Wednesday, May 26, 2010

How Nutritious Are Your Investments?

By Robert J. Shiller for Project Syndicate

NEW HAVEN – Those labels that you see on packaged foods listing their ingredients and nutritional values had their beginnings in an international scandal and in the efforts by governments to deal constructively with the public outrage that followed.

The scandal erupted with the publication in 1906 of Upton Sinclair’s novel The Jungle, a bestseller that detailed the experiences of a Lithuanian immigrant family working in America’s meatpacking industry. The public response to the book’s description of unsanitary conditions in the industry was so strong that the United States Congress enacted the Pure Food and Drug Act – the first law to require labeling of contents on food packages – the very same year.

By 1910, according to The Manchester Guardian, “The Jungle Scare” had spread to the United Kingdom, where it had been taken up by “less scrupulous [sic] newspapers of this country,” with “slanderous” and “sensational” claims about the food industry. That may have been true, but the eventual effect was better food labeling laws in the UK, too.

Indeed, the scandal set in motion a sequence of laws in countries around the world that today require food labeling to go beyond mere lists of ingredients to include information about the vitamins, minerals, and calories that products contain. These labels are undoubtedly useful to consumers, but it is unlikely that many manufacturers, if given the choice, would have introduced them on their own.

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Saturday, May 15, 2010

Fear of a Double Dip Could Cause One

By Robert J. Shiller in The NY Times

THE risk of a double-dip recession hasn’t abated, even after news of the huge European bailout in response to the Greek debt crisis.

World markets soared initially on the announcement of the nearly $1 trillion rescue plan, and then declined. But as the economist John Maynard Keynes cautioned long ago, such market reactions are basically a “beauty contest” — with investors trying to predict the short-term reaction that other investors think still other investors will have.

In other words, don’t view these beauty contests as a heartfelt response to a fundamental change in the economy.

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