Renewed emphasis

Greg Mankiw has a sensible piece in today's NY Times ("The Freshman Course Won't Be Quite the Same ... The financial crisis will require subtle changes in teaching"). Keep the basics, but elaborate re the financial sector, leverage and monteray policy.

Behavioral economics gets a lot of press because everyone gets to feel virtuous about thrashing the rational (straw) man. But it's just a model! And all sensible people point that out.

What Mankiw's piece does not address is the role of hubris. Being a part of the human condition, it afflicts those in the private as well as the public sectors. So we want checks on these human tendencies. Competition and the possibility of bankruptcy (where these are not pre-empted by you-know-who) play this role in the private sector. But electoral competition and a vigilant electorate are not up to the job in the public sector.

These are simple thoughts, but they bear emphasis in light of Mankiw's discussion.