What is Missing from Political Debates

With all of this talk of the Financial Meltdown [gasp], how we might deal with Iran [shriek] and [insert additional meaningless political fodder here], I thought I might express my general opinion. Fortunately, this xkcd.com comic makes it relatively easy to articulate:



Maybe you will point to everything that is truly wrong in the world. As for me, I will look at the shape of things relative to human history. And in that light, I say let's head to the pub...

"Behave! or we're moving to Nebraska!"

Alex at MR points to a somewhat amusing, somewhat disturbing case of unintended consequences:

Under a newly implemented law, Nebraska is the only state in the nation to allow parents to leave children of any age at hospitals and request they be taken care of [...] So-called “safe haven laws” in other states were designed to protect babies and infants from parental abandonment.

Hmm. What bad could come of this well-meaning policy? < /sarcasm >

Over the last two weeks, moms or dads have dropped off seven teens at hospitals in the Cornhusker state, indicating they didn’t want to care for them any more.

“They were tired of their parenting role,” according to Todd Landry of Nebraska’s Department of Health and Human Services [...]

Like the road to hell, it seems the road to abandonment is also paved with good intentions. Full story here.

Market Provision

I have always found it interesting how even the most obscure demands are often met by markets. Did you know you can Google in Klingon?

What I am Reading

Lot's of things. Mostly my Micro textbook. And some Tullock articles. But I came across a very funny piece in the LA Times today from Joel Stein. IMHO, he gets the current financial crisis right. Here is a taste:

Do you have credit card debt? Did you buy a house with less than 20% down, or with an adjustable-rate mortgage, assuming that skyrocketing equity would let you refinance or flip it? Of course you didn't, because you're a super-intelligent reader of my column. But don't you think every single Rosa Brooks reader did?

The rest of the article carries this light-hearted tone. But he makes some very good points as well. ATSRTWT.

(Unavoidable) Email Scam

In the spirit of the old Nigerian Letter scam, this fine piece of craftsmanship landed in the inbox today:

SUBJECT: REQUEST FOR URGENT BUSINESS RELATIONSHIP

DEAR AMERICAN:

I NEED TO ASK YOU TO SUPPORT AN URGENT SECRET BUSINESS RELATIONSHIP WITH A TRANSFER OF FUNDS OF GREAT MAGNITUDE.

I AM MINISTRY OF THE TREASURY OF THE REPUBLIC OF AMERICA. MY COUNTRY HAS HAD CRISIS THAT HAS CAUSED THE NEED FOR LARGE TRANSFER OF FUNDS OF 800 BILLION DOLLARS US. IF YOU WOULD ASSIST ME IN THIS TRANSFER, IT WOULD BE MOST PROFITABLE TO YOU.

I AM WORKING WITH MR. PHIL GRAM, LOBBYIST FOR UBS, WHO WILL BE MY REPLACEMENT AS MINISTRY OF THE TREASURY IN JANUARY. AS A SENATOR, YOU MAY KNOW HIM AS THE LEADER OF THE AMERICAN BANKING DEREGULATION MOVEMENT IN THE 1990S. THIS TRANSACTIN IS 100% SAFE.

THIS IS A MATTER OF GREAT URGENCY. WE NEED A BLANK CHECK. WE NEED THE FUNDS AS QUICKLY AS POSSIBLE. WE CANNOT DIRECTLY TRANSFER THESE FUNDS IN THE NAMES OF OUR CLOSE FRIENDS BECAUSE WE ARE CONSTANTLY UNDER
SURVEILLANCE. MY FAMILY LAWYER ADVISED ME THAT I SHOULD LOOK FOR A RELIABLE AND TRUSTWORTHY PERSON WHO WILL ACT AS A NEXT OF KIN SO THE FUNDS CAN BE TRANSFERRED.

PLEASE REPLY WITH ALL OF YOUR BANK ACCOUNT, IRA AND COLLEGE FUND ACCOUNT NUMBERS AND THOSE OF YOUR CHILDREN AND GRANDCHILDREN TO WALLSTREETBAILOUT@TREASURY.GOV SO THAT WE MAY TRANSFER YOUR COMMISSION FOR THIS TRANSACTION. AFTER I RECEIVE THAT INFORMATION, I WILL RESPOND WITH DETAILED INFORMATION ABOUT SAFEGUARDS THAT WILL BE USED TO PROTECT THE FUNDS.

YOURS FAITHFULLY MINISTER OF TREASURY PAULSON

At least the Nigerian Letter could be avoided...

[HT: Paul]

Pay Your Taxes (It's patriotic!)

Below is an old cartoon (wartime propaganda, really). If you ask me, it really begs the question by assuming that since paying taxes is the patriotic thing to do, it is also what individuals should do. It seems reasonable to ask whether patriotism should be an individual's primary motivation. I would say no. Others would say yes. But this is where the real disagreement rests.

Now what are you going to do? Spend for the Axis? Or Save for taxes?

Enjoy the video.



[HT: Joe]

Was Milton Friedman an Agorist?

In the fight for freedom over tyranny, Milton Friedman cites two forces on the side of liberty:

Number one is the extraordinary ability and ingenuity of the American people in finding ways to get around laws. That's a major source of strength for freedom. And number two is the inefficiency of government.

Watch the whole video here.

Oh, Charlie

Charlie Rangle makes the news, yet again:

WASHINGTON - Embattled Rep. Charles Rangel's Mercedes-Benz was towed yesterday from the House of Representatives parking space he had been using for years in violation of congressional rules.
[...]
Rangel refused to answer questions about the car, whose registration expired in 2004 and which has sat in the House garage, covered with a tarp and bearing no plates.

The Zinger comes from House GOP leader John Boehner's spokesman, Michael Steel.

The new information about Chairman Rangel taking advantage of taxpayers to illegally store his vintage luxury car is appalling, mostly because it is part of a pattern - a pattern of Chairman Rangel abusing his public position for personal gain

Can you believe that an esteemed Representative would take advantage of taxpayers? ...of course you can.

Spot the Economic Fallacy

Can you spot the economic fallacy on which this (very funny) Onion News Network clip is based (Warning: explicit language, fake news)? The answer is in the comments.


Economists Warn Anti-Bush Merchandise Market Close To Collapse

Happy Hour

Tonight I went to a hookah bar with a friend. She was telling me about her job and how they have a happy hour on Fridays. Can you imagine that? Drinking at work!

Then she told me where she works: Freddie Mac.

I couldn't help but laugh. I guess they could use a few drinks considering the mess they got into.

See here, here, here, here, here, here, and here if you believe that the folks at Freddie are the only ones drinking on the job ("Bail them out? You must be drunk!").

From the Onion

Over at Cafe Hayek, Russell Roberts links to this video from the Onion (warning: explicit language, fake news source):


Obama Promises To Stop America's Shitty Jobs From Going Overseas

Blockquoting X

Here, the X is Milton Friedman in "From Cradle to Grave", the fourth episode in his 1980 series Free To Choose

We as human beings don't have a responsibility, but I hope we have a compassion and an interest in the bottom twenty percent. And I only want to say to you that the capitalist system, the private enterprise system in the nineteenth century did a far better job of expressing that sense of compassion than the governmental welfare programs are today. The nineteenth century, the period which people denigrate as a high tide of capitalism had the-- was the period of the greatest out pouring of eleemosynary and charitable activity that the world has ever known. And one of the things I hold against the welfare system, most seriously, is that it has destroyed private charitable arrangements which are far more effective, far more compassionate, far more person-to-person in helping people who are really, for no fault of their own, in disadvantaged situations.

What I love about Friedman is his ability to articulate his position so clearly and with such conviction.

Joke of the Day

Captions:
"Ummm, Honey... I need a couple quarters."
OR
"If she doesn't come out holding that dragon, I am going to be pissed."
OR
"Ahhh, forget about her. Go for the fish!"

Do you have a funny caption for this video? Comments are open.

Free to Choose

Milton Friedman's television show, Free to Choose, is now available online. There are 10 episodes from 1980 and 5 from 1990. Enjoy.

[HT: Walter Williams]

On the Margin

In tonight's class, Walter Williams asked the following question:

What is marginal polymorphonuclear neutrophil?

Submit answers in comments (unless you were in the class, in which case you should keep quiet).

The Engineer and The Scientist

Arnold Kling illustrates the difference between "model jockeys" and academic economists.

A model jockey might ask, "What will be the effect of the stimulus proposal on GDP?" You have an equation, estimated using past data, that predicts how much consumption will go up for a given increase in disposable income. You interact that with a bunch of other equations, and out comes your answer. That is how the engineers look at macro.

Kling also explains how the time horizon selected (shorter or longer) can affect the result found. ATSRTWT

Orthodox Keynesian Fiscal Policy

In discussing fiscal policy, many macroeconomics professors speak of increasing output without regard to what specific component of output is actually increased. Often they put forward the [ridiculous] position that digging ditches and refilling them is just as effective as building roads, bridges, dams, office complexes, or sports stadiums. All of these expenditures, after all, shift the IS curve to the right.

The absurdity of such a claim makes it easy to refute. But we should ask whether Orthodox Keynesians actually subscribed to this idea before relishing in the defeat.

As it turns out, James Tobin (arguably the most prominent Orthodox Keynesian) states that a consensus between Orthodox Keynesians and Neoclassicals existed in the late 1950s and 60s:

I thought that there was also a normative consensus, in the sense that you shouldn't regard any output that you get from putting unemployed resources to work as free, because you have alternative ways of putting unemployed resources to work. The same classical opportunity cost considerations that determine allocation of resources in a classical equilibrium determine the allocation of resources as among different ways of returning to that supply-constrained regime. So I think in that sense there is no excuse for wasteful projects to increase employment, like digging holes in the ground, because you can arrange to employ people by investments or other projects that are socially beneficial (Snowdon and Vane 2005, p 151).

It seems as if many arguments refuting Orthodox Keynesian fiscal policy are actually in refutation of a position held by no one.

Of course, the model makes no differentiation between one type of output and another: a change in Q is a change in Q. But if the consensus Tobin spoke of actually existed, there seems to be little practical value in further specification of the model.

Rather than continue to knock over a straw man, then, I suggest one accepts that no one actually believes that one government expenditure is just as good as the other. Instead, ask another question: how is government to know what expenditure is best? And if Mises and Hayek taught us anything through the socialist calculation debate, it is that only decentralized actors working within a price system can approximate the best use of resources.

Economists and Sustainability

The Journal of Heritage Stewardship had this to say about the position of economists in the environmental/sustainability discussion.

For the most part, however, future concern dwindles in inverse proportion to the pressing demands of the voracious present. (35) Advocates of intergenerational equity are far outnumbered by economists who consider market forces and individual interests adequate guarantors of environmental and social heritage, (36) assume that “future generations are likely to be incomparably richer than people alive today,” (37) and rely on future technological miracles to deal, more cheaply and efficiently than can now be done, with our toxic legacies of nuclear waste, land and air and water pollution, lethal additives, corporate bankruptcies, and state indebtedness. (38)

I would say their summary of the widely held position among economists is fair. Terms like "incomparably rich" and "technological miracles" seem to poke fun at the position. But even the smallest of growth rates--much lower than our current 4%--sustained over a significant period of time result in drastic changes in standards of living. Consider that my great grandparents spent most of their time in a field so that they could eat and I spend less than 1/3 of my (rather low by today's standards, but relatively large in comparison to the past) income on food; and I do not end each day sweaty with a sore back.

Does anyone have a strong reason for why technology might not be so miraculous after all? (I don't believe it is. I would say it is an inevitable outcome. But I am more than willing to admit that my understanding of Schumpeterian entrepreneurship is more faith than fact at this point.)

[HT: Claire]

Oh, Politics

This NYT article is mediocre, but I found the title amusing: Once Elected, Palin Hired Friends and Lashed Foes.

Why don't they just say what everyone already knows: Once Elected, Palin Acted Like an Elected Official. That's right. Business as usual. Yeah, she is a scummy politician. But really, that is a redundant phrase; all politicians are scummy. In fact, I am going to even the score for Mrs. Palin.

Once Elected, Obama Hired Friends and Lashed Foes
Once Elected, Biden Hired Friends and Lashed Foes
Once Elected, McCain Hired Friends and Lashed Foes
Once Elected, POLITICIANS Hire Friends and Lash Foes

Only when we stop pretending that some politicians are saints will we be able to avoid using coercion to accomplish our ends. Until then we should expect business as usual.

Pondering Pasta

My friend Kelly and her housemate Maureen invited me over to their new apartment in DC tonight for pasta. And, of course, I started (over)thinking...

(1) Since there is no such thing as a free lunch, I must be paying a non-pecuniary price for the meal. In this case, my first thought is that I barter with my friendship.

(2) But friendship is reciprocal. It wasn't like I was only giving friendship. I was getting it as well. So I am paying friendship and getting friendship and pasta in exchange. If we assume that we value each other's friendship equally, further explanation is needed.

(3) My conclusion: she expects that at some time in the future I will divert roughly the same amount resources to her.

I think this makes a fair amount of sense. If after a couple months she finds that we always eat at here place--on her dime--and she expects it to be that way forever, she would be less inclined to be my friend. Relaxing the assumption above, we might say that the difference between how much each friend contributes to the relationship reflects the relative value of each participant. She might be willing to give a little more than me in the long run if she finds me to be an exceptional friend worth paying a premium for. And if, at the same time, I value her a little less than she values me, a long run difference in contribution is sustainable.

Her expectations, of course, take into account all future transactions. It could be the case that one friend is in a bind for an extended period of time. If she expects to recoup her losses when this time period ends, the friendship will not necessarily end.

It might even be true that friends don't expect immediate repayment when hard times are over. Just knowing that you would do the same if they found themselves in a similar situation could suffice. This treatment presents friendship as a sort of insurance scheme.

My most important observation stemming from this though is that the temporal nature of the transaction observed serves to illustrate the level of trust required for friendships. She does not know how I will act in the future. But she trusts that I will act in accordance with the social norms of friendship.

In other words: Thank you for dinner.

And Now for Something Completely Different

A guy I went to High School with recently got a divorce after being married for barely a year. I don't know him that well, so I don't know the details. And they don't really matter, I guess. But the situation did get me thinking. Maybe too much.

First: one year? Wow. I cannot imagine things spiraling into disrepair so quickly. Maybe, of course, it was a bad situation from the start, a silly decision that good friends and sound reasoning could have prevented. Can you imagine the conversation that must have taken place?

Well, it's been a year. We gave it the old 'College Try'. But I think we should cash out before the warranty on the microwave expires.

Personally, I would like to think people don't commit to bad relationships. I know they do. But I close my eyes and pretend the world works the way I think it does (too many mainstream economics courses?).

Second: why are 22 year olds getting married, anyway? Ok. Maybe I am just being a cynic. But marriage is the last thing on my mind right now. I am (happily) single (with no prospects). Other people are having relationships; I am reading books and discussing how macroeconomic phenomena might emerge.

To be honest, I don't even know where I would meet a potential spouse right now. You can almost always find me at my house (studying) or in class. Or, I am having a drink with people from the class (talking about the class!). And I am guessing that "What do you think about spontaneous orders?" is not a successful pick-up line (though, I would be willing to give it a shot).

So who is right, here? Should I be thinking more about my future wife and less about the 'big questions that puzzle me'? Or are my married and marrying friends making a huge mistake? Do they know something I don't? Or are their calculations in error. Comments open.

(And don't give me the standard econ answer. I know different people have different preferences. My question is completely normative: What should I be doing?)

Joke of the Day

Angus at Kids Prefer Cheese shows us that the value of an MBA is plummeting.

A New Economics Fable

Maybe some of you have read Russ Robert's Fable of Free Trade and Protectionism. Well, he has posted a new fable at Cafe Hayek: The Fable of Fannie and Freddie.

Once upon a time, Fannie and Freddie were partners in a business. Well, it wasn’t exactly a business. It was almost a charity. Not quite. It was sort of a government agency. Or maybe it was all three together. When Fannie and Freddie talked to investors, they acted like a business. When they talked to the government regulators, they acted like a government agency.

And when they talked to the American people, they acted like a charity. A charity whose goal was to help more people own a home.

Who could be against that?

But it’s hard to be three things all at the same time [...]

ATSRTWT

Calvin and Hobbes

John and Thomas, that is.

Straight Talk Express Rolls On

Did you see McCain's speech tonight? Here's what hit the cutting room floor.

[HT: Angela]

Cafe Hayek

There was a time when I did not read Cafe Hayek. I guess I did not find the subtle jokes that funny. Or maybe I was just not mature enough to get it. Well, that is no longer the case. Now I wake up every morning and--rather than waste my time with the headlines--skip right to the letters section featuring Don Boudreaux (No subscription needed!). Today's gem is entitled "Sex Is Pleasurable, Studies Show":

Yahoo! News

Dear Sir or Madam:

The headline of one of your reports today (Sept. 4) from the Associated Press reads "Sarah Palin and her fellow RNC speakers weren't completely truthful at times." Wow.

Why not also run a report with the headline "Law of Gravity Still Working," or one screaming "Julius Caesar Remains Dead!"? Deceitful politicians are as newsworthy as ants at a picnic - although much more avaricious and annoying.

Sincerely,
Donald J. Boudreaux

What I Love about Mason #2

The conversations.

At GSPW, Pete Boettke and Pete Leeson took part in an impromptu debate regarding whether Saddam Hussein was either (1) irrational and, thus, did not respond to sufficient offers or (2) rational but, unfortunately, was not offered enough to cease power. And this was in the context of an empirical economics paper on betrayal aversion.

Then, after PCS, Robin Hanson was talking about UFOs (apparently not an uncommon occurrence...).

Tomorrow: PPE!