Assault of thoughts - 3/8/2012

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

- A colleague at AU points me to this post on the availability of jobs for scientists and engineers. I'm rushing out today and have only skimmed it, but I'm very much in agreement with all this. I actually just sent off an article to The Atlantic on this subject, discussing the recent case of Jennifer Weddel. I have no idea how competitive that venue is, but I've been reading it for awhile, I respect it, and figured it's as good a place as any to try first.

- Gene Callahan shares a particulary strange Arlington County outreach. Housing assistance for hipsters! No, really. I guess this is mostly about FHA loans? I'm not sure. Actually, Kate and I were going to go to a seminar thing at our bank this Saturday on buying a house... thinking of jumping into the Arlington housing market this summer. Maybe we should go to the hipster event too! I don't think I'd pass as a hipster, though.

- Also, Gene on microfoundations and the history of science.

- Paul Samuelson got frustrated arguing with libertarians. I'm sure the feeling was mutual.

Assault of thoughts - 3/7/2012

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

- Another victory for the second amendment in the mid-Atlantic region.

- Gene is being hard on himself over Ron Paul's performance in Virginia. The forthrightness is good, of course - his initial prediction specified that Paul wouldn't do better than 20-25% in any state. But I still think the logic was sound (I imagine Gene does too). First, I'm not sure it ever made sense to talk about any given state the way Gene did. These results have sampling distributions, after all. I would still maintain that Paul won't do better than 20-25% in a national Republican contest between him and one other conservative Republican. That was one thing that was appealing about the Virginia race as a test - it was just Paul and Romney. But people should also know something funny about Virginia - you don't have to be a Republican to vote in the Republican primary, independents and Democrats did turn out, and Paul got a lot of their vote - and a good chunk of this is going to be a protest/spoiler vote. That's not some kind of excuse - like I said, there are sampling distributions to these things and I'm perfectly willing to give Paul credit for his share here. I'm simply saying that among people who would not vote for Obama, his pull was probably smaller. Gene still has better intuition on these things than a lot of people who are predisposed to like Paul.

- Tyler Cowen points us to an interview with a ticket scalper. This reminds me of a question that we had for the intermediate micro midterm on ticket scalpers and consumer welfare when ticket prices were kept low. Most students got that the emergence of these markets was efficient - only a few suggested it was a bad thing. But my favorite answer said that "enterprising people" would start scalping tickets. It's one thing to understand the welfare implications of scalping. It's another thing to recognize scalpers as what they really are: entrepreneurs. That's what I call "thinking like an economist".

- Commenter Blue Aurora points me to this new paper on the econophysicists in the Journal of the History of Economic Thought.

- Karl Smith is won over by Paul Krugman. I'm still halfway between Smith's old position and Krugman's position on this question.

- Glasner responds to my post on Keynes and Hawtrey.

Assault of Thoughts 12/19/2012

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

- Mark Thoma highlights a nice passage from an interview with Romer about the Great Depression. She talks about how we can trick ourselves into imagining the fiscal stimulus of the New Deal was bigger than it was because of the myth of FDR and the physical legacy, and also compares it to ARRA and talks about what happened with the states. This was a particularly good passage: "Even under Roosevelt the fiscal expansion was modest. When we think about the New Deal, we tend to remember things like the WPA [Works Progress Administration relief program], which built dams and bridges, and the Civilian Conservation Corps, which constructed so many buildings in our national parks. These programs left enduring legacies, and so we often think of the fiscal policy response of the New Deal as being big and aggressive. But what Chandler points out, building on a classic paper by E Cary Brown, is that the fiscal response to the Great Depression was actually quite small – not nearly as large as the American Recovery and Reinvestment Act of 2009. Even when Roosevelt increased the Federal deficit in the mid-1930s, a move to budget surpluses by state and local governments meant that the net fiscal stimulus was much smaller."

This was one of those five books interviews. Her books were: Golden Fetters (Eichengreen), A Monetary History of the United States (Friedman and Schwartz), Essays on the Great Depression (Bernanke), America's Great Depression (Chandler), and The End of One Big Deflation (Temin and Wigmore).

- Gene Callahan argues that liberalism imposes a moral viewpoint, that it is not morally neutral as many suggest, and that we should be honest about this. I strongly agree. Richard Rorty said something very similar, although he put it in terms of cultural norms rather than morals (but really - is there a difference?) he wrote: "The rhetoric we Westerners use in trying to get others to be more like us would be improved if were more frankly ethnocentric, and less professedly universalist. It would be better to say: Here is what we in the West look like as a result of ceasing to hold slaves, beginning to educate women, separating church and state, and so on. Here is what happened after we started treating certain distinctions between people as arbitrary rather than fraught with moral significance. If you would try treating them that way, you might like the results." I don't always live up to that - I talk about univesalist ideas and I talk as if liberalism is morally neutral all the time, I think. But if you pinned me down on the point, I'd agree with Gene and Rorty.

- Russ Roberts has a great post on Van Halen and their M&M contract. Contract theory is really fascinating stuff. I took a class on information and contract economics at GW - it was when I really first got introduced to this stuff, as well as two great economists (I'm calling them both economists, although they don't always get referred to as such): Avner Greif and Elinor Ostrom. Anyway, I think contract theory is important to bring to the table when we're bringing theories about marginal product equaling wage rates to the real world. I've been thinking about this a lot myself with the labor market for scientists. I'm bothered by the way journal publications are often treated as a measure of productivity and therefore as some kind of direct determinant of wages in a standard labor market model. I suspect that publications are more of a status symbol, and also one of these contract monitoring devices - but have very little direct relevance to thinking about the productivity of scientific labor.

- Ryan Murphy pokes fun at Russ Roberts being over the top about the Keynes vs. Hayek debate. I agree. He's refering to the same post that botched Keynesianism by reducing it to underconsumptionism, and thereby completely missing how much Mill and Keynes agreed about the determinants of output. Russ really should know better than to keep telling students and the public that Keynesianism is consumptionism. It's not a good thing, and ever since that post where he openly declared he said things for ideological reasons, it worries me.

- Jonathan Catalan replies to my post on re-framing the discussion of Keynes and Hayek. He writes: "Second, and more importantly, Daniel is looking to frame the discussion from his point of view." Well, yes. I'm reminded of a response Christopher Hitchens often gave to people who accused him of just offering "his opinion". "Of course", Hitchens would reply, "who else's opinion would you expect me to offer?". I think this is what Keynes thought and I think this is what most Keynesians think, and I think that Keynesians who don't think like this are in many ways wrong about Keynes and Keynesianism. Certainly some people disagree with me on that. That's almost another matter entirely because I still think the MMT/Minsky/Post-Keynesian types that disagree with me on that are still closer to my interpretation than Brian Doherty's interpretation is to my interpretation of Keynes. My point is simply this: if you want to argue with Keynes, argue with Keynes - not your preferred underconsumptionist, big-government, anti-market strawman (that's not directed at Jonathan - it's a general "your preferred"). If you want to argue with an underconsumptionist, big-government, anti-market strawman, then go find such a person to argue with. They're certainly out there. My concern with my re-framing post is that even putting it in the terms that Doherty (and many other people) do skews the argument. It's like I said about the Keynes-Hayek rap when it came out: I've always liked Hayek, but if you find me rooting for Hayek against Keynes, something seems wrong with your portrayal of Hayek, Keynes, or both of them. And the important point I was trying to make is that a lot of people who don't really know Keynes watch that video and now have a completely different impression of Keynes. That's not trivial when it comes to the economics dialogue.

- Speaking of Keynes, I found a neat new picture of him. That may not interest anyone else, but I like finding these. My favorite so far is the one of him and Lydia dancing.

Assault of Thoughts - 2/15/2012

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

- A great article by Mark Thoma on income distribution. He also provides links (on his blog post about this) to Tim Taylor and Jacobson and Occhino on the declining labor share of national income. I need to really go back to the data, but what I remember from looking at this question a year ago was that labor share of compensation has been more steady, it's just that the earnings share has declined. Perhaps I'm remembering this wrong. The idea is that benefits make up an increasing portion of compensation. This still can have big implications - when I was looking at it, what I was primarily concerned about was the financing of unemployment insurance. Unemployment insurance (and Social Security and Medicare, for that matter) is financed through taxes on wages and salary. If these are making up a smaller and smaller share of total compensation, that means the tax base for these programs is shrinking. This is all something of an aside - the links above deal more directly with the distributional issues.

- Here's a very well written post on the relationship between social science and natural science. Normally I'm skeptical of crude discussions of this issue by natural scientists who don't really have much of a concept of social science, but this is very carefully worded and has some good thoughts. The issue motivating the post is how each talks about race. My interest in race is entirely consequentialist and not ontological at all (which I interpret as being just fine according to this post). I study how the human species makes resource allocation decisions (just like many biologists study resourc allocation by other species - I'm just a biologist that studies a highly evolved primate). The way humans sub-divide each other into races plays a crucial role in many of these allocation decisions, so I work with "race" as it is popularly understood a lot. It doesn't matter, from my perspective, whether there is a genetic foundation for race groups at all. I operate on the assumption that it isn't, based on my weak understanding of the biology of the question, but I'm happy to defer on this point to the biologists either way. In most cases when I work with questions of race, the genetics of it is entirely beside the point for me.

Note especially in this post how he talks about the relationship between social science and biology as analagous to the relationship between biology and chemistry. He talks about a "hierarchy of disciplines" (I cringed when I first read that), but he clarified that in this hierarchy chemistry is more "fundamental" than biology, and biology is more "fundamental" than social science. This is the critical point. This does not mean we need to build economics up from chemistry, the way some people pre-occupied with "microfoundations of macroeconomics" might suggest if their views were taken to their logical end. What it does mean is that biologists are dealing with fundamentally chemical systems, and social scientists are dealing with fundamentally biological systems. Reconciliation of theory and observation can work in both directions, of course.

- Simon Wren-Lewis talks about teaching minimum wages and immigration. As most of you know, the empirics and the theory on this are not as clear as some people would like to pretend. What's fascinating to me is that there are some people who are insistent on what a downward sloping labor demand curve means for the minimum wage, but are willing to very quickly write it off for immigration. A bigger problem is that these discussions rarely take the general equilibrium impact of the minimum wage or immigration into account.

Assault of Thoughts - 2/11/2012

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

- Jeff Sachs calls Krugman a Crude Keynesian (HT - Ryan Murphy). I'm not quite sure about this. It wasn't that long ago at all that Krugman was talking a lot about unsustainable debt and I see no reason to think he's given up those concerns. What he says regularly is that the biggest drag on the debt is the continuing depression. Sachs may not agree with that logic and the priorities that it implies, but it's not immediately clear to me why that disagreement makes Krugman care less about the long-term debt than Sachs. My own debt concern revolves more around entitlements and tax reform than anything having to do with Keynesian policies. If either of those came up as an even remotely realistic possibility I'd be fully on board, but that seems unlikely.

- I've been busy this last week, so I haven't kept up with the blogosphere (and will be very busy for the next week), but I did want to bring attention to this post by stickman. His point is that scientists - climatologists and economists - are, contrary to the claims of some, not generally the ideologues in the climate science debate. Both are quite up front about what they can and cannot prove and admitting that outcomes are going to be various. One of the emphases of the video he shares is that climatology is a systems science (economics is too) and thus precise prediction is hard.

- Jonathan Catalan also responds to my post on externalities and free market economics.

- A post from a couple months ago by Andrew Bossie on the relationship between the G.I. Bill and the post-war non-depression. This is one of those things I really wish I had time to dig into more now, but I just have too much on my plate.

On to econometrics homework!

Assault of Thoughts - 2/5/2012

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

- David Henderson on five myths about free markets. I haven't listened to this yet, but past talks by David along similar lines have been very good. I think some people are under the mistaken impression that these myths are held by left-of-center economists. I think this is largely untrue and really a straw man I have to deal with a lot. But there are large segments of the population that think this sort of thing, and Henderson's clear exposition is great for meeting that.

- A great article in the New York Times by Christina Romer explaining why manufacturing isn't special and shouldn't get special treatment. Yes, yes - be nostalgic if you want. But don't use that as an excuse to be reactionary, regressive, or protectionist. The "decline of manufacturing" is actually not a decline in manufacturing per se, but a decline in manufacturing employment. And that is a very good trend. We can do things to help those who are hurt by the dislocation, but don't mix that up with an argument for standing against progress.

- Arrggh. Arnold Kling on 1946. It's like these people don't even realize that a counter-argument exists. It's like they don't even realize that most Keynesians in the early to mid forties were not saying this. Samuelson bent over backwards in his chapter in the Harris volume to point out that he was swimming against the tide, that he was making recommendations that ran counter to thoses of a lot of his fellow Keynesians. Dealing with the 1946 issue feels like dealing with 1920-1921 all over again. I'm not saying it's a fantastic vindication of Keynesianism and an assault on your theory or anything. I'm simply saying that theories like Keynesianism don't last as long as they do by being so vulnerable to such a simplistic chain of logic. Arnold, if you think this is a decisive case of Keynesians getting it wrong, you're working off of a strawman version of Keynesianism. Here's the end of my public service announcement: Keynesianism does not, and never has claimed, that government is the only source of demand or that the economy can't recover without government spending or that government cut backs will doom the economy in all circumstances. In some cases, government cut backs can be quite beneficial for the economy.

- LK has a discussion of Hayek's prediction of the Great Depression. He raises serious doubts about the veracity of the claim.

Assault of thoughts - 1/18/2012

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

- Brad DeLong reposts an excellent obituary he wrote for Milton Friedman. It especially highlights Friedman's push for an all-volunteer military. It's a literature I knew about from school, but really got familiar with when preparing a proposal on recruitment for the Army Research Institute. Friedman did some excellent work on that, and it's shaped my view of the intersection of public economics and labor economics - particularly a lot of my thoughts on the science and engineering labor market. Unlike Bob Murphy, I do think we should tax to stop an asteroid and I also think a draft in a truly existential crisis is a different matter. But that's a pretty specific situation. Also, for those of you who are not aware, there's a relatively new Milton Friedman institute at the University of Chicago which Evan has been keeping me abreast of (and which actually appears to have been renamed the Becker Friedman Institute). I haven't been keeping up with it, but they can certainly be expected to have quality work there.

- Margaret Simms, my colleague at the Urban Institute, has two recent media pieces. First there's a quick interview about the economic circumstances of blacks here. Also interviewed in that one is William Rodgers, who used to be at my alma mater, William and Mary, and is now a colleague of Hal Salzman, my co-author for the engineering labor market work, at the Heidrich Center at Rutgers. Margaret also has a column on inequality that makes similar points to the Krugman column I posted on Monday.

- Paul Krugman has a good post on the dissemination of research in economics, and the role of the blogosophere. He's made many of these points before.

- It's official now, so I wanted to note that I will be authoring a chapter in a book on a basic income guarantee that Guinevere Liberty Nell has just gotten approved from Palgrave. I'm actually not currently a proponent of the basic income guarantee, mostly because of it's labor supply effects. But I will be writing a "pro-" chapter, or at least a chapter highlighting some salutary qualities of a basic income guarantee as a monetary policy tool. The theme of the book is to present the basic income guarantee as an alternative to the welfare state that market socialists and Austrian economists can both support. As you all know, I don't fall into either of those categories but I'm addressing my chapter mainly to monetary disequilibrium Austrian economists (although as I learn more about market socialism, I think I can work some of that in as well).

Assault of Thoughts - 1/8/2012

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

- A record decline in government jobs under Obama (that's record percentage point decline, not just levels). I tell ya - Obama does a pretty crappy job at this socialism thing.

- Peter Klein complains about Yglesias on the Austrian school and economic journalism in general. I especially liked this: "I once heard a lecture by the sociologist Steven Goldberg about his work on male social dominance, expressed in his books The Inevitability of Patriarchy (1974) and Why Men Rule (1993). I remember him saying that whenever he presents his dominance thesis, someone invariably raises the objection, with a smug and self-satisfied expression, “What about Indira Gandhi?” or “What about Margaret Thatcher?” He went on (I’m paraphrasing): “Right. . . . Like I’m going to devote three years of my life to researching and writing a book called The Inevitability of Patriarchy, and someone’s going to say ‘What about Indira Gandhi,’ and I’m going to slap my forehead and say, ‘Oh, crap, why I didn’t think of that!’” Goldberg was a funny guy, with a great Brooklyn accent too. (His books point out that Gandhi-led India and Thatcher-led Britain were male-dominated societies, particularly in matters of state.)." Now that reminded me of a bunch of people on Keynesianism, but I won't name names here. I have a comment that does defend one grain of truth in Matt's post - about how Austrians moved away from their business cycle theories as the depression wore on. I imagine this is a reference to the move towards Haberler's explanations and therefore is not all that incorrect. Plus how many freaking times do we have to hear that Hayek apparently liked NGDP targeting - and yet now Yglesias is wrong to say that his position changed? Anyway - the rest of Yglesias is fairly bad, but there's a grain of truth there.

- Harry Holzer of Georgetown University (formerly of the Urban Institute) has an article on skills an a competitive grant program for job training in the new Issues in Science and Technology. And in a previous issues Diane Auer Jones has an article on apprenticeships.

Assault of thoughts - 1/1/2012

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

- HAPPY NEW YEARS! 355 days left, so make them count!

- John Cochrane, of the University of Chicago, is now blogging.

- I considered a New Years resolution of not blogging about Ron Paul anymore, but then decided against it. There's a duty to face this scourge of the American polity head on, etc., etc., and who am I to put my own blood pressure above duty? But I do want to cut back, because honestly it gets frustrating. So I'm simply going to note that rather than writing a post about this Glenn Greenwald post, I have some comments on it over at Ryan Murphy's blog. Believe it or not people, there is a huge moderate, rational, reasonable, and in my view correct middle ground between the Bush doctrine and the Paul doctrine. Accusing those of us who occupy this territory of sacrificing "intellectual honesty" demonstrates that Greenwald is either confused, a jerk, or both.

- And sort of in the same vein, Bob Murphy has a defense of the Mises Institute inspired by all this "racist newsletter" stuff. He makes some great points. I've said many times on here that I absolutely do not think Ron Paul is a racist. The same goes for the Mises Institute, DiLorenzo's Lincoln stuff, etc.. Of course, that doesn't mean that we can't note that because of our views on race and American society, we have a lot of concerns about Paul, DiLorenzo, Hoppe, etc. - we can absolutely say that. I have said that. But I think people should be careful about throwing around the word "racist" [and perhaps Hoppe does deserves the label... I don't want to weigh in on Hoppe specifically - other people probably know him better].

- Finally, for wine drinkers in the Mid-Atlantic area, I have to recommend Cooper Vineyards and Nassau Valley Vineyards. In addition to some old stand-bys, these made for a nice New Year's Eve party (Norton Reserve from the former, and Cabernet from the latter).

Assault of Thoughts - 12/17/2011

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

- I truly do not understand the appeal of Ron Paul. I think he's wrong on a lot of policy, but of course if you're a libertarian you think he's right. I get all that. But as I've said in the past I don't get this view that he's above politics when he seems to me to be the quintessential politician. I am also really, really bothered by things like this, from 1992. I think I know much better than, for example, presumptuous New Englanders or Californians, the context in which a Southerner displays a Confederate flag. So I've been willing in the past to stick my neck out and defend such people, while agreeing that it is unintentionally offensive. I'm willing to stick my neck out and defend some old coot who was a segregationist in the 1950s and seems to have realized in the ensuing decades that he was wrong. I'm willing to stick my neck out and say "you know - the old guy probably genuinely realizes he was wrong". But something like this in the 1990s really bothers me. I don't want a man like this to be my president.

-Tyler Cowen keeps pointing to China as an example of Austrian business cycle theory. Is it just me, or does this seem really wrong? When we see bad investment decisions in China, it's because the government is making these decisions for political reasons. It's not because cheap money fosters a different capital structure than would have existed naturally. Ghost cities aren't examples of an elongated capital structure. What gives? Is it just me or does this have exactly zero to do with ABCT?

- Scott Sumner talks Wittgenstein, macro, and Ptolemy. At the end he ponders over "what future generations will think of the Keynesian/monetarist split. Which model will seem like the Ptolemaic system?" I think making a big thing of this alleged "Keynesian/monetarist split" says you're one of two kinds of people: (1.) you're a monetarist that is mistakenly under the impression that Keynesians are allergic to monetary policy, (2.) you're an old Keynesian that drank the post-war Keynesian Kool-Aid that turned "monetary policy alone isn't right - fiscal policy has a role" into "monetary policy alone isn't right - fiscal policy has a role". I think the future will see that the whole monetarism back and forth was just us coming to grips over the emphasis of the Keynesian paradigm.

- Brad DeLong defends Stiglitz, has some criticism for Nick Rowe, and cheers us Hicksians.

Assault of Thoughts - 11/28/2011

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

- Brad DeLong continues the discussion on Mises and gold, quoting me again. This one is quite good. He pointed out some Misesian contradictions before, but reconciled it with a cost of production theory of value. He never actually thought that's how Mises reconciled the contradiction - I think he simply thought Mises ignored it. But a lot of people (myself included) mistakenly figured Brad was saying Mises actually held a cost of production theory of value. This post is much better in that it identifies the contradiction and simply calls it a contradiction, without any hypothetical reconciliation. Hopefully some Austrians will take it up.

- And speaking of Brad DeLong on the history of economic thought, I had always figured he was exaggerating when he used to talk about Marx as a real business cycle theorist. I figured he must be cherry-picking or exaggerating. Nope - as usual Brad is dead-on. I've had my nose in Theories of Surplus Capital, Capital, and Grundrisse all weekend absorbing Marx on Say's Law, and that's pretty much his position. Granted - he starts with some very interesting discussion of the whole C-M-C' "metamorphsis of commodities" model that gets to sounding a lot like an explanation you'd hear out of Nick Rowe. But then he essentially says "this is all abstract - let's get more concrete" and makes a series of RBC arguments.

- A great old post by Arnold Kling on labor shortages.

- Heeding his warning, I am linking to this Nick Rowe post without comment... I do have a few thoughts, but now I'm nervous about sharing them. His footnote about "political economy" may be the most valuable point in the post for some readers.

- And Nick Rowe's post reminds me of a fortune cookie I got just this weekend: "The wise man learns more from the fool than the fool learns from the wise man". Probably right.

Assault of Thoughts - 11/26/2011

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

- This is a great post by David Friedman on the interest rate as the "price of money". One thing I would add that is along the lines of what he says is that you really have to think about what money is as a good. We usually say that it's a medium of exchange, a store of value, and a unit of account. So what is a loan? Well clearly if you take a loan you have access to money as a medium of exchange (which is useful because it's still a unit of account), but you don't have access to money as a store of value. Why? Because you have to give it back! It's not an asset to you, it's a liability. So what you're really trading for is the medium of exchange function of money - it's ability to be traded - it's liquidity. That's the source of the liquidity preference theory of the interest rate. Loans can be thought of as an unbundling of the medium of exchange and store of value functions of money. I think part of the discussion of liquidity preference at a time like this is confusing, though. When we talk about increases in liquidity preference during a depression, it's really the residual of a lot of other decisions. People don't want to spend because of uncertainty about their income levels and people don't want to invest because of uncertainty about demand (i.e. - low returns on that investment), so they save and keep their money relatively more liquid than they otherwise would.

- Is this post by Bob Murphy as strange to readers as it was to me? Krugman basically says "if everyone saves at once the economy can't grow as easily". Bob essentially responds "Krugman is wrong - after all if only one person saves and everyone else spends the economy can grow". Then Daniel basically responds to him "Right - but if everyone saves at once the economy can't grow as easily". Is there something I'm missing here? What is Bob talking about? He's just talking about something completely different from Krugman and thinking he's talking about the same thing, right?

- This post by David Henderson on Robin Wells also seemed strange to me (I've got some comments in it). Isn't discussion of minimum wages, the impact of regulation on investment, unions, etc. standard fare in intro economics classes? I know it is in ours at American University, and we're not exactly some arch-libertarian school! Henderson (and again David Friedman in the comments) acts like Wells is proposing a whitewashing of economics. Friedman writes "The obvious question is whether, when she teaches economics, she feels obliged to expose students to views that don't fit her own political position, since she seems to be suggesting that people who disagree with her have such an obligation." It's amazing to me that he raises that as the obvious question. I don't think there's a single economics intro course in the country that doesn't follow this basic pattern:

1. The market is efficient because of X, Y, Z

2. Government action distorts the market and makes it less efficient - standard examples include rent control, minimum wage, regulations, and granting monopoly privileges (I challenge someone to show me a freshman text that doesn't discuss all four of these) - all the stuff that Henderson raises in his post.

3. Final exam.

That's what an intro student gets. If you continue, you get a lot more context, caveats, uncertainties - the sort of stuff that Robin Wells is suggesting we emphasize more earlier on. I agree with her. I personally think that an intro student should learn the basic market efficiency and government distortions material - the standard intro presentation. But I agree with Wells that to the extent we can hint at the complexities of the situation we should. I don't understand what Henderson and Friedman are concerned about here. They act as if intro economics courses gloss over market efficiency and government distortion, when that's essentially what these courses are about.

Assault of Thoughts - 11/23/2011

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

- Mark Blaug, perhaps the best known historian of economic thought, passed away on the 18th (HT Tyler Cowen). This is a paper of his on how nobody does history of economic thought anymore. I've been lucky enough to have had a class offered in the subject both in undergrad and now in grad school, by two great professors who also have a deep interest in history of thought (Robert Blecker and Clyder Haulman). And of course readers know that this blog is practically a "history of Keynesian thought" a lot of the time.

- Speaking of this blog's work on Keynes - the moment I've been dreading has happened! One of my professors has become aware of the existence of F&OST! Not so terrifying as I imagined it - my math econ professor emailed to say my German preface post has been discussed favorably on an economic history listserv, and he offered some other literature. I can deal with one of the more intimidating professors we have reading what I think is one of my better posts :)

- Krugman and Thoma point us to Diamond and Saez offering a new rendition of Edgeworth's old argument for a progressive tax. This - I should add for people entranced by flat tax schemes - is pretty widely accepted by economists. Dan Klein of GMU accepts the logic of it (if not the policy... I'm not sure what his exact views on taxes are). Bob Murphy will give you counterarguments here (I should also note that most economists agree with Bob on interpersonal utility comparisons, but would not draw all the conclusions from that that he does).

- I got this book in the mail yesterday: Beyond Stock Stories and Folktales: African Americans' Paths to STEM [science, technology, engineering, and mathematics] Fields. I'll be reviewing it for the Journal of Negro Education once I get a break from classes this December. Part of my continuing effort to build a foundation (and a chunk of a CV) on science and engineering labor market research.

Assault of Thoughts - 11/17/2011

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

- One little pet peeve that has come up recently: people who, when speaking of the demand curve facing all firms in a market for a single product, call it "aggregate demand" instead of "market demand".

- Sometimes I just don't understand how other bloggers' minds works. Thankfully, probably the two blogging minds I understand least blog together (easier to contain my puzzlement that way). The most recent zinger was this post from Don Boudreaux where he presents the most common argument for constitutional limits to democratic governance - the argument that I accept for constitutionalism, and the argument that has allowed constitutionalism to sweep the free world - and he asserts that that argument is "seldom identified" as a reason "for restricting the role and scope of government". Really Don? Really? I'm filing this under "inventing an opposition out of thin air just so you can argue with them".

- LK makes an interesting point discussing this Skidelsky interview. Everybody ought to know by now that the 1930s in both Britain and the U.S. amounted to blind groping towards something like Keynesianism. Understandable, of course. Keynes didn't even have a full grasp on Keynesianism until 1936, and these things take time to digest. As we know, his ideas became very popular very quickly, and were eventually used in policy making more deliberately. LK notes that the first time Keynesians really had the reins of policy was during WWII, and their task then wasn't to increase aggregate demand, but to tamp it down and control inflation. When I was looking through the Keynesian predictions for the post-war period I saw this a lot too. They stated regularly how important it would be to keep hold of inflation now that we're out of the depression. One new policy tool that was often cited in this regard was Social Security (forced savings). Hayek said that Keynes was worried his followers might turn into inflationists. I wonder if this is just another of Hayek's many tall tales. If you think about the Keynesian scene in the 1940s, there really doesn't seem to be much reason to think they'd turn into a bunch of inflationists. There was inflation then, of course. But then again - it's not cheap to kill fascists. I don't know how attributable that is to Keynesianism, particularly when the administration hired the Keynesians to keep all that in check.

- Brad DeLong takes Paul Krugman to task for yelling at David Glasner. I agree strongly. Take a look at the update in Glasner's post - he links to F&OST. I made the same connection to the liquidity trap that Krugman did (before Krugman did), without treating Glasner like an enemy (which he's clearly not). [UPDATE: After all, if Brad DeLong has to tell you you're being too harsh to someone on the internet, you know you have a problem! :) ]

- Speaking of people who link to F&OST.

Assault of Thoughts - 10/19/2011

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

- Ryan Murphy presents a hierarchy of evidence. I think he sets the bar far too high for "science" (only his two highest). I think this sort of high bar (he's not the only one that sets it there) comes from thinking too much about physics and probably too much about most philosophy of science too. If we cut out his #3, 4, 5, 6, and 7 we are eliminating a lot of what we colloquially think of as "science". The list is also clearly weighted towards the empirical potholes that economists hit on a regular basis (I don't think Ryan would deny this point). Also, I think the whole "black swan" thing has limited applications for many scientists, and is less relevant especially when you are not extrapolating into the future. Black swans and fat tails are far less relevant for a variety of elasticities and impacts that economists estimate, for example. That's not to say black swans couldn't show up there - it's just to say that we are consciously taking local effects and we think those are very useful to know, and that even if there are black swans in some circumstances it doesn't make the insights about the local effect any less valuable. This isn't to say he doesn't make good points. I like the way he introduces #3 a lot, for example.

- A great post from Krugman that's been making the rounds. What a great time to be entering the profession.

- Haven't listened to it yet, but this is the new EconTalk. It's on Keynes and Hayek.

Assault of Thoughts - 10/15/2011

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

- Matt Yglesias talks about modern macroeconomics in terms of Kuhn's take on the Copernican Revolution. I don't think I endorse this interpretation. For one thing I think of New Keynesianism as the version of Keynesianism we got as a result of the Lucas Critique, whereas here Yglesias is juxtaposing the two. Is there an incomensurability between the two? No, I really don't think so. He also just seems to analogize the two as "New Keynesianism is messy" and "Epicycles were messy", and I'm not sure that's the best way to draw parallels either. "Messiness" is largely dependent on the complexity of the subject of study and exactly what you're choosing to model in that subject. The question is - are we working at what Kuhn called "normal science" or not? I think there's a ton wrong with this interpretation, but it's interesting.

- A better Matt Yglesias criticizes Kocherlakota: "if at first you fail, then fail, fail again". I've criticized this mindset recently, to Bob Murphy's chagrin. People act as if the fact that we're not in utopia right now means that what we tried briefly three years ago is absolutely the wrong answer. If you want to say it never was the right answer, that's one thing. You can argue that point on its merits. But don't look around and say "we tried stimulus once, we're still in a bad position, stimulus must not work". As Gene Callahan once noted, it's like saying that because death from pneumonia occurs when people fail to respond to antibiotics, the key to not dying from pneumonia is to stop taking antibiotics (instead of... maybe... more aggressive treatment).

- Abstract thought, recipe following, and chemistry in some highly evolved (but not quite as highly evolved as us) primates. Humans are truly amazing creatures.

Assault of Thoughts - 9/29/2011

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

- A new blog on the economics of the digital age (HT Brad DeLong). One of the bloggers there has written about skills biased technological change in the past - I've cited him for my engineering chapter.

- WSJ on technological unemployment. As a short-run phenomenon, I think this should be taken more seriously than it is. As a long run phenomenon I think it's reasonable to dismiss it as a problem.

- Since Arnold Kling probably likes that last bullet point, I have to offer one he won't like. I agree completely with Karl Smith. There is a macroeconomy, aggregates are useful, and we can think scientifically about aggregates without deriving it up from the individual.

- Keynes vs. Smith on wine. I am a Smithian in the sense that I appreciate the distinctiveness of Virginia wine, but I'm not sure that appreciation quite amounts to terroir. In that sense perhaps I edge closer to Keynes.

- Bob Murphy raises some good questions for Steve Landsburg. I agree with a lot of it in the comments. The allocation of costs in Landsburg's post seems very selective.


I got more than four hours of sleep last night and my midterm and presentations are behind me, which is a lot more than I can say for the previous three nights. So I'm feeling great! Have a good Thursday everyone.

Assault of Thoughts - 9/24/2011

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

- Obama is allowing more states to opt-out of NCLB (HT - Scott Johnson). This is very good. Now he needs to do the same with health reform. If the federal government has a decent idea about how to provide for the general welfare, that's great. Go for it. But they should not overestimate their abilities. Allowing flexibility from the states on these initiatives and not just allowing but encouraging experimentation and learning from best practices is important.

- Krugman talks about what is essentially Keynes's version of the liquidity trap. So if you're interested in the difference between what Krugman has been calling a liquidity trap for the last several years and Keynes's version of it, this might interest you.

- Dimitri Medvedev just significantly increased his likelihood of staying out of prison, or at least living out the decade.

- xkcd on that zippy little neutrino. It does a good job framing paradigm shifts. Paradigm shifts do involve a complete rethinking of some aspect of theory. But this headline characteristic of paradigm shifts obscures another important characteristic: many paradigm shifts don't only shift - they generalize what we realize are special theories. It's wrong to say Newton was "overthrown" by Einstein. If Newton was "wrong" most of what we know about engineering wouldn't work. So when we say that we came around to the idea that Newtonian physics was "wrong" we need to be careful about what we're implying by that. The comic makes the same point about Einstein and this neutrino.

Assault of Thoughts - 9/18/2011

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

- Sylvia Nasar has another great article on Keynes. She's speaking at the Mercatus Center in November, the day I present at APPAM and the night before Kate and I leave on a trip... it seemed like too much to squeeze in, but now I'm thinking I might want to show up. I liked to things about this article especially: (1.) it explained Keynesianism easily without resorting to consumptionism, and (2.) I like the details on Marshall.

- Lots of times when I argue with libertarians, I criticize what I consider to be their dangerous foray into social engineering. On the American political spectrum right now, libertarians propose considerably more radical shifts in the way society is organized than any other group, and for an economist that thinks these social orders evolve that seems suspect. So I found Karl Smith's coining of the phrase "liberalization failure" interesting. His concern is a little different from mine, of course. He defines it as: "When attempts to leave a market to its own devices results in a social backlash and the adoption of policies worse than what would have prevailed had the government taken the economists’ orginal recommendation." I wouldn't define it so narrowly in terms of the "social backlash" (although this is obviously a problem in many cases). I would broaden it to situations where people think they can predict what will happen as a result of large-scale liberalization, but they really can't. Still, it's a good idea. But ultimately I'm not sure I like it for the same reason I don't like the terms "market failure" and "government failure". I think the idea of "failure" in general for these things is a bad way to think about it. An externality, for example, isn't a "failure" - it's just a description of the way the world works given a certain property regime and set of incentives. Indeed, in a situation of externality the whole problem is the market isn't complete - it seems strange to blame the market for that. "Government failure" is odd too because often it's not the apparatus of government itself so much as the decisions that are made that turn out badly. If a firm goes out of business do we call that "market failure"? No. We say that given the institutional environment that firm didn't have what it took to be successful. The same goes with most things dismissed as "government failure". Demonstrating that a given piece of regulation is bad hardly proves that the act of regulating is unwise. I think these terms - "government failure", "market failure", and probably "liberalization failure" too aren't as clear analytically as they first appear. But it is good that Karl Smith is calling attention to the failure of libertarians to consider a lot of public choice problems associated with their ideas.

- I always have a tough time accepting the idea that the media has a strong liberal bias. New research suggests my suspicions might be good. You can get almost anyone - liberal, centrist, or conservative - to admit that Fox is pretty conservative. You can get almost anyone - liberal, centrist, or conservative - to admit that MSNBC is pretty liberal. There are obviously example of ideological news sources. But all the other major channels and all the big name newspapers seem to all be thought of as "liberal" by conservatives I talk to and "conservative" by liberals I talk to. That's a major clue-in that there's probably not all that much bias in them. Or to put it another way - if these news sources were unbiased, you would expect conservatives and libertarians to think they have a liberal bias, and you would expect liberals to think they leaned right. If they were biased, you wouldn't expect to see that symmetry. [And commenters - be a little circumspect about whether your brilliant refutation simply amounts to proving my point]

Assault of Thoughts - 9/16/2011

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

- Charles Krauthammer has a good article on Social Security. He doesn't mention the role of persistent growth but does mention something else important - than mandatory nature of the program. He's also a little too worried about the sustainability of the program, but his point is right on: this Ponzi scheme works because it's not like a Ponzi scheme in all the ways that matter. So let's keep it running until the electorate decides they don't want it anymore.

- Bob Murphy has a post critiquing the idea of measuring trend GDP from peak-to-peak. I think the key insight for why we do this comes from Friedman's "plucking model". I try to explain that in the comments, but Bob seems to think I'm saying Austrians can't explain long recessions (I'm not saying that - they do have an explanation for that). The point is that the plucking model gives us a reason for why we measure GDP potential from peak-to-peak. Maybe this weekend I'll do a more detailed post on the plucking model, but it's a very interesting empirical regularity.

- And speaking of empirical regularities and Bob Murphy, Chris Bertram sharply criticizes Bob's a priorism with respect to Graeber and the origin of money. Bob may point the finger at Gene Callahan for misleading him (I don't know which of these stories holds water), but all that misses the point and here Bertram hits the point dead on: a priorism is a bad way of understanding the world. What's ironic is that of the Mises Institute bunch, Bob is one of the most likely to give you data to support his argument. He is one of the least a priorist (in practice at least) of a very a priorist bunch. So I don't want to pile on Bob here - I just want to reiterate Bertram and Graeber's general point. As Graeber says: "Economists claim to be scientists. Normally, when a scientist’s premises produce such spectacularly non-predictive results, the scientist begins working on a new set of premises. Saying “but can you prove it didn’t happen sometime long long ago where there are no records?” is a classic example of special pleading. In fact, I can’t prove it didn’t. I also can’t prove that money wasn’t introduced by little green men from Mars in a similar unknown period of history." I just hope he realizes he's stumbled into an idiosyncratic little group that is very resistent to empiricism as a deliberate methodological position, and that most economists don't think like this at all.

- Karl Smith puzzles over being considered a liberal or a leftist. I have to post this because I have the exact same reaction. I've been referred to as a liberal for years now and it's still weird to hear people say that because I don't think of myself as being particularly liberal. There are three reasons for this I think. First and foremost, it's who we're talking to (the libertarians). I know other people don't think of me as a liberal. Second, in the middle of this recession I'm finding myself frustrated that Democrats sound increasingly like Republicans so I probably come across as "to the left" of them, whatever that means. Really it's just a disconnect with all but the more liberal politicians on one very big issue. And third, with the rise of the Tea Party supporting basic safety nets, basic public investments, etc. and thinking these are just smart and reasonable things to do has become suspect. So what would have been fine for a conservative to say thirty years ago is suddenly less tenable. These days, being of the view that Social Security, public education, a safety net, and investment in science is something to be celebrated can come across as "liberal".