Companies Leaving California in Record Numbers
Update: See related article "Companies Fleeing California For Utah Over Confiscatory Tax Rate" (HT: Juandos):
"Computer software giant Adobe, computer game monster EA Games, and Internet auction king eBay are abandoning California to set up shop in Utah. Why? California’s horrid business climate and high taxes."
60 Comments:
But Liberal Democrats, Left and Team Obama view California as model of operational excellence, seeking to create heaven on earth. Any criticism results in the following questions:
- Don't you care about the kids?
- Don't you care about minorities?
- Don't you care about the disabled?
- Don't you care about the unemployed?
California, like the University, has removed obligation from society and replaced it with rights. Very expensive.
California's loss is Utah's gain
Just look at all the companies that pulled up stakes and split...
No problems here. Nothing to see. Keep moving.
California is in terrible shape and our governments are bent on making it worse. I would however point out two things: first, we have been a business unfriendly state for at least 50 years and it never hurt this much before. I think that is why politicians believe they need do nothing. Second, while a large number of companies are leaving the state for other states most of the jobs leaving the state leave for other countries. It is hundreds of jobs leaving for other states and thousands of jobs leaving for other countries. Example: the Chevrolet Camaro once built in Van Nuys is now built in Ontario, Canada. If the number of jobs we have lost had gone to surrounding states their economies would be booming. That is not the case. In fact, Nevada is worse off than we are and they are a very business friendly state.
i was wondering why utah, not nevada? nevada is very business friendly and has no state income tax.
turns out adobe got a $40 million tax incentive from utah.
California has become the flip side of a deep Southern state. It seems, most people in California understand Classical economics as much as most people in a deep Southern state, e.g. Alabama, understand Keynesian economics, i.e. almost nothing.
About the only thing holding-up California's economy is its high quality and relatively cheap education system, which turn young people into productive workers, who many contribute tremendous value to society or the state.
However, Keynesian economics was used "improperly" by both the U.S. and California governments recently.
Restrictive monetary policy and contractionary fiscal policy caused the U.S. recession, and the U.S. government responded ineffectively.
California worsened its recession by raising taxes, fees, fares, etc. in the middle of the recession (and it's still finding ways to raise tax revenues, including going after people who owe back taxes, placing new high fee parking meters, etc., with the silent approval of Republicans).
There's a remarkable hatred towards businesses in California. Employees take advantage of workmans compensation, jump at the chance to sue an employer, or start a class action lawsuit for the smallest reason or perception.
Attacks on businesses have forced them to raise prices, while the government keeps raising taxes. Consequently, although incomes in California are high, so is the cost of living.
"Attacks on businesses have forced them to raise prices, while the government keeps raising taxes"...
Ahhh, it only gets better PT: From 2006 to now, 4.7 billion in capital has moved out of California. Thirty-five businesses closed their California doors between 2006 and 2008; 44 in 2009; and a whopping 84 in just the first six months of 2010!...
Reefer madness?
Juandos, your article states:
"California's anti-business atmosphere puts the damper on doing business in the state. High taxes, restrictive regulations, exorbitant fines and fees, workers insurance, permitting requirements make starting a business in California daunting."
Also, I may add, California landlords are forced to charge high rents, because renters have "too many" rights.
we have been a business unfriendly state for at least 50 years and it never hurt this much before
It does take a while.
I watched the same phenomenon unfold in New York. When I left high school in 1971, New York's economic decline was probably already a decade old, but there were still jobs to be had and Buffalo still appeared to be healthy and growing. We were still building highways to accommodate our expected future population of 2 million.
But, though decline starts slowly, it seems to increase exponentially. By the early 80's, the steel plants had closed, shipping had stopped and the railroads were ripping up tracks.
Come the 90's, we knew we were sunk and nowadays the city boosters try to content us with the news that we have "diversified" our economy into education, health care, banking and government -- parasitic industries all.
Welcome to the club, California.
How long do you think before California becomes the USA's new Kenya? Less than 10 years I bet...
I would however point out two things: first, we have been a business unfriendly state for at least 50 years and it never hurt this much before.
It's a positive feedback loop with exponential decay. The slope of the curve is flat at the beginning, but at the end it drops off a cliff, rather like a downward-pointing hockey stick.
There are examples in nature. The radioactive element Polonium-210 has a half-life of 138 days, but a mean total lifetime of only 200 days. As you can see, the time it took to go from halfway-dead to totally dead is less than half the time it took to get from zero to halfway-dead.
PeakTrader...you must be a blooming idiot if you think people from the South do not understand Keynesian economics. I do not know of a group that has opposed Obama and his Keynesian policies more than Southerners, unlike the supposed intelligent and sophisticated people from any given northern and eastern state.
Peak Trader,
Why do you believe that people in deep Southern states do not understand Keynesian economics? Do you know many people who live in deep Southern states?
"It's a positive feedback loop with exponential decay. The slope of the curve is flat at the beginning, but at the end it drops off a cliff, rather like a downward-pointing hockey stick"...
radian! radian! radian!
Now I find that to be a rather excellent and graphic explanation of how 'progressive politicos' and their supporters have shaped the business atmosphere in this country while the vast majority of the electorate was asleep at the television remote...
Good stuff!
Robert, the Census Bureau shows Southern states have the lowest education attainments. So, they may be least likely to understand Keynesian economics.
It's ignorant to reject something you don't understand, or be in denial about something that works successfully. You don't seem to even know the difference between Keynesian economics and Marxian economics.
Jet, there are people on this site who seem to completely reject Keynesian economics (I don't know where they're from), even when the mathematical models are supported empirically.
Following on the heels of Neptune Orient Lines and Nissan...
"Robert, the Census Bureau shows Southern states have the lowest education attainments. So, they may be least likely to understand Keynesian economics."
"may be least likely...", which is different from what you said in your original post.
"It's ignorant to reject something you don't understand, or be in denial about something that works successfully. You don't seem to even know the difference between Keynesian economics and Marxian economics."
What? I know that they are practically the same thing...in the limit.
PeakTrader
"Jet, there are people on this site who seem to completely reject Keynesian economics (I don't know where they're from), even when the mathematical models are supported empirically."
Yeah...the same mathematical models also support global warming.
Peak trader,
It is unlikely that residents of Southern States misunderstand Keynesian economics more than the Democrat party and its supporters misunderstand economics in general.
When I was living in the South, I found that the average redneck had a slightly better grasp of economics than J.K. Galbraith at Harvard.
Peak Trader,
Perhaps those of us who grew up in Deep Southern states are a little sensitive towards comments which seem to be generalizations about us.
One of the early and strongly influential advocates of Keynesian solutions was Louisiana's Huey Long. Many historians believe that Long's nationwide popularity pushed Roosevelt to adopt Keynesian measures aimed at stimulating the 1930s economy.
Many depression-era folks from my home state of Louisiana did understand very well what Long was promoting. There were populists aspects of Huey Long's platform plans which had nothing to do with Keynesian theories, of course. But my father's generation in Louisiana was not dumb, even if most were not as educated as Americans from the Northeast. They knew what Huey wanted to do and why.
"You don't seem to even know the difference between Keynesian economics and Marxian economics"...
There's a real world difference PT?!?!
Methinks that some of y'all confuse years spent in school with education.
LOL! Methinks Marjorie hit the nail on the head.
PeakTrader: "the Census Bureau shows Southern states have the lowest education attainments. So, they may be least likely to understand Keynesian economics."
Do you have any evidence to support your suggestion that education attainment is correlated with an understanding of economics theory?
Zeljka Buturovic and Daniel B. Klein, in a study published earlier this year, found no correlation between economics enlightenment and level of education.
Hey jet beagle, good find sir!
Thanks for linking it...
Peak Trader: As a Southerner, I can tell you that only a silly Yankee would think that the government could borrow or steal from those who work and earn and create jobs and give to those who do not in order to create prosperity. Keynesianism is absurd on its face and the real world evidence shows that it is not effective in stimulating growth.
Jet, if an unbiased test was given on Keynesian economics, college graduates would score higher than those who didn't attend college.
If you give a high school economics test, then both college graduates and high school graduates who never attended college may score equally.
If you give a 6th year level economics test, almost everyone would fail, except most grad econ students, and those with graduate degrees in economics.
Also, you state:
"Do you have any evidence to support your suggestion that education attainment is correlated with an understanding of economics theory?"
A mechanic doesn't only read about how to take an engine apart and put it back together. A mechanic actually takes an engine apart and puts it back together.
Do you believe reading casually about economics teaches you much about economics? You need to complete a rigorous economics program just to begin understanding economics.
I suggest you read some grad econ papers, if you want to know what economists really do.
"Methinks that some of y'all confuse years spent in school with education."
You've got that exactly right. In fact it's possible there's an inverse correlation.
(and I didn't learn that big word in school)
"Do you believe reading casually about economics teaches you much about economics?"
Well, yes, as a matter of fact I do. Most basic economics is a matter of understanding human nature and using common sense - except Keynesian economics of course.
"You need to complete a rigorous economics program just to begin understanding economics."
No you don't. Try reading some of the Austrian School economists for easy to understand, common sense principles that reflect human nature, and describe how people are likely to act. I'm not talking business or finance here, you understand, just economics.
"If you give a high school economics test...
...If you give a 6th year level economics test, almost everyone would fail..."
What is all this nonsense about taking tests? What does any of that have to do with economic understanding in the real world?
"A mechanic doesn't only read about how to take an engine apart and put it back together. A mechanic actually takes an engine apart and puts it back together."
Peak, JetBeagle asked you for EVIDENCE, not clever analogies to mechanics. How about some references?
...You may be right, though, those Keynesians in government are proving they can certainly take an economy apart, I'm just afraid they may not have taken the rest of the course where it gets reassembled.
"Jet, there are people on this site who seem to completely reject Keynesian economics (I don't know where they're from), even when the mathematical models are supported empirically.
You're joking, right? How can you say that with a straight face? (I assume you are straight faced) What empirical evidence? How about some references?
Peak:
"I suggest you read some grad econ papers, if you want to know what economists really do."
ROFLOL...You've got to be kidding. I can guarantee you that the "smart" people writing those papers are the same ones that have lost so much money over the last three years using their "quant" models to try and predict the market. Your primitive understanding of economics is a joke.
Many people don't realize only 2,000 MAs and 600 Ph.Ds in economics are awarded in the U.S. each year compared to 100,000 MBAs.
The "terminal" MA program I graduated from admitted 30 students each year out of 300 who applied and normally only two or three graduated each year. So, only roughly 1% of people who applied, with at least a BA degree, completed the economics program.
It was a survival course more than anything else; a mountain of work that required you to think beyond your capacity to think. Men would snap at each other and women would cry.
The program preferred math majors over econ majors, although any major could apply. There's a book called "The Making of an Economist" that provides some insights.
I recall my first grad econ class, Macro 5000. The instructor spent the first few days writing the most detailed equations I ever saw as fast as possible on all four chalkboards and towards the end he had to write smaller and smaller to complete the equation.
After a few days of this, a student (a "rich" Saudi) said "What is this?, I thought this was economics" The instructor looked at the equation and said "What is it you don't understand?" The student said "I don't understand any of it," and pleaded to the class "Does anyone understand this?" No one in class said anything (I suspected they didn't know). The instructor said "Come to my office after class for further instruction."
I recall another class where the instructor almost completed an equation and said to the class "What do you think the answer is?" About 10 students spoke up and announced numbers between 27 and 600 (it had to be either negative or positive or between zero and unity). The instructor looked at the class in wonder and said "You must be geniuses!"
Also, I may add, to clear up some false assumptions or misperceptions.
Many of the most successful people are econ majors or have econ degrees. To name a quick few: Warren Buffett, George Soros, Donald Trump, Steve Ballmer, Tiger Woods, John Elway. One simple example of the data supporting Keynesian economics is the liquidity trap (see Japan).
Peak:
You wasted your time and money.
I think most (if not all) of those cited studied economics before it turned into an irrelevant mathematical exercise.
One simple example of the data supporting Keynesian economics is the liquidity trap (see Japan).
What liquidity trap? You mean the quagmire the Japanese government caused by using Keynesian economics to make the 1990 recession permanent?
How about all that Keynesian economics used in the 1930's to make a severe recession a ten year affair - the longest recession in American history?
There's no empirical evidence at all for a liquidity trap. There is, however, plenty empirical evidence for a Keynesian trap.
That econ degree of mine is coming in handy these days.
BTW, Peak, the problem with economics is that it uses math to quantify human behaviour. Our standard scientific tools have always been poor when applied to social sciences. This is a known drawback. Since fiddling with quantitative modeling is the hallmark of graduate degrees in economics - to the exclusion of any questioning of those models most of the time - you'll forgive us if we don't take all that too seriously.
A Ph.D. just means that a collection of math geeks thought the models of another math geek were really cool. As Milton Friedman said, there are plenty of economics Ph.D.'s who don't understand economics.
Methinks says "What liquidity trap?"
The one you apparently didn't notice. Are you also going to blame Keynesian economics for all those inefficient economic boom/bust cycles before the Great Depression, and the bubble manias?
Also, you state: "The problem with economics is that it uses math to quantify human behaviour."
Putting a man on the moon, waging a war, turning a small firm into a large firm, etc. require human behavior, or more accurately human choices, including economic choices. Are you saying math has no business in human behavior?
Moreover, you state: "That econ degree of mine is coming in handy these days.
Handy for what? Making meaningless statements and then using your math skills to conclude Ph.D = Math geeks.
Furthermore, I may add, Keynes was a successful stock broker:
Keynes and the Market: How the World's Greatest Economist Overturned Conventional Wisdom and Made a Fortune on the Stock Market
"One of his lesser-known talents was the ability to make vast sums of money on the stock market. At the time of his death, Keynes’ net worth—almost entirely built through successful stock investments—amounted to the present-day equivalent of more than $30 million, and the college endowment fund he managed had massively outperformed the broader market over a two-decade period."
Peak Trader: "Men would snap at each other and women would cry."
Sounds like a typical day at the office for me...
Peak,
Well, the Keynesians sure noticed the liquidity trap and decided to get caught in it. If Keynesianism works so well, why is Japan still in recession twenty years and countless stimulus attempts later?
Why did the U.S. economy always rebound from recession within a couple of years until Keynesian policies were enacted and then the recession lasted for more than a decade?
Where's the empirical evidence that Keynesianism works?
I seriously wonder about that economics degree that made you cry so much. Do you seriously not understand the limitations of mathematical modeling when applied to human behaviour? I suggest your program was lacking or you're lacking if you don't understand these limitations. You have to think beyond the models to theory and empirical evidence. Also, I'm wondering about your reasoning skills. "Drawbacks" and "limitations" do not mean "has no business" to anyone who is not simply a foot stomping priss upset that the grown-ups are unimpressed with her perceived uber accomplishment of finishing a masters degree. Pull yourself together. It's hard to take you seriously when you behave this way.
And, yes, there are unfortunately too many math geeks passing for economists. I won't go into specifics because that list will likely push you right over the brink.
Furthermore, I may add, Keynes was a successful stock broker
No. Keynes invested in stocks. HUGE difference. I would think that a champion of Keynes would know that he was an economist, not a stock broker.
One of his lesser-known talents was the ability to make vast sums of money on the stock market.
I don't know how lesser known that was since I remember learning that in my econ 101 class in undergrad when we were first introduced to Keynes.
So, yes, I know that, but so what?
There were tons of guys from Brooklyn called vinny, Tony and Mikey who were locals on the exchange floor with no more than a high school diploma who earned massive fortunes trading stocks. Maybe we should let them run the economy!
What do Keynes' stock trading skills (or luck) have to do with anything?
I mean, I love your passion and all, but it wouldn't hurt you to calm down a bit.
Methinks, even someone who apparently cried in econ 101 should know government intervention in the macroeconomy can help smooth-out business cycles. Economic boom/bust cycles are inherently inefficient, in both the boom and bust phases, because resources are utilized suboptimally.
Dr. Perry posted a chart that showed U.S. real per capita income increased at a faster rate after the Great Depression, although the U.S. became a larger economy (large economies tend to expand more slowly). So, perhaps, government intervention in education, women rights, and business cycles helped raise U.S. living standards at a faster rate, and strengthened the U.S. as a superpower.
You seem to believe there are only bad government policies. I suspect most of them are bad. However, there are good and roughly neutral government policies too. In Japan, monetary policy failed. Perhaps, without expansionary fiscal policy, the Japanese economy would've been worse. Also, all economies aren't the same. What may work in Japan may not work in the U.S., for example.
Mathematical models, e.g. input-output models, contemporaneous models, optimization models, etc. have proven most useful to individuals, businesses, making policies, etc.
To deny Keynesian economics makes as much sense as denying Classical economics. I have no doubt you're thinking beyond the "limitations" of reality. I suspect, an econ instructor rather than giving you a grade would just write "nonsense."
Also, I may add, whether you like or dislike Keynes, you can't deny the importance of his economics:
Commanding Heights
"Keynes concluded that classical economics rested on a fundamental error. It assumed, mistakenly, that the balance between supply and demand would ensure full employment. On the contrary, in Keynes's view, the economy was chronically unstable and subject to fluctuations, and supply and demand could well balance out at an equilibrium that did not deliver full employment. The reasons were inadequate investment and over-saving, both rooted in the psychology of uncertainty.
The solution to this conundrum was seemingly simple: Replace the missing private investment with public investment, financed by deliberate deficits. The government would borrow money to spend on such things as public works; and that deficit spending, in turn, would create jobs and increase purchasing power. Striving to balance the government's budget during a slump would make things worse, not better. In order to make his argument, Keynes deployed a range of new tools -- standardized national income accounting (which led to the basic concept of gross national product), the concept of aggregate demand, and the multiplier (people receiving government money for public-works jobs will spend money, which will create new jobs). Keynes's analysis laid the basis for the field of macroeconomics, which treats the economy as a whole and focuses on government's use of fiscal policy -- spending, deficits, and tax. These tools could be used to manage aggregate demand and thus ensure full employment. As a corollary, the government would cut back its spending during times of recovery and expansion. This last precept, however, was all too often forgotten or overlooked.
Keynes intended government to play a much larger role in the economy. His vision was one of reformed capitalism, managed capitalism -- capitalism saved both from socialism and from itself. He talked about a "somewhat comprehensive socialization of investment" and the state's taking "an ever greater responsibility for directly organizing investment." Fiscal policy would enable wise managers to stabilize the economy without resorting to actual controls. The bulk of decision making would remain with the decentralized market rather than with the central planner.
Source:
Commanding Heights : John Maynard Keynes | on PBS
managed capitalism is just another name for a mixed economy: one of pressure group warfare. A combination of government controls and some free market elements.
I can see the results of such an economy today. Greater government controls, greater unsafe regulations, more special interests and pressure groups and a shrinking free market
no thanks. We don't need such a system
would say that government intervention is a bad idea because it has a negative expectancy (prob of loss x amount of loss).
See? Math is very useful. I do it all the time.
In Japan, monetary policy failed. Perhaps, without expansionary fiscal policy, the Japanese economy would've been worse.
AH!! The old "it could have been worse" or the more recent "jobs created and saved" mantra! Can't be disproved. Political gold, those statements! Unfortunately we're in the presence of people with at least some basic understanding of economics. So, let's see if it really would have been worse. Answer this question: Before Japan foisted all that Keynesian fiscal policy on its hapless economy, how many 20 year recessions were there?
I mean, if Keynesian policies are meant to reduce the inefficiencies of boom and bust cycles, then how come they prolong the bust. And how can you seriously claim that Keynsian policy is successful when they produce these results - or, to not make the causation vs. correlation mistake - does nothing to prevent these results?
I don't really find asserting that denying Keynesianism (works, presumably) a competing s compelling argument.
cont'd.
You keep quoting stuff from different sources that I'm sure I've read before and I'm sure I don't want to read again. I don't know what you're trying to accomplish with this except to convince me that Keynes was a great and smart man (and Stock Broker!). I already know that Keynes is an important economist and a very smart person. But, smart people can be wrong about things.
Keynes was just wrong.
If it makes you feel better, Milton Friedman (another great mind and great economist) believed just as Keynes did at one time. It's also true that a lot of interventionist economic policies undertaken by governments were mislabeled "Keyensian" when Keynes would have clearly disapproved of them as too aggressive.
But, that doesn't change the fact that he was wrong about the things that are rightly attributed to him.
even someone who apparently cried in econ 101 should know government intervention in the macroeconomy can help smooth-out business cycles
You write as if this is cost-free. This can be done only at the price of reduced economic growth and a lower standard of living. Boom and bust may be "inefficient" by some absurd Keynesian measure, but they make people richer, faster. The bust cycles are never as bad as the boom cycles are good.
"Keynes concluded that classical economics rested on a fundamental error. It assumed, mistakenly, that the balance between supply and demand would ensure full employment"...
Hey PT doesn't the obviously flawed logic of Keynes' assumption about classical economics strike you as bizzare at the very least?
Good point, randian. The permanently lowered living standard is a sign of of Keynesian success.
PeakTrader wrote: "One of his lesser-known talents was the ability to make vast sums of money on the stock market. At the time of his death, Keynes’ net worth—almost entirely built through successful stock investments—amounted to the present-day equivalent of more than $30 million, and the college endowment fund he managed had massively outperformed the broader market over a two-decade period."
Peek, do you not find it at all interesting that Keynes did this before mathematical models in economics become so ubiquitous?
Peek, do you not find it at all interesting that Keynes did this before mathematical models in economics become so ubiquitous?
I find it more interesting that Keynes did this when all manner of insider and fraudulent trading was epidemic in the public stock markets. I don't know for a fact that Keynes did these things, but I do know it's almost impossible for outsiders to make money in markets rigged by insiders to benefit themselves. Some outsiders will make money, because otherwise the insiders couldn't entice them into the market, but in the long run your money will become the house's money, just like in a gambling hall.
Randian,
I don't find that particularly interesting. I don't know what you mean by "fraudulent trading", but insiders trading on material nonpublic information only makes markets more efficient - contrary to popular belief. It may sound counter-intuitive at first, but it's true. In the United States, insider trading was perfectly legal until the mid 196o's when, like shorting before it, it became the arbitrary target of the SEC.
I don't know what methods Keynes used, but I do know that people who could barely spell "economics" but were "good with numbers" were also very successful in the stock market. One reason is that the market was a lot less efficient in terms of both public and non-public.
I do find it curious that people repeatedly bring up his unrelated stock picking skills. His stock picking prowess doesn't improve his economic policies.
By "fraudulent trading" I mean things like pump and dump, front running, false rumor, and ramping. These were legal at the time Keynes was trading. None of these things are insider trading, which I agree is harmless. They're attempts to condition the market by creating false price signals.
I'm not arguing his stock picking skills improve his economics. I'm arguing the reverse, that his stock picking skills, however good they may have been, are not proof his economics were sound, as Peak Trader appears to imply.
Those are some interesting beliefs. However, some of them are likely wrong.
How does economic boom/bust cycles make people richer or raise living standards? In a boom, there's strain utilizing resources and in a bust there's slack utilizing resources. So, economic boom/bust cycles are suboptimal, both in the boom and bust phases. Since WWII, the booms have generally become longer and the busts shorter.
The data show U.S. real per capita GDP expanded at a faster rate after WWII, and when the economics of international trade are included, U.S. living standards improved at an even faster rate.
Japan has an aging and declining population. Yet, average annual real GDP growth from 1990-2009 has been positive. Also, in Japan real GDP growth fell by over two-thirds between 1960-73 and 1973-83, and increased to half the level in 1983-91 compared to 1960-73.
Japanese can raise their living standards substantially by selling their assets, exchanging yen for dollars (they only need 85 yen for one dollar), and moving to the U.S.
Before WWII, there were more and longer periods where the U.S. wasn't at full employment.
Insider information benefits insider traders at the expense of outsiders with less information. Also, the stock market reflects the economy to a large extent. So, a better understanding of the economy (including reflected in mathematics) would be an advantage to stock traders.
Regarding Keynes' supposed investing success, it turns out he was not as savvy as he was fortunate to have a rich daddy to bail him out.
http://gregmankiw.blogspot.com/2009/06/was-keynes-really-savvy-investor.html
Not that his stock picking abilities have any bearing on the validity of his macroeconomic advice. George Soros is a financial wizard, for example, but he is also a far left loon. The ability to make money and wisdom are not always traits which inhabit the same body.
Bill, that's not an honest assessment. Even great speculators don't always make money:
"Keynes understood because he was a gambler himself and felt the gambling or liquidity instincts of the businessman." As Keynes himself once explained, "Business life is always a bet."
He was a master of markets and their psychology. As bursar of King's College -- during the Great Depression -- he increased the college's endowment tenfold. He also made himself very wealthy managing his own portfolio, despite periodic reverses. He did not hesitate to take risks."
What about Irving Fisher, the classical economist, who created the Fisher equation of exchange and worked on the quantity theory of money:
Fisher famously predicted, a few days before the crash, "Stock prices have reached what looks like a permanently high plateau," and the market was "only shaking out of the lunatic fringe."
Fisher not only lost Columbia University's money, he lost Yale's money:
"In the Depression of the 1930s, there were also major differences in the downturn’s impact on endowments: Harvard lost very little; Yale lost its shirt. Why? Because, as early as 1926, Harvard’s fund managers, believing that the stock market was spinning out of control, sold off most of the university’s equity holdings. As a result, the Great Crash found Harvard cash-rich. Yale, historically conservative in managing its funds, had held off on investing in equities until 1926. when its leading economist, Herbert Hoover confidante Irving Fisher, persuaded the university to take the plunge — with disastrous consequences."
What is the source of your quoted passage?
Also, arguing that Person A made money in the market while Person B was less successful with his investments so therefore Person A's macroeconomic theories are somehow more valid is frankly absurd. This is the classic logical fallacy known as Appeal To Authority. No one is infallible based on the fact that they were successful in other aspects of their life (if indeed Keynes was a successful trader). You must separate the theory from the man and judge it based on the evidence. The bottom line is the evidence does not support Keynesian theory and every day we see additional confirmation of this.
Bill, the sources are:
Commanding Heights : John Maynard Keynes | on PBS
Irving Fisher Wikipedia under Stock market crash of 1929
University Endowment Losses: Why Aren’t They News?
The stock market reflects the economy to a large extent. It's easy to misunderstand the economy, because there are hundreds of major (invisible) forces pushing and pulling a large (dynamic) economy.
"It's easy to misunderstand the economy, because there are hundreds of major (invisible) forces pushing and pulling a large (dynamic) economy."
The invisible hand(s)
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