Wednesday, June 27, 2012

Latest from Nashville's own Merle Hazard

Behind this homage to 60's surf music are a couple of ideas from the book: "look ahead and reason back"; and "the alternatives to agreement determine the terms of agreement."

Simple models can be used to predict that two parties bargaining over what happens in the future would reach some kind of compromise today that reflects what happens after we hit the fiscal cliff: whomever is hurt more by the cliff should be more willing to reach agreement, and that should be reflected in any compromise.

However, for some, it may be that the cliff is preferred to compromise, perhaps because past compromises have dug us into such a deep hole.

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