Steve Jobs

You all know by now, of course. I just felt like it was worth putting up a condolence post. I've never been a real Apple product user, but when I think of Steve Jobs I think of (1.) how many people are deeply impacted by his products, (2.) his role as an exemplar of innovation, and (3.) this speech, which we actually had a long lunch-time discussion about at the NBER conference I was at last week:



There have been a lot of points in my life where I've felt like a real failure - a lot revolving around my professional and educational career (much like Jobs's speech here). But my experience with these failures has been similar to his (aside from the stupendous amounts of money, of course) - they've provided a way forward that I never would have anticipated before. The big failure for me was being rejected from PhD program after PhD program when I graduated from William and Mary, which eventually directed me toward the Urban Institute and GWU's public policy master's program. It felt like a miserable failure at the time - but as regular readers know it has shaped how I've moved forward, and given me incredible opportunities thanks to the senior researchers there who took me under their wing. I also simply could not have had a better exemplar than the Urban Institute of objective research on policy issues that is still able to make a positive difference in the world. My more recent failure has been another round of rejections to the programs I really felt I belonged in, namely Georgetown and Maryland. I don't feel as downtrodden as I did in 2006 when this happened, because I'm starting to see how failures happen for a reason (did I really belong there?) and open new doors. I may not get an academic position after I graduate from American - I'm certainly not likely to get a high-powered academic position. But I wonder if I could do more good not just for the world - but for the science of economics - outside of academia. Just as Jobs points out in this speech, I am more open to how we grow from failure than I was when I was younger.

*****

One more thing I have to mention: I've been very disturbed by how politicized some of the blogosphere reactions to Jobs's death have been. Why is this where so many people's minds go after a tragedy? Why do people have to assume that because they support the good things that Jobs stood for, their political opponents somehow don't? I don't know - I'm not going to link to any of them, but I encourage people to try to stay edifying.

Ron Paul is a funny little man

The moderator asks Paul about the yearning of Republican voters for another candidate to "jump in"... first Perry, then Christie, etc., and whether it reflects their lack of satisfaction with the current candidates.

Paul's response?: When people yearn for another candidate it's because all the candidates except for me aren't "asking the right questions" and represent the status quo.

But somehow it apparently doesn't say the same thing about the one Republican everyone knew would run in 2012 since 2008: Ron Paul! It doesn't seem to dawn on him that if people are yearning for someone better than the current slate of Republican candidates, and he's in the current slate of Republican candidates, it seems like they don't think he's up to snuff either!

In his response, Paul also clearly has no idea what Keynesian economics is, but that's not particularly surprising or important. What I found more funny was when he called the other Republican candidates the "status quo". This is the guy that's been in politics longer than ANY OTHER REPUBLICAN CANDIDATE. And yet somehow he still manages to convince otherwise intelligent people that he's not just another politician.

Speaking of Ron Paul, Bob Murphy alludes to Paul as the candidate who consistently supports the Constitution. I had to laugh at that, but I suppose if you read the Constitution how Paul does he's been a consistent supporter. In the same post, Bob considers how Sean Hannity would approach a Romney nomination, writing: "I can’t wait to hear Sean Hannity explain why RomneyCare in Massachusetts is a bold experiment in federalism, whereas ObamaCare in the USA is crazy socialism." It's true that it would be entertaining to see Hannity make that case, but it's actually a very solid argument and one of the many reasons why I like Romney (not that I'd call ObamaCare "socialism", but I've held from the beginning that a more federalist approach that is not reliant on a national mandate would be preferable). Romney is the only Republican right now that I could see myself voting for over Obama. The big problem with Romney is that he'd take the wrong approach to the recession, but since Obama is for the most part taking the wrong approach to the recession that doesn't seem like quite the obstacle to supporting Romney that it could have been. On a number of other issues Romney is better than Obama (although the reverse is also true).

Regardless, one of the biggest reasons I can't support Paul is that he's so bad on the Constitution. Consistently supporting what you wish the Constitution said is not consistently supporting the Constitution in my mind.

Against Ideology

Gene Callahan has some good thoughts here. He writes:

"Dan Klein claims: "One’s ideological views – that is, the pattern of positions one tends to take on important public-policy issues – run deep and change little."

Well, Dan is not using the word "ideology" in the same way I do. And that's fine: I can get different definitions than my own. But in my case the claim is simply empirically way off: My views have changed dramatically at least five times in my life: from conservative as an adolescent (I used to watch Firing Line religiously at age 12!), to pretty far left by my mid-twenties, to neoconservative in my mid-thirties, to mild libertarian a few years later, to libertarian anarchist, and finally, to a understanding that holds that ideologies themselves are the main problem with contemporary politics.

I like to believe that this is a result of a willingness to think things all the way through again and again, changing my beliefs as required by such re-thinking. My critics will probably say it is just evidence of some personality disorder. I figure the odds are 50-50 as to who is right."

I probably lean more towards Gene's presuppositions about the meaning of "ideology". Dan Klein's definition here simply refers to a consistently held position. Of course, consistency can be well reasoned and empirically supported. I usually think of being "ideological" as adhering to ideas because of a desire to make your positions "fit" with some larger, coherent worldview.

Gene also links to a thoughtful post by Rod Dreher on the topic.

Ideology's primary cost, of course, is it's inflexibility. Internally consistent worldviews are a dime a dozen. The harder part comes in when you realize that consistency with the external world is a lot harder to establish, and often requires flexibility in foundations and conclusions.

Partisanship is of course the worst sort of ideology. Inflexibility when it comes to the ideas you hold - a determination to "fit" what you think with an internally consistent, pre-fabricated worldview - is bad enough. When you then substitute an articulated worldview for a party, you don't have much less to stand on. Liberals who never question a Democratic president. Republicans who blame Democrats for what they lauded in Republicans. Libertarians who will fawn over Ron Paul at the same time that they project their hero-worship onto others, etc. Parties are useful things. At a time when nobody on "the other side" seems palatable, one can be relieved that the party institution at least maintains a center of semi-sane gravity. But anything much beyond that appreciation seems dangerous.

Hitchens on al-Awlaki

Christopher Hitchens has been one of the greatest public intellectuals presenting a relentless case in favor of the liberal tradition on the one hand and a resolute opposition to the threat that Islamic fundamentalism poses to liberalism. He writes about al Awlaki here. One thing I like about this piece is that he doesn't get tangled up in the killing itself and focuses on who al Awlaki was - what sort of al Qaeda member he was - and the implications that that has for the way Americans react to the problem. This is particularly good:

"Slow and sidelong cultural erosions of this kind can do incalculable harm. And they can also be horribly and cheaply self-replicating: Some people will “overreact” to a specter of Islamism however slight, and this will offend the man who is only trying to meet his prayer obligations, and then a whole machinery of supposed grievance and redress clanks into action. Meanwhile, those who orchestrate this little carnival of mayhem and social corrosion are able to do so from areas that are beyond our legal jurisdiction but within our military reach, and to taunt us while doing so."

Is anything Stiglitz is famous for original???

This is not a knock on Stiglitz at all (I already got Greg Mankiw commenting on here... gotta tone back what I say about famous economists that I actually like a lot!!!).

What I mean to say is actually fairly high praise for an economist (I think). Reading Adam Smith in my economic thought class these last several weeks has made me realize that every single idea Stiglitz is famous for, Adam Smith already presented.

Some are sort of basic ones, but still points that Smith was the first to make in a rigorous way: Asymmetric information? Featured prominently in Smith. Market power? Featured prominently in Smith. Those are more general and really just mean that Smith constantly referenced the characteristics of the market economy that Stiglitz is famous for constantly referencing.

Others are far more specific, and not just off-hand insights: Efficiency wages and credit rationing are both in there in considerable detail.

Throw in the fact that Smith's trade theory is in many ways just the New Economic Geography, and you realize reading the Wealth of Nations is like getting a preview of the early 21st century Nobel laureates!

Karl Smith on Romer and Bernstein

Karl Smith presents a good case for not making too much of the Romer-Bernstein forecast. I like the method of turning it around on another policy and thinking about how we would react.

But I think something he tip-toes around should also be stated much more clearly: the methods by which economists forecast the future and the methods by which economists estimate stimulus impact are completely different, and the latter are much more accurate. People often talk as if the two empirical tasks are one and the same, without realizing that they are entirely different. They're so different, in fact, that when I learned forecasting and when I learned the sorts of methods they use to produce multiplier estimates, they were taught in entirely different econometrics classes. So if somebody says something like "their model predicting the impact of stimulus obviously doesn't work because their forecast was way off", they don't know what they're talking about. They're conflating two completely different things.

You can be (like I am) confident in their multipliers but not all that confident in their forecasts. This shouldn't be that surprising of a position. We trust that climatologists have a better sense of what's happened with climate in the past than they do of what will happen in the future. We trust that evolutionary biologists have an easier time describing the evolutionary tree from 50 million years ago, but we don't think they're particularly good at understanding what the tree will look like 50 million years from now. Only in very mechanical systems, like planetary orbits, do we trust long-term projections. Even in cosmology more generally nobody knows exactly what's going to happen in the far future.

Greg Ransom on Hayek

Greg has three posts up on Hayek and Social Security (here, here, and here). He's quoting from the same chapter that I was.

Unfortunately he seems to be deleting comments, so I'm not sure how far you'll get. I emailed him about it and asked him to continue the conversation, but no response so far. I'm not sure what I've said that offended him.

In case he deletes your comments too, think of this as a forum to discuss the material he presented in those posts. My interpretation is the same as it was (it ought to be - I read those exact passages just a couple days ago when writing my post!). Hayek supports social insurance. He has a lot of problems with Social Security, Medicare, and unemployment insurance and does not think that they at all meet the standards of social insurance he would find acceptable. As Levine and Zernike suggest, Hayek spends most of the chapter (after setting up what sort of program he would approve of) denouncing the programs that exist. So Greg Ransom is presenting that very first part - the discussion of acceptable social insurance in a liberal society.

This isn't exactly Hayek's Pure Theory of Capital. It's a fairly straightforward chapter. I wish Greg would tell me what he thinks is wrong with my read of it, but he doesn't seem interested.

Bob Murphy now has an outlet for his work in my neck of the woods

Looks like Bob Murphy is now a columnist for The Washington Times. Congratulations Bob!

Choking down Mankiw (and every other intro textbook)

One of my pet peeves is the idea that a surplus in the labor market and unemployment are the same thing.

It's just not. The definition of "unemployment" varies across societies, but it is usually some variant of "not working but in the market for work". That's not a labor surplus. If a labor surplus exists, it is a subset of the unemployed, but it's not the definition of unemployment. There can be unemployment in a labor market that's in equilibrium.

Anyway - the point of my title is that the macro class I'm TAing is using Mankiw, I'm planning a lesson for my review session right now on the chapter on unemployment, and Mankiw defines unemployment as a labor surplus in that chapter. I have to choke it down because I can't contradict the textbook, have them fail a test, and then have them tell the professor that I taught them something different.

Oh well. Still - this is a really bad habit of textbooks.

Hayek on Social Security

Okay, I've read Hayek on Social Security in The Constitution of Liberty and I simply have no idea what Greg Ransom is talking about. I see nothing fallacious about what Levine and Zernike have written, and in the context of The Constitution of Liberty I find this story about Hayek, Social Security, and Charles Koch all the more fascinating and relevant.

My read on Hayek is that he sees a role for a bare minimum level of social insurance, but that he is wholly opposed to Social Security, Medicare, and the national health systems of Europe. The entire chapter is dedicated to contrasting these programs with the bare minimum insurance to provide for what he calls "extreme need", which he would accept. I have no idea what Greg could possibly have in mind when he says the terrible things about Levine and Zernike that he did, and he really does owe both of them an apology. I can't find a single thing they wrote that Hayek didn't express in The Constitution of Liberty.

"Though a redistribution of incomes was never the avowed initial purpose of the apparatus of social security, it has now become the actual and admitted aim everywhere. No system of monopolistic compulsory insurance has resisted this transformation into something quite different, an instrument for the compulsory redistribution of income. The ethics of such a system, in which it is not a majority of givers who determine what should be given to the unfortunate few, but a majority of takers who decide what they will take from a wealthier minority, will occupy us in the next chapter. At the moment we are concerned only with the process by which an apparatus originally meant to relieve poverty is generally being turned into a tool of egalitarian redistribution. It is as a means of socializing income, of creating a sort of household state which allocates benefits in money or in kind to those who are thought to be most deserving, that the welfare state has for many become the substitute for old-fashioned socialism. Seen as an alternative to the now discredited method of directly steering production, the technique of the welfare state, which attempts to bring about a "just distribution" by handing out income in such proportions and forms as it sees fit, is indeed merely a new method of pursuing the old aims of socialism."

And on the way Social Security benefits are paid, Hayek writes,

"This is all part of the endeavor to persuade the public through concealment, to accept a new method of income distribution, which the managers of the new machine seem from the beginning to have regarded merely as a transitional half-measure which must be developed into an apparatus expressly aimed at redistribution. This development can be prevented only if, from the outset, the distinction is clearly made between benefits for which the recipient has fully paid, to which he has therefore a moral as well as a legal right, and those based on need and therefore dependent on proof of need."

Levine and Zernike refer to this passage (accurately):

"In this connection we must note still another peculiarity of the unitary state machine of social security: its power to use funds raised by compulsory means to make propaganda for an extension of this compulsory system. The fundamental absurdity of a majority taxing itself in order to maintain a propaganda organization aimed at persuading the same majority to go further than it is yet willing should be obvious."

He concludes this thought with:

"Such subsidized propaganda , which is conducted by a single tax-maintained organization, can in no way be compared with competitive advertising. It confers on the organization a power over minds that is in the same class with the powers of a totalitarian state which has the monopoly of the means of supplying information".

He also writes:

"Though in a formal sense the existing social security systems have been created by democratic decisions, one may well doubt whether the majority of the beneficiaries would really approve of them if they were fully aware of what they involved."

He also calls it "a tool of politics, a play ball for vote-catching demagogues"

And as for that Austrian public health care he was getting: "There are so many serious problems raised by the nationalization of medicine that we cannot mention even all the more important ones". He's mostly referring to single payer type stuff here, and I have issues with single payer too. But the point is it's precisely such a system that he had to be cajoled away from by Charles Koch. That's what's so ironic about it. I don't think single payer is wise, but if I had reason to believe I couldn't get a certain degree of medical care outside of a European country that provides that benefit, I might resist leaving too! And perhaps that would be hypocritical of me. But my case wouldn't be remarkable because I'm not giant of the libertarian movement that's written extensive criticisms of this stuff!

This is particularly good too:

"There can be no principle of justice in a free society that confers a right to "non-deterrent" or "non-discretionary" support irrespective of proved need. If such claims have been introduced under the disguise of "social insurance" and through an admitted deception of the public - a deception which is a source of pride to its authors - they have certainly nothing to do with the principle of equality under the law".

And this is a nice conclusion:

"It has been well said that, while we used to suffer from social evils we now suffer from the remedies for them."

Hayek clearly and unequivocally supports a minimal level of social insurance, but I could fine nothing but scorn for the currently operating social security and public health insurance systems. He likened their public relations arms to totalitarian propaganda. He said they were fulfilling the agenda of socialism. He went through what would be necessary to end them. He challenged the idea that they represented any notion of equality under the law. He called it the tool of demagogues. Nothing in the chapter on Social Security in The Constitution of Liberty suggests that anything Levine and Zernike said was wrong. The man claimed quite clearly that he did not like Social Security and he did not like public health insurance programs. Period.

This is not the first time people have questioned Ransom's grasp of Hayek either (see here and here, and lots of the convos on Coordination Problem). I advise my readers to take what he says with a grain of salt from now on. Read that chapter in The Constitution of Liberty. Levine and Zernike don't deserve the terrible treatment that Ransom gave them, and they seem to understand Hayek a lot better than he does on this point.