Saturday, December 31, 2011

Economic Harmonies by Bastiat

I am beginning to think the Libertarian philosophy contrasting the coercive nature of the state with the voluntary, mutually beneficial associations inherent in free-market [crony-free ] capitalism began with Bastiat's Economic Harmonies. Everything that I once thought was original with Ayn Rand is there, in a more bright and crisp form--with a more affable demeanor, though with equal persuasive power.

Note: When reading Bastiat you must remember externalities were not an issue in his time, and the reader must guess how he would write today.

If Paul Krugman is wrong...

If u believe that Paul Krugman's is always wrong, and u can devise what u believe to be credible rebuttals to all of his arguments, are u thinking, or reacting? And if u r a researcher, is your job to react or think?

P.S. U may replace "Paul Krugman" with "Milton Friedman" if u like.

Thursday, December 29, 2011

Why Mercantilism bothered Adam Smith reason which I think is particularly interesting is that the rulers only cared about the types of trades that brought gold / silver money into Britain. Trade within Britain did not meet this criterion, though it was this trade that impacted people's lives the most.

In Wealth of Nations (Book IV, Chapter 1), he laments this fact.
Either its rulers did not understand the major sources of wealth for the regular person or they didn't care. Either way, it is unfortunate, but at least it motivated Smith to write one of the most influential books in history.

Wednesday, December 28, 2011

If I was a military historian...

I would write a book about navies quickly built from scratch and proved victorious.

(1) Rome in the Punic Wars, who went from no navy to a navy that defeated the Phonecians / Carthage to become the superpower of the Mediterranean.

(2) Agrippa who built ships in a lake, practiced in seclusion, and then dug a canal to carry the ships to sea, ensuring one victory among several to transform a lad named Octavius into an emperor named Augustus.

(3) Peter the Great, who drug a reluctant nation into the Baltic--a nation with no navy nor desire for a navy--to take land from Sweden that would soon become Saint Petersburg.

Some of my details may be off, as I write from memory. I'm sure there are other similar stories I haven't read about.

What a book that would be!

In case my appraisal matters...

I am promoting Jonathan Haidt's "The Happiness Hypothesis" to the #1 most influential book in my life.

Saturday, December 24, 2011

Nations run like businesses

Someone should write an economic histrory book about the Phonecians / Carthage and Britain's East India Tea Company, illustrating the similarities of the two entities--both were operated giving business profits priority over everything--and what it meant for their citizens and neighbors.

One might even suggest the U.S. is run similarly, though I don't believe that to be true.

And they should thank me for the idea in the preface.

No one is really religious anymore

Why? This is what I observe.

(1) I have read a number of books by the Dalai Lama, and have concluded that he does not believe anything about his religion other than the personal, psychological benefit it
can provide.

(2) There are Christian churches in the U.S. allowing Muslims to use their Christian churches for Islamic worship. That is admirable, I believe, but you can't tell me those people really believe their religious texts. All gods are jealous gods.

(3) When contemporary Americans justify their religious beliefs, they always tout how religion makes them a better person, but they never say it is because they actually believe the words of the Bible. They never say it is because they believe in the holy trinity , heaven and hell, angels, holy sacrament, the resurrection, the story of Job, ...

(4) Everywhere religions are becoming more and more tolerant of other religions, even though it is arguably impossible to do so while staying true to scripture.

For these reasons, religion in modern countries share two trends. First, they distance themselves from much of their holy scriptures, instead believing all religions to be different paths to a similar sacredness. Second, this secularization occurs while reserving a belief in a sacred something that gives people a psychological benefit.

For these reasons, I don't think anyone really understands the role of religion in modern societies (the philosopher Daniel Dennett has made the best attempt thus far), but whatever its role, it promotes a social harmony like it has never done before, such that Humanists must resign themselves to [largely] attacking its historical role and its role in developing countries.

Thursday, December 22, 2011

My collection of quotes is better than yours

Take that, Department of Applied Economics

There does not exist a category of science to which one can give the name applied science. There are sciences and the applications of science, bound together as the fruit of the tree which bears it. 
—Louis Pasteur

Wednesday, December 21, 2011

Economic Models and Inequality

     Can any economist imagine a model of the economy where 1% of people earn 16% of the aggregate income and own 35% of its wealth?  What would that model have to assume about individual intelligence, the nature of politics, economies of scale in management, signaling, and the like?
     I can form explanations, but if we started with an economy where 1% of people owned 3% of the wealth and I was then asked what would have to change for 1% to own 35%, I would probably reply that it is inconceivable, and no reasonable model would predict such an outcome.

Quote on Rent-Seeking and Corporate Tax Rates

We have a situation where we in essence invite corporations to buy their own tax rate, where they spend money on lobbying and they get their special deals, rather than just having one consistently applied competitive tax rate where everybody gets the same deal.
—Roquel Alexander from the University of Kansas, interviewed on Planet Money podcast (Jack Abramoff on Lobbying; December 20, 2011).

Should Student Loans Be Forgiven?

     A recent Intelligence Squared debate concerned the notion: Do too many people go to college?  The debate mentioned how student loans are not forgiven, so if a student accrues $100,000 in student loans and goes bankrupt he still must pay back the loans.
     I understand why.  Default on a house, and the bank can at least take ownership of the house and sell it.  Go bankrupt with student loans and there is nothing for the government to take and sell.  There is no collateral, of sorts.
     What if, out of empathy for struggling college graduates, we began forgiving student loan debt if individuals go bankrupt?  Would this help students?
    Some, but not others.  Because debt can be forgiven the profitability of the loans (at the old interest rate) wanes.  With banks / governments less interested in making loans, interest rates will rise to compensate for the greater default risk.  Otherwise there will be an excess demand for loans (which in could be addressed by restricting loans to only the best students, but that may not be politically feasible, and I assume it is not).  Now, instead of punishing the students who cannot translate a degree into a decent salary, you are punishing everyone who takes student loans by making everyone pay a higher interest rate.
    Are the banks / governments better off?  On the one hand, they get a higher interest rate.  On the other hand, some people default and never pay back their loans.

Debt-Bondage, Ancient Rome, and the Incentives of Lenders and Borrowers

Debt-Bondage: the archaic system of ensuring cheap labor for the landowning gentry.  In return for subsistence, poorer citizens became indentured servants of the landowners.  One of the main issues that generated the Struggle of the Orders.

     Most people would object to the idea of debt-bondage, where the poor would initially take loans to avoid starvation during bad times, and when they were unable to repay the loan (the nobles might make it hard to repay) they became something of a slave to the lender.  Ask most people whether debt-bondage should have been banned, and they would have said yes.
     Just like people say there should be minimum wages, and price controls, and paid maternity leave, and regulated payday loans...
     Their wish would be granted in 320-330 BC, when Roman conquest brought in slaves from new territories, making nobles less reliant on debt-bondage as a form of cheap labor.  Did the peasant who would have normally gone into debt-bondage benefit from this?  Maybe.  Maybe not.  Now it may have been harder for peasants to get loans.  In the past landowners would have lowered their interest rates in hopes the peasant would take a loan, some of which would default and earn them slaves.  Now they will charge higher rates because they are in less need of slaves.  Moreover, when peasants needed the noble's help to avoid starvation, now that they had to compete against imported slaves, the peasants may have simply starved, as the noble was unwilling to loan them money for food.
     The situation is similar to immigrants into the U.S.  Unskilled labor may be harmed, as the supply of unskilled labor is now higher, pushing wages down.  Conversely, the income generated from immigrant labor may increase the demand for other more pleasant jobs, allowing unskilled labor access to better employment.
     Economics rarely provides certainty or easy answers, which is one reason I respect it.

Catherine the Great Convenes Her Empire

     In 1766 Catherine the Great called on representatives from "all free estates of the realm" to convene so that they could review the current laws and suggest news laws which would enhance the empire.  Even free peasants sent representatives.  Russians were so impressed with her desire to rule with care and humanity that they offered to add "the Great" to her name.  She declined, saying she had not yet earned that title.
     It may not be surprising that the 564 delegates got little accomplished (besides flattering their Tsaress).  What I think is interesting is that the bond between the peasant and the monarch, seen so often in history (see here, and here, and here), expresses itself.

The discussions in St. Petersburg were providing even more unproductive and divisive than those in Moscow.  The commission continued to stumble along, burdened by procedure, by conflicts of class, and by the generally impossible nature of the task...Many peasant delegates simply transferred their limited rights to speak to nobleman from their districts.  The few free peasants who did speak concentrated on grasping their chance to lay their complaints before the empress herself.  Catherine, listening as they jumbled together every abuse, burden, and future fear, realized how far they were—and how far she was not—from Montesquieu.  By the autumn of 1768, still without seeing any concrete results, the empress was tired.  The commission had dragged on for eighteen months through more than two hundred sessions and not one new law had been written.
—Robert K. Massie.  2011.  Catherine the Great: Portrait of a Women.  Page 360.  Random House, NY, NY.

By the way, it is a fantastic book.  Robert K. Massie is my favorite biographer, whose biography of Peter the Great is even better.

Context-Dependent Preferences in Birds

     This study illustrates how "irrational preferences" may form in birds, and supports a view I have found present in most economists, though not often seen in print.  This view is that the brain did not evolve nor does it gather information to perform well on one particular choice or experiment, but to perform well in all of life.    
     When you consider any one specific choice, especially if that choice opportunity is unusual and novel, both birds and people may seem to make irrational preferences, in that they pay attention to contextual clues which are irrelevant to the actual choice.  For example, you may express a higher value for wine in an experiment if you are randomly assigned an ID number that takes a high value.  Birds may respond to signals from a research that were relevant in another, similar choice opportunity, but not the present one.
     The researchers found that even though the birds relied to heavily on contextual signals in one particular experiment, the birds performed better across a larger array of experiments because they rely on contextual clues (that is my take one the study, and I only read a summary of it).  Similarly, humans respond to their environment because most of the time the environment matters.  Behavioral economists may conclude me to be predictably irrational if he narrows his range of inspection sufficiently small, but I will continue to live my life as if the context of my surroundings matter...just like the birds.

Tuesday, December 20, 2011

I was wrong about posting copyrighted videos

Here is a much better answer to the question of whether one can post copyrighted videos online for education purposes.

The legality of clips on xxx derives  from the Fair Use statute, which is part of copyright law. There has been lots of misinformation over the years about what is regarded as fair use. Contrary to what you may have heard, there is no "rule" based on percentages or time limits. The principle that we encourage our users to observe when posting to xxx is that you should only post as much of a given work as you need in order to make your point.

The key to making these posting fair is to significantly transform the clip from its original context and to add cultural value, such as is often the case for educational re-uses. I can't, however, advise you on the legality of any particular posting -- this is your responsibility to decide in good faith. The fact that you are asking these questions and concerned about contributing responsibly is an excellent start!

The best resources for thinking through fair use that I know of are those created by the Center for Social Media -- of particular relevance here may be their guide to best practices in fair use for online video:

If only we were still hunters and gatherers...

...agriculture brought about a steep decline in the standard of living.  Studies of Kalahari Bushmen and other nomadic groups show that hunter-gatherers, even in the most inhospitable landscapes, typically spend less than twenty hours a week obtaining food.  By contrast, farmers toil from sunup to sundown...early farmers had more anemia and vitamin deficiencies, died younger, had worse teeth, were more prone to spinal deformity, and caught more infectious diseases, as a result of living close to other humans and to livestock.
—Elif Batuman.  December 19 & 26, 2011.  “The Sanctuary.”  The New Yorker magazine.

Diamond considers agriculture to be not just a setback but “the worst mistake in the history of the human race,” the origin of “the gross social and sexual inequality, the disease and despotism, that curse our existence.
—Elif Batuman.  December 19 & 26, 2011.  “The Sanctuary.”  The New Yorker magazine.  Referring to Jared Diamond, author of Guns, Germs, and Steel.

Religion First, Then The Plow

     Anyone interested in the evolution of man and his ancient roots, especially those wanting to understand the psychology of a person and society, must look into the recent archaeological findings in Anatolia, written about recently by National Geographic magazine and The New Yorker.
     This site contains what appears to be religious structures obviously requiring large groups of people but occurring before agriculture.  They are over 11,000 years old, over 6,000 years older than the Great Pyramid!  What is remarkable is that these religious structures were built before man took up the plow, which means that (at least in this location) organized religion came before large, organized, hierarchical, and agricultural societies.  Consequently, we must update our assessment about the importance of organized religion in the homo sapien species.

The findings at Gobekli Tepe suggest that we have the story backward—that it was actually the need to build a sacred site that first obliged hunter-gatherers to organize themselves as a workforce, to spend long periods of time in one place, to secure a stable food supply, and eventually to invent agriculture.
—Elif Batuman.  December 19 & 26, 2011.  “The Sanctuary.”  The New Yorker magazine.

     In The New Yorker article I learned that the term "Neolithic Revolution" (the transition from hunter-gatherer to livestock-farming )was coined in the 1920s by a [disillusioned] Stalinist named V. Gorden Childe, who committed suicide in 1957 after an uprising in Hungary.

A World Without Conspicuous Consumption

...some may like it and others may not.  Of course, those who want to read something other than the Bible could simply leave the community.  This is what Thomas More dreamed of in Utopia.

“We are as prosperous and as happy as any one; we have here all we need.”
As all work for the common good, so all are supplied from the common stores.  I asked the purchasing agent about the book-keeping of the place; he replied, “As there is no trading, few accounts are needed.  Much of what we raise is consumed on the place, and of what the people us no account is kept.  Thus, if a family needs flour, it goes freely to the mill and gets what it requires.  If butter, it goes to the store in the same way.  We need only to keep account of what we sell of our own products, and of what we buy from abroad, and these accounts check each other.  When we make money, we invest in land.”  Further, I was told that tea, coffee, and sugar are roughly allowanced to each family.
Each family has either a house, or apartments in one of the large houses.  Each has a garden patch, and keeps chickens; and every year a number of pigs are set apart for each household, according to its number.  These are fed with the leavings of the table, and are fattened and killed in the winter, and salted down.  Fresh beef is not commonly used.  If any one needs vegetables, he can get them in the large garden.  There seemed to be an abundance of good plain food everywhere.
In fact there is little room for poetry or for the imagination in the life of Aurora.  What is not directly useful is sternly left out.  There are no carpets, even in Dr. Keil’s house; no sofa or easy books, except a Bible and hymn-book, and a few medical works; no pictures—nothing to please the taste; no pretty out-look, for the house lies somewhat low down.  Such was the house of the founder and president of the community; and the other houses were neither better nor much worse.  There is evidently plenty of scrubbing in-doors, plenty of plain cooking, plenty of every thing that is absolutely necessary to support life—and nothing superfluous.
—Charles Nordhoff.  American Utopias.  1875.  This passage concerned the Aurora commune.

Two Quotes

In sheer numbers, the brain is just beaten by the Milky Way with its 200 billion or more stars, but they are spread across 100,000 light years, not packed into a one-and-a-half-litre capacity skull.
—Alun Anderson.  The World in 2002.  “Brain Work.”  The Economist magazine. a recent poll by the Pew Foundation, Russians, by a margin of 57% to 32%, preferred to rely on strong leadership rather than democracy to deliver good government.
The Economist magazine.  December 10, 2011.  “The Cracks Appear.”  Leaders.  Page 13.

Copyrights Be Damned

I was just informed by my university that you can post a video of any copyrighted material for teaching purposes so long as it is under 30 seconds (and it may be 60 seconds, the person wasn't sure).

Monday, December 19, 2011

Utopia Documented

     When I first began reading Thomas More's Utopia I thought it naive to think any society of more than fifty people continually be hard-working, but taking only what they "need" for consumption, without having to document who took what or having to ration goods.  However, I was proven wrong by the 1875 book American Utopias by Charles Nordhoff, who showed that when people self-select into a community for strong religious feelings, such utopias can exist.
     Whether such communities can be forced upon people is much less likely, and if history has been documented properly, has never been done.
     I wonder why these religious communes all were somewhat heretical in their religious beliefs.  For example, the Shakers believed Christ had come a second time in the form of a woman.  Did any communes follow a conventional Christian creed?  I don't know.  I can't recall reading of one.

Middle Ground Between Science and Religion

It takes remarkable integrity on the part of Haidt (an atheist) and the Dalai Lama (who is thought of by some to be a demigod) to make these remarks.

My research indicates that a small set of innate moral intuitions guide and constrain the world’s many moralities, and one of these intuitions is that the body is a temple housing a soul within.
—Jonathan Haidt in The Happiness Hypothesis.  2006.  Basic Books.

...if scientific analysis were conclusively to demonstrate certain claims in Buddhism to be false, then we must accept the findings of science and abandon those claims.
—Dalai Lama, from 
The Universe in a Single Atom

Sunday, December 18, 2011

Inside the mind of a saint

Anyone writing a novel featuring a historic character who is a deeply pious Catholic, and has trouble imagining how one would think, would do well to read "The Story of a Soul," the autobiography of Saint Theresa of Lisieux.

Saturday, December 17, 2011

Jonathan Haidt

"The Happiness Hypotheses" by Jonathan Haidt is among the most profound books on individual and social behavior--readable also. Daniel Kahneman contributed more to economics than any psychologist before him (excluding the real father of psychology: Adam Smith), but if economists really want to explain societal behavior, they can learn even more from Dr. Haidt.

It is not another "cute" book; it is surprisingly profound.

Conversation with my daughter

Bailey: Maggie, do u want ice cream or a milkshake?
Maggie: Yes.

Thursday, December 15, 2011

Lit agents are ridiculous

This is what an independent author (novelist) wrote me today.

"I've been through the grueling process of being rejected by over a hundred agents, going to writers’ conferences to meet them, sending them material, etc. Even after my book won two national literary awards and after I got the great testimonials, I hit the agents again, but they still wouldn’t give me the time of day. It’s so depressing. I’m sorry, I have no connections or success to share with you there. All I can say is that Amazon and Kindle are the independent publisher’s greatest friend"

One thing I have noticed is that independent authors establish "publishing companies" which sell only their books, so that on paper they appear to have book contracts.

Origin of word "placebo" and placebo quotes

When there was nothing else to offer, placebos were a salve.  The word itself comes from the Latin for "I will please."  In medieval times, hired mourners participating in Vespers for the Dead often chanted the ninth line of Psalm 116: "I shall please the dead in the land of the living."  Because the mourners were hired, there emotions were considered insincere.  People called them "placebos."
—Michael Specter.  “The Power of Nothing.”  The New Yorker.  December 12, 2011.

I had great respect for shamans—and I still do.  I have always believed there is an important component of medicine that involves suggestion, ritual, and belief—all ideas that make scientists scream.
—Ted Kaptchuk, an acupuncturist interviewed by Michael Specter.  “The Power of Nothing.”  The New Yorker.  December 12, 2011.

Kaptchuk practiced acupuncture for half his adult life.  But he stopped twenty years ago.  Despite the popularity of acupuncture, clinical studies continually fail to demonstrate its effectiveness—a fact that Kaptchuk doesn’t dispute.  I asked him how a person who talks about the primacy of data and disdains what he calls the “squishiness” of alternative medicine could rely so heavily on a therapy with no proven value.
Kaptchuk smiled broadly.  “Because I am a damn good healer,” he said.  “That is the difficult truth.  If you needed help and you came to me, you would get better.  Thousands of people have.  Because, in the end, it isn’t really about the needles.  It’s about the man.”
—Ted Kaptchuk, an acupuncturist interviewed by Michael Specter.  “The Power of Nothing.”  The New Yorker.  December 12, 2011.

Tuesday, December 13, 2011

Straight-A Students Need Not Apply

Recent research has shown that teachers discourage creativity in students. Perhaps this is why some employers will not hire straight-A students. Any student favored by teachers, they assume, can recreate what the teacher does, but nothing more.

The lies of children

Regarding my previous on self-deception, as the father of a four-year-old who lies frequently, I believe children sincerely believe most of the lies they tell. Only as they mature do they begin to understand the complexity of their beliefs.

The "tinkering" metaphor

     FDR was popular during the Great Depression partly due to his willingness to experiment with different solutions to the economic crisis.  He tried everything, as David Kennedy remarks...

What unit of plan or purpose, one might ask, was to be found in an administration that at various times tinkered with inflation and price controls, with deficit spending and budget-balancing, cartelization and trust-busing, the promotion of consumption and the intimidation of investment, farm-acreage reduction and land reclamation, public employment projects and forced removals from the labor pool?

—David M. Kennedy describing Franklin D. Roosevelt’s New Deal in Freedom From Fear

     The idea of using government to create different experimental interventions into the economy makes a lot of sense with certain metaphors of the economy.  If your metaphor for the economy is a gasoline engine, a broken economy is like a broken engine, and it makes sense to keep replacing different parts until the engine works again.
     Is a gasoline engine a good metaphor?  Yes, if you allow the possibility that replacing one working part with another part can cause damage elsewhere in the engine.  Like, spending money on a new alternator degrades from the performance of the fuel injection.  You would also have to assume that the engine, given time (and it may take a long time), will fix itself.  
     Any money the government spends must be taken from somewhere.  Even if the money is printed, money is essentially taken from the economy in the form of a devalued currency.  Consequently, you only replace the alternator if you have reasonable assurance the alternator was the problem, or if you believe the cost of replacing a working alternator in the form of a less efficient fuel injection is something you can live with.  Likewise, you do not want to risk the damage to the fuel injection unless you believe it will take the economy a long time to fix itself.
     This is why a better metaphor for a troubled economy is a sick person.  Chemotherapy might help a cancer patient, but will hurt the patient if the cancer diagnosis is wrong—just like a fiscal stimulus might be counter-productive if the problem is lack of confidence / spending, and just like a "quantitative easing" might be counter-productive if bank reserves are not the main problem.

The Art of Self-Deception

When a person cannot deceive himself, the chances are against his being able to deceive others.
—Mark Twain.

The secret of getting away with lying is believing it with all your heart.
—Elizabeth Bear.

“Do you think she means it?”
“Of course.  All the best liars mean what they say...until they’ve said it.”
—Dialog between two senators in Nero: The Decline of the Empire.

Jerry, just remember: it’s not a lie if you believe it.
—George Castanza.

Don't forget my idea about self-deception.

Monday, December 12, 2011

College Subsidies

My experience on a committee to review general education has taught me one thing: instead of giving government subsidies to the university, it should be given directly to students in the form of vouchers.

Otherwise, when designing general education, we will ask what we know and what we like, and wish the student to follow our footsteps. If I am a math professor, students should learn to "purify their soul by studying Euclidean geometry" (actual statement). If I study ethics, students should take more ethics courses.

In the beginning (long, long time ago) university classes depended almost exclusively on what the students wanted to learn. After 12 years of school, students have probably earned that opportunity.

Ayn Rand's Opposite

Some of the jobless never appeared on the relief rolls at all because they simply left the country.  Thousands of immigrants forsook the fabled American land of promise and returned to their old countries.  Some one hundred thousand American workers in 1931 applied for jobs in what appeared to be a newly promising land, Soviet Russia.
—David M. Kennedy describing the Great Depression in Freedom From Fear.  Chapter 6.

Quotes about cities

There’s no such thing as a poor urbanized country; there’s no such thing as a rich rural country.
—Edward Glaeser quoted by Robert Kunzig.  “A City Solution.”  National Geographic.  December, 2011.

Spillover works best face-to-face.  No technology yet invented—not the telephone, the Internet, or videoconferencing—delivers the fertile chance encounters that cities have delivered since the Roman Forum was new.  Nor do they deliver nonverbal, contextual cues that help us convey complex ideas—to see from the glassy eyes of our listeners, for instance, that we’re talking too fast.
—Robert Kunzig.  “A City Solution.”  National Geographic.  December, 2011.

Maybe I do understand the EU

     I've always been hesitant to talk about the European Union (EU) because I feel uncomfortable with my understanding of its essence.  For example, I don't understand the current fracas.  Why should Germany have much to do with the corruption inherit in Greek politics?  Why don't they act like the independent countries as they are—Greece default, and Germany let her default—but treat the Euro as if it is commodity money? So long as they limit the amount of Euros created, and if people have confidence that the volume of Euros will not change significantly in response to a Greek default, is there really much of a problem with the EU and its currency?
If they do this, there is little difference between the Euro and gold money, assuming gold could only be mined by the European Union Central Bank.
I've always thought that I missed something important, because no one utters such a thought, but a recent Wall Street Journal editorial emboldened my views on the EU.

We wish the Germans well in driving a hard bargain in return for writing a big check, but there is a better way. That would be to return to the Euro as it was originally conceived: Countries share a currency but are responsible for their own fiscal policies, including the consequences of default.

The Wall Street Journal. December 10-11, 2011. A14.

What's that? Oh, yes: the sweet sound of self-confirmation.

Thursday, December 8, 2011

Reasons why most people would call me insane

(Reason 1)  I don't believe anyone really existed before 1990, nor do I believe real, conscious people exist in poor, repressed countries.  However crazy it seems, I just cannot fathom a universe where all the suffering I read about in history books really took place.

(Reason 2)  Politically-charged issues like global warming and income inequality are difficult to understand because so much ostensibly credible evidence is presented by each side.  I go further than simply saying it is a complex issue.  While truth does exist in many places, when an issue because hotly contentious, with much to gain / lose on either side, I believe that truth literally ceases to exist.

(Reason 3)  I do not believe Tyler Cowen exists, because it seems he has no supporting staff, and I do not believe one person could write and read so much while also teaching, eating, and sleeping.

(Reason 4)  I don't believe the book A Death in the Family could win a Pulitizer Prize when I cannot even get a literary agent to consider my novel.  Much of my world, alas, is an illusion.  Either I don't exist, or that book doesn't really exist.  Or perhaps the Pulitizer Prize is also an illusion?

Wednesday, December 7, 2011

I wonder how long...?

I wonder how long the unemployment must stay at its high levels before people start calling on the federal government to directly create jobs itself.

Read his memoir, An American Life, and you will also find Reagan referring to the Works Progress Administration, among the biggest government jobs programs of all time, as “one of the most productive elements” of Franklin Roosevelt’s New Deal.  Read accounts of Reagan’s tenure as California governor and you will find him proposing, in 1971, that a WPA-style public works program replace the state’s welfare apparatus.
—Thomas Frank.  “More Government, Please!”  Harper’s Magazine.  December 2011, page 10.

But if we are so concerned about job creation, why not [have the government] just create jobs?...We have waited for them [read: the job creators of the private sector] long enough.  It is time we took the business of job creation into our own hands.
—Thomas Frank.  “More Government, Please!”  Harper’s Magazine.  December 2011, pages 10-11.  Frank was referring to the government hiring workers.

By and large, the things they built [FDR’s New Deal] are treasured today.  Indeed, there was a genius and grandeur to their far-flung labors.  The Roosevelt Administration dealt with unemployment by putting murals in post offices, by bringing electricity to deepest Appalachia, by paying artists to paint, theater directors to state plays, and penniless authors to assemble collections of folklore and write a famous series of guidebooks.
—Thomas Frank.  “More Government, Please!”  Harper’s Magazine.  December 2011, page 11.  Frank was referring to the government hiring workers.

How to be a political pundit

If you are to be a liberal pundit:  Read all you can about President Reagan, and then use what you have learned to show how Republican politicians contradict their favorite president (e.g., Reagan raised taxes many times, and viewed many elements of Roosevelt's New Deal favorably).

If you are to be a conservative pundit: Read all you can about Franklin Roosevelt, and then use what you have learned to show how Democratic politicians contradict their favorite president (e.g., Roosevelt did not always want to borrow during a recession and opposed a number of modern financial regulations, like the FDIC).

Vitamins should be banned

From Reason magazine.  January 2012.  Page 15.

Denmark has banned Marmite, Rice Krispies, and Ovaltine, among other popular foods.  The foods were banned because they have added vitamins or minerals, which are illegal in Denmark.

For the last four years, Wesley Wood has supplemented his Social Security income by selling vegetables he grows from the front yard of his Parma, Ohio, home.  But city officials have shut him down.  The city's code says vegetables can be grown only for private use and any home business must be conducted "wholly within the dwelling."

The most devoted medical researcher ever

   John Hunter is arguably the most devoted medical researcher that has ever existed.  From childhood until his death he spent almost every day dissecting animals and cadavers, and when experiments on patients were impossible he experimental upon himself.  These forays into the human anatomy were not class assignments in medical schools, but personal missions.  But how is he the most devoted medical researcher ever?
   Because his interest in syphilis, concomitant with his lack of patients to study patients, induced him to give him self syphilis.  You read right: John Hunter gave himself syphilis so that he could study it.  First he found a sailor with syphilis willing to give Hunter a sample of his penis discharge in exchange for a few pounds.  Then Hunter scraped the tip of his penis raw with sandpaper and placed the sailor's discharge on it. Sure enough, he contracted syphilis, and spent the rest of his life documenting the symptoms.
   Crazy? Yes.  Extreme?  Yes.  Devoted to medical science?  Absolutely.

   Following John Hunter's example, I plan to study the effects of a fiscal stimulus by borrowing money from a Chinese friend and then paying my wife money to dig holes in the backyard.   If this experiment doesn't increase my yearly income, I'll just assume that the stimulus wasn't big enough.

Sherwin B. Nuland
Doctors: The History of Scientific Medicine Revealed Through Biography
Lecture Six: Hunter, the Surgeon as Scientist.
The Great Courses.

Tuesday, December 6, 2011

A Story of Creativity: how the stethoscope was invented

I love stories illustrating how bursts of creativity are formed, and here is one I heard today.

   Laennec was a French medical doctor who encountered a patient that would change medical history forever.  She was not wealthy, smelt bad, a little obese, yet pretty, and Laennec did not want to press his ear to the skin under her breast to listen to her heartbeat—as he should have.
Later that day he was walking in a the Louvre courtyard where he saw two kids playing a game he recalled from his childhood. The game requires two people on the opposite side of a board. One person would scratch a symbol (perhaps a letter) on one end of the board and the other person pressed his ear to the board and tried to decipher the symbol from the sound alone.
Brilliant! That is how the stethoscope was born. Laennec experience this burst of creativity where he immediately knew how to listen to the heart and lungs better while standing further from the patient. Rushing back to the hospital, he finds the woman, rolls up a notebook into a cylinder, and presses one end on the patient's chest and his ear to the other end. It worked. Much better than the unaided ear. With refinements to this basic idea the modern stethoscope was born.

The psychologist Jonathan Haidt describes the mind as a rider on an elephant. The conscious component is the rider, who tries to direct the elephant, which is a metaphor for the subconscious.
Laennec's genius stems from the fact that his elephant was working on medical problems without the rider's awareness, and once it found something it brought it to the rider's attention—much as an elephant might stop without being told too if it sees something the rider cannot.
We should not lament the fact that our mind concentrates on seemingly irrelevant details when our consciousness focuses on a problem. Yes, our stated values can change according to environmental factors irrelevant to the good's worth. For instance, without our awareness, we state a higher value for a beer if it comes from a hotel whose prices are high, compared to the same beer from convenient stores, known for low prices.  
So what if our mind anchored onto something irrelevant to the taste and satisfaction of the beer. Because our mind is constantly weaving unrelated observations together, we suffer from minor (but scientifically identifiable) irrationality (the kind that helps behavioral economics earn tenure and sell books). Yet this irrationality is the womb of creative genius. Laennec was able to connect the kids' game with the patient, and modern medicine forever improved. Likewise, our mysterious elephant is a wrinkled ton of possibility, because of—not in spite of—many behavioral irrationality.

Sherwin B. Nuland
Doctors: The History of Scientific Medicine Revealed Through Biography
Lecture Seven: Laennec and the Invention of the Stethoscope
The Great Courses.

To train an economist...

   In which of the following situations would you lose more faith in the ability of an economist?
   (Scenario A)  If it is revealed he is unaware of the recent econometric innovations in heteroskedastic estimators (when used with panel data, specifically).
   (Scenario B)  If it is revealed he doesn't understand the causes  of communism in Russia or the consequence of socialism in China.
   Then ask yourself, is your answer consistent with how graduate students are trained?
   This is posed as an interesting question, and not a condemnation of my colleagues who teach graduate students.

The Political Purpose of Debasing Profits

I think the job of an economist, before determining his political affiliation, is to first make sure he can rationalize all political affiliations.  Otherwise, he doesn't understand people, or society.  It is important that he does understand society, to the extent that anyone can.  Here are some of my forays into this worthy exercise.

Why do liberals / progressives consistently demonize rich people and the earning of extraordinary profits, even if the income of most people is rising?

   In economic issues, the central component of the progressive platform is force.  Force employers to pay people a certain wage or don't hire them at all.  Force investment firms into mortgage-backed securities and taxpayers to subsidize the homes of others.  Force other taxpayers to pay for the education of my students.  Force you to pay for the health care of other people.
   However, at the same time people support large government plans to redistribute wealth, they dislike the notion of forcing people to do things.  It makes us seem dictatorial.  Consequently, they must be convinced that the people they are forcing are immoral, and that is why the very richest of people will usually be seen as corrupt to the progressive party members.

   Or, does causation run the other way, and force is the natural consequence of believing the richest among us are corrupt?  And let's not deny the possibility that the richest Americans may actually be corrupt (though if they are, does more government solve it, or less?).

The Final Destination of OWS

This is a great narrative to teach the lessons from A Road To Serfdom in the classroom, illustrating the timeliness of a book written decades ago.

  “There’s no work for us anymore—we’re out of work a year at a time,” he said.  “It’s because of them”—he waved toward the financial district.  “The people who are holding us back.  The banks, the government, anyone who controls the money.”
  Two middle-aged men had stopped in front of Moss and begun to argue with her in heavy Russian accents.  “Cuba, North Korea, Venezuela is the ultimate destination of what you’re doing,” the first Russian said.
  “My wife if midwife—she has a job,” the second man said.
  “Congratulations, that’s great,” Moss said.
  “You can get job, too.”
  “I’d love one.  Can’t find one.”
  “This is waste of your time.  Go look for job—put your time into that.”
  “Bottom line: go to North Korea,” the first Russian said.  “This is your final destination.”
—George Packer.  December 5, 2011.  “All The Angry People.”  The New Yorker.  Pages 32-38.

How would a progressive reply, and let's be fair in asking. I'm guessing they might say, "You can have an active government without a dictator. That's what elections are for. Look at France. Look at Sweden. Do those resemble North Korea, Cuba, and Venezuela?

I might have to change my assessment of The New Yorker. I inferred from James Surowiecki's columns it had an active editorship which forced a progressive slant to all articles. The fact that the editors allowed the narrative above increases the magazine's value—to me, at least.

A Forty Year Plan

We barely have 10 years here.  We will take it to 10 more and 10 more and 10 more to construct the new social virtues.
—Hugo Chavez as reported by Mary Anastasia O’Grady in The Wall Street Journal: “Chave’s 40-Year Plan to Conquer Vice.”  December 5, 2011.  A15.

Chavez is expressing his desire to force the same virtues that resonate within the successful communal societies I discussed in a previous post. What he doesn't understand—or more likely, what he doesn't acknowledge—is that these communal societies thrive because the virtues were voluntarily adopted by the residents of those societies (they can leave), and the religious fervor undulating throughout their congregation helps to intensify these virtues, as well as employs god to punish the vices.
A forty year plan is not necessary to Venezuela's resurgence. What is necessary is something Chavez cannot provide.

Monday, December 5, 2011

The Truth About Communal Living

     Every Thanksgiving, the Libertarian blogs I read pass around narratives of the Pilgrims' experience with their new home in America, and those narratives are true stories about the failure of a socialist system.  The Pilgrims first initially employed a communal lifestyle without property, where one was supposed to work out of loyalty to everyone else, and the amount of food one received was largely independent of one's own effort, but heavily dependent upon the effort of others.
     If we are to be objective researchers, however, we must also admit that there have been many instances when communal living was successful.  Many monasteries are an example, especially the Benedictine kind, where monks grew food and engaged in crafts for self-consumption and sale and all the proceeds are given to the monastery as a whole, to be distributed by the monastery.  Some Mendicant Orders might be included, and some nunneries.
     Better examples are found in the eighteenth and nineteenth societies formed in Germany and carried to the U.S., where hundreds and sometimes thousands of people lived and worked diligently for the society itself, with no personal property of their own.  They go by the names Amana Society, Harmonists, Separatists of Zoar, and the most widely known society, the Shakers.  I consider these Protestant and independent monasteries.  There are others: The Oneida and Wallingford Protectionists, Aurora and Bethel Communities, Icarians, the Bishop Hill Colony, and the Cedar Vale Commune.  I want to say the Transcendentalists created a commune, as well as the famous U.S. socialist Upton Sinclair, but I can't say for sure (I know Sinclair lived in a commune at one time, but I can't remember what kind of commune).
     While it is true that few such communes exist today, neither do some nations that existed in the nineteenth century (e.g., Prussia).  Most of these did thrive for decades though, and left behind large estates with fertile land and large, sturdy buildings.  They lived a socialist lifestyle, without property, and for them it worked.  Plenty of communes have failed after a vigorous startthink hippiesbut plenty did not.
     I certainly would never want to live in such a place, but neither would I want to spread the story of the Pilgrims without the story of these other societies.  Communal living, without property, and with labor motivated by altruism and strict social norms, can work.  It seems the key to their success resides in their voluntary nature (by contrast, communism was mandatory in Russia, and initially for the Pilgrims), the religious fervor of their members, and a diligently monitored set of social customs (either work, or live someplace else).
     Communal living is a possibility in some instances, and Libertarians can admit this while still arguing that the possibilities are fewand for them personally, non-existent.

Inspired and partially informed by...
Charles Nordhoff
American Utopias
Originally published in 1875 as The Communistic Societies of the United States.

Friday, December 2, 2011

Is Utopia a vegan paradise?

Or just a place where slaves do the killing for you?

The Utopians feel that slaughtering our fellow creatures gradually destroys the sense of compassion, the finest sentiment of which our human nature is capable.  Besides, they don’t allow anything dirty or filthy to be brought into the city, lest the air become tainted by putrefaction and thus infectious.
—Thomas More in Utopia, 1516.
What pleasure can there be in listening to the barking and howling of dogs—isn’t that rather a disgusting noise?  Is any more pleasure felt when a dog chases a hare than when a dog chases a dog?  If what you like is fast running, there’s plenty of that in both cases; they’re just about the same.  But if what you really want is slaughter, if you want to see a creature torn apart under your eyes—you ought to feel nothing but pity when you see the little hare fleeing from the hound, the weak creature tormented by the stronger, the fearful and timid beast brutalized by the savage one, the harmless hare killed by the cruel hound.  Utopians, who regard this whole activity of hunting as unworthy of free men, have accordingly assigned it to their butchers, who, as I said before, are all slaves.  In their eyes, hunting is the lowest thing even butchers can do.  In the slaughterhouse, their work is more useful and honest, since there they kill animals only out of necessity; whereas the hunter seeks nothing but his own pleasure from killing and mutilating some poor little creature.  Taking such relish in the sight of slaughter, even if only of beasts, springs, in their opinion, from a cruel disposition, or else finally produces cruelty, through the constant practice of such brutal pleasured.
—Thomas More in Utopia, 1516.

Thomas More's Utopia

     Thomas More's Utopia is what I am reading (actually, a easily-read translation by Robert Adams).  And these are some my impressions.
     I never understood where the word "Utopia" came from until now.  The word was invented by More, combining a Greek adverb and noun to create a word best interpreted as "no place."  Clever.  The strangest thing about the book is that it is divided into two sections, and the first section seems irrelevant.
     Much of it is predictable, and reminiscent of a college progressive yearning for local food, ostentatious equality, and despots.  The book is far from boring, however, and here are some parts I particularly enjoyed.
     Everyone works in Utopia, and in similar jobs.  Each person farms for a period of time and works a craft other times.  Because each person performs similar manual labor, and because one does not earn money for their labor, there is considerable equality.  They also work less than people do even today: six hours a day, including Saturday.  Although Utopians work less and cannot specialize, they are wealthier.  Why?
     Thomas More makes an argument that because there is no upper-class to confiscate the wealth of others, and because that upper-class in non-Utopian society is assumed to provide no service (I thought peasants worked, clergy prayed, and nobles fought?), each person in Utopia consumes more while working less because there are more people working.  This assumption breeds another: that no money is required because there is so much wealth, when people take all they "need" there will still be goods left over.
    Pervading the assumed functionality of Utopia is the assumption that social pressure will work as well or better than money in inducing people to work hard.  It is also assumed that the social culture of equality will prevent people from distinguishing themselves and causing inequality.  It is the social norms of Utopia that is responsible for the equality and wealth, not politics (in fact, there are very few laws in Utopia, and no lawyers).
     This made me think of wage labor in the Soviet Union (particularly in the 1929-1941 era).  All proletariats  were guaranteed a job, but at set wages for everyone.  Because the Communist Party determined other things like food rations, housing, and the like, there was considerable equality (cramped housing, fleas in summer, stale bread, and even some laudable things like women's rights).  Like Utopia, a strict passport system existed in Russia, limiting people's rights to move around.
     Russian communists tried desperately to establish a new proletariat culture where workers were inspired to work diligently despite the lack of economic incentives.  Maybe some of them had read Utopia.  Because the proletariats could easily find work elsewhere, they were hardly submissive to their bosses.  Good luck finding workers on a peasant holiday.  How did communists try to change peasant culture?  For example, Russia established a movement called socialist competition, where groups pledged to reach certain production goals and competed against other groups in fulfilling this mission.  The same thing happened in Utopia, where blocks of communities competed against each other for the best gardens.  This kind of thing worked in Utopia, but failed in Russia.
     Slowly, the Communist Party learned that the social culture in Utopia, where people work out of social obligation alone, was hard to instill, so they they began mimicking the free-market.  Higher wages were not offered, but hard working laborers did win metals, special meals, priority to housing, goods experiencing a shortage, and cheap theater tickets (how is that not a market?).  When that didn't work, the Communists began offering higher wages for better (more skilled and more reliable) work , and did their best to find a wage close to the free-market wage but still meeting budget restrictions; after all, a Russian plant may offer higher wages for better work and higher quality products, but because they don't sell these products on the market and instead "distribute" them to other organizations, additional revenues may not result.  And by 1931, 70% of workers were paid based on what they produced, not what they "needed."  However much people dislike markets, they have a hard time living without them.
     The contrast between a 16th century fictional account of an idealized social system and its partial implementation in 20th century Russia provides a number of instructive contrasts.  The most notable of these is the very reasonable idea that reliable, high quality work on a large-scale really does require more compensation.  Go figure.

More, Thomas.  1516.  Utopia.  Edited by George M. Logan and Robert M. Adams in 1989.  W. W. Norton & Company: NY, NY.

Hoffman, David L.  1994.  Peasant Metropolis: Social Identities in Moscow, 1929-1941.  Cornell University Press: Ithaca, NY.

Wednesday, November 30, 2011

Understanding Social Interactions is Difficult

To begin with, we don’t have a good theory of social behavior from which to start.
—David Weinberger, discussing the difficulties of taking enormous amounts of data and and using it to predict the future of the world.  December, 2011. “The Machine That Would Predict The Future.”  Scientific American.  Pages 52-57.
On December 17, 2010, Mohamed Bouazizi, a street vendor in the small Tunisian town of Sidi Bouzid, set himself on fire in a protest against the local culture of corruption.  That singular act set into motion a popular revolution that burned across the Arab world, leading to uprisings that overthrew decades of dictatorial rule in Egypt, Libya, and beyond, upending forever the balance of power in the world’s most oil-rich region.
What model would have been able to foresee this?
—David Weinberger.  December, 2011. “The Machine That Would Predict The Future.”  Scientific American.  Pages 52-57.

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