- It's official - Donald Trump has purchased the Kluge Estate winery. Kluge is a winery out near Charlottesville, Virginia (not far from Monticello) that fell on some hard times recently. I think Trump is the perfect buyer - I always thought Kluge was a little pretentious, so Trump will fit right in. Kate and I aren't too attached to any of their wines with the exception of their Cru. It's a fortified white wine (essentially like a white port) made in Jack Daniels barrels with a nice smokey taste to it. Hopefully they will continue to make it. Trump is apparently keeping the Kluge's themselves on staff, although it's still not clear if anything about the winemaking will change.
- Prof. Gary King, of Harvard, has determined that 27% of politicians' time is spent "taunting" each other. It sounds like an underestimate to me.
- stickman picks up my post on Akerlof and provides a lot of other good thoughts on market design. It also made me think of a point about the sort of intervention that economists and market-minded policymakers suggest in cases of market failure. Usually the suggestions are not for politicians to make allocation decisions, but simply to correct the conditions that would allow the market to make allocation decisions. We use more carbon for fuel than is optimal. Few serious economists would disagree with this. But they don't respond by regulating energy usage, deciding who can use oil, or deciding what kind of oil can be used. They respond by saying "we oughta price in the social costs of carbon and then the market will allocate it efficiently". Keynesians note the macroeconomic inefficiency of markets, but the response isn't to make allocation decisions - to pretend that we know what people need, etc. The solution is to adjust the interest rate so it goes from sending bad signals to at least more accurate (if not completely accurate) signals, so that market allocation can work. All the allocative decision making suggestions (ethanol in oil, flourescent lightbulbs, central planning) come from politicians - not people who think seriously about market and government failure.
- I'm now a reviewer at the journal Critical Review. I feel underqualified and I told the editor that, but he still wanted to have me on. Fair enough - I won't refuse! This is exciting for me - reviewing is an important responsibility to pick up in an academic career.
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They respond by saying "we oughta price in the social costs of carbon and then the market will allocate it efficiently".
ReplyDeleteAnd my response would be that even that is beyond your capabilities and that even that process is rife for all manner of arbitrage (so much so that it begins to look just like the same thing as making allocation decisions).
"All the allocative decision making suggestions (ethanol in oil, flourescent lightbulbs, central planning) come from politicians - not people who think seriously about market and government failure."
Well, even if that is the case, the people you claim are thinking seriously aren't the decision makers. A principal-agent problem, within a principal-agent problem.
Another assault on thoughts:
ReplyDeleteHow is that hopey-changey working out for you?
http://www.chicagotribune.com/news/columnists/ct-oped-0410-chapman-20110410,0,1926897.column
re: "And my response would be that even that is beyond your capabilities and that even that process is rife for all manner of arbitrage."
ReplyDeleteGood! You seem to echo my point that we can't possibly conceivably hit the right target. Now the only thing left to argue over is whether we can introduce a carbon tax such that we will make a welfare-improving impact. I think we clearly can - the risk of overshooting the tax strikes me as being much lower than the risk of undershooting it.
re: "(so much so that it begins to look just like the same thing as making allocation decisions)."
I don't think you understand what I mean when I talk about allocative planning. There is no conceivable way to make allocative decisions simply by adjusting the price of carbon, so I think you and I are talking about different things. When I talk about allocative decisions I'm talking about entrepreneurs' decision on the relative mix of leaving oil in the ground, using it to make plastics, using it for cars, etc. For any given price of carbon (whether it does or does not reflect marginal social cost), you and I both agree that at that given price the allocation decisions are best left to entrepreneurs. The question is, does the price of carbon reflect the marginal social cost of the use of carbon?
re: "Well, even if that is the case, the people you claim are thinking seriously aren't the decision makers. A principal-agent problem, within a principal-agent problem."
Correct - this has been my point and why government failure questions and good governance are as important as market failure questions.
As for your link - you know from my postings on facebook and here my thoughts on that situation. I still think he's better than any of the alternatives we have and not bad enough to substantially concern me.
Really? You think a person who claims that he has the power to send U.S. forces anywhere because it was just too difficult to ask Congress for authorization is the best option? Bush didn't even do that.
ReplyDeleteObama needs to be impeached and then tried in the Senate; he has fundamentally wounded the constitutional order by his action, and if this let stand then provides the sort of gloss that will allow Presidents to do anything they want.
And do not tell me that the electorate is the appropriate check; the point of the Art. I powers of Congress is to keep us out of war - Obama's notion is based on the sort of arrogant presumption that any war we enter will not see the tables turned on us - the Athenians had a similar idea regarding Syracuse during the Sicilian expedition.
Indeed, Obama is worse than McCain, because at least with McCain he was honest in his thoughts on the subject; it is far easier to fight that sort of thing.
ReplyDelete"There is no conceivable way to make allocative decisions simply by adjusting the price of carbon..."
ReplyDeleteSure there is. You make all manner of exceptions for those gaming the system. The system is ripe for that sort of arbitrage. It is a more indirect way of doing that of course, but it works out with a similar result.
re: "You think a person who claims that he has the power to send U.S. forces anywhere because it was just too difficult to ask Congress for authorization is the best option?"
ReplyDeleteIf this were the only issue to consider, no there would be better options. If I thought he would go into an operation that was more than air strikes without a declaration of war, no there would be better options (this is not to say that I think he should order air strikes without a declaration from Congress - you know I don't think that).
re: "he has fundamentally wounded the constitutional order by his action"
Really? I think he just thought targeted airstrikes didn't amount to a war. I don't think he considers himself above Congressional authority over war-making in general. And given the chance to do it over again, I'm pretty sure he'd do it differently even if he's covering his ass now.
My final addition to your blog today: http://www.wired.com/autopia/2011/04/cars-uncle-sam-says-you-cant-have/?utm_source=feedburner&utm_medium=feed&utm_campaign=feed%3A+wired%2Findex+%28wired%3A+index+3+%28top+stories+2%29%29&pid=809
ReplyDeleteA conciliatory link! Wonderful!
ReplyDeleteThis is meant to be an example, I assume, of regulations that have nothing to do with a market failure that I can possibly conceive of and stand as an example of a restriction that everyone in the classical liberal tradition - libertarians and non-libertarians - can agree are useless.
Are you by any chance going to the Critical Review seminar in late August?
ReplyDeleteAirstrikes ("targeted" or not - and since when has the U.S. undertaken just dropping general ordinance on a country - since the wars in SE Asia?) are acts of war. Just as shelling a country from the sea is an act of war. When conduct military operations over another sovereign state's territory it is an act of war.
ReplyDelete"I don't think he considers himself above Congressional authority over war-making in general."
He clearly does. Did you listen to his speech? He mentioned Congress in passing once. He made no mention of the constitution at all - it was almost entirely about him and he did - "I" was the most important part of the speech. "I" could not allow this; "I" did that; "I" blah, blah, blah. Well, that is not how our constitutional framework works - in no way does it work that way. Obama can engage our military forces by himself for one purpose - to repel attacks. Otherwise, he is bound by the Article I powers of the Congress to follow their lead, not vice versa. Obama gave the standard which the Constitution requires back in 2007; then he decided to simply ignore it.
No - I'm not even aware of it. What's it about?
ReplyDeleteI check their stuff out every once in a while, but I was just asked to look over a paper on Friday and was offered on Saturday.
Daniel,
ReplyDeleteMostly it just annoys me that I can't buy and drive a Nissan Skyline in the U.S.
Gary -
ReplyDeleteI agree with you on what we should have done. You don't need to approach me as if I don't. I'm just trying to explain why I think Obama did it. I'm saying this is more like the 1998 bombing of Iraq than some new sweeping doctrine of war. I think you're being naive if you think that's what it is.
I would note that even an asshole like Hamilton - who wanted to create a "President for Life" - argued against granting the executive this sort of power. Neither the writers of the Constitution, nor the population in general, had any stomache for the sort of thing that modern Presidents have tried to get away with since WWII (starting largely with Truman and his actions in Korea). Presidents before that time tried to assume this sort of plenary authority in isolated incidences (one thinks of an incident in Nicaragua in the 1850s), but the Congress was always pretty good at asserting itself against such (even during the Civil War). Since WWII the Congress become less and less effective at making its Article I powers an effective check on the ever increasing claims of the executive branch (and that's not just the case re: defense policy - the delegation of power by the Congress has become something of a stampede since the 1970s).
ReplyDeleteThe 1998 bombing of Iraq actually had Congressional authorization going back to the authorization associated with the first gulf war. While I would have liked to see more than that, in this case the President doesn't even have that sort of thing on which to stand.
ReplyDeleteNo, the really analogous examples from the Clinton Presidency are his actions in Haiti and the Balkans. In both cases the Clinton administration read into the War Powers Act authority which it did not delegate to him - if you read the thing you will see that. Similarly Obama is using the War Powers Act in a way it was never meant to be used and which the letter of the act does not allow.
The legislation associated with the action in 1998 explicitly refrained from authorizing using the armed forces.
ReplyDeleteAs for the War Powers Act - this is not the issue at all Gary. We both agree it's an argument based on an overinterpretation of the War Powers Act.
The question at hand is, is it just that or is it a rejection of a Congressional role in war making. Stretching the War Powers Act beyond the point that you and I consider constitutional is quite different from "considering himself above Congressional authority".
You can't shoe-horn your way into that excessive claim simply by citing the fact that he obviously has an inappropriately overinterpreted the War Powers Act.
That's like saying because he used TARP authority do dubiously help out an auto company he thinks he is above the authority of Congress and can give any company any money he wants.
It simply doesn't follow, Gary.
The very fact that he's clearly stretching an existing law is a demonstration of the fact that he recognizes Congressional authority. The fact that Bush and then Obama bent over backwards to call GMAC a finance company demonstrates they recognize Congressional authority. If they didn't they would have just given it to GM without even worrying about making the case - and they would have given it to a bunch of others to boot.
All you need to do is actually read the sorts of justifications that Obama is using to condone his actions; arguing, for example, that the UN and NATO decisions on the matter are what grant him this authority. That is, to be frank, non-sense - the UN Charter clearly states that use of military force must be within the constitutional framework of the nations signing the UN Charter, same goes for the NATO treaty. Obama knows the constitutional limits on his power; I know he knows because he stated exactly what they were in 2007 - and then he chose to ignore them. Again, I would perfer a McCain - at least you know what you are up against with McCain.
ReplyDeleteIt's a seminar on common arguments against libertarianism and capitalism in Texas. I was invited by Jeffrey Friedman. I thought you'd be invited too as an editor.
ReplyDeleteSounds cool - you planning on going? He hasn't mentioned it, although he was the one that asked me. I'm not fancy enough to be an editor - they'll just send me articles to do a peer review of every once in a while. My understanding, though, is that the path to editing a journal is essentially to be a good dependable reviewer for that journal for many years - so this is definitely a good first step toward being a reviewer at some journal some day :)
ReplyDelete(a) I was referring to the original Gulf War Resolution (the one Bush pere sought, even though he argued that he did not need it - a constant refrain of Presidents since Truman I must add - we've been dealing with these sorts of Presidential usurpations for a while, whether one thinks the current usurpation is one of kind or degree is up for debate).
ReplyDelete(b) The issue is Obama's claim to have plenary power to launch offensive wars (as the attack on Libya was - calling it a "humanitarian effort" or "kinetic whatever the hell" is downright Orwellian IMO). His statements about the WPA are second or third order arguments - so-called, even if I lack this power, look at what Congress has given me, so really, the point is moot, sorts of arguments. In other words, he is "stretching" the current law after his claims regarding plenary power are lost - and he hasn't lost those and is unlikely ever to do so at least in a court of law. The only authority that can reign him (and future Presidents) in is the Congress, and a very good way to do is to impeach and try him for his actions (better than the funding option because the funding option will never keep us out of a war or end one, as we have learned from experience). Right now there is some effort to send a resolution to the President saying something to the effect of, hey, if you ever do this again, we'll impeach you, but that rings hollow to me. There have to be other checks on the President besides the ballot box and those checks exist in the Constitution (though of course you would think all that Art. I language about Congress' warmaking powers would be enough), because, for example, the ballot box cannot alleviate the nation of the numerous evils created by war once the President has decided to launch it because in his personal and singular opinion it was a good idea.
(d) The only mostly on-point examples we have of something like this in our history are the wars in Haiti and the Balkans undertaken by Clinton; this was under the Albright policy of "What's the use of having this superb military that you're always talking about if we can't use it?" Even they are somewhat different because there was plenty of debate, etc. regarding them in the Congress before the U.S. went to war - though they too were done through proper constitutional channels.
(e) The fact remains that Obama clearly knows better yet has made plenary power claims anyway; again, I'd rather have McCain in office in this instance - at least I know where he stands.
(f) My prediction, no one will effectively stand up to the executive on this issue until one of these wars really bites us in the arse - only then will the general "indispensable nation" ideology which is the official Washington position across ideological/party libes regarding our foreign policy (and which is generally considered "crazy" to question) be questioned.
I will have to come from Spain most likely, but yea I'm attending.
ReplyDeleteThey respond by saying "we oughta price in the social costs of carbon and then the market will allocate it efficiently". Keynesians note the macroeconomic inefficiency of markets, but the response isn't to make allocation decisions - to pretend that we know what people need, etc. The solution is to adjust the interest rate so it goes from sending bad signals to at least more accurate (if not completely accurate) signals, so that market allocation can work.
ReplyDeleteHere's the real difference in philosophy.
What makes you think that markets are inherently and necessarily inefficient?
Macroeconomic inefficiency.
ReplyDeleteMarkets have enormous allocative efficiency advantages, which is precisely why economists' are so keen on markets relative to the general populations. When you know how markets work you understand how efficient they are.
But macroeconomic efficiency - the ability to fully employ productive resources - is different, and there's no guarantee of that for the reasons I talk about on here all the time (primarily demand deficiencies that emerge from the demand for liquidity).
"Macroeconomic inefficiency" probably isn't the best word for it, because when we talk about "efficiency" we're usually talking about allocative efficiency. Perhaps it's just best to say "full employment".
Markets are inherently and necessarily, given certain efficiency conditions. They do not guarantee full employment.
And I don't think this has anything at all to do with philosophy.
Daniel,
ReplyDeleteAll that merely does is move the locus of debate.
What is "full employment?"
Jebus, it is turtles all the way down apparently.
Anyway, everything I have read on the matter gives estimates for the U.S. of such varying range that they are largely meaningless and certainly entirely unhelpful to any would-be policy maker trying to centrally plan the rate of employment. Thus illustrating that Friedman was right - keep inflation low and you'll get the natural rate of employment.