I think a paper disucssing the relationship between the thinking of Beveridge, Hutt, Oi, and Kalecki on slack capacity would be really interesting...

As of right now I can only muster a modest discussion of the first two with passing references to the second two in this chapter for Guinevere Nell.

I wasn't even aware of Oi's work (a lot of it building on Hutt) until I did some googling after his death.

Some links

- The Herndon, Ash, and Pollin response to Reinhart and Rogoff is going to be coming out in the Cambridge Journal of Economics, a fine publication if I do say so myself which focuses a lot on Keynesian, Post-Keynesian, and Classical economics.

- David Henderson has a nice tribute to Walter Oi, who passed away on Christmas Eve. David has written a lot on Oi's work on the all volunteer force and ending conscription. I've personally got a lot out of his work on labor as a quasi-fixed factor of production (it's sort of the starting point in the lit review of my apprenticeship chapter of my dissertation).

- Kitchens and Fishback have a new working paper on rural electrification.

- Hanushek et al. have a new working paper on variability in returns to skill across countries - variability is surprisingly high and current estimates underestimate the lifetime impact of skills.

Super-duper inside Austrian baseball

There has been a recent spat on the intertubes between some people associated with the Ludwig von Mises Institute and some people associated with George Mason. In this matchup the Mises Institute people are supposed to be the boorish rubes and the George Mason people are supposed to be the serious academics.

In some ways, the stereotype makes sense. All Austrians are fairly political, but the Mises Institute people take it to a whole new level. Sometimes it's that they mix their ideology/political philosophy thinking in with their economics - and they take both seriously. Sometimes it's because they're not very serious and they just take breaks from their Ron Paul boosting and statist (i.e. - non anarcho-capitalist) bashing to talk about economics. There's a range in Auburn just like there is anywhere.

But what I think there George Mason crowd misses in many cases is that as far as scholarly engagement goes, for the most part they aren't especially distinguishable from Auburn. The biggest distinction is on the ideology front.

Painting in broad strokes, of course there are more firebreathers in terms of their actual ideas in Auburn, but the Auburn crowd has been nicer to me personally than the George Mason crowd.

If you look at their treatment of non-Austrians (particularly Keynesians), the George Mason crowd seems equally dismissive to me. They make idiotic or rude comments about Krugman or DeLong with equal frequency as far as I can tell that doesn't speak well to their commitment to "civil intellectual engagement". The public choice facets of the George Mason camp if anything make them more likely to attribute disagreement to bad faith or impure motives on the other side. And that gets old really fast.

As far as basic facts they seem to botch other ideas with equal frequency.

I'm reading Living Economics right now by Peter Boettke to review for Free Liberal, and while he has some great intellectual history in there he also has the EXACT same claims that we see all the time from internet Austrians.

You cannot convince me that Walter Block or Robert Wenzel are any more less civil than a handful of GMUers (the usual suspects... I'm not going to name names, because UNLIKE Block and Wenzel some of these guys will actually throw a hissy fit if I name them). And of course there are gems too. Pete Boettke (the GMU axis) and Bob Murphy (the Mises Institute axis) are both guys I disagree with a lot but perfectly civil.

So as much as I like to see them beat each other up, there seems to be a huge presumption by a lot of people that it's just obvious that we should be more dismissive of the Mises Institute people than the GMU people. It seems to me that a lot of GMUers who might not realize it should hear from an outsider that the distinction is not as strong as they seem to think. And they should probably be more critical of their own bad actors.

Reindeer Caroline

The Washington Post should really get a regular person to read headlines before they put them up

...not sure if this is the same as in the print edition

Questions on James Buchanan

Does anyone know if he ever had any dealings with:

1. The Reagan administration
2. The Federalist Society
3. State politics (in Virginia or elsewhere)
4. Desegregation issues

This is what austerity looks like...

And yet for some reason Bob Murphy thinks that this graph is proof AGAINST Krugman's concerns!

The post linked above is an excellent demonstration of the gaping chasm that exists between different peoples' interpretation of what's been going on. I sort of wish now I talked more about current events in my class. I talked about the evolution of growth theory and about the Lucas critique on the last two days of class, respectively, but I kind of wish I kept the Lucas critique and spent the other class period talking about the Great Recession and the policy response as they relate to Keynes and Hayek.

As it stands I was very skimpy on policy in the Hayek lecture and in the Keynes lectures. For Keynes we did an overview day, a day on consumption theory, a day on investment theory, and a day on interest rate theory - with some monetary policy discussion coming in on the interest rate theory day and a brief mention of fiscal stimulus on the consumption day when we derived the multiplier. Hayek didn't have any direct policy talk.

Perhaps this was a mistake.

This graph screams austerity but for some reason people are caught up on the fact that it did not actually decrease and ignoring the fact that the last five years look very, very different from the preceding fifty.

Maybe I was too subtle in that last post...

Bob Murphy commented:

"Obviously there are no IUCs possible, but to the extent that we operationalize "who cares more about liberty?" I don't even see how this can be close. I just scrolled through your blog and in the first 3 pages, the only mention I see you making of liberty is to mock/criticize the people who have devoted their lives to defending it. And it's not "Hey guys I strategically disagree with your wonderful aims" but rather "I think these guys are either naive or lying."

Look, I clearly don't care as much about racial bigotry as people working at the NAACP. That doesn't mean I'm a racist or that I hate black people, it just means it's clearly not as high a priority to me as to them.

By the same token, you clearly care more about economic theory and your kid than liberty. In contrast, I care about liberty, Krugman, and karaoke.

None of this is a judgment, and I'm not saying you're a closet totalitarian, but I can't believe you're acting as if you and your social network care as much about "liberty" as the people I know who do things like move their families to a different state etc. for it."

Here's the thing - I don't (and I think most people don't) look at Bob Murphy, fantastic guy that I think he is, and think "there's a man that's devoted his life to defending liberty". We look at him and think "there's a guy that's devoted his life to fighting the state". And maybe he's OK with that and thinks the two are synonymous, but what he and other libertarians need to recognize is that it's not just that we think the second one (that he devotes himself to fighting the state), but we do not think the first one accurately describes him.

If you are suspicious of Abraham Lincoln, you are going to have a hard time convincing me you care more about liberty than me.

If you are suspicious of the Civil Rights Act and other anti-discrimination, you are going to have a very hard time convincing me you care more about liberty than me.

If you are a pacifist in the face of fascism that threatens the liberty of millions, you are going to have a very hard time convincing me you care more about liberty than me.

And this doesn't even get into the much trickier questions about the tangled net of positive and negative liberty that we're faced with when past inequalities of opportunity generate present inequalities of outcomes. But if you scoff at that as a problem you're going to have a very, very, hard time convincing me you care more about liberty than me.

Which makes me wonder if Bob is in the naïve/ignorant camp more so than I thought. It's one thing to disagree with me. That's allowed. I know he holds a different view and I've always known that and I disagree with him. But he doesn't even seem to be aware of the issue.

A question for libertarians

I feel like I've seen the phrase "liberty movement" crop up a lot lately - more than usual. I'm a little puzzled by the uptick, although maybe I'm just imagining it.

In any case, it's certainly not used as often as simply talking about "libertarianism", and I had always assumed the reason it wasn't used as often is because of the way it sounds to me (and by extension, all reasonable people of any political persuasion).

Whenever I hear "liberty movement" used as a synonym for "libertarian" it strikes me as either naïve/ignorant or deliberately distortive and opportunistic.

I always felt like this sense of the phrase was confirmed by the fact that you largely heard it in the context of Libertarian Party political events, Ron Paul stuff, etc.

So my question is - what do libertarians think of the phrase "liberty movement" as a synonym for libertarian? Do you sort of have my impressions (which is what I've always assumed because most of you don't use it all that much), or am I completely off base and you too think this is a good synonym.

I should add this isn't like my concern with the use of the word "classical liberal" to mean "libertarian". Whatever my disagreements with that usage, "classical liberal" is simply terminology and what's at stake to a large extent is dueling claims to a historical and intellectual pedigree. But "liberty movement" isn't just terminology. It's not just a label, in other words - it pretty clearly means "this is the group of people that like liberty" as a way of distinguishing that group from other groups.

Take a good look backwards as well as forwards in the economics of the minimum wage

Don Boudreaux links to Bryan Caplan, who has an interesting post up pointing out that we need to consider the dynamic response to a minimum wage announcement. I only call it "interesting" because I'm not entirely sure what I think of it yet, but I think it's worth thinking about.

The point is that if a minimum wage hike is passed in advance firms can gradually adjust through reduced hiring and attrition (if indeed that's the direction they would respond - of course if the monopsony model is correct there may be increased hiring gradually). The point is, by the time of the actual discontinuity in the law everything might have happened already.

Maybe.

The trouble I'm having with this is that I'm not sure what would cause the gradual response. If you were making major transitions to capital-intensive production I could see doing that gradually, but presumably that's not what we're talking about in many of these cases (although I suppose that's an empirical question). If you're not doing the same thing, more capital intensively, why not just pay the same amount of people low wages until the minimum wage goes into effect and then pull up stakes? In the high turnover world of fast food franchises (as in, for example, the Card and Krueger study) that seems very reasonable. What glide path are we really thinking of in the Card and Krueger case??

But as I say - it's interesting. I don't quite know the answer.

This reminds me of a post I had a couple weeks back on the minimum wage noting that we have to follow things forward in time before we pass judgment. Why? Because different monopsony models imply different long run effects. If it's a straightforward market power model then the minimum wage (as long as it's modest) should be good in the long and short run. If it's a fixed labor cost version of the monopsony model it will have good short run and bad long run effects. So you need to look a while out to really get a sense of what you're dealing with.

It's an ex-post dynamic response explanation. Here, Bryan and Don are talking about an ex-ante dynamic response. But it's still the same sort of idea.

I would think if there's one single thing an economist should be able to do better than anyone else, it would be identifying a serious risk of endogeneity and calling it out: John Cochrane edition

John Cochrane thinks two New York Times articles are a sign of cognitive dissonance on health economics.

I do not.

My new Critical Review article is out

Share far and wide.

Many readers of this blog gave me reactions to this, and for that I am very grateful.

I hope people will be interested in it. I like to think of it as a thoughtful analysis of Hayek's business cycle theory. I come out liking his capital theory for both theoretical and empirical reasons, and not liking the business cycle theory for both theoretical and empirical reasons.

I offer what I think is a new way of putting what I think is wrong with his business cycle theory that I think is right with Keynes, and it connects both of them back to their Wicksellian roots. I don't mention Wicksell specifically so as not to overcomplicate the argument. I had been planning on including it, and it was certainly in the back of my head when I was writing it.

I also think it's a nice paper in that it collects and reviews the scope of the empirical literature. I don't do that in grueling detail (it's really not the venue for that), but I think that my separation of the studies into what can be thought of as reduced form and structural analyses helps a lot to clarify what we do and don't know.

And if nothing else I provide what I think is the most or at least one of the most comprehensive empirical lit reviews.

Cranky about Franky

This has been a cranky week for libertarians, between people suggesting that maybe it would be nice if workers could be in a position to stay with their families on holidays, maybe we shouldn't be so consumption focused over the holidays, and maybe exclusion of the poor is a problem in market economies.

It is the last point that I want to talk about a little and provide a quick quote I like.

Pope Francis's recent pronouncement was admittedly overwrought (like Greg Mankiw, I thought the discussion of "trickle down" in a Vatican document looked ridiculous. But I don't get the uproar over the broader point.

People act like the pope was denying that markets raise people out of poverty. It seems to me he wasn't denying that at all. I can't even imagine what would get people to think he was saying that except they're on a hair-trigger and jump at anyone questioning a libertarianish party line as being entirely anti-market.

It seemed to me all the pope said was that market economies will produce winners and losers, and that a group of people - by circumstances of birth and disadvantage relative to the wealthy - can be left out of a lot of the gains of the market economy.

This seems to me to be obviously true.

It's not a statement that markets fail to reduce poverty. I obviously thinkl markets do reduce poverty, but I also think they exclude people. The two are not contradictory. I highly doubt Pope Francis misses this point. When markets were under threat, the papacy did not have any trouble standing against socialism. I doubt there's a major about face now and there was certainly no indication of that in what I read.

I promised a quote. I particularly liked this one:

"Just as the commandment “Thou shalt not kill” sets a clear limit in order to safeguard the value of human life, today we also have to say “thou shalt not” to an economy of exclusion and inequality."

Some links

1. C-SPAN aired an excellent hearing today on abuses of presidential power specifically in the area of encroachments on legislative power.

2. Ben Harris (Urban Institute/Brookings Tax Policy Center) explains why the next debt ceiling fight is likely to be worse than the latest one.

3. A summary of a recent discussion by Mike Rowe on elitism in employment and education, and what you could call non-academic skilled work. Richard Vedder is on Rowe's side, which was nice to see - I usually don't find a lot to agree with from Vedder.

4. The New York Times on apprenticeship. Great article. It quotes the chair of my dissertation committee on the first page.

5. Speaking of my chair, vote for his daughter's group - Maya and the Ruins - at Folk Alley's 2013 listener poll. It's a few steps... you've got to register, confirm an email they send, and then click on it again to vote. But I know 90% of my readers are not doing anything particularly productive with their time. Willie Nelson is also on the list, which gave me pause, but I felt OK voting for Maya and the Ruins cause I don't think it'll put much of a dent in Willie's career.

Paula Stephan on the Endless Frontier: Self Recommending

Here.

If I'm not mistaken a young Paul Samuelson worked on the report.

Another interesting glimpse into how well Bryan Caplan would do on a Turing test

The question he asks is what evil in plain sight today will be abhorred by our descendants. Interestingly, he frames this in terms of political ideologies - liberalism, conservatism, and libertarianism. He claims that liberalism offers us the problem of cruelty to animals, conservatism offers us the problem of abortion, and libertarianism offers us the problem of our treatment of foreigners.

The really odd pair are the liberal/libertarian options. Before getting to that I want to say that he makes a good point on abortion. I'm pro-choice, but I've come around to the view that pro-lifers (I used to be one of them too!) have a potentially legitimate case. Of course it all depends on personhood which is not an easy thing to know what to think of. Having been through a pregnancy and having a child now I still don't know what to think of the question of personhood. Indeed that's a big part of why I'm pro-choice. In the face of such a contested question I find it hard to tell everyone to follow one viewpoint. But if the conservative view is correct this is a monstrosity.

OK, back to liberalism and libertarianism.

The liberalism one was weak and the libertarian one was confusing.

We're animals, and animals eat other animals. Most liberals are happy to eat other animals for exactly this reason. Tough luck - you're below us on the food chain. Of course outright cruelty to animals isn't a good thing, but that's not what Bryan is talking about and do you really have to be a liberal to think that cruelty to animals is bad? I hope not. Bryan takes some unusual life-style choices that are plausibly more common among liberals and invents a moral problem where there really isn't one.

The libertarian case - our treatment of foreigners - is confusing because I think of this as being a liberal thing as much as a libertarian thing. And indiscriminate pacifism on the part of some libertarians (and liberals) is not better treatment of foreigners, it's worse treatment. It's not that this isn't characteristic of a lot of libertarians (although many are anti-immigration), but it just doesn't seem as distinctive as Bryan would like it to be.

There is a very obvious liberal option that is different from conservatism or libertarianism: concern for individuals who happen to be disadvantaged due to the circumstances of their birth. I'm not just talking about feeling bad for the disadvantaged any more than Bryan is talking about just feeling bad for slaves. Everyone feels bad for the disadvantaged. I'm talking about using the coercive power of government to put a stop to a barbarity. Presumably Bryan is supportive of legally barring the ownership of other human beings. He is contemplating legally barring abortion.

The willingness to use the power of the state to help those who are disadvantaged by chance is something that I think our descendants are going to look back on and be shocked that we didn't do more to address.