Corner Solutions in Policy

It seems to me Jason Kuznicki (via Andrew Sullivan) isn't describing a corner solution so much as lexicographic preferences. Corner solutions don't necessarily emerge because of preferences - they can also emerge because of the starkness of the available tradeoff. What Kuznicki is describing - the absolute subbordination of everything else to a single priority in our preference ranking - seems more like lexicographic preferences.

But I could be wrong.

Thoughts?

Assault of Thoughts - 5/7/2010

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

- The New York Times on Greece and Britain. I've been interested in the amount of attention the British election is getting in America. It's practically driven Greece out of the news, at least for the day. It seems strange to me - the election seems so much less consequential than Greece, which is threatening the entire continent - if not the world economy. But Americans like their election coverage, and I imagine it's nothing more than that. The article draws parallels between Britain and Greece, but leaves out by far the most important difference between the two: Britain is not on the euro.

- Jonathan Finegold Catalán has a good post on property rights and the oil spill. His analysis is right on target. I think there are lingering questions about whether the ocean (or any number of other things) is something that we want to identify as property. But whether or not it is a good idea to consider it "property" - the fact that it isn't property has important consequences, which Jonathan does a good job analyzing.

- Steven Horwitz has a good post on mergers and monopolies. Monopolies have always been a boogey man for Americans especially, but also for advocates of the free market. Intuitively that makes sense - monopolies are anti-competitive, right? But the reality is more complicated than that. Monopolies are often given a bad name that they don't deserve.

- I've been doing some soul searching after my partial differential equations final. Considering some political economy programs that place less emphasis on the higher math. One of the things I think I'd be interested in pursuing in such a program is the political economy of monetary policy making - specifically with respect to the Triffin dilemma and the dual mandate of the Fed. These choices are in many ways political choices (and perhaps that's not always a bad thing). Anyway, over the course of googling these things just to get a sense of the problem, I came across this interesting piece on the political economy of monetary policy by Volcker back when he was at the New York Fed.

- Sometimes I wonder about Arnold Kling's views on liberals and libertarians. By this definition, I'm definitely a libertarian and I think a ton of people are libertarians. This is quite simply a classical liberal position, and the classical liberal assumption on these sorts of things is shared by a lot of people beyond just libertarians. I have no idea why it's so hard for libertarians to realize this. I mean - define it this way if you want. Go ahead. But then the term "libertarian" becomes meaningless and indistinguishable from "classical liberal".

- Further findings regarding life on Mars. Very important stuff, if not entirely conclusive yet.

- Mark Thoma at The Huffington Post explaining why it is so essential for economics programs to place more emphasis economic history again. I couldn't agree more. My dream job would just be to be an economic historian. Unfortunately, that's a fairly restrictive skill set with restricted employment options so it's better left as a hobby and personal interest I think.

- Another sad example of moderates being dismissed by extremists.

Is it valid to assume that we assume Keynesian assumptions?

This morning I listened to Russ Roberts and John Papola's Keynes vs. Hayek rap, called "Fear the Boom and the Bust" again. I enjoyed this when it first came out. They took so many artistic licenses that I was pretty skeptical of the claims that anyone would actually learn anything about Keynes (or Hayek) from it. But it's definitely entertaining, and it will definitely get people interested in economics and provide some of the broad strokes. That was my only critique initially. But I noticed something else this morning that struck me. When Keynes and Hayek show up at the concierge desk at the beginning of the video, the attendant recognizes Keynes immediately but has no clue who Hayek is - the implication being that Hayek is obscure and under-appreciated, while everyone knows and loves Keynes.

Is this really true, though? I would guess that the average person is about as likely to know either one of them. However, I'm guessing more people have read Hayek's The Road to Serfdom than The General Theory. In that sense, I think the video gets it exactly backwards, at least when it comes to the populace in general (although even among economists I'm guessing there are few who have read the General Theory itself, and a lot that have picked up The Road to Serfdom... The Road to Serfdom is something of a cult classic in a way that The General Theory simply isn't). Of course, there are no real numbers available on who knows Keynes and who knows Hayek, or who has read their books, so there's no way to confirm these suspicions.

Later today, though, I had the sense again that Roberts and Papola have it exactly backwards when it comes to public perceptions of Keynes and Hayek (or thinkers like them). I was reading Megan McArdle's blog post on the dramatic drop in the stock market this afternoon. She furnishes several very sensible explanations of the sharp drop, but this one was especially notable:

"The market knows something that we don't, but ought to, about Greece. Greek approval of the austerity plan should have perked things up. Instead, the markets are in turmoil. And maybe they're right to be. Passing an austerity plan doesn't guarantee that it will work; Argentina was going through governments like paper plates right before it terminated the dollar peg and defaulted." (the emphasis is mine)

Now, of course it makes sense that someone like McArdle might have this positive view of the austerity plan. She has well known libertarian sympathies. But it's not just that she thinks the austerity plan is a good thing. She demonstrates here that she also thinks that the market thinks that the austerity plan is a good thing. Why in the world would the market think that (forgive my anthromorphization)? If you completely reject Keynesianism, that's why. I suppose even a Keynesian might think that an austerity plan might be better than default - but even that only makes sense as an explanation for the stock market drop if listed companies had a lot invested in Greek sovereign debt. However, an austerity plan is a good thing if you come from a (crudely, broadly conceived) Hayekian perspective. In other words, McArdle is implicitly assuming that the biggest market players are fundamentally Hayekian - or at least much more Hayekian than Keynesian.

This mistaken assumption that "Keynes is King" is apparent when you discuss recent American macroeconomic policy as well. Inevitably, people will call it "Keynesian" - particularly if you ask someone that is relatively Hayek-friendly. In fact, it's been nothing of the sort. Despite the large increase in federal spending, declines in state spending have made our macroeconomic response something very different from Keynesian fiscal stimulus. I discuss this confusion here and here. People make the same mistake that Megan McArdle, Russ Roberts, and John Papola do: they assume Keynes is everywhere and that government spending is tremendous. It's not. When you factor in all levels of government it's not really registering.

The way I see it we're muddling our way through all this. The best that can be said is that the Fed performed a lot better than it could have, and the federal government didn't make it appreciably worse. But other than that we're just muddling through. I know we haven't tried a Hayekian solution - I'm not claiming that we have. But we haven't tried a Keynesian solution either. Why is there this sense among some people that everyone's a Keynesian and that Keynesianism is dominating things? I just don't see it. I don't know if this narrative feeds into some sort of martyr complex that Hayek fans like to foster or what. I'm not sure what the origin is.

Who likes libertarians?

For self-conscious libertarians - we really do love you. We just need to set you straight every once in a while, and disabuse you of your tendancy to pick and choose from the broad liberal tradition and cordon off everything else as being anti-thetical to liberalism.

I was actually in a libertarian club in college, and have many libertarian sympathies myself. I just learned over time that the air-tight internal consistency of the program didn't always mesh well with reality. Regardless - interesting poll results.

The First Day of the Rest of My Academic Career

I just finished my partial differential equations final yesterday, and I increasingly have the sense that I am entering a new leg of my journey as a scholar. This was part of a round of math courses I took after finishing my master's degree in public policy in 2009, in preparation for applying to PhD programs this fall. So now I'm really beginning to focus on why I'm going for the PhD and what research I'm interested in doing.

Despite my habit of posting on broad political economy questions, obscure disputes in the history of economic thought, and the Austrian School, these aren't my only interests. They just seem to me to be interests that are comparatively easier to blog about, and are more appealing to a wider audience. I'm going to start drafting my personal statement very soon, and a big part of that is sketching out goals and a research agenda. So I thought I'd outline that research agenda here.

For a while now, I've been very interested in the literature on gross labor market flows: the work of people like John Haltiwanger, Robert Shimer, Robert Hall, Steven Davis, Scott Schuh, and others. People generally think in terms of net labor market adjustments. The change in the unemployed population, for example, is the difference between the number of people entering the state of unemployment and the people leaving unemployment. But simply looking at the unemployment rate leaves out a lot of information. There's an enormous difference between a 0% change in the unemployment rate where everyone that was unemployed last month is still unemployed this month, and a 0% change in the unemployment rate where all of the unemployed from last month found new jobs and an identical number of people became newly unemployed. The first situation would be an extremely unhealthy labor market, while the second would be a very robust labor market.

Without getting into too many details, researchers focus on two kinds gross labor market flows: gross job flows and gross worker flows. Gross job flows are the gross changes in jobs at a particular firm. Gross worker flows are the gross changes in individual labor force statuses (ie - hiring, firing, quiting, etc.). Net job flows should equal net worker flows, which should both equal the change in the employed population. I have two "macroeconomics of the labor market" research questions I want to pursue in graduate school: one having to do with gross job flows and one with gross worker flows.

Gross Worker Flows and the Price Level
One of the best known economic relationships is the Phillip's Curve, which highlights a negative relationship between inflation and unemployment. The Phillip's Curve has (justifiably) taken quite a beating over the years. The immediate concern was its inability to predict the stagflation of the 1970s, but there are other issues as well. The basic idea has survived through a series of adjustments, including the inclusion of "expectation adjustments" (an adjustment that I would argue was anticipated by Keynes in his Tract on Monetary Reform), and the New Keynesian sticky wage models. One huge problem that I see with the Phillip's Curve is that it relies so heavily on the relationship between unemployment and inflation. It seems to me that the relationship between inflation and the labor market is primarily driven by wage setting behavior. Even if we don't assume substantial wage rigidity, the biggest wage adjustments are going to occur when labor contracts begin or end. In other words, gross worker flows (changes in hiring and separation rates) are going to be much more important for the determination of the price level than net worker flows (changes in the unemployment rate). I want to work with the relationship between gross worker flows and the price level, although I'm not sure exactly what I would look into. I have to better familiarize myself with the job search literature, which already has done a great deal of work on search behavior and wages. Robert Shimer has a new book out on gross worker flows and the business cycle, but I'm not sure how big of a role the price level plays into it. There's also a relatively new book out on the status of the Phillip's Curve today, although based on my review of the table of contents it doesn't seem to deal with these gross worker flows issues. I just need to situate myself in the existing literature and think a little more on it.

Gross Job Flows and Output
I'm also interested in John Haltiwanger's work on gross job flows (ie - firm level job creation and destruction) over the business cycle. My top choice for schools is the University of Maryland, which in addition to the advantage of being in the D.C. area, also has John Haltiwanger on the faculty. My concern, though, is that a lot of Haltiwanger's work has been quite descriptive. I'd want to dig a little deeper into the reasons why these relationships hold. I think an important source for the answer to this question is going to be Roger Farmer of UCLA. In a recent book, which I have yet to read, Farmer presents a modified Keynesian model where "animal spirits" in asset markets make corporate liquidity crucial to hiring decisions. [Although Farmer specifically talks about "hiring" (a gross worker flow concept), his model (as I understand it) assumes that all workers separate from their firms at the end of the period. This imposed 100% separation rate turns changes in Farmer's hiring rate into a job creation rate (a gross job flow concept)]. What we have here is a disaggregated liquidity preference model of output and employment that can explain the employment level with an appeal to gross labor market adjustments rather than net labor market adjustments. In other words, it has a Keynesian flavor but it gets past a lot of the problems with older Keynesian models that I have concerns about. And Farmer is explicit that it doesn't rely on rigid wages, which he argues (and I agree) was an unnecessary distraction introduced by New Keynesians. That's not to say I think wages aren't rigid. They almost certainly are. But focusing on them distracts from the more important dynamics. Again, I need to figure out where I fit in all this, but I think Farmer provides a good place to start, and I think I have a good point that his assumptions about the separation rate make his model essentially one concerned with gross job flows rather than gross worker flows.

That's dissertation fodder. I have a couple other "research interests" as well:

A Hicks-Hayek-Modigliani-Garrison Model (The "Kuehn Model" for short)
In the past, I've alluded to a Keynesian-Austrian synthesis. One thing I specifically have in mind is Roger Garrison's model of the macroeconomics of the capital structure. I've seen him present this in a lecture, and I've read papers of his, and I'm very impressed by it. It really brings to the forefront one of the most important contributions of Austrian economics: the capital structure. However, one nagging concern I have with it (at least as I've seen it presented) is that it offers no theory of output. From what I've seen, Garrison simply assumes that we sit happily on the production possibilities frontier with no explanation of why he would assume such a thing. Of course, Keynes and his descendants provide an answer to this question. Garrison has half the Keynesian answer: the loanable funds market. It seems to me if you add liquidity preference to it, you can then determine output in Garrison's model. Then you don't simply assume the level of output, and I see no reason why you can't maintain all of Garrison's great insights into the capital structure. So at some point I think it would be interesting for me to add a couple quadrants to Garrison's model and see how all this works out. First, however, I need to beef up my basic familiarity with Garrison. I just bought his Time and Money to do just that, which will be next on my reading list after 1848: Year of Revolution, which I'm currently reading. I think I can get by with a few articles from Modigiliani. I think I'll also rely on Garrison for my insights into Hayek (Pure Theory of Capital is really expensive in the bookstore!). Who knows when I'll get to the project itself, but I've sketched this out with pencil and paper in a few ways, and at some point I'd like to dive in and write something.

The Georgia Job Creation Tax Credit: A Regression Discontinuity Design Approach
Writing this right now, now that my 1920-21 depression paper is basically drafted. It's going very well. The title is pretty self-explanatory. Job creation tax credits have been of interest to me for quite a while.

Fascist Political Economy, the "Compression of Liberalism", and the "Presumption of Ideological Orthogonality"

I had a recent private correspondence where the idea of a "fascist political economy" came up. It's an issue I find interesting, but what I found a little disconcerting was that my correspondent (who is no wild-eyed ideologue) suggested that the U.S. economy "bears a resemblance" to fascist political economy. The argument is specifically that we are "corporatist", and the line is then drawn between corporatist and fascist economics.

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[UPDATE: Just to make clear - below, this post gets into issues and points that weren't made at all in my correspondence. That discussion simply got the gears in my head turning.]

First, I find the "corporatist" label itself hard to swallow. Usually, what people point to in this regard are the bank and auto bailouts, as well as health reform. It seems to me that a "corporatist" position would require support of the normal functioning of a corporation in regular cooperation with an industry association, the state, and perhaps a labor association. The idea that this characterized the bailouts is ludicrous. Whatever your views on the bailouts (I supported the bank bailouts, but opposed the auto bailouts), you can't convincingly argue that they were anything but a temporary attempt to stop the hemorrhaging in an already battered economy. It may have been unwise policy, and it may even look like corporatism, but it's no more real corporatism than Somalian anarchy is "real libertarianism". There is no permanence to the relationship between the state and the corporations set up by the bailout, and there is no clear point to it except to protect the "real economy" from the fall-out of multiple failed institutions. Health reform is trickier. Obviously there hasn't been any nationalization, but there has been quite a bit of regulation, and we will have exchanges which I suppose might resemble a corporatist organization to some people. I opposed the mandate, but I also have to wonder about anyone that thinks this rises to the standard of "corporatism". While I don't think the availability of health care is in any sense a "right" (I'm a negative rights sort of guy), I do think it's in a vague public good/humanitarian good territory that free societies might consider providing publicly. It's the same with education. If you completely jettisoned all sense of context, perhaps our public education system could be considered "corporatist", and then you could leverage that into an accusation of "fascist". But the liberal tradition has always recognized the reality of "public goods" (to varying degrees depending on the writer, of course). It seems to me that a corporatism that seems exclusively directed towards these "public goods" may or may not be good policy, but should avoid the "corporatist" label effectively and be considered firmly rooted in the liberal tradition. The distinction of fascist political economy, it seems to me, is that unlike the liberal tradition that recognizes only limited scope for "public goods" based on some very well defined properties, the fascists and socialists see all goods as inherently "public goods". This is not the perspective we see in the United States.

Fascist political economy emphasizes the submission of all economic activity to the needs of the nation or the state rather than the needs of the individual. To achieve this, cooperative organizations between business, government, and labor are formed. The state sets production goals and priorities and businesses and labor cooperate in an effort to meet these goals. Where in the U.S. do we see this? Nowhere. Even in the bailouts discussed above, the only "goal" to speak of is "please don't implode while unemployment is so high". It's hardly reminiscent of the 20s and 30s in Italy and Germany.

I think the source of these concerns about fascist political economy comes from what I would call the "compression of Liberalism" that is adopted by many libertarians as well as Tea Party types with somewhat less ideological clarity. "Classical liberalism" no longer means what it used to mean - it has become a synonym for libertarianism. All the differences of opinion between the classical liberals, and all liberals through the ages, are jettisoned and a libertarian core alone is maintained as legitimate.

This sort of "compression of Liberalism" inevitably leads to what you might call the "presumption of ideological orthogonality". Let me provide an example. I'm sure many of you have had someone run through the ten planks of the Communist manifesto for you and check off the several points of the list that we've adopted in the U.S.. The exercise (I suppose) is meant to be some sort of stunning revelation about how Communist we've become. But the argument falls flat. Why? Because it relies on this "presumption of ideological orthogonality". To be convinced that it says anything about the extent to which we're Communist, you have to believe that Communism shares no perspective at all in common with Liberalism. You have to assume that all ideologies are perfectly independent of each other, so that a check list is sufficient for determining how Communist one is. A similar example with fascism is the common claim that the fascists supported public works projects. What does this demonstrate other than that the fascists apparently agreed with a lot of Liberals on the value of the strategic use of public works projects? Why does this observation imply that Liberals who do support public works actually resemble fascists? Why can't it imply that fascists who do support public works are actually secretly Liberals (I don't believe that either, but it's telling that you never hear anyone draw that conclusion - why don't you?). The fact is, economic and political ideologies are not perfectly orthogonal. There are a lot of perspectives out there that support a progressive income tax. My support for a progressive income tax is integral to my Liberalism, which is grounded in my classical liberalism. This doesn't change because Marxists or fascists also support progressive income taxes for their own reasons.

It's extremely disconcerting to me that for a lot of smart people out there the options are apparently libertarianism and corporatist fascism, and that if you depart from libertarianism you "resemble fascism". Analytically, it's a laughable conclusion. But socially, it's disconcerting as well. One of the great things about Liberalism is that historically it has practiced what it preaches with regards to pluralism. Advocates of human liberty and representative government have always maintained disagreements on specific points and emphases. Liberalism is not a homogenizing perspective. It's deeply unfortunate that we've come to the point where departure from one brand of classical liberalism isn't recognized as another version of Liberalism, but an alien ideology.

For further reading on fascist political economy, I highly recommend Adam Tooze's Wages of Destruction: The Making and Breaking of the Nazi Economy. He provides good references to the earlier literature as well.

Carl Schmitt provides insights into the legal underpinnings of fascism (specifically German national socialism). I think these insights and his thinking on the Ausnahmezustand are especially important to keep in mind. There are two fundamental planks of Liberalism: human liberty and representative government. Schmitt highlights how fascism is completely contingent on the abrogation of the latter. Whatever your views of the American response to the economic crisis, it has strictly adhered to the principles of representative and Constitutional government throughout. It's an essential distinction. If I were less charitable, I might even argue that common libertarian complaints about representative government as fundamentally problematic (tyranny of the majority type arguments) also depart from Liberalism's focus on representative government and bear a striking resemblance to Schmitt's judicial philosophy, which doesn't let a pesky thing like the will of the people get in the way of the "correct" policy. But I do think I'm relatively charitable, and I won't make that accusation because I understand and respect the "tyranny of the majority" perspective, regardless of whether similar facetious reasoning gets applied to my brand of Liberalism on occasion.

The best genealogy of Liberalism that I've read is Keynes's The End of Laissez-Faire, which I also highly recommend. He succinctly reviews the differences of opinion in classical liberalism, and traces these differences of opinion into what I've above called the "compression of Liberalism" into two camps: laissez-faire and Marxist socialism. He laments the "compression of Liberalism", as do I.

And for another perspective on fascist political economy, here is Dwight Schrute delivering a speech modified from one delivered by Mussolini. He's tricked into delivering it at a sales conference by Jim, of course, although Dwight's fascist sympathies are revealed at other points in the show as well.

French Catholic Modernism

Evan looks at the dual critique mounted by French Catholic modernists at his other blog.

I actually didn't just post this so that I could use the picture from "The End of the World" youtube video. That was only half of the reason for posting this. It's also a very interesting piece from Evan.

Boettke, Stiglitz, Hayek, and Socialism

Hypothetically, I always thought it would be great to host a dinner party for Joe Stiglitz and Friedrich Hayek and just sit there absorbing their discussion. And I call it a "discussion," rather than a "debate" intentionally - because I think they would both have a lot of very constructive things to talk about, despite their stark differences. Specifically, I've always been intrigued by both of their takes on information and knowledge. Hayek's theory of knowledge emphasizes that knowledge is decentralized, dooming any attempt to centrally solve problems of allocation and production. The price mechanism is a knowledge discovery process that leverages all of society's dispersed, tacit knowledge. Stiglitz makes these points as well, and of course adds a robust literature on information asymmetries and information imperfections. Honestly, the old "socialist calculation problem" never deeply interested me. It always seemed like a rather obvious point, and I think the fact that I was so young when Communism fell makes it less important of a question for me. So in my Hayek-Stiglitz dinner party fantasies, I've always been more curious about how Hayek would discuss information asymmetry problems with Stiglitz, because as far as I know (and that's not very far), those sorts of issues didn't come up as much in his work.

The impetus for this post was an interesting post this morning by Peter Boettke. He writes on what he calls "robust political economy", as well as Stiglitz's Wicksell lectures, titled "Whither Socialism?". This passage in his review is key:

"Whereas Hayek argues that the standard model underestimates the informational role of disequilibrium prices, Stiglitz argues that the standard model overestimates the functional significance of equilibrium prices in ensuring Pareto efficient resource allocation."

My feeling here is the feeling that I often express with respect to Austrian Business Cycle Theories: that each of these narratives is "necessary but not sufficient". I'm of the opinion that both Hayek and Stiglitz are right. Hayek's point is that socialist calculation fails because the planner lacks the knowledge that is coordinated by prices to allocate efficiently. When prices are in disequilibrium, individuals acting on their decentralized knowledge respond in the market, bringing prices back into equilibrium. This fundamental corrective isn't available to the socialist planner. The socialist planner who doesn't realize this therefore underestimates the informational role of prices. But nothing in this basic point (certainly not original to Hayek or Mises) contradicts Stiglitz's work on information imperfections. Hayek's observation of what planners are lacking is not proof of what individuals in the market place do not lack. Stiglitz's point is that individuals in the market often lack information that they need to operate efficiently in the marketplace. Asymmetries in individual information leads to strategic behavior that distorts canonical market efficiency outcomes. There is nothing in these two stories that contradicts the other. I see no reason why Hayek's critique of socialism and Stiglitz's critique of market optimization can't coexist.

This is another Boettke post on Stiglitz.

Another Austrian economist that has had an interest in Stiglitz is Jonathan Finegold Catalán at Economic Thought. You can find a list of his posts on Stiglitz here.

The Fascist Octopus Has Taken The White House!

Bryan Caplan has urged "grateful bloggers" to "dance on the grave of Marxism" this May Day [please also see update at the bottom of this post]. It seems to me to be a very appropriate dance floor. Caplan offers his own contribution in a counter-factual history of what could have happened if Lenin had his fatal stroke in 1917. I raise some issues with the counter-factual he poses (fifth comment down), but all in all it's interesting.

I was going to offer insights from my favorite anti-Marxist, John Maynard Keynes. But then I saw an Atlantic post on accusations of Obama's Marxism, and I decided that I needed to stamp that out instead. I think Keynes would have approved. He spent much of his career critiquing both laissez-faire and Marxism, and in pointing out to people how Marxism was anti-thetical to his own ideas and threatened the cause of liberty. Back to Obama. On his tour of the Midwest, Obama said something that agitated the hyper-sensitive, hyperbolic, and self-righteous Right. He said: "I do think that at a certain point you've made enough money." Mark Levin said that the sentiment has "strong shades of Marxism". Seems like a pretty reasonable interpretation...

Except that I've misquoted Obama. I added a period, where he had a comma. What Obama actually said was:

"We're not trying to push financial reform because we begrudge success that's fairly earned. I do think that at a certain point you've made enough money, [<-- COMMA!!!!!!!] but you know part of the American way is that you can just keep on making it if you're providing a good product or you're providing a good service. We don't want people to stop fulfilling the core responsibilities of the financial system to help grow the economy."

Yes, when you start switching around commas and periods, and when you don't restate the entire sentence you can make it sound like just about anything. What's sadder, though, is that you know this is going to get traction.

It's like that infamous Chicago radio interview where Obama explicitly said that the courts were not the right place to pursue economic justice, and yet somehow the message that came out of that was that we should pursue economic justice in the courts. It's the same thing here with this "enough money" statement. He explicitly said in the sentence quoted above that people should continue to earn money - more money than they even need - if they're providing a good or service that people want. That's the epitome of market capitalism. How the hell does that get turned into Marxism? It's bizarre to see people do these mental gymnastics to take a grammatically simple sentence and turn it into what they wanted him to say.

At least in the Chicago radio interview, Obama elaborated his idea over the course of several sentences. He spent quite a bit of time explaining why the courts failed to achieve all the aims of the Civil Rights movement, why they weren't the right place to achieve all the aims of the Civil Rights movement, and for that reason why the leaders of the Civil Rights movement were wrong to put so much emphasis on the court process when they should have put more emphasis on community organizing. It took him a while to lay that thesis out - it's a complicated thesis after all! But this point about "enough money" is just one sentence. Can't people read all the way to the period at the end of the sentence? A couple years ago I would have said "can't people listen to the end of a radio interview before forming your full opinion?". Since then I've realized we really don't have that much attention span - but I would have thought we could at least finish the end of a sentence. Apparently not.

In the Chicago radio interview, Obama laid out a strong case for (1.) negative rights, and (2.) a limited role for legislating from the bench. Willful misreading or involuntary ignorance twisted that into a case for (1.) positive rights, and (2.) an expansive role for the courts. By the same token, Obama is here making an explicit case for market capitalism, where people can continue to earn money beyond what they could possibly need if they're providing a useful product. But willful misreading or involuntary ignorance is turning it into precisely the opposite message. What's most striking is that they're twisting his words where they have common ground with him! They presumably agree with him on this point. So why not agree with him on this point and then disagree with him on the details of the finance reform where you legitimately disagree with him? The answer, of course, is simple. Claiming that Obama doesn't want you to make any more money after you've "made enough" plays better in a campaign ad than detailed disagreements on the financial reform bill. And these people - like all politicians - are all about winning power. They're all about the next election. So they choose to do and say what is most advantageous for winning power.

If the Lincoln-Douglas debates were held today, Douglas would have won hands down. People simply don't have the attention span to listen to an entire point. They form their opinion ahead of time and hear only the snippets that buttress that opinion. That is not a good sign for free society.

UPDATE: When I had read Bryan's initial post, I got the impression that this was just an opportunity for a bunch of people to discredit Marxism and celebrate the (relative) lack of Marxism that we've enjoyed as a planet since 1989. The Distributed Republic, which is aggregating many of these posts, has something more specific in mind - remembering the victims of Marxism. This is also an important thing to do today. I'm not sure what exactly to say on the matter - the facts speak for themselves. Millions died at the hands of this ideology. But why was the ideology so powerful? Ultimately, I think it was powerful because of human hubris. We place a high premium on our own intelligence and ability to figure things out. We are pretty smart creatures - it's not an entirely inexplicable hubris. But ultimately it's fallacious. We make mistakes. And our failures can be especially damaging when we get too wrapped up in extended, logically deduced megaprojects like Marxism. Logical deduction is very enticing. In theory, it's air-tight. It's a fantastic way to discover truths. But deductive logic is contingent on two pillars: accurate axioms or assumptions, and a valid chain of deductions. Human frailty often misleads us on both those points. However impressive logical deduction is on paper, we always manage to mess it up. Marxism emerged from this supreme confidence in man's ability to figure things out. When the early Marxists first devised their socialist framework, they relied on their ability to figure out the determinist contours of human society. That was hubris. The practitioners of Marxism added to that initial hubris the mistake of assuming that they could actually plan something as complicated as the economy. The Marxists were so confident in their deductive reasoning and so unwilling to test their ideas against experience that they felt justified in immolating countless innocent human beings. Hubris breeds confidence in our own logic, and confidence in our own logic leads us to violently defend logically deduced megaprojects that we've convinced ourselves can solve all the problems of the world. This hubris is the underlying failure of all megaprojects based on deductive logic: from Communism to libertarianism. Human reasoning is a powerful tool, but it has to be tempered and tested with experience. Anyone who tells you that they've figured everything out and by their logic Communism works is a fool. You can't figure out in your head some silver bullet form of social organization. By the same token, anyone who tells you that they've eschewed empirical testing and through their deductive logic they have concluded that libertarianism is a fool-proof silver bullet for social organization is also a fool. I'm bringing libertarianism into this, because I think the debate over Marxism is often skewed and distorted. Superficially, many ideologies are stark opposites - but unless we see their common underlying fallacies we inevitably threaten life and liberty. Verification, falsification, and empiricism dictate that people square their understanding of the social and political world with the understanding and experience of others. With these priorities, you cannot have the mass death that we experienced at the hands of Marxism. That sort of thing is only possible if you close your mind to experience and rely only on your own logical abilities (or, I suppose, if you are both an empiricist and a sociopath). The crimes of Marxism originated in the hubris of its deductive reasoning, which was cantilevered out to undergird an alien ideology.

Zipf's Law and a Genealogy of Daniel's Intellectual Sympathies

"Zipf's Law" is an intriguing empirical regularity that appears in a number of physical and social situations. Zipf's Law applies in situations where the frequency of the occurence of an element is inversely proportional to its rank in a frequency table of all elements in the set.

I've seen two interesting posts recently on Zipf's Law and its application to urban populations, one by Scott Sumner and one by Ed Glaeser. They remark on dependence of our calculation of Zipf's Law on where we set the physical boundaries of an urban center. New research shows that when you don't pay attention to politically determined boundaries, and instead compute Zipf's Law on a geographic grid, the law doesn't hold nearly as well. Both writers go into more detail on why.

I have a soft spot in my heart for Zipf's Law and these sorts of questions because of a relatively random engagement that I had with it as an undergraduate. Somehow - I don't recall exactly - I became fascinated with the "spatial economics" literature, including Zipf's Law. I explored this literature more deeply in a paper on economic geography in a History of Economic Thought class that I took. I traced this relatively obscure field from Johann Heinrich von Thunen in the early 19th century, through Zipf's Law and the Hotelling model (applied spatially), and ultimately to Paul Krugman's New Trade Theory and his work on economic geography (recently recognized with a well-deserved Nobel Prize). It also first got me hooked on complex adaptive systems and emergent behavior. At the time, this was all just really fascinating stuff for me. My roommate that year was in the class with me, and he wrote on business cycle theories. I thought that was a very dull topic to chose, but of course now the business cycle holds considerable interest for me!

This initial flirtation with spatial economics took me down two important roads that have shaped how I think today. First, my reading on the Hotelling model and New Trade Theory took me down the "imperfect competition" road in the traditional Industrial Organization sense. That reading later introduced me to a range of people like Joe Stiglitz, Edward Chamberlain, and Joan Robinson - Keynesians who put a lot of emphasis on market imperfections. The other road it took me down, of course, was Krugman's Keynesianism. Ever since I first read some of Krugman's work on economic geography, I've been captivated by him. I don't always agree with him, but I've always been impressed. I never paid that much attention to Keynesianism as an undergraduate, but keeping up with Krugman always kept it in the back of my mind. So after I graduated, when I had more time in the evenings for free reading, I decided I ought to read The General Theory cover to cover because after all - the economist I most respected thought fairly highly of it. Even after reading it, I still didn't grasp everything there was to grasp about Keynes - but I was hooked. Whereas before I had an ambiguous identity as an economist, after reading The General Theory I knew I was a Keynesian of at least some stripe. Since then, keeping up with Stiglitz, Mankiw, DeLong, and Krugman, reading a couple more pieces by Keynes, and some additional books by Milton Friedman and Lawrence Klein has really helped me to triangulate what kind of Keynesian I am. But it all started with a fascination with Zipf's Law and economic geography!