Sunday, March 31, 2013

Allegedly desperately wanting the approval of Austrians (warning - just navel gazing here)

I liked the line in Mike Sax's post introducing me as "the alleged Keynesian" :)

Apparently I am also desperate for the approval of Austrians. All I can say is if that's my goal, I think I'm doing it wrong.

This is exasperating, but I guess we're on the same page

OK, yesterday you won by evolution by making the "most copies".

Today the goal is "someone who produced as many offspring as he could successfully rear to a condition where they were capable of doing the same."

Which has been what I have been saying all along: the point is the capacity of a gene to persist, not just making the "most copies". If this was what David meant the whole time, fine. But it's not what he had said.

Lax Defense of Ideas Judged to be Good

Sort of in the same vein as the last post - how we store ideas in our head and how that results in some less than convincing use of ideas.

When we've evaluated an idea as a good idea, I think we tag it as "proven" or even "self-evident" before storing it away. Like the catechismic use of ideas this makes a lot of sense. It would be wasteful of cognitive resources for me to run through the arguments justifying the allocative efficiency of the market every single time the allocative efficiency of the market came to mind. Instead, I tag it as a "good" idea, keep the evidence and arguments on the back burner, and feel comfortable whipping it out and applying it.

Generally speaking that's fine. After all, if challenged we're usually OK at dredging up the evidence and proofs.

But it can lead to blindspots when we go beyond assertion and try to make an argument. Tagging ideas as "good" can lead to lax defense of those ideas because we associate them with strong evidence and proof already - so what's the use of adding more? It's self-evident! We identify the idea with the quality of being well-defended.

I won't go into details because I'm really distracting myself from work at this point, but Bob Murphy has a great example of this with a Paul Krugman post on monetary policy under Lincoln. I thought Krugman's post was a fine post when I first read it (before reading Bob). Made sense to me! But as Bob points out, Krugman offers no real evidence to defend his kinda weird claim that everything was fine in the 1860s and 70s. Krugman may in fact be right. I think he is right. But what a weird period in history to bring up if you want to defend the ideas he presents! There's so much going on - so much noise. And Krugman doesn't even try to present the defense.

On the flip side (since I gave two cases in the last post too), I think you see this a lot with Austrian citation of 1921 or 1946. They've tagged their idea as "good", so they go ahead to latch on to the thinnest of evidence that they think supports their idea, because it's self-evident. (It doesn't need their defense after all - the marginal contribution of effort exerted in the defense of the idea is small, from their perspective). But to outsiders who have not tagged the idea as "good", the major problems with 1921 and 1946 are pretty obvious.

Ideas as Catechismic Devices

I think we often treat ideas as catechismic devices. By this I mean that we don't really care about the content of an idea, so much as we think of it as slotting into a particular sequence of arguments. That's natural, I suppose, but it probably results in the underutilization of the content of an idea.

I'll give two examples of this - one taking libertarians to task and one taking Keynesians to task.

This came to mind in reading a post by Eli Dourado talking about Matt Yglesias. I agree with a lot of Dourado's criticisms of Matt, actually, but I found this passage odd:
"Matt Yglesias argues that there is no such thing as a “market distribution” of wealth, because most wealth would not exist without the state. He lists “a few minor exceptions” to the maxim that market solutions are efficient...

In my view, Matt’s argument is not compelling. Take first his list of “minor exceptions” to the general rule that markets work best. Do we need state intervention to keep air pollution down to acceptable levels? There has never been a completely laissez-faire society that has had dirty air, so it is difficult to say. What we do know from the work of Elinor Ostrom is that we don’t need state intervention in all cases to solve problems associated with water usage or overfishing, which are structurally similar to that of air pollution (i.e., they have high transaction costs). It turns out that the threat of state-sanctioned violence is not the only solution to repeated prisoner’s dilemmas, even when transaction costs are high, either in theory or in practice." (emphasis mine)
I think this is a typical misuse of Ostrom's work. The catechismic sequence of argument (from a libertarian's perspective - others think this sequence runs a little differently) in which Ostrom is usually nested goes something like this:

Libertarian: we don't need government, use markets
Non-libertarian: but what about the roads?
Libertarian: Elinor Ostrom shows you don't need government for that stuff

And indeed she does. There are relevant follow up questions about whether non-state provisioning is optimal, of course, but this is certainly a fine retort to that particular sequence of arguments.

But the weird thing about Dourado's post is Ostrom actually militates in favor of Yglesias's argument that it doesn't make sense to talk about "market distribution", since Ostrom's whole research agenda is dedicated to the prevalence and success of non-market distribution! This, I think, is hard for some libertarians to process if you think of Ostrom's ideas as tools to use against statist arguments, as opposed to simply a set of thoughts and conclusions around non-market, non-state allocation.

It seems to me this is just a cognitive short-cut - an efficient way to classify, arrange, and utilize ideas. As such it's obviously not limited to libertarians. A good example of this for Keyesians (not that you can't be a Keynesian libertarian) is the liquidity trap. The liquidity trap as an idea is just a set of thoughts and conclusions around the trade-off between cash and other assets, and one particular shape of the demand for liquidity. It is often used catechismically, though:

Keynesian: we need some deficit spending to get us out of this slump
Non-Keynesian: Awful idea - that would crowd out private investment and since government is wasteful anyway you're just making matters worse - you're crowding out good spending with bad
Keynesian: but in a liquidity trap the whole point is that you will not be crowding out private investment until you are at the point when the economy has recovered (and then you stop anyway)

Again, this is all fine as far as it goes. There's nothing particularly wrong with this back and forth and it's a way to economize on the storage of ideas and have answers that are ready at hand. The problem is, too strong a reliance on this catechism leads some people to make problematic claims, for example around monetary policy - that further monetary policy is "pushing on a string". Now in a limited sense, if we are talking about traditional monetary policy and the interest rate channel that's not wrong. But of course there's more to monetary policy than just that, and if you really think about what the liquidity trap is as an idea (rather than just its role in this catechism), you're going to come to a different conclusion - that the liquidity trap offers reasons to doubt some channels for the operation of monetary policy, but not others.

The lesson is not "don't have catechismic devices". There's good reason to have those. The lesson is don't let those devices dominate the way you use ideas.

Do I have a "seriously confused picture of how evolutionary biology works"?

David Friedman seems to think so. I made this point:
"You keep speaking as if evolution is a numbers game in the sense that the genes with the most copies win. I don't think that's quite right. There is no winning evolution or if it is it's that your genes survive. There are many more bacteria in the world than there are humans or sharks but I personally feel that humans should feel pretty good about themselves and sharks oughta feel really good about themselves. I don't think more copies is the right metric (if we have to choose metrics at all)."
I was sure he'd disagree on the grounds that I was overstating his point about "winning", but apparently he had no concerns about that part:
"You keep speaking as if evolution is a numbers game in the sense that the genes with the most copies win. "

Yes. That's what reproductive success aka fitness is. It wins in the sense that its genes become more frequent in the population, with the result that later generations are more like it.

Suppose someone who has the normal inclination to truck and barter also has the objective of maximizing the number of children he produces and rears as productive individuals capable of themselves producing and rearing children, instead of the objective of maximizing his own utility with a reasonably conventional utility function. Further suppose that this objective is hardwired into his genes, so that his descendants are likely to have the same objective.

My claim is that, over time, the number of people with that gene, hence the number who behave that way, will increase. Do you disagree?

You might find it worth actually reading _The Selfish Gene_, which I gather from your earlier comment you haven't done. I may be mistaken, but it sounds as though you have a seriously confused picture of how evolutionary biology works."
This seems surprisingly wrong to me and weirdly teleological. First, I don't have any particular disagreement with his supposition, although I would note that the brute force method of simply maximizing reproduction can introduce obstacles to survival of the gene too (think about cancer - it does pretty well for itself until it kills its host). But sure, brute force is one way to make more of yourself. That was never really the issue.

The issue is whether that's some kind of Darwinian golden ticket. Since natural selection hasn't selected that particular trait, that ought to give us pause I think.

Now as I noted to Friedman earlier I'm perfectly familiar with the argument of The Selfish Gene although I haven't read it. I don't deal with evolutionary biology day in and day out so I may have a slip of the tongue on genetic vs. species level phenomena every once in a while - particularly when talking more casually - but that seems minor compared to what Friedman is doing here. Evolution by natural selection is simply the point that the genes that are able to survive will survive. Persistence is the fundamental question. Will a gene persist or not? Prevalence is obviously relevant to persistence to a certain extent, but natural selection has little to say about what level of prevalence is good or bad except insofar as it contributes to persistence.

This is Dawkins's perspective, as far as I'm aware.

He repeatedly refers to both organisms and genes as "survival machines". The point is to survive, not to make more copies of yourself than anything else.

Dawkins writes:
“We are survival machines – robot vehicles blindly programmed to preserve the selfish molecules known as genes. This is a truth which still fills me with astonishment.”
“Was there to be any end to the gradual improvement in the techniques and artifices used by the replicators to ensure their own continuation in the world? There would be plenty of time for improvement. What weird engines of self-preservation would the millennia bring forth? Four thousand million years on, what was to be the fate of the ancient replicators?

They did not die out, for they are past masters of the survival arts. But do not look for them floating loose in the sea; they gave up that cavalier freedom long ago. Now they swarm in huge colonies, safe inside gigantic lumbering robots, sealed off from the outside world, communicating with it by tortuous indirect routes, manipulating it by remote control.

They are in you and in me; they created us, body and mind; and their preservation is the ultimate rationale for our existence. They have come a long way, those replicators. Now they go by the name of genes, and we are their survival machines.
“Prediction in a complex world is a chancy business. Every decision that a survival machine takes is a gamble, and it is the business of genes to program brains in advance so that on average they take decisions that pay off. The currency used in the casino of evolution is survival, strictly gene survival"
Now I'm just utilizing google here, but I didn't find anything suggesting that Dawkins thinks that you win evolution by making more copies of yourself than anyone else. Repeatedly the concern is with persistence and survival. Indeed in a weird Paul Ehrlich type moment Dawkins gets very worried about human overpopulation and the threat it poses to the survival of the species. That's hardly the sort of view that Friedman is promoting.

Perhaps I have badly misunderstood evolution and Dawkins, but I really don't think so (at least as far as it concerns the subject here - I'm sure there's plenty else I misunderstand). I don't usually feel comfortable making the sort of sweeping pronouncements that David made about me, but I'm beginning to wonder if he fundamentally misunderstands it.

Saturday, March 30, 2013

Price distortions, Keynesians, and Austrians

Krugman on price distortions.

I've been saying this for a long time - that we know how prices aggregate decentralized information and our whole concern is that the price signals are distorted.

The lines in here on Austrians are funny and sadly often true. I do think there's a point to not tying them closely to the view that distortions are in the price of labor. Some say that (especially explanations of "what made the Great Depression "great"" that follow Rothbard, etc.. But Austrians really are quite directly concerned with interest rate distortions in a way that the others aren't. In that sense they're a lot like Keynesians.

[Side note to market monetarists - of course if an interest rate is distorted that means that there are distortions in money and credit too... don't take this to imply at all that I am saying that the interest rate channel is the only mechanism through which monetary policy operates]

There is of course a difference - Austrians think interest rates are too low and Keynesians think it's too high [or, to appease market monetarists that see red whenever we talk about interest rates, Austrians think money is too loose and Keynesians think money is too tight].

This is the heart of my argument in my forthcoming Critical Review article, which I think is a pretty damn decent piece of prose.

I had a conversation about this with Jeff Tucker and Troy Camplin the other day on facebook but didn't get a response to my concluding thought (perhaps they'll pick this post up). David Henderson was in the discussion too but I think he was skeptical of a lot of Tucker's claims. In response to their insistence that interest rates were below the market rate, I noted that both stories are plausible. The Fed absolutely could distort interest rates by keeping them too low. And you'd expect to see different things in each case.

If interest rates are too low you'd expect to see eager borrowers outnumber willing savers, and you'd expect a boom (indeed, an unsustainable boom according to Austrians).

If, on the other hand, interest rates were too high you'd expect to see cautious or unwilling borrowers - maybe even people who would have borrowed deciding to sit on cash instead. You would not expect a boom, you'd expect a slump.

Now you can invent stories to account for this (and indeed - the stories have been invented). Maybe Obama is just terrifying the investors that would have otherwise borrowed at these too-low interest rates. Another option is to jump ship and talk about structural problems in the labor market (what Krugman focuses on).

But these don't seem to accomplish the task if we accept how markets usually work. Certainly at first glance the evidence seems to be pointing to the fact that interest rates are too high and money is too tight right now. Any countervailing force to explain that away has to be really huge. It has to (1.) dampen all that unsustainable boom activity that's supposed to happen when the Fed keeps interest rates too low, and (2.) push us deeper into the worst depression in (most of our) memory.

What accomplishes that? Health reform? Please. A minimum wage hike on the eve of the recession?

This is grasping at straws and people need to come clean on that.

Presenting paper on Georgia's Job Creation Tax Credit Today


Just a graduate research conference at AU. It's one of those things that seemed good and easy to submit something to several weeks ago but now is coming at an awful time with all the other stuff going on. Oh well - low pressure and a half day for another line on the CV.

Yesterday I submitted the paper to the department's econometrics paper contest too, and I passed it off to some mentors at Urban and GW to look at before preparing for submission somewhere.

Technology and Future Human Evolution

Alternative titles:

"Another post inspired by conversation with David Friedman: Deal with it, haters"

"I bet Robin Hanson already talked about this much more clearly"


I feel like Friedman is confused about a point I've been making about technology and human evolution, so I want to flesh it out a little more here and get your thoughts on it.

Genes are selected by reproducing themselves successfully. David talked a lot in the prior comment thread about what I call a brute force approach to this objective. You could imagine a gene or set of genes that just gets the organism to reproduce early, often, and in large volume. An organism with those sorts of genes would literally be a cancer on the planet, but as we know - cancer tends to do pretty well for itself. Lesser versions of this are out there, of course: cockroaches, rats, etc.

But obviously genes get along fine without this approach and persist using other strategies. Instead of the cancer strategy you could just be good at keeping your host organism from dying before reproducing. You're not going to overtake the Earth, but there's no Charles Darwin Prize waiting for the gene that overtakes the Earth like a cancer. Genes get one of two "prizes": are you around next year or aren't you? There's no valorization of any particular outcome when it comes to evolution except for perhaps whether your mechanism for being around next year helps or hinders you chance of being around two years from now.

Enter technology.

There's an awful lot in this world that helps humans survive that isn't directly tied to our genetics. My furnace has done an excellent job keeping me alive this winter, but I didn't and couldn't build it myself - and there's nothing in my genetic make-up that could whip up a furnace back in October to ensure its own survival.

And this has been my essential point - science and technology are generated and distributed according to different principles from genes. In other words I, with my genes, will access technology, survive, and reproduce even though I don't have any genes to pass on to produce that technology myself (I may have genes that lead me to truck, barter, and exchange because that's how I got the technology in the first place - these would be passed on).

David seems to think (and I may be misinterpreting him) that this poses some sort of problem. That we are outrunning the slow process of evolution but that it will catch up to us and the fact that the techie-gene has allowed lots of non-techie genes to persist spells trouble for the whole business model.

I have my doubts about that, but I do think it will dramatically change the way that the human species evolves over the next several millennia.

Think about how humans thrive in the modern world. As I noted before, they thrive by accessing technology (whether that's safe food, medicine, or a furnace). Humans that do this pass on their genes. The problem is, lots of humans access technology and thrive that don't create technology. Will their genes crowd out the techie genes?

Well think about the people with the techie genes. How do they thrive? They thrive by trading their technology and getting the resources to acquire someone else's technology. People with the genes to produce value do well in this world, so the question really is what force is going to win out: the positive externality of techies shielding non-techies from failing to reproduce, or the internalized benefit of the tremendous value produced by techies? Or perhaps that's the wrong way to pose the question since we're surviving in a world of comparative advantage.

It's not a foregone conclusion either way, but it seems to me comparative advantage principles argue strongly in favor of this being a virtuous cycle we've stumbled into. Certainly it has been for the last two centuries or so. But if this is going to last it means that the composition of future generations of humans is going to be substantially determined by social and technological forces rather than genetic forces (or, if you like, you could say that I think that genes that produce certain social organizations will be highly fit in future generations).

Remember, survival for modern humans is grounded in comparative advantage. It's Darwin's Difficult Idea meets Ricardo's Difficult Idea. That means that gene's will be selected in the context of their cooperation with someone else's genes, on the other side of the transaction. All I'm saying is that that's a very different dynamic than non-trading, non-technological species.

Friday, March 29, 2013

David Friedman is being far too interesting to talk with to let me get any work done

I may comment on this more, but this is an issue that interests me a great deal and I thought I'd except part of this conversation. Gene Callahan is also very good at highlighting these problems, FWIW:

David writes:
"On another subject, you write:

“It fits my story - I was conservative in high school, was a libertarian that dropped all the stuff I didn't like about conservatism when I moved into college, and as I learned more and more economics I became much less libertarian (some people may become more libertarian, but they probably have different starting points).”

It doesn’t fit mine. I was a classical liberal in high school, became a more extreme libertarian as I thought more about the question and learned more economics.

And I would expect, on average, that learning economics would make people more libertarian. The strongest argument against laissez-faire, although not the best, is the difficulty of seeing how a decentralized system can coordinate production. Understanding that is central to understanding economics, so learning it makes one more, not less, likely to approve of a laissez-faire system.

It’s true that there are more sophisticated economic arguments against laissez-faire, but there are also more sophisticated economic arguments against those arguments, most obviously public choice theory.

My expectation is consistent with my observation. Most economists are less libertarian than I am but more libertarian than other social scientists. And extreme libertarians in academia, although rare, seem to very often be economists."
I respond:
I think learning economics would make people value things like spontaneous order more. I find it grating that libertarians identify this so instinctively with libertarianism. Libertarianism and anarchism are examples of quite extreme social engineering in a lot of ways (obviously any given libertarian is going to vary in the extent to which this characterizes them - Hayek, for example, was very good at seeing the risk of things like this).

So I'd say if you came in not appreciating spontaneous order you ought to come out of economic education appreciating it a lot more. But that doesn't seem like quite the same thing as libertarianism to me. I may try to post on this this weekend, because I think the conflation of the two is pervasive.
I think it's wrong to think about something like public choice as a theory of why laissez faire works. Public choice is a theory about the behavior of public figures particularly as it relates to problems posed by social welfare theory. Libertarians that like public choice theory make certain public choice arguments, but non-libertarians use other types of public choice arguments (although it's often just called "political economy" in that case).

I think it's very dangerous to equate these positive ideas with normative allegiances.

David may not be familiar with stuff I've written in the past on libertarian social engineering, but I think most readers probably are. Libertarianism, in many renditions (as I noted, Hayek is [often] a very important exception), is very much a viewpoint that militates against spontaneous order, although it's more amenable to spontaneous order in some fields. Virtually any dedication to a radical reorientation of social institutions is going to have some tension with spontaneous order. I want to tinker around. I'm not terrified of social engineering. It's one of the neat things that we humans are capable - re-imagining our society and then doing something about it. But I don't think any of the changes I'm interested in making are anywhere near as radical or disruptive as what libertarians want to do.

Quote of the day

Yglesias has a great reaction to the new Mercatus ranking: "any reasonable person can look at this map and see that something's gone wrong".

I always think it's weird that libertarians rolled their eyes when Bush used the word "freedom" just to be a synonym for his collection of political views but seem unaware that a lot of people are rolling their eyes at libertarians for doing exactly what Bush does.

Bush, I feel, knew that a lot of people deep down just thought he had a lot of rotten ideas and that was that. He used the word "freedom" because (1.) he liked his definition, but more importantly (2.) he was running for election.

I feel like most libertarians genuinely think that they are in a minority that values liberty. As Yglesias said - "something's gone wrong" with them.

Something I find very weird

People who treat identities associated with political ideology, religion, or a particular ethical perspective the same as they treat identities associated with things like race, ethnicity, age, sexual orientation, or sex.

For all intents and purposes the former involves a selection process and the latter doesn't (obviously you can select into a sex or race if you want to, but I think we can safely ignore that simply as a matter of numbers and also because ultimately that's probably just a realignment with an underlying orientation that you can't select into or out of).

Now, the point that there is a selection process is very different from the claim that you have full control over these outcomes. I'm using "selection" here as economists use it, and of course you don't always have full control.

But in any case, a judgment of an identity you can select into or out of seems enormously different from a judgment of an identity that you can't select into or out of. The principle difference being, of course, an evaluation of the selection itself.

You can't very well rail against the fact that half of humans have penises and half have vaginas. You can't very well blame someone with a penis or a vagina for that (or for anything that having those things entails). But if a selected identity is in anyway blameworthy (and certainly not all are - but certainly some are), of course you can attach blame to someone that selected into it!

Why would anyone even think to treat the two as the same?

The exception, of course, is if you're a hard core determinist... but in that case why do you care so much about any of this anyway? We who either are not determinists or who have no idea what to think of questions like that but choose to live under the convenient fiction of rejecting determinism should not be conflating identities that you can and can't select into. In other words: if you're entertaining the very idea of a selection process, you ought to acknowledge these things are different. If you're not willing to entertain the idea then it seems like a moot point.

David Friedman's quote of the month: Haidt on political discrimination

Apropos of the last post, David Friedman's "quote of the month" is also of some interest:
“Anywhere in the world that social psychologists see women or minorities underrepresented by a factor of two or three, our minds jump to discrimination as the explanation,” said Dr. Haidt, who called himself a longtime liberal turned centrist. “But when we find out that conservatives are underrepresented among us by a factor of more than 100, suddenly everyone finds it quite easy to generate alternate explanations.” - Jonathan Haidt, quoted in this New York Times article.
When I read the quote on Friedman's page, I didn't immediately notice his reference to social psychologists and my first reaction was "I disagree with both the premise and the conclusion of this statement". Now that I see he is speaking just of social psychologists, I have to reign that in a little. Perhaps he is right about them - I don't know many social psychologists.

I am somewhat familiar with the literature on racial and gender disparities in the academy, though, and I do know that people who actually study this stuff don't think this at all. A major study in the early 1970s found that some of the gender gap was due to discrimination, but most work on the subject today doesn't really highlight discrimination as the source of disparities. I have a book review of an edited volume on the subject of black underrepresentation in the sciences coming out in the Journal of Negro Education - I'd have to revisit the book to say for sure, but I don't think any of the contributors raised the issue of discrimination in any substantial way. I'm currently working on a paper on gender disparities in the sciences. The subject of the paper is the extent to which these disparities pose a constraint on growth, but I'm of course reviewing the gender disparities literature and off the top of my head I can't think of a single study of the issue that suggests discrimination is the source of the problem. These analyses usually point to "pipeline" issues - explanations of why successively fewer minorities and women move on to higher levels of education to be considered for academic jobs. Work-life issues of course come up with women (you might call the incompatibility of some of these jobs with pressures of early motherhood "discrimination", but I'm not sure that's what Haidt has in mind here). Questions of adequate primary and secondary preparation obviously come up a lot with racial minorities. And in both cases there's questions of the impact of the lack of role models. But discrimination is the one thing that people seem to agree is not a deciding factor. You see some evidence in tenure decisions, if I recall, but it's by no means the dominant issue in this labor market.

Interestingly enough, when I clicked through to the New York Times article a lot of this research is quoted by the author of the article (not Haidt himself).

Larry Summers's comment on women in the sciences came up and Haidt had this to say: "“This was not a permissible hypothesis,” Dr. Haidt said. “It blamed the victims rather than the powerful. The outrage ultimately led to his resignation. We psychologists should have been outraged by the outrage. We should have defended his right to think freely.”". I think the backlash against Summers was overstated, but there are two things worth noting here: (1.) some of the harshest backlash again came from people that don't study this stuff, and (2.) the problem with Summers wasn't that he "blamed the victim" (although I guess he sort of did), but that he was spitballing on an issue he had no expertise in (did he really think nobody had thought of this possibility before?!) and which had already been investigated and rejected as a driving force.

So when Haidt says "our minds jump to discrimination as the explanation", take that with a big, fat grain of salt. Maybe his mind jumps to that. Maybe social psychologists' minds jump to that. Maybe the general public. But so what?

And now we come to political diversity in the academy. Now I've seen less work on this except for the Daniel Klein type stuff that just shows a disparity (as far as I know Klein has not produced any analysis tying this to discrimination). I have big doubts that this is really going on.

For starters, think about any job talk you've ever been to. I can only speak to job talks in economics departments and at the Urban Institute (mostly economists there, some public policy). I can't think of a single one that has offered me any clue as to the political background. Can you? I know the statistics (I read my Dan Klein!), so I could generate an expected value. But any given person is going to just be a guess. Something tells me the issue doesn't come up in the interviews either (I know no one ever asked me about it, and I've never asked anyone about it in the cases where I've interviewed a job candidate). So the idea that there is discrimination against libertarians and conservatives already is running into trouble with the smell test. How does anyone know?

You would only really know in an obvious way if the job applicant's politics comes out in their academic work. And of course such a person is going to be less likely to be hired - why would you hire someone with such poor research practice!

If it's that hard to pick out a conservative or libertarian relative to picking out a black guy or a woman (relatively easy, in my experience), and if we don't find discrimination as a hugely important factor in explaining racial and gender disparities, I seriously doubt it even registers for conservatives and libertarians. There are much better potential explanations out there. The first two here loom large as explanations of racial and gender disparities, the third and fourth are better at explaining specifically why conservatives and liberals are so outnumbered:

Pipeline issues: as with minorities and women, something is keeping conservatives and libertarians from progressing through the academic pipeline. As with minorities and women, this could be a combination environmental pressures and personal preferences, and of course preferences on these sorts of things are going to be endogenous. Women don't get told they can or should be scientists when they are young - conservatives don't get told they can or should study human evolution or the determinants of poverty and inequality when they are young, etc.

Inadequate preparation: This is a big problem for racial minorities. It is very hard to get minority professors when the primary education that most minority children pass through is so broken. This is not to say everything is peachy once you get to the post-secondary level: it's not. But if your flow into the post-secondary level is limited in the first place that poses a real problem. This might be a problem for conservatives too if conservatives come from places with weaker academic preparation. If you just think of an electoral map, they do seem to well represented in places where the school systems are worse.

Conservatives and libertarians might be dumber: Notice "might" be. And this isn't blaming the victim, it's sympathizing with the victim. It appears to be less of a problem with libertarians than with conservatives. As with claims about the abilities of women and minorities, this needs to be thoroughly investigated before it's just accepted, but the point is that there is an inherent plausibility to this where there is an inherent implausibility to thinking that there are such differences for women and minorities. You choose to be a conservative or libertarian. You select into those groups. You evaluate arguments and make assessments. You don't choose to be a woman, and you don't choose to be a racial minority. Even people that switch sexes arguably don't "choose" that - they're making a correction to align with a reality that they never chose. So why wouldn't intelligence influence ideological or political affiliation - something you choose? Shouldn't intelligence influence things where we make evaluations and choices? I'm not saying it's a determinate factor. Value systems come in as well (equally smart people with different values are going to align differently politically), but because you actually select into political viewpoints in a way that you don't select into sex or race or sexual orientation, the determinants of that selection process ought to also be considered as potential legitimate determinants of success in academia.

Conservatives and libertarians aren't underrepresented in academia - they are changed by academia: This again has to do with the fact that you select into political ideologies in a way that you don't select into race or sex. The thinning of the conservative/libertarian ranks as you move down the academic pipeline might say something about what understanding more about the world does to a person's political ideology. You can see this process historically too: as we as a species learn more about our world, we as a species get more "progressive" as the term is understood today. The scientific revolution seems to be closely related to the emergence of liberalism and the industrial revolution, after all. It fits my story - I was conservative in high school, was a libertarian that dropped all the stuff I didn't like about conservatism when I moved into college, and as I learned more and more economics I became much less libertarian (some people may become more libertarian, but they probably have different starting points). I'm not sure what I am now, but I don't think I'm a conservative or libertarian.

Don't get bent out of shape if you're a libertarian or conservative. There are always idiosyncratic forces acting on any given case. No one is calling you dumb. You have to step back and think of the problem more generally:

1. Is discrimination a major determinant of the lack of women and racial minorities in academia? The answer seems to be "no" - it's a bigger issue in other labor markets but doesn't seem to be in this one.

2. Sex and race are much more visible than political ideology. Is it plausible that a less visible trait is more likely to be discriminated against than a more visible trait? My suspicion is "no".

3. You can select into and out of political ideology in a way that you can't select into and out of sex and race. Are these selection effects relevant for considering the difference between sex and race discrimination and ideological discrimination? I can't imagine how the answer is not "yes".

Thursday, March 28, 2013

David Friedman on Intellectual Diversity, and a Response

David has a stimulating post here. Here's my response (apologies to my Marxian friends, but it has to be said. A guy in my department that likes Marx a lot and borrows from him knows that the theory doesn't work - I think you all can too):
"It's a tough knot to untangle, I think. There are obviously obstacles to a deep understanding of a minority perspective, as you point out. This is DuBois's veil - to bring it back to racial questions that inspired the discussion.

But there's a compounding problem here that minority positions on intellectual questions are often (not always, but often is plenty good enough for these purposes) minority positions because they are simply not defensible positions. A prior evaluation that a position is indefensible then leads to a situation where majority proponents are ill-equipped to argue with the minority position.

There is a difference, in other words, between an opposition being ill-equipped to engage a minority position and the determination that the minority position ought to be given a seat at the table.

Take Marxian economics instead of Goldwater so that there's no particular bias in evaluating the case (and not people who think Marx had some good points and sympathies - I'm meaning the actual architecture of Marxian economics). I think it's reasonable to say that non-Marxian economists are very poorly equipped to dispute Marxian arguments and that in a debate the Marxian could very well run circles around them. This might not have been the case 100 years ago, particularly in certain countries or schools.

But is this a reason to make sure every economics department is well stocked with Marxians? I don't personally think so. We have Marxians in sociology and not in economics for a very good reason today: Marxian economics was concluded to be largely indefensible and Marxian sociology was determined to have much more to it.

Presumably in academia what we want is not a diversity of ideas per se, nor even a collection of the most talented proponents of diverse ideas. What we want is a collection of the most talented proponents of the available set of defensible ideas.

I think about these issues with the Murphy/Krugman debate a lot. Krugman unambiguously has the better arguments - absolutely no question. That was clear in the 1930s before either of them were born. But it's equally clear to me that Bob knows Krugman's arguments far better than Krugman knows Bob's arguments, to the extent that Bob could plausibly get the better of him in a debate.

Rant on the "I F***ing Love Science" facebook page


Lots of good stuff in there. The Neil deGrasse Tyson complaint is a little frustrating... science education is important and there's something to be said for getting a lot of people to have a broad respect for science even if they don't do it. I'd be happy if a lot of non-economists knew they didn't do economics but maintained a healthy respect for what an economist says about the economy relative to what some journalist says. Still, a lot of good points here.

I don't follow the page actually, but I think a lot of it is funny/pretty/etc. But that's the whole point. Don't like a page that's funny and make the mistake of thinking it's more than that that you're viewing and "liking". Like the joke or the inspirational picture, but know that it's a joke or an inspirational picture and that science isn't done in one-liners with a pretty graphic.

Here's an assertion that I think is largely true but that is sure to piss a lot of people off: John Papola is the internet's "I fucking love science" page for economics. Flashy and visually impressive. Funny. Gets people excited. Piques the interest of people who are genuinely into economic science. But really botches a lot of stuff and smuggles in politics.

Discuss, but know that this is my space and I'll heavily moderate if it needs to happen.

Two recent Econlib posts of note

1. David Henderson discusses Scott Winship's skepticism about claims of the costs of inequality.

It's a good post to take a look at just to get the whole scope of the issue, but I think there are a lot of problems with Winship's claims and the bashing of several left-leaning economists is entirely inappropriate and unsupported by what he presents. He puts a lot of emphasis on work on inequality by the CBO and work by Burkhauser. These analyses are fine, but hardly the CBO/Burkhauser research speaks to fundamentally different questions than the stuff the list of economists he bashes at the beginning usually cite. It is household adjusted, which is good to look at but different, and it's post-transfer, which is good to look at but different.

If we are thinking about redistributive policy that latter point - that the CBO/Burkhauser numbers are post-transfer - is extremely relevant. One can't very well argue that redistributive efforts are unnecessary because inequality is illusory if your proof that inequality is illusory demonstrates that it's illusory because of redistributive efforts! Indeed, that may even show that the existing redistributive policies were necessary and did their job!

Inequality is a very complicated issue to discuss, and there are lots of different questions that people are legitimately interested in - is the wage distribution fair? do families have access to the resources they need? does redistribution work? is inequality a problem when you consider prospects over the life course?

All of these are important - but all call for looking at very different data. Too much of the accusations around inequality are derived from muddying the fact that people seem to be interested in fundamentally different questions.


2. Bryan Caplan discusses job mismatch.

I think people need to approach this discussion very carefully too. This issue is actually exactly what the Sloan Foundation has funded me for three years to look into. The job relatedness questions he cites should not be interpreted as "mismatch", in my opinion. For one thing we should be skeptical about exactly what they're capturing. Mark Regets, an economist at NSF who works exclusively with the NSCG data that Bryan cites, always likes to refer to bizarre cases that come up in the data where surgeons report that their job is unrelated to their education (i.e. - medical school). Unfortunately, he refused to disclose the identity of these survey respondents so I could avoid these surgeons (something about privacy, etc.). More importantly for the purposes at hand, it raises questions about how people are interpreting the survey. Maybe most of what the surgeon does he feels he learned on the job or through inservices - that school only contributed a small component to his knowledge. Maybe these people are focusing on the detailed technical knowledge they gained outside of school and are ignoring the fact that school taught them how to "think like an economist" or "think like a lawyer" - a very important contribution even if people pick up the details of their work after school. It also has to do with conceptualization of what a certain major "does". An English major writing proposals for a big contractor may say that her job is unrelated to her major because she feels like she's gone off of the editor/journalist/writer track she thought she wanted. Of course that's nonsense. In all likelihood she does her job much better than someone that doesn't have the background in writing and editing that she does.

Another reason to not interpret these questions as evidence of mismatch is that mismatch has a specific meaning in economics related to a poor search-and-matching process in the job market. So do we think that everyone working outside their field is poorly matched to their job? Of course not. Lots of people choose to work outside their college major for lots of different reasons. This is especially important for interpreting the wage premium associated with working in a job related to your major. If you work outside of your major by choice (in other words - it's not a matching problem), it's likely because you are very passionate about this opportunity that has come up. Passion in the labor market leads to compensating differentials: they don't have to pay you as much because you are doing what you love.

There's also a question of the underlying skills distribution within a major as an explanation for the earning differential. If there are fewer engineering jobs than engineering majors, the best engineers may be more likely to get the engineering jobs (if they want them). These engineering majors are going to be more productive than the other engineering majors, so of course they are going to enjoy a premium. You would see this even if the cost of mismatch were zero. The NSCG data used in the paper that Bryan cites has no grades or ability information that I am aware of to account for this, and the notes on the wage regressions don't seem to account for it either.

So approach with caution.

Our Sloan work specifically concerns the "loose coupling" between major and occupation. Most people assume the science and engineering labor force is a pretty smooth pipeline, or if they know that people work outside of the field they assume it's always bad or a divergence. We're looking into the decision making behind working out of field. This should be the subject of one of my dissertation chapters (and then hopefully that will be an article), as well as a bunch of other papers we're putting together. We'll be using the NSCG, as well as the Baccalaureate and Beyond survey, which does have data on grades.

Best line yet in the microeconometrics seminar, plus another great guest lecturer

"As everyone knows, Russell Crowe invented game theory"

Ya, I should probably watch that again soon.


In addition to the normal seminar discussion leadership, we had a lecture by Aman Ullah of UC Riverside on non-parametric econometrics. I thought his criticism of parametric models was a little too harsh, but asked a question that he thought was a good one that was framed a little nicer. One of the things he raised was the specification of the earnings equation by Heckman and his students as a quadratic function of experience. He talked about how he re-estimated it non-parametrically and found a quartic relation - and that this was later confirmed by a more exhaustive parametric analysis which tested a quartic relation against quadratic and other options.

That's all fine, and a nice exercise. But I noted that they didn't use a quadratic relation because they were too lazy to do non-parametrics. They used it for theoretical reasons based in Becker's human capital theory. Then I asked whether any theoretical framework for explaining the quartic relation (he had come up with this in the late 80s) had been developed, because if this is really robust it ought to tell us something about our labor theory. Not that he was aware of, he said.

This is an important point, though. The explanation offered at the time of his paper was the impact of World War II (I believe... maybe Vietnam): a cohort effect. That's fine, but that doesn't suggest there's anything wrong with the quadratic specification - that suggests that there's something wrong with an omitted variable that you ought to have conditioned on.

That's a huge difference! It's the difference between revising human capital theory and not revising human capital theory.

My concern with non-parametrics is that it gives the illusion of being agnostic when actually you are making some very consequential assumptions about whether its OK to be indifferent between a conditioned and unconditioned binary relationship. Now that's not necessarily true of newer advances in non-parametrics, which he talked about as well. Non-parametric methods can be used to estimate "functional coefficient" models that do condition on other variables and in that sense offer the opportunity to get more meaningful stories back into the analysis (albeit not by assuming a parametric specification). He's used these functional coefficient models to look at some of Card's work on the returns to schooling.

One question I didn't ask because time was running over was about the role of non-parametrics in non-experimental techniques that rely on a particular functional form. It's one thing to be agnostic about theory in an empirical question, but if you're using a particular non-experimental technique you cannot be agnostic about the assumptions required for that technique if you're implementing it. The specific example I have in mind is the popularity of using non-parametric methods like local linear regressions to estimate regression discontinuity models. It's always seemed to me that these pose serious risks around violating the local continuity assumptions of RDD, which is critical for identifying the model. I'm going to email this question to him today - because it has implications for one of my dissertation chapters.

Wednesday, March 27, 2013

I used to talk a lot on here about the problems posed by what I called temporal autarky...

The Past

...but sometimes unidirectional time is a good thing (also see Season 5 of Fringe):

For you guys that like betting on predictions...

... Kate and I have a bet. Based on what I've heard about how mothers carry the baby and a few other factors, I am guessing we're going to have a girl. She says a boy. The loser has to partake in an activity of the winner's choice.

On the ride in this morning I would be doing a yoga class and she would go to a historical site with me (I had mentioned Mount Vernon).

Now she tells me it will be pedicures...

...the stakes have been raised, so I think I'll have to figure out something a little less user-friendly than Mount Vernon (that's to their credit, of course - they are one of the best in that department... but it won't do in a bet where I'm facing the prospect of a pedicure).

We have awesome baby names for both, so either way it will be fine. And if it's a boy he'll come into this world knowing his father has beautifully maintained toes (pedicures are toes, right?).

Thoughts on the Chavez school econ project

I had a great time yesterday morning at the Cesar Chavez charter school. I was at the Parkside campus, in Anacostia. The set-up was a little different than I expected. They had us each sit with a group of four or five students. The students took turns presenting their reports/proposals, and then we asked them questions about it, lead a discussion, and evaluated them. I heard from nine students overall. The teacher assigned them which policy proposal to defend, which made for a nice diversity of arguments. Many of them disagreed with what they were assigned and did a good job explaining why in the discussion section.

One of the things that I found fascinating was the difference between my first session of four students and my second session of five students in how they thought about the social insurance purpose of Social Security. The first group was adamant about this, to the point of being very skeptical about differentially taxing or providing benefits to wealthier beneficiaries or even raising the payroll tax cap (it wasn't clear to me when they were presenting that they all understood how the cap worked, though, but we went through that in the discussion). This did not surprise me - this was part of their Great Depression studies in their history class, so they had been talking a lot about the purpose of the program, which was social insurance.

The second session was very different - very willing to consider the redistributive aspects of Social Security, and take them into account when thinking about policy. There was one student that seemed to be familiar from outside school with the disability side of the program, and that colored a lot of the discussion.

I obviously consider Social Security a social insurance program, but of course I didn't propound on that or anything. In the first group we talked how we might address poverty issues if we don't do it through Social Security and the in the second group we talked about the same thing (if you couldn't address poverty through Social Security how would you do it?).

I did raise privatization in both groups (these kids are so young! they were in kindergarten when that was the hot topic!). They all shot that down pretty quickly even though many of them didn't even know what it was at first (and no, I didn't push them). I think the recent crash (which they were well aware of) had a lot to do with that. They saw right through the risks involved with moving money out of the trust fund. I actually had to coax them into thinking about why anyone would propose it in the first place - the point that there are actually years when financial markets do well too and that in the long run it does well!

We also got into discussions about COLA (the second session actually had a proposal around COLA - the first didn't). We didn't get into chained CPI or any of that - the proposal was just framed as "slowing the cost of living adjustment", but we did talk about the differences in the prices of the things that seniors spend on and the things that non-seniors spend on, and the implications for COLA. I've had an ongoing facebook discussion with a fellow GW alum about this - my view is that chaining is a great idea - the problem really is in the basket used (regular CPI probably isn't the best). I get fussy when progressives dump on chaining when the real problem is the basket. Chaining is a good idea.

Tuesday, March 26, 2013

Ryan on Pete Boettke


Very good thoughts, although I'm not sure Boettke is going the full Sapir-Whorf. Certainly a dominant discourse shapes the way we think about things even if the fact that Eskimos have fifty ways to say "snow" doesn't mean as much as some people like to think it does. It's almost tautological - we think in sentences and the sorts of sentences we put together a lot are going to have an influence on the thoughts we think a lot.

What's wrong is the extreme nature and false dichotomy of the sentences Boettke attaches to economic scientists of the twentieth century.

Two links on children and the crisis

- Simon Johnson on the impact of austerity on children's programs. Anyone who thought that Thomas Sowell's article just nailed Obama because it pointed out that Obama ignored a "solution" to the problems posed by austerity by rejecting the GOP bill needs to read this article. The GOP bill was rejected because it made one part of sequester less biting and arbitrary and another part of sequester more biting and arbitrary. A solution to sequester would be not having sequester.

- Julia Isaacs, of the Urban Institute, has a report on the incidence of unemployment from the perspective of children.

A question that always pops into my head when reading stuff like this from Peter Boettke


Can he even conceive of an economist that deeply respects the thinking and legacy of Keynes, Hayek, Buchanan, and Friedman or does he just dismiss that as a nonsense position?

In the realm of the history of economic thought - which I've been moving out of lately for career-building reasons but would love to do more with at some point - the thing I probably hate most of all is turning the history of thought into a cartoonish battle of the titans. That's really not how intellectual history works, IMO.

Monday, March 25, 2013

Rosnick on Work Hours and Climate Change

David Rosnick (CEPR, fellow GW alum), a reader of the blog but who usually sticks to emailing me comments, has a new paper in the Real World Economics Review on work hours and climate change.

I imagine this is something Keynes would have really gotten on board with if he knew anything about climate change.

Even aside from working hours, this is a good argument for telecommuting too.

Lots of good working papers today!

These ones look particularly interesting to me:

- The Great Reversal in the Demand for Skill and Cognitive Tasks by Paul Beaudry, David A. Green, Benjamin M. Sand

- Bubbles, Crises, and Heterogeneous Beliefs, by Wei Xiong

- Rethinking Elderly Poverty: Time for a Health Inclusive Poverty Measure?, by Sanders Korenman, Dahlia Remler

- A Spatial Approach to Energy Economics, by Juan Moreno Cruz, M. Scott Taylor

- Subjective and Objective Indicators of Racial Progress, by Betsey Stevenson, Justin Wolfers [the subjective well being gap has closed a lot since the 1970s, and what remains of that gap is pretty much explained by objective differences - so closing the rest of the subjective well-being gap will probably have to rely on improving economic performance].

- Inefficient Hiring in Entry-Level Labor Markets, by Amanda Pallais [This is relevant to the minimum wage discussion with Gene Callahan the other day, and another explanation for why unemployment is higher for low skill or young workers who have trouble signaling their productivity]

Noah Smith on non-market goods


He argues they're substantial and they ought to be considered when thinking about policy. I agree. What's interesting about his list is that a lot of these things are directly related to market goods - like satisfaction at work.

I have a few thoughts on this, since these issues come into gender economics a lot:

1. We do have a few tools for smuggling this stuff in: specifically, externalities and compensating differentials. They're pretty blunt tools, though, and they're better at accounting for non-market things without really thinking in depth about them. Nancy Folbre, for example, has written a lot about care as a positive externality and implications for the time spent caring for others. And she is among the economists who has thought most deeply about the sort of problems Noah raises.

2. Folbre brings to mind one important way that we've accounted for non-market activities: when they require time, we (well, some of us) have been including them in our models for decades: child care, home production, etc.. Macro models endogenizing these things as well as fertility also do that. The reason of course, is that you can still do constrained optimization and the price you're thinking about is just the opportunity cost of the time you spend in the non-market activity. Again, though, this has limits - but it it's still an important approach that economists are uniquely positioned to take, since time is a major constraint on most people.

3. So what do we do about it? Well many surveys do have these sorts of variables that we certainly ought to play around with. But I think we should simply be collaborating more with other social scientists like psychologists and sociologists. I've been working with a sociologist for years now and am just starting up a research relationship with a psychologist friend of mine who sometimes comments here (she goes by Dr. J). She is quite interested in these satisfaction and personal aspiration issues. These relationships have helped to keep me well rounded (and let me specialize in what I do best). Along the same lines, I think economists ought to always be involved with projects that have site visit or interview components to the extent that they are able to as well. Nothing illuminates what's actually going on in the world than sitting down and talking with someone. Often its fairly straightforward to translate what they're saying into economics lingo (although of course something might be lost in translation). We're still faced with optimization under constraints and strategic thinking in a lot of these cases. But at the very least it provides context to other research.

Sunday, March 24, 2013

Upon finishing the first part of The Hobbit (unfortunately I did not see it in theaters)...

...I am less amazed now that Jackson is stretching it out into three movies and more amazed that he didn't do LOTR in nine movies. It's very nice not to race through everything.

Tyler Cowen shares David Sinky on Scientific Labor Markets

Insofar as I wade into policy preferences, my view of the scientific labor market is that the problems are principally demand side problems rather than supply side problems so if we should be doing anything as public policy we ought to buy science (or the derivatives of science) rather than supply more and more scientists to the market. At an NBER conference I once characterized this as the Field of Dreams strategy: "if you build it, they will come" (that made Richard Freeman laugh - a great triumph and endorsement, IMO). If you make investments in the scientific outputs you feel are lacking, the scientific labor market appears to be pretty good at getting the bodies where they need to be to make that output. The interesting market failures are on the demand side.

However, Tyler Cowen shares thoughts from David Sinky this morning presenting an alternative view with some interesting arguments. I am bolding the ones I particularly like:
"Since it seems that the supply of talented researchers in any specific area is likely fairly inelastic in the short term, to what extent do you see cash funding (as opposed to supply of talent) as a major constraint to specific scientific research in either the short and medium terms?

Even if we believe that this funding will lead to a proportional increase in clean-tech research, I suspect that returns may be quite low since the impacts of this funding would seem to be:

1. Pulling smart people from their private sector efforts into publicly funded research

2. Funding marginal projects by lower quality researchers where returns are likely to be significantly lower than average returns to research funding (which may be quite low already)

3. Increasing the funds available to established, high-status labs and researchers. If a large percentage of a lab’s output is due to the abnormally high human capital of its lead researchers, the binding constraint is their time and mental resources rather than cash so the returns on additional cash would not be very high.

4. Allowing institutions that were already going to fund this sort of research to direct additional funds to other priorities such as undergraduate academics (stem or otherwise), student amenities or other unrelated research initiatives. I suspect much of this logic also applies to donations to “cancer research charities” which I believe may be one of the single least efficient use of charitable dollars.

In general, I am disappointed that neither the right nor the left seems interested in trying to estimate the return to marginal government spending on research (either in aggregate or for specific programs).

The points above lead me to suspect it is quite low in aggregate but I’m open to being convinced otherwise if you think there is good evidence to do so."
I don't know if I agree that number three is true, but I really couldn't say. This is something for someone like Paula Stephan - who has spent a lot of time thinking about the economics of labs specifically - to weigh in on.

The first two I think are widely recognized concerns. Of course what you're funding has to be of value and the whole problem with market failures in science (and anything) is that you know there is high social value work to be done but knowing that doesn't tell you exactly what that work is.

Four is an empirical question.

I think that in theory the measurement of returns to research is important but it's very difficult, for at least two reasons. First the benefits can be far off into the future if we're thinking about basic research. Think about the economic returns to relativity. Yes, I mean Einstein - we're going back that far. The most obvious answer today is GPS and cell phones right? Relativity has had an enormous payoff but you had to wait a hundred years for the really interesting stuff. One answer to that is that after discounting the benefits are minimal in the long run, but that raises the second problem that we've seen with climate change: what's the right discount rate? Who should we care about - just ourselves or future generations? Because of the way we experience time we're stuck with a sort of temporal autarky. I can't go back 100 years and compensate someone for discovering relativity. That leads to less science than there ought to be. Should this problem be remedied or not? Do I have standing in the policy decisions of 100 years ago if I am affected by those policy decisions (as I certainly am). Do people 100 years from now have standing in today's policy decisions that affect them - or should we discount them according to our preferences?

Saturday, March 23, 2013

"Earth hour" is pure posturing, and pretty useless in itself...

...but at least it's coming from a good place.

Thank God tomorrow we'll be done with all the sanctimonious counter-posturing that are the complaints about Earth hour, which are equally useless and probably not coming from a good place.

People - if you think the idea here is to do away with capitalism and modern technology I think you've rather missed the point.

When I was in elementary school I remember we had this book that was something like "365 things you can do to save the planet" - one for each day. My parents weren't hippies or anything - it was just a good kids book with a lesson, etc. etc. I remember feeling like the book contained solemn duties. I wasn't weird about it or anything, I just remember feeling like this was important. It was the planet after all! And it was stupid little stuff. Conservation, conscientiousness, and instilling the value that you know what: the place isn't here just for you.

That's all Earth hour is.

It's just a hokey awareness raising effort that has more to do with responsible lifestyles than anything else - and absolutely nothing to do with the overthrow of capitalism. And honestly there is something genuinely solemn about that mindset. I got that element right at least, and I was just a dumb kid.

So stop complaining. You sound like an idiot.

Why Keynes and not Hicks?

Jonathan considers the question.

The Keynesianism we have is really Hicksianism. I do think economists appreciate this. I think most economists know IS-LM as we use it is not in the General Theory (of course you can yank it out of there if you wish, but be prepared to get nagged by some post-Keynesians). So of course the Keynesianism that grew out of IS-LM great out of Hicks (for the rest of this post though, when I talk about Keynesianism I'll be referring to old Keynesianism/IS-LM not the newer stuff).

So if we know this why do we still praise Keynes?

This is going to sound a little fuzzy, but I think it's because Keynes taught us how to think about things and Hicks taught us how to model things. Those are two very different tasks, and it's the former task that tends to loom large in our psyches. When we want to walk someone through the logic of a Keynesian answer to a question, we always go back to the props that the General Theory furnishes us with. The catchy passages in the book don't hurt - many people have pointed this out. But I don't think it's just that. It's how compelling the argument is. Hicks doesn't give us anything like this sort of intuitive argument that we can whip out when we need it. He gives us the model. The model is important, but it doesn't frame the theory the way Keynes does.

As an example of what I mean, think about the theory of the Phillips Curve or the NAIRU. These are big ideas associated with Phillips and Friedman, respectively. That's because they presented us with the idea and when we think about the idea we're drawn back to their exposition of the idea. But lots and lots of people have modeled the Phillips Curve and the NAIRU - some models explaining the same phenomenon but with strikingly different explanations. Some models are constructed differently but give us basically the same story. A model is just a bit of math to illustrate a concept - it's smaller than a "theory". You can have lots of different models of the same theory.

Now Hicks's model was a big deal. But I think Keynes still looms large because he ultimately gave us the concept of Keynesianism.

I would be careful not to understate Keynes's contribution, though. Liquidity preference theory of the interest rate is essentially original to him (you can find wisps of antecedents in Franklin and Fisher), and it's actually one that Hicks was skeptical of early on (Hicks referred to it as seeming like interest rates were being pulled up by their own bootstraps). I think the fact that we have preferred the Hicksian version of liquidity preference is that his exposition is more Marshallian than Keynes's (which gives us this nebulous idea of lots of potential states of the economy). Keynes wanted to present a picture of multiple potential states - an unclosed model - because he was presenting an alternative to the idea (we can argue about how prevalent it was) that the economy is always going to be operating at full employment or at least tending towards it. That view of things - that model of the bigger idea - didn't last as the model that we use to represent the bigger idea, because most of us are more comfortable with closed models and unique equilibria.

Keynes also has a lot of good substantive contributions that are simply left unexploited by mainstream economists and have been taken up by heterodox economists.

Friday, March 22, 2013

Cesar Chavez Public Charter School 11th Grade Social Security Panel

Looks like I'll be here on Tuesday morning, taking part in a panel that will be listening to policy proposals from 11th grade economics students on what to do with Social Security. The idea is to talk with them about the issues at hand and give them feedback on proposals that they've been developing and preparing to present.

I have a feeling this will be fun and informative for me and the students, and it will manage to make me feel like I wasted a lot of time in high school :)

Gene schools me (although he graciously does not note that I conceded Bob's point)

I am too quick, sometimes, to focus on the point where I think the other guys is definitely wrong and concede the points that sound more reasonable to move past them.

I don't think minimum wage earners en masse are producing $22 of output for their employers and getting screwed. Monopsony power involves some exploitation but I can't imagine that much or else the marginal effect of the minimum wage would be far more positive.

But that does not mean the phenomenon has to be all that rare. Gene ably reminds us that asymmetric information's a bitch if you're on the right tail of an expected productivity distribution and don't have access to any signaling options.

Three points before sharing Gene's thoughts:

1. Bob suggests it ought to be easy to develop a business plan to take advantage of this - of course that need not be the case if it's costly to get information on all applicants' skills and only picking the undervalued ones.

2. Gene is defensive about being considered anti-marginalist. He need not be. He need not even invoke the "frictionless physics" analogy. Frictions in economics are marginalist - they just add new margins to think about.

3. This still might not be a wildly common occurrence (although probably more common than Bob or I originally suggested), because of internal labor markets. Once you observe an employee's productivity, given the high turnover in these industries, you're probably going to promote him and share some of those rents before you lose all of those rents.

Alright, here's Gene in his entirety because it's so good:


How Labor Markets Really Work

Bob Murphy asks Daniel Kuehn:

"Do you think there are at least 1000 workers in the United States who produce more than $20/hour for their employers, yet they are only earning minimum wage?"

My guess would be: "Certainly."

Too many economists have no idea how companies hire people. I have done it at several places. Here's what happens:

Someone higher up in the company decides some task needs to be done. They give you the task. You say, "Well, OK, but I'll need a couple more programmers."

"How much will they cost?"

"Good Java programmers get around $100,000 per year."

"Hmm... can you get by with one full-timer and one part-timer?"

"Yeah, I guess so..."

"OK, do it."

Most likely, no one in the company has any real idea how much this project is worth. No one has any real idea what the value of the output of these 1 and 1/2 programmers is. All that matters is whether the higher up is pleased with the outcome of the project. And so long as her superiors are pleased, and the company as a whole makes money, things can go on this way forever.

So, my guess is that there certainly are well over 1000 workers in the United States who produce more than $20/hour for their employers, yet they are only earning minimum wage. As well as whole boatloads who earn the minimum wage but produce far less for their employers. Bob attempts to dismiss the possibility of such failures of wages to equal marginal products by saying that, if they existed, we could create "a business plan for how we can hire these 1000 (at least) people at $10/hour, and still make $10,000 in pure profit per hour."

There are at least two problems with the above attempt at a reductio:

1) Since the employers don't know (for the most part) who these people are we certainly can't either!

2) It is quite possible someone could make employer A $21 per hour, but make far, far less if employed by B. The factors of production are not homogenous and are not perfect substitutes for each other. 

(Ah, [some] Austrians! This point is in the forefront of their minds when they wish to critique some interventionist scheme, but when it comes to defending the near-perfect efficiency of the market, it goes walkabout.)

The same thing applies to other factors of production as well: Where I have worked, when someone "needed" a new computer, no one in the chain of approval asked "What will its marginal product be?" And no one would have known how to answer if they had. No, we justified it because, "Carl has been here two years, and yet he has the slowest computer in the group, and he's really griping about it." And the request would get approved in good times and turned down in bad times, which is absurd in a marginalist theory of how prices are set.

Final note: I am not "anti-marginalist," any more than I am against physics models that feature frictionless surfaces. I am just noting that it is an idealization, and the real world only resembles the model in a very rough fashion.

I don't think Hayek would have liked this Johnny Cash classic...

"One Piece at a Time" came up on Pandora...

It's kind of sick that what I thought upon hearing it was "Hayek would have hated such flagrant disregard for capital specificity and heterogeneity".

More good gender econ from Rochester

So they have a graduate gender conference every year. It was a real shame to miss this year's because it was focused on labor.

The conference schedule is below. As I imagine happens with a lot of women's studies conferences, it's a lot of humanities or pomo type social theory. There was at least one economist there. As you know, that's not my style at all but pluralism is still good. Rather than shy away from that sort of thing, I think mixing it up with the more formal social science would probably be healthy.

Anyway - here's the conference schedule from this year with all kinds of funky formatting copying that I am not going to fix at 1:40 in the morning:

20th Annual International Graduate Research Conference in Gender and Women's Studies

Women in Labor: Gendering (Re)Production 

Friday, March 1, 2013
Hawkins-Carlson Room

5:00pm-5:30pm Opening Reception
5:30pm-6:30pm Panel One: Cultural Products
Moderator: Grace Seiberling, Associate Professor of Art History, University of Rochester
  • Marissa Schwalm (Binghamton University), "Blood & Ink: Women Pushing Equality with Graphic Autobiographies in the Workforce and the World"
  • Caoimhe Morgan-Feir (OCAD University), "Spinning a Yarn of Bioart and Labour"

Saturday, March 2, 2013
Hawkins-Carlson Room

10:15am-10:30am Opening Remarks
Honey Meconi, Director, Susan B. Anthony Institute for Gender and Women's Studies
10:30am-12:15pm Panel Two: Reproductive Bodiesf
Moderator: Alison Peterman, Assistant Professor of Philosophy, University of Rochester
  • Jennifer Loft (University at Buffalo), "Inscribing the Indigenous Woman's Body: Reflecting on Trauma and Memory in Alliance with Jennifer Griffiths' 'Traumatic Posessions' "
  • Rashida A. Manuel (University of Cincinnati), "Of Slaves and Surrogates: Reproductive Labor in the Twenty-First Century"
  • Rachael Pack (University of Western Ontario), "Risky Reproducers and Genetic Hopelessness: Biopolitical Implications of the Crack Panic"
12:15pm-1:15pm Lunch
1:15pm-2:15pm Keynote Adress
"Work, Profit, and Care: Some Reflections from Feminist Economics"
Julie A. Nelson
Professor and Chair, Department of Economics, University of Massachusetts
Editor, Feminist Economics
2:30pm-3:45pm Panel Three: Gendered Divisions of Labor
Moderator: Rachel Remmel, Assistant Professor of American Studies, Eastman School of Music
  • Kari L. Colosi (Binghamton University), " 'Speaking Up is My Job Now': Women's Political Activism and the Environmental Politics of Shale Gas Development in Rural Upstate New York"
  • Aparna Parikh (Pennsylvania State University), "Jane in the Call Center"
  • Susila Gurusami (UCLA), "Boys and Girls in White: Investigating the Socialization of Inequality in Medical Specialties"
4:00pm-5:00pm Panel Four: Confronting Public and Private Spheres
Moderator: Jeffrey Runner, Associate Professor of Linguistics, University of Rochester
  • Anasa Hicks (New York University), " 'Like All Other Things': Domestic Work at the Moment of the Cuban Revolution"
  • Ada Yuk Yin Lee (Chinese University of Hong Kong),"In-Betweeness: Gender Identities and Same-Sex Practices of Women-Loving Filipina Domestic Workers in Hong Kong"

Gender, economics, Rochester, etc.

What's so sad is that there is excellent and growing work by economists on gender, gendered power, family, reproduction, and discrimination going on. Not all economists work on gender related issues, of course, but I didn't think until tonight that you'd have a professional economist working counter to them by musing that he struggles to think of why rapists can't "benefit" from an unconsious woman that doesn't know the difference.

Landsburg is at Rochester, which is especially a shame given the city's pride of place in the women's rights movement and Susan B. Anthony's work in particular. The University of Rochester is home to the Susan B. Anthony Institute for Gender and Women's Studies. Of course Seneca Falls isn't too far away either - the Women's Rights Convention in 1848 was held there precisely because of the strong support for women's rights in the region.