On Friday, Brad DeLong, the economic historian at U.C. Berkeley who pioneered the art of econoblogging, confessed that it was after lunch and he hadn't yet read the Wall Street Journal. Instead, he was using Mark Thoma at Economist's View and Felix Salmon at Econoblogger "as economic news preprocessors."
Thoma and Salmon, like DeLong, are prolific bloggers. Line up enough of these pre-processors in your blog aggregator, as I do, and you get the benefit of a bevy of smart people filtering the critical news of the day -- and then deconstructing, critiquing and otherwise adding value to that information. What would once have required taking an article from the Wall Street Journal or New York Times or Financial Times into a graduate level seminar and having it taken apart by a professor and a few other bright students is now available, in infinitely greater scope and detail, for free, on every subject of interest to humanity. For my own project here, striving to better understand globalization, the ongoing assembly of rank upon rank of pre-processors on a network of related subjects -- the economy, China, India, energy and the environment, and intellectual property -- has become a vital part of my daily explorations. In the age of information overload, tweaking your filters is job No. 1.
Resisting the impulse to endlessly engage in filter accretion -- and the consequent metalayer of information overload -- requires no shortage of will power. Today I added A Fistful of Euros, a group blog devoted to the European economy, and Taiwan/China Theory/Future, a thoughtful and idiosyncratic take on my favorite part of East Asia by academic Mark Harrison. And yet, even as I was plugging their RSS feeds into my aggregator I was quailing at how many new items had popped up, ready for my perusal, over the weekend. Enter blog guilt -- a sickening feeling well recognized in the blogosphere -- the uneasy sensation one gets when one falls behind on one's filters. What am I missing? How far behind in the "conversation" have I fallen?
But there is a flip side to this soul-killing overload, an advantage to oversubscription, a happy serendipity inherent in the accumulation of more pre-processors than the brain can adequately process.
Long speeches by central bankers are not a regular part of my daily reading list. So I'll cop to skipping over the first couple of mentions of a speech Friday by New York Federal Reserve Bank president Timothy Geithner on hedge fund and derivative regulation. But by the third or fourth mention -- by the time that the econobloggers had started comparing the press coverage of the speech, and were pointing to each other's summaries and cut-and-pastes -- the sheer number of mentions were themselves a clear signal that this was something I should pay attention to. Out of the cacophony of a hundred filters blooming, a mandate rings through, clear and true.
So I read it. For the most part, as is typical of central bankers, Geithner stakes out a careful, cautious stance that treads familiar ground: the difficulty of striking the right balance between regulatory supervision and unfettered market efficiency. But his caution surrounds a dangerous core: Geithner acknowledges that the explosion, over the past 10 years, of hedge fund trading in exotic financial instruments may well have contributed to the general resilience that the U.S. (and global) financial system has demonstrated in response to external shocks since the Asian financial crisis of the late '90s. And yet he surmises at the same time that the very flexibility of the current system may actually make it more vulnerable to a really, really big shock.
Financial panics start when traders and bankers who call in loans or sell off their holdings at the first sign of trouble set off a cascading effect in which everybody else follows their example and the system implodes under the strain. Paradoxically, Geithner appeared to be saying, the more flexible the system, the more quickly such a cascade could happen, and the harder it could be to stop.
"The same factors that may have reduced the probability of future systemic events, however, may amplify the damage caused by and complicate the management of very severe financial shocks. The changes that have reduced the vulnerability of the system to smaller shocks may have increased the severity of the large ones."
That's a subtle argument, and we're not going to know whether it holds water until the flood is already 5 feet high and rising. Naturally, given my own fixations, the first thing that came to my mind was yesterday's editorial in the New York Times worrying about the proliferation of mortgage-backed securities, and wondering what would be the consequences of all the current musical-chairs-like trading in mortgage risk in the event of a prolonged housing bust. Will that be the backbreaker?
We'll watch and see, and learn some more from the near instantaneous critiques of the editorial that have already appeared in the blogosphere. And maybe see if we can dig up some pre-processors who focus explicitly on derivatives, because that might be useful, in the long run.
Too much information, or not enough? Too many pre-processors, or not enough? Too hot, too cold, or just right? Too much tweaking the filters, at the expense of actual learning? People worry whether the traditional practice of journalistic newsgathering will be undermined by all these parasitical bloggers delivering content to people for free. But all I see right now is more people gathering more information and redistributing it than ever before. I guess I'll believe there is a problem to worry about in that domain when my filters start to dry up and I wake up one day having caught up with all the news.