The Micro Electronics of Macro Economic Crisis

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Presentation transcript:

The Micro Electronics of Macro Economic Crisis Eli Noam Professor of Finance and Economics, Columbia Business School Director, Columbia Institute for Tele-Information September 5, 2009

http://www.telecom.cide.edu/cortes/JMariscal_06.jpg

http://www4.gsb.columbia.edu/ipimages/citi/rk2377.jpg http://www.inovacomm.com.br/images/raul_keynoters.jpg

http://search. barnesandnoble. com/booksearch/imageviewer. asp http://search.barnesandnoble.com/booksearch/imageviewer.asp?ean=9780195188523

The Big Picture http://www.planet-earth.org/images/bluemarble.jpg

The Micro Electronics of Macro Economic Crisis Eli Noam Professor of Finance and Economics, Columbia Business School Director, Columbia Institute for Tele-Information September 5, 2009

http://www.treehugger.com/nyse-floor-recession-001.jpg

Regulation

http://image62.webshots.com/62/5/35/7/424753507nQSOGC_fs.jpg

Bank of Tokyo-Mitsubishi-UFJ in Osaka http://upload.wikimedia.org/wikipedia/commons/b/ba/Bank-of-Tokyo-Mitsubishi-UFJ-Osaka-01.jpg

http://i.bnet.com/blogs/inkblot.png

http://news.cnet.com/i/bto/20081204/Ebbers_270x202.jpg

http://home.att.net/~r.s.mccain/chivalry.JPG

Beyond Orthodoxy 15 15

In Australia, “Department of Broadband, Communications, and the Digital Economy”. In France, a “Minister of State for development of the Digital Economy’” Korea: “Ministry of the Knowledge Economy”

http://www.nanotechia.org/lib/tmp/cmsfiles/Image/OECD_grey_logo.jpg

http://www.kolabora.com/news/images/itu_logo_3.jpg

Gordon Moore and Eli Noam Moore’s Law Gordon Moore and Eli Noam Eli M. Noam, Hardware

mortgage-based securities http://www.propublica.org/images/articles/gt_market_crisis_081008.jpg

http://www.bbc.co.uk/tyne/content/images/2008/10/05/gnr08_finish_elite_10_300x400.jpg

sub prime mortgages http://3.bp.blogspot.com/_FYQ0Ff-1j38/SLNoJ0D2ISI/AAAAAAAAABs/azpI42bx0b0/s320/subprime_crisis.jpg

sub prime mortgages http://z.about.com/d/politicalhumor/1/0/i/l/1/subprime_mortgages.jpg

derivatives http://www.economist.com/images/20070421/CSF234.gif

bank crisis http://i.thisislondon.co.uk/i/pix/2008/06/lehman_415x275.jpg

http://farm1.static.flickr.com/79/265918244_f16ba8182a.jpg

Business cycles are not new: -- The 7 fat years in Egypt followed by the 7 lean years Joseph in Egypt (http://www.sschool.com/children/puzzle/joseph1.jpg)

http://home.comcast.net/~DiazStudents/MiddleAgesFeudalism2.jpg

http://delnoris.files.wordpress.com/2009/07/federal_reserve.jpg

http://upload. wikimedia http://upload.wikimedia.org/wikipedia/commons/e/e2/Federal_Funds_Rate_(effective).png

http://www.computing.dcu.ie/~odonovp8/e-commerce.jpg

http://sweetsolarhome.com/wp-content/uploads/2008/10/government_subsidies.jpg maybe

Ineffective Regulation 34 34

Price Deflation 35 35

Characteristic #1 of Information: Usually extremely high fixed costs and low marginal cost . Expensive to produce, cheap to reproduce

Fundamental economic characteristic #2 of Information: Excess Supply

Characteristic #3 of Information: Price Deflation

39 39

http://wilsonig.files.wordpress.com/2009/04/toll-plaza.jpg

http://farm1.static.flickr.com/52/137189224_a6d5a9279b.jpg ok

Conclusions We have met the enemy, and it is us We have met the enemy, and it is us The info society operates with somewhat different fundamental characteristics. And this makes traditional macro tools ineffective But micro electronics also provides new tools for macro economics. Unbundle macro. De-mass macro.