Liberty

ASET Book Club

2012-02-10T07:41:00.000-08:00

Join the Arizona Society of Economics Teachers Book Club to discuss Thinking, Fast and Slow by Daniel Kahneman on Wednesday, February 22, 2012. Please email programs@azecon.org for more information.

Date: February 22, 2012
Time: 5:45 - 7:45 p.m.
Location:

Arizona Council on Economic Education office
3260 North Hayden Road, Suite 207
Scottsdale, Arizona 85251

Excellent Reviews

Book Review: Thinking, Fast and Slow by Daniel Kahneman
A Nobel laureate’s new book cautions us not to trust our gut
By Roger Lowenstein

Thinking, Fast and Slow, Kahneman’s new and most accessible book, contains much that is familiar to those who have followed this debate within the world of economics, but it also has a lot to say about how we think, react, and reach—rather, jump to—conclusions in all spheres. What most interests Kahneman are the predictable ways that errors of judgment occur.

Synthesizing decades of his research, as well as that of colleagues, Kahneman lays out an architecture of human decision-making—a map of the mind that resembles a finely tuned machine with, alas, some notable trapdoors and faulty wiring.

http://www.businessweek.com/magazine/book-review-thinking-fast-and-slow-by-daniel-kahneman-10272011.html

New York Times Review

System 2, in Kahneman’s scheme, is our slow, deliberate, analytical and consciously effortful mode of reasoning about the world. System 1, by contrast, is our fast, automatic, intuitive and largely unconscious mode. It is System 1 that detects hostility in a voice and effortlessly completes the phrase “bread and. . . . ” It is System 2 that swings into action when we have to fill out a tax form or park a car in a narrow space. (As Kahneman and others have found, there is an easy way to tell how engaged a person’s System 2 is during a task: just look into his or her eyes and note how dilated the pupils are.)

More generally, System 1 uses association and metaphor to produce a quick and dirty draft of reality, which System 2 draws on to arrive at explicit beliefs and reasoned choices. System 1 proposes, System 2 disposes. So System 2 would seem to be the boss, right? In principle, yes. But System 2, in addition to being more deliberate and rational, is also lazy. And it tires easily. (The vogue term for this is “ego depletion.”) Too often, instead of slowing things down and analyzing them, System 2 is content to accept the easy but unreliable story about the world that System 1 feeds to it. “Although System 2 believes itself to be where the action is,” Kahneman writes, “the automatic System 1 is the hero of this book.” System 2 is especially quiescent, it seems, when your mood is a happy one.

http://www.nytimes.com/2011/11/27/books/review/thinking-fast-and-slow-by-daniel-kahneman-book-review.html?_r=1&pagewanted=all

Review of Thinking, Fast and Slow by Daniel Kahneman
By Max H. Bazerman

Do cognitive biases show up in people other than college sophomores? Do people make decision mistakes outside the lab, when real incentives are on the line? Are smart people immune from bias? Are these biases really mistakes? Does experience eliminate biases?

As a card-carrying member of the biases-and-heuristics crowd of the behavioral decision research field, these are the questions I have continually been asked over the years, despite my belief that they were answered conclusively long ago. In accepting an invitation to review Thinking, Fast and Slow (TFS) by Daniel (Danny) Kahneman, I anticipated getting a comprehensive and clear response to these decades-old questions. Instead, TFS provides an assessment and integration that goes far beyond these early, comparatively simple questions.

http://www.psychologicalscience.org/index.php/publications/observer/obsonline/thinking-fast-and-slow.html

Financial Times Review

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Kahneman presents our thinking process as consisting of two systems. System 1 (Thinking Fast) is unconscious, intuitive and effort-free. System 2 (Thinking Slow) is conscious, uses deductive reasoning and is an awful lot of work. System 2 likes to think it is in charge but it’s really the irrepressible System 1 that runs the show. There is simply too much going on in our lives for System 2 to analyse everything. System 2 has to pick its moments with care; it is “lazy” out of necessity.

Books on this subject tend to emphasise the failings of System 1 intuition, creating an impression of vast human irrationality. Kahneman dislikes the word “irrationality” and one of the signal strengths of Thinking, Fast and Slow is to combine the positive and negative views of intuition into one coherent story. In Kahneman’s words, System 1 is “indeed the origin of much that we do wrong” but it is critical to understand that “it is also the origin of most of what we do right – which is most of what we do”.

http://www.ft.com/cms/s/2/15bb6522-04ac-11e1-91d9-00144feabdc0.html

Wall Street Journal
http://online.wsj.com/article/SB10001424052970204479504576639032103005502.html

Slate Magazine

http://www.slate.com/articles/life/science/2011/10/daniel_kahneman_s_thinking_fast_and_slow_reviewed_.html

2012 ASET Conference

2012-02-05T14:52:00.000-08:00

11th Annual ASET Conference
Making ₵ents of the ₵entennial

Conference Schedule At-A-Glance
Feb. 4, 2012

8:30 - 9:00 Registration & Continental Breakfast
Downstairs, Library Corridor

9:00 - 9:15 Welcome & Introductions
SW Reading Room, 3rd Floor

9:15 - 9:20 An Economics “Short”: Economics of a Zombie Attack – Scott Gustafson, Mesa Community College

9:20 – 10:05 Keynote Speaker – Jim Rounds, Sr. Vice President, Sr. Economist, Elliott D. Pollack & Co.

10:05 - 10:25 Break (Visit Exhibitors for extra door-prize tickets!)

10:25 – 11:15 Break-out Session 1 - AS Classrooms

11:15 - 12:15 Lunch & Exhibitors
Lunch served downstairs, Library Corridor
Seating on 3rd floor balconies and Library Corridor

12:15 - 12:30 Presentation of Award Recipients & ASET Board Members & Candidates
SW Reading Room, 3rd Floor

12:30 – 1:15 Keynote Speaker - Cynthia Course, San Francisco Federal Reserve Bank

1:15 - 1:35 Break (Visit Exhibitors for extra door-prize tickets!)

1:35 - 2:25 Break-out Session 2 – AS Classrooms

2:30 – 3:00 Door Prizes, Ballots, Evaluations, Certificates
LB 145, Library Classroom, 1st Floor

AEA Teaching Economics Conference

2012-01-15T06:56:00.000-08:00

Second Annual AEA Conference on Teaching Economics
and Research in Economic Education
May 30 – June 1, 2012
Boston, MA

The AEA Committee on Economic Education (CEE) is organizing the second annual conference on teaching undergraduate and graduate economics, and research on economic education at all levels (including precollege). The conference is cosponsored by the Journal of Economic Education. All sessions will be held at the Royal Sonesta Hotel in Boston, except a dinner at the Federal Reserve Bank of Boston. Plenary speakers at the conference will include:

•Susan Athey, "Economics Education for the Internet Age: Design, Analysis, and Experimentation in Large-Scale Online Marketplaces"

•Peter Diamond, “Unemployment, Vacancies, Wages”

•Greg Mankiw, “Recent Challenges Facing Monetary and Fiscal Policy, and What They Mean for What We Teach”

A large number of concurrent sessions will also be scheduled, featuring both research and pedagogy papers, panel discussions, and workshops on teaching economics at the college level (undergraduate and graduate). Proposals for individual papers, complete sessions of papers on a particular theme, panel discussions, or workshop sessions, should be sent by e-mail to KimMarie McGoldrick, University of Richmond, kmcgoldr@richmond.edu no later than December 1, 2011.

The registration fee for the Boston conference will be $75 for AEA members until April 15, and $125 after April 15. For those who are not AEA members, the registration fee will be $125 until April 15, and $175 after April 15. Registration for the conference and hotel will open on March 1, 2012, on the AEA CEE web page.

Interpreting The Constitution In The Digital Era

2011-12-31T08:28:00.000-08:00

GPS monitors can track your every movement. Brain scans can now see lies forming in your brain. And advancements in genetic engineering may soon allow parents to engineer what their children will look and be like.

These new technologies are "challenging our Constitutional categories in really dramatic ways," says George Washington University law professor Jeffrey Rosen. "And what's so striking is that none of the existing amendments give clear answers to the most basic questions we're having today."

On Wednesday's Fresh Air, Rosen, the co-editor of the new book Constitution 3.0: Freedom and Technological Change, details how technological changes that were unimaginable at the time of the Founding Fathers are challenging our notions of things like personal vs. private space, freedom of speech and our own individual autonomy.

What Milton Friedman might say to the Occupy movement

2011-12-28T06:55:00.000-08:00

Three Suggestions

2011-12-25T06:57:00.000-08:00

Three Myths about the Great Depression

2011-12-24T06:55:00.000-08:00

Sweatshops

2011-12-23T06:54:00.000-08:00

Three Myths about Capitalism

2011-12-22T06:53:00.000-08:00

The Market and the Distribution of Wealth

2011-12-21T06:50:00.000-08:00

This view, as we said, is today held by many, even by some economists who understand the superiority of the market economy over the command economy and the frustrations of interventionism, but dislike what they regard as the social consequences of the market economy. They are prepared to accept the market economy only where its operation is accompanied by such a policy of redistribution.

The present paper is devoted to a criticism of the basis of this view.

The Solyndra Scandal: What Was Secretary Chu Thinking?

2011-12-20T05:45:00.000-08:00

Reign of the technocrats - smart people and decision making

Rule by technocracy

2011-12-19T05:46:00.000-08:00

5 books - economics is fun

2011-12-18T05:27:00.000-08:00

Is economics actually fun?

Oh gosh, yes! Of course it’s fun. Partly because it’s relevant, but partly because there are an awful lot of things that are basically just fun stories. I wrote a book, Economics is Everywhere, which contains stories from my life and things I see, designed to illustrate economic ideas. Some of them are just hilarious. And it’s not just me, whose humour is sort of weird, I admit. Almost anyone can read them and get a good laugh out of them, while learning something. And that’s the best way to teach, I think.

Richard Epstein on Inequality

2011-12-17T16:44:00.000-08:00

Watch Does U.S. Economic Inequality Have a Good Side? on PBS. See more from PBS NEWSHOUR.

RICHARD EPSTEIN: What's good about inequality is if, in fact, it turns out that inequality creates an incentive for people to produce and to create wealth, it's a wonderful force for innovation. So let's just go and take somebody like Bill Gates again or any entrepreneur.

Guy earns $50 billion, right? How much consumer welfare has he created by selling products? We can estimate the amount of gains to purchases, because everybody who buys one of his products or one of Steve Jobs' products, in effect, values it more than he receives.

The social gain from inequality to consumers of those goods probably dwarfs the entrepreneurial gain by a factor of 10-1 or 20-1.

Chinese TV Host Says Regime Nearly Bankrupt

2011-12-16T08:40:00.000-08:00

Becker on OWS

2011-12-15T06:47:00.000-08:00

Throw Them All Out

2011-12-14T06:40:00.000-08:00

Nick Gillespie wrote on November 30, 2011

I'm reading Peter Schweizer's excellent new book Throw Them All Out, which details how politicians ranging from Nancy Pelosi to John Boehner to John Kerry to Dennis Hastert use their political positions to massive advantage in trading stocks. And how politically connected fat cats such as Warren Buffett and George Soros use their access to lawmakers to swing sweetheart deals, stimulus dollars, and government-loan guarantees their way. The book is an appallingly thoroughgoing and transpartisan expose of crony capitalism as it is practiced today.

Is Modern Capitalism Sustainable?

2011-12-13T08:20:00.000-08:00

Will capitalism be a victim of its own success in producing massive wealth? For now, as fashionable as the topic of capitalism’s demise might be, the possibility seems remote.

Kenneth Rogoff is Professor of Economics and Public Policy at Harvard University, and was formerly chief economist at the IMF.

Capitalism v crony capitalism

2011-12-13T06:46:00.000-08:00

Also Chris Coyne does a very good job addressing some of the confusion between capitalism and crony capitalism that is evident in the movement.

Posner on OWS

2011-12-12T06:48:00.000-08:00

Vernon Smith

2011-12-11T06:03:00.000-08:00

Elected Dirty Dealers

2011-12-10T05:59:00.000-08:00

The real issue is that the US Congress – like many countries’ legislatures – lives by rules that are very different from those imposed on ordinary citizens. In particular, the accounting, transparency, and fraud rules that govern businesses do not apply to elected representatives.

The Hour of the Technocrats

2011-12-09T06:51:00.000-08:00

On behavior, taxes and externalities

2011-12-09T06:16:00.000-08:00

This excellent post by Williamson touches on behavior, externalities, the work of Robert Frank and has me reflecting on my reading of Thinking, Fast and Slow by Daniel Kahneman. Kaheman writes about stage 1 and stage 2 in thinking and the role played by these mechanisms in belief formation and bias. Both may well be at play in this discussion.

In reality, there is mobility within the income distribution, and how much mobility is an important issue here. Given mobility within the income distribution, we all care, for selfish reasons, about how the rich are treated, as we all could be rich some day, or our descendants could be rich.

Finally, I have no idea where that "behavioral elasticity" is coming from, and I don't trust it. My best guess is that it includes none of the factors that I think are important in addressing the problem. What we need here is a dynamic general equilibrium model that can take account of the short run and long run effects of a change in the income tax schedule. My best guess is that "behavioral elasticity" means that Diamond and Saez are measuring the effects of tax evasion and the intensive margin of labor supply, and that's all. If so, I think they miss most of what is important:

1. There's also an extensive margin. Tax people at a higher rate, and some drop out of the labor force.

2. Taxes affect occupational choice. Some work by Manuelli/Seshadri/Shin says that the effect of taxes on human capital is big time. Why do I want to undertake a costly and risky investment for a very small payoff?

3. Entepreneurial activity has to be very elastic with respect to tax rates at the top end. Why would I want to risk my own wealth or that of my close family for a very big payoff with very low probability, if that big payoff is taxed at 73%?

4. The United States is highly dependent on highly-skilled labor that migrates here from other countries. With a top tax rate of 73%, the Indian engineers might prefer to work in India, and the Canadian professors might prefer Canada.

Thus, I think it is likely that tax revenue is much more elastic with respect to the tax rate, particularly in the long run, than Diamond and Saez are letting on. To evaluate this properly, you need a serious model, and they have not provided one.

OEDC Economic Forecast 2012

2011-12-08T06:50:00.000-08:00

Internship Programs | Institute For Humane Studies

2011-12-07T20:16:00.000-08:00

Internship Programs | Institute For Humane Studies

Higher education costs and state subsidy

2011-12-06T06:41:00.000-08:00

Robert Higgs’s Tocqueville Award Acceptance Speech

2011-12-05T15:41:00.000-08:00

For society as a whole, I wish nothing more fervently than I wish that it should be as free as possible. For me, freedom is not simply the highest-ranked value with regard to public affairs; it stands on a level by itself, far above all the others.

I espouse individual liberty in this “extreme” fashion for two reasons, which in my mind complement one another. The first is that freedom is the optimal condition for each individual’s engagement in society. To be driven, bullied, abused, disregarded, treated with contempt and dishonor―these are bad things in themselves, not only for me, but for every human being. We ought to recoil from them, regardless of whether the perpetrator is a local cop or the government in Washington. Yet all too many of us become accustomed to such official cruelties and take them in stride without much conscious thought that they are wrongs and ought to be stopped, regardless of their source.

Individual liberty, however, is also an instrument for the creation of many of the conditions, goods, and services that constitute material abundance and relieve many of the anxieties and pains that once accompanied social life for almost everyone. Virtually everyone favors economic development, especially inasmuch as it reduces or eliminates extreme poverty. Individual liberty is a necessary condition for sustained economic progress. The specific conditions of a free society―private property rights, secure contracts, a reliable rule of law―are prerequisites for the ongoing creation of wealth in the long run. At this late date, after we have witnessed the personal horrors and economic disasters brought about by socialist central planning, it should not be necessary to go on preaching the gospel of private property and the market economy, yet we all know that many people still do not understand these essential matters and often act politically to thwart the operation of a genuinely free society.

What’s the Matter with Rachel Maddow?

2011-12-04T15:43:00.000-08:00

From Reason

Maddow is intelligent, serious, and well-meaning—which makes her vision all the more unsettling: It has ominous implications not only for individual liberty, but also for its concomitant: authentic spontaneous social cooperation.

I have a number of colleagues who admire and agree with Maddow. The above Reason analysis does justice both to the clear and present danger of the progressive agenda for individual liberty and personal responsibility and the more current concern with idealogues of Maddow's ilk. The patina of reasonable and thoughtful argument masks the consequence of rule by elite.

Ten Key Ideas, Opening the Door to the Economic Way of Thinking, by Russell Roberts | Library of Economics and Liberty

2011-12-03T08:25:00.000-08:00

Ten Key Ideas, Opening the Door to the Economic Way of Thinking, by Russell Roberts | Library of Economics and Liberty

Max Borders, The Economy: Metaphors We (Shouldn't) Live By | Library of Economics and Liberty

2011-12-02T08:23:00.000-08:00

Max Borders, The Economy: Metaphors We (Shouldn't) Live By | Library of Economics and Liberty

Mesa Community College Center for Economic Education

2011-12-01T08:31:00.000-08:00

Economics and Inequality

2011-12-01T05:59:00.000-08:00

Kenneth Arrow

This article is part of Occupy the Future, a forum on lessons to be drawn from the Occupy movement.

The specific problems of the current U.S. economy—the drastic increase in unemployment and sluggish increase in output—overlay a tendency of much longer duration, a drastic and rapid increase in the inequality of income. Every economy of complexity produces an unequal distribution of the good things in life. But the period immediately following World War II showed a considerably increased equality of income compared with either the Great Depression or the previous period of relative prosperity.

Shakespeare - gangsta?

2011-11-30T08:27:00.000-08:00

Europe’s Disaster Is Headed Our Way

2011-11-30T08:17:00.000-08:00

Niall Ferguson writes:

But the third reason Americans should care about Europe is more important even than the risk of a renewed financial crisis. It is the danger that what is happening in Europe today could ultimately happen here. Just a few months ago, almost nobody was worried about Italy’s vast debt, which amounts to 121 percent of GDP. Then suddenly panic set in, and Italy’s borrowing costs exploded from 3.5 percent to 7.5 percent.

Today the U.S. gross federal debt stands at around 100 percent of GDP. Four years ago it was 62 percent. By 2016 the International Monetary Fund forecasts it will be 115 percent. Economists who should know better insist that this is not a problem because, unlike Italy, the United States can print its own money at will. All that means is that the U.S. reserves the right to inflate or depreciate away its debt. If I were a foreign investor—and half the debt in public hands is held by foreigners—I would not find that terribly reassuring. At some point I might demand some compensation for that risk in the form of ... higher rates.

The invisible hand . . . and Thanksgiving

2011-11-30T06:50:00.001-08:00

Studies in Emergent Order

2011-11-29T08:15:00.000-08:00

Studies in Emergent OrderAbout SIEO Symposium on Emily Chamlee-Wright’s The Cultural and Political Economy of Recovery.

Studies in Emergent Order (SIEO) is an open-access journal dedicated to fostering research, discussion and publication concerning the roles played by and implications of emergent order phenomena, particularly in society but not excluding other areas. Click here to see the current issue.

At SIEO, we provide a refereed online journal, opportunities to discuss journal articles as well as submit them, book reviews of new publications, and an annotated bibliography of key writings on emergent order.

Posner's analysis of Greece and the US

2011-11-28T06:12:00.000-08:00

Greece and the Euro-Becker

2011-11-27T06:09:00.000-08:00

Gary Becker writes in an excellent post

I will discuss the following two crucial questions about Greece and the euro:

Should Greece have become part of the euro? No.

Should Greece leave the euro? Not now, but probably in the future.

From Cafe Hayek

2011-11-26T06:13:00.000-08:00

Quotation of the Day…
by DON BOUDREAUX on NOVEMBER 7, 2011
in NANNY STATE, OTHER PEOPLE'S MONEY
… is from pages 168-169 of H.L. Mencken’s priceless 1956 collection, Minority Report; I recalled it upon reflecting on Pres. Obama’s warning, in a speech a couple of weeks ago to his supporters in San Francisco, that (quoting Mr. Obama) “The one thing that we absolutely know for sure is that if we don’t work even harder than we did in 2008, then we’re going to have a government that tells the American people, ‘you are on your own. If you get sick, you’re on your own. If you can’t afford college, you’re on your own.”

Imagine being responsible for yourself.

Anyway, here’s Mencken on FDR:

Roosevelt transformed millions of Americans from citizens into clients. The direct effect of this was evil, and the indirect effect was even worse, for all these people were robbed of their self-respect.

Matt Ridley - Angus Millar lecture at the RSA in Edinburgh

2011-11-25T19:01:00.000-08:00

My argument is that like religion, science as an institution is and always has been plagued by the temptations of confirmation bias. With alarming ease it morphs into pseudoscience even – perhaps especially – in the hands of elite experts and especially when predicting the future and when there’s lavish funding at stake. It needs heretics.

http://www.bishop-hill.net/storage/ScientificHeresy.pdf

Google Ngrams

2011-11-24T06:52:00.000-08:00

Fascinating - I just used this app to trace freedom and security in Google books over the past 200 years.

Illusion of asymmetric insight

2011-11-23T14:12:00.000-08:00

The truth is, you are succumbing to the illusion of asymmetric insight, and as part of a flatter, more-connected, always-on world, you will be tasked with seeing through this illusion more and more often as you are presented with more opportunities than ever to confront and define those who you feel are not in your tribe. Your ancestors rarely made any contact with people of opposing views with anything other than the end of a weapon, so your natural instinct is to assume anyone not in your group is wrong just because they are not in your group. Remember, you are not so smart, and what seems like an insight is often an illusion.

Why We Can't Escape the Eurocrisis | Gerald P. O'Driscoll Jr. | Cato Institute: Commentary

2011-11-22T06:06:00.000-08:00

The underlying dilemma is that governments have promised their citizens more social programs than can be financed with the tax revenue generated by the private sector. High tax rates choke off the economic growth needed to finance the promises. Economic activity gets driven into the underground economy, where it often escapes taxation.
Why We Can't Escape the Eurocrisis | Gerald P. O'Driscoll Jr. | Cato Institute: Commentary

Brian Fagan | Elixir: A History of Water and Humankind

2011-11-21T09:49:00.000-08:00

TUESDAY, NOVEMBER 22

New York Times bestselling author Brian Fagan visits with his new book Elixir: A History of Water and Humankind. Spanning five millennia, from ancient Mesopotamia to the parched present of the Sun Belt, Elixir shows that every human society has been shaped by its relationship to water—our most essential resource. In sweeping narrative, Fagan moves across the world, setting out three ages of water—the first, lasting thousands of years, in which water was scarce and sacred in almost every culture; the second, in which human ingenuity transformed water from a mystical force to an exploitable commodity; and third and present age, in which the water crises of the future may need us to adapt the water ethos of our ancestors.

Water: The Epic Struggle for Wealth, Power, and Civilization

2011-11-20T09:59:00.000-08:00

From the November 2011 issue of Reason

2011-11-19T20:51:00.000-08:00

Free market ideas for reducing unemployment

Thinking Fast and Slow

2011-11-18T07:30:00.000-08:00

Our comforting conviction that the world makes sense rests on a secure foundation: our almost unlimited ability to ignore our ignorance.

That is from Daniel Kahneman, Thinking Fast and Slow, p. 201. The chapter is called "The illusion of understanding."

Libertarianism.org

2011-11-17T11:27:00.000-08:00

Libertarianism.org is a resource on the theory and history of liberty, broadly construed. Libertarianism takes many forms and the blogs, essays, and videos here explore them all. None of the views expressed at Libertarianism.org should be taken to represent the position of the Cato Institute or its scholars.

This house believes that subsidising renewable energy is a good way to wean the world off fossil fuels.

2011-11-17T10:32:00.001-08:00

Vote in the current Economist debate:

About this debate

By any measure, the world is on course to overshoot the safety limits that scientists have set for carbon emissions. A record 30.6 gigatonnes of carbon was pumped into the atmosphere last year. This means that, despite a recession in the rich world, and a lot of highfalutin talk about climate change, emissions are running close to the business-as-usual scenario offered by the Intergovernmental Panel on Climate Change: that comes with a 50% chance of a 4˚C temperature rise by the end of the century.

To improve the odds, a large part of the world’s energy production will have to shift to renewable sources. This will not happen unaided: renewable energy is almost always more expensive than the lowest-cost fossil-fuel alternative. According to the International Energy Agency, this means $13.5 trillion will have to be invested in promoting renewable energy by 2035. But who is going to pay for this—and how? Can the transformation be made through taxing emissions? Or must renewable energy receive some form of state subsidy—wasteful and inefficient though this tends to be?

NPR - Keynes

2011-11-16T08:39:00.000-08:00

Keynes' Consuming Ideas On Economic Intervention

by David Welna

November 16, 2011

The last in a three-part series on thinkers who have had a lasting influence on economic policymakers. Other stories featured Ayn Rand and Friedrich Hayek.

On his deathbed the year after World War II ended, John Maynard Keynes is said to have remarked that his only regret in life was that he did not drink more Champagne. For Keynes, consumption — economic or otherwise — was what made the world go 'round.

A long-dead British lord and economic theorist seems an unlikely subject for a ra

‘Poor Economics’ takes business book prize

2011-11-16T07:28:00.000-08:00

Poor Economics, which champions radical new ways of tackling global poverty, is the 2011 Financial Times and Goldman Sachs Business Book of the Year.
With much of the developed world racked by crisis and shaken by protest about capitalism’s deficiencies, the judges said co-authors Abhijit Banerjee and Esther Duflo offered a hopeful guide to the way forward.

The Economy in Haiku

2011-11-15T11:18:00.000-08:00

The economy in haiku
Oct 26th 2011, 14:52 by R.A. | WASHINGTON

THE KAUFFMAN FOUNDATION conducts a quarterly survey of economics bloggers (you can see the third quarter results here). It tends to focus on current economic conditions and policy questions, but the fourth-quarter questionnaire contained something a little different: a challenge to capture the state of the economy in haiku. The results are sublime. Here, for instance, is the contribution from Interfluidity's Steve Waldman:

This is not so hard.
Helicopter money please.
Wired straight to households.

Tax the Rich and Now
Borrow to Invest in Stuff
Bring Back the New Deal
- Daniel Gross

Boost U.S. Demand
Need More Money and Tax Cuts
Hands off the long run
-Karl Smith

Climate change question
Cap-and-trade or carbon tax
Either efficient
-John Whitehead

Double dip at bay
Despite moronic Congress
Europe sinks us all
-Ryan Avent

Econ guys, gentle souls
Think policies guide markets
Jail time is better
-Robert Cringely

Economy Grows Big
Increase in Stock Market
My Children Get Rich
-James Altucher

Economy sucks?
New policies shake things up!
Causing more suckage.
-Glen Whitman

Employment down, output up
Doing more with less
Until everything is done by no one
-Wade Roush

Intermodal loadings increase
Trade conflict looms without cease
Occupy Wall Street
-Stephen Karlson

jobs and Jobs are gone
need more Jobs to get more jobs
innovate to grow
-Arthur Diamond

Jobs are needed now
Austerity ill-timed
Action is required
-Jeff Miller

Keynes' America falls
Growth will emerge with startups
Hayek wins the day
-Tim Kane

many angry folks
watch political duck soup
less soup back to work
-David Zetland

Monetary stimulus is all that's left
Do it right or suffer
Target NGDP to end the quest
-James Picerno

More demand is needed
The Fed is responsible
Do not look elsewhere
-Scott Sumner

More public spending
Is needed to fill the gap
Sadly America fails
-Bill Mitchell

New Commanding Heights
Credentials Suffocating
Let the market work
-Arnold Kling

No one has a job
Except econobloggers
And they're not paid much
-Felix Salmon

Revenge of the Nerds
ZMP can't outcompete
Very small shell scripts
-Eli Dourado

The goal is simple
Get Americans to say
"I, Entrepreneur"
-Nick Schulz

The US needs jobs
Politicians have theirs now
With which they do little
-Austin Frakt

This is not so hard.
Helicopter money please.
Wired straight to households.
-Steve Waldman

Those kids blame the banks.
Is Wall Street pre-occupied?
Next: capital strike.
-Michael Munger

Uncertainty rules
While the economy suffers
Politics rejoices
-Pedro Albuquerque

When Japan fell in 1990s
They were lectured by the world economists
Time for Japanese to smile
-Amol Agrawal

NPR - FA Hayek

2011-11-15T08:12:00.000-08:00

Austrian School Economist Hayek Finds New Fans

by Tamara Keith

November 15, 2011

Second in a three-part series

These days it can feel like the country is unsteady — politically, economically. In a search for the way forward, scholars and politicians often turn to their fundamental beliefs. NPR is taking a look at some of the most influential philosophers whose ideas molded the present and could shape the future. You might not know all their names, but you're certainly familiar with their ideas. They are woven into the fabric of our society.

The Nobel Prize-winning Austrian economist Friedrich Hayek's arguments for free-market capitalism and against socialism and central planning made him a popular figure in 1940s America — and again today.

Hayek argued for humility among economists and politicians. And that, says George Mason University economics professor Don Boudreaux, was his most important contribution. Boudreaux is one of the people behind Cafe Hayek, an economics blog with a Hayekian point of view.

"The economy will always be more complex, will always confound you in your attempts to mold it to your designs," Boudreaux says of Hayek's economic philosophy.

OWS

2011-11-15T06:51:00.000-08:00

Will Wilkerson

2011-11-14T11:14:00.000-08:00

One of the most robust finding in political psychology is that liberals tend to explain both poverty and wealth in terms of luck and the influence of social forces while conservatives tend to explain poverty and wealth in terms of effort and individual initiative. Here's a useful summary of the sort of thing I have in mind:

NPR and Atlas Shrugged

2011-11-14T06:47:00.000-08:00

This week NPR is running a series on intellectual thought centered around individualism and liberty. This morning was Ayn Rand, tomorrow is FA Hayek.

Ayn Rand is best known for her novels The Fountainhead and Atlas Shrugged. The ideas behind them — her philosophy — have sunk so deeply into our political thought, most people don't even recognize them as her ideas anymore.

But Rand does have important admirers, like House Budget Committee Chairman Paul Ryan, R-Wis., and former Federal Reserve Chairman Alan Greenspan. Recently, House Speaker John Boehner channeled Rand when he said, "Job creators in America basically are on strike."

Underpinning that statement is a philosophy Rand introduced through her best-selling novel Atlas Shrugged.

NEW VIDEO: Hayek in 1983 on Social Evolution & the Origins of Tradition

2011-11-13T11:06:00.000-08:00

NEW VIDEO: Hayek in 1983 on Social Evolution & the Origins of Tradition

David Boaz introduces libertarian thinking

2011-11-12T11:12:00.000-08:00

Federalism DIY: 10 Ways for States to Check and Balance Washington

2011-11-11T09:53:00.000-08:00

The federal government is tightening its control over the 50 states and the lives of every American. The U.S. Constitution, however, says states are supposed to be equal partners with the federal government. State sovereignty—allowing each state to control its own affairs—is the cornerstone of that equal partnership and critical to protecting Americans' freedom. Below are 10 ways local policymakers and citizens can restore that balance of power and do what's best for the people of your state.

Arizona Free Enterprise Club

2011-11-10T09:53:00.000-08:00

An example - beliefs trump "intellect"

2011-11-09T09:57:00.000-08:00

This is a wonderful example of beliefs trumping analysis, theory and data:

You cannot hold pre-NYT Economist Paul Krugman up to the current version. You’ll just go mad. Sallie James pointed out the problem with Columnist Paul Krugman, when it comes to the concept of competitiveness.

But my favorite example was well chronicled by our friend James Taranto last year. When Sen. Jim Bunning held up an extension of unemployment benefits, Krugman lamented “the incredible gap that has opened up between the parties”

Take the question of helping the unemployed in the middle of a deep slump. What Democrats believe is what textbook economics says: that when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment. …

But that’s not how Republicans see it. Here’s what Senator Jon Kyl of Arizona, the second-ranking Republican in the Senate, had to say when defending Mr. Bunning’s position (although not joining his blockade): unemployment relief “doesn’t create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.”

Krugman added, “To me, that’s a bizarre point of view — but then, I don’t live in Mr. Kyl’s universe. And the difference between the two universes isn’t just intellectual, it’s also moral.”

Intrigued, Taranto went out to investigate what “textbook economics” says on the matter. He went to, of all places, Paul Krugman’s textbook (co-written with Robin Wells, AKA Mrs. Krugman) Macroeconomics. It says:

Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of “Eurosclerosis,” the persistent high unemployment that affects a number of European countries.

Now Krugman’s extended moralizing about helping the unemployed is not invalidated by his hypocrisy, but his pose of astonishment that anyone could agree with what his own textbook says is hard to square with claims of consistency or good faith.

Quality assurance through competition.

2011-11-08T09:48:00.000-08:00

Beliefs and Fear

2011-11-07T09:45:00.000-08:00

In keeping with the theme of the role played by beliefs in and out of spontaneous orders, this discussion of the role of failure is on point. Free and liberal societies allow the individual to test internal and external constraints. Both the testing process and the results of the test are critical for a feedback mechanism that can provide individuals with clear signals about the costs and benefits of action.

Steven Horowitz is on to something important in this Freeman aricle:

In today’s society failure has become something to fear, avoid, and therefore prevent at all costs. Whether it is unemployment compensation, farm subsidies, or bailouts for failing companies, the world seems to view failure as having no redeeming social value. If success is all good and failure is all bad, then it seems as though we should do everything we can to remedy or prevent failure.

But is that so? Without denying the value of perseverance, and recognizing that the slogan “never give up” can be useful in overcoming certain obstacles, we must keep in mind that failure can act as a guide to more worthwhile activities.

Still more on beliefs and the calculus of consent

2011-11-06T09:42:00.000-08:00

Keynesianism has conquered the hearts and minds of politicians and ordinary people alike because it provides a theoretical justification for irresponsible behaviour. Medical science has established that one or two glasses of wine per day are good for your long-term health, but no doctor would recommend a recovering alcoholic to follow this prescription. Unfortunately, Keynesian economists do exactly this. They tell politicians, who are addicted to spending our money, that government expenditures are good. And they tell consumers, who are affected by severe spending problems, that consuming is good, while saving is bad. In medicine, such behaviour would get you expelled from the medical profession; in economics, it gives you a job in Washington."

It is not a question of political parties and policy preferences, but the structure of politics itself. We simply cannot afford to continue to let the foxes guard the chicken coups anymore, and not expect the chickens to be eaten.

Mike Munger blogs . . . .

2011-11-05T09:41:00.000-07:00

More on beliefs

2011-11-04T09:37:00.000-07:00

Cafe Hayek continues to explore the avenues through which beliefs shape not only our views of the world, but our understanding of so called empiricism.

For the kids . . .

2011-11-03T09:26:00.001-07:00

Today Coloradoans go to the polls - the question is increasing the tax burden in the state.

The LA Times reports

http://latimesblogs.latimes.com/nationnow/2011/10/denver-colorado-tax-hike-vote-proposition-103.html

In a test of whether recession-scarred voters have any stomach for new taxes, Colorado residents will decide Tuesday whether to drum up nearly $3 billion for education by temporarily increasing state income and sales and use taxes.

The debate over the measure closely mirrors recent rancor in Washington over the question of whether more spending will revive a moribund economy or slow down a nascent recovery.

A likely swing state in 2012, Colorado is a particularly interesting place to see which argument voters cotton to. Its population is well-educated, with more than one-third of residents older than 25 holding at least a bachelor’s degree. But the state’s unemployment rate has been stuck around 8%, and a solid share of the electorate finds taxes distasteful, passing a major tax-limitation measure in 1992.

If Proposition 103 passes, individual and corporate tax rates would temporarily jump from 4.63% to 5% and the sales and use tax rate from 2.9% to 3%, the Associated Press reported.

Supporters intend for the extra money to plug holes in the state’s K-12 and college education budgets, which have endured hundreds of millions of dollars in cuts. Opponents say the state’s economy is too fragile to withstand higher taxes, which would expire after 2016, and that throwing money at education won’t necessarily improve its quality.

Data from the Tax Foundation:

http://www.taxfoundation.org/research/topic/16.html

Colorado
The Facts on Colorado's Tax Climate

Here are some basic facts on Colorado’s tax system and how it compares to other states:

Tax Freedom Day Arrives on April 8 in Colorado
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2011, Colorado taxpayers work until April 8, four days before national Tax Freedom Day, to pay their total tax bill, ranking the state 24th highest nationally. The Tax Freedom Days of neighboring states are: Arizona, April 2 (ranked 39th nationally); Utah, April 10 (ranked 19th nationally); Wyoming, April 11 (ranked 11th nationally); Nebraska, April 12 (ranked 15th nationally); Kansas, April 10 (ranked 20th nationally); Oklahoma, April 2 (ranked 41st nationally); and New Mexico, March 31st (ranked 45th nationally).

David Warsh reviews The Grand Pursuit

2011-11-03T09:26:00.000-07:00

Brian Fagen

2011-11-02T09:23:00.000-07:00

Brian Fagen is in the valley later this month - Nov. 21 and 22 - at Changing Hands and Mesa Community College

Beliefs shape worldview

2011-11-01T05:13:00.000-07:00

Russ Roberts make a point that came up in the ASET book discussion last month when he writes:

The evidence for the Keynesian worldview is very mixed. Most economists come down in favor or against it because of their prior ideological beliefs. Krugman is a Keynesian because he wants bigger government. I’m an anti-Keynesian because I want smaller government. Both of us can find evidence for our worldviews. Whose evidence is better? I’m not sure it’s a meaningful question. My empirical points about Keynesianism won’t convince Krugman. His point don’t convince me. I am not saying that we will never get any kind of decisive evidence on the question. I’m saying it sure isn’t here now.

This caused some consternation which is chronicled here along with my response. In particular I justified my claim about Krugman by pointing out that he rarely (ever) admits the possibility he might be wrong, that he is uncharitable about the motives and findings of people who do not agree with him (I gave some examples), and that he cherry-picks data to make his case and ignores data on the other side. This to me, is being an ideologue rather than a truth-seeker. That is a little unfair–he might be a truth-seeker in his heart but keeps it to himself when he writes in the New York Times. As I pointed out–he writes differently in his books where he will often say, could be, might, we’re not uncertain, and so on.

But the key point I was trying to make when invoking ideology, is that Krugman and I and most economists have a worldview. There’s nothing wrong with that. It’s not an indictment or a criticism. It’s simply true. That worldview may be based on casual observation, various principles that make sense to us about how the world works, facts of various kinds, and more statistically sophisticated forms of evidence.

Tim Hartford on Robert Frank's new book

2011-10-28T09:22:00.000-07:00

AEA Annual Meeting

2011-10-18T07:59:00.000-07:00

Annual Meeting

The next meeting is scheduled for January 6-8, 2012 in Chicago, IL. The Submission portal is now closed to accept submissions for the 2012 Annual Meeting in Chicago.

George Will

2011-10-11T06:21:00.000-07:00

The entire piece is well worth a read.

The collectivist agenda is antithetical to America’s premise, which is: Government — including such public goods as roads, schools and police — is instituted to facilitate individual striving, a.k.a. the pursuit of happiness. The fact that collective choices facilitate this striving does not compel the conclusion that the collectivity (Warren’s “the rest of us”) is entitled to take as much as it pleases of the results of the striving.

Warren’s statement is a footnote to modern liberalism’s more comprehensive disparagement of individualism and the reality of individual autonomy.

SOCIAL SCIENCE DISCOVERS EXPERIENCE-LOVING, HARD-THINKING LIBERTARIANS

2011-10-09T06:04:00.000-07:00

Yesterday I referenced Michael Shermer and his new book. Shermer is part of the discussion over at CATO and this conversation is on point:

I also recommend the work of Dan Klein - this paper is both representative and informative. http://www.criticalreview.com/2004/pdfs/klein_stern.

A telling anecdote was reported in the New York Times earlier this year when University of Virginia researcher Jonathan Haidt asked participants in the annual meeting of the Society for Personality and Social Psychology how many in the audience considered themselves to be politically liberal. As the Times reported:

A sea of hands appeared, and Dr. Haidt estimated that liberals made up 80 percent of the 1,000 psychologists in the ballroom. When he asked for centrists and libertarians, he spotted fewer than three dozen hands. And then, when he asked for conservatives, he counted a grand total of three.

“This is a statistically impossible lack of diversity,” Dr. Haidt concluded, noting polls showing that 40 percent of Americans are conservative and 20 percent are liberal. In his speech and in an interview, Dr. Haidt argued that social psychologists are a “tribal-moral community” united by “sacred values” that hinder research and damage their credibility—and blind them to the hostile climate they’ve created for non-liberals.

The process of science is supposed to help humanity overcome our innate tendencies toward confirmation bias—a point strongly made in Shermer’s new book. Science is necessary because confirmation bias is everywhere. Research by Dan Kahan and colleagues at the Yale Cultural Cognition Project[2] has shown time and again that when confronted with policy issues involving tradeoffs involving technological benefits and risks, it turns out that those who identify as liberals (egalitarians and communitarians) in particular fear change and—to quote Jost—“reject out of hand scientific findings that might be experienced as disagreeable.”

For example, a 2009 poll[3] by the Pew Center for the People and the Press reported that 70 percent of scientists favored building additional nuclear power plants. Sixty-two percent of Republicans also favored this, but only 45 percent of Democrats did. A more recent Pew poll [4] (without reference to scientific opinion) done after the nuclear disaster in Japan found that 49 percent Republicans still favored increased use of nuclear power, whereas only 31 percent of Democrats did.

2011 Students For Liberty Arizona Regional Conference

2011-10-08T05:52:00.000-07:00

2011 Students For Liberty Arizona Regional Conference
Saturday, October 22
Arizona State University
Hosted by the ASU Students For Liberty

Join Students For Liberty in Phoenix, Arizona on October 22 for the 2011 Students For Liberty Arizona Regional Conference. Renowned speakers, activists, and passionate students are once again gathering on the Arizona State campus to support the ideals of individualism and a free-market society. The Arizona Students For Liberty Conference this fall will once again be a place for open and honest discussion where students of all backgrounds and political leanings can gather to advance their knowledge and respect for a free academy and a free society. Students will have an opportunity to network, discover internships and other future seminar opportunities as Students For Liberty continues its tradition of defending liberty in the beautiful state of Arizona. This is the premiere pro-liberty event happening in Arizona including three meals, drinks and an after conference social. You don’t want to miss this prestigious pro-liberty event so invite your friends and we’ll see you there. Register today!

Logistics

Location: Arizona State University
Address: Discovery Hall: 250 E. Lemon St. Tempe, AZ 85287
Date: Saturday, Oct. 22
Start Time: 9:30 AM
End Time: 8:00 PM
What You Can Expect:

FREE registration
FREE food
FREE books, pamphlets, stickers, and other freedom materials
Connect with liberty organizations and other students for liberty
Hear and meet some of the greatest liberty speakers in the movement
Information on internships, jobs, programs, seminars, and conferences
Awesome socials including FREE drinks!
Help us spread the word! Invite your friends to the Facebook event!
http://www.facebook.com/?ref=home#!/event.php?eid=156432974433372
Confirmed Speakers

David Schmidtz, Keynote Speaker

A leading intellectual of the liberty movement in our generation, David is the Kendrick Professor of Philosophy and joint Professor of Economics at the University of Arizona. He is also the founding director of Arizona’s Freedom Center and works mainly in ethics, environmental ethics, rational choice, and political Philosophy. He has been published in several journals, including the Journal of Philosophy, Ethics, and Political Theory. He is the author of several books including The Limits of Government: An Essay on the Public Goods Argument which combined his interests in moral philosophy and economic analysis. One of his passions is discussing and analyzing the environment and ethics.

A strong advocate for open and honest discussion, we are pleased to welcome Professor Schmidtz as our Keynote Speaker.

David Boaz, Keynote Speaker

Mr. Boaz is one of the major key players advocating and defending liberty in America today. You can see him frequently discussing current events and topics on major national television and radio stations. He is currently the Executive Vice President of the Cato Institute and consistent supporter of Students For Liberty.

He is the editor and author of several books and studies including Libertarianism: A Primer and The Politics of Freedom: Taking on the Left, the Right, and Threats to Our Liberties. Mr. Boaz is well versed in the history and struggle for liberty, which is why we are so excited to have him coming to Arizona State to speak!

The You Have Two Cows Challenge

2011-10-07T05:24:00.000-07:00

HT: Marginal Revolution

No doubt you are familiar with the two cows guide to political philosophy.

Socialism: You have two cows. The government takes one and gives it to your neighbor.

Communism: You have two cows. You give them to the Government, and the Government then sells you some milk.

Capitalism: You have two cows. You sell one and buy a bull.

So under what type of ism do you have two cows but the government says that you can’t drink their milk? Whatever we call such an ism it may help to know that it is the one we live under. In a recent case in Wisconsin, as summarized by the judge:

Plaintiffs argue that they have a fundamental right to possess, use and enjoy their property and therefore have a fundamental right to own a cow, or a heard [sic] of cows, and to use their(s) in a manner that does not cause harm to third parties. They argue that they have a fundamental right to privacy to consume the food of their choice for themselves and their families and therefore a fundamental right to consume unpasteurized milk from their cows.

In response, Judge Fiedler wrote:

No, Plaintiffs do not have a fundamental right to own and use a dairy cow or a dairy herd;

No, Plaintiffs do not have a fundamental right to consume the milk from their own cow;

No, Plaintiffs do not have a fundamental right to produce and consume the foods of their choice…”

So MR readers, here is the challenge: You have two cows. The government says that you cannot drink their milk. What ___ism?

My suggestions?

Creative destruction

2011-10-06T05:50:00.000-07:00

A former student writes:

"I was hoping to get an interview with an economics professor who would be able to give me an educated opinion for my article. The topic is streaming movies vs. DVDs. Huge companies like Blockbuster have declared bankruptcy following the creation of companies like Netflix and Hulu."

While I have very little familiarity with delivery of entertainment (beyond that of an occasional user) I do have familiarity with the work of Joseph Schumpeter. It seems to be that the above question asks for an opinion on the role that entrepreneurship, innovation and discovery play in the process of economic change.

My thinking begins with the costs and benefits of economic change. The evolution or more rapid revolution of change that Schumpeter labeled the gale of creative destruction creates first and foremost anxiety and fear. Thinking about the impact that DVDs had on the marketplace at the time of their introduction I recall my worry about having to replace my small library of videos, replacing my VHS player with a DVD player (I selected a model that was a combo VHS/DVD player) and my concern about all my family videos that were recorded on VHS. I thought to myself, how much will this new technology cost me in terms of time, money and angst. Click here for a 1999 blog posting on this topic. And I am only a small part of the demand side of the market. Think about the supply side - manufacturers of VHS tapes, suppliers of materials to these manufacturers, marketing and distribution.

The example above is a classic one that illustrates creative destruction and the costs and benefits. Schumpeter recognized that often the benefits of an innovation were in the future (in 1999 most of the DVD use and benefit lay before us) while the costs were immediate.

Thinking about the current transformation in delivery of entertainment from a physical media to a delivered media (a process currently underway) it is worth reflecting on the current costs, future benefits and incentives for further evolution or revolution in the delivery of entertainment.

Douglass North explored the nature of change which he called non-ergodic (a fancy word for unpredictable) and I would suggest that considerations of the current and future emergence of delivery of entertainment keep this unpredictability in mind. The pace of change is accelerating - "the cloud", "googlization", and "artificial intelligence" are manifestations of emergent and continual change - the gale of creative destruction that Schumpeter associated with dynamic, liberal society. Larry Page, the quintessential big thinker, sees the day when we will all expand our horizons and knowledge through technology, if a chip can be implanted in our pets to maintain their security and location, Page reasons, why not a chip in humans that connects to the power of information and "wisdom" on the web.

My opinion - innovation and the accompanying change are processes that have costs and benefits, create temporary winners and losers and, most often but not uniformly lead to progress in the future. Entertainment in the 1910s in the US centered around black and white silent film, phonographs, live plays, novels and literature, conversation, and contemplation. Today, many of these modes of entertainment have been replaced by processes such as streaming media. Clearly there are costs and benefits to this gale of creative destruction and, most observers, would agree that the benefits have outweighed the costs and the gains to winners in this evolutionary process outweigh the losses to the losers. That said, we can be confident that our children and grandchildren will not by using current streaming technology for their entertainment, at least in current form.

Relevant works

Cox, W. Michael and Richard Alm. Concise Encyclopedia of Economics: Creative Destruction

Levy, Stephen. In The Plex: How Google Thinks, Works, and Shapes Our Lives

North, Douglass Understanding the Process of Economic Change

Roberts, Russell (EconTalk podcast) http://www.econtalk.org/archives/2007/10/mccraw_on_schum.html

Beliefs as the source of opinion

2011-10-06T05:45:00.000-07:00

In thinking about Boyes recent post and a great deal of our discussion on this blog it is becoming increasingly clear that the informal institutions that make up culture are ultimately the force that shapes evolution.

Shermer's new book - The Believing Brain: From Ghosts and Gods to Politics and Conspiracies---How We Construct Beliefs and Reinforce Them as Truths argues:

In this work synthesizing thirty years of research, psychologist, historian of science, and the world's best-known skeptic Michael Shermer upends the traditional thinking about how humans form beliefs about the world. Simply put, beliefs come first and explanations for beliefs follow. The brain, Shermer argues, is a belief engine. From sensory data flowing in through the senses, the brain naturally begins to look for and find patterns, and then infuses those patterns with meaning. Our brains connect the dots of our world into meaningful patterns that explain why things happen, and these patterns become beliefs. Once beliefs are formed the brain begins to look for and find confirmatory evidence in support of those beliefs, which accelerates the process of reinforcing them, and round and round the process goes in a positive-feedback loop of belief confirmation. Shermer outlines the numerous cognitive tools our brains engage to reinforce our beliefs as truths.

Interlaced with his theory of belief, Shermer provides countless real-world examples of how this process operates, from politics, economics, and religion to conspiracy theories, the supernatural, and the paranormal. Ultimately, he demonstrates why science is the best tool ever devised to determine whether or not a belief matches reality.

Slow Recovery

2011-10-05T08:29:00.000-07:00

Boyes highlights the mistaken notion that the current slow recover is an aggregate demand issue. He first wonders how Thomas Friedman comes to this conclusion and I might add to Boyes excellent analysis a review of Friedman's profession and professing. Friedman is a journalist with a great deal of experience in the middle east based upon his work their in the 1990s. I would argue that Friedman is an excellent example of Sowell's argument that the intelligensia (media and otherwise) take a major role in the formation of public opinion. Friedman has a background in writing and has developed a skill set that employees powerful metaphor to advance his arguments. Note that he sees his role as shaping public opinion rather than reporting the news. An excellent example of his ability to use metaphor in a powerful way is this recent appearance on the News Hour.

Friedman is the first segment

Watch the full episode. See more Nightly Business Report.

Transcript is here:

http://www.pbs.org/nbr/site/onair/transcripts/how_to_fix_economy_friedman_and_mandelbaum_111003/

Note in his analogy Washington DC is the booster rocket for the economy. Clearly Friedman has a goal or agenda here far greater than reporting and his commitment to government intervention and steering the economy is reflective of the ideology of the elite.

But back to the point, is Friedman correct in arguing that aggregate demand is weak. Well, he is 70 per cent wrong, as Bob Higgs points out:

People, please look at the data. They are conveniently available to one and all at the website maintained by the Commerce Department’s Bureau of Economic Analysis, the outfit that generates the national income and product accounts for the United States.

According to these data, real personal consumption expenditure recovered from its recession decline by the fourth quarter of 2010. Continuing to grow, it now stands (as of the most recent data, for the second quarter of 2011) even farther above its pre-recession peak.

Real government expenditure for consumption and investment (this concept does not include the government’s transfer spending, such as unemployment insurance benefits and social security benefits) is also running higher than its pre-recession level.

http://hnn.us/liberty_and_power/articles/141753

Aggregate Demand

2011-10-03T08:51:00.000-07:00

The New York Times editorial pages were interesting today. Thomas Friedman told us that the problem with the economy is aggregate demand. He also told us that technology has led to a loss of jobs -- outsourcing is now just standard daily practice not one of shipping jobs elsewhere. Most jobs are really not jobs because "the world is flat". Not sure what all this means except the part about insufficient aggregate demand and a hint of Ludditism. Tyler Cowen attempts to make a case for a tax increase to go along with spending cuts. His argument is that unless taxes are increased spending will continue and future taxes will be higher. He uses James Buchanan's argument for a balanced budget to buttress his agrument for both tax increases and spending cuts. But, what Buchanan argues is that unless constrained, say by a balanced budget requirement, politicians will simply continue spending and increasing the size of government. This has nothing to do with the argument to increases taxes and cut spending now; it is not a balanced budget constraint that Cowen is talking about but merely an Obama program of increasing the size of government. Irving Kristol's commentary is as confusing as Friedman's but he also supports the Keynesian aggregate demand is the problem argument.

So why isn't the insufficient aggregate demand thesis correct? There is no doubt that the economy is in the doldrums due to a lack of investment by business and a lack of consumption on the part of households. But, that does not mean the government can solve this by increasing spending. A dollar of spending is not fungible -- government spending is completely different than investment or even consumption. Moreover, government spending takes money from investment and consumption and reduces these further. The problem with the economy today fits nicely into Higgs' uncertain regime thesis. Businesses don't know what is coming. Why hire someone now if in the future that someone means higher taxes, higher health costs, etc? Why expand your buainess now if you will fact more regulations -- say like Dodd/Frank or Sarbanes/Oxley. The economy will not recover until that uncertainty is resolved in a way that will reward entrepreneurs for risk taking.

The NYT editorial pages are great -- they make me examine how the writers can possibly believe what they write. Yesterday'sd ecitorial by Krugman was classic. He wandered around and finally stated his constant refrain -- we need a lot more government spending right now.

We used to argue in textbooks that economists did not disagree as much as the general public might think. But, this is totally wrong. I have never experienced a period where there was such a strong and divergent set of views about the economy. In a future blog, I will pursue this idea further.

Economic Recovery Stalled After Obamacare Passed | The Heritage Foundation

2011-10-02T07:39:00.000-07:00

Economic Recovery Stalled After Obamacare Passed | The Heritage Foundation

Merle Hazard - Greek Debt

2011-09-30T07:50:00.000-07:00

The Moral Consequences of Economic Growth

2011-09-29T14:36:00.000-07:00

I highly recommend Benjamin Friedman's excellent book.

Friedman says in this 2009 interview:

I look at four or five quite specific issues. One is opportunity. A key issue for any society is whether the young people who are given an opportunity to get ahead are simply the sons and daughters, and nieces and nephews of people who are already at the very top, or whether opportunities are made available more broadly.
I argue in the book on the basis – not just of theory, but also lots of social and political evidence for the U.S. and Western Europe and other countries – that when the broad bulk of the citizenry is moving forward in its living standard and has a sense of optimism that that forward progress will continue, then not only is the society better able to afford to make opportunity available more broadly, but people are more likely to support it.

A second issue is tolerance. Tolerance with respect to what? As an American, I would immediately think of race relations. As an American, I would immediately think of attitudes towards immigrants. But, I also have in mind things like religious tolerance, or discrimination, ethnic prejudice, and the like.
A third issue that I have in mind is generosity toward the poor. It's all very well to provide opportunities, but everybody knows that for one reason or another, lots of people are not going to be able to take advantage of the opportunities that are provided.

In economics, we talk often about people's individual endowments. We have this marvellous phrase called "labour market luck." Well, some people are not well endowed and others have bad luck, and then what? What are we going to do?
Once again, the idea that I advance in the book is that when the broad bulk of the society's population has this sense of forward progress in their material living standard, then people are also prepared to be tolerant in each of these ways.
And then finally, the fourth one that I'll mention is democracy, by which I mean creation of new democratic political institutions in societies around the world that are not yet functioning democracies, but even for a society like ours that already is one, the strengthening and nurturing of the democratic institutions that we already have.

Now, in each of these four cases, and in a few others besides, my argument is that sustained economic growth broadly distributed across the population leads to forward progress also in these moral dimensions, to call it that using the 18th century sense of the word.

Grappling with the Banality of Evil - Wendy McElroy - Mises Daily

2011-09-27T16:34:00.000-07:00

Many consider service to "their country" to be an automatic virtue, but it is a dehumanizing vice whenever it involves the abandonment of conscience. The military demands this abandonment.

Grappling with the Banality of Evil - Wendy McElroy - Mises Daily

Almost half of all mortgages in Arizona are underwater,' report says

2011-09-26T11:55:00.000-07:00

And I have colleagues who believe that the housing market in Az has bottomed out and is headed up.

Almost half of all mortgages in Arizona are underwater,' report says

A picture is worth a thousand words . . .

2011-09-25T07:26:00.000-07:00

Michael Mandel on regulatory "creep"

2011-09-24T12:28:00.000-07:00

Books for Christmas | Competitive Enterprise Institute

2011-09-23T11:34:00.000-07:00

Books for Christmas | Competitive Enterprise Institute

A Must Read, Arnold Kling | EconLog | Library of Economics and Liberty

2011-09-22T07:21:00.000-07:00

A Must Read, Arnold Kling | EconLog | Library of Economics and Liberty

Max Borders, The Economy: Metaphors We (Shouldn't) Live By | Library of Economics and Liberty

2011-09-21T07:22:00.000-07:00

Max Borders, The Economy: Metaphors We (Shouldn't) Live By | Library of Economics and Liberty

Dr. Horwitz dispels the myth that . . .

2011-09-20T08:02:00.000-07:00

Dr. Horwitz dispels the myth that laissez faire Hoover caused a depression and FDR saved us.

Which intellectuals have influence?

2011-09-20T06:23:00.000-07:00

Which intellectuals have influence?
by Tyler Cowen on August 9, 2011 at 6:59 am in Economics, History, Political Science, Uncategorized | Permalink

Ben Casnocha suggested to me that I have harsh standards. I don’t mean “influencing lots of other minds,” I mean changing the world. Here are a few intellectuals who have had real influence:

1. Jane Jacobs: City planners heed her strictures in many different locales, sometimes too much.

2. Rachel Carson, and numerous environmentalists: Obvious.

3. Milton Friedman: He inspired market-oriented reformers around the world, eased the way to floating exchange rates, helped legitimize early derivatives, and focused attention on monetary policy and away from fiscal policy, among other achievements.

What about today?

1. Peter Singer: Many fewer people eat meat and he has given the animal rights movement greater intellectual credibility.

2. Muhammad Yunnus: He popularized micro-credit and spread the notion to many countries, even though he is by no means its inventor.

3. Richard Posner: Many more judges use economic concepts when issuing judgments or writing up opinions.

Most of the people in this category have spent a big chunk of their lives pushing a single, fairly specific issue or method. You could add Bernanke (a special case, but still a yes), Charles Murray on poverty, and Germaine Greer. Art Laffer maybe. Friedman is a throwback to the time when generalists could be quite influential.

Who hasn’t had much influence over events? I would cite Jared Diamond, Richard Dawkins, Slavoj Žižek, Christopher Hitchens, Paul Krugman, Tony Judt, Noam Chomsky, Francis Fukuyama, Charles Taylor, Steven Pinker, Naomi Klein, and Niall Ferguson, among many others including virtually all economists.

Perhaps these individuals will have long-run influence on people’s broader views, and thus on longer-run events, but I wonder. Not everything feeds into a long and powerful stream, and every now and then there is a reset. We do not know, but we do know that some very focused individuals have had real influence.

I would put Esther Duflo, Jeffrey Sachs, Paul Romer, and Jacob Hacker (public option) in the “still have a good chance to have a big influence” category.

There is also the “futile crusaders” category, for instance Thomas Friedman for pushing for a centrist movement for green energy and Larry Lessig for IP reform and campaign finance reform, although of course subsequent events could upgrade them. We may well end up with green energy and IP reform but more likely as the result of technologies and market prices, rather than from successful intellectual battles.

Overall it is very hard to have much influence.

Daily Kipper- und Wipperzeit Update, Arnold Kling | EconLog | Library of Economics and Liberty

2011-09-19T13:56:00.000-07:00

My line is that as long as you have bad debt that is priced at par, you have an active crisis. To the extent that the ECB is trying to keep the price of weak-country debt close to par, it is not offering a credible solution. Uncertainty will prevail in the markets.

Daily Kipper- und Wipperzeit Update, Arnold Kling | EconLog | Library of Economics and Liberty

Teaching benefits

2011-09-18T18:19:00.000-07:00

One facet of teaching that the NEA and AFT, in their data and in their public pronouncements, routinely fail to account for is the shorter workday and work year. In public schools, the median number of school days is 180 per year. Add half-a-dozen or so workdays for parent conferences, professional development, and planning, and the annual work year for most teachers is still shorter than 190 days. By comparison, an accountant or lawyer with two weeks of paid vacation and ten holidays or personal days will work 240 days annually—nearly 30 percent more days per year than public school teachers.

The typical teacher also has a shorter on-site workday than most other professionals. On average, teachers report being in school for fewer than 38 hours per week. This number rises to 40 hours if largely voluntary after-school activities such as coaching or club sponsorship are included. In fact, language limiting the number of hours that teachers are required to be in school is common in their collective-bargaining agreements, particularly in urban school districts. In the just-expired New York City teachers’ contract, the contractual workday was just 6 hours and 20 minutes (including a 50-minute duty-free lunch). The new contract extends the workday by 20 minutes. In Chicago, the limit is 6 hours and 45 minutes, including a 45-minute duty-free lunch.

Of course, many teachers put in nights and weekends at home grading papers and planning for the next week. However, a job that permits relatively more work at home is typically more attractive (particularly to women with children) than one that requires a similar amount of work time on site. And many other professionals bring their work home as well.

The combination of a shorter workday and work year means that the annual hours on the job for teachers are much shorter than in comparable professions.

Teaching salaries

2011-09-17T18:14:00.000-07:00

This is a key point that I make to my colleagues and those I engage in discussion about education.

In spite of this data there is a deeply held belief that is actively encouraged by the special interests in public education that public school teachers are somehow "under" paid.

Is Matt Damon Right That Teachers Make a "Shitty" Salary?
Nick Gillespie | August 2, 2011
Reason

At last Saturday's "Save Our Schools" rally, a fairly livid actor Matt Damon told Reason.tv that teachers make a "shitty" salary. Is the Oscar winner right about that?

The short answer is no. The longer answer? Also no.

According to Department of Education statistics for 2007-2008 (the most recent year listed), the average public school teacher brought in a bit over $53,000 in "total school-year and summer earned income." That figure, which is about $13,000 more than what the average private-school teacher gets in straight salary, does not include health and retirement benefits, places where teachers almost always get better deals and bigger employer contributions than the typical private-sector worker. For more on teacher compensation, go here.

An average salary of $53,000 may not be much for a movie star such as Damon, but it's a pretty good wage when compared to U.S. averages. Indeed, the Census Bureau reports that median household income in 2008 was $52,000. Teaching in most public schools requires a bachelor's degree and here teachers fare less well on first glance, though still not awful. The median income for a man with a B.A. was $82,000; for a woman, it was $54,000. About three-quarters of teachers are women, so the average salaries when gender comes into play hew closely to one another.

More to the point, Bureau of Labor Statistics and other surveys that take into account the reported number of hours worked in a year consistently show that on a per-hour basis, teacher income (again, not including fringe benefits, which are typically far more robust than those offered other workers, including college-educated professionals) is extremely strong.

More Thoughts on Metaphors, Arnold Kling | EconLog | Library of Economics and Liberty

2011-09-16T07:17:00.000-07:00

A must read . . .

Kling writes:

Another key issue regarding metaphors concerns what is the correct metaphor for government. For libertarians, government is like a Mafia Godfather, carrying out a protection racket. It is a criminal organization that controls certain economic activities through the use of force. It obtained its status by ruthlessly stamping out competitors.

To someone on the left, government is more like the adult supervision at a day care center. It sets the rules, provides structure, and prevents what otherwise would be dangerous behavior and chaos.

I think of government as a monopoly offering lousy service and determined to maintain and extend its franchise come hell or high water. Imagine General Motors or Microsoft or Blue Cross or Comcast with no competition whatsoever for consumers to choose from, and not even the ability to opt out of driving or personal computing or health insurance or cable TV.

I also see government in terms of insiders and outsiders. My influence there is Murray Edelman (as well as my late father, Merle Kling). When today's WaPo calls the deficit deal The Triumph of Old Washington, I nod my head in agreement. The outsiders get symbolic victories, and the insiders get the real win.

More Thoughts on Metaphors, Arnold Kling | EconLog | Library of Economics and Liberty

Dodd-Frank's winners: Revolving-door regulators | Timothy P. Carney | Politics | Washington Examiner

2011-09-15T11:32:00.000-07:00

I would only add that this is not limited to democrats, a review of both Bushes and Reagan administrations documents the same behavior.

Comments Dodd-Frank's winners: Revolving-door regulators
By: Timothy P. Carney

House Financial Services Committee Chairman Spencer Bachus (R-AL) adds a grade of F- to a 'report card' for the Dodd-Frank Act one year after the legislation passed July 15, 2011 in Washington, DC. Republican members of the committee gave grades of F to all aspects of the bill.It may not prevent another bailout or protect consumers from dangerous financial products, but the Dodd-Frank financial regulation law -- now one year old -- has already benefited one group of people: the government officials who wrote and implemented the law before cashing out as lobbyists or consultants for Wall Street, hedge funds and big banks.
The top staff lawyers in charge of crafting the legislation in both chambers of Congress have both left Capitol Hill for K Street, as has a Securities and Exchange Commission staffer who helped implement the law. This is "private-sector job creation, Obama-style," as blogger Ira Stoll drolly notes.

The Great Wall Street Cashout is another example of how President Obama's agenda of bigger government -- and congressional Democrats' style of leaving the key details up to executive-branch regulators -- accelerates the revolving door and breeds crony capitalism.

Read more at the Washington Examiner:

http://washingtonexaminer.com/politics/2011/07/dodd-franks-winners-revolving-door-regulators#ixzz1TzZE17tJ

We Who Dared to Say No to War

2011-09-14T16:37:00.000-07:00

Why is America’s Budget Deficit So Large?

2011-09-13T14:14:00.000-07:00

Martin Feldstein writes:

Shrinking America’s budget deficit to prevent a further rise in the debt-to-GDP ratio from its current level will require reduced spending and increased revenue.