Democracy in Deficit: Hayek Edition

Often you'll hear the argument that whether Keynes was right or wrong, he opened the flood-gates to politicians who destroyed fiscal sanity in his name. Buchanan makes this argument in Democracy in Deficit, and recently it's been repeated by Peter Boettke and Don Boudreaux.

It's an absurdly weak line of reasoning, and I want to illustrate why by using the same logic with Hayek - not because I think it's a legitimate case against Hayek (unlike Boettke and Boudreaux with Keynes, I personally think Hayek is an extremely high-caliber economist) but to illustrate how ridiculous the argument sounds:

So let's start by simply assuming that Hayek's great - that paying attention to Hayek will not lead a government astray and will not pile up an unmanageable debt. Hayek, on his own, is fine. But that's not really important. What's important is what Hayek and Hayekian economics gives politicians the license to do. Many politicians over the years have said that they are inspired by Hayek. Thatcher and Reagan are obvious politicians that fit this - both are symbolic of their era and of course have many allied politicians who felt the same way about him. More recently Paul Ryan has listed Hayek as a major influence, and has quoted him (here and here), including at CPAC - a major Republican Party venue. The same goes for Senator Rand Paul, and obviously his father as well. When was the last time Keynes was listed as a top intellectual influence for a President or for a Prime Minister? When was the last time Keynes was promoted at a Democratic Party function? I'm not sure if it's ever happened. You also have Hayek trumpeted by Glenn Beck and promoted on his show. My assertion - which I don't think any honest person looking at the evidence can reject - is that if you think Keynes has set a tone for any set of politicians (whether they are faithful to him or not), then Hayek has obviously set an even more substantial tone for another major set of Republican politicians (whether they are faithful to him or not). Anyone who wants to claim that Keynes gave politicians a license to do what they do has to admit that Hayek, as a major inspiration for a large swath of conservative politicians, has given at least as much license and therefore ought to be judged by the same standards that Buchanan, Boudreaux, and Boettke judge Keynes by in this regard.

So what can we lay at Hayek's feet for the license he gave politicians? Massive military buildups. Large and growing deficits during recessions as well as boom years. A complete lack of will to deal with entitlements or propose a long-term budget solution.

No one who lays these things at Keynes's feet can neglect laying them at Hayek's feet as well. If anything the case is stronger. Ron Suskind's recent book on Obama reveals to us that the president was vehemently opposed to the major Keynesian voices on his economic team. This is Obama - the guy that actually did stomach a modest stimulus two and a half years ago. If this guy has been given license by Keynes, then certainly we can put the Reagan legacy and virtually all post-Reagan Republicans at Hayek's feet.

*****

I propose something different: we stop honoring this argument as legitimate or logical. I appreciate James Buchanan a great deal. I've said here before I was thoroughly impressed when I was first assigned to read him as an undergraduate. I still am. But James Buchanan did a very poor job thinking about the legacy of Keynes, and unfortunately his arguments have been reproduced widely.

Krugman has made a similar argument about Hayek to what I make above. The difference between Krugman and myself is that he thinks it's actually a legitimate argument against Hayek and I don't. Boettke and Boudreaux seem to understand the problems with this line of argument when it comes out of Krugman's mouth. But when it comes out of Buchanan's mouth about Keynes and when they repeat it themselves, they are completely oblivious to how illogical they sound. Foolishness gets passed off as wisdom. This argument really has to stop. I'm getting to the point where I am having a hard time taking people seriously who make this argument.

If you have a problem with politicians - criticize politicians. Don't bring the bone you have to pick with Keynes into it unless there's a much clearer connection than this one.

This will be the narrative to defeat

Keynes, certainly the greatest economist of the 20th century and perhaps the greatest ever, has made an incredible comeback in the last several years. In many ways he never left. While very specific public policy prescriptions had fallen out of favor for a while, the impact he made on how economics is done and how we think about the economy lived on even through the people who thought they were displacing him. But even in addition to that framework for doing economics, the more specifically Keynesian ideas have had a resurgence for one important reason - the same reason that any scientific theory gains acceptance: it makes good sense theoretically and it fits the data.

A lot of people who are not on board, though, have been pushing back. It's notable that one of the major ways they push back is with a sort of sociological, historical counter-argument, rather than an analytical, scientific counter-argument. Peter Boettke writes:

"The main mechanism [for the rise of Keynesianism] is the shift in the nature of public administration due to the progressive era, which Vincent Ostrom examines in detail in his masterpiece in the field, The Intellectual Crisis of American Public Administration (1973). This shift in public administration changes the expectations of what public policy is to deliver to citizens, and more importantly for our purposes what is expected of the policy experts. Keynes' economics fit that demand better than the more traditional mainline of economic thinking, and the Keynesian avalanche occurred and transformed economics as a discipline and economic policy ever since. To challenge this hegemony, one must get at the root cause, which is that transformation of public administration."

Boettke is - and I don't think he would dispute this - a heterodox economist. But he's not the only one that's asserted things like this. Lee Ohanian has been on record saying things similar to this (although less blatant in saying "the politicos like it") as well. And you can look at the way the whole Tea Party movement reacts too - they don't care about economic science - they see the constellation of Keynesian ideas (even if they can't identify it as "Keynesian") as a politician-buttressing ideology. It's much like the reaction against evolution that some people have - often it isn't an analytic counter-argument at all. Instead, creationists provide a sort of botched, unconvincing "these are the political ramification of evolution" counter-argument.

And yet the narrative is remarkably persistent, despite the lack of a real argument. They categorize Keynesianism as political ploy rather than scientific theory, which relieve's them of the need to engage it as a scientific theory.

This frustrates me to no end, but ultimately this will be the narrative that needs to be defeated. It's not even a narrative that makes particular sense. Since when have politicians been elected on the slogan "I don't really care about your specific spending needs because Keynesianism doesn't go that specific, I'm just going to deficit spend on everything". Keynesianism makes horrible politics, which is part of the reason why Alex Tabarrok has questioned whether for that reason alone we need to consider alternatives (I provide thoughts on Tabarrok here) I disagree with some of the pessimism of guys like Tabarrok on "Keynesian politics", but I think his grasp of the situation is much stronger than Boettke's on this point.

Anyway, like I said - this is the narrative to beat. I plan on writing something about this in my Economic Thought class this fall - answering or starting to answer this question of "why did Keynes catch on in America?". I think it has very little to do with what Boettke has mentioned and a lot more to do with the fact that (1.) it's good science, and (2.) American economic thought extending back to the colonial period was predisposed to accept Keynes.

Discussion on the Constitution at ThinkMarkets

Troy Camplin and I have been discussing more of the Constitution this morning at ThinkMarkets, and rather than continue to clog up that venue, I thought I'd move the most recent comments over here for thoughts.

Troy blogs here and here (take a look at Troy's recent post on the General Theory at the second link I provided and see if you can catch his mistake on Keynes's use of the savings identity).

Troy Camplin Says: ...Sorry, but the 9th and 10th amendments make it clear that any powers not explicitly given to the federal government are not to be held by the federal government at all, but by the people (note that “people” is first in the 10th amendment) and the states, respectively.

Words mean things. It’s not a postmodernist free-for-all.

Daniel Kuehn Says: Troy – traditionally the disputes are over interpretations of Article 1, not the eighth and ninth amendment. I don’t know anyone that disputes the idea that rights not stated are reserved to the people and the states (the 14th clouds the picture a little of course).

I’ve seen this “words mean things” line come up several times now, and I’m not sure why you (and Daniel and others) act like this is some sort of point in your favor. The alternative argument is not that we get to make up what’s in the Constitution – it’s that word’s mean something and originalists ignore the plain meaning of the words. Why do you take “disagreeing with Troy” to mean “postmodernist free for all”?

Troy Camplin Says: That’s your interpretation, Daniel, and not a very mature one, at that. Try reading in context.

There are plenty of things in the Constitution I disagree with, but that I’m not going to bend with a postmodernist reading that allows words to mean “exactly what I want it to mean, no more, no less,” as the postmodernists insist. Words DO mean things. They don’t get to mean whatever you want them to so that you can get whatever reading you want. Which is clearly what you want. It is of course easier than actually following the law of the land and making changes according to the way the Constitution allows.

On the other hand, your argument seems to be that whatever you happen to disagree with is unconstitutional, but all the rest our government does is clearly constitutional. Project much?

But you are right — nobody debates the 9th and 10th (the two I was talking about) amendments. They just ignore them completely, pretending they are not there.

Daniel Kuehn Says: Troy - It’s fine that you and I disagree on the plain meaning, and I’m not immature for it. I don’t think you’re a postmodernist because you’re wrong – I just think you’re wrong. I find it odd that so many on your side think that because we’re wrong we’re also loosey-goosey with language.

re: “They don’t get to mean whatever you want them to so that you can get whatever reading you want. Which is clearly what you want.”

That’s the last thing I want. The Constitution provides no constraint on federal power and no structure to American governance if you can get whatever reading you want out of it.

Troy Camplin Says: Your last statement is immature. That’s what I was refering to. I did not say you said I was a postmodernist. I said that those who essentially argue that words can mean whatever they want them to mean, so the Constitution means whatever they want it to mean are postmodernists. They do violence to all sorts of texts, not just law.

The ones who are wrong have typically used loosy-goosy language. Thus the accusation.

You can make no argument from the Constitution that allows for government bailouts for companies any more than it allows for farm subsidies [I had earlier argued that farm subsidies probably don't pass constitutional muster].

Daniel Kuehn Says: Troy – you suggested that I interpret the Constitution to mean whatever I want to mean, and since I clearly don’t all I can conclude is that you just don’t like how I (and most others) have interpreted the plain words. There’s nothing immature about how I connected the dots there. I know better than to call you a post-modernist, but given the standards that you’ve set up for it you seem as much a post-modernist as I do.

On bailouts – it’s hard to get enthusiastic about them, but certainly the systemic benefits of the bailout qualify it as a potential promotion of the general welfare in a way that farm subsidies simply aren’t. Moreover, regulation of commerce between the states has long been interpreted to encompasses the ensuring the regularity of the channels of commerce, and attempts to maintain credit markets certainly seems to fall under this. In light of these obviously constitutional reasons for bank bailouts, and the limited time with which to respond, direct provision of funds could easily be justified as a necessary and a proper action for implementing policy. None of these elements are present with agricultural subsidies (although perhaps these were more systemic and plausibly Constitutional in the 20s and 30s).

It doesn’t mean bailouts are wise policy (that which is permissible is not always advisable), and it doesn’t mean we won’t deliberate over whether the methods are actually necessary and proper (that’s what legislatures and courts are for – to deliberate these disagreements), but it seems obvious that there’s Constitutional justification.

I don’t want to continue to crowd this blog – feel free to respond if you want, but I’m moving these last comments over to my blog so we don’t choke the discussion going on here.

Libertarians, Logic, and "Free Liberals"

Andrew Sullivan shares a great post by Tim Lee contrasting Hayek with Rand and Rothbard. Lee writes:

"One of the more pernicious influences of Rand and Rothbard on the libertarian movement was their tendency to treat every policy problem as almost reducible to a logical syllogism. Too many libertarians act as though they don’t need to know very much about the details of any given policy issue because they can deduce the right answer directly from libertarian principles. The practical result is often to shut down internal debate and discourage libertarians from thinking carefully about cases where libertarian principles may have more than one plausible application. Hayek seems to have written “‘Free’ Enterprise and Competitive Order” with the explicit purpose to combat that kind of dogmatism. He thought it “highly desirable that liberals shall strongly disagree on these topics, the more the better.”"

I've critiqued the Austro-libertarian fetish for deduction on here before, and Lee makes largely the same point here. I think you have to start a step back, though, and simply point out that human society is immensely complex. You can take a few first principles that you make up, like mathematical axioms, and derive a logical system from it that you can apply to situations that seem to be relevant to those first principles (like physical matter). That's a deductive project that can have real payoffs. But you simply can't do that with human society. Too much is going on. Even if you have a true axiomatic claim about human action, you're very likely to miss lots of other first principles and contingencies that could completely change the picture. Imagine if we just dropped half the field axioms in mathematics. The set of deductions you would be able to come up with would be incomplete! You wouldn't be able to demonstrate nearly as much, and you'd certainly be missing substantial portions of the way classical mechanical systems behave. Or, as another way of putting it, think of what happens when you add additional field axioms in higher mathematics. We have a hard time getting to the bottom of physical reality this way, and yet many Austro-libertarians go through life as if they can rule out empirically derived social science because their deductions from their axioms don't come to those conclusions.

I've recently been in contact with Jan Helfeld - a fairly well known libertarian interviewer - that covers these same frustrations that Lee is sharing. Jan uses a Socratic Interviewing method based on a few underlying claims that he uses to try to demonstrate inconsistencies in the arguments of various politicians and media personalities. Kevin Rollins (editor at Econ Journal Watch and a GMU student) suggested I debate with him and exchange some thoughts. We're still trying to set that up, but I sent him some written thoughts I had on his whole project. This is a selection of what I sent him that is relevant to this point about libertarians and their use of logic:

"Your interviewees note this [the problems with his axioms], but they don’t always articulate it in the best way (probably because they are caught off guard or just haven’t thought about these issues). But they do realize there are fundamental problems with the deductions that you make. My concern with some of your interviews is that your interviewees tell you this – they tell you your questions miss the point – but you never change or try to think about what may be wrong with your questions, or work with them to figure out a better way of approaching the problem. You keep asking the same question over and over again instead of considering the possibility that you’re asking the wrong questions. You may catch them in logical inconsistencies, but if the logical structure you impose on them is meaningless that doesn’t really prove much except that you were able to trap them in a word-game. Is the point to prove Congressmen are not the greatest logicians or that they don’t understand basic principles of a liberal society? You may succeed at the former – it’s not clear to me you succeed at the latter.

It reminds me of something Keynes said about Hayek. He wrote that one of Hayek’s books was an “example of how, starting with a mistake, a remorseless logician can end up in bedlam”. You strike me as this sort of “remorseless logician”. You take a first principle that you don’t appear to closely interrogate (or at least that you don’t appear to think has the problems that I see in it) and then you persist at it until you elicit a reaction from your interviewees."

Jan seems like a great guy but I feel like the method that strikes him as being so effective can be very misleading. People will nod their heads to claims like "individuals don't have the right to initiate violence" and "individuals can't delegate rights they don't have". These sound like pretty reasonable assertions. There's nothing particularly absurd about them. So his interviewees nod their heads in agreement. Jan then takes those axiomatic building blocks, shorn of their qualifications and problems, and makes a quick case for libertarianism out of them. But that seems to just gloss over the really hard questions! What are rights really? Is government just an institution that individuals delegate their rights to or is it something else? What are some extenuating circumstances where an initiation of violence might be justified? Are rights themselves an initiation of violence (a la Proudhon)? Is government action that seems on the surface to be an initiation of violence really an initiation of violence? Most of the time these secondary questions (which come up because of flimsy "axioms") don't even come up - or if they do come up they get plowed through as if the interviewee is changing the topic.

The confidence that libertarians get from this deduction-fetish, which Lee points out in Rand and Rothbard, is very dangerous when they start talking about organizing society. It raises the specter of libertarian social engineering, which I've critiqued at length here. I have no quarrel with social engineering, but this sort of large-scale social engineering and the risks that it involves simply isn't conceivable for a more empirical framework that does not insist that its deductions are universal and unimpeachable (except by another logician's ability to see a flaw in the logic).

One solution is simply to be more open minded and pluralistic when it comes to libertarian thought. That sounds like a "no duh" solution, but the simple willingness to be speculative, entertain alternative possibilities, and impute significance to competing priorities can go a long way. A good example of this is Kevin Rollins' own "Free Liberal" project*, which is outlined at his website and carried out socially in a variety of venues. Kevin's approach is interesting - I've had lots of opportunities to correspond with him and his group at this point, and their willingness to embrace a pluralist inquiry and perhaps most importantly a speculative inquiry is impressive. They are quite libertarian, but their discussion seems to be a lot more productive than the discussion you see in other venues. This is the sort of thing that is going to move liberal thought forward. Not every libertarian is a Misesian or a Rothbardian or a Randian either (and these three gangs don't always get along with each other). There are lots of libertarians that don't use these logic games, and there are lots that like the logic-games, but don't rely exclusively on them.

*I am hereby issuing an open invitation to Kevin to offer a guest post here exploring Free Liberalism further.

On Don Boudreaux and Brad DeLong

A couple days ago I was lucky enough to have DeLong comment on my blog - he does it from time to time, and it's always great - he's a prominent figure in the economics blogosphere, and in economics, period. This time, though, I was critiquing Brad's style of attacking people in a relatively personal way on his blog (he can be of the "forget the honey, these flies have some vinegar in store for them" style) and he took issue with my critique. Fair enough. I responded to him by suggesting he give up his "Stupidest Man Alive" posts as a New Year's resolution. It didn't take apparently. Shortly afterwards he announced that Don Boudreaux (and Mark Perry and John Tierney) were in the running for "stupidest man alive". OK, so he didn't take a lowly blogger's stylistic advice into account. No big deal. So why did he give Boudreaux, Perry, and Tierney this honor? Well - for quite good and quite clearly identified reasons. What DeLong took issue with was this claim by Tierney (and Perry and Boudreaux for applauding Tierney):

"The overall energy situation today looks a lot like a Cornucopian feast, as my colleagues Matt Wald and Cliff Krauss have recently reported."

Ummm... ya... that is a problematic statement, is it not? Energy prices are higher now than they were, and there are no clear signs that the rate of new production is going to outpace new demand in the near future. This is not an energy doomsday, but it's not a "cornucopia" either. Indeed, it's precisely this pressure that is going to incentivize new discoveries and whole new energy sources and ways of using energy, but that doesn't make the current energy situation or the situation in the foreseeable future a "cornucopia". And Brad said as much.

Don Boudreaux didn't like that very much - which I have to add isn't surprising because Brad called him "stupid", after all. The problem is, because Don was seeing red from being called "stupid" he went off the deep-end in interpreting DeLong's quite reasonable critique. He concluded that DeLong was taking the position of Paul Ehrlich, who predicted mass scarcity of resources, inexorably increasing prices, and that England "might not exist" by the year 2000 (I don't even really know what that means, but it doesn't sound pretty). At this point I want to invite readers to read DeLong's post in case you glossed over my earlier hyperlink. Is there anything in there that indicates he has any sympathy at all for the Ehrlich argument? Is there anything in there that even indicates the thinks there will be a dependable trend increase in prices? Of course not. Because Ehrlich was completely ignorant of economics and DeLong is one of the best informed economists out there. Don apparently did not take the time to read DeLong's post - I'm not sure he got past the title, because he certainly expected DeLong to take Ehrlich's side of the bet when he offered the classic Simon-Ehrlich wager to DeLong.

So what do I care? Well this is where I (probably unwisely) inserted myself. I told Don it was absurd for him to think DeLong would ever take this bet because it was absurd to think DeLong was sympathizing with Ehrlich in his critique of Tierney. I even pointed out an earlier DeLong post to Don where he agreed with Alex Tabarrok that neither Simon nor Ehrlich were especially wise in predicting such a persistent trend. And how did Don respond?:

"Daniel, you seem to read famous economists as if they are incapable of being dead wrong. Economists are too frequently slaves to their silly textbook and academic-journal models, having little ability to distinguish their models from reality, and fancying themselves wise and knowing because they've mastered complicated mathematical formulae and esoteric jargon. I'm certain that I'm wrong - even dead-wrong - quite often. But I've never, to my awareness, read any economist with such eagerness to excuse him or her from dumbshit error as you read the likes of Krugman, Keynes, and DeLong."

Well, it turns out I read DeLong exactly right on this point.

DeLong doesn't think the Ehrlich side of the bet is a wise bet because: "Falling expected extraction costs over time will impart a downward trend to resource prices even if net resource earnings are expected to be stable. Moreover, expected resource earnings are probably not expected to be stable: they are probably on a downward trend because most exhaustible natural resources are negative-beta assets--which means that investors ought to be willing to pay more for them than if they required a Treasury bond-like return. And most organizations that extract natural resources would like to be around for a while and think that their industry has a bright future--which means that it is at least plausible that they are likely to pump a little bit less than they should and so push today's prices up even further above the optimal Hotelling level."

All that, and he never initially claimed to take Ehrlich's side, of course. I want to re-emphasize that it's not especially notable that I was able to tell Don that DeLong thought this in advance of DeLong's response. It was written in plain English in everything DeLong has ever written about it. DeLong made a counter-offer. He reminded Don that his only claim was that we were not in an "energy cornucopia" where a flush supply of oil compensated for the increasing demand from developing economies. The absence of demand pressures usually manifests itself in lower prices, so DeLong instead suggested a put option for oil at $20/barrel.

You would think Don would show some humility after all this. To me, for framing my ability to read plain English as reading DeLong, Krugman, and Keynes with "eagerness to excuse him or her from dumbshit error" - but especially to DeLong for completely misreading him and absurdly associating him with 1960s vintage environmental-doomsday-dystopians. But there is no humility to be found - he's back on the attack, calling DeLong "not a nice man" because DeLong apparently read Don's response too fast and thought Don refused his counter-offer when he actually said he'd sleep on it.

Yawn. OK who cares? Am I missing something? That's an honest question because this is so absurd - am I missing something about why Don called him that? Don thinks that makes you "not a nice man"? DeLong apologized.

A new offer is on the table from DeLong, that the price of oil won't average $10/barrel for any five year period over the next twenty years.

I am not holding my breath for Don to embrace any of these offers, although I suppose it could happen. Don is only interested in painting anyone that disagrees with him as an extremist. If you offer him proof that you're not an extremist (as DeLong did initially, and then again, and now a third time), Don just hunkers down. Don is the kind of guy that looks for fights, and then when there is nothing to really disagree over, he invents positions for you. It's entirely transparent unless you're completely enraptured by him, as a lot of the commenters at Cafe Hayek are. And when I try to point out that the vast majority of people are not extremists - that there is not some cadre of environmentalist fanatics or statists out there - I get attacked by Don for being credulous.

DeLong likes to fight too (and I also enjoy heated debate - I'm not claiming to be a delicate flower that shuns heated debate in general). I still maintain calling people the "stupidest man alive" is not the most effective approach or the most polite approach. But it's also clearly a schtick and has to be understood as such. DeLong is not the one with egg on his face here. I've critiqued DeLong for a handful of things in the past, I've favorably cited considerably more, and it is still the position of Facts and Other Stubborn Things that he is among the few indispensable bloggers in the economics blogosphere.

I'm waiting for an apology from Don for claiming I eagerly defend "dumbshit errors" by famous economists, but I'm not holding my breath for that either, until he breaks out of his ideological bubble.

(Not Brad DeLong)

Good post on "interpretative charity"

This is one of the best blog posts I've read in a while now from one of the best critical thinkers out there. He nails a point that has always bothered me but couldn't always express: the lack or misunderstanding of "interpretative charity" in both the blogosphere and in intellectual circles. He writes:

"A common misconception takes interpretative charity to be an inability to say anything contrary about someone's thoughts or actions... a sort of well-meaning but naive refusal to engage in argument because a nicer and more well-meaning interlocutor could always be plausibly imagined. The idea is that the overly-charitable interpreter nuances a person's position to death so that even the worst crimes and falsehoods could be justified in the name of standing aloof from uncivil polemic... While I don't see any need to link other conversations, this post originated out of continued frustration with the idea, held by a few folks, that I can be something of an etiquette obsessed contributor to... blogs, unwilling to ever just go out and offer a straightforward criticism."

The author, speaking of a paper he wrote where he exhibits this "interpretative charity", says that his critique:

"simply couldn't have been made without taking most of the paper to follow through certain arguments on the basis of their own most reasonable terms. That is, without prioritizing interpretative charity some critiques actually remain unavailable."

Every commenter an ombudsman at F&OST...

Robin Hanson shares a great list of behaviors which are "Signs that your opinions function more to signal loyalty and ability than to estimate truth". I think I do fairly well on most of these - some of these I consciously work at. But then again, I'm a biased observer. What do readers think? Do I fare well by these standards? Do you fare well in your comments or in your own writing? And be specific please - remember, I may be biased in my self evaluation but you are probably biased too. I'm interested in this as a self-evaluation tool, and interested in how others think of themselves on each of these points. I've bolded the pit-falls that I think I am especially good at avoiding, and highlighted in red the pit-falls that I'm most likely to be guilty of:

1.You find it hard to be enthusiastic for something until you know that others oppose it.

2.You have little interest in getting clear on what exactly is the position being argued.

3.Realizing that a topic is important and neglected doesn’t make you much interested.

4.You have little interest in digging to bigger topics behind commonly argued topics.

5.You are less interested in a topic when you don’t foresee being able to talk about it.

6.You are uncomfortable taking a position near the middle of the opinion distribution.

7.You are uncomfortable taking a position of high uncertainty about who is right.

8.You care far more about current nearby events than similar distant or past/future events.

9.You find it easy to conclude that those who disagree with you are insincere or stupid.

10.You are reluctant to change your publicly stated positions in response to new info.

11.You are reluctant to agree a rival’s claim, even if you had no prior opinion on the topic.

12.You are reluctant to take a position that raises the status of rivals.

13.You care more about consistency between your beliefs than about belief accuracy.

14.You go easy on sloppy arguments by folks on “your side.”

15.You have little interest in practical concrete implications of commonly argued topics.

16.Your opinion doesn’t much change after talking with smart folks who know more. [maybe, but this is tough to assess because there's usually ample "smart folks who know more" that agree with me and "smart folks who know more" that disagree with me - so attributing this accurately is a little hard]

17.You are especially eager to drop names when explaining positions and arguments.

18.You find it hard to list weak points and counter-arguments on your positions.

19.You feel passionately about a topic, but haven’t sought out much evidence.

20.You are reluctant to not have an opinion on commonly discussed topics.


It bothers me most when people fail on #11 and #18, and these are two things that I consciously try to succeed at. You only shoot yourself in the foot if you don't familiarize yourself with the weaknesses of your own argument. You open yourself up to having other people raise the point - it's always better to raise the point yourself and acknowledge not everything is worked out yet. Number eleven is pointless too. Some people have a need to disagree with those from a "different school of thought". I think that's extremely dangerous because (1.) it could create superficial differences where there really aren't any, and (2.) it's not really clear whether you've thought through someone's claim or just opposed it because they support it.

The rhetorical advantages of vagueness and handwaving

Three libertarianish posts to chew on: Mario Rizzo on David Brooks, Arnold Kling on lib'ruls and government research, and my response to Buturovic and Klein in EJW (given the Arnold Kling inclusion you can consider this another installment in my "What Was Arnold Kling Thinking?" series... part 3 I think). Each benefits in a slightly different way from vagueness.

1. Mario Rizzo doesn't like David Brooks's op-ed about the need for a more pragmatic, less ideological conservative movement. That's fine. Conservatives and libertarians have been frustrated with Brooks on these points for a while now - this sort of spat is nothing new. I was interested, though, in this point by Rizzo about ideology:

The conservative reaction against “ideology” is a total misconception. A “good” ideology is a philosophy that focuses our attention on the long-run, Bastiat’s unseen,” and the fundamental values of a free society. Most of all, however, it helps us focus on those rules that act to resist the special interests who would undermine the structure of a free society, one issue at a time.

It doesn't get much more vague than that. (1.) The long run, (2.) Bastiat's "unseen", (3.) the values of a free society, and (4.) resisting special interests. Well I agree on all those points, but presumably I'm closer to David Brooks than Mario Rizzo. A lot of people would agree on these points (many would have to be informed about what Bastiat said, after which they would agree) - so how does this level of vagueness advance the discussion at all? It doesn't. And that's fine - Rizzo has every right to fire off a quick unelaborated reaction and there's nothing wrong about this post. My only point is that when things stay this vague we make our opinions look more broadly agreeable than they actually are. I know a lot of what Rizzo thinks in more specific cases, but if someone came up to me who I was not familiar with and said their ideology was composed of those four things, my reaction might be "Hey - we agree! And you know Bastiat! That's fantastic!". Vagueness papers over potential underlying disagreements, and when those disagreements come to the surface people sometimes assume bad faith. Just a thought.

2. Arnold, Arnold, Arnold. So now his point is:

My view on the funding of left and right is that if you include government funding, the left enjoys a huge funding advantage. A single government contract for Jonathan Gruber to lend his technocratic hand in government regulation of health insurance or for Mark Zandi to bless the stimulus with precise estimates of multipliers exceeds what one can earn in a lifetime by writing essays on expert failure. Compared with the amount of money that the government spends on statist propaganda and on promoting research that argues for more state power, the funding of conservative think tanks is miniscule... I do not know any economist on either side who I would accuse of altering his opinions to increase his earning power. But if you do want to prostitute yourself, then my advice is to join the left, not the right. The left is where you are more likely to get tenure and really large research contracts. (emphasis mine).

So I could approach this in one of two ways. The first way was the path I took in the comment section on his blog - pointing out to him that when you bid on government research contracts (and I've bid on millions of dollars worth even over my short career) you present your proposed methodology and a cost estimate. There's no room at all for ideology to creep into that. If you cost too much, you lose. If you suggest that guessing is a better methodology than random assignment, you lose. Moreover, the government takes your results no matter what they are. I've had findings that the government liked and that the government didn't like. I've had findings saying government intervention was effective and that it was ineffective and that it was counter-productive. Guess what - the government publishes all these results. They don't hide the ones that say they didn't do a good job. In fact, when they get a lot of research indicating that they did a bad job they adjust the program. That's why they have research contracts in the first place, after all. Anyway, the second approach I could have taken was highlighting how vague all this is. "Propaganda", "prostitution" - what is Arnold Kling saying here? It's not clear at all. He says that he doesn't think anyone has really changed their views to get a government contract, which makes things even more vague. Usually Arnold isn't shy about what he thinks - but assuming "prostitution" is not to be taken literally here we're left pretty confused. Kling relies on vague pronouncements about "statist propaganda" in an effort to avoid really talking about the process of government research contracting and talking about how a standard methodology has any ideological content at all. Arnold's handwaving and vagueness, in other words, allow him to make a point without really backing it up with anything. It's hard to provide a counter-argument because you can't figure out what the hell the original argument is, and even if you do provide a counter-argument it'll just be branded as "statist propaganda". It's hard to argue with vagueness.

3. Finally - if you haven't read my response to Buturovic and Klein yet, you should. My critique of them boils down to their inexcusable vagueness and hand-waving. The technical term I use is that they suffer from a serious "identification problem". Buturovic and Klein's paper is an exercise in keeping things as vague as possible, and just attributing everything they observe to "economic enlightenment". By ignoring all the other factors that may be driving the result they don't have to worry about any ambiguity or competing interpretations in their findings. I find it incredible hard to believe that either of them are unaware of these sorts of identification problems. Klein sees himself and EJW as a sort of ombudsman for economic journals. You can't possibly take on that role without understanding underidentification issues and parameter identification problems. The same with Buturovic, who is a professional survey researcher. Moreover, both of them have to be aware of these issues because they discuss pre-existing surveys that are specifically designed to address the sorts of problems I discuss in my response. So if you know that these sorts of things exist and are worth worrying about, how do you get around it? I can think of three ways: (1.) design the study to deal with it, (2.) don't draw any firm conclusions as a result of it, or (3.) keep things so vague that the problem never comes up in your discussion and hope nobody notices. Buturovic and Klein pretty blatantly chose option number three. But come on - their audience is economists. Economists savage each other on identification problems for sport. Did they really think they would get away with it? Vagueness and handwaving provide a brief rhetorical advantage in this case, but if you're presenting your findings to people who are trained to ask detailed questions to get behind the vagueness, you're going to be in trouble.

Oh... and somebody let Mario Rizzo know I cited Bastiat's "unseen" in my response...

Austrians need to know when they are and are not unique

The Austrian School can fall into priding itself on its insularity. I find it to be something of an odd impulse. I think it's encouraging to realize the existence of common ground, especially on scientific questions. On cultural or ethical questions it's less clear whether that is a good or necessary thing. On scientific questions disagreement may be productive - but it's jarring and uncomfortable. We seek answers, syntheses, and reconciliations precisely because scientific questions shouldn't have two answers. This is also why science is detail-oriented and qualified. If we can account for differences because of the existence of some caveat that changes the mechanics of the question, then we once again have a theoretical framework that eliminates contradictions.

Anyway, that's one thing that always irks me about the Austrian School - although perhaps it's simply how I'm perceiving them and it's all in my head. But they can come across as wanting to stress how different and in how much disagreement they are with everyone else. And they also sometimes manage to convince themselves that everyone else rejects the pillars of their theory. Many, many Austrians don't do this - I'm just saying the ones that do are conspicuous. I remember that an Austrian friend of a friend of mine, during a discussion about economics, once asked me pointedly "What theory of value were you taught in your program? Do you use a labor theory of value?". I calmly answered "No, I use a subjective, marginal theory of value just like you and everybody else - nobody has used a labor theory of value since the 1870s, if not before". That's an extreme case of ignorance - I don't think most Austrians are walking around thinking other economists are using a labor theory of value. But the underlying impulse is real. In an earlier post on another issue I called it the "presumption of ideological orthogonality" - the assumption that "because I think X and I know that guy disagrees with me on Y, he must think not-X".

I stumbled across what you might call a presumption of orthogonality again today at Coordination Problem, where Steve Horwitz writes of the opportunity cost of capital:

"Most economics textbooks teach opportunity cost in terms of foregone utility from consumption choices (e.g. "beer vs. pretzels"), although Economic Way of Thinking is an exception. And I think this is consistent with the post-Marshallian vision of most economists wherein subjectivism is about consumption and value but production decisions are based on more objective notions of cost as embodied in the cost curves. Other than EWOT, how many intro books derive the supply curve using an approach that emphasizes the rising marginal opportunity cost of alternative uses of the inputs?"

A better question, I think, is "how many intro books don't emphasize the opportunity cost of inputs". I'm not sure how you could talk about a cost curve without talking about the opportunity cost of capital. I did a quick Google search and predictably found a bunch of lecture notes and textbooks that references this. I know we learned about the opportunity cost of capital at William & Mary. To be honest, this post surprised me a little. Steve Horwitz, Peter Boettke, Mario Rizzo, Roger Garrison, etc. - these guys usually don't make this mistake of assuming that mainstream economists are dunces. They recognize that mainstream economists are more often than not "mainstream" because they are convinced by "mainstream" arguments, not because they are ignorant.

If you cut out that paragraph from Steve's post it would have been perfect - he really has some awesome things to say about the opportunity cost of capital, particularly the role it plays in Austrian theory. I don't want this post to detract from that. This is just something that I wanted to add.

What I think happens is that the Austrian School has a very unique set of emphases. The capital structure is important to them. The time structure of production is important to them. Subjective value - embraced by all economists - is something that they make a point of highlighting. The dangers of inflation and debt monetization - which is understood and accepted by all economists - plays a pivotal role in Austrian theory. The mature Austrian recognizes that their theory does have a few genuine novelties, but that for the most part it differentiates itself in it's emphases (this is especially true of Austrians that aren't particularly sensitive about things like praxealogical method). The same is true of any school of thought, really. The only really novel thing about Keynesianism is liquidity preference. Most of the rest is just a difference of emphasis, and most of the different conclusions flow from liquidity preference. Keynesians usually don't worry too much about heterogeneous capital, for example, which drives Austrians up the wall. But not worrying about it when they explain their theory is different from thinking it doesn't exist. Austrians and Keynesians universally agree about the reality of the heterogeneity of capital. The difference is, one group has made it a centerpiece of their theory and the other hasn't.

I think Austrians especially - but really everyone - needs to be cognizant of this sort of thing.

It's silly to convince ourselves that there are stark disagreements or misunderstandings where there really aren't. It's also silly to reject each other's theories out of hand simply because of a difference of emphasis. For example, I think Austrian Business Cycle Theory is actually a very good and reasonable theory. I have no reason not to. I think inflation can distort the structure of production. I think people can miscalculate. I think capital is heterogeneous. There is no good reason for me not to see value in ABCT, nor is there good reason for anyone else to dismiss it out of hand. It's a solid theory. Now, the question of how much of the business cycle ABCT explains is an open and an empirical question. I think there are more important factors involved, especially for the post-gold-standard business cycle. But that's different from saying that ABCT is wrong. Keynesian theory might be a little harder to accept because it adds something where we don't have common ground, namely liquidity preference.

Before ending this, I want to identify a few points of agreement that some Austrians really need to stop pretending we disagree on:

1. Subjective value
2. "Seen and unseen"... I know you all like to quote Bastiat but the rest of the world calls this a "counterfactual". It is absolutely integral to our understanding of the economy, and we didn't need Bastiat to get there. This one bothers me to no end.
3. Heterogeneous capital
4. The credit cycle
5. The knowledge problem. I've covered this in a series of posts on calculation problems vs. incentive problems. Nobody sides with Lerner and Lange today - you're not the only ones carrying the Socialist Calculation Debate torch.
6. That inflation errodes wealth

And sometimes you even have a hard time convincing Austrians that we know about rent-seeking, the free market, liberty, free trade, and taxes too. But we have very intelligent readers here at F&OST, so I think it would be overkill to make a big deal out of those things.

Reasons, Freedoms, and Offense: the point of drawing Mohammed

Daniel discusses "Everybody Draw Mohammed Day" below, and solicits responses.  Here's mine.

My concern about this is the extent to which emotionalism and vague sentiment are being packaged up as reasons and free thought.  I could conceive of a situation where drawing a likeness of Mohammed would serve some useful purpose, despite the fact that it may offend some people.  In these cases, I'd of course advise prudence with regard to the display of such images, but I don't see any reason for one person's conscience to be dictated by another's.  The question, then, is whether such useful purposes are present in the recently declared holiday.

In the poster for the event, and in many statements by organizers, it's claimed that this is about the First Amendment and free expression.  This seems obviously false.  A media corporation censored the South Park episode, not the government.  And, while I'm no expert in the contracts involved with such endeavors, it hardly seems as if the free expression of Parker and Stone has been squelched, even if we set aside the fact that we're not dealing with citizens' rights vis-à-vis their government. There's nothing stopping me from drawing a picture of Mohammed right now, scanning it, and posting it on this blog for all the world to see (or at least all of the places where Google has a grip).  Parker and Stone can surely do the same.  What has been restricted is not their free expression, but rather the extent of corporate backing that would allow them to broadcast their work to millions of viewers in a branded, highly advertised, and moneyed project under the Comedy Central name.  Forgive me if I don't shed any tears for their hardships.  It is a damn shame that they have to express themselves like the rest of us in this case, rather than take for granted the provision of soapboxes and loudspeakers by one of the largest media conglomerates in existence.

So basically, it's absurd to make this into a free expression issue.  This is show business, not a Vietnam War protest, and Parker and Stone knew as much quite well when they signed on for their big fat paychecks, signed over the rights to their creation, etc.  The fact that they decided to be corporate tools and we decided to pay for their cable channel in order to get a good laugh doesn't mean that their artistic or philosophical sensibilities are our burden.  Nor are their sensibilities the burden of Comedy Central or Viacom.  Not to shatter everyone's blissful misconceptions of the matter, but no one who produces or consumes the product that is South Park cares very much about the personal expression of its producers, or what they think about anything. 

But this also doesn't mean that "Everybody Draw Mohammed Day" is only about South Park.  In addition to a claim to being about the First Amendment, the poster advertising today's festivities says that they seek to "water down the pool of targets".  Awfully noble.  After all, the big concern is that threats have been made against the creators of South Park, as they have been made (and sometimes even carried out) against cartoonists over the past few years.  This is a serious issue, and while certain offenses may justify violent response (human rights abuses, terrorists attacks or other crimes, imperialism, etc.), the offense of certain images against religious sensibilities (which we shouldn't deny are real) doesn't seem deserving of death, at least for those committed to liberal values.

Daniel wants to embed this liberal sense more objectively, to draw a distinction between whether simply anger or violence is provoked by these actions.  I don't know how helpful this is.  The images only subjectively provoke one thing rather than the other given certain assumptions.  And I share those assumptions, to be sure, but the whole reason why we have a problem here is that some people don't share those assumptions.  Violence is only unprovoked in a situation where the drawing of a likeness of the Prophet doesn't deserve violent punishment.  If it's our contention against those who disagree that no such punishment is deserved- ever- it hardly seems sensible to just assume that everyone take this to be the case on our say-so.  Better to say, perhaps, that (objectively) the comics have provoked anger and violence, that (subjectively) they don't obviously provoke anything, either anger or violence, and that we don't think it's reasonable for people to respond in violent fashion to the offense they entertain at certain images, although we do think it's reasonable (though not necessary) to respond simply with anger and objection.  This, I think, prevents us from hiding our own imperative statements behind the cover of "that's how things are".  We can then take full responsibility for our own values, and push them on people openly.  This strikes me as the only honest way to have an ethical dialogue unless we are prepared to argue from natural law, divine command, or whatever other solid foundation the objective and enduring basis of the free expression of religious blasphemies. Daniel may be prepared to do this, but I'm not.

So much for the reasons for this day.  I've tried to separate the substantive from the non-substantive and clarify how I think a substantive response would best proceed.  Granting that we've made such an argument, though, what of the drawings themselves?  Is this how we should express our concerns?  If, as Daniel says, the founders of this holiday "aren't trying to marginalize or intimidate Muslims in general [...] they're quite clearly singling out a particularly totalitarian and illiberal segment of Islam", it seems questionable to me whether images of the Prophet will serve the intended purpose of the day.  What will it accomplish (for? against?) the totalitarian and illiberal segment?  More anger?  Perhaps a feeling of being cornered?  Marginalization?  Disgust?  Boredom?  Confusion?

If we want to convince people to abandon violent tendencies, or at least stop them from such tendencies, it seems worthwhile to ask how practical it really is to piss them off further.  I don't personally see why someone with goals of alleviating violence would do something to fan the flames (even if they think such flames are unjustified in the first place).

...which is why I suspect that this is one big pissing contest between partisans of a rather unenlightened liberalism and partisans of a rather unenlightened religious despotism.  Which is why I'm not especially interested.