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    Maxine's Essays

    • 21st Century Regress
      Sometimes it seems like the world is going to hell and there's absolutely nothing a girl economist can do about it.
    • What Exactly Are We Crowding Out?
      The current economic downturn isn't a random draw of a black ball from an urn containing white balls and black balls. There's no sampling distribution. Very specific policies and actions landed us here. Now we must decide not only what policies need to be put in place to prevent it happening again, but also what policies would best drive us out of the ditch faster and sustainably.
    • I Wish It Were Only Butter
      We should be giving up some butter if we must. We should not give up education or health investment (or infrastructure or the environment (hello, BP). They may be the only legacies of any value that we pass on to our children and grandchildren.
    • Rational Health Investment?
      The obvious "market solution" is to improve the long run return on investments in health among the disadvantaged through meaningful and effective publicly funded education. The obvious short run "market solution" is to reduce the costs of investment and the shadow price of health for the disadvantaged by providing health insurance cover and reduced out-of-pocket costs.
    • The Socrates Parameter
      To the extent that our limbic systems respond to such engineering by over-riding the judgment of our frontal lobe and to the extent that our frontal lobe is deprived of the information it requires to make a rationally self-interested judgment, we are not only pigs and fools, we are slaves.
    • The Economic Rewards of Virtue
      If individual virtue tempers our "piggy" desires and conditions our choices to something that is both individually and socially better, then the economic rewards of virtue as embodied in and promoted by societal norms and institutions are far greater than we have ever suspected. As economists, we would do well to recognize this when we teach U max.
    • The Market for Morals
      Markets then are places where more is exchanged than goods and services, labor and product, credit, and interest. They are places where we also develop the personal virtues of temperance and prudence and the social virtues of benevolence and justice. When they function well, they produce trust, loyalty, and sympathy among those who trade there.
    • Post-Modern Applied Economics: It’s the Error Term, Stupid
      Maxine believes it’s time to refocus attention and discussion on the error term. It is often where much of the action is in our models. It is where unexpectedly catastrophic events dwell resulting in fat tails. It is where our animal spirits manifest and cause us to do the right thing or the wrong thing or the thing everyone else is doing rather than the self-interested, fully-informed rational thing. It is where God and miracles and chance dwell.
    • Intergenerational Win-Win: Health Insurance, Education, Environment, Infrastructure
      So when we’re talking about fiscal stimulus packages and we’re borrowing from our grandchildren to finance them, we should be thinking about how to use stimulus monies to create value for those grandchildren AND stimulate our economy.
    • Short-term Private Payoffs, Long-term Social Costs
      The real health reform discussion, the one we should be having, is “What must we do to create a health system that is both efficient and fair?” The answer will almost certainly include relegating the private sector to markets where market forces or regulation are effective at aligning short-term private incentives and goals with long-term societal interests. If such markets are scarce or non-existent in health, then the private health sector will be of limited value.
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    That things could be different is not some Capra-esque fantasy. Treating people right is good business even in banking. The two links below are about a real life guy who was living proof of that. During the depression he carried all of the local farmers through and kept people on their farms. He was deeply revered in that community. I lived around there in the early seventies and heard lots of similar stories. I talked to a lot of the old timers about their lives and it was startling, but to a person they all talked about the depression as the best time in their lives. No one had anything, but what they had they shared and on Saturday nights the whole town would gather at a barn dance. What they had and what got them through was community, and their bank and their banker played a cohesive role.

    It looks like that first link is broken. I'll try to figure out a navigation strategy and re-post. sorry.

    The link continues to be difficult. Here is the text. (Sorry for the long post)

    From Direct Marketing Magazine July 2003 By Denny Hatch

    As I was canceling my First Union business account, the lady asked why I was leaving. I said it was because I was dunned twice for two cents and collection action was threatened. "That was a system thing," she explained. "A person did not do that to you. It was the system. No person ever sees what is mailed to customers. You should have come to me and I would have taken care of it."

    Bob Hemmings is one of the great men of direct marketing. Now in his 80s and proprietor of the Hemmings IV Direct agency in Pasadena, CA, Hemmings is dapper, intense, powerfully built, immediately recognizable with his Adolph Menjou mustache and bone crusher of a handshake.

    In his younger days, an employer of Hemmings was Frank Brock , president of the First Bank of Troy, ID. Troy's population in 1960 was 514; Brock's bank had 6,000 active accounts—12 times as many people who lived in the town. He had customers in 45 states and around the world as far away as Pago Pago, American Samoa.

    What was Brock's secret?

    Hemmings recalled that Brock knew precisely what business he was in. "I am in the financial services business to help provide finances for my customers—from the cradle to the grave," he said.

    Brock once made a loan to a man who had robbed the bank five years before. He was caught and served three years in prison. Brock said: "He has learned his lesson. I don't hold past mistakes against him. He is a much more stable individual now."

    According to Hemmings, Frank Brock knew practically all of his customers by their first names; whenever a good loan customer ran into financial difficulty, the bank carried him—without dunning notices or piling up interest charges—until he was back on his feet.

    Brock's entire day was spent in his office going over his list of customers and clipping newspapers. Whenever someone would marry, die, move away, give birth, etc., he would send a remembrance. All of his customers received a personal note or a telephone call at least once a month from Frank Brock. The current buzz phrase for what Brock did: Continuous Event Marketing.

    When the child of a customer reached a certain age—let's say six—the kid would receive an invitation to come to the bank with his parents. There he would be greeted at the door by none other than the bank's president, Frank Brock, and given a formal tour of the facilities (the vault was a favorite), then brought back for a welcoming chat in the president's office.

    At the end of the conversation, Brock would take out a brand new crisp dollar and present it to the child and then lead the little tyke up to the teller's window where a passbook savings account would be opened in his name. With great ceremony, the child would give the teller his new dollar and the teller would present Brock with the passbook who, in turn, would present it to the child with a flourish.

    Later, in high school, the kid would open a checking account. Later still, this young man would go away to

    college ... go into the Army ... get discharged, and get a job in a distant town or another country, but always keep the accounts at that original bank. He knew the president. If he ever needed to borrow money, he could do so on his name alone. If he ever needed cash, it immediately would be wired to him, no questions asked. If he ever moved back to town and wanted a mortgage, it was a piece of cake. Wherever that kid was in the world, Frank Brock was his personal banker.

    Hence 6,000 active accounts in a town of 514.

    Years later, Hemmings phoned the bank. Frank Brock had long since died, but Hemmings got the chief cashier on the phone whom he had worked with many years before. The bank had been bought out by a larger bank.

    "Is the new president still going over the customer lists the way Frank used to?" Hemmings wanted to know.

    "Aw, hell, we're so busy with paperwork and dealing with the computer—nobody has time for customers anymore," he said, and then added, "but, you know, maybe we should."

    Wow, Peter! Thank you for both links. Frank Brock reminds me of my businessman father's banker in a small town outside the larger town where we lived. The banker would never bounce a check when I was in college, gave me the same tour when I was younger, financed my first car. Dad donated the first deposit in my savings account when I was a kid, but the rest of the story was nearly identical. The banker treated everyone the same way. I loved banking there. It was the way business was supposed to be. Don Hammond is another man I would like to know. It was a perfect sermon to read on Ash Wednesday. Thank you for sharing.

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