Friday, June 29, 2012

A sort of Turing test opportunity

Not exactly, I know. But I have to run out for a while and can't write it up now. What do you think my response to Mattheus is?

I gave a hint of it in the comment section of the post he references. I don't think it's an especialy typical view. Probably the closest person I know to my view made explicitly is Gene Callahan. But I think my view is more or less what people really mean when they cite things like the "social contract" (which is definitely a silly idea).

Macro, science, and falsification

Noah Smith has an interesting post up on the subject. It's one of those posts where on all practical counts I agree with him but I would not agree with a lot of the more abstract points he makes (namely, that macro is not scientific... or to be more fair what he actually said is that it's "barely a science at all"). The reason he says this (and the reason I disagree) is, of course, falsification. I've never been particularly impressed by Popperianism, as readers know. Science is as much about compiling convincing evidence as it is about a strict falsification regime. It's about deriving the best explanations we can about what we observe (which does not require falsification - although of course it never hurts), not about saying something about an ultimate reality. Science accepts that its explanations are imperfect and is happy with broader laws that explain processes well. It doesn't require that we provide an explanation so precise that it can be definitively falsified (although again, that's always nice). Of course someone who worries about being strict on falsification can live in the community of scientists fairly comfortably. Instead of theorizing that "all swans are white", you could always theorize that "a whole lot of swans are white". The latter theory works just fine. "A whole lot of recessions are caused by demand shocks, and this is how we think the ones that are work" is a fine macroeconomic scientific statement too. Most science is about this sort of stuff. Developing good descriptions, from observation, of one process out of many potential processes that may or may not be operating at a particular time. Falsification is never a bad thing when you do this sort of science, but when you realize that in complex systems sometimes you've got lots of processes going on that deserve careful research, the ideal-type of the falsification contest starts to seem a little beside the point of it all.

But like I said, as a practical matter I agree with a lot that Noah has to say. He concludes with: "The solution is for macroeconomists to A) admit their ignorance more often (see this Mankiw article and this Cochrane article for good examples of how to do this), and B) search for better ways to falsify macro theories in a convincing way." Both are very good suggestions, and I'm particularly interested in B.


Some reasons why people get so down on macro (inappropriately, in my view) is:

1. They have this idealized Popperian physics in their head (is this even how physics works?) of crisp laws describing phenomena and clear cut experiments, and that's just not what defines science nor is it representative of all science. Economics is more like biology: (a.) complex processes all at work at once (so it's not clear there has to be one "right" macroeconomic theory (b.) explanation is more important than prediction, precisely because it is a complex system, and (c.) there's a whole lot of good scientific work to do that is largely descriptive or taxonomical. Physics-envy is not good for economics. We're studying the social behavior of highly evolved apes. Economists are very specialized primatologists. That should give you a hint that you should probably look to biology rather than physics for a template.

2. We expect models to explain a lot more than they were designed to explain. This problem with how people view macroeconomics is well illustrated in a recent post (quoting an older article) by Mark Thoma. He writes: "Macroeconomic models have not fared well in recent years – the models didn’t predict the financial crisis". What a fascinating sentence! Why would anyone expect a macroeconomic model to predict a financial crisis? Who says this is a determinant of whether macroeconomic models have "fared well"? Can I say that household bargaining models haven't "fared well" because they didn't predict the financial crisis? Of course not. That's silly. The financial crisis was not a macroeconomic crisis. It was not driven by macroeconomic processes. The financial crisis was caused by the vagaries of the finance industry. You judge finance models by this, not macroeconomic models. Now, how have macroeconomic models done in predicting how the macroeconomy would respond to the financial crisis? How have macroeconomic models done in explaining the path of output, interest rates, inflation, and employment? Some have certainly done more than others. None predicted a financial crisis because, well, that's what finance guys do. Should we look into macro-finance linkages? Definitely. Definitely, definitely, definitely. But the crisis was caused by the structure of CDOs, by certain risk models, by expectations about house prices, and by the exposure of different financial firms. None of these are really issues that macroeconomists are best placed to speak on.

3. Prediction may be impossible. This kind of expands on point #1. We don't say that seismologists aren't scientists because they can't predict the epicenter and magnitude earthquakes a couple years in advance. We don't say that climatologists aren't scientists because they can't predict right now when and where the hurricanes will hit next hurricane season. We don't say that evolutionary biologists aren't scientists because they can't sketch out the food chain 100 million years from now. And these failures at prediction also don't cause us to abandon the models used by seismologists, climatologists, or evolutionary biologists. Even if you get caught up in this falsification project, falsification doesn't necessarily imply prediction. Prediction of complex systems is very hard. Sometimes we can just explain the behavior of complex systems. Scientists aren't miracle-workers.

Thursday, June 28, 2012

You know what's kind of nice that I noticed?

In all the pictures you see of the Supreme Court where they're posing for a picture (i.e. - not on the bench), they're just sitting in simple Windsor chairs. No big fancy plush red leather chair. Just simple wooden things.

I looked at a few older pictures as well and that seems to be the approach for quite a while.

Interesting Supreme Court connection: Justice Rehnquist lived about a quarter mile from my parents' house in Arlington. My sister played on his grand-daughter's basketball team back when she was in middle school, and we would see him at games every once in a while.

Well that makes me sound positively heroic!

"In a recent paper in the Cambridge Journal of Economics, Daniel Kuehn storms into the face of austerity hawks by arguing that the 1920-21 recession - heralded by many as a poster-boy for austerity measures – is not applicable."

- from a post by Vincent Geloso

I still wished I had explained the supply shock argument a little better (i.e. - reproduce with ample citation Romer's excellent treatment and share a few other things on agriculture at the time that I dug up). The tight money policy was an aggregate demand shock, and the tight money policy did really put the economy into a nose-dive, so you have to be careful in talking about it as a supply-side downturn. And there was a good reason why they did that: to bring the price level back in line. The reason why it doesn't really give us much guidance about fiscal policy is that monetary policy had a ridiculous amount of maneuvering room (which it took advantage of even before Harding came into office), and their was no demand shock to speak of except for the one that Benjamin Strong was already in the process of removing.

Three good points on the constitutionality of health reform

Rod Long, responding to what I thought at the time was an over the top claim from Jason Brennan:

""Isn’t the most plausible explanation of this that most legal theorists are intellectually corrupt?"

Surely there's another obvious explanation: the Constitution contains contested terms, and the best interpretation of those terms is quite appropriately inseparable from one's pre-existing moral views. For example, the 5th Amendment calls for "just compensation." It doesn't call for "what we, the framers, currently consider just compensation." It calls for just compensation, meaning whatever compensation is actually just. So of course you can't settle what it calls for without bringing in claims about what's actually just."

"Necessary", "proper", and "general welfare" are also, of course, contested terms. Just because they are contested does not mean they can mean anything or that they have no limit. It just means people are going to disagree on what that limit is. You do not get to pretend the word is window dressing just because it is contested and that makes you uncomfortable.


Judge Posner, quoted by Beverly Mann (this one goes really well with Long's point):

"The chief justice, echoing Justice Scalia's "broccoli" comment at the oral argument, rejected (as did the four dissenters, and so that is now the view of a majority of the justices) the Commerce Clause ground for the mandate, saying that to accept that ground would mean that "Congress could address the diet problem by ordering everyone to buy vegetables." This argument, reassuring though it is to our obese population, confuses separate constitutional provisions. The Commerce Clause would empower Congress to order everyone to buy vegetables, because the market for most vegetables is interstate, but the "liberty" protected against the federal government by the Fifth Amendment would doubtless be interpreted to forbid such an imposition, just as it would be interpreted to forbid a federal law requiring everyone to be in bed with the lights out by 10 p.m. in order to economize on the use of electricity and, by doing so, reduce carbon emissions from electrical generating plants."

"Liberty" is a contested term. Half the posts on this blog are about liberty as a contested term.


Ruth Bader Ginsburg (cause it's basically her job to make good points about the constitutionality of health reform):

"The Necessary and Proper Clause “empowers Congress to enact laws in effectuation of its [commerce] powe[r] that are not within its authority to enact in isolation.” Raich, 545 U. S., at 39 (Scalia, J., concurring in judgment). Hence, “[a] complex regulatory program . . . can survive a Commerce Clause challenge without a showing that every single facet of the program is independently and directly related to a valid congressional goal.” Indiana, 452 U. S., at 329, n. 17. “It is enough that the challenged provisions are an integral part of the regulatory program and that the regulatory scheme when considered as a whole satisfies this test.” Ibid. (collecting cases). See also Raich, 545 U. S., at 24–25 (A challenged statutory provision fits within Congress’ commerce authority if it is an “essential par[t] of a larger regulation of economic activity,” such that, in the absence of the provision, “the regulatory scheme could be undercut.” (quoting Lopez, 514 U. S., at 561)); Raich, 545 U. S., at 37 (Scalia, J., concurring in judgment) (“Congress may regulate even noneconomic local activity if that regulation is a necessary part of a more general regulation of interstate commerce. The relevant question is simply whether the means chosen are ‘reasonably adapted’ to the attainment of a legitimate end under the commerce power.”"

You're both right

Specifically, Williamson is right about the state of macroeconomics and Krugman is right about IS-LM.

And Williamson is just being cantankerous and missing the point when he claims that IS-LM can't explain things it wasn't designed to explain. The point is that on one of the crucial questions that we needed to get right, IS-LM does a great job describing our predicament - a lot better than what some people said who long ago abandoned IS-LM as some kind of joke or dead end. Of course the conversation doesn't end there, even in evaluating the questions IS-LM does speak to. And of course there are a lot of important questions it doesn't speak to! The point is this: if economic policymakers knew no macroeconomics but IS-LM and they were fully convinced of the value of IS-LM we would be in a better place than we are today. That's all.

Now - when I say that Williamson is right about the state of macroeconomics, I should clarify that that means I think Krugman is wrong. He's way too down on mainstream macro... reminds me of a few other people I know.

Do not be shamed by this meme!

True, Supreme Court justices probably shouldn't be appointed by lottery as if a random member of the population knows the Constitution as well as anyone else.

True, you should probably stay away from talking down to trained constitutional lawyers (and, let's remember, our president is one).

True, you may very wel be wrong.

Still, my inner Jefferson thinks we all oughta weigh in on this. It's a good thing we can all read the Constitution, get some background on google, and argue about this. That's fantastic. That's what this country is all about.

Pontificate. You might learn something. You might make someone else think of something they haven't thought of before.

Do it about economics too.

Pay attention to the brilliant guys in the room that have been studying this a lot longer than you have, of course. Pay very close attention to them. But pontificate!

One more thought

I am no lawyer and no expert on Obamacare. Perhaps the tax argument was just fine in this case. I'll defer to others on that.

The more obvious argument to me in the lead up to this ruling was to say that Congress unambiguously has the authority to spend for the general welfare (and it's doing a lot of that with this reform), and it unambiguously has the authority to do anything "necessary and proper" to accomplish anything that it has the authority to do under Article 1 Section 8. You could make a good argument that the mandate is "necessary" and "proper" for carrying out its spending for the general welfare. Ergo, it's perfectly constitutional.

Thoughts on the ruling

I don't have a whole lot, except for amusement at the comical reactions of some of my conservative and libertarian friends. But I did post this on facebook that you might be interested in:

"A pretty good day, I suppose. I've never been particularly thrilled with the content of Obamacare, but I have also not appreciated the cafeteria Constitutionalism of opponents that decides inconvenient clauses don't exist.

The mandate was actually one of my least favorite components of the law, but in the long run it's better that we stick with the Constitution.

For those of you who (understanda
bly) care a lot about coverage and are celebrating because of this, one thing that's worth remembering is that we really have two problems: coverage and cost. Arguably, the former depends on that latter more than the latter depends on the former. Arguably, Obamacare does much, much less for the latter.

My thought is we should have done health reform more like we did welfare reform - with substantial state-level implementation flexibility. In that sense Romney has a point, and in that sense a Romney/Obama hybrid plan probably would have been better IMO. But the future is our oyster - the world doesn't come to an end in 2012. We have a good framework, a good president, and a good ruling to build off of

I don't know if I'll post much more on this. But obviously the discussion isn't going to end in the forseeable future and you know me - I may post after all. But, since I don't have any immediate plans to I thought I'd extend the invitation for guest posters if you want to sound off and don't have a blog of your own.

Science is demand constrained, not supply constrained

That's a pretty good way of summing up my views on the economics of science, although not perfect. There is a frontier in science (it's the endless frontier, after all!) so there are certainly going to be some supply constraints. Perhaps the point is that those aren't really the binding ones in most cases (and if they are binding it's probably a constraint that could easily removed in due time by a scientific demand shock).

Anyway, regarding science demand constraints:

Moon Landing

A response to my posts on epistemology that I don't agree with

I don't mean to pick on this particular comment that just went up - I'm just quoting it because it is similar to the flavor of other comments. I don't think it's a good defense of epistemology:

emergenteconomics writes: "In economics it's certainly acceptable to do epistemology -- a non-circular definition might be "thinking about knowledge". In fact I think that much more epistemological discussion should take place. Why? So much of what passes for economic knowledge has turned out to be questionable, largely as a result of the global economic crisis. Many economists are beginning to understand the difficulties with the knowledge that the mainstream of the discipline has produced (the prominent economists who've partially or fully recanted include Stiglitz, Krugman, DeLong, Wolf, Buiter, etc. etc.) It seems sensible to do things like thinking about how we achieved our knowledge and how to make the process of knowledge-generation better in future. This is part of healthy scientific endeavour. We should do much more methodology, too."

This is fine as far as it goes, but as I've noted to other people this sort of thing isn't really getting into epistemology at all. This is economists thinking a little harder than they did before about methodology. And that's fine. But there is no new foundational knowledge to ground our claims as true knowledge from any of this soul searching. Nobody in economics or any other science is ever in pursuit of this foundational truth. Nobody cares about that, and the absence of a foundational proposition or "basic belief" hasn't seemed to do science all that much harm, and that's my point. It's not clear there is one. It's not clear we could know it if there was one. It's not clear we'd know we had it if there was one and we had it.

If we're not grounding knowledge in these "basic beliefs" - if our talk is in this way untethered (and we're not concerned with doing anything about it), then what this untethered talk really is is methodology. And that's a fine thing to talk about.

British invasion

1. A great hearing in the House Ways and Means subcommittee on Human Resources on how taxes and welfare discourage work. The star witness is Duncan Smith, Secretary of State for work and pensions in the UK, who describes recent reforms to their income support system. The other witnesses are great too, including Gene Steuerle (of the Urban Institute), who talks a lot about implicit marginal tax rates associated with the phase-out of these programs, and Jared Bernstein talking about the success in incentivizing work and the importance of demand side policies. Bernstein makes an important point - the marginal tax rates you hear about are very real, but the increased labor supply that studies of these programs pick up already account for the marginal rate disincentive. He agrees with Gene we should reduce those marginal rates when we can, but they don't negate the value of the program.

2. Richard Layard has put out a "Manifesto of Economic Sense" with Paul Krugman. This is a good example of good-citizen economists.

Wednesday, June 27, 2012

The Sraffa Problem is not a problem

A little while back we were talking about "multiple rates of interest" and "own rates of interest", and I argued that "own rates", while they are going to be compared to the interest rate charged for credit in making any investment decision, don't matter in a Wicksellian sense at all. Andrew Laiton links to that discussion, and Nick Rowe links to Andrew.

I don't know Andrew's affiliations but he offers what I generally think of as an Austrian-flavored approach. Credit expansion changes real patterns of production, and so you can't just ignore credit expansion or pretend that the different production structure does not matter.

My respones to that has always been that the logic of it all makes sense, but I have a hard time believing that these real distortions of the capital structure matter all that much. Neat theory. I even "believe it" insofar as I'm sure there isn't absolutely no impact on the real structure of the economy. But it doesn't seem to explain the really crucial elements of macroeconomic fluctuations.

Nick takes a position closer to my initial position. Basically that while you can't preserve all the relative prices it doesn't really matter because that's simply not what is being targeted (and the reason why it's not being targeted is presumably related to the point I made earlier - that the primary concern here, unless you're an Austrian, is not preserving a particular structure of production).

Nick makes an interesting point at the end about how the Sraffa problem causes trouble if you change your target, and that a lot of the tacit knowledge central bankers amass about one target don't always carry over to others.

Take a position: Gun control

Ryan Murphy thinks we should go off the beaten path in blogging. His answer is apparently to jump into the middle of culture war issues that are (if it can be conceived of) more purposeless and unsatisfying than the average economics blog post!

So be it!

He proposes we start with gun control, and that we take a position on it.

I find Ryan's consequentialist arguments all good, although they don't push me personally one direction or the other (in other words, I don't weight consequentialism very highly in answering this question). The one consequentialist argument I do take seriously, though, is that widespread gun ownership offers a defense against extreme oppression. Personally I'm not worried about that in the modern United States. You could dramatically reduce gun ownership rates here and I wouldn't worry that we'd be subjecte to tyranny any time soon. But that wasn't always the case, and indeed the gun culture almost certainly contributed to the emergence of political orientations here that make tyranny so unlikely today. The other point is that you never know what's going to happen in the future. Even though I doubt dramatically lower gun ownership rates would lead to tyranny any time soon, if we had lower ownership rates in the future any emerging threats of tyranny could be a lot more effective.

Notice this is actually an argument about gun ownership. It doesn't do any good if guns are legal and nobody owns them.

I don't really care all that much about the impact on crime, although of course poking around in the data is always interesting. Guns are tools. Guns don't kill people... you know the rest. Some people hate the cliche but it's pretty ironclad. There are lots of tools that help criminals out. You gotta be a criminal before those tools become dangerous.

Then Ryan moves on to deontological arguments.

He mentions a "right to rebellion". I don't know if I'd put it in so many words, but lets put it this way: if you rebel and you win it's a moot point about whether you had a right to. If you rebel and you lose it turns out you're actually a traitor and not a rebel so the question of whether you had a right to rebel is once again a moot point.

Certainly we have a right to self governance, and that of course opens the door to attempts at rebellions (regardless of whether a particular attempt is justified). I would change Ryan's wording a little and say that it's hard to conceive of self-governance without gun ownership.

I agree with Ryan 100% on the Constitutional argument. Come on liberals. Guys like Ron Paul feel like they can pick and choose what they want to be in the Constitution, and toss out the general welfare clause. That's wrong. We shouldn't be cafeteria Constitutionalists just because Ron Paul is.

Even if it weren't in the Constitution, what basis is their for restricting gun ownership? I can't think of a good one.

Now, I think a lot of heat is generated over specific gun control laws that is unfounded. In the recent Heller case about D.C. I was glad about the ruling - that law was clearly aimed at preventing people from having guns. I think there are probably a lot of licensing laws and things like that that make complete sense. Your right to do something isn't violated by the public interest in keeping things orderly and safe. I have a right to own property, including a car - but there are still licensing and safety laws associated with that. Some may be unwise, but those sorts of laws don't seem to violate the second amendment to me. They should probably be avoided at the federal level, though.

Just as a matter of disclosure - I don't own a gun and my parents never owned a gun. I've fired one a couple times. I've always thought it would probably be a good idea to learn how to shoot one if not own one, and I still may. But obviously it's never been pressing enough for me to get off my butt and do it. So none of what's written above is coming from the mouth of a gun owner or enthusiast.

The meaning of "is" and "valid"

Part I: Epistemology

Jim: "What is the answer to question Q?"
Joe: "The answer is X"
Jim: "What do you mean by 'the answer'?"
Joe: "Are you an idiot"
Jim: "Bear with me"
Joe: "An answer is just a response to your question that satisfies what it is you wanted to know"
Jim: "So Y and W are an answer to the question Q?"
Joe: "Well no, the implication of the word 'answer' is that it is a valid response - you can justify that it is valid"
Jim: "What do you mean by 'valid'?"
Joe: "Well X is a valid response to question Q because of A, B, and C"
Jim: "No I don't really care why X is a valid answer. That's  your business. I'm asking you what 'valid' really is"
Joe: "I don't imagine citing methodological rules of thumb used by my community is going to satisfy you is it?"
Jim: "No."
Joe: "I don't know then"
Jim: "Well you should know!"
Joe: "Why? It doesn't seem like it makes a difference whether I know that or not."
Jim: "__________"

[If someone can give Jim a good answer for Joe, that would be swell]

Part II: Ontology

Joe stormed off after the pregnant pause to go answer a few more questions, but Jim is still preoccupied with question Q (or, more accurately - Jim is preoccupied with Joe's response to the series of queries in Part I. Jim really could care less what the answer to question Q is).

Jim: "So you said that..."
Jim [cornering Joe, fiendishly]: "So you said that 'the answer is X', right? I'm still not sure what you think a valid answer is, but lets not worry about that. Could you explain the rest of that statement to me?"
Joe: "Finally something substantive! Yes, it's very critical that we found out that X is the answer to question Q because of applications in..."
Jim: "Oh no, no - I'm sorry to confuse you. I'm not terribly concerned about X, I mean the rest of the statement"
Joe: "Huh? The rest of the statement? Those are the only two parts of the statement. 'The answer' and 'is X'"
Jim: "Right."
Joe: "Huh?"
Jim: "is"
Joe: "Huh?"
Jim: "What do you mean when you say that X 'is' the answer to question Q?"
Joe: "Are you just fucking with me now?"
Jim: "No this is actually a question that people have spent a lot of time writing about"
Joe: "Ya Nazis..."
Jim: "What was that?"
Joe: "Nevermind. Yes I'm familiar with the broad outlines of the issue. I don't know the answer to that either."
Jim: "Then what grounds do you have for assigning beingness to X? How can you say that X is or that something is X if you don't know what 'is' is?"
Joe: "Well I do know what 'is' is"
Jim: "What is it?"
Joe: "To be"
Jim: "Right - but what is that?"
Joe: "Does it really matter?"
Jim: "It matters tremendously!"
Joe: "Aside from being a form of entertainment and mental pilates, why does answering that question in a way that will make you go away matter? What value does that question have?"
Jim: "_______"
Joe: "And furthermore, how can we even answer a question like that? It seems to me we only have access to our own observations and the sort of word games that our brain is able to apply to those observations. We know neither can be completely trusted. So how do you expect to get a handle on some kind of ultimate nature of reality and being when you are so poorly equipped? In other words: can anyone really answer your question?"
Jim: "_______"

[Again, if you can fill in the blanks my hat is off to you]

One more shot at the silliness of dignifying a claim to knowing anything about "truth", "knowledge", "reality", or anything remotely like that

Evan writes (inspiring much head nodding): "I think you're being rather too cavalier here, Daniel. I don't see why knowledge about knowledge is problematic... you seem to imply that its self-referentiality implies a vicious circle. I'm not sure why this needs to be the case."

But the self-referentialism isn't the real problem here - the problem is the foundationalism. Perhaps the phrase "knowledge about knowledge" changed the emphasis and that's my fault.

What foundation do we have for true knowledge? None that I can think of. So how do we really have knowledge about knowledge? You can substitute in "how do we really have knowledge about reality?" or "how do we really have knowledge about truth?" to realize that the real problem here is foundationalism. As I've said many times on here before, I'm no philosopher. Evan can at least pass as one, so if he finds that too cavalier he can clarify.

Bob Murphy jumps in on the self-referentialism theme: "Daniel, get this, there are apparently idiots out there writing books on grammar. I mean, how could you read a book about proper grammar, if you didn't already know it? The book would be gibberish to you, right?"

But this analogy doesn't work and it really highlights my point. We make up grammar (or some sort of natural selection process does the job for us). "Because that's just the way it is" is a perfectly valid answer to the question "why must my subject and my verb agree?". If the question is "why is 'the subject and verb must agree' the way it is in this language?", you could probably add some kind of historical explanation on top of that, but that's not grammar anymore - that's history and perhaps a little etymology depending on exactly what your question is (not to be confused with entomology):

Wrong Superhero

It's apt that Bob brings up grammar, in fact, and that I am making the point that grammar is OK to proceed in a way that these discussions of "truth", "knowledge", and "reality" are not. After all - that is exactly the point that Wittgenstein makes, is it not (seriously... is it not? That's not rhetorical. I'm no philosopher.) We can proceed in talking about grammar and language. We cannot proceed in talking about these "deeper" (read "mostly vacuous") questions.

Also in the thread, I said to Evan "we all have implicit assumptions that we work off of that one could call epistemological and metaphysical assumptions. I'm not sure you can say that means we're doing epistemology or metaphysics", and Mattheus writes in response to that: "But these assumptions need to be an explicit part of your science. Lay them out on the table so we can challenge and refine them."

No they don't.

Gene already told Mattheus that as a historical matter they don't need to be an explicit part of your science, and he agreed. Now, if you're interested in arguing about these things - if you're interested in doing philosophy in other words - then by all means enjoy arguing about these things. But I hope you can appreciate the scientists lack of interest in making these assumptions explicit or arguing about them when you haven't even given a reason why that argument would have any consequence at all for understanding the phenomenon that we are trying to explain.

Finally, there was some discussion about methods of knowing things or strategies for getting knowledge. Again, I'm no philosopher but that sounds like methodology and that seems like a worthwhile thing to talk about to me. Talking about what "knowledge is" or what "truth is" seems very different from that. I'm sure there's stuff that epistemologists talk about that's valuable from a methodological perspective. A lot of what Mattheus is interested in might be worth talking about from the viewpoint of methodology. 

Wikipedia gives us three bullet points to sum this up in discussing epistemology:

  • What is knowledge?
  • How is knowledge acquired?
  • To what extent is it possible for a given subject or entity to be known?

My assertion is that the first and the third are pretty silly things to argue or care about (but I ascribe to subjective utility theory - by all means if you enjoy arguing about it, then argue about it). I will grant that the second bullet point might lead to discussions that have value insofar as they shed light on methodology. But my point is that the thing that really makes this epistemology - the "knowledge" part - is the least important element of the second bullet. Indeed, to the extent that the person who pursues the second bullet preoccupies herself with whether what is being acquired is actually "knowledge", pursuits of the second bullet probably become less useful.

The real ACLU/KKK paradox

Every once in a while people try to treat ACLU representation of the KKK as somewhat paradoxical - that a "liberal" group is representing a reactionary organization.

Framing it like a paradox of course opens the discussion up to those old cliches that its not the speech that everybody approves of that needs protecting etc., etc.

That's all fine to motivate grade school discussions of the first amendment, but I'm always a little surprised that there's not more discussion of what I think is the bigger paradox here: isn't it strange that the KKK is OK with the ACLU representing them????

The ACLU is supposed to be one of those groups involved in that big leftist globalist multicultural conspiracy they always worry about, right? Not to mention the history with the Jewish and black communities. I understand perfectly why the ACLU would be interested in having the KKK as a client. How in the world do they ever manage to get them as a client?

Not that racists have ever been sticklers for logical consistency, of course.

Anyway, that thought was provoked by this news item.

It's not every day there's a post by Casey Mulligan that I agree with

But this is one. Casey Mulligan says that we should treat survey respondents like "mercenaries, not slaves" (using the old Milton Friedman line about the all volunteer force).

I'm interested in the criticism about whether this will make the survey less representative. If this is actually true, you'd think it would make low income households over-represented. From a statistical standpoint that's fine - we can always re-weight to maintain representativeness. But it's not necessarily a bad thing that we over-sample low income families. It makes estimates about those households more precise. Indeed, many surveys deliberately over-represent these households for that reason!

There is another option, of course, which is to have an eminent domain approach to peoples' time: make them take the survey, but then compensate them for it (which is basically what we did under the draft, which kind of throws a monkey wrench into the old Friedman phrase, doesn't it? but "mercenaries, not people who are approached with the eminent domain powers of the Congress" doesn't have quite the same ring to it) .

While I'm on a roll with claims my readers find heretical...

I've always had a lurking suspicion that talking about the intensive margin of labor supply decisions is a load of B.S.

I don't mean that decisions about hours aren't something we consider when supplying labor to the market. Not only do we care about that, but we also care about how flexible those hours are. What I mean is that we think about hours of work as in some ways a part of the whole package of the job, like whether we have our own office or whether our boss is frustrating. Hours are not something you make an optimizing decision about - they are a characteristic of a particular job that makes the job more or less desirable. There may be some margin for setting hours in a "shirking model" sense, but I kind of doubt the whole labor-leisure model makes all that much sense.

Previously I've thought that the better way of presenting labor supply would probably be like we talk about investment decisions - thinking about a stream of net benefits from a job that you bargain over with the employer. The twist on this investment decision is that the investment can walk away from the deal as well as the investor. Some models work like this. Christopher Pissarides talks about jobs as assets, and that whole class of models follows suit.

But yesterday I was thinking about a way that my (I think justified) skepticism about the intensive margin of labor supply could be incorporated into an old-fashioned labor-leisure model. This is a rough idea, I admit - but just a general approach I'm thinking about. And maybe this is already out there in one form or another.

First, we have lots of jobs available to us, so the budget constraint shouldn't be thought of as the budget offered from one job but from all our employment options. This is important because the budget constraint in the region of 10-15 hours of work per week is probably going to be dictated by a very different job than the budget constraint in the region of 60-65 hours a week. So the slopes ought to be different (this is not new at all to labor-leisure set ups), and perhaps not even linear.

Not only is the budget constraint probably not linear, it's also probably got some distinct discontinuities in it. There are probably very few paid jobs out there where you can work two hours a week. Sure there's piece work. I imagine you could be a consultant and only do that. And there are probably certain professions where that's possible. But work with me here - even in the most flexible, part-time jobs you have to work at least a shift, right? And often they want you working more than just one. So there's going to be a flat or very gradual slope to the budget constraint through the single digit hours, and then you're probably going to get discontinuities and budget constraint slopes maybe around minimum wage or somewhat higher at 8 hours, 16 hours, or some regular intervals like that that indicate typical part time shift durations.

Then further down on the budget constraint you're going to see another discontinuity at 40 hours because a lot of Americans work a 40 hour week (at least nominally - everyone knows that can easily run longer or shorter... but the center of gravity for actual hours worked is going to be somewhere around 40). The types of jobs that you work forty hours a week are probably going to be higher wage than the types of jobs you work for less than forty hours a week, so this is where you're going to have a big discontinuity. The budget constraint will jump up (almost like an endowment at 40 hours), and the slope will probably be steeper.

Of course lots of people work above forty hours a week, but the types of jobs that work more than forty hours also tend to have higher implicit hourly wages, so this is where I think the budget constraint is most likely to be non-linear and get progressively steeper and steeper. There might even be some kind of bargaining power story here around workers that work that long and how they can bend that budget constraint up in their favor.

But the discontinuity at about 40 hours is what's really interesting, I think. There are a lot of potential implications there about the welfare effects of changing work-hour norms.

Tuesday, June 26, 2012

From a friend of a friend on facebook...

Can there be anything sillier than trying to amass knowledge about knowledge? Methodology is one thing. You can talk about the way people go about trying to get what they think is knowledge. Trying to get knowledge about something is also OK. It might not be actual "knowledge" but at least it's not circular logic. There's some exchange between observation and your thoughts about what you observe.

But pursuing knowledge about knowledge itself? How would one know if one's got it? How can you even go about getting it if you don't know what knowledge is in the first place? How would you know about the quality of your knowledge of knowledge? Epistemology is an awfully silly endeavor, if you think about it.

But what do I know?

A brief note on dyanamic vs. static analysis

I'm reading some of the literature on Hayek's discussion of Ricardo effects to help write a much weaker (although hopefully completely adequate) couple paragraphs on the subject myself. It's tougher reading than, say, the Cantillon effects literature. I find it hard to follow verbal renditions of dynamic processes. But that's mostly what this consists of.

Anyway, one of the issue that gets raised with Ricardo effects is the difference between static and dynamic analysis. There are claims that Hayek was doing dynamic analysis and nobody understood him because they were all doing static analysis, and there are also claims that Hayek was doing naive static analysis and just calling it "dynamic" (this is where the verbal renditions can obscure what the model is really communicating). But in all of these discussions, there's always this underlying insinuation that static analyses are weak and dynamic analyses are strong.

I don't really like this assumption. Maybe in specific fields or in answering specific questions a general aversion to statics is wise, but I don't like it as a general statement.

Think about engineering a bridge. If your primary concern is how much of a load it can carry, that's really a statics question. If your primary concern is how it can deal with shocks from weather or vibrations from the traffic, that's a dynamics question. In most cases, you're probably concerned with the statics question. Of course that doesn't mean the dynamics aren't important:

In other situations, the dynamics take precedence.

Just as in engineering, in economics the question of which we should prefer probably depends on the problem at hand, and we're inevitably going to have arguments about that. But it doesn't make sense to consider one approach inherently more naive than the other.

Monday, June 25, 2012

Too many equations? I smell a proxy...

An interesting post from the Science Careers blog:

"Numerous sources claim that Stephen Hawking once said that someone had told him that every equation he put in one of his books would reduce sales by half. Apparently, that's true of biology papers as well.

According to a study by Tim W. Fawcett and Andrew D. Higginson, scheduled to come out today in the Proceedings of the National Academy of Sciences (PNAS), including lots of equations in a biology paper reduces its influence, with the most math-heavy papers receiving 50% fewer citations, on average, than other papers.

Strangely, while the article is about biologists--the article is titled "Heavy use of equations impedes communication among biologists"--the
EurekAlert press release makes it sound as if this phenomenon applies to science articles in general. But one presumes that you would not find the same bias in, say, a theoretical physics journal.

So what should biology researchers do? Avoiding equations in science--even biology--probably isn't a good idea. Assuming the authors have drawn the correct conclusion--that is, that math-heavy biology papers aren't inherently less important than math-light ones--it probably makes sense to put your equations in an appendix, where, the article's authors say, they did not affect citation rates.

Once the article is live it will appear 

I don't know how biology works but I would imagine in economics there is some non-linearity to a trend like this (highly equation-dense papers are less popular, but so are those that have little equations... empirical papers would obviously have a somewhat different pattern, probably peaking out earlier).

I would guess this is just a proxy for something else. Of course no one likes slogging through equations. Even if you are comfortable with them, you still have to put a lot of effort into reading that kind of paper. I would guess that papers chock full of equations are by authors who have not made much of an effort to distill the point of it all.

I was once discussing math in journal articles with Richard Freeman and he said that when he's working on a paper if it's got lots and lots of math it means he doesn't have a real intuitive grasp of his argument yet. As he thinks through what's really essential and gets a better sense for what the math is telling him, he's able to pare it down and frame it better. So if it's a more manageable, clean model it's also probably something he is explaining really well in the text. That makes for a more influential and more citable paper.

Of course this is often in the eyes of the beholder. What some people call "math-heavy" will not seem that way to others.

I have not had the pleasure of writing a really math-heavy paper yet. I've used some pretty fancy empirical techniques, but the fancy math really comes in theoretical papers, which I did not do at the Urban Institute and have not tried to tackle on my own. I'm making a determined effort to get some more mathematical papers under my belt during the doctoral program. In my career I doubt I'll do much of that - I'll continue to be an empiricist. But it seems like a good thing to try out.

New publications

Also, I recently noticed that the long-term care apprenticeship publications have been released. I'm a co-author on three: a report with descriptive statistics on all the long term care apprenticeship programs registered with the Department of Labor, a report with results from our site visits to five of those programs (I participated in three of those five site visits and wrote a lot of this report), and a report with different options for evaluation of the programs. They are provided in the links below:

Kuehn, Daniel, Robert Lerman, Lauren Eyster, Wayne Anderson, Galina Khatutsky, and Joshua Wiener. 2011. “Characteristics ofLong-Term Care Apprenticeship Programs: Implications for EvaluationDesign”.  Washington D.C.: Prepared for Office of Disability, Aging and Long-Term Care Policy and Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services.

Anderson, Wayne, Galina Khatutsky, Joshua Wiener, Robert Lerman, and Daniel Kuehn. 2010. “A Descriptive Analysis of the U.S. Department of Labor’s Long-Term Care Registered Apprenticeship Program”. Washington D.C.:  Prepared for Office of Disability, Aging and Long-Term Care Policy and Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services.

Wiener, Joshua, Wayne Anderson, Daniel Kuehn, and Robert Lerman. 2011. “Evaluation Design Options for the Long-Term Care Registered Apprenticeship Program”. Washington D.C.: Prepared for Office of Disability, Aging and Long-Term Care Policy and Office of the Assistant Secretary for Planning and Evaluation, U.S. Department of Health and Human Services.

Two websites

One mine, one another guy's.

First, I wanted to make readers aware of a blog by occasional commenter "evilsax". It's colorfully named "Diary of a Republican Hater" (my advice to evilsax: they're far too silly to "hate"). There's a lot of political commentary on here, and a lot of discussion of economics too. Between the name of the blog and the pseudonym "evilsax" I can only assume that this is the alter ego of Bill Clinton. This is an especially interesting post that I may comment on later if I get a chance.

Second, since finishing the first year of the program and getting the Sloan grant I've felt like I need to start acting like a more responsible academic, and so I've cleaned up my own website. Its just a simple google site with publication information and a little background. Let me know what you think, and what you like in an academic website (I'm not capable or interested in doing anything fancy, but there are some really ugly or unwieldy academic homepages out there, and I don't want to be one of them). Right now my CV is just a document that's been loaded up, and my "publications page" is an actual web page with links. Eventually I plan on doing the whole CV like that.

David Henderson fails Steve Horwitz's test too...


It made me feel better. It's never fun to be the only one that flunks the test.

Then again, maybe there's something up with the test...

Clark on Keynes

As many of you probably saw, Clark Johnson has the first post in a series on Keynes and monetary policy over at Lars Christensen's blog. Johnson is a well regarded economic historian, and I found the post interesting if a bit puzzling. I hope to blog in more detail later when more of the posts come out.

I did not find it puzzling in a way that was different from how I always find market monetarists puzzling. The argument just seemed to boil down to "Keynes did like Roosevelt's devaluation a lot, but he also was pushing fiscal policy really hard so he thought monetary policy was ineffective" [my paraphrase, not his words... for new readers if I quote it's always written in blue - if it ain't blue, it's a paraphrase or a hypothetical exchange].

Johnson concludes this post with: "Yet Keynes seemed to dismiss this entire episode [the devaluation] in his call a few months later for fiscal stimulus!"

What I need explained to me is why "calling for fiscal stimulus" is equivalent to "dismissing monetary stimulus". You see this a lot, and maybe market monetarists have convinced themselves of the equivalence, but I can tell you a lot of us Keynesians are not clear on the argument.

Good info on the NRA in here. Bad policy - very bad policy. The important thing to remember is that although this is definitely part of the New Deal and needs to be laid at Roosevelt's feet, it's not a part of the New Deal that you'll find many economists applauding.

More later hopefully.

Sunday, June 24, 2012

Who said it? (No cheating)

"Today, persistent low interest rates encourage firms that do invest to use capital-intensive technologies... In this way, the Fed may still be contributing to a jobless recovery, when we finally do recover."

Sounds awfully Austrian, doesn't it? (that last sentence would probably be put differently if it were an Austrian)

Steve Horwitz has a challenge for undergraduates

Here. He says this Doonsbury comic is full of bad economics.

I can think of one thing he might be thinking of, but given the context offered by the comic strip (i.e. - that it's job creation at a particular private equity firm) I don't think that particular complaint really works that well. It seems like pretty good economics to me, even if you approach it from the most cynical of public choice perspectives.

Any thoughts on what Steve is thinking of? Am I missing something obvious? Anyway - undergraduates go ahead and give it a shot.

For those of you considering a PhD program...

... my brother Evan has some frustrating financial details about funding that are worth thinking about.

If you go this route, it's important know everything there is to know about your funding situation, including the way banks look at it and its tax treatment (which can vary depending on the sort of funding you've got, its purpose, and its source).

Two good links and a bad lecture

- Arnold Kling on a new McKinsey report warning of shortages of educated workers of all levels of education. I was reading the report the other day, and it's pretty bad for a lot of the reasons Arnold raises. First and foremost, of course, supply and demands are schedules - not just quantities. Of course you can have shortages with supply and demand schedules, but you've got to have a good way of explaining that. I spend most of my time thinking about higher skill labor, and in those fields the real "market failures" (much as I hate that terminology) are in the product markets - the output produced by these workers. There are much fewer problems in the labor markets. One you could point to is credit constraints, but we have an awful lot of policy to deal with that. So what's causing these enigmatic "shortages"? Nothing I'm aware of. The other problem with studies like this that do forecasts is that it's really impossible to forecast demand trends especially (even if you were treating demand like a schedule, and not like a fixed quantity). Supply trends are somewhat easier. Complex systems are very tough to forecast, and labor market forecasts have proven fairly inaccurate in the past (see Richard Freeman's work on the BLS forecasts).

- Peter Dorman has a good post on the "reflexive libertarianism of mainstream economics". He's specifically talking about conditional cash payments to parents in developing countries who promise to make their children attend schools. The mainstream impulse, he alleges (and I think he's right) is that just giving them cash would be better because that would have an endowment effect on them and they'd be able to reoptimize themselves however they see fit. The primary problem he raises with this is about the cultural determination of norms. He has a great sentence about using these methods to break these cultural patterns: "no, trying to shift norms is no more paternalistic than choosing to not shift them.  Welcome to the inevitability of politics." This is the point I make a lot (and that I usually get support from Gene Callahan on) about how I'm not a libertarian because it's not pro-liberty enough - and that it's not clear that changing property rights is definitely the more coercive option. I'm probably more likely to appeal to more mainstream economics to make my case than Dorman. For example, I'd note something like hyperbolic discounting, the fact that parents are agents acting on behalf of their children (so there's a principle-agent dynamic where the child has very little power), and the uncertainty of the payoff of educational investments to explain why you might want to condition cash transfers rather than just handing out money. It's a much more mainstream story than Peter's that seems more convincing to me. The point is, though, that the naive mainstream view is just a very simple model and you have to be careful about understanding it as gospel truth. If you observe in the real world that handing out cash in developing countries and conditioning the handing out of cash produce two very different results, you need to be prepared to explain why that is. Right now I'm nearing the end of writing a chapter on the basic income guarantee as a macroeconomic policy, and I'm actually making the "reflexive libertarian" argument that Dorman talks about - endowments don't distort important trade-offs and so are superior to conditional transfers. I don't quite believe it myself (and I think I'm going to add a brief note of skepticism at the end) - I'm just making the argument in the chapter because I think it's important to focus on the basic income's macroeconomic implications, which is a somewhat rarer approach. Insofar as people do talk about it as macroeconomic policy they often ignore the issue of price distortions. So it's worth going over even though I don't entirely buy it myself.

- And finally, Niall Ferguson has a really condescending Reith Lecture. All you young kids - if you knew what was good for you - would be in the Tea Party! OK, Niall - whatever you say (HT - Peter Boettke, who was a little more enthusiastic about Ferguson than me).

Saturday, June 23, 2012

Much of my cohort (with a few significant others and a kid in tow)

That's my beautiful wife directly above me.

Friday, June 22, 2012

Another thing about natural vs. social science and ignorance of the world around us

Ignorance is indeed frustrating, but it's not a sign of failure. It's just the way it is. We're ignorant of lots of things and we'll continue to be.

But remember, the Big Bang didn't really start to get sketched out in detail until the 1920s and 1930s (hmmmm... productive years in economics too, right?), and really didn't get widely accepted and cleaned up until the 1960s. This was around the time that we really started working out the details of monetary and fiscal stimulus and cleaning up the oversights of the 1920s and 1930s ourselves.

Physics envy is a really ugly thing to see among economists. There's nothing shameful or unscientific about our uncertainty. This is how science progresses, and those physicists we often hold up as paragons of science are dealing with it just like the rest of us are.

UPDATE: Let me clarify that a little. The Big Bang Theory was "widely accepted" before the 1960s, but it was not as near universally accepted as it would be in the 60s and 70s. Steady state models still had a lot of adherents too, and that question wasn't put to rest until the 60s. But it was definitely "widely" accepted before then.

Some economists need to accept the fact that we're scientists

Social scientists can have really weird hang-ups about this. I don't know why. Science is a method for understanding the world around you, it's not some secret club that you're not allowed into because you have some inferiority complex around physicists. Get over it. We're just highly evolved apes. Do you think other people who study other apes with the scientific method are scientists? OK - then you're a scientist.

Yes, you do science that has immediate implications for human welfare and lots of normative questions lurking around the corner. So do lots of other scientists.

Anyway - a very strange hang-up.

In discussing the Manzi quote yesterday about whether the number of stars in the galaxy was odd or even, I was reminded of this news piece from 2010.

A Yale astronmer believes that the traditional method for counting (counting, nothing fancier than that - just counting) stars is providing biased estimates (umm... sound familiar to you econometricians?), and he wants to triple the number of stars out there. The idea, while not entirely accepted, is being taken very seriously. The guy is making a good point apparently - not a crackpot or anything like that. Whether it's a correct point needs to be sorted out, but it's apparently a good point.

Other astronomers are a little worked up over it, and the guy making the claim even admits "it's a big pain". Why? Because they have to rethink a few things and recheck things, etc.

Notice what you don't see them saying. You don't see them saying "astronomers have a huge range for the potential number of stars out there - this is clearly not science" or "this guy is a hack he's clearly not a scientist".

The fiscal multiplier is a very tricky thing to pin down, both because we don't observe a lot of data and the data series that we do observe are simultaneously determined. Tricky stuff. But multiplier estimates still seem to fall in a fairly narrow range. Of the estimates people generally trust, the largest estimate is no more than triple the smallest estimate.

And that's pretty good, particularly since multipliers might be expected to vary with institutional settings anyway.

Astronomers don't go into soul searching over this sort of thing - why do economists? Why do we have people out there making such a big deal over uncertainty and error?

If you can't deal with uncertainty and error, you shouldn't be doing science.

I think there are two major reasons social scientists do this - one of which I've stated before:

First, people get weird because they think humans are special. Humans are special, of course - there's a lot that's unique about us. But we're not special in a way that makes us unamenable to scientific study.

Second, I think a lot of social scientists got interested in social science because they were first interested in political or social philosophy, and social science seemed more practical than philosophy. But they've still got a philosopher's mindset. I think you see this hang-up about science less among psychologists precisely because fewer of them come at the field from an interest in more philosophical issues.

Philosophy's fine. That was the entry point for natural scientists too at one time, and that's how social science started. But let's not let it get in the way of doing good science.

My thoughts on the Philly manufacturing numbers, the Fed meeting news, and the jobless claims

Thursday, June 21, 2012

We lose another great one

Anna Schwartz has died.

I think most of you are probably aware of Bernanke's remark over a deade ago about A Monetary History, that it was "the leading and most persuasive explanation of the worst economic disaster in American history". It's really quite a statement if you think about it. How many books out there that take as their subject a century's expanse of time also manage to be "the leading and most persuasive explanation" of a three year period that occurs during that century?

Granted, The Great Contraction is not just any three year period. It clearly stands out in the century they covered. But that's still saying something, because as anyone familiar with the book knows, it really is a history of the entire century - and it has a great deal to say about monetary economics on top of being a history. It really is quite an accomplishment.

I am intrigued by but skeptical of the new Skidelsky book

They seem like they are taking the worst part of a fascinating Keynes essay and putting it on a pedestal. I've always loved Economic Possibilities for Our Grandchildren, but I think I'd turn the Skidelskys completely inside out on this one. Keynes is right on capitalism and wrong on human fulfillment, although the Skidelskys seem to think he's wrong on capitalism and right on human fulfillment.

Virginia Woolf may be too hard on Keynes here...

I was reading Brad DeLong's old review of Skidelsky's biography and found this interesting:

"Virginia Woolf had a different, less happy and romantic view. She wrote of her "vivid sight of Maynard by lamplight--like a gorged seal, double chin, ledge of red lip, little eyes, sensual, brutal, unimaginate. One of those visions that come from a chance attitude, lost as soon as he turned his head. I suppose though it illustrates something I feel about him. He’s read neither of my books..." (page 15). There is a clear lesson: if your circle includes Nobel Prize-winnning caliber novelists with wicked pens, read their books and praise them as often as possible."

Based on the Bloomsbury dates and the fact that she says "neither of my books", I'm assuming she's referring to The Voyage Out (1915) and Night and Day (1919).

Two questions:

1. Does anyone read these?
2. How likely do you think it is that Woolf read Indian Currency and Finance (1913)? I'm guessing her husband Leonard had. Do you think she did?

This is deeply misleading

Arnold Kling writes:

"In a podcast with Russ Roberts, [James] Manzi says,

Is the number of stars in our galaxy odd or even? Well, there's a real answer to that question. If you have a bunch of people yelling odd and a bunch of people yelling even, one of those two groups is right. But unless one of them has access to knowledge that I don't think we have a species right now, we don't know. And that doesn't mean it is a theoretically technically unanswerable question, how many stars are in the galaxy, but we don't have the knowledge right now and we don't have the capacity of knowledge right now. And that's the way I feel about that debate.
He is referring to the debate about whether the stimulus created jobs. As you know, I think his book, Uncontrolled is excellent. The podcast is also recommended."
Whether the number of stars in our galaxy is odd or even is a question that we can't answer because we can only produce an estimate of this number that we can infer from what we observe. Estimates have errors and as long as we estimate these figures we can't say anything about them that you need zero error to say.
Similarly, we can't say whether the stimulus produced an odd or an even number of jobs. We just can't.
But we can provide an estimate, with error, of the number of stars in the galaxy and we can provide an estimate, with error, of the number of jobs created by the stimulus. Those are the scientifically accessible and the practically relevant questions.
This is really irresponsible blogging.

An interesting idea... what are the implications

William Faulkner, at a public meeting, in 1957: "The Negro is—is a part of our economy and our—our southern traditions. It's true anywhere, Virginia, Mississippi, or Texas. The—the—the southern—southern—the white southerner loves Negroes as individual Negroes, and—but he—he don't like Negroes in the mass, as apart from the northerner who in theory loves the Negroes in the mass but he's terrified and frightened of individual Negroes."

1. Is this a reasonable claim on his part?
2. If it is, how might this help explain the complex web of public policy as they relate to Afican Americans in the twentieth century?

I'm not entirely sure about the answer to either of those questions, but it's an interesting thought.

Assault of Thoughts - 6/21/2012

"Words ought to be a little wild, for they are the assault of thoughts on the unthinking" - JMK

- Building off of the exchange over "The Night They Drove Old Dixie Down", Gene Callahan argues that the Star Spangled Banner is also a song with a "lousy cause". However, in citing something from 1772 to discuss the point, Gene is off on this particular "lousy cause" by over four decades. The actual "lousy cause" of the Star Spangled Banner is much less romantic... the song's message is basically "HA! You didn't burn down all of Baltimore!" (very intimidating taunt, Mr. Key - very intimidating). In related news, there is plenty going on for the War of 1812 bicentennial, if you're looking for something to do this summer.

- Andrew Sullivan links to a discussion of how novelists can't imagine how business works. If you follow through the links you also get to a discussion of the question from Nozick that borders on psychoanalysis. I'm not sure what I think of the argument, but it's interesting. There are a lot of left-leaning intellectuals that really do seem divorced from daily life in capitalist society, and their rendition of it really does come across as childish. But sometimes I think the right-leaning intellectual playing Freud to the left-leaning intellectual can be equally childish and divorced from reality. When you read people like Sowell or Nozick they seem to really fail to understand the real life hardships that real people deal with, and just like the left-leaning intellectuals, I imagine their position in the ivory tower has something to do with this. I guess I'm just saying we're all only touching part of the elephant, which hopefully isn't all that controversial a thing to say.

- New evidence for comparative advantage in trade flows. One of the things that always struck me about the way my undergraduates talk about trade after a class or two is how they overemphasize comparative advantage (relative to the way the economics profession thinks about trade). For the last several decades the profession has been more Smithian and less Ricardian, thanks to the work of Paul Krugman and others. I'm not sure undergraduates always realize there is a difference between Smith and Ricardo. Granted, as Krugman noted in his Nobel lecture, in recent years the world has been looking less Smithian and more Ricardian so that even as his work was being recognized it was becoming less relevant. Whether it's "right" or "wrong" empirically at a particular point in time, I still think it's important to run students through comparative advantage exercises. Just getting in their head that exchange is not zero sum is very important.

- A depressing thought on higher education from Tyler Cowen.

- Eric Falkenstein has an interesting (if somewhat condescending) post about "fawning Keynesians". I've always liked Economic Possibilities for Our Grandchildren, which he talks about a lot - although I've never had any hesitation in saying I disagree with the part of it that Falkenstein criticizes. In other words, I think you can be a fan of Keynes without spouting nonsense. I don't think what Keynes said at the time was nonsense. It was a plausible possibility at the time, and an interesting thought experience. That Skidelsky is still moralizing about greed is a little more embarrassing, of course. What I've always liked about Economic Possibilities is it's optimistic view of the long-run. In the midst of the widespread stagnationism, Keynes offered both optimism and realism. So what if he thought we'd be living more leisurely than we actually ended up living!

Oh, so it's not just now?

Richard Ely in 1887 on what happens to economists that stray fom the straight and narrow:

"Any deviation from the straight and narrow path laid down by them ["orthodox" economists] was deeply damned. Was there not, indeed, that never-failing refuge of incompetence and malignity, the epithet "socialism," ready to hurl at all offenders?"

Wednesday, June 20, 2012

We have the Sloan grant!

That means no more need for the teaching assistantship, and support for the next two or three years (I honestly forget what we put in for), which will get me into the start of working on my dissertation for sure.

The grant itself is to support research on "loose coupling" between science and engineering education and science and engineering labor markets. I'll be spending a lot of my time on the labor market side, but it's essentially an "early careers of scientists" research agenda. I'm sure I'll share more of the details as the work moves along.

This is also the sort of organization that it's good to build a relationship, for future grant applications. You're a known quantity for them, which helps.

Very excited!

DeLong on Hayek

I never did understand this episode, and it doesn't sound like he was joking. Thoughts?

Title insurance report has been published

It's available at HUD's website here. I drafted a lot of this report, and also did a lot of the data work, towards the end of my time at Urban.

I'm including the cover because HUD put on something prettier than I've ever had put on the cover of my reports at Urban:

There are some interesting relationships not related to regulation that we were able to pull out, but by far and away the biggest was local regulation of the industry. However, be careful about drawing conclusions from that. Regulation had a lot more to do with the variability in title charges than it did in the absolute burden of title charges.

Haberler contra Woods on 1920-21

"The story after World War I, on the other hand, was a little more complicated. The United States experienced a severe depression in 1920-21, but it was a financial and monetary affair having nothing to do with real maladjustments."

- Gottfried Haberler in "Reflections on Hayek's Business Cycle Theory", Cato Journal, Falll 1986.

This is setting up the discussion of the formulation of Hayek's views on malinvestments in considering the U.S. economy of the 1920s.

Ryan Murphy on me and the whole Hayek/Sumner thing

Ryan has a good post up, and I agree with more of it than I suspect he thinks I would.

So I've said from the beginning that Hayek (and Greg Ransom) support NGDP stabilization, which - because we're talking about NGDP and we're talking about a particular level of NGDP you can call "NGDP targeting" if you so desire.

So I already recognize exactly what Ryan points out - that there are tons of Austrians out there that are somewhere along the NGDP targeting spectrum and thus who are not categorically different from Scott Sumner. I know not everyone is a Rothbardian (least of all people who are quickest to cite Hayek!), and I don't think I claimed that.

Part of how we got to this point, I think, is Greg Ransom's framing. He sees Bob's post which to me seemed to make a fairly obvious point and counters that Hayek didn't want to see deflation.


Nobody said he did (here, at least).

In other words, Greg broadened the debate considerably farther than the initial parameters that Bob was interested in, which was simply pointing out that Sumner would not sit well with Hayek. You want to point out that there is no categorical difference between Sumner and Hayek? I agree with that. But I still think Bob is right that there's a pretty big gulf between them. Hayek's concern was a stable price level. At around 2% inflation right now, I don't think he'd be embracing Sumner's demand to

Do you? Really?

And that's the point.

In the middle of a seminar, you may not see much of a difference between 0% MV growth and 5% MV growth. In the middle of a depression, I do. And that's ultimately what these things boil down to. We've got people between whom there is no categorical theoretical difference and a huge categorical practical difference.

If you just want to point out that there are lots of things you could call an "NGDP target" that people with a similar basic framework for thinking could converge on, I've never disagreed with that. If you want to point out that the Austrian school is not monolithic, I've never disagreed with that. But on the theoretical side you've got big gaps between the Rothbardians and Sumner and on the practical side you've got big gaps between Hayek and the Rothbardians and Sumner.

So that's Hayek. What about "Hayekians"? Well who's a "Hayekian". I first read Hayek almost ten years ago now and he's had a big impact on me, and I'm happy to volunteer that. I still see a big practical difference between Sumner and Hayek and if you're closer to Sumner on that practical difference I think that's a good thing.

New Acquisitions

Stopped by a used book store I hadn't been to for a while on my way home from the bank yesterday, and I picked up:

- "Pragmatic Philosophy", an anthology edited by Amelie Rorty (Richard Rorty's first wife) in 1966. This was before Rorty's Mirror of Nature, which makes it an interesting volume insofar as the selections are all pre-Rortian pragmatism that still inevitably bear his mark. It has the classic pragmatists, their critics, and more modern (but pre-Rortian) pragmatists.

- "Faulkner at the University", a selected transcript of conferences William Faulkner held in his time as writer in residence at the University of Virginia in the late 1950s. It's a crucial source for Faulkner scholars, because most of the discussion is about his writing (what he meant or intended to say in different stories, etc.). There are other interesting social observations interspersed as well.

I've been perusing both of them and started in on C.S. Peirce directly in the anthology.

A new blog you should definitely be following

Gene Steuerle is blogging.

Gene is a former deputy assistant secretary of the Treasury and currently an Institute Fellow at the Urban Institute. I had the privilege of working with him on a project on alternative financial services (payday loans, etc.). That research should be coming out in the Journal of Economic Behavior and Organization at some point.

Gene primarily writes about budget issues.

Tuesday, June 19, 2012

It's not Hayek that I have trouble taking seriously...

...Greg Ransom weighs in on the question that Bob Murphy raised earlier.

I have some comments - read them now before they're purged (it must be the new IP address from the move that is letting me get through. I had been banned for... well... for disagreeing with Greg Ransom about Hayek).

Something to remind people: Bob initially raised the question of whether Hayek and Sumner are on the same wavelength. I think he's right in answering "no". "NGDP targeting" has taken on the definition assigned to it by market monetarists - some steady growth in the level of NGDP. If you want to argue that beause Hayek variously wanted a constant MV and an MV that adjusts with productivity to maintain a stable price level, I'd agree with you on that. But it's a little disingenuous to call that "support for NGDP targeting" just because it's (1.) a target, and (2.) talking about NGDP.

I could say I want NGDP to fall 15% a quarter... is that support for NGDP targeting?

I think not.

The cost of drones

Are estimated here, based on various reports (HT - Andrew Sullivan). The people who put this interactive graphic together highlight the inconsistency of some of the reports (and there are a couple that clearly don't fit in with the rest of the estimates), but what struck me is that given how hard this is to estimate, how consistent these estimates actually were. Are basically looking at repeated claims of sixty civilian deaths, tops, with about half under Obama and half under Bush for the given date ranges. Ballparking is probably the best we can do on a covert program like this, and these multiple ballparks seem to give you roughly that answer (we can ignore the guy who said their have been zero civilian casualties as being simply wrong). We can make allowances for the fact that these estimates don't bring us completely up to date, and therefore it probably makes sense to tack some more civilian deaths onto that tally (although the accuracy of the strikes has almost certainly gone up over time).

By my count, this indicates that we've had 307 drone strikes. Let's suppose they're almost all legitimate targets (I know we disagree on al Awlaki, for example, but most of these guys aren't U.S. citizens and I assume even the harshest critics will grant that we're not just flipping a coin when we target people). That's 300 or so high value targets with - at most - 100 civilian casualties.

Beats the hell out of bombing Baghdad, if you ask me.

Can you imagine how different things would be if, after the invasion of Afghanistan, we had a fleet of these available to chase the guys that got away into the Pakistani mountains back in 2002, before we the blunder of invading Iraq? If we successfully prosecuted an extensive drone-based followup to the invasion of Afghanistan in 2002 Bush would have had much less evidence to stand on invading Iraq in 2003. He might have still gone forward, part of the reason why many people found that as palatable as they did was the fact that they still felt like the threat was at large.

Quote of the day

"But Truth is the silliest thing under the sun. Try to get a living by the Truth -- and go to the Soup Societies. Heavens!"

Herman Melville to Nathaniel Hawthorne, 1851

Not sure if I mentioned I'm working through Moby Dick right now. I'm finding I enjoy Melville tremendously.

Bad Krugman! Bad!

We do not put up scatterplots of government spending vs. GDP growth and try to draw conclusions from it!

Bad! This is not a natural experiment!

If he were my cat I'd spray him with the spray bottle.

This is why it's so hard to argue with people like Peter Boettke

I've always enjoyed reading Peter Boettke. He's a good writer and he has an excellent command of the literature. But here's a selection from his new book that exemplifies why it can be so hard to argue with him:

"But there are good reasons why economists forced these [underconsumptionist] theories into the underworld of economic opinion. They reflected bad economic analysis. What I mean by that is that these theories implicitly assume away scarcity and believe the fundamental problem of modern society is poverty amidst plenty; they explicitly deny both actor rationality and the coordinating role of prices, as well as the function prices serve in guiding decisions and the feedback and discipline provided by profit and loss. If you postulate a world of post scarcity, then neither the coordinating role of the price system, nor the incentives of the property rights structure is critical, and if you don’t allow the individuals that populate your economy to learn from market signals, and you don’t allow those signals to actually work, then of course the economy will not work! This is not mysterious." (from Chapter 1 of Living Economics, footnotes removed)

Peter glosses over the fact that Keynes disagreed with all of these "underworld" theorists (and in great detail), but he simply pointed out that the underconsumptionist position had important kernels of truth that had long been neglected. Anyway, we've got accusations of:

- Assuming away scarcity
- Denying actor rationality
- Denying the coordinating role of prices
- Denying the feedback role of prices
- Denying the discipline provided by profit and loss
- Not thinking the coordinating role of the price system is critical
- Not thinking the property rights structure is critical
- Not thinking individuals learn from market signals

That's a lot that he's packed into one paragraph! You want to know why the mainstream often ignores certain corners of the Austrian school? It's because certain corners of the Austrian school have a tendency to tell the mainstream what positions they are expected to hold and defend. The mainstream economist spends all his or her time running through these points and impressing upon them that actually not a single point on that list describes them instead of... you know... talking about economic ideas they actually have. Some of us are willing to wade into this lost cause. A lot aren't.

A warning to those still figuring out their view about economics and flirting with the Austrian school (which is fine - there's some interesting stuff to chew on in the Austrian school): if you tell a mainstream economist they don't think the coordinating role of the price system is critical or that the structure of property rights is critical, they're going to assume you don't know what you're talking about and not spend any more time on you.