Fruits of my labor

For a while now, Kate and I have been spending a lot of our weekends fixing up my mother in law's house to get it ready to sell. It went on the market on Thursday and there's an open house today (in case anyone is looking for a house in Arlington/Falls Church!). A long string of home improvement projects has finally come to an end!

This is the patio, which we just finished up yesterday:

DARPA RFI Response

This was a little rushed and I didn't get time to go back and do any editing, but I got the basic idea out to them. This is my response to this request for information.

Yglesias on Classical Liberals

Matt Yglesias has a really great post on classical liberals and the mistaken idea that that terms is and that those men were synonymous with "libertarians". Readers know this is a big interest of mine too. Yglesias focuses specifically on the classical liberals' views on land redistribution and limited resources. Of course, one of the best classical liberals on this point is my favorite classical liberal - Thomas Jefferson:

"The property of this country is absolutely concentered in a very few hands, having revenues of from half a million of guineas a year downwards. These employ the flower of the country as servants, some of them having as many as 200 domestics, not labouring. They employ also a great number of manufacturers, and tradesmen, and lastly the class of labouring husbandmen. But after all these comes the most numerous of all the classes, that is, the poor who cannot find work. I asked myself what could be the reason that so many should be permitted to beg who are willing to work, in a country where there is a very considerable proportion of uncultivated lands? These lands are kept idle mostly for the aske of game. It should seem then that it must be because of the enormous wealth of the proprietors which places them above attention to the increase of their revenues by permitting these lands to be laboured. I am conscious that an equal division of property is impracticable. But the consequences of this enormous inequality producing so much misery to the bulk of mankind, legislators cannot invent too many devices for subdividing property, only taking care to let their subdivisions go hand in hand with the natural affections of the human mind. The descent of property of every kind therefore to all the children, or to all the brothers and sisters, or other relations in equal degree is a politic measure, and a practicable one. Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise. Whenever there is in any country, uncultivated lands and unemployed poor, it is clear that the laws of property have been so far extended as to violate natural right. The earth is given as a common stock for man to labour and live on. If, for the encouragement of industry we allow it to be appropriated, we must take care that other employment be furnished to those excluded from the appropriation. If we do not the fundamental right to labour the earth returns to the unemployed. It is too soon yet in our country to say that every man who cannot find employment but who can find uncultivated land, shall be at liberty to cultivate it, paying a moderate rent. But it is not too soon to provide by every possible means that as few as possible shall be without a little portion of land. The small landholders are the most precious part of a state."

(Letter to Madison, 1785)

Sarah Palin and Paul Revere

I've written in the past on Tea Party misues and misunderstanding of American history - particularly revolutionary and Constitutional history. It's particularly frustrating because not only are they often mistaken about the course that the founders set us on - they also accuse others who don't think like them of "abandoning the Constitution", "turning from the vision of the founders", and stuff like that. As someone who takes the founding and the significance of the American project seriously, that doesn't sit well with me.

However, I want to note in big bold letters that Sarah Palin's recent claim that Paul Revere warned the British wasn't really an issue at all. It was pretty obviously a misstatement, and I think misstatements are crucially different from misunderstandings. When Tea Partiers co-opt the Don't Tread on Me flag and the phrase "no taxaction without representation" in protesting Obama, that bothers me considerably more because it demonstrates a deeper misunderstanding of the founding era - the concern was not with taxation, it was with taxation levied by a Parliament in which the colonists had no representation.

Anyone who speaks publicly is going to misspeak. It's not something we need to obsess over. I see a big difference between saying Paul Revere warned the British and not being able to name any newspapers that you read. The former tells me absolutlely nothing about the state of Sarah Palin's intelligence. The latter tells me she probably never really spends much time reading newspapers, which is not a trivial thing for someone seeking high office.

David Friedman has an interesting little piece of history - Paul Revere actually did warn the British on his ride! Now, I'm not sure this vindicates Palin's mistake. It seems like a Gettier Problem of sorts. Still - interesting!

On Paul Krugman

I've had some mean things said about me regarding my respect for Paul Krugman, and not all from anonymous internet commenters. Some people that ought to be more professional have, in the past, said some not-nice things about me personally over my thoughts on Krugman. You know what, though? It's not my fault Krugman has insights that seem to pan out and well constructed arguments for those insights.

The quality of critiques of Paul Krugman are very depressing to me. People mostly whine about his partisanship or his tendency to lump a lot of mid-century macro together and exaggerate their mistakes. These may be valid critiques, but they're pretty banal as far as I'm concerned.

A lot of people are worried right now about a double-dip as bad news about early 2011 continues to mount.

In 2009, Krugman noted that we'd start to see trouble in early 2011. He's citing Menzie Chinn and Deutsche Bank too, but they're all on the same page in terms of this analysis. The stimulus would have its peak effect on GDP growth at the end of 2009, it would have its peak effect on output in late 2010, and the unwinding of the stimulus would be a drag on GDP in early 2011. This is how it played out. And there was no mumbo jumbo. No fancy epistemology. No political philosophy. No morality tale. A few cracks at politicians, at most. He made a prediction, provided a reasonable explanation, and over a year later we're seeing it essentially play out.

He also said not to worry about interest rates in 2009. Others were worried about deficits and increases in the money supply, and the primary problem with that in their ideas was higher interest rates and the crowding out of private investment which would plunge us deeper. How are interest rates doing? How is inflation looking?

If people can point to another person who:

1. Noted in 2009 that GDP growth would peak in late 2009 and we would start to see problems in late 2010/early 2011

2. Noted that despite tremendous increase in base money, interest rates and inflation would not increase, and

3. Has a straightforward explanation for these occurrences, preferably one that was (a.) fully fleshed out before the crisis occurred, and (b.) consistent with a wide range of the data that's out there

Then we can talk. Otherwise I'd prefer we all acknowledge that Paul Krugman is an important economist to listen to and digest. You may not like his style or his politics. That's fine. But don't act like I'm some kind of thoughtless minion for noting that the man is intelligent, articulate, insightful, and most importantly: seems to be right on a variety of occasions where I'm simply not aware of others being so consistently right.

I suggest that people pick their favorite blogs and start working through posts from 2009. See what you think of them after revisiting it with about a year and a half's perspective.

We can add Brad DeLong to the list, but Krugman distinguishes himself by the specificity of a lot of the predictions, whereas Brad does a lot of the work conceptualizing the problems we're facing and being a watchdog of sorts.

PSST and downturns - more from Kling

Arnold Kling has another post up, highlighting how PSST can lead to economic downturns. He writes:

"The consequences for employment depend on how resources move from declining to expanding industries. Three possibilties:

(E) Excessive Expectations. Resources move too quickly to what are perceived as expanding sectors. Think of the Internet Bubble, or perhaps the 1928-29 boom in electric utilities. People over-estimate the speed with which new industries can attain profitability, and investors in these industries over-estimate their wealth.

(D) Displacement Downturn. Resources move out of what are perceived as declining sectors before new sectors can absorb them. (The human and physical capital in declining sectors in fact may not have productive value in the new industries. As Tyler Cowen would put it, Zero Marginal Product.) People perceive the wealth decline in displaced sectors before they can realize the gains in new sectors. Alex Tabarrok points me to a literature on this, exemplified by Greenwood and Jovanovic.

(G) Goldilocks Growth. Resources move effortlessly and synchronously from declining sectors to expanding sectors. For example, within telecom in the 1990s, we lost jobs related to land lines and gained jobs related to cellular, and it all seemed to go pretty smoothly."

One way to look at this may be to identify sectors and occupations that are thought to be going through a transition, and look at their separation and rehiring rates relative to workers in other industries and occupations, and then decompose our unemployment problem into two groups: those losing jobs in transitional sectors that are not able to adjust, and those losing jobs in non-transitional sectors that are not able to adjust. Much of this would have to be done after the fact to identify which sectors are truly going through a PSST transition or at least a popped bubble.

I expect you'd find that the non-transitional jobs make up a substantial share of the problem, which would suggest that even if we think PSST sparked the downturn, other mechanisms are really driving it; a housing crash causes a sharp fall in the marginal efficiency of capital (the discount rate you require to invest); declines in house prices reduce spending, etc.

This brings me to another point, then. Is PSST an actual "regime change", or is it just another word for "housing bubble". If it's just another way of talking about bubbles, it seems less interesting to me. We know a lot of bubble psychology, and sustainability is the last thing we want to attribute to bubble patterns. If, however, PSST refers to the macroeconomic import of genuinely transitional periods in genuinely (previously) sustainable activities, that could be interesting although I still have serious doubts that that is the primary causal mechanism here (perhaps a spark, as I said - although I think it's more likely the spark was just an old-fashioned bubble). It certainly influences me that the crisis of my formative years seems so clearly to be a Keynesian crisis. If I was in the position in life I'm in right now during the early 1980s, I'd probably come out with a slightly different view. The causal mechanism here seems to me to be fairly clear - and I feel more confident because a lot of very smart people seem to agree with me. But this is still an interesting thing to think about, and it's certainly a viable way of describing "how the economy works" if not "how the economy breaks".

An update on my thoughts on the "Bleeding Heart Libertarians" blog

Back in March, the Bleeding Heart Libertarians was launched with much fanfare and a little head scratching in some quarters (Peter Boettke wondered whether the distinction was "more rhetorical than substantive".

After following them for couple months I have to say I'm a little disappointed too. The immediate impetus for writing about this disappointment was this post by Fernando Teson. It follows in a long tradition of posts (Arnold Kling and Chidem Kurdas do this a lot too, although Kling has not seemed to be doing it as much recently) of essentially telling progressives what it is they believe, and then proceeding to debunk the ideas that they have attributed to them.

For example, Teson writes: "If progressives became really convinced that open markets helped the poor and if all they cared about was helping the poor, they would have to support open markets. However, the cost of doing this would be prohibitive, because they would have to give up their emotional commitment to vividly altruistic social engineering. This commitment, and not concern for the poor, is what centrally animates the progressive agenda."

How exactly am I supposed to react to this? All the progressives I regularly read and listen to are convinced that open markets help the poor, and I'm certainly convinced of that as well. No progressives I regularly read and listen to naive about "vividly altruistic social engineering", and that's certainly not what animates their agenda. Perhaps I'm not a progressive? That's possible. I've been loathe to outright embrace the label in the past. But I think most readers would agree I'm closer to that than I am to being a libertarian.

Teson goes on: "So BHLs [Bleeding Heart Libertarians] must shrug their shoulders and continue to defend these fundamental empirical propositions: that markets help the poor; that the correlation between private property rights and prosperity is undeniable; that very often government intervention is harmful or counterproductive; and so on."

I've already noted that my firm belief that markets help the poor. Everybody on here knows that the biggest problems I point to that require a public solution are externalities - cases where property rights break down or can't function for some reason or another. So clearly I embrace the idea that the correlation between private property rights and prosperity is undeniable. And I'm also not naive about the idea that government intervention is often harmful and counterproductive. So again - how to take this? Am I just not a progressive? Does that mean I'm a libertarian? Perhaps - but I have serious doubts about that (if I were a libertarian I think you all would have let me know it by now).

Teson continues: "It is not just that progressives do not value economic liberties –although that would be enough to build a high wall separating both camps. In addition, the account of human rights by both camps diverges considerably. Progressives tend to support so-called “socio-economic” rights. They even argue, at least sometimes, that these welfare rights are normatively equivalent to traditional civil liberties."

Hmmmm. Again - have you ever heard me promote positive rights on here? Nope. It's been negative rights all the way, baby! Not natural rights, granted - but it has unequivocally been negative rights.

Teson then says: "Progressives succumb to the seductive enticements of political power in ways that no BHL [Bleeding Heart Libertarian] worth his salt can accept."

I'm going to stick to the maxim "if you don't have nothing nice to say, don't say anything at all" in my response to this little piece of condescension.

And: "Progressives tend to be soft on authoritarian “socialist” regimes. They are reluctant to criticize Castro, even today, and they have historically made excuses for the crimes of the Soviet Union. What could possibly be the theoretical underpinning of such an attitude, if it’s not the twin convictions that capitalism is suspect and (more alarmingly) that individual liberty is not so important after all?"

What?!?!? And now we're apologists for totalitarianism? This is where I started to realize Teson and I have two really fundamentally different groups of people in mind when we use the term "progressive". Teson seems to be concerning himself with the very far left, although perhaps he thinks that represents a much wider portion of the spectrum. Unless he's getting worked up over brief homages to Cuban literacy rates, this is bizarre. Even the New Left, which is decidedly more socialist than almost anyone labeled a "progressive" in the United States, practically defined itself by its opposition to totalitarian socialism. Teson couldn't even make his case with respect to that decidedly socialist crowd, so he's certainly not going to make it with regard to American progressives.

*****

In the end I haven't been all that impressed with Bleeding Heart Libertarians because I honestly don't even know if they're trying to talk to people like me. I would have thought they would be talking to people of my ilk, but I read a post like this and it's blatantly obvious they have someone completlely different in mind. I'm not sure who that is - it sounds like some washed-up ivory tower leftist or perhaps a newly minted activisty type. Maybe that's the intended audience, in which case I guess they're welcome to have that conversation if they want. But if they think they're characterizing that spectrum from the center-left (me, essentially), to the intelligent and pragmatic progressive left (I dunno - Matt Yglesias and Paul Krugman) they have completely missed the mark, to the point that there's really a swiftly diminishing marginal return to reading it. It's like the Cato Unbound essays with Daniel Klein talking about "overlords". I'm not sure who he's intending to talk to, but if he thinks he's talking to people like me he seems to be very, very, very confused.

Trust is the foundation of a liberal society

Building trust in others, and maintaining and reinforcing that trust in spheres of our lives that we've artificially (and often to ideological ends) designated as "public" or "private" is the heart of what Vernon Smith has called the "ecological rationality" of human society (as opposed to constructivist rationality which - while useful in certain endeavors - is limited in its ability to explain human social order).

A couple "temporal autarky" related points

First, stickman has a great post on whether pregnant women should be banned from smoking, using some of the same points that I did in the series of recent "temporal autarky" posts. This problem pervades parent/child issues. A child depends on parents for many things, but can't transact with that parent to make responsible investments at the time they need to be made. Stickman specifically raises the example of a child in the womb, which is certainly an example of a situation where a child and a parent can't come to a voluntary agreement about the treatment of the child.

I respond with trepidation on banning pregnant women from smoking, but I do think there's a viable argument for it, and I do think in particularly bad cases (such as the one stickman mentions) child services would have a viable case for child abuse charges. Having the government provide a service to address these issues (i.e. - offering public school or offering prenatal and maternal health services) is much easier to jump on board with than having the government intervene to change a person's behavior.

*****

In this video, Jeff Greason provides a great discussion of settlement strategies for NASA. Jeff is in the private space sector, but (like me and unlike some commenters here) he doesn't see himself as in competition with, threatened by, or crowded out by NASA and public space exploration. He does a great job at explaining the public choice problems surrounding space exploration. This usually isn't a problem for people to see, because the public choice problems are so prominent. Finally - he differentiates himself from guys like Dr. Zubrin by offering a vision of interplanetary settlement that doesn't rely on one single massive "Mars Direct"-esque undertaking.

*****

I've started to draft my response to DARPA's Request for Information on the financing of a 100 Year Starship. It's due Friday, and it won't be very long (they want no more than five pages). I'll post it afterwards. Essentially I'm summarizing the idea of temporal autarky and its implications for financing investments in the far-future, and I'm suggesting that DARPA reconsider its exclusion of government funding. I'm really benefiting from having a blog on this one - I've pulled sixteen pages of blog text and comments on the subject from posts here going back months. It's a good resource to have to keep a record of thoughts I'm interested in revisiting later. And your comments and critiques are helping me anticipate concerns that DARPA may have.

More on PSST

Arnold Kling responds here, noting my post. My reaction to the response is the same as my reaction to a lot of Kling's talk about PSST - it sounds fine. What I wonder is whether is whether it is an explanation of recessions. Adjustment happens all the time, and we can certainly think of a lot of reasons why substantial adjustment can be discontinuous or halting. We can also think about why people would want to adjust in the middle of a recession - this is a sort of time you cut your losses and reconsider your plans and economize, after all. None of these fairly plausible stories seem to provide an answer for why millions of able-bodied Americans who want to work can't seem to find work. Even with adjustment, it seems like you have to assume something awfully dysfunctional in the market process itself to get that. You need a mechanism. I'm still not sure what Kling's is.

He also compares PSST to Nick Rowe's quasi-monetarism, and he calls Nick a Monetary Walrasian. Those are fightin' words, but actually in the past I have agreed with Kling on this.