Dean Baker

Recent Articles

Does the Post Know How Patent Monopolies Affect Drug Prices?

It seems that they don't. The paper has a good article in the business section discussing how drug companies use illegal or unethical methods to push their drugs in order to take advantage of the huge patent rents available. However, the lengthy article never once notes that the patent system is at the heart of the problem. If drug research was financed through a mechanism that allowed drugs to sell at their market price, the incentives for this sort of corruption would disappear. --Dean Baker

Bernanke, Who Engineered Huge Bank Mergers, Rails Against Giant Banks

The NYT reported that in a speech before the Independent Community Bankers of America Federal Reserve Board Chairman Ben Bernanke lashed out against the risks created by giant too big to fail banks. It would have been worth mentioning that Bernanke had helped to engineer several mergers that made very large banks even larger during the financial crisis in 2008. For example, when Bear Stearns was collapsing, the Fed supported an arrangement whereby it was taken over by J.P> Morgan in exchange for a guarantee of $30 billion in assets. The Fed also supported the takeover of Wachovia by Wells Fargo. If Mr. Bernanke has changed his view on the risks posed by very large banks, it would have been appropriate to call readers attention to this fact. --Dean Baker

China's "Human Face" on Opposition to a Higher Yuan

According to USA Today , China's government tried to put a "human face" on its opposition to raising the value of the yuan by presenting the case of a small business owner who is worried that he will lose his workers to better paying employers if the yuan rises in value. Of course, this is not exactly how the situation was described. In the article, the small business owner on display complained that his material costs had risen by 17 percent in the last year while his labor costs had risen by 30 percent. He then added that a 3 percent rise in the value of the yuan would be devastating. Of course if his labor costs rose by 30 percent this suggests that his workers have many other options where they can make better wages. He must therefore raise his wages to keep pace. If this makes him unable to stay in business, then it would be unfortunate for him, but present no real problem for his workers, since they obviously have alternative employment options. This does not sound like a...

Are Auto Companies Really Worried that Financial Reform Will Prevent Them From Giving Consumers "Cheap Credit"?

That's what the Post told readers in noting opposition to Senator Dodd's bill. Of course just because they say that they are worried about their ability to provide cheap credit to consumers does not mean that this is actually their concern. Lobbyists sometimes do not tell the truth. --Dean Baker

Greenspan Tries to Rewrite History of Housing Bubble

Alan Greenspan refused to acknowledge responsibility for the housing bubble again in a talk given at Brookings yesterday. It would have been helpful if the NYT had provided some additional history to point out to readers that what Greenspan was claiming was not true. For example, Greenspan asserted that: "Unless there is a societal choice to abandon dynamic markets and leverage for some form of central planning, I fear that preventing bubbles will in the end turn out to be infeasible. ....Assuaging their aftermath seems the best we can hope for.” Rather than using the Fed's research and ability to shape public debate to warn of the bubble, Greenspan repeatedly insisted that there was no housing bubble. He even encourage homebuyers to take out adjustable rate mortgages at the end of 2003 when fixed rate mortgages were near a 50-year low. In fact, the Fed even published a study saying that there had been no run-up in prices -- rather the widely increase was attributable to measurement...

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