Some thoughts on a new Mises Daily article from Jonathan that I haven't even read in its entirety yet...

Jonathan has a Mises Daily article on "The Foremost Austrian Contribution to Economic Science", which centers on the price mechanism and references a lot of what he's been thinking through with the Prices and Production reading group. I've only read the first couple paragraphs and cannot finish it now, but I want to recommend it to readers based on what I've read so far. A few thoughts:

1. First, it's kind of funny because I was thinking of this on the way to work. Don Boudreaux recently accused me of defending "dumbshit" (his words) ideas from any Keynesian out there and always taking issue with Austrians/libertarians. This, I hope I don't have to explain to my regular readers, is patently untrue. But it was disconcerting enough to read that I thought of what I like in Austrian and libertarian thought. One thing that dawned on me is similar to - although not exactly - what Jonathan is saying here. I think by far the greatest victory for the Austrians was their position in the socialist calculation debate. Nobody today thinks or talks like Abba Lerner (much less Oskar Lange). The Mises-Hayek position on the price mechanism is implicit in everything any economist says. That's a huge achievement on a crucial specter that was haunting not just nineteenth century Europe, but the entire world in the twentieth century. The socialist calculation debate position of Mises and Hayek was, of course, grounded in their understanding of the price mechanism. Austrians like to embrace a bunker mentality. It's romantic. It attracts angsty internet surfing teenagers. But they can't escape from the fact that they scored a major victory not just against a socialist (that's relatively easy), but against a left-Keynesian (who, admittedly, was much farther left than the Keynesian center of gravity).

2. Nevertheless, my caution from reading the beginning of the article is that it seems like Jonathan is putting out the idea that the Austrians came up with the price mechanism (as opposed to providing a particular version of it with particular emphases, or as opposed to applying it in particular ways - as in the socialist calculation debate). Like I said, I haven't read the whole article but I hope this is not what he is arguing. I hope he ends up highlighting the particular Austrian spin on the price mechanism, but if he's claiming the price mechanism is somehow an Austrian idea that the mainstream rejects, that of course would be deeply wrong. The same goes for his discussion of intertemporal coordination. This simply is not an Austrian "contribution". It is pre-Smithian. I hope in reading it in more detail than I have gotten a chance to (I don't want people to think I'm passing judgement right now), I hope he will emphasize Hayek's new contributions to an old idea and not attribute the price mechanism or intertemporal coordination to the Austrians. Sentences like this: "This contribution, which is in present day almost always ignored in all forms, is the explanation of a working price mechanism" make me wary, but I will give it a full read first.

3. But aside from some cautions I mean this to be a positive referral, so let me get out another positive point: this article is extremely well written. The quality of the writing is much better than earlier Mises Daily's by Jonathan. That is not an easy feat to improve your writing so substantially that readers actually notice, but he did. I struggle with this a lot, usually when I compare my writing to my brother's. He used to write with a lot of flowery flourishes that I didn't care for - and I teased him for it - but he's clamped down on that and in my opinion he writes very well. I do my best too, and don't think I'm an especially bad writer - but it's something you always have to work at. The trick is to just keep doing it (and to read a lot). Jonathan is clearly working on his writing. This brings me to...

4. This really should not have been published as a Mises Daily article. Jonathan commented on a recent post of mine that: "I'd like to get published (as in, really published - in the way you mean it), but the hard part is coming up with the original idea. It's still too early for me anyways.". I think he sells himself far too short. Not every piece has to be an earth-shattering discovery. Is this American Economic Review material? By no means (nor is anything I'm coming up with). But this is better than a blog post that Mises.org churns out six a day of. The article is a little over six thousand words, which means it has room to grow. My advice: (1.) drop everything else you are writing, (2.) add qualifications and nuance to claims about the price mechanism or intertemporal coordination as a "contribution" (or don't qualify if you disagree with me, of course), (3.) find articles by people like Rowe and DeLong to cite, not blog posts and sub those in for your blog links, (4.) find something you want to develop a little more - the Stiglitz point may be interesting to delve into in more depth, (5.) circulate it to myself, Mattheus, Lee, and anyone else for thoughts, and (6.) submit this thing (modified, inevitably) to either the Quarterly Journal of Austrian Economics or the Review of Austrian Economics. I really see no good reason for you not to take this advice in its entirety (including my point #2, but that's up to you - and if you don't take that advice that leaves me latitude to submit a reply!).

Good post on "interpretative charity"

This is one of the best blog posts I've read in a while now from one of the best critical thinkers out there. He nails a point that has always bothered me but couldn't always express: the lack or misunderstanding of "interpretative charity" in both the blogosphere and in intellectual circles. He writes:

"A common misconception takes interpretative charity to be an inability to say anything contrary about someone's thoughts or actions... a sort of well-meaning but naive refusal to engage in argument because a nicer and more well-meaning interlocutor could always be plausibly imagined. The idea is that the overly-charitable interpreter nuances a person's position to death so that even the worst crimes and falsehoods could be justified in the name of standing aloof from uncivil polemic... While I don't see any need to link other conversations, this post originated out of continued frustration with the idea, held by a few folks, that I can be something of an etiquette obsessed contributor to... blogs, unwilling to ever just go out and offer a straightforward criticism."

The author, speaking of a paper he wrote where he exhibits this "interpretative charity", says that his critique:

"simply couldn't have been made without taking most of the paper to follow through certain arguments on the basis of their own most reasonable terms. That is, without prioritizing interpretative charity some critiques actually remain unavailable."

Robots, Robin Hanson, Nick Rowe, and Socialism

OK, if you all insist I'll break my New Year's resolution one more time since I already have today.

When I first saw this post by Russ Roberts about an Econtalk with Robin Hanson about "technological singularities" I was very interested in it and almost posted on it. I've heard Robin Hanson lecture on this before. The timing is always speculative, but the logic of the argument - particularly when you look across the length of human history - is persuasive.

I was tempted to write a very quick post in response, simply noting that if the technological singularity Hanson describes here ever happens it would probably be sufficient to turn me from a market Keynesian to a socialist.

I decided the admission would haunt me for the rest of my blogging career so I didn't post it, but what the hell.

I post it now because of this post by Nick Rowe fleshing out the implications of the technological singularity in more detail, and this post by Karl Smith. "Overproductionism" inevitably leads people to socialism for good ethical reasons - if providing for demand can be easily achieved without contracting for the services of a large portion of the population, you're going to have extreme inequality and suffering not as a result of differential compensation from differential marginal products, but simply because the labor content of output is negligble. The problem with this line of reasoning has always been that our demand always outpaces technological unemployment (this is why concerns about underconsumption are much more defensible than concerns about overproduction). If there is a paradigm shifting technological singularity that makes the overproductionist fallacy no longer fallacious, then we're going to have to rethink a lot about the way society was organized.

Yes, this is very Marxist. What of it?

The point is, though, it's all predicated on the assumption that everything we know to be true about the economy is no longer true as a result of this sort of Hansonian "technological singularity". That assumes the singularity even happens, and it assumes it happens in the asymptotic, extreme way that it's being discussed by Hanson, Rowe, and Smith.

I think it would be a good thing, if we could manage the transition. Whether it's likely to even happen is a different story. I'm personally inclined to bet against Marx and crude overproductionism, but time will tell.

I think about these issues a lot... I think about the social implications (e.g. - "this would make me a socialist") less thoroughly than I think about the intellectual history of these overproductionist ideas. So thoughts on my thoughts on the social implications would be appreciated.

Boettke on Keynesianism

Breaking my New Year's resolution on day five! Anyway - this is worth posting. Peter writes:

"The claim that Keynesian economics has made a comeback since 2008 in the public imagination has become commonplace. I have claimed repeatedly that the reports of the death of Keynesianism in the public policy sphere in the 1970s and 1980s were widely exaggerated.

The sweeping victory of Keynesianism among professional economists and public policy experts in the 1940s and after is one of the most striking intellectual transformations in the history of modern political and social philosophical thought. Mark Blaug points out in his Economic Theory in Retrospect, that never before in the history of economic thought have we seen such a sudden and complete conversion to a new paradigm.

I have been completely intrigued by this question roughly since 2001, when I started writing on the shift in the ideological paradigm away from liberty and the free market (at least in the rhetoric of public policy). If you look at either my APEE address, "Liberty vs Power" later published in the Journal of Private Enterprise or my Trotter Lecture for the NZBR, you will see that I was arguing about the lingering influence of Keynesianism. But in those earlier papers I never really addressed the reasons why there was such a wide-scale acceptance of what I consider such fundamentally flawed ideas. I was content to engage in a content analysis of economic ideas, but left alone the questions of the sociology of knowledge/history of economics that must be addressed to understand the Keynesian avalanche. In other words, I was more interested in making the linear argument that bad ideas leads to bad policies which results in bad outcomes, rather than trying to figure out why bad ideas caught on and had such staying power despite a track record of bad consequences.

When I read Vincent Ostrom's The Intellectual Crisis in American Public Administration, I started to connect some dots between progressivism, scientism and Keynesian policy expertise. Keynesianism, in short, fit perfectly the intellectual demands for progressive public policy that Ostrom identified. I am working with one of our graduate students on developing this argument.

Now there is a new working paper through NBER that also addresses why Keynesianism was so widely accepted by economists and public policy makers.

What do you think?"

I am very suspicious of arguments like this in intellectual history... they're too damned convenient ideologically and essentially assume intellectual weakness or opportunism. If, however, this is not intended as an intellectual history so much as a political history, I think the idea may get more defensible. I sketched my response out in much more detail in the comments. Jonathan also has a very good comment in there.

Holiday pictures, just cuz

My niece Sophia and I trimming the tree at my parents'. She had the structurally unsound tendency to find a branch she liked and insist that we put three or four ornaments on it.

*****

My beautiful wife and my beautiful niece.

You'll notice in the next photo as well that Sophia does not half-ass her smiles.

*****

My family - sister Kendra (currently at George Mason University getting a BA in public policy) on the left, then me, then Kate, then Evan. His wife Tricia is directly in front of him, and their daughter Sophia is directly in front of her. My dad, Richard, is next to Sophia. Above my dad is my mom, Valerie, and to the left of her is my other sister Erica (currently at James Madison University getting a BA in physical therapy) holding my new nephew Becket Gilead Kuehn. He mostly cries, poops, sleeps, and clings to you like a tree-frog.

Something I was thinking about on the way to work...

...and checked the numbers as soon as I got to work - it works out beautifully.

If you entirely eliminated farm subsidies you could double NASA's budget and stay deficit neutral.

I'm feeling a personal crusade coming on... it's a catchy budgetary switcheroo isn't it? Farm subsidies are by far the dumbest public policy we do from the perspective of social scientists. Cold, hard economists hate them because they distort the market. Warm fuzzy non-economist social scientists hate them because they put developing nations at a disadvantage. It's a big bone of contention in all international fora dealing with economics. And it's farming for crying out loud. We've been farming for thousands of years. Help farmers prevent run-off or fight agricultural diseases if you want to but don't just pay them to produce food. Even more left-leaning small-farm movements hate it because the bulk of the subsidies go to agribusiness.

Space exploration and research, alternatively, has all the hallmark market failures we think about. It's an externality - lots of benefits that don't accrue to the people carrying the costs. And as I've pointed out before, it's not just any externality - it's an intertemporal externality. The real benefactors haven't even been born yet. There are enormous start-up costs. Those start-up costs for getting into space are lowering dramatically, but they're still going to be large for actually colonizing space. Basic research has well known market failures associated with it. Moreover, this is all brand new. It's an "unknown unknown" - the sort of ignorance of the future that Keynes identified as a major driver of underinvestment.

If you have even the slightest inclination to adopt market failure logic, you'll recognize that they apply to space research and exploration. If you have even the slightest inclination to acknowledge market efficiency, you'll recognize how dumb farm subsidies are. Even if you lean towards skepticism on either side you have to agree that this switch is at least a marginal improvement. Only the most extreme elements on either side could suggest this would actually make things worse.

Anyway - that's my new way of making this all concrete: end agricultural subsidies and double the NASA budget.

UPDATE: Does anyone have any good information on farm subsidies? The whole system seems very complicated. I was initially refering to a "farm income stabilization" figure from Wikipedia. There are a lot of programs, though, and I'm not sure what makes the most sense to talk about. This site has some information - it puts the figure a little lower, just short of being able to double NASA. I'd appreciate any other thoughts or information. I'm also turning up stuff on insurance. I'm not sure how those programs work, but an insurance program doesn't seem to be as blatantly problematic as a straight subsidy either.

William & Mary Policy Review Call for Papers

If you have any policy-relevant papers near completion that you're looking for a forum for, I'd like to call your attention to the William & Mary Policy Review. It's a relatively new journal associated with the public policy school that should have good potential. One of the thing's that's nice about it (aside from it being out of William & Mary) is that it seems to publish both students and faculty.

Over the next month or so they'll be accepting submissions for their Spring 2011 volume. They publish in the Spring and Fall.

I have discussed - and I know Jonathan and others have discussed - the struggles of publishing in such a competitive field when you're still a student. This might be something that new or aspiring scholars might want to look into.

I won't be pulling anything together for the Spring, but we'll see what my plate looks like when the Fall call for papers comes around.

Two Critiques of Keynes

- Matthew N. Luzzetti and Lee E. Ohanian have a new NBER working paper on why Keynes was so successful. The abstract reads:

"This paper studies why the General Theory had so much impact on the economics profession through the 1960s, why that impact began to wane in the 1970s, and why many economic policymakers cling to many of the tenets of the General Theory. We discuss three key elements along these lines, including the fact macroeconomic time series through the 1960s seemed to conform qualitatively to patterns discussed in the General Theory, that econometric developments in the area of simultaneous equations made advanced the General Theory to a quantitative enterprise, and that the General Theory was published during the Great Depression, when there was a search for alternative frameworks for understanding economic crises."

I have a feeling the paper will take the form of a back-handed compliment of sorts. The history of simultaneous equation modeling and Keynesianism is an interesting one, though.

- Don Boudreaux, in typical form, attributes all manner of ignorance, uncertainty, and messiness of real life to Keynesianism. If I were to evaluate my own view of economics and policy and discover that I don't think about or worry about the sorts of things Don raises this might be a more damning critique. But I think about these sorts of things all the time, and there are much smarter Keynesians out there than me - if I'm thinking about these things they are too. It makes me wonder exactly where Boudreaux is coming from. "Keynesianism" for some people becomes a catch-all for everything anyone left-of-center says about economics. For others it is a catch-all for everything that any advocate of increased government spending says about economics. For Don Boudreaux it sometimes it comes across as a catch-all for everything that goes wrong, period. I don't usually like it when Brad DeLong does his "stupidest man alive" posts. I recently discussed it with him in a comment section to this blog. But sometimes, people tempt me to move a little closer to Brad (who recently did don Don with the title).

More 2010 Favorites

Regular commenter Prateek Sanjay notes that he's also enjoyed all my Lovecraft posts this year. These posts have definitely added some diversity to F&OST readers and commenters. You can find all of them (at least the ones I bothered to tag - which should be most of them) here.

Prateek specifically writes: "If Lovecraft actually met Hayek, he'd find they both had much in common with each of their versions of "limitations of knowledge"!"

Clearly both saw limitations to human knowledge, although they were obviously of much different scope. One theme I've thought of writing on (and maybe submitting to one of a couple literary journals that often feature articles on Lovecraft) is comparing Lovecraft's views on "the unknown" during his fertile period in the early 1920s to the views of Keynes and Frank Knight, who both published important books on how humans grapple with "the unknown" in 1921.

I think there's a fundamental asymmetry between the way Lovecraft talks about fear of the unknown in his essay Supernatural Horror In Literature, and the way he talks about it in his tales. His tales seem to me to actually invert the argument he makes in the essay (although I haven't surveyed them widely - I've mostly thought about the contrast between what Lovecraft writes in Supernatural Horror in Literature and what Lovecraft writes in Call of Cthulu). Thoughts on any of this are much appreciated.

Prateek might be interested in this particular Lovecraft post... Lovecraft was certainly aware of the existence of F.A. Hayek, and wrote about him in at least one of his letters.

The Year in Review at Facts and Other Stubborn Things

So I see a lot of bloggers are posting their top posts, so I guess I'll do that too. The top ten, by page views, are a little surprising to me:

- Benoit Mandelbrot, 1924-2010 Oct 16, 2010 1,168 Pageviews
- On Secession Jul 24, 2010, 23 comments 581 Pageviews
- One more NFIB chart post... Sep 17, 2010, 2 comments 502 Pageviews
- Critical Rationalism Blog Apr 16, 2010, 9 comments 410 Pageviews
- Hey, at least it keeps them off the streets! Oct 6, 2010 371 Pageviews
- Murphy v. Krugman: The Blind Debating the Blind Oct 21, 2010, 5 comments 230 Pageviews
- This deserves its own post... Sep 2, 2010, 25 comments 196 Pageviews
- Daniel Klein, Progressivism, and Rights Dec 7, 2010, 20 comments 157 Pageviews
- A Good Krugman Post Oct 31, 2010 153 Pageviews
- Boardwalk Empire Sep 17, 2010 146 Pageviews

Why the simple memorial to Mandelbrot is first is beyond me. I looked up search terms that brought us up and "Mandelbrot" was very high, so I guess somehow we got caught up in a search algorithm and it directed people here. I think I posted links to my "On Secession" post on a Mises.org discussion of Woods's book - that explains that. Nick Rowe and Brad DeLong both picked up my "One more NFIB chart post..." - on DeLong's blog he dubbed me a "three musketeer" along with Nick Rowe and Niklas Blanchard for my efforts taking on some odd interpretations of the NFIB business confidence data. A proud moment indeed. I know Brad picked up the "Hey, at least it keeps them off the streets" post too. DeLong, despite my occassional critiques, is a good promoter of an amateur blogger. The blog that directs the most traffic here, though, is of course Economic Thought. I have to thank Jonathan and Mattheus for a great year. In a lot of ways, this blog and their blog were co-travelers in the blogosphere. Economic Thought played the Hayek to Facts and Other Stubborn Things's Keynes (and while Hayek wins when he is given a script and put on Youtube, we all know how it worked out in real life).

My fairly critical post on the Murphy/Krugman debate was also shared on Mises.org. I'm not sure how the Daniel Klein post got around so much, but I'm glad it did - I enjoyed writing it, and it was only a couple weeks ago that I wrote it and it's made the top ten for 2010 (although I'm not sure how much of a feat this really is... I'm sure most page views happen within the first week of posting).

The Daniel Klein post is one of my favorites this year. Others that I particularly enjoyed are:

- Keynesianism and Consumptionism (I'm still working these ideas out for myself, but I think it's a major source of misunderstanding and I think I laid out my case fairly well).
- Me on Selgin, Lastrapes, and White (This was pretty contentious over at Cafe Hayek with Selgin himself mocking me (and then apologizing), but I really think it needed to be said. I did not find this to be a very good paper at all).
- My post on the insincerity of "taxation is theft" claims (this was one of my weakest arguments this year and I got blasted for it from all directions - but I still think it was worth writing because I think there's a kernel of an argument there and the melee helped me work through it. I'm still floundering for a full argument).
- My post tying Janos Kornai to proto-Keynesian sorts of ideas (I think I was on to something - I want to get a copy of Kornai's book but it's hard to find online).
- On the supply inelasticity of graduate school educated labor
- This post, Surprise! I agree! is one of many where I've pointed out what I've called "the presumption of ideological orthogonality", or the assumption that "because I think something, and because you're my opponent, you must oppose it". It's a really bad assumption to make.
- This post on The Empire of Liberty is another speculative post that I think hit the mark more than my critique of the "taxation is theft" post. Mattheus gave me props on it, and he's a rigorous critic.
- Alien skepticism... what I think and don't think about aliens.
- Earlier in the year I had a string of posts contrasting "calculation problems" with "incentive problems" to highlight why addressing so-called "externalities" can be tough, but is completely different from central planning. I like these ideas... I need to distill these posts into a paper of some sort.
- All my posts on 1920-21 (some about the depression, some just about the period) are here.

My New Year's resolution? Well like I said earlier, it's to not blog in the morning until I've written 250 words. It sounds silly, I know, but this will actually be a major lifestyle change for me. I spend about an hour and a half every morning before going to work looking around at other blogs and drafting my own thoughts - sometimes producing two or three posts in a morning. That's been great, but if I could actually research and write in that time it would be very, very good for me. I've got a lot of ideas stewing that need to get on paper - to say nothing of current obligations.