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.

My last slide on Hayek today

The Hayek lecture today is going to start with a brief run through of the Austrian school from Menger to the present (we've already covered Menger and Bohm-Bawerk), followed by a brief bibliography of Hayek, one student talking briefly about his long essay on the socialist calculation debate, and then the bulk of the lecture will be on ABCT.

Then I have a slide at the end to motivate discussion until the end of class. I thought you all might be interested in it. We talked about Vernon Smith when we discussed "modern Smithians" in the Adam Smith lectures, so they are familiar with constructivist vs. ecological rationality.

The important things for me are for them to understand Hayek is making more than just a libertarian claim - he's making a claim about spontaneous order and planning. Second, I want them to just think through all the things economists have said that we've discussed and how it applies to the Fatal Conceit quote, and third I want to challenge them to not take Hayek at face value.

Exactly why isn't a radical change to the evolved social order like libertarianism in flat contradiction of the point Hayek is trying to communicate here?!?!

Most of the lecture is straight up ABCT, but I think this will be a discussion they will be more interested in ending with.

For those of you out of the loop on my slow posting...

This is a big reason why... although there's been a ton of other work too.

The only thing sadder than me doing my first post in over a week griping about a Wikipedia entry...

...is Bob Murphy doing a post griping about me griping about a Wikipedia entry.

(784% longer than my original post, too!)

Wikipedia fail

15% of the Wikipedia article on liquidity preference is about Rothbard.

Internet Austrians are completely delusional about the extent to which what they think matters.

A question for readers who know what's going on internationally better than I do

Do you know of a good resource for information on sub-national labor market policies - especially employment protection policies or anything impacting turnover rates - in:

1. Germany
2. Switzerland
3. Austria
4. Canada
5. Austrailia

Also do you know of excellent up to date books on labor markets and labor market policies in the first three?

My third essay, I think, is going to have a strong comparative component to it and I need to bone up on some other labor markets

How economists think about market imperfections: an anecdote

You'll often hear from libertarians that "mainstream" economists are preoccupied with market imperfections because it's an excuse to push policy, criticize the market, or both. A good example was Don Boudreaux the other day thinking that Alan Manning was criticizing markets in general just because he has issues with models of perfect competition. Of course just about any non-libertarian is more willing to muse on certain types of policy options than libertarians, but generally speaking I think that understanding of mainstream economics of imperfect competition is silly.

I've got a good anecdote from yesterday's labor class where we were talking about asymmetric information and statistical discrimination. It was a great discussion, but we didn't say a single word about policy or government. We never mentioned it once. The more active parts of the discussion revolved around:

1. Making sense of some of the odd diagramming approaches in Cahuc and Zylberberg.

2. Me bitching (believe it or not, I do that in class too) about some assumptions in the textbook treatment that higher productivity workers would have higher reservation wages. I think outside options are much more sensible way of motivating how asymmetric information leads to adverse selection. It's a little different from the lemons model in that sense.

3. Real world examples.

We also got off topic (we do that) and talked about the IZA labor conference on Monday, our papers, classes next semester, and of course Caroline.

We didn't talk about public policies to address imperfections in the entire two and a half hour class.

I do not think this is unusual.

We deal with these models because they are good at explaining the way the world works, period. To the extent that we care about policy of course models that explain how the world works are the ones you should use to inform policy.

Four thoughts on Cochrane on New and Old Keynesianism

It's an interesting post but I disagree with him on (at least) four counts:

(1.) Nobody really thinks (well, maybe Cochrane does) that the NK consumption function is exactly right. We bring in intertemporal optimization because people do plan for the future, but people still think that current or at least near/medium term income matters for psychological/behavioral reasons if nothing else,

(2.) so with MPC = 0 if government spending doesn't crowd out you've still got a case for government spending. The problems only come in if government crowds out. Insofar as government commits to major investment programs, and insofar as we think investment is governed by expectations of future demand, you get positive multipliers again (of course, by a different mechanism than the Old Keynesian multipliers).

(3.) The whole MPC/income thing goes out the window when we consider credit constrained, paycheck-to-paycheck people, which leads me to

(4.) It's true politicians talk like Old Keynesians. I think economists do this less - they focus on my (2.). When we do talk about MPC it's almost always with reference to something like (3.).

So it's a good post laying out the issues, although I don't buy all the "you silly Old Keynesian" implications. I agree with Krugman that the Old Keynesian intuitions hold up surprisingly well, even if the mechanisms do change.