Wednesday, May 19, 2010

Assault of Thoughts - 5/19/2010

"Words ought to be a little wild, for they are the assault of thoughts on the unthinking" -JMK

- I don't usually read Jonathan Chait (The New Republic), but he has a very interesting post on Alan Greenspan's argument justifying the Bush tax cuts. I have no clue if this is true - it's so bizarre that I'm almost biased towards thinking Chait is embellishing something. If it is true this will definitely go in the annals of very wacky economic policy positions. This was a hilarious line from Chait: "I've seen theories this convoluted and loopy before. But they've usually been scrawled in long-hand by random cranks who mail letters to magazines." I always figured the bizarre theories of imminent socialist takeover only came out of the woodwork after Obama was elected - apparently our Federal Reserve chairman had a few of his own back in 2001.

- There has been an extensive exchange between Joe Salerno (of the Mises Institute) and Steve Horwitz (St. Lawrence University) over the role of fiduciary media in the business cycle, and specifically Mises's views on fiduciary media and free banking. I haven't followed it in any great detail, but I think these internicene debates can be very interesting. Whenever people with a lot of common ground disagree on something, they have the advantage of having a lot of common material and understanding to draw from - which makes the discussion very dense substantively. So in case you're interested, Peter Boettke sets things blazing here, Salerno responds here, and here more specifically to a comment by Horwitz on Boettke's original post. Horwitz response here and here. Larry White chimes in here on the Division of Labour blog (I don't follow this one, so there may have been more posts on this blog in the debate). If I've missed any posts, I'm sure you can find links to others in these. I'm not a free banker or a 100% reservist, and I don't know Mises so I can't really comment. I of course think that markets tend towards equilibrium, but my entire understanding of the economy is grounded in the prospect of disequilibrium made possible by a monetary economy. So I think if I put more thought into it I might actually agree with the Currency School. Earlier versions of the Banking School seemed to rest their case on the real bills doctrine - and in that sense I guess I agree with the Banking School. Insofar as the real bills doctrine is strictly adhered to, I think the Banking School is right - the whole concern of the Currency School is that practically speaking, there's no reason to assume that it is adhered to. These are just a few reflections after some googling - I'm really not familiar with the debate.
- Rafe Champion has a couple interesting posts on Popper and economics - here and here.

- Dyson writes about how Obama's space plan is going to help liberate NASA. I tend to agree. Her basic point is:

"This is a persistent challenge for government agencies: they get hammered
whenever something goes wrong. People are accustomed to the risks of driving
cars or taking planes. But governments are not supposed to kill people...

Government should focus on long-term, risky research (where the risk is
to projects, not to people), and the private sector should focus on delivering
services that are already well understood and ready to be handled in a routine
I would argue that government should take some risk with human life, but I basically agree - if it's stuff we've done before, if it's near-earth stuff that could turn a profit, the market is much better at dealing with those risks: the government over-reacts and gets too risk averse. Buzz Aldrin has suggested giving a group of astronauts a one-way ticket to Mars. I don't know if that's necessary, but his disposition is the right one I think. We need to accept space colonization as a real necessity and a real risk. See this earlier post where I discuss why space colonization is not something that the market is able to spear-head.
- Fascinating new findings on anti-matter.


  1. "People are accustomed to the risks of driving
    cars or taking planes."

    I'd just note that both cars and planes - especially during their very early, dangerous stages - were of course results of the "private sector."

    "...and the private sector should focus on delivering services that are already well understood and ready to be handled in a routine

    I really don't understand the basis for this view at all. The private sector is constantly doing wild and crazy shit that the "state" could never dream up (consider, I dunno, heli-skiing or base-jumping or free climbing).

    "We need to accept space colonization as a real necessity..."


  2. I agree that the framing of what the "market should do" was a little vague. She's not coming at this from an economics perspective. She sort of crossed the risk management aspect with the routine aspect and wasn't exactly clear in differentiating the two.

    I think the more interesting (and intelligible) point from her is that government is too risk averse on this stuff where the market wouldn't be. I think that makes sense. I also think there's this point about routine tasks that makes sense too. There's no reason for the government to do routine tasks like near-earth-orbit stuff.

    Of course you and I may differ on the non-routine tasks. If the non-routine task is just a dangerous task because it is new (ie - automobiles when they were new or planes when they were new), it seems to me that it is the market's job to manage that risk. But if the non-routine task is something that there is no real market incentive for because of institutional distortions - like colonizing space - then I personally think there is a role for the state in that sort of non-routine task. We may differ on that.

    So I'm personally not arguing that the state should do the big exciting stuff because the state is more innovative than the market. That is DEFINITELY not my point. I'm coming at it from the calculation vs. incentive distinction that I've made in earlier posts.

    If you want more details on exactly what I'm refering to, click through and read my post on colonizing Mars. Maybe I'll do a new Mars colonization post soon.


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