bernanke is paraphrased as saying that nations need to work together because countries are recovering at uneven rates. And then he goes on to say that teamwork is struggling because a "sense of common purpose" has waned. Well if we think about this from an economists standpoint, and the prisoner dilemma theory, this sort of "world rebuilding" project falls apart. Every country has their own best interests in mind. If your a US company then you (should) want the US to recover quickly, and if Swaziland isn't keeping up, then thats too bad. The idea that each country is wanting every other country in the world to get better is not our nature. As for the prisoner's dilemma application, imagine every country in the world as a prisoner. They can all get better treatment if they all seal their lips and cooperate. Chances are, a few of the prisoners doubt another prisoner's ability to shut up, so they take it upon themselves to rat out the other ones. This country be applied to a group of countries willingness to help out other countries.

Bernanke also says that there are challenges to face when dealing with recovering nations that are growing at different rates. As we know, the emerging markets are growing faster than the established ones, but Bernanke in this article does not point out to what exactly those challenges may be. I cannot think of any at this time, any of you reading chime in with your opinion!!!

And lastly, Bernanke said that tensions over economic policies have been growing and that a global solution has been jeopordized. This goes back to Logic. Of course the United States has a larger interest in the recovery of trading partners like Japan, but a small country like Swaziland is not gonna have much incentive to go along with these plans because their future individual benefit is small. Although Swaziland may not be involved in these talks of economic policies, it is very hard for me to understand the rationality in trying to come up with a "one-world plan" and how we need to think about the global economy after reading Olsen's books. Just a thought!

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